Construction Law/Loss of OH & P

Advertisement


Question
QUESTION: Hi ,Dear,
We are the Main Contractor for Road construction project to which FIDIC May 2005 MDB Harmonized edition is applicable.it 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
Rohana

ANSWER: Hello Rohana,


Thank you for your question.

The two categories should have been claimed and should be dealt with separately:

1. for change in Contract Price, you should rely on Sub-Clause 12.3, 4th paragraph, point a), providing you fulfil those conditions.

As for Sub-Clause 12.4, from described situation, I am not that sure you can count on it, as that rather refers to recovering certain costs you have incurred for items that were to be incorporated in the omitted works.

2. I understand you claimed and obtained an Extension of Time. You should have asked for related costs too at the time, if you did not d that, you might have drastically diminished your chances to obtain such costs.

But anyway, connect your claim with that EoT, which you obtained already and based on due calculations of costs of overheads AND as the case may be, staff and equipment kept idle, demonstrate the quantum you claim.

Trust that answers your queries and will help.

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

QUESTION: Hi Dear,
Thank you for the valuable advice.Can you please be more specific to the way i should present my calculation for recovery of this loss of over head and profit.is it by distribution of total loss to the items satisfied the stipulated conditions under 12.3(a) or any other way.
thank you in advance for your kind response.
rohana

Answer
Dear Rohana,


Thank you for coming back.

Please note that provision is not about "recovering of this loss of over head and profit" but for establishing new unit rate(s).

All in all, you indeed get the same thing, i.e. additional money, but by increasing certain unit rates for the executed works with reduced quantity, not by being compensated a specific loss.

Please bear that nuance in mind.

Secondly, please read carefully that paragraph, it clearly refers to specific items. Hence you must check if you cumulatively fulfil those conditions for each envisaged item.

Trust that clarifies the matter.

Construction Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Florin NICULESCU

Expertise

Questions related to Civil Engineering Contracts, using FIDIC or other Conditions of Contract, concerning Procurement procedures and documents (pre-qualification, tendering and contracting) and Services/ Works Contracts implementation matters including Determinations, Payments, Time Extensions, VOs, Claims/Disputes. Additionally, questions related to dealing with International Financing Institutions. Can also answer questions in Romanian. Can not answer improperly formulated questions.

Experience

Over 20 years of experience in the field of design, works supervision, construction, management of aid funds and technical assistance for various types of contracts implementation, including severe conflictual contractual situations leading to Claims and disputes. Claims/ Contract management, Disputes adjudication, Arbitration.

Organizations
Member of Romanian Professional Association of Roads and Bridges; Listed on President's List of Adjudicators of Romanian Association of Consulting Engineers www.aric.org Former member of the Disputes Resolution Board Foundation (DRBF) of United States – nominee on DRBF President’s Disputes Board Members List www.drb.org and of DRBF Chapter for Eastern Europe http://dabdrb.googlepages.com Former member of Polish Association of Consulting Engineers (SIDiR) – nominee on SIDiR President’s Disputes Board Members National List http://www.sidir.pl/sidir/index.php?action=czlonkowie&a2=r Member of “AllExperts.com” volunteers pool http://www.allexperts.com/user.cgi?m=4&expID=85358&catID=914 Member of the "Constructions Disputes Resolution Services” International Panel of Construction ADR Specialists" of United States www.constructiondisputes-cdrs.com

Education/Credentials
- Graduate in 1994 the Construction Institute - Graduate of several FIDIC,Procurement and other courses - Graduate of first Disputes Board Members Mentoring Scheme (http://www1.fidic.org/resources/adjudicators/pupilage.html) - FIDIC Accredited Adjudicator

Past/Present Clients
- Several State organisations/Ministries , such as Ministry of Transport, National Admistration of Roads, Ministry of Regional Development (former Ministry of European Integration), Public Works and Housing, Central Contracting and Financing Unit in Romania and also in Turkey, Croatia and Macedonia - Numerous Western based private consultancy companies - full CV and other relevant information available at www.abinitio.ro

©2016 About.com. All rights reserved.