The Lump Sum Construction Contract – What seems to be the problem?

By | January 15, 2011

The lump sum contract associated with construction particularly in the Middle East has created untold misery to contract administrators and quantity surveyors working in every sector of the construction industry. The problem is caused by a misunderstanding of the concept of lump sum contracts and the application of the principles associated with such forms of procurement.

A lump sum contract is an agreement pursuant to which one party consents to pay another party a set amount of money for completing the work or providing the goods described in the agreement. Typically, lump sum contracts do not require contractors to provide a detailed breakdown of costs. Rather, the payment of the total contract price is linked to the contractor completing all of the work specified in the contract. For example, a software installation company may enter into a lump sum contract for installing multiple data processing systems in a building. Instead of receiving an individual fee for each system installed, the company will receive one fixed amount after it finishes installing all of the systems.

Lump sum contracts are regularly used for a variety of transactions, including construction work, consulting projects, and architectural assignments. A lump sum contract is easy to manage since payment is made only once. Generally, the lump sum contractor is paid a flat amount of amount of money after the party receiving the services or goods is given the output. For instance, under a lump sum arrangement, an architect firm is usually paid its total fee once it has supplied all the deliverables acceptable to the Employer.

The construction industry often engages in lump sum contracting. In most cases, the building owner signs a lump sum agreement with a general contractor. The general contractor then enters into separate agreements with subcontractors.

The explanation so far seems simple. Then what seems to be the problem?

The problem arises out of two major factors:

  • The written contract;
  • Understanding and interpretation of the written contract.

A lump sum contract is usually a written agreement, although an oral agreement may be binding in some cases. Once the contract has been signed, all parties are bound to adhere to its terms. A lump sum contract ordinarily details the fixed total amount to be paid to the contractor and the timeline for payment. If the contract is for services, a comprehensive description of the scope of the services to be performed by the contractor should be documented. Contracts for goods should thoroughly detail the goods to be provided, including the components, features, and characteristics that must be a part of the final deliverable.

However, all this is dictated by the terms contained in the various documents being made part of the contract. Construction contracts using standard forms like the JCT, NEC, FIDIC etc., detail a hierarchy of documents that would be referred to in the settlement of disagreements or disputes. Such documents may include the specifications and a bill of quantities amongst other things. If the bill of quantity is listed as a contract document, it is possible for the Employer to require the contractor to execute everything it has priced for in the bill.

It must be noted that a bill of quantity can contain one or more of the following items in addition to the lump sum items:

  1. Provisional Sums
  2. Items using Prime Cost Sums
  3. Provisionally described items
  4. Provisionally measured items
  5. Nominated Sub-Contractor items
  6. Nominated Supplier items
  7. Contingencies

Despite described as a lump sum contract all the above items are subject to adjustments and additions to and deletions from the bill of quantities is possible if the contract provides for variations, but no re-measurement of quantities stated in the bill of quantities will be allowed.

As a rule, construction contractors are not entitled to receive more money than the contract specifies. Items required to complete the works must generally be provided even if they have been omitted from the bill of quantities – (Williams v Fitzmaurice (1858) 3 H&N 844). Michael O’Reilly points out that if there is no mechanism in the contract for receiving payment for these extra items, the contractor will have to pay for them. This means that the contractor will have to provide what is indispensably required to fulfil its obligations under the contract.

If it is presumed that quantities do not form a term in lump sum contracts unless the contract states otherwise, the contractor will not be paid any additional payment if the quantities required to be executed are greater than stated in the bill of quantity, (Portman and Fotheringham v Pildritch (1904), Priestly v Stone (1888), Re Ford and Bemrose (1902) CA, Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597). It could therefore implied that the reverse is also true – being that if the quantities stated in such a bill of quantity are greater than what is required to be executed (as long as the item description is not changed) the contractor will be entitled to receive the full payment against that item.

