Construction Law/IPC

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QUESTION: Dear Sir,

In accordance with Sub-Clause 14.3 of FIDIC MDB Harmonized Conditions of Contract 2010 edition,

“The Contractor shall submit a Statement in six copies to the Engineer after the end of each month”

Is the submission of Statement at the end of each month is binding on the Contractor? Is the Contractor can submit Statement other than one month period?

My second question relates to Sub-Clause 13.8 [Adjustment for changes in Cost], this Sub-Clause states,

“ “Ln”, “En”, “Mn”, … are the current cost indices or reference prices for period “n”, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates); and”

If the Contractor submit Statement for the period of 3 months, then is it correct to use indices applicable on 49th from the last day of the period? Or is it necessary to divide the works month wise in order to apply indices separately for each month?   

Thanking you in anticipation.

Regards,

Umer Shabbir

ANSWER: Dear Umer Shabbir,

Thank you for this question.

The use of the word 'shall' in sub-clause 14.3 suggests that this is a mandatory requirement; however I think the decision rests with the Contractor as to when it submits its applications, providing that it does not seek to increase the frequency. Arguably, although the IPC process s a significant administrative tool, the only Party to suffer by not observing the monthly cycle is the Contractor.

Notwithstanding this, where the contract price is subject to the fluctuations clause (13.8) there is a need to assess on the periodic basis stated and not simply apply the latest set of indices.


I hope that this assists you.

Kind regards,
John Dowse

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---------- FOLLOW-UP ----------

QUESTION: Dear Sir,

Thanks for the answer. But i still have some confusion in applying the price adjustment formula.

I noted that "n" being the month unless otherwise stated in the Contract Data. It means that n period may be greater than one month which depicts that indices will be belongs to 49th day of the other period stated in the Contract.

In this Sub-Clause 13.8 while defining the Ln, En, Mn... ,it is stated that "n" belong to period to which the particular payment certificate relates. This means that period "n" may be varied depending upon the Contractor's submission of Statement.

I believes that Ln,En,Mn belongs to period to which particular payment certificate relates not any monthly or other period stated in the Contract.

I would like to hear your interpretation of the said clause.

Thanking you in advance.

Answer
Dear Umer Shabbir,

Thank you for this additional question.

If I can refer you to sub-clause 13.8 (FIDIC Red Book 1999) and the definition of Pn given therein it is stated that the period "n" is one month unless otherwise stated in the Appendix to Tender. As such the formula anticipates the calculation being performed on a monthly cycle. It is, of course, possible for the contracting Parties to agree to vary this.


I hope that this assists you.

Kind regards,
John Dowse
Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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