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Construction Law/increase and decrease in Contract Price

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Question
Dear Sir

In old red book as well as in some bespoke Contracts as in Governmental Contracts in Saudi Arabia, there are a maximum and a minimum limit to increase or decrease the overall Contract Price for re-measurable Contracts. For example, in Saudi Arabia the maximum limit to increase is 10% and to decrease is 20%. My question is;
1- Do these limits apply on any changes may take place as variances in actual quantities rather than the estimated quantities in BOQ as well as also in variation order values and claims?
OR this condition is set only to cover any potential variances in actual quantities since the BOQ quantities are only estimated (i.e. variation order values/claims don't undergo those limits and their budgets could be different)

Thank you,

Khaled

Answer
Dear Khaled,

I have no knowledge or experience of contracts in Saudi Arabia, but I will try to answer your question.

Let us consider the position of the government when it funds a project. The funds will come from a external funder (banks or whatever) or the budget.  In either case, the funds will be limited.  If the project exceeds the available funds, then the Employer will need to get more funds which might take time and might be politically difficult.  Thus the Employer limits the total cost of the budget.  Thus any limits will include all increases of costs from whatever source.  If the quantities are calculated incorrectly or if there are delays attributable to the Employer, which lead to increased costs, then these costs will be included in the limits stated by the Employer.  The Engineer and the Contractor must work to keep the costs within the limits stated, even if it means omitting sections of the Works, which could cause other problems.

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

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