Can the Employer or Engineer therefore, change the description of an item in the bill of quantities where the quantity has been over measured and attempt to re-measure and obtain the lesser quantity? Unless the contract provides to do so, definitely not! Any attempts to do so would mean introducing an element of re-measuring where the contract does not provide and this would be in breach.

In the same context, what about an item contained in the bill of quantities which is not required to be executed? Contractors always argue that being a lump sum contract they are entitled to be paid for every item in the bill of quantities regardless of requirement in the same manner that the Employer is entitled to insist upon the contractor to provide items required but missed out in the bill of quantities and that each balances with the other. In order to prove this point the contractor will need to establish that the price it has put in for such an item is in actual fact to compensate for some item missed out in the bill of quantity. The burden of such proof will rest with the contractor.

Reference:

O’Rielly, Michael – Civil Engineering Construction Contracts


96 Comments

Mohammed Awad on January 16, 2011 at 12:56 pm.

This article spot the light on one of the most important issues related to construction contracts i.e variations to lump sum construction contracts, we thank Dr. Haris for this article.

Reply

Troy Dias on January 19, 2011 at 7:54 am.

“In the same context, what about an item contained in the bill of quantities which is not required to be executed? Contractors always argue that being a lump sum contract they are entitled to be paid for every item in the bill of quantities regardless of requirement in the same manner that the Employer is entitled to insist upon the contractor to provide items required but missed out in the bill of quantities and that each balances with the other. In order to prove this point the contractor will need to establish that the price it has put in for such an item is in actual fact to compensate for some item missed out in the bill of quantity. The burden of such proof will rest with the contractor.”

I don’t agree with the above conclusion. I agree with you that the burden of proof lies with the Contractor but in this particular situation he does not need to analyse whole contract bill to prove his case. In a lump sum contract, the specifications and drawings are used to describe and identify the scope of works. BQ (or Schedule of Rates) does not use for this purpose and it is used to value variations and often times used for interim payment valuations.

Reply

Haris Deen on January 19, 2011 at 1:05 pm.

Thank you Troy, This is the type of comments I would like in order to trigger a wider discussion. You don’t seem to disagree with me that the burden of proof of the contractor’s entitlement for payment of a non executed item in a BOQ rests with him. Your only complaint seems to be that the contract does not have to analyse the whole contract bill to prove his case. I did not say that he should do so. The main point is that anyone should not be entitled to be unjustly enriched by claiming money for work he has not executed. If he can prove that this is money that he richly deserves, then certainly he should be paid.

Reply

Troy Dias on January 19, 2011 at 8:40 pm.

Thanks for your quick response. My point is in a lump sum contracts, BQ does not use to describe or identify the scope of Works. The BQ is a tool we use in a lump sum contracts to calculate the Tender / Contract Price. The scope of Works is defined in the Specifications and Drawings. The Contractor’s obligation is to complete the Works in accordance with the Specifications and Drawings. The BQ may contain items which are not required to accomplish the Contractor’s obligations under the Contract.
However, the Contractor should execute any works defined in the Specifications (in most cases Specification takes precedence over the Drawings) even though such works are excluded from the BQ (and/or not shown on the Drawings).
I consider that, after the award, the BQ is used only for the purposes of valuation variations and interim payments, unless BQ contains provisional items which are subjected to remeasure.
Further, in lump sum (without quantities) contracts, BQ is replaced by Schedule of Rates.
In conclusion, I consider that, in a lump sum contract, you can’t simply negate payment for any item in the BQ which are not defined in the Specifications and/or shown Drawings, as the BQ does not identify or describe the Scope of Works.

Reply

Haris Deen on January 21, 2011 at 11:21 am.

