Contracts: advanced questions Red Book

Question/Answer
Red Book (Civil Engineering; 4th Ed. 1987)
Remeasurement modified to Lump Sum
Question
The following query is in relation to a situation which has occurred in the context of the
execution of a Lump Sum contract, regulated by a standard FIDIC (Red Book) terms and
conditions. The Specifications call for "Cast Iron" pipes, while the BOQ calls for "UPVC"
pipes. The Contractor and upon the approval of the Engineer, and without having any
instructions to do so, executed the Works in UPVC. Does this entitle the Employer to
request cost saving on this item? And on what basis? Your response to the above is
highly appreciated.

Answer
You say that you have a Lump Sum Contract. The FIDIC Construction Contract Book is a
remeasurement contract so the payment provisions must have been changed to provide
for the Lump Sum. The answer to your question will depend on the wording of these
Lump Sum provisions. I regret that FIDIC can only comment on questions which on the
interpretation of the FIDIC General Conditions, so we are unable to answer your
question. We fear that this is an indication of what happens if General Conditions are
modified by Special Provisions without due care.

Subcontrcator's experience
Question
I would like your advice on the definition of a subcontractor, and of the following tender
criteria: "subcontractors' experience and resources shall not be taken into account in
determining the bidder's compliance with qualifying criteria". In other words, does this
mean that if a bidder has worked as a subcontractor, he is not permitted to add that
experience as part of his qualification? I would like your clarification.

Answer
The FIDIC definition of a subcontractor is given at Sub-Clause 1.1.2.8 of the 1999
Contract for Construction as: "Subcontractor" means any person named in the Contract
as a subcontractor, or any person appointed as a subcontractor, for a part of the Works;

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and the legal successors in title to each of these persons. Different clients have different
criteria when evaluating tenders. FIDIC would certainly expect that any client will want
to ensure that the tenderer has adequate experience as a main contractor and has not
just worked as a subcontractor. However, in FIDIC's opinion, this would normally be
worded as "Experience as a subcontractor ....". FIDIC has also known clients to be
concerned that tenderers have relied on a proposed subcontractor's experience and
resources when preparing a tender and then the named subcontractor is withdrawn and
another, less experienced, company is proposed after the tender has been accepted.
However, for an international tender, some clients require that a certain percentage of
the Works must be subcontracted to local companies. In this case the experience and
resources of the proposed subcontractors will be an important part of the tender. The
client's criteria when evaluating tenders depend on a number of different factors,
including the past experience of the particular client. In order to ascertain the exact
intentions for evaluating your particular tender you would need to raise the question
with the client.

Free-issue materials
Question
I have a question regarding Clause 69.1 for Default of Employer. We are executing a
Contract for a Project in Pakistan under FIDIC Fourth Edition, 1987. The Employer has
assigned The Engineer and also an Employer's Representative. The Employer's
Representative is form time-to-time acting like The Engineer and would like to
physically check the works at site. They are also applying deductions on the certificates
of The Engineer, such as retention money on escalation, and also Quantities, etc. The
amount of the unauthorized deductions are around 5 % of the total amount certificates
issued by The Engineer. We have served a notice under Clause 69.1 and 69.4, of the
Conditions of Contract to reduce the rate of work and furthermore, clarify that the Clause
69.1 explains the default of the Employer, regardless of the quantum of amount in case
of Employer's failure to pay to the Contractor total amount due under any certificate of
the Engineer. Do you think that the above statement is true and it is a case of default of
the Employer ?

Answer
Depending on what is written in the Contract and the Particular Conditions, generally
speaking you have a case against the Employer. The damages which the Contractor may
claim would include interest and/or financing charges. However, you must check the
provisions of the Sub-clause 2.1 Engineer's duties and authority ,to see what is
mentioned there. It is not very clear what is this Employer's Representative and what
are his duties under the Contract,. However, one would suspect that you have a case

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against the Employer.

Bogus claims
Question
I request to give me clarification about the correct interpretation of Clause 60.6 Final
statement in the FIDIC Conditions of Contract 1987 revised in 1992. This is about
submission by the Contractor of final statement containing the following (a) 'the value
of all work done in accordance with the contract, and (b)any further sums which the
contractor considers to be due to him under the contract or otherwise'. I want clarification
with respect to (b) above. Does it include the Claims which the Contractor has never
raised during the currency of contract according to provisions of the contract? I am
confronted with a dispute In which the contractor for a value of total work of Rs 70
million has submitted final accounts of Rs 280 millon by including various type of claims
which he never claimed during the contract period and now claims in the final statement
and since the Engineer/Employer failed to respond, the Contractor claims that the final
account has become final. I would request for an early response as to the true and
intended purpose of the sub-clause (b) of Clause 60.6 of the General Conditions of the
above mentioned FIDIC version for civil works construction. Should I include all bogus
claims what I intend to include for the purpose that if I claim USD 100 I would at least
get USD 1. How I can rebut this?

Answer
The provisions of Sub-clause 60.6 have to be read together with the provisions of Sub-
clause 60.5 and of course with the provisions of the Sub-clause 60.9. In order for the
Contractor to maintain any claim, he must include it in his Statement at Completion, if it
has arisen by then, and in his Final Statement. There are a number of incidences under
the contract when the Employer gives to the Contractor indemnities or is otherwise
responsible to the Contractor. Clauses in which this occurs and where the Contractor's
resulting claims against the Employer could arise for the first time after the Statement
at Completion or Final Statement have been submitted by the Contractor include the
following: Clause 19.2 (Employer's responsibilities) in relation to safety; Clause 21.3
(Responsibility for amounts not recovered); Clause 22.3 (Indemnity by Employer);
Clause 24.1 (Accident or injury to workmen); Clause 25.4 (Compliance with policy
conditions); Clause 26.1 (Compliance with statutes, regulations); Clause 70.2
(Subsequent legislation); and Clause 71.1 (Currency restrictions). In each of the above
cases, it is conceivable that the Contractor would wish to make a claim against the
Employer after the date of the Final Statement. Further, if the Contractor was made
liable under the applicable law to a third party in respect of design which had been

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carried out by the Engineer, the Contractor would wish to bring a claim against the
Employer to recover any damages paid out. Sub-clause 60.9 in fact bars the claims not
mentioned in the Statement at Completion and in the Final Statement. The purpose of
the sub-clause is sensible, namely to enable the Employer to achieve a reasonable
degree of certainty as to his ultimate liability.

Appointing an Engineer
Question
Is it recommended to have in a contract based on FIDIC's Electrical and Mechanical
Works Contract an external expert acting as the Engineer? Or is there no problem in
recruiting the Engineer from amongst the Beneficiary (in our case a "public" authority)?
We are signing a contract shortly. The Engineer is according to the Red Book, Clause 2.4
Part I bound to act impartially. The question is if there is an internal incompatibility in
the relationship to his Employer.

Answer
The basis upon which the 1987 Yellow Book and Red Book is written is that the Engineer
is appointed by the Employer, but that he is independent of both parties - i.e., he is an
independent third party. In many cases he is required to give impartial decisions - in fact
under Clause 2.4 of the Yellow Book he is required to act impartially at all times when
exercising his discretion. If the Engineer is an employee of the Employer - e.g., someone
from the Employer's Engineering Division - there is a big risk that he will not be in a
position to act impartially. Although he may be very experienced and capable from a
technical point of view, and able to handle all technical matters, he may not be free to
make decisions which involve financial arrangements, etc. in a fair and impartial manner.
It is not impossible, nor unknown, for the Employer to nominate himself or one of his
own staff as Engineer, but it is rare and certainly causes problems. The text of any
clauses referring to the impartiality of the Engineer will probably need revising at some
stage, as will the provisions for handling claims and disputes (Clauses 2 and 50). The
principle of using an employee of the Employer as Engineer would be more acceptable
if a Dispute Adjudication Board (DAB) was introduced to replace the principal provisions
of Clauses 2 and 50.1 to deal with claims and disputes.

Standard Letters
Question
I am a Civil Engineer, presently working as Contracts Manager. Foreign (non-British
nationality) engineers usually have an understanding of the contract document and the

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associated entitlements/obligations, but always express difficulty in composing (or
responding to, if they are on "the other side" , correctly worded "standard" letters to the
RE, Engineer or Employer in compliance with the requirements of the various sub-
clauses. Do you have such a publication?

Answer
The only book which we can recollect is "Musterbriefe in Englisch" (ISBN 3-7625-2607-
9) although its standard letters are not such as we would prefer to endorse. Although
we will review the situation with regard to the new FIDIC Contracts Guide, FIDIC lack
enthusiasm for the very concept of standard letters, which seems to be tied up with the
concept of avoiding thinking about the situation. However, we do recognise the validity
of concerns expressed by those whose first language is not English. Thus, "Musterbriefe
in Englisch" has been republished as an electronic edition (it goes with the 1987 Red
Book civil works contract). An updated version for use with the Construction Contract
1st Edition, 1999, the Red Book successor, will be published by FIDIC in 2009 (FIDIC
has acquired the copyright of Musterbriefe in Englisch). It should be noted that Edward
Corbett's book "FIDIC 4th "contains some standard letters. These have been
incorporated with permission in the electronic version of "Musterbriefe in Englisch"
published by FIDIC.

