Construction Law/Loss of OH & P


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

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.

[an error occurred while processing this directive]---------- FOLLOW-UP ----------

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 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.

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.

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