You are quoting out of context Troy. My article is based on a BOQ being a contract document. You are right where the BOQ is not a part of the contract. In the ME all contracts I have come across (If I am wrong someone will correct me,) the BOQ is a contract document listed in the documents forming part of the contract and the heirarchy for reference in the event of a dispute. It is always stated that despite the heirarchy, all documents are complementary with each other. That means that the BOQ in this instance is part of the scope and the Contractor will be required to execute all the items in described in the BOQ if it wants to get paid. IT ALL COMES DOWN TO WHAT THE CONTRACT STATES AND THAT IS HOW JUDGES AND ARBITRATORS DECIDE A CLAIM. I have not found any case where a judge or arbitrator (in the frist instance or on appeal)has allowed a claim that a contractor is not entitled for and refused any claim that contractors are entitled to9 compensation. Under the doctrine of restitution no one is entitled to receive any payment for what he is not entitled for under a contract and the converse is also true that the employer cannot escape from paying a contractor his rightful dues under a contract.

Reply

martin on June 5, 2011 at 12:00 am.

I have a question along the lines of the QS doesnt represent the specification in his BQ, the contractor prices his lump sum against the BQ not the spec a, leaving us as the employer with a bit part finish not as the specification, is this the resposilbility of the QS not relating the priced BQ or the contractor who should have priced in conjuncture with the spec and drawings. I noted your comment about the spec takes precidence over the drawings.

Reply

Haris Deen on June 12, 2011 at 11:44 am.

Dear Martin,
Your question is not very clear. However, I will try to answer.

In the first place addressing the responsibility of the QS – The QS has a duty to provide accurate Bills of Quantities. He cannot expect to shield himself under the ‘Lump Sum’ pretence for his mistakes.

As far as the Contractor is concerned he must provide everything that is indispensably required for completion of the Works whether it is shown on the drawings, specified in the specifications or measured in the BOQ.

Please read my article very carefully as it deals with different aspects of a Lump Sum contract which will enlighten you more on this subject.

Abdulrahim Ostol on July 5, 2013 at 1:26 pm.

Dear Sir,

I am with the client side our contract with the main contractor is a lump sum although in our General Conditions of contract Clause Variation Order, we have addition and deletion. We deleted items in the BQ which is not required hence the Contractor insisted it is a LUMP SUM price and he is entitle to claim the same value signed in the letter of award and noticed to proceed.

Kindly advised as a Client or Owner, do we have the right to claim the negative Variation order, hence contractor also claim that there are some concealed and unforeseen items during tender.

It is clear in our General Conditions of Contract that the Contractor before tendering he has the right to verify the site conditions, its drawings, specifications, bill of quantities and to satisfy himself and he has no right in the future to claim any additional cost, what ever missed to price under this contract. However, the client has the right to increase or delete items during construction period not exceeding 20% of the lump sum price.

Kindly Advised,

Regards

Abdulrahim

Reply

Dr. Haris Deen on July 8, 2013 at 1:05 pm.

Dear Abdul Rahim,
If the Contractor has priced an item that was not required to be executed in any case, at the time of tender, then he was taking a risk. If the item is not required and the Contractor insists on payment for that item, he cannot be paid for what he is not executing. Tell him that payment will be made only for items he has executed and the final account will take into account those items that he has not executed. You do not have to do anything at the moment. Payment should be made only for items identified in the BOQ (if BOQ is part of the Contract) on interim certificates.
I cannot give a further clarification without knowing the full facts.

Reply

Craig on January 19, 2011 at 9:16 am.

Interesting that you state that this is mainly an issue in the ME. I have applied LS contarcts elsewhere with less conflict.

Interesting article.

Reply

Haris Deen on January 19, 2011 at 12:58 pm.

Yes Craig, In the UK all contracts for building works using JCT Forms are lump sum contracts with all sub-structure works, provisional sums, nominated sub-contractor works and dayworks re-measured. We have not had any problems at all like the ones we have here in the ME.

Reply

Kasun on February 17, 2011 at 12:29 pm.

Thank you for enlightening us.

