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Construction Law/Value of Contract & Value of Works


Dear Engr. Liaqat Hayat

Thank you very much for sharing of your expertise and volunteer services.

My question is:

In lumpsum type of Contract there is mentioned "A Contract Value" : say X SAR

This X-SAR basically comprises of the following major cost heads (however not mentioned in contract);

1. Contractor's quoted Price for Works

2. Reserve Amount and Optional Items
  "at the discretion of the Employer"

3. Engineer's Fee

In the contract, the scope under Works are defined as following:

“…… Scope of work includes all the works necessary for the execution of the works under the contract including buildings, accessories and equipment in the manner indicated in the drawings, specifications, quantity schedule attached to the Specifications……”

My question is:

when we say:

“Charges for preparation of the project drawings"design" shall be paid on the basis of ...% of the total value of the Contract [including the value of works for which reserve amounts and optional items are dedicated]”

Is there exists any difference between the "Value of Contract" and the "Value of Works"?

Because as per my understanding the Contract Value includes overall Cost Items and some of those items may be executing by other Contractors/suppliers/design firms to be appointed by the Employer  but  the cost for those works have been included in the value of the Contract and the Main Contractor is suppose to  built that amount in its IPC and this amount is deductible/ payable to the other Contractor/Supplier.

So i consider the definition of "Works" as those works comes under direct scope of Main Contractor while the others are not direct part as discussed above.

Based on this discussion, your expertise is required either there exists a difference in "Value of Contract" And "Value of Works"?

Looking forward, best regards

Dear Mr. Sheraz,

Thanks for your question.

As I understand from your question, Value of Contract includes overall cost items excluding those items specifically mentioned separately like 'provisional sum'. The items under provisional sum can be varied items to be valued as per variation procedures and/or by nominated contractors on cost plus basis. This is equivalent to what you are saying "but the cost for those works have been included  in the value of the Contract and the Main Contractor is suppose to  built that amount in its IPC and this amount is deductible /payable to the other Contractor/Supplier". Please note a difference between items agreed in the contract value mentioned and those after varied items/cost plus items are included.  

This is what I understand from your question and still you have a query, please come back.

Liaqat Hayat

Construction Law

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Liaqat Hayat


I can answer questions based on FIDIC 4 and FIDIC 1999 [design-build] with particular reference to time extension , price adjustment and disputes. I am in particular more inclined for response to points pertaining to how claims should be framed and put up in case of technical or other contractual shortcomings. Regarding procurement matters I have spent over 5 years as procurement specialist for highway authority and dealt with numerous claims and disputes in the capacity of "The Engineer" .

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