Appendix to Tender data mission (continued)

Question
I believe this case does not constitute a question of mistake in contract to be decided
under the applicable law. The schedule of prices of labour and materials is a provision
for the tenderer to indicate his price (cost plus profit) on which he had based his Contract
Price, in order for the Engineer to ascertain the value of an item of work that had been
executed (possibly under a variation order) and for which, or for a similar item of work
of which, no price could be found in the Bill of Quantities (BOQ). Thus the schedule of
prices of materials and labour only assists the Engineer to determine the overheads and
profits of the Contractor, under the terms of the contract, that has to be added to the
basic cost of executing an item of work, which the Engineer can always readily
determine. If provison had been made in the contract for payment for price escalations,
then such payments had to be determined by reference to price escalation indices,
published by an accepted authority. As to which source or publication is to be used for
this purpose, depends on what would have been reasonably expected to be in the minds
of the two parties at the time of entering into contract.

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Answer
We assume that this inquiry is about FIDIC 1999 Conditions of Contract where in the
199 Red Book Sub-Clause 13.8 it says: "13.8 (Adjustments for Changes in Cost) - In this
Sub-Clause, "table of adjustment data" means the completed table of adjustment data
included in the Appendix to Tender. If there is no such table of adjustment data, this
Sub-Clause shall not apply. If this Sub-Clause applies, the amounts payable to the
Contractor shall be adjusted for rises or falls in the cost of labour. Goods and other
inputs to the Works, by the addition or deduction of the amounts determined by the
formulae prescribed in this Sub-Clause. To the extent that full compensation for any rise
or fall in Costs is not covered by the provisions of this or other Clauses, the Accepted
Contract Amount shall be deemed to have included amounts to cover the contingency
of other rises and falls in costs. The adjustment to be applied to the amount otherwise
payable to the Contractor, as valued in accordance with the appropriate Schedule and
certified in Payment Certificates, shall be determined from formulae for each of the
currencies in which the Contract Price is payable. No adjustment is to be applied to work
valued on the basis of Cost or current prices. The formulae shall be of the following
general type: Pn=a+bxLn/Lo+cxEn/Eo+dxMn/Mo where: "Pn" is the adjustment
multiplier to be applied to the estimated contract value in the relevant currency of the
work carried out in period "n", this period being a month unless otherwise stated in the
Appendix to Tender; "a" is a fixed coefficient, stated in the relevant table of adjustment
data, representing the non-adjustable portion in contractual payments; "b", "c", "d", ...
are coefficients representing the estimated proportion of each cost element related to
the execution of the Works, as stated in the relevant table of adjustment data; such
tabulated cost elements may be indicative of resources such as labour, equipment and
materials; "Ln", "En", "Mn",... are the current cost indices or reference prices for period
"n", expressed in the relevant currency of payment, each of which is applicable to the
relevant tabulated cost element on the date 49 days prior to the last day of the period
(to which the particular Payment Certificate relates); and "Lo", "Eo", "Mo", ... are the base
cost indices or reference prices, expressed in the relevant currency of payment, each of
which is applicable to the relevant tabulated cost element on the Base Date. The cost
indices or reference prices stated in the table of adjustment data shall be used. If their
source is in doubt, it shall be determined by the Engineer. For this purpose, reference
shall be made to the values of the indices at stated dates (quoted in the fourth and fifth
columns respectively of the table) for the purposes of clarification of the source;
although these dates (and thus these values) may not correspond to the base cost
indices. In cases where the "currency of index" (stated in the table) is not the relevant
currency of payment, each index shall be converted into the relevant currency of
payment at the selling rate, established by the central bank of the Country, of this
relevant currency on the above date for which the index is required to be applicable.

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Until such time as each current cost index is available, the Engineer shall determine a
provisional index for the issue of Interim Payment Certificates. When a current cost index
is available, the adjustment shall be recalculated accordingly. If the Contractor fails to
complete the Works within the Time for Completion, adjustment of prices thereafter
shall be made using either (i) each index or price applicable on the date 49 days prior to
the expiry of the Time for Completion of the Works, or (ii) the current index or price:
whichever is more favourable to the Employer. The weightings (coefficients) for each of
the factors of cost stated in the table(s) of adjustment data shall only be adjusted if they
have been rendered unreasonable, unbalanced or inapplicable, as a result of Variations."
The clause is very clear and unfortunately the question raised is not related to an
interpretation of a Sub-Slause.

Fairness of deductions
Question
As our project is a lump-sum contract, the client has reduced some of the items and is
deducting suome of our payment amounts from the monthly certificate. Is it fair to deduct
an amount?

Answer
Although it is not for FIDIC to comment on the "fairness" of a particular circumstance, it
is the FIDIC philosophy to publish Conditions of Contract that adopt an approach of
fairness and balanced risk allocation between the parties as a primary focus. Further,
FIDIC can only comment in general terms on the interpretation of a FIDIC clauses, and it
should be noted that for the application of a clause to a particular problem situation, one
should always consult a specialist. With that being said, in general, the Sub-Clause
entitled Variations (Sub-Clause 52.1 in the 4th Edition or 13.1 in the 1999 Edition of the
Construction Contract) does provide the right for the Engineer to vary the work
downward; specifically the Engineer may decrease quantities or omit work, provided of
course that this work is not carried out the Employer or another contract. Further, Sub-
Clause 51.1 provides that such variations will be valued in accordance with the Clause
52, in the case of the 4th edition or Clause 12 in the case of the 1999 editions. Both of
these clauses provide the rules for the valuation of these variations, which include the
possibility of reduction in price. Please note that the above represents a general answer
only, and specific advice to the particular facts surrounding your situation, we
recommend you consult a specialist.

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Liquidated Damages
Question
I am working as a Resident Engineer for Highways with consultants. A brief detail of our
project is as as follows: The project is a repair project and is divided in 3 sections. The
sections are of varying lengths with 150m for the shortest one and 1.5 Km for the
longest one. Completion date for the project has already elapsed early this year and no
time extension has been granted to the contractor owing to delay on his own behalf.
Two sections have already been completed (opened to traffic) and the 3rd section is near
completion. No separate times for completion have been provided in the contract for
either section. ·Clause 47.2 of FIDIC Conditions of Contract (4th edition) recommends
the reduction in penalty subject to taking over of different sections. As sated above, none
of the sections have been acquired by the client contractually. The referred clause also
states that the provisions of the sub clause shall only apply to the rate of liquidated
damages and shall not affect the limit thereof. What I infer from this part is that even
after the reduction of penalty, it shall be applicable from the original date of expiry of
the contract. Is this the right interpretation? My second query is regarding the reduction
in liquidated damages. Under the above circumstances where the sections have not been
acquired, but opened to traffic and general public, can the penalties be reduced
contractually subject to mutual agreement with the client? Thirdly, during the currency
of the project, some savings have been there (which couldn't be estimated at design
stage due to repairing nature). The savings are less than 15% (considering Clause 52.3).
If penalties are applied and reduced thereof, are they to be calculated on the original
contract price or the revised one?

Answer
If understood correctly, your first question relates to sub-clause 47.2, specifically the
last sentence, which reads "The provisions of this Sub-Clause shall only apply to the
rate of liquidated damages and shall not affect the limit thereof." The meaning of this
sentence is that although this clause allows for the amount of liquidated damages to be
reduced proportionately to the work being handed over, if the work is handed over in
parts, the maximum limit of liquidated damages (as specified in the appendix to tender
(see Sub-Clause 47.1)) is not affected. In regard to your second question, Clause 47
should be read in conjunction with Clause 48. In the background to your question, you
stated that none of the sections have been 'acquired by the Client contractually', yet
earlier you state that '2 sections have already been completed (opened to traffic)'. In this
light, we would suggest that you may review both sub-clause 48.2 and 48.3, which,
depending on the particular fact pattern surrounding your contract, may be applicable.
In answer to your third question, liquated damages are not penalties. You are kindly

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referred to the verbiage contained in Sub-Clause 47.1, which reads, in part "... and not
as a penalty ...". As explained in the Guide to the Red Book, Liquidated damages are an
amount determined by the Employer, before tenders are invited, as a reasonable
assessment of the actual damages which he would suffer in the event of delay in
completion of the Works. Hence, in general, Liquadated Damages should be calculated
from the vantage point that will result in a reasonable assessment of the actual
damages.

Value Engineering sub-clause

Question
In terms of the FIDIC 1987 Red Book, is the Contractor entitled to a portion of the saving
as provided for in the terms of Sub-Clause 13.2 (Value Engineering) in the 1999 Red
Book?

