Valuation of Variations
FIDIC and what happens
when you change it
David Risbridger
Leonie Sellers
21 July 2016
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
Valuation of Variations
What we will cover
1. Background.
2. Key FIDIC provisions.
3. Sanctity of the pricing.
4. Methods of measurement.
5. Differences in work/extrapolation of rates.
6. Fair/reasonable.
7. Other provisions.
8. Common issues.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Background
1. Clauses 13.1-13.3.
2. Right to vary.
3. Instruction/Proposal Request.
4. Entitlement to time.
5. Entitlement to Money.
6. Two competing approaches.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Key FIDIC Provisions (1)
1. Sub-clause 13.3 (link to Clause 12.3).
2. Contractor’s proposals – this can be a lump sum or any alternative method of
pricing.
3. Measurement under Clause 12 is the default position.
4. The Red Book is a re-measurement contract UNLESS YOU AMEND IT.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Key FIDIC Provisions (2)
1. The measurement agreed or determined in accordance with Sub-clauses 12.1 and 12.2.
2. The appropriate rate for the item
• the rate specified for such item in the contract,
• or if no such item, a rate specified for similar work.
3. New rate or price? When? (12.3(G))
I. no rate or price is specified in the Contract for this item; and
II. no specified rate or price is appropriate because the item of work is not of
similar character, or is not executed under similar conditions as any item in the
Contract.
4. The general evaluation test in Sub-clause 12.3(a) still applies.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Key FIDIC Provisions (3)
1. How are new rates and prices determined?
• derived from any relevant rates or prices in the Contract.
• reasonable adjustment for the matters listed in Sub-clause 12.3(a) and
12.3(G).
• reasonable cost plus profit taking account of any other relevant matter.
• cost means expenditure reasonably incurred including overhead and
similar charges.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Omissions
1. Agreement.
2. Applies where:
I. the Contractor incurred or will incur cost which if work not omitted would be
covered by a sum forming part of the Contract sum.
II. that the omission will lead or has lead to that sum not forming part of the
Contract sum.
III. cost not deemed to be in substituted work.
3. Engineer then agrees or determines the cost.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Determinations under Sub-clause 3.5
1. Consult first.
2. If agreement NOT reached, then make a fair determination in accordance with
the Contract, taking due regard of all relevant circumstances.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Sanctity of prices
What does this mean?
The level of the rate itself is not an “appropriate” issue.
WELDON PLANT V COMMISSION FOR THE NEW TOWNS [2001] ALL ER
(COMM) 264.
HENRY BOOT V ALSTOM [2000] BLR 247.
Is an employer constrained in ordering more of an item at a lower rate?
Additional information? Can a greater degree of breakdown help?
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Methods of measurement
Role.
What does FIDIC say?
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Differences in work
Not of similar character
Different conditions
Any conditions or those referred to in the Contract?
Extrapolation of rates
Mixed approaches
HENRY BOOT case
• Plant/material/labour/overhead
Preliminaries cost even if no applicable rate
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Fair/reasonable
Cost based analysis.
Market rate analysis.
WELDON PLANT V COMMISSION FOR THE NEW TOWNS [2001] ALL ER
(COMM) 264.
Any link to pricing in the contract?
Preliminaries, overhead and profit.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
General rate adjustment clauses
Dayworks
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Common issues
What happens if there is no provision?
Additional breakdown provisions – do they help?
Is it always cost?
Particular issues on omissions.
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Valuation of Variations
Measurement contracts
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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simmons-simmons.com
elexica.com
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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