FIDIC Training Presentation on Variations and Contract Payments

international federation of national associations of independent consulting Engineers
FIDIC Training Riyadh 1020 BTA - Dr. Moustafa Ismail March 2018 LEC- V 1
FIDIC Forms of Contracts
Training Course:
Saudi Arabian Arena Engineers
March 2018
LECTURE 07A
‫وبركاته‬ ‫هللا‬ ‫ورحوة‬ ‫عليكن‬
2018
.

Variations and Adjustments
• Cl.13.1 Engineer has the right to vary
o Prior to issue of TO certificate
o List of variation inclusions
• Value Engineering Cl.13.2
o Development risk with Contractor
o Savings 50/50 after deductions.
FIDIC Training Riyadh 1020 BTA - Dr. Moustafa Ismail March 2018 LEC- V 2March 2018

Variation Procedure
• Engineer requests proposal from Contractor
o Contractor responds with:
• Description
• Programme
• Evaluation
o Work proceeds without delay

Variation due to Legislation
• Local law at Base Date/ 28 days
• Cl.20.1 claim
o Extension of time
o Payment of cost
FIDIC Training Riyadh 1020 BTA - Dr. Moustafa Ismail March 2018
LEC- V
4March 2018

Contract Price & Payment
• Considerations:
o Payment schedules
o Disbursement approval
o Particular Conditions
o Budgeting
• Funding availability
• Additional Costs / Variations

13.1 Right to Vary
• Initiated by Engineer at any time prior to TOC either by:
• Instruction/request for Contractor to submit a proposal.
• Contractor execute and be bound, unless the Contractor
promptly gives notice stating that the Contractor cannot
readily obtain the Goods required for the Variation.
• Upon receiving this notice. the Engineer shall cancel.
confirm or vary the instruction.

13.1 Right to Vary - continue
• Each Variation may include:
a. changes of quantities in the BOQ.
b. changes to quality, other characteristics of item
c. changes to levels. positions and/or dimensions.
d. omission of any work unless it is to be carried out by others.
e. any additional work. Plant. Materials for Permanent Works.
including any associated Tests on Completion. Boreholes,
other testing, exploratory work. or

Special Case for changes Work carried by others

13.1 Right to Vary - continue
Each Variation may include:
f) changes to the sequence or timing.
The Contractor shall not alter and/or modify the Permanent
Works. unless and until the Engineer instructs a variation.

13.2 Value Engineering
The Contractor may. submit to the Engineer a written proposal. if
adopted.
(i) accelerate completion. (ii) reduce the cost to the Employer
(iii) improve efficiency or value to the Employer of Works. or
(iv) otherwise be of benefit to the Employer.
 proposal at the cost of the Contractor and comply with 13.3
 If a proposal. which is approved by the Engineer. includes a
change in the design then:
LEC- V
10March 2018

13.2 Value Engineering - continue
a) the Contractor shall design this part.
b) sub-paragraphs (a) to (d) of Sub-Clause 4.1
[Contractor's General Obligations] shall apply.
c) if a reduction in the contract value of this part. the
Engineer shall Proceed to [Determinations] to
• agree or determine a fee. This fee shall be half (50%) of:

13.2 Value Engineering - continue
i. such reduction in contract value. Excluding
adjustments under S Cl. 13.7 [Adjustments for
Changes in Legislation] and S Cl. 13.8 [Adjustments
for Changes in Cost].and
ii. the reduction in the value to the Employer for varied
works. consider reductions in quality, life or
operational efficiencies.
• However. if amount (i) ˂ than (ii). there shall not be a fee.
LEC- V
12March 2018

13.3 Variation Procedure
• If the E requests a proposal. prior to Variation. the
Contractor in writing ASAP. Cannot/why or
submitting:
a) a description of the proposed work and a program
b) Contractor's proposal for modifications to the
program(TIA).
c) Cost break down, Justified and auditable.

13.3 Variation Procedure continued
• The Engineer Promptly (under S. Cl. 13.2 [VE] respond with
approval. disapproval or comments.
• The Contractor shall not delay
any work whilst awaiting a
response.