Based on my understanding and experience I am strictly following the below points in all Lump sum contracts that I administrate

1 ) Drawings and specifications are key for defining the scope –
YES I agree . However following scenarios are very interesting

case 1 :
What if BOQ contains a item that is physically possible to do at the tender stage ( irrespective of whether it is related to works of drawings and specifications) but not shown in the drawings and specifications ?
My opinion – the contractor is required to do that item and it is possible to instruct omissions on that item

case 2 :
What if BOQ contains a item that is physically not present on site ( or not required to do even at the tender stage ) and it is not shown in the drawings and specifications ?
My opinion – the contractor is not required to do that item and it is not possible to instruct omissions on that item. So no deduction on the contract price is possible for this item.

2 ) Look for the BOQ general items . Check if there is an item that allows the contractor to add items If he believes that due to any reason those items are missing or quantities are not sufficient.
IF there is such a provision usually it will be like this
“The Contractor shall describe and price below the items necessary for the completion of the work as described in the specification or shown on the drawings and for which special provision is required and which are not covered by the rates in the Bill of Quanties”
If so the below No 03 mechanism is applicable

3 ) I follow the following omission and addition concept to price variations
If there is provision in the BOQ for the Contractor to insert his items for missing items ( refer Item 2 above )
for example
Boq quantity = 10 m ; rate = say 5 $ per m
agreed contract price = 10 * 5 + other items = 50 $ + 150 $ ( say for other items ) = 200 $

case 1 : drawing quantity = 12 m
if no variation issued then contractor will do 12 m of work
and the contract price = 200 $ – this is clear
omission ( what the Contractor supposed to do ) = 12 * 5 = 60
addition = 12 * 5 = 60
the contract price change = (-60)+ 60 = (0) ; new price = 200

case 2 : drawing quantity = 12 m
if variation is issued to increase the length to 17 m
then
omission ( what the Contractor supposed to do ) = 12 * 5 = 60
addition = 17 * 5 = 85
the contract price change = (-60)+ 85 = (+25) ; new price = 225

case 3 : drawing quantity = 12 m
if the complete wall is eliminated
then
omission( what the Contractor supposed to do ) would be = 12 * 5 = 60 ;
addition = 0 ;
the contract price change = (-60)+ 0 = (-60) ; new price = 140
note that this disregards the issues of substantial changes to the contract price etc ..

case 4 : if this wall is not shown on the drawing at all ; and it is not required for any other supportive works that are shown in the drawings
then
omission( what the Contractor supposed to do ) would be = 0 * 5 = 0 ;
addition = 0 ;
the contract price change = (- 0) + 0 = ( 0) ; new price = 200

Reply

Haris Deen on February 20, 2011 at 11:41 am.

Dear Kasun, thank you for your inquiry. From the facts contained in your question, I am led to believe that you are a QS. If I am wrong I offer my apologies.

You have not indicated the conditions of contract that you are basing your analysis on. Whatever, the procurement type, Lump Sum, Re-measured, Cost Plus etc., what is agreed between the parties and contained in the document will override any other consideration.

A Lump Sum contract is simply what it says it is. The Employer promises to pay the Contractor a Lump Sum Price for what the Contractor has agreed and promised to execute. What constitutes the scope which the Contractor has to do to be entitled to receive the lump sum will be contained in the documents or reasonably implied there from. If you read my article carefully you will find cases I have cited supporting the settled law that in a lump sum contract the Contractor has to execute whatever is indispensably essential for the proper completion of the job as intended by the parties irrespective of whether the work required is shown on the drawings, specified in the documents or measured in the BOQ.

The argument usually is the place of the BOQ in the contract. Contractors insist that in a lump sum contract if an item is measured in the BOQ it does not matter whether the item is required or not they need to be paid the full contract sum, as the basis of a lump sum contract.

This is only correct if the BOQ is not part of the contract.

