Construction Law/Subcontractor High Prices
I had a 2 questions
Contract Type: Fidic Red Book 1999,
Question 1 : Engineer instructed a variation work to contractor on site but the contractor is now claiming triple the price 600,000 aed and actual market rate 200,000aed and he is the only contractor (of course he is Nominated and Dominated subcontractor and this SC knows he only MUST do the variation job, so quoted high) who can work for that half done job due to Municipality authorities design changes. So how can a client convince the contractor to work for 200,000 aed. Can a client keep silent on cost til work is executed and later evaluating/Paying the market cost 200,000 aed.
Question 2 : Sub Contractor submitted the variation with lumpsum price (Over quoted again) and denied to submit the breakdown saying that they cannot provide breakdown. But this variation work need to go on site very urgent. So do the Engineer has the right to ask contractor to do the job without finalizing the cost and what if main /subcontractor refuse to do?
Hope my questions are clear.
And expecting your quick reply.
Thansk & Regards,
Thanks for the questions.I would like to clear the definition of the "Nominated Sub Contractor". According to Sub Clause 5.1
" (a) a nominated sub contractor is that who is stated in the Contract as being a nominated Sub Contractor or (b) whom the Engineer, under Clause 13, instruct the Contractor to employ as a Subcontractor"
Kindly check whether the Subcontractor you are referring to, is a nominated subcontractor according to the above definition.
Now coming to your questions.
Answer to Question 1.
If the subcontractor is a nominated subcontractor in accordance with the above definition, the only remedy is that the Client should call him and try to make him understand the situation and request him to reduce the price. If this firm is the only one who can do the job, then he will charge for his expertise more than the actual cost of work. However if the client can afford then he can take the nomination back and advise the main contractor to find another competent subcontractor. The rates will then be agreed with the main contractor, the details for which will be provided in the answer to your second question.
Answer to Question 2.
The procedure for arriving at new rate is mentioned in Sub Clause 12.3 last paragraph which states that the new rate would either be derived from the relevant rates in the Contract with reasonable adjustments or if no rates are available in the Contract then it shall be derived from the reasonable Cost of executing the work with reasonable profit.
The same sub Clause further states, " Until such time as an appropriate rate or price is agreed or determined, the Engineer shall determine a provisional rate or price for the purpose of Interim Payment Certificates".
Pursuant to Sub Clause 13.3 the Engineer shall promptly approve, disapprove or comment on the variation proposal submitted by the Contractor by himself or in response to an instruction of the Engineer. However the Contractor shall not delay any work whilst awaiting a response from the Engineer.
Summarizing the above, the Contractor will submit a detailed proposal including rate analysis of the rates to arrive at the cost of the proposal and the Engineer will respond with approval, disapproval or comments but the contractor will continue to work and not wait for rates to be finally agreed. However the Engineer in that case will fix provisional rates for interim payments.
In real life this all depends on the integrity and neutrality of the Engineer and the respect he commands and the Contractor shall believe in him that the rates to be decided by the Engineer would be just. Based on this principle you or the Client can assure the subcontractor to immediately start the work.
Hope the questions are answered.