Answer
The FIDIC 1987 eRed Book does not have a similar provision as the one mentioned in
the FIDIC 1999 edition Value Engineering, Sub-Clause 13.2 However you may find in
the 1987 Red Book a so called bonus for early completion.

Additional works
Question
Being a project manager from the client side, I would like to know as per FIDIC can I
force a contractor to carry out additional works prior to approval of his financial claim?

Answer
The basic answer is YES, provided you follow the correct contract procedures. There are
a number of Sub-Clauses which are relevant including, from the 1999 Construction
Contract: a) S/Cl 3.1: The Employer may have imposed constraints on the Engineer's
authority in the Particular Conditions. b) S/Cl 3.3: The Contractor shall comply with
instructions given by the Engineer. c) S/Cl 13.1: The Contractor shall execute and be
bound by each Variation initiated by the Engineer. Subject to exceptions as stated in the
Sub-Clause. d) S/Cl 13.3: Procedures for the Engineer to value the Variation. The
Engineer may have asked for and accepted a proposal, or he proceeds as Clause 12.

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New rates
Question
In a civil marine work contract of FIDIC conditions, disputes quite often occurs on fixing
of revision of rates. though clauses 51 and 52 of Fourth Edition - Red Book - clearly
provide causes for variation and valuation of rates, ambiguity still persists with respect
to adoption of revised rates for varied quantities only or for full quantity executed as
long asthere are no major changes in deployment of workmen, equipment and materials.
Leaving the decision to engineer may not give an appropriate solution as persons
holding the post of engineer may have different views and their decisions may not
exactly match with the views of FIDIC authors. Please clarify the situations when revised
rates are applicable for the entire quantity or for increased quantities only.

Answer
The decision whether a new rate applies to the total quantity of an item, or just to the
Variation quantity, will depend on the reason why a new rate is necessary. This may
depend on the reason and details of the change to the Contractor's cost. Sometimes the
original quantity will already have been executed and paid at the BQ rate, before the
Variation is ordered. However, sometimes the fact of the quantity being changed by the
Variation will change the circumstances and costs and makes it reasonable to pay the
total quantity at the new rate. The new rate may differ if it is being applied to the total
quantity or just to the Variation quantity. The Engineer will, of course, take all these
factors into account when calculating a new rate. You should also refer to the
commentary on Clauses 51 and 52 in the FIDIC Guide to the Fourth Edition. The
commentary emphasises the importance of consultation with both the parties.

Appendix to Tender data missing

Question
A contract was signed under the FIDIC Conditions of Contract which require that indices
for the skilled and unskilled labour should be filled by the Contractor in the relevant
Appendix while submitting the tender. This requirement including the source of the
indices was however not fulfilled by the Contractor. This fact was noted but employer
failed to get this requirement met and the contract was signed without this information.
The dispute arose when the contractor submitted escalation claim due change in prices
of the labour component according to relevant provision. The contractor insists the use
source indices issued by the local government for calculation of adjustment which is near
the place of the construction and because this condition is more profitable to contractor.
The Client insists that he will use the indices issues by a gevernment office which are

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normally used in government contracts. I am the Arbitrator in one such case and need
advice of FIDIC what will be the judicious coarse of action in this scenario. I however feel
that entire responsibility of not providing this information cannot be placed on the
Contractor and the Employer should have insured that Contractor provide this
information before signing of the contract. omission was made and the contract was
signed without this information (source of indices). I will be anxiously waiting for advice
from your expert what reasonable coarse of action should be adapted in this dispute
resolution as the Contractor has gone in dispute on this issue.

Answer
It seems that the Contractor made a mistake by not adding the information to the
Appendix to Tender. The Employer then accepted the Tender and the Parties signed a
Contract which included the mistake. Unfortunately you say that they cannot agree on
the information which should be added to the Appendix to Tender. To correct the
mistake requires a change to the signed Contract to add this information. Correcting a
mistake in a Contract is a legal question which must be studied under the applicable
law. FIDIC cannot comment on such legal questions.

Engineer's decision
Question
Our firm has a contract for consulting services with the Government of El Salvador for
the construction of major transportation infrastructure in the country. The project is
divided into three packages that are governed by FIDIC Conditions of Contract for Works
of Civil Engineering (Red book, 4th Ed. 1987). The construction of the first package of
project, which included two 400-meter bridges over the most important river in El
Salvador, was completed last April.The Contractor is a Joint Venture of firms that is now
claiming additional payments based on the contract documents. In order to have a clear
interpretation of the documents, we would like to clarify the following: Clause 67.1
Engineer's Decision - we would like to confirm if under this Clause the Contractor can
claim for matters that happened during the construction period, even after the Take-
Over Certificate has been issued and the Statement at Completion has been certified
and paid.

Answer
Regarding Clause 67.1: if the Contractor is dissatisfied with an Engineer's evaluation of
a claim under Clause 53, he may refer the matter at any time (before or after completion)
to the Engineer under Clause 67.1 for an "Engineer's Decision". He can do this any time
up to his Final Statement and there is no time limit. The Engineer then has 84 days to

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respond. The Contractor cannot submit a "new'" claim for normal determination under
this clause. The claim must first be processed under Clause 53, and only when a Clause
53 determination has been given which the Contractor finds to be unacceptable do we
have a "dispute" situation which can be handled under Clause 67.1.

Calculation of claims
Question
I would like to know if you can help me find information regarding the procedure and
calculation of claims (of any kind) arising out of a Civil Engineering Construction contract.

Answer
FIDIC publishes guides to each of its forms of construction contract, which may provide
the guidance you require on the procedures for claims. You would need to order the
Guide for the use of whatever Conditions you are using. If your enquiry relates to October
2000. FIDIC's guides do not elaborate on the calculation of claims, so you might need to
consult other publications. Personally, I am only aware of "Building and Civil Engineering
Claims in Perspective" by Geoffrey Arthur Hughes, which was first published by
Longman in 1983. It may have been republished and fulfil your needs.

Not in pre-handover list

Question
I have the following problem and I can not find a solution in the FIDIC Red Book Fourth
Edition 1887. The problem is as follows: we have made a contract with a pre-hand over
list made, with the Engineer, in April 2000. A new contract, given to another company
in the same building was given in May 2000, it was an obligation for me to give the keys
of the building. As the Engineer is in Zimbabwe and the Building is in Burundi, no
engineer was there for the hand over of the inside of the building. Now, the Engineer
asks us to repair some things which were not on the pre-hand over list. Can you please
tell me what I have to do.

Answer
FIDIC does not undertake to proffer advice relating to every situation which may arise
under a FIDIC-based contract. However, it appears that the answer to your question
depends upon whether a Taking Over Certificate has been issued. If so, the pre-hand
over list presumably advised you of the work described in Sub-Clause 49.2(a), and the
Engineer has asked you to repair some things as described in Sub-Clause 49.2(b). If not,
the Engineer may be "specifying all the work which ... is required to be done ... before

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the issue of such Certificate" under Sub-Clause 48.1. In either case, you have not
indicated any reason for not complying with the Engineer's instructions.

Additional payments
Question
Our firm has a contract for consulting services with the Government of El Salvador for
the construction of major transportation infrastructure in the country. The project is
divided into three packages that are governed by FIDIC Conditions of Contract for Works
of Civil Engineering (Red book, 4th Ed. 1987). The construction of the first package of
project, which included two 400-meter bridges over the most important river in El
Salvador, was completed last April.The Contractor is a Joint Venture of firms that is now
claiming additional payments based on the contract documents. In order to have a clear
interpretation of the documents, we would like to clarify the following: Clause 53.1
Notice of Claims - it is important to confirm if the Contractor can invoke this Clause to
claim for additional payment owing to construction works that were performed before
the Take-Over Certificate, once this Certificate has been issued. In other words, if the
Contractor can claim for matters that happened during the construction period even after
the Take-Over Certificate has been issued.

Answer
Regarding the application of Clause 53.1. This clause requires the Contractor to give
Notice of a potential claim within 28 days of the event occurring. This establishes his
right to claim and he should then proceed to substantiate the claim according to Clause
53.3. He can claim at any time - before or after Taking-over - if events occur (before or
after taking-over) which he considers entitle him to claim. The intention of Clause 53.1
is to try to make sure claims are dealt with as and when they occur so that everyone is
familiar with the circumstances (thus the 28 day provision) - and not to leave them to
the end - when people have probably forgotten all the details. If he did this within the
time limits, then the claim should be evaluated according to the Contractor's
submissions. If he did not - as would appear to be the case - and has come in with a
claim a considerable time after the event, then we would suggest that you have two
courses of action. Firstly you should perhaps try to establish why he did not give notice
within the 28 days. Either you can reject his claim on the ground that he did not submit
it within 28 days as required by Clause 53.1, or, under Clause 53.4 you can make an
assessment based on records which were kept at the time. Normally I would suggest it
depends on the circumstances. If the claim appears to be frivolous and confused with no
substantiation (possibly an event you knew nothing about) you may well decide to reject
it. But if it concerns an event of which you were aware which you knew had disrupted

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the Contractor, then maybe you could consider it under Clause 53.4.

