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Prof. Sam.: My Comments Are Given in Red Below

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Koshy Thankachen

The contractor is claiming entitlement to overhead and profit markups of 25% and 15% respectively for valuing variations, based on the rates in the original contract. However, under FIDIC the engineer has power to fix fair and reasonable rates for variations according to clause 52.2, and is not obligated to use the same overhead percentages if they were unusually high in the original contract rates. While the original agreed rates cannot be renegotiated, variation rates are subject to independent assessment by the engineer. The subcontractor still needs to substantiate the overhead component of the original rates, and high markups in the original rates do not set a precedent requiring their use in valuing variations.

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Prof. Sam.: My Comments Are Given in Red Below

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Koshy Thankachen
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The contractor is claiming entitlement to overhead and profit markups of 25% and 15% respectively for valuing variations, based on the rates in the original contract. However, under FIDIC the engineer has power to fix fair and reasonable rates for variations according to clause 52.2, and is not obligated to use the same overhead percentages if they were unusually high in the original contract rates. While the original agreed rates cannot be renegotiated, variation rates are subject to independent assessment by the engineer. The subcontractor still needs to substantiate the overhead component of the original rates, and high markups in the original rates do not set a precedent requiring their use in valuing variations.

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Sp08-Q&A-4

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The contractor is claiming entitlement to overhead and profit markups of 25% and 15% respectively for valuing variations, based on the rates in the original contract. However, under FIDIC the engineer has power to fix fair and reasonable rates for variations according to clause 52.2, and is not obligated to use the same overhead percentages if they were unusually high in the original contract rates. While the original agreed rates cannot be renegotiated, variation rates are subject to independent assessment by the engineer. The subcontractor still needs to substantiate the overhead component of the original rates, and high markups in the original rates do not set a precedent requiring their use in valuing variations.

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40 views3 pages

Prof. Sam.: My Comments Are Given in Red Below

Uploaded by

Koshy Thankachen
The contractor is claiming entitlement to overhead and profit markups of 25% and 15% respectively for valuing variations, based on the rates in the original contract. However, under FIDIC the engineer has power to fix fair and reasonable rates for variations according to clause 52.2, and is not obligated to use the same overhead percentages if they were unusually high in the original contract rates. While the original agreed rates cannot be renegotiated, variation rates are subject to independent assessment by the engineer. The subcontractor still needs to substantiate the overhead component of the original rates, and high markups in the original rates do not set a precedent requiring their use in valuing variations.

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My comments are given in red below.

Dear Prof Sam,

We got one delay issue related to delay in obtaining building permit from JAFZA.
Can it be treated as an issue be claimed under clause 44.1 (d) If obtaining the permit from JAFZA
is written in the contract as an obligation of the Contractor, then he cannot get an EOT. if not

Could you pls explain me under which clause can the contractor claim for EOT? –ditto-

Regards,

Prof. Sam.

Prof. Indrawansa Samaratunga PhD, DSc


FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng
Chartered Quantity Surveyor and Registered Arbitrator / Expert
Australian Inst.of Qty.Surveyors-Middle East Representative
PO Box 23461, Dubai, UAE. T +971504588949 F +97143378668

Regards.

----- Original Message -----


From: "Eric B. Bautista"
To: sam99@eim.ae
Date: Tue, 13 May 2008 12:51:10 +0400
Subject: Query - PC Rates Items

Dear Prof. Sam,

In a Lump Sum Contract, which one we should considered when adjusting the PC Rates items? Is
it based on the BoQ quantity or the Contract Drawings? Contract Drawings.

Regards,

Prof. Sam.

Prof. Indrawansa Samaratunga PhD, DSc


FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng
Chartered Quantity Surveyor and Registered Arbitrator / Expert
Australian Inst.of Qty.Surveyors-Middle East Representative
PO Box 23461, Dubai, UAE. T +971504588949 F +97143378668

Thank you and regards,

 ________________________
Eric B. Bautista

Sr. Quantity Surveyor/Planning & Cost Control

Amana Contracting & Steel Buildings - Dubai


----- Original Message -----
From: sathis jayaweera
To: sam99@eim.ae
Date: Tue, 13 May 2008 04:17:49 -0700 (PDT)
Subject: Re: Q&A-Sp08 3
Dear Prof Sam,
 
Please explained the following matters.
Assumed Condition of Contract is FIDIC 4th edition. The Contract has been delayed “X”
period due to the Contractor culpability and the Engineer has instructed a
variation within the “X” period in accordance with the sub- clause 51.1 CoC.
Would be value a variation in accordance with the sub- clause 52.1 or current market
price ?. If the variation is neither necessary nor appropriate then the Contractor can
demand it to be valued at current market prices or to decline from executing it.

Regards

Prof. Sam.

Prof. Indrawansa Samaratunga PhD, DSc


FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng
Chartered Quantity Surveyor and Registered Arbitrator / Expert
Australian Inst.of Qty.Surveyors-Middle East Representative
PO Box 23461, Dubai, UAE. T +971504588949 F +97143378668

 Thank you for  sharing your time with us .


 
W.P.S.K. Jayaweera

-----Original Message-----
From: rahul s nirgudkar [mailto:rahul_nirgudkar@rediffmail.com]
Sent: 14 May 2008 07:38
To: sam99@eim.ae
Subject: urgent response requested

Dear Sir,

I have a subcontract for false ceiling works, wherein most of the items in the subcontract
boq have been replaced by another type / design of ceilings, leading to lot of variations
for the subcontract.

The subcontractor has submitted his version of Rate Build Up (Rate Breakdown)for the
Original item rates in the subcontract when questioned for the Rate breakdown structure
of variation item rates.
The submitted version shows 25% OH & 15% Profit, which he claims is the basis for the
agreed subcontract price schedule, and hence the same shall be used for "Variations" as
per the Clause 52 of FIDIC-4th Edition-Red book. With this principle, he has used the
same structure for all variation pricing.
Is he not obliged to substantiate his 25% overheads under the provisions of FIDIC
Contract? Any required substantiation should have been obtained prior to entering into
the contract. In FIDIC forms of contract, there is no obligation requiring the Contractor to
substantiate the overhead component forming part of a contract rate.
His subcontract has some provisional sum items which have 15% profit margin over the
actual cost.

Could you please advise if contractually this argument of subcontract is tenable under the
provisions of FIDIC Contract, No. and is he entitled for the payment as per the aforesaid
principle. OH&P mark-up for new rates should be the same OH&P mark-up found within
the contract rates.

I understand that the original prices are agreed in the subcontract & not subject to
negotiation, but the new items of work (prices of variations) are subject to review &
assessment as per the FIDIC under clause 52.2 "Engineer's Power To Fix Rates" based on
his reasonable & fair evaluation. If the parties agreed to a bad bargain (because the
Contractor has unusually high rates/prices or high marks-up therein), then the Engineer
does not have the authority to rectify such bad bargain, in the process of fixing reasonable
and fair rtes/prices, because the parties have agreed in contract to use such high
rates/prices or high marks-up therein, in the valuation of variations.

The parties are bound to use such high rtes/prices or high marks-up therein for the
valuation of omissions ! Therefore the same should also apply to additions.

Regards,

Prof. Sam.

Prof. Indrawansa Samaratunga PhD, DSc


FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng
Chartered Quantity Surveyor and Registered Arbitrator / Expert
Australian Inst.of Qty.Surveyors-Middle East Representative
PO Box 23461, Dubai, UAE. T +971504588949 F +97143378668

I shall be obliged should you respond on priority please as this is urgent.

Thanks and regards,

Rahul Nirgudkar

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