Construction Law/Prime Cost
In one of our Contract which is based on FIDIC MDB 2010 Conditions of Contract, an item ‘provisions of performance security/ guarantee’ has been included as a prime cost item (provisional sum). The following provision is contained in preamble of the Bill of Quantities;
“For items shown as ‘Prime Cost’ the Contractor shall provide evidence of the exact amount of the direst cost paid for the item by the Contractor and that the item has been procured at a competitive market price. This amount shall be paid by the Employer. The provisional Sum shown fir these items is indicative only”
We (The Contractor) have provided performance security to the Employer covering the period upto the end of Defect Notification Period. We have incurred cost for arranging performance security more than the prices stated in the BoQ.
My questions are as follows;
(i) Are we entitled to recover actual cost in arranging performance security as this cost is priced at the risk of the Employer?
(ii) Is it possible that provisional sum exceed the cost provided in the Contract and how this exceeded cost can be covered in the Contract price?
There can be a problem g=here, since the Sub-clause 4.2 says: "The Contractor shall obtain (at his cost) a Performance Security". This means that the Contractor shall pay for the cost of the Performance Security, not the Employer. I know some cases like yours where, because of this provision of the Sub-clause 4.2, even if it was an item in the BoQ, the money that the Employer paid to the Contractor as per the BoQ were asked and paid back because of the provision of 4.2.
If it would not be this case, when that provision is included in the Sub-clause 4.2, the Contractor will get the exact amount paid for the Performance Security, as per the preamble of the BoQ.
So, the answer to your question i) is yes in case that sentence was removed from the Sub-clause 4.2.
Sorry, I did not understand your question ii). Please be aware of the definitions of the Cost (Sub-clause 126.96.36.199) and Contract price (Sub-clause 188.8.131.52).
Hope my answer helps you.
All the best!