New rates for remeasurement

Question
I have a question regarding adoption of FIDIC Red Book Fourth Edition reprinted 1992.
The particular Contract contains Clause 51/52 "Variations" and also contains Clause 56
"Works to be Measured" and has BOQ. Design and Construct Services for Electrical and
Mechanical were tendered as diagramatic designs and are to be developed to the
Approval of Engineer as part of obligations under the Contract and have various BOQ
items. This Design Development for Mechanical/Electrical services is his obligation
under the Contract, and in this way would not seem to qualify as a Variation to the
Contract. However new items to the original BOQ have been necessitated by DD. Under
which Clause can new rates be established for the re-measure of these Works?

Answer
The Conditions of Contract for Works of Civil Engineering Construction (1992) do not
contain express provision for new rates being established for the re-measurement of
non-varied Contractor-design works, where new items to the original BoQ have been
necessitated by Design Development. Typically, Contractor-design works are priced on
a lump-sum basis, and are not subject to re-measurement after Design Development,
so such express provision would be inappropriate in the Conditions of Contract which
FIDIC intended to be suitable for Employer-design works.

Termination before completion

Question
Has Employer got an authority according to FIDIC to terminate the contract of Engineer
before completion of project and appoint another engineering company or continue with
its own resources? I know that that Employer cannot do this according to Red Book FIDIC
Clause 1.1 Definitions by referring to Part II of the contract. What should we do as a
contractor at this stage?

Answer
You appear to understand FIDIC's provisions, as summarised at the top of page 41 of
the Red Book Guide: "It should be noted that ... the effect of ... [1.1(a)(iv)] is to prevent
the Employer from changing the Engineer without the consent of the Contractor." In
effect, provided the legal person defined as "Engineer" continues to exist, such legal
person continues to be the Engineer for the purposes of the Contract, and the Employer

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has no power to name someone else as Engineer. By "continues to exist", we mean does
not (as a natural person) die, or is not (as a company) dissolved. FIDIC cannot give
specific advice in respect to the actions a party should take, and only undertakes to
clarify aspects of its own provisions. You do not seem to need such clarification, but may
need to obtain advice from a lawyer with expert knowledge of construction law.
There is always a possibility that some aspect of the situation (which you have not
mentioned) would entitle the Employer to replace the Engineer under the law governing
the Contract. For FIDIC, it seems that you should first decide whether the replacement
"Engineer" is acceptable as such because, if not, you could inform the Employer
accordingly and seek to resolve the matter before it escalates into a major dispute.

Employer replaces the Contractor

Question
Regarding the correct application of the Red Book Contract, the Employer in compliance
with sub-clause 63.1, after giving written notice to the Contractor upon his
contravention of provision in sub-clause 4.1, enetered upon the site and the works, and
terminated the employment of the Contractor. The Employer wants to employ another
Contractor, which took second place in the initial, public tender, to complete the works.
The further procedure will be in compliance with sub-clauses 63.2, 63.3, 63.4 and
64.1.The questions is: is this procedure in compliance with the General Conditions of the
Red Book 4th Edition?

Answer
We refer to your query whether a proposed procedure complies with the fourth edition
of the General Conditions of Contract for Works of Civil Engineering Construction.

FIDIC cannot undertake to provide advice on actual circumstances, and is only prepared
to clarify and explain the meaning and purpose of the provisions it publishes in its
Conditions of Contract. In the case of serious matters such as termination, legal advice
should be sought.

However, we would make the following observations, without concluding whether the
Employer is entitled to proceed as you have described. For these purposes, we start by
assuming that the Employer's termination was valid by reason of the Contractor's breach
of sub-clause 4.1. Such validity may, of course, be challenged by the Contractor.

Following a valid termination, the Employer's options on employing another contractor

would not appear to be constrained by the General Conditions, other than under Clause
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63 (with which you state the further procedure will comply), although they may be
constrained by the applicable law. You mention compliance with sub-clause 63.4, which
relates to assignment of subcontracts. Applicable law may constrain the Employer's
rights in respect of subcontracts which were associated with the Contractor's breach of
sub-clause 4.1.

You mention compliance with sub-clause 64.1, which relates to urgent remedial work
which the Contractor is unwilling or unable to do, prior to termination. After termination,
his previous unwillingness or inability would not seem to entitle the Employer to invoke
sub-clause 64.1. As regards employing a contractor which took "second place ... in the
initial public tender", this is not a matter to be decided by the General Conditions of the
Contract under which the termination was effected. The choice of replacement
contractor is a matter to be decided by the law relevant to the procurement procedures
and any constraints imposed by those providing funds for the project.

Delayed payment
Question
I am an Architect registered with the RIBA in the UK since 1978 and the UAE Authorities
in Abu Dhabi, UAE since 1981.

I have recently been Engineer under a FIDIC Red Book 4th Edition Building Contract
between a UAE Government Agency and a local Contractor, and Employer's
Representative/Adviser under a FIDIC Design and Build Contract, same Employer but
different Contractor.

Clauses of Particular Application have been prepared by a third party advising the
Employer direct in both cases, but largely ignored, the Employer paying late throughout,
not paying the final Interim Certificates on Taking Over the Works in either case,
threatening the imposition of Penalties by ignoring and/or rejecting the cases for
Extensions of Time in both cases, and not paying at all until forced agreement to reduced
amounts has been accepted by the Contractors through barter.

As you may know, there is very limited recourse to the law here, especially for foreigners.
Both Contractors are likely to weigh the costs of Courts and further Delay against the
benefit of any payment at all; one has already given in, but the other is still fighting, or
perhaps more realistically, negotiating.

What should I do, please: indeed, is there anything that can be done ? This is the worst

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case of abuse of Contract I have come across in more than 20 years here, though the
amounts are relatively small.

Answer
Whilst we can sympathise with the situation described in the question, there is not a lot
FIDIC can recommend or that he can do as Engineer in this case.

The situation described is, unfortunately, not all that uncommon in some Middle East
countries and the ultimate decision of what to do lies with the Contractor. If he feels the
situation warrants extreme measures, then he can terminate under Clause 69.1 (unless
of course 69.1 has been changed - as it very often is in these countries). Otherwise there
is not a lot you can do.

Being fair and impartial the Engineer could (and perhaps should) write to the Employer
reminding him of the terms of the Contract - but he will probably bring down the wrath
of the Employer on his shoulders, and that may not help anybody.

You should perhaps also bear in mind that Contractors who choose to work in these
countries are usually (or should be) rather familiar with this situation and may well have
allowed something in their price to cover this sort of thing - especially, as the person
asking the question says, the amount is not very large.

Expiry of Defects Liability Period

Question
For the Red Book, can the Engineer issue instructions under Clause 13.1 after the expiry
of the Defects Liability Period ?

Answer
After the Defects Liability Period expires, the Engineer may issue instructions under
Clause 49, and cannot rely upon Clause 13 as authority to issue other instructions.

Performance security
Question
Please inform us about the validity of the performance security if the duration of the
contract is 90 days.

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Answer
These principles would probably apply whichever FIDIC document is being used.

Priority of tender documents

Question
The question refers to FIDIC Conditions of Contract for Works of Civil Engineering
Construction (4th Edition 1987, reprinted 1988 with editorial amendments, reprinted
1992 with further amendments). I am an employer who is negotiating with the
contractor now. I have a trouble in using the FIDIC conditions, and ask for your help
urgently. Sub-Clause 1.1 (b)(v) "Tender" means the Contractor's priced offer to the
Employer for the execution and completion of the Works and the remedying of any
defects therein in accordance with the provision of the Contract, as accepted by the
Letter of Acceptance." And Sub-Clause 5.2 specifies the priority of the contract
document, of which the Tender is listed as third. Are those two "Tender" have the same
meaning? Can we explain that the Tender only refer to the document entitled letter of
tender (maybe 1 or 2 pages, very short and simple anyway), or all the documents
submitted by the Contractor along with the letter of tender as response upon the
Bidding Document (a lot of documents, such as appendix to tender, priced BOQ,
technical proposal, evidence for construction experience and financial capacity)?

Answer
The Tender at Sub-Clauses 1.1(b)(v) and 5.2(3) means the form of Tender which is given
at the end of Part 1 of the Red Book. The form of Tender, at paragraph 2, confirms that
the Appendix to Tender forms part of the Tender and Sub-Clause 1.1(b)(iv) confirms
that the priced bill of quantities forms part of the Tender. If the Employer requires other
documents to be included in the Contract as part of the Tender then he must state this
clearly in the Instructions to Tenderers and in the form of Tender.

Obtaining Contract Data

Question
Sub-Clause 11.1 tell us that the hired contracting party is responsible for the data
contained in his proposal based on the data supplied by the Contractor. Could you
please tell me how I can obtain the data?

