Construction Law/Price Indices
QUESTION: Dear Mr Liaqat,
According to FIDIC Red Book 1999, Sub Clause 13.8,the price adjustment indices will be applicable on the date 49 days prior to the last day
of the period (to which the particular Payment Certificate relates).
I could not understand this sentence clearly. What time of the Price Indices will be applicable, either price indices of the time 49 days prior to the date of interim payment application submission to the Engineer by the Contractor or the 49 days prior to the deadline of payment to the Contractor by the Employer?
Could you please make it clear.
ANSWER: dear sir
thanks for the question
this pertains to the period when contractor fails to complete the works within the time for completion and in that case the cost escalation will still be there.In that case index or price on the date 49 days prior to expiry of the time for completion or the current index ,whichever more favourable to the employer, will be applicable.If still any doudt,please come back with more specific querry. Let me also clarify that this 49 day scenerio only comes when you are considering to give cost escalation to the contractor in the period after time for completion
---------- FOLLOW-UP ----------
QUESTION: Dear Sir,
It is still not clear for me. I will try to elaborate the case. We have a contract in accordance with FIDIC Red Book 1999. Contract Commencement date is September 2010. The Contractor will not get any price adjustment within 1 year. It means the Price Adjustment is only applicable after Sept 2011. Construction duration of the project is about 5 yrs. There are more than 500 BOQ items and the payment is going on monthly basis. For example, the Contractor submitted the Interim payment application to the Engineer for the works executed from Oct 2011 to Nov 2011 on Dec 15 2011 and the Engineer certified the Interim Payment Certificate for the payment within his time frame and the deadline for the payment to the contractor would be(56 days+Dec 15 2011) 9 Feb 2012 in accordance with FIDIC. Now I want to be clear on:
Price Indices of what date shall I use for the payment as a Employer?
I hope this will be clear for you.
The current cost indices is applicable to relevant cost elements on the date, 49 days prior to the last day of the submission of IPC.The last day here would be IPC submission date plus 28 days unless mentioned otherwise in contract.