REPEAT
• The Contractor shall not delay
any work whilst awaiting a
response.
LEC- V
15March 2018

 requirements for the recording of Costs of
variation . shall be issued by the Engineer,
contractor acknowledge receipt.
 Each Variation shall be evaluated in accordance
with Cl. 12], unless the Engineer instructs or
approves otherwise as per with this Clause.
FIDIC Training Riyadh 1020 BTA - Dr. Moustafa Ismail March 2018 LEC-
V
16March 2018

13.4 Payment in Applicable Currencies
• If stated in Contract/ payment in more than a
currency:
o Any agreed adjustment to the contract price the
amount to be specified in each applicable currency.
o For this purpose. reference shall be made to the actual
or expected currency proportions. SAR- $ - Pounds

Definition:
"Provisional Sum" means a sum (if any) which is
specified in the Contract as a provisional sum, for the
execution of any part of the Works or for the supply of
Plant. Materials or services under S. Cl. 13.5
[Provisional Sums].
13.5 Provisional Sums
Each Provisional Sum shall only be used. As per the Engineer's
instructions. and the Contract Price shall be adjusted accordingly.

13.5 Provisional Sums - continued
 The total sum paid to the Contractor shall include only such
amounts. for the work. supplies or services to which the
Provisional Sum relates. as the Engineer shall have instructed.
For each Provisional Sum. the Engineer may instruct:
a) work to be executed by the Contractor and valued under S.
Cl. 13.3 and/or
b) Plant. Materials or services to be purchased by the Contractor.
from a nominated Subcontractor
FIDIC Training Riyadh 1020 BTA - Dr. Moustafa Ismail March 2018 LEC-
V
19March 2018

13.5 Provisional Sums - continued
Or otherwise: and for which there shall be included in the
Contract Price:
(i) the actual amounts paid / due to be paid by the Contractor.
PLUS
(ii) a sum for overhead charges and profit. as a % actual amounts
by applying the relevant percentage rate (if any) stated in the a
schedule or in the Appendix to Tender shall be applied.
The Contractor shall produce quotations. invoices.
vouchers and accounts or receipts in substantiation
(justified, auditable).
LEC- V
20March 2018

Reserves Vs Provisional sum
LEC- V
21March 2018
• Contingency reserve
• Management Reserve
• Provisional sum

13.6 Day work (only if a day work schedule is available)
For work of a minor or incidental nature. Engineer instructs
a Variation on a day work basis, the value is estimated in
accordance with Day work Schedule included in Contract.
If none
this Sub-Clause shall not apply.

13.7 Adjustments for Changes in Legislation
• Contract Price adjusted for:
• any increase or decrease in Cost resulting from a change in
the Laws of the Country
• or in the judicial or official governmental interpretation of
such Laws. made after the Base Date. which affect the
Contractor performing his obligations under the Contract.

• 13.8 Adjustments for Changes in Cost
• In this S.Cl. ··table of adjustment data·· means the completed
table in Appendix to Tender. If there is no such table of
adjustment data. this S. Cl. Shall not apply.
 the amounts payable to the Contractor shall be adjusted for
change in the cost of labor. Goods and others.
• by the addition or deduction of the amounts determined by the
formulae prescribed in this Sub-Clause.
• If not satisfyable, then the Accepted Contract Amount shall be
deemed include amounts to cover such rises and falls in costs.

Clause 14 Contract Price & Payment
• Advance payment
o Design
o Mobilisation
o Funding facilitation
• Interim payments
o 56 days
• Final Payment
o 84 days

• Aid funding requires:
o Authority approval
o Timing
o Variations
o Routine audit checks
o Time to transfer funds
o Advance notice of change

• Cl.14 requires prompt action within time constraints
• Finance costs will lead to claims
• Alter Cl.14 by Particular Conditions to suit funding
authority

• Financial planning:
o Check estimates & budgets
o Prepare draft payment schedules
o Update estimates & programme
o Check funding
o Cl.14.4 estimates each 90 days

Budget Forecast
• Engineer prepares for Employer
o Regular intervals
o Updated budget
o Report of changes
• Data for report:
o Cl.2.4, 2.5, 3.5, 4.21, 8.3, 13.1, 13.3, 14.3, 13.8, 14.3,
14.6, 20.1, 20.4

END OF
LECTURE SEVEN- A
Thank You
‫هللا‬ ‫ورحوة‬ ‫عليكن‬ ‫السالم‬
‫هللا‬ ‫أهاى‬ ‫فى‬

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