Answer
The Contractor must have based his tender on information: 1) which was provided to all
tenderers by the Employer from the investigations which had been carried out by the
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Employer; 2) which the Contractor obtained from his own inspection and examination of
the Site and its surroundings. Where the Contractor obtained this information will
depend on the circumstances but he must have satisfied himself that his tender was
correct and sufficient to meet his obligations under the Contract.

Interim certificates
Question
Sub-Clause 60.4 stipulates that the Engineer may correct any error in an interim
certificate in subsequent certificates. Are there any limitations in the application of this
provision?

Answer
You are referring to Sub-Clause 60.4 of the 1987 Contract for Civil Engineering Works.
There is a similar provision at Sub-Clause 14.6 of the 1999 Contracts. The Contract does
not put any limitation on this provision. However, under Sub-Clause 60.2 the Engineer
has previously certified the amount which he considered to be due and payable. If he
has now found an error and changed his mind he should explain the reasons for the
change.

Refixing of rate
Question
I am interested in application of Clause 52.2 (Power of the Engineer to fix Rate). If
circumstances allow a refixing of rate, would it apply to the varied
quantity(increased/decreased) or to the entire quantity, i.e., quantities in the bid plus
increase/decrease?

Answer
You are referring to the 4th Edition 1987 of the Contract for Works of Civil Engineering,
Sub-Clause 51.1 (a) allows the Engineer to issue an instruction to increase or decrease
the quantity of any work included in the Contract. The rate which the Engineer agrees or
fixes under Sub-Clause 52.2 would only apply to the varied quantity (increased or
decreased). The original quantity is not part of the Variation and would be paid at the
original rate.

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Recovery of Costs
Question
Working with 1987, 4th Edition, reprinted in 1992 FIDIC form of contract on a project
where Clause 70, whist being modified does permit the recovery of changes in the prices
of labour and materials. Are there any legal precidents which reflect the provision
reflected in the 1999 form of contract to allow the recovery of costs, post the stated
contract completion where the contractor has failed to complete the works in the
specified time? Or are there any precidents to reflect the recovery of costs per sec, post
the contract completion date? If there are any precidents, if there are in electronic,
format, could you forward them or, advise where they could be obtained.

Answer
FIDIC is unable to provide legal guidance or information on legal precedents. However,
to be helpful, the federation has asked an expert to comment so that your future research
can guided in the approriate direction. You are correct that the 1987 4th Edition does not
include specific provision for the recovery of price changes after the contract completion
date when the Contractor has failed to complete the work in the specified time.
Alternative clauses can be found in the FIDIC Guide to the 4th Edition and in the 1999
Contracts. The problem with legal precedents is that no two dispute situations are ever
exactly the same and so need legal advice. Guidance and summaries of some arbitration
awards can be found in the international legal journals, newsletters from law firms and
the publications of the international arbitration centres such as the ICC Paris, the London
Court of International Arbitration and other centres in different parts of the world.

Engineer's instructions
Question
A FIDIC standard Contract for civil engineering (Red Book 4th Edition 1987) is basis of
a Contract for a Wharf and Approach Bridge Construction and Causeway Reclamation
project (The Contrac•). The Contract is a Lumpsum Agreement and the BOQ refers as
follows: All works in this section except Provisional Quantities will be paid for as
LumpSums. Quantities are estimates only. If the Contractor wishes, additional items may
be added to the Bill or quantities amended. Rates nominated will be used only to assess
variations (if any) to the Contract and to assess progress claims and payments.
Provisional Quantities and Items will be paid for as described in the Conditions of
Contract. One of the BoQ item was pertaining to Crane Rails to be provided by the
Contractor. Later the Company organized the Rails on their own and the Contractor is
not required to provide the Crane Rails as per the BoQ. In view of this the Crane Rail

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related Amount as stated in the BoQ is proposed to be deducted out of the BoQ. Please
confirm that this is proper approach under Article 51 and 52 or any other conditions of
FIDIC standard contract.

Answer
Under a FIDIC Contract, any change to add or omit work must be made by an instruction
from the Engineer under the appropriate sub-clause. You mention Sub-Clauses 51 and
52, which are from the 1987 4th Edition of the Contract for Civil Engineering Works.
Sub-Clause 51.1, item (b) allows the Engineer to issue instructions to omit work, but this
is qualified by the statement in brackets "(but not if the omitted work is to be carried out
by the Employer or by another contractor)". Your proposal for the crane rails would
appear to contravene this requirement. Hence the change and price adjustment may
need to be negotiated between the Parties and would probably involve legal advice.

Variations exceeding 15 percent of the effective Contract Sum

(Clause 52.3)
Question
We are in the process of preparing a claim under Clause 52.3 of the FIDIC Conditions of
Contract for Works of Civil Engineering Construction and are seeking clarification on the
application of the clause especially as regards to which amount do we apply the
percentage which is in excess of the 15%. Do we apply it to: - The effective contract
sum; or, - The difference between the amounts calculated using the actual percentage
by which the effective contract sum shall have been exceed by and the 15%. Please note
that In this particular contract, the majority of Preliminary and General Items were stated
as provisional sums (as stated in the Bill of Quantities by the Engineer) it is not easy for
us to accurately determine the contractor's on-costs. We have since acquired a copy of
the "Guide to the Use of Fidlic Conditions of Contract for Works of Civil Engineering
Construction" and the explanation given does not adequately cover us, refer page 117
of the guide. Please advise us on how this clause is to be applied.

Answer
The precise problem is not clear and we can only comment in general terms on the
interpretation of Sub-Clause 52.3. The Sub-Clause allows the Contractor and Engineer
to discuss and agree a lump sum addition or deduction to the Contract Price when the
additions/deductions as described at (a) and (b) are more than 15% of the "Effective
Contract Price". It will be up to the Contractor to prove the changes to his Site and
general overhead costs. The details and calculation of the lump sum will dependant on

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the reasons for the increase or decrease to the Contract Price.

Unit rates
Question
1. The following addition has been made in Clause 52.2 (FIDIC 1987, Contract for Works
of Civil Engineering) in our contract by the Employer: "..Provided further that no change
in the Unit Rates or prices quoted shall be considered for any item in the Schedules to
the Bill of Quantities, unless such item individually accounts for an amount of more than
2 percent of the sum named in the Letter of Acceptance, and the original billed quantity
by more than 30 percent. Not withstanding above, for variation exceeding 10% in
quantity of any item of BOQ with respect to original BOQ quantities, the following shall
apply to the unit rate of that item: a) For rates quoted below CSR 2000 rates, no change
in quoted unit rate shall be allowed. b) For rates quoted above CSR 2000 rates, the
quantity exceeding 10% from original BOQ quantity of the items shall be paid to the
contractor as per NHA CSR 2000 rates applicable in the relevant district. Provided
further that for non BOQ items appearing in NHA’s CSR 2000, CSR 2000 rates shall
apply whereas the rates of non CSR & non BOQ items shall be determined by the
Engineer as stipulated in General Conditions of Contract." 2. The Situation BOQ Item
No.108b(i) Formation of embankment from roadway excavation in Rock material (Hard
Rock) and BOQ Item No. 106d(i) Excavate Surplus Rock material (Hard Rock) has
increased up to 453 % and 77.8 % respectively from the Original Billed Quantity and
these Items are individually accounting for more than 2.55% and 4.99 % respectively of
the sum named in the Letter of Acceptance. Therefore, we desire to request the
Employer/The Engineer that the Unit Rates for the said items as quoted in the BOQ for
the entire quantity be changed and till the time new rates are fixed, the provisional rates
or prices be determined in accordance with CSR-2005 with 25% Premium to enable on-
account payment. 3.Questions a) Will the revision of rates be based on composite
schedule of rates – 2005 (CSR- 2005) with 25% premium as requested by us? b) Are
“sub- paragraphs a and b of the addition made in the said clause” (refer to para 1 above
) applicable to us as we consider that the said sub paragraphs are not relevant to us
because our variation is over 30%. c) Will Revised Rates be applicable to the entire
quantity or only on varied quantity? d) With so much variation, is it alright to ask for
determination of Provisional rates?

Answer
As a general principle, FIDIC expressly prohibits users of its contracts to add and adjust
Clauses in the General Conditions. Any adjustments and changes should be made in the
Particular Conditions. However, since your Organization may not be responsible for

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misuse and breach of copyright we shall attempt to help you. But here again, FIDIC is
able to offer advice on interpreation of clauses, but of course only on the clause of the
contracts General Conditions, not on someone else's clauses. This said, once again, we
shall try to be helpful on the understanding that in future you try to impress on clients
that they should use the GCs correctly, and not risk legal action and contract invalidity
owing to breach of copyright. The changes to the GC mean that the interpretation of the
FIDIC Sub-clause 52.2 may not be relevant to the amended contract. However the
following may be helpful. a) Impossible to answer because of the changes to the GC. b)
Impossible to answer because of the changes to the GC. c) Revised rates are normally
only applicable to the additional quantity but this depends on the circumstances and the
make up of the revised rates. In determining revised rates the Engineer should take all
factors into consideration. d) The Contractor is entitled to be paid for work done in
accordance with Sub-Clause 60.2. If the revised rates cannot be agreed in time for the
next Interim Payment Certificate then the Engineer should determine provisional rates
as the last sentence of the first paragraph of Sub-Clause 52.2. If the final rate is different
to this provisional rate then Interim Payment Certificates can be corrected as Sub-Clause
60.4.

