Construction Law/Loss of OH & P


Hi ,Dear Sir,
We are the Main Contractor for Road construction project to which FIDIC May 2005 MDB Harmonized edition is is a re-measured contract.
Original Contract price 600 US $ Million and final contract sum is 450 US $ Million due to reduction in quantities of BOQ at actual execution.
Meantime some of critical items were increased (Asphalt Surfacing Works) and EOT was approved by the Employer.
1. Part of the Overhead (OH) and Profit planned from the Contract has lost due to reduction of Contract price.
2. Additional OH has incurred due to prolongation.
Can you please provide points to handle the proper contractual claim such as loss of overhead and applicability of Cl 12.3 (a) and 12.4 w.r.t this situation.
We have already given the notices(Cl 20.1) for loss of OH and Profit due to reduction in Contract price and additional payment for prolongation.
Thank you

Dear Rohana,

Considering the value of the works, this question is a bit beyond the scope of this service.  I suggest that you engage professional advice to prepare your claim.  However, I will do my best to start you off.  

A claim for loss of overheads and profit is a difficult one to win.  You have to show audited accounts for several years and the profit is based on the profit shown in those accounts. The4n you have to prove that you refused work, usually with minuted records of the main board, because you were committed to the relevant project.

There are several accepted formulae for calculating off site overheads.  They all give different values so you must pick the one you like and can defend.  

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Peter M. Elliott


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 before submitting a question.


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')

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

B Sc(Hons) in Civil Engineering

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