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Construction Law/Sub-Clause 52.1 Valuation of Variations [FIDIC 1987]

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QUESTION: When the contractor receive a variation instruction from the Engineer to change the specifications for pipe (which includes the supports, accessories, .....), at the middle of the project which is prolonged 2 years after the planned completion date; where in the original BoQ there was a unit rate for the linear meter for this type of pipe.
We, as contractor, priced the variation according to Sub-Clause 52.1 (at the present time of receiving the instruction for variation), and we also priced whatever needed as manpower and supports etc... at the current rates in the market.

The dispute now with the Engineer, that he wants to pay only the difference of the pipe which has changed the specification, and to keep the other costs which includes the manpower, supports ..etc as per its portion in the original BoQ.

For example if the mt price in the BoQ was 7$, and the pipe element itself costs 5$, he assumed to keep the 2$ witch was for other ancillary cost as is, and only give the difference of the new type of pipe.

The Contractor argument, is that the contract provision does not stipulate this method, and also the itemized price for the original BoQ is not subject to be analyzed in order to use part of it in pricing the variation.

Any thoughts?

ANSWER: Dear Rezk,

Variations have to be priced using the logic of the Contract.  Sub-clause 52.1 requires that the price of new items be based on that of comparable items within the Contract.  If the only change is the change in diameter, then you get the difference between the costs of the different pipes, unless there is an inflation clause.  In which case, the increase in costs is adjusted in each Interim Payment. Your only hope is that the delays are the Employer's risk and thus you will get an EoT with costs, then you can include the increased cost of all resources in your claim for the EoT.  

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

QUESTION: Hi Peter,
Thanks for your reply.
However, i need to explore the situation as following:
1- The original (contractual) BOQ include prices for plastic type of pipes,
2- the Engineer requested to change this type of plastic pipes to be polypropylene,
3- the Contractor respond to this request to be as variation,
4- the Engineer accepts the concept of variation,
5- the Contractor make the valuation of the variation at the present time including the price of the new type of polypropylene, and the ancillaries as the supports, hangers, and the like,
6- the Engineer did not accept this method of valuation, as he consider that the only change was in the pipe type, therefore he advised to pay the difference in price for the pipes, but the other ancillaries as the supports and hangers he did not accept to be priced at the present rates in the market but to be paid as it was priced in the unit price in the contract BOQ,
7- the Contractor claims that this procedure of pricing is not valid as the BOQ did not include the price for the ancillaries explicitly but included in the overall unit rate.
Here is the conflict and dispute arises:
Shall this variation to be valuated at the present time of instruction (including all the ancillaries’ costs) as the Contractor claims, or it is correct to pay the difference in the pipe type as the Engineer view?
Thanks & best regards,
Rezk Girgis

Answer
Dear Rezk,

I would ask for a full tender breakdown of the item, including the cost of the supports.  I would price the variation on the price of polypropylene pipe 28 days before the date of tender submission, not the current market price, especially if there was any form of indexation.  I would ask for full justification, including manufacturer's instructions, regarding the spacing of pipe supports together will details of the costs of the supports.  Thus, regretfully, I am inclined to the Engineer's viewpoint as being rather generous.  I suggest that you accept his offer and get on with the Project.  Fight another battle where you have more chance of a larger profit.

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

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