Additional sum for replacement cost

Question
We are requesting a clarification of the intention of Clause 21.1 (b) Insurance of Works
and Contractor's Equipment of the FIDIC Civil Engineering Construction 1987 (4th
Edition) Part1. There appears to be a mixed Insurance market view as to whether the
additional sum of "15% of such replacement cost" for Professional Fees, Demolition and
Removal of Debris applies to: (1) each of these costs individually, or (2) as a combined
amount, and (3) whether this amount should be applied as a percentage of loss or a
percentage of the sum insured (contract value). Our Contractors are keen to have
clarification.

Answer
The wording of Sub-Clause 21.1 (b) should be clear. The insurance shall cover the full
replacement cost as (a), plus an additional 15% of that figure. This additional 15% is to
cover any additional and incidental costs, INCLUDING professional fees etc. This figure
may be changed in the Particular Conditions and you should also refer to the FIDIC Guide
to the 4th Edition, at page 72.

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Excess quantities of work (Sub-clause 52.3)
Question
I am "The Engineer" of Project and have recommended re-rating of certain items of work
under the provisions of Clauses 52.2 of the Contract. I have however failed to
understand from the given provision is that: a) The Engineer shall evaluate at the time
of Taking Over, if the Contract Cost has increased or decreased (±) 15% of the original
cost of contract, as a result of: i) all work executed & measured is in excess of BOQ
qualities. b) Then the Engineer shall determine such further "Sum" that may be added
or deducted from the contract price, taking into regard the Contractor's site and general
overhead costs of the Contract based upon only the amount by which such
additions/deductions will be in excess of 15% of the Effective Contract price. In my
opinion the Excess quantities of work have been taken care of by re-rating under Clause
52.2 and no further Sum may be added to the Contract. Does the Clause 52.3 intend to
apply the re-rating on quantities that are more than 15%of the BOQ quantities thus re-
rated. I quote an example: let us assume the cost of Contract as USD 100000. A BOQ
item costing USD 20000 is increased to value USD 50000 at contract rates. Hence re-
rating under Clause 52.2 becomes applicable. On re-rating the value of (original +
increased) qty of work becomes USD 55000. Now the total value of contract, i.e., USD
55000. The value of work beyond 15% of contract price is $ 40,000. Is the Contractor
entitled to additional premium under Clause 52.3 for Executing work beyond 15% of
Contract price. Is this what is meant by the provision of the Clause 52.3?

Answer
Clause 52.2 refers to the re-rating of an individual variation. Clause 52.3 refers to the
situation when the total effect of all variations, plus the remeasurement of the
approximate quantities in the BoQ results in an increase or decrease of more than 15%.
It is possible that each individual variation did not have a significant effect on the
Contractor's overheads but the total effect of all variations and the remeasurement was
significant. It is necessary to consider the actual effect of the additional quantities on the
Contractor's overheads. For example, part of the allowance for overheads may be a
fixed, or lump sum, figure which is not related to the quantity of work which has been
carried out. A substantial increase in the total quantity of work may not increase this part
of the overheads. Hence, the overheads per unit quantity would decrease. The allowance
for overheads in the rates would need to be reconsidered. Any re-rating under Clause
52.2 would be taken into account when considering Clause 52.3. The Guide to the Fourth
Edition published by FIDIC gives useful guidance and examples at pages 115 and 117.

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Free haulage
Question
My inquiry is: are their any guidlines for maximum FREE HAULAGE distance ... for the
TERM BORROW materials to be engaged in EMBANKMENT CONSTRUCTION ....
sinilarly....what free distance limits are set/provided in FIDIC for any transportation of
material .... from BORROW, from the site of e.g., asphalt mixing or concrete mixing plant
to the site of accomodating the finished product in the road construction projects.

Answer
The FIDIC Conditions of Contract give the legal rights and obligations of the Parties to
the Contract. Matters such as the maximum free haulage distance will depend on the
requirements and details of the project. They will vary for different projects and should
be given in the technical specifications and/or bills of quantities.

Enforcing a claim
Question
I am requesting an interpretation of Clause 63.2 and 63.3 of the FIDIC Red Book, 4th
Edition. a) When a Contractor has sums due to it arising out of a valuation under Clause
63.2 at the time of termination, and the Employer/ Engineer delays certification of
possible claims under Clause 63.3, how does FIDIC envisage that the terminated
Contractor may enforce its claim/obtain those sums certified by the Engineer as being
due to it? b) Once a new contractor has been engaged, is the date scheduled for
completion under the new contract relevant, and when is the new contractor liable for
further delays to the completion date? c) Is there a duty on the Employer or Engineer to
inform the first Contractor that the project has been completed? When the defects
liability period is over? d) Is there a duty on the Employer/Engineer to issue a certificate
in accordance with Clause 63.3 within a reasonable time? What may be considered a
reasonable period for issuing such a certificate? e) What are the possibilities for a
Contractor to obtain the monies due under Clause 63.2 if the Engineer fails to issue a
certificate under Clause 63.3.?

Answer
This is really a legal question, but the key seems to be that the first sentence of Clause
67.1 says that it continues after termination. A few additional comments may be helpful.
One assumes the enquiry is referring to the Fourth Edition, amended 1992, without any
significant amendments. Matters arising from termination under Clause 63.1 will
depend on the provisions of the applicable law as well as FIDIC Contract Clauses. Most

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legal systems include requirements for the termination of a contract and also contain
provisions based on the concept of "good faith" which may be applicable. Any comments
based on the FIDIC Contract must be reviewed in relation to the applicable law, but
some general comments may be helpful. a) Clause 67.1, first sentence, says that it
continues after termination. b) Clause 63.1 enables the Employer to "terminate the
employment of the Contractor". The Clause is clear that this does not release the
Contractor from any of his obligations or liabilities. So does the law require that the
Employer also is not released from his obligations? If so then other Clauses will also be
relevant. c) The new contractor is presumably liable for delays which he causes and
which are not attributable to the previous contractor. d) Clause 1.5, final sentence,
requires that any consent, approval, certificate or determination shall not unreasonably
be withheld or delayed. e) Clauses 60.6 and 60.8 give time periods for the Contractor's
Final Statement and the Engineer's Final Payment Certificate. Clause 63.3 requires the
Engineer to issue a certificate, without stating a time period. By reference to Clause 1.5,
this must be issued in a reasonable time. Reasonable might be based on the Clause 60.6
and 60.8 time periods unless there are special circumstances. f) It certainly seems
necessary for the Contractor to be informed, or his questions to be answered, in order
that he knows when the construction and Defects Liability Periods are completed. g) The
Contractor's rights and procedures for obtaining payment are covered by Clause 67 and
the applicable law.

New rate or price

Question
We are a consulting firm providing Contract Administration Services to Contractors in
Pakistan. While seeking assistance from the FIDIC website FAQ Section, we have come
across the advice upon Sub-Clause 52.2 of Red Book 4th Edtion Conditions of Contract
Part II stating therein that: the rate which the Engineer agrees or fixes under Sub-Clause
52.2 would only apply to the varied quantity (increased or decreased). The original
quantity is not part of the Variation and would be paid at the original rate. The rationale
being used in construing the Sub-Clause 52.2 in terms that the Revised Rates under
Sub-Clause 52.2 will be applied to the varied quantity only has created much confusion
in some of the on-going projects with the National Highway Authority, Pakistan. As per
the advice of FIDIC Secretariat FAQ Section, if for instance, a Contractor's original BOQ
work increases from 100m3 to 140m3 , then he shall be paid for 100m3 as per original
rates and for the remaining 40m3, revised rates shall be applicable. If we apply the same
logic in a case where the Contractor's original BOQ work decreases from 100m3 to
60m3, then he shall be paid for 100m3 as per original quantity of work. Whereas, for
the decreased quantity, he should be paid at the revised rates (although he shall be

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actually executing 60m3 work.). The same is true for the case when total executed
quantity exceeds by more than 30% and the new rate shall be applicable to the total
executed quantity. The same Clause cannot be construed differently. If this does not
happen, then it shall cause prejudice to the interest of the Contractor.

Answer
Under Sub-Clause 52.2, the Engineer only fixes a new rate or price when the BOQ rate
or price has become inappropriate or inapplicable for a particular Variation. In fixing the
new rate or price he will consider the reasons why the original rate or price should be
changed. He will not fix a new rate or price until he knows whether it involves an
increase or decrease in quantity. The new rate or price will probably be different for a
decrease to that for an increase. It may be different for a large increase to a small
increase. The anomalies which you mention should not occur because the Engineer will
have considered these situations before he fixes the new rate or price.

New BoQ rates

Question
A contract was drawn up for a specific length of highway. Re-alignment was required
which increased the length by a few kilometers. Should this additional work be included
in a variation order as per Clause 51 or should a seperate contract be floated. The
contractor is asking for single variation order with two different refixed rates (for the
same item of BoQ ), one for the variation in the original work and second for the
additional work. I differ with his views. I feel that if one variation order is considered for
the whole work then only only one refixed rate for varied quantity can be given. I require
your advice on this issue.

Answer
If both the change to the original work and the additional work came from the same
change of requirement and instruction then it would be usual to issue a single variation
order. However, it is also quite normal for the price calculations for a variation order to
include different rates for the same BoQ item. The contractor's costs and the reasons
why the BoQ rates are inappropriate may be different for the varied work and for the
additional work. It is then fairer and more transparent, to the benefit of both parties, to
negotiate different new rates.

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New variation order
Question
A contract was drawn for a specific length of highway. Re-alignment was required which
increased the length by few kilometers.should this additional work be included in a
variation order as per Clause 51 or should a seperate contract be floated. The contractor
is asking for single variation order with two different refixed rates (for same item of
BoQ),one for the variation in the original work and second for the additional work. I differ
with his views. I feel that if one variation order is considered for the whole work then
only only one refixed rate for varied quantity can be given.irequire your advice on this
issue.

Answer
If both the change to the original work and the additional work came from the same
change of requirement and instruction then it would be usual to issue a single variation
order. However, it is also quite normal for the price calculations for a variation order to
include different rates for the same BoQ item. The contractor's costs and the reasons
why the BoQ rates are inappropriate may be different for the varied work and for the
additional work. It is then fairer and more transparent, to the benefit of both parties, to
negotiate different new rates.

Instructions to vary the Works

Question
We are executing a construction works project (18-floor tower), now there is an addition
of two more floors. I would like to know ... this addition would be dealt as a variation or
separate contract required, where we will have the liberty to revise the price, since this
two floor's addition is less than the 25 percent of the contract value, hence we dont have
right to increase the price, incease if we deal it by variation. please clarify.

Answer
Clause 51.1 allows the Engineer to issue instructions to vary the Works. Your question
is whether the additional two floors are just a change to the quantity of the work which
is included in the Contract, as Clause 51.1(a), or are outside the scope of the Works,
which should be defined in the Contract. The answer to your question therefore depends
on the exact wording of the Contract Agreement, the other contract documents and
perhaps also the Tender Documents. It will also depend on the interpretation of this
wording in accordance with the applicable law. This is not something which FIDIC can

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answer and you should obtain specialist advice.

Fixing of a new rate (Red4: 52.2)

Question
We requested for the clarification regarding replies to a couple of questions which
appear at the FAQ Section of FIDIC website. Reply to the first question illustrates that
under Sub Clause 52.2, Engineer may fix a new rate or a price if the BOQ rate becomes
inappropriate or inapplicable for a particular variation, keeping in view the reasons for
the change. In reply to the second question, FIDIC says that the original quantity is not
a part of the variation and cannot be paid at the revised rate. Replies to the questions as
noted above are contradictory to each other and we think that the matter should further
be clarified. Our elaborate note, which was submitted to this effect constitutes of our
understanding of the Clause 52.2 of the Red Book 4th Edition. The definition of the
varied work trickles to the Clause 52.2 from the Clause 51.1, which gives the
definition/scope of the varied work as following: (a) increase or decrease the quantity of
any work included in the Contract, (b) omit any such work (but not if the omitted works
is to be carried out by the Employer or by another contractor), (c) change the character
or quality or kind of any such work, (d) change the levels, lines, position and dimensions
of ay part of the Works, (e) execute additional work of any kind necessary for the
completion of the Works, (f) change any specified sequence or timing of construction of
any part of the Works. The given definition thus holds that the varied work may not
essentially comprise of only the change in the quantity of certain item included in the
contract. Varied work may also arise out of the virtue of other reasons as noted above.
Hence, restricting the definition of variation only to the change in quantity may not be
appropriate. The reply given at the FIDIC website to the first question, as has been
referred above, seems to hold the same view by the virtue of which the decision to this
effect has been left to the Engineer. However, the reply to the second question forwards
rather a restrictive interpretation of the Clause 52.2 by saying that a new rate would
apply only to the increased/decreased quantity. Such an interpretation falls in
contradiction to the definition of the varied work as well as the open ended spirit of the
FIDIC Document in general and that of the Clause 52.2, read in conjunction with the
Clauses 51.1, 51.2 and 52.1 there-before, as well as that of the Clauses 52.3 and 52.4
thereafter. ..... FIDIC's initial reply: FIDIC can only comment in general terms on the
interpretation of a FIDIC clause. If you require a more detailed opinion on the application
of a clause to a particular problem situation then you should consult a specialist. The
examples in your letter illustrate the wide range of situations which may arise on a
project and result in the application of Clause 52.2. For this reason, the clause cannot
restrict the Engineer in the way he calculates a new rate. The Engineer is aware of the

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exact situation and so can make the appropriate decision to suit the wording and
application of the Variation. A Variation normally, but not always, only applies to work
which has not yet been executed. If somew ork has already been carried out on the same
basis as was envisaged for the original bill rate then that work would normally be valued
at the bill rate. However a particular Variation, such as a decrease in quantity,may be
worded in such a way as to require a different approach. ........ Your reply also narrates
that our understanding of the issue falls closely to a certain project specific legal opinion.
We believe that such a concurrence on the matter has become evident only because of
the proper understanding of the rationale. This particularly holds when we also consider
the possibility of variation because of the decrease in the quantity of certain items of
work. No logic would allow that the decreased quantity which is not executed may be
paid at some revised rate fixed by the Engineer. The revised rate would certainly apply
to the quantity executed. The rationale thus demands the same treatment for fixing of
the rate by the Engineer in case of variation in the quantity of certain items of the work
because of an increase, giving an obvious reason of our understanding of the matter in
line with the legal opinion in the similar context. Your reply dated 7th June 2007 further
seems to acknowledge that the exact situation under such a case may only be
determined by the Engineer through an appropriate decision, as has been provided
under the spirit of the FIDIC Document. However, the comments thereafter, once again
seem to restrict the definition of variation. So, to continue: regarding fixing of a new rate
(Red4: 52.2) Regarding our query regarding re-rating of the varied quantity. We seek
the clarification regarding the opinion of FIDIC on re-rating of the varied quantity, as
shown in the FAQ Section of the FIDIC website. Our debate/discussion as appended with
our query is only meant to express our understanding that the Sub-Clause 52.2 only
talks of the "varied work" and not the "varied quantity", which, however, remains
subservient to the definition of "varied work". The actual intention of our query thus
remains to seek the clarification in light of the Sub-Clause 52.2 of Civil Works contract
4th Edition, 1987. To this effect, it may be deemed appropriate that the writers of this
particular clause or the related backup material may be consulted so that the ambiguity
or the confusion, as has arisen regarding the varied work through the opinion of FIDIC in
the FAQ section, may be removed and the prestige of the organization like FIDIC, which
is considered as an apex body in contract administration, would be maintained.

Answer
Thank you for your more detailed explanation of your query. Our replies to previous
questions were in response to particular questions, whereas your question is rather
different. You are, of course, correct that Variations under Sub-Clause 52.1 can cover a
wide range of situations, including changes to the nature as well as to the quantity of an
item of work. For this reason, Sub-Clause 52.2 must be general to cover the wide range

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of potential situations. It is then for the Engineer to assess the particular situation and to
agree or fix an appropriate rate. In deciding the quantum, and also the application, of this
rate the Engineer would take into account the consequences of a change in nature as
well as a change in quantity. You should also note the explanatory remarks in the FIDIC
Guide to the use of the FIDIC Conditions of Contract for Works of Civil Engineering
Construction. Sub-Clauses 52.1 and 52.2 are reviewed at pages 114 and 115 of the
Guide and include the statement: If the nature or amount of the work involved differs so
much from that included in the original Contract that the rates and prices are rendered
inapplicable, it is the Engineer's task to agree appropriate rates and prices with the
Contractor, or, if agreement cannot be reached, to fix the rates and prices. We trust this
further explanation will answer your query. Any further comments would require details
of the specific contract and problem, which FIDIC could not consider.

Undue delay for claims

Question
Can you please identify what is meant by "without undue delay" under Red Book 4th
Edition clause 44.3 considering that the Contractor and the Engineer have mutually
agreed, under cl. 44.2(b), to submit detailed particulars every first week of the month
and noting that every month the contractor is submitting the same. What is the duration
needed by engineer to provide his interim/final determination of extension of time claims
under this clause?

Answer
Your question refers to Sub-Clause 44.3 in the Red Book, Fourth Edition 1987. Sub-
Clause 44.2 has imposed time limits for the submission of information by the Contractor,
which you say have been agreed. FIDIC does not impose a time limit on the Engineer
because the actual time needed for him to make his determination will depend on the
circumstances and the details in the information provided by the Contractor. However
the "without undue delay" emphasises the need for the determination to be made as
soon as possible. Sub-Clause 1.5 also requires that any determination "shall not
unreasonably be withheld or delayed". This gives the Contractor the opportunity to raise
a query if he needs the determination in order to plan his work.

Payment on a Clause 63.2 valuation

Question
Concerning Clause 63.2 and 63.3 of the FIDIC Red Book 4th Edition . The Contract was
terminated by the Employer pursuant to Clause 63.1 (this is undisputed). It was agreed

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that the additional costs to the Employer of executing the works by an alternative
contractor has to be deducted from the value of the works executed by the first
Contractor. The wording of Clauses 63.2 and 63.3 was not changed or amended.
Contractor now requests a payment from the Employer calculated pursuant to a Clause
63.2 valuation. In addition Contractor states that the whole of the Works has not
completed and, therefore, the Defects Liability Period has not expired, which is a
precedent to any certification of Employer's costs under Clause 63.3. Therefore, an
Employer's application for Clause 63.3 costs is premature, cannot be considered and
Contractor is entitled to request a payment based on the calculated Clause 63.2
valuation without any deduction pursuant to Clause 63.3. a) Is a contractor entitled to
ask for a payment based on a Clause 63.2 valuation, since an employer is not obliged to
make any further payment until the expiration of the Defects Liability Period? b) Is it
correct to interpret that Contractor's request for payment based on Clause 63.2 is not
(currently) justified also in cases, where a completion of the project was delayed due to
circumstances caused by an alternative contractor or the employer, if the terminated and
requesting Contractor itself has formally and explicit pleaded that the whole project is
not completed without complaining the delay of completing the project caused by the
alternative contractor or the employer? c) Can the Contractor simultaneously refer to
and request a Clause 63.2 calculated claim and reject (alleged) unmatured Employer's
Clause 63.3 costs, if both clauses were agreed?

Answer
This is a complex technical/legal question arising from a specific request by the
Contractor on your project. FIDIC can only answer general questions of interpretation
and cannot comment on specific requests or claims. The FIDIC Guide to the Fourth
Edition states at page 146 for Sub-Clause 63.3: "If the Employer terminates the
Contractor's employment, he is not liable to pay the Contractor any further amounts
(including damages) until the expiration of the Defects Liability Period and the
certification by the Engineer of the cost of execution and remedying of any defects,
damages for delay in completion (if any) and other expenses incurred by the Employer
as a result of the Contractor's default."

When is payment made

Question
We are seeking a defintion as to when payment is actually made by the employer to the
contractor. Is it when the employer issues his payment instruction to his bank, or is
payment deemed to be made once the monies are received in the contractor's bank
account. Are there FIDIC guidelines on this matter?

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Answer
your query is really a general legal question about when a payment is "made", rather
than a question of interpretation of a FIDIC contract. The answer may be different under
different jurisdictions. You should consult a lawyer with experience of the applicable
law.

Statutory declaration
Question
My firm is executing a Contract with FIDIC terms and conditions and I require a Statutory
Declaration document for international use (Project location is Madagascar). Can you
please advise where I can find this in your documentation, or better yet can you e mail
me the appropriate document.

Answer
Your Statutory Declaration would seem to conflict with the principles of the FIDIC
Contracts. Progress payments are referred to as 'interim', which suggests that they are
provisional and not final. EPCT Sub-Clause 14.6 allows the Employer to make
corrections or modifications to previous amounts considered due, which suggests that
the Contractor can request modifications to a previous valuation. It is only the
requirement for the Application for the Final Payment, as Sub-Clause 14.11, which uses
words indicating finality. The Contractor then confirms the finality by his Discharge, as
Sub-Clause 14.12. The equivalent provision in the 1987 Red Book was Sub-Clause
60.7. The Standard Letter for that Sub-Clause merely repeated the wording of the Sub-
Clause. However, this was a contractual letter and not a Statutory Declaration. A
Statutory Declaration will presumably be issued by the Government and will depend on
the requirements of the applicable law, which will vary for different countries.

Final and binding DAB decision

Question
In the 1992 reprinted version of the 1987 FIDIC Conditions as well as in the 1999 FIDIC
Conditions it is, in the relevant DAB Clauses, stated that the Contractor, Employer and
Engineer shall give effect forewith to every decision of the Board unless and until the
decision is revised in an amicable settlement or an arbitrational award. On the other
hand it is stated that a Board decision becomes FINAL and BINDING unless either party
gives a notice of dissatisfaction within 28 days after receiving the Board decision. A very
basic legal principle is that only final and binding decisions are enforceable. Are the

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FIDIC conditions really based on the very unusual principle that the Employer has, on
basis of un unbinding Board decision, to pay to the Contractor a compensation with the
consequence of running the risk of never being able to recover the paid amount from a
foreign contractor when the revised arbitration award is issued (long) after the
completion of the works. Please clarify whether the Employer has to pay a monetary
compensation on basis of a Board decision, which is NOT FINAL AND BINDING.

Answer
Sub-Clause 20.4 of the 1999 Contracts is clear that both parties shall promptly give
effect to the DAB Decision. The Employer must pay any sum awarded to the Contractor
although the sum to be paid may be changed by a later amicable settlement or
arbitration. If a Notice of Dissatisfaction has been issued then the dispute, not the DAB
decision, may be reopened and finally determined by the Arbitral Tribunal. The sum to
be paid may then be increased, or decreased, and additional money may need to be paid,
or money may need to be repaid. An Arbitral Award, including such further payment or
repayment, would be Final and Binding and would be covered by arbitration law and
the New York Convention. It is normal practice that a DAB or Adjudicator's Decision is
Binding and so must be paid, but is not Final and so may be changed in this way. If no
Notice of Dissatisfaction has been issued then the DAB Decision becomes Final as well
as Binding and the dispute cannot be reopened.

Lump sum calculation

Question
Can you please advise how to calculate the lump sum to be added or dedcuted to the
contract price when the effective contract price execceds 15%. In addition, please advise
on when do we deduct, and when do we add such amount.

Answer
Commentary at page 117 of the FIDIC Guide to the 4th Edition is recommended. The
Guide explains that some of the Contractor's overhead costs are included in the rates for
items of work and others are included in separate items in the Bill of Quantities. Changes
to the actual quantities may mean that the overhead content of items which have paid
is not appropriate to the actual overhead costs incurred by the Contractor. In order to
calculate any adjustment the Engineer will need to obtain information from the
Contractor, or would have to make his own assessment. Any calculation must take into
account any adjustment which has already been made under another Sub-Clause and
only applies to any increase or decrease in excess of 15% of the Effective Contract price.
The Sub-Clause starts with a reference to the situation "on the issue of the Taking-Over

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Certificate for the whole of the Works". It is also necessary for the value of variations
and other adjustments to have been agreed in order to make the Sub-Clause 52.3
calculations. Any additional payment or deduction would then be made in the next
payment certificate after the figures have been agreed or determined.

New rate for an increased quantity

Question
I am "The Engineer" for a road construction project. A difference of opinion has arisen on
the applicability of new rates fixed by the Engineer on the quantities, i.e whether the
new rate will be applicable only on the enhanced quantity beyond the original BoQ
quantity, Oor it shall apply on the entire quantity. To explain this further, the BoQ
quantity for piles was 2000 cu m. The designer increased the number of piles so that
the quantity became 3000 cu m. The Engineer fixed a new rate for pile work from X to
Y. Will Y rate be applicable to enhanced quantity of 1000 cu m , or should it apply to
3000 cu m?

Answer
FIDIC can only comment in general terms on the interpretation of a FIDIC clauses, and it
should be noted that for the application of a clause to a particular problem situation, one
should always consult a specialist. With that being said, in general, Sub-Clause 52.2
gives the power to the Engineer to fix new rates and states the conditions when such
new rates may be fixed, but Sub-Clause 52.2 does not indicate a calculation method or
the applicability for new rates. The reason for this is because Sub-Clause 52.2 must
allow for covering a wide range of potential situations. So, although it is true that revised
rates are normally only applicable to the additional quantity, it is for the Engineer to
assess the particular situation and circumstances surrounding, and to take all factors
into consideration in making his determination regarding the quantum and applicability
of the new rates fixed under Sub-Clause52.2. For reference, see page 127-128 of the
FIDIC Red Book Guide to the use of the FIDIC Conditions of Contract for Works of Civil
Engineering Construction, and please note that the above represents a general answer
only, and specific advice to the particular facts surrounding your situation, we
recommend that you consult a specialist.

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