Even where the BOQ is a contract document and complementary with other documents Contractors put forward the same argument. This argument is founded on the basis that the Contractor will have to execute work not measured in the BOQ or shown elsewhere but required without any additional payment as part of the lump sum contract. Where the BOQ is a contract document it is meant to describe the scope for which a price has been submitted and this is settled law. The Contractor cannot be unjustly enriched for work that he has not executed. The item not fully executed can be deleted by the Engineer from the BOQ and the contract sum adjusted accordingly. Of course if the Contractor can prove that he priced the item in question to compensate for any missing items he would be entitled to be paid this item as a variation. If such proof is available, then the Contractor will also have equitable legal remedies.

REMEMBER THAT IF THERE ARE NO SUPERFLUOUS ITEMS IN A BOQ AND THE CONTRACTOR HAS TO EXECUTE ALL THE ITEMS IRRESPECTIVE OF ANY DISCREPENCIES IN QUANTITIES THE CONTRACTOR IS ENTITLED TO RECEIVE THE FULL LUMP SUM CONTRACT PRICE.

On an issue such as the above, my advice to Contractors and their estimators is not to depend on the BOQ against the work to be executed in a lump sum contract. Be particularly aware of items described and not required to be executed and for items that might have been missed out. Qualifications in a tender submission might not be acceptable, but a subtle tender query indicating a superfluous item in a BOQ and suggesting that the Contractor will price the item in compensation for any particular item missed out. It will stand in good stead if some item can be “concocted” if it is difficult to find one during the time available for tendering.

Now, coming to the different measurement areas that you have stated in your query, please understand that you cannot introduce re-measurement to a lump sum contract.

If an item in the BOQ is under measured it is the Contractors’ risk and he has to bear it. Similarly, if there is an item over measured it is the Employer’s risk. Any attempts by the Engineer to make any adjustments to such over measured quantities must be resisted.

The question sometimes arises where an item described in the BOQ has been changed to another description. For example, if the BOQ indicates 10,000 m² of asphalt road paving and the Engineer wants to change it to interlocking tiles, the variation order will describe an omission of 10,000 m² of asphalt paving and if the quantity that has to actually executed is 10, 100 m² of interlocking tiles, the Contractor is entitled to get paid for 10, 100 m² but calculated for 10,000 m² (The quantity added must be equal to the quantity deleted – the compensation for the additional 100 m² is based on price adjustment).

In conclusion, I must stress that you cannot introduce re-measurement to a lump sum contract, unless the contract contains provisional items or quantities.

I hope that this clarifies the position and if you are still unsatisfied, please fell free to comment.

Reply

Gishan Nadeera on September 11, 2012 at 8:51 am.

Dear Dr.Haris
Thanks for the information you provided. I just want to know as you stated, my question is based on Lump Sum Contracts where B.O.Q is not part of the contract documents.

There is one project I’m handling and the lumpsum is agreed between client and the contractor, and the drawings, specification or B.O.Q is not part of the contract documents as they not stamped and signed by the both parties.

This Building is 21 floor residential tower in Pearl Qatar and contractor knew initialy the designed no of units was subject to change later. Contractor executed the work.
1.Now contractor is claiming that for the work which is required by UDC which was not shown initially in the drawings, specs or B.O.Q.
2. And also he is claiming some mechanical items which is increased due to the changes of no of units.

As per your comment if the B.O.Q is not part of the contract, contractor has to do all the work which is essential to complete the project and I belive the above factors can catogorise the essential work. Therefore contractor not entitle for any variations. Please correct me if I’m wrong.

My next question is initial stage installation of the marble and granite was contractors scope and later client gave that scope to a different contractor.
In this situation does client have the right to omit the lump sum amount?

Thanks

Reply

Dr. Haris Deen on September 25, 2012 at 10:17 pm.

Dear Gishan,
Sorry for the delay in responding. In any lump sum contract, irrespective of the documents forming part of the contract, the contract is awarded on the basis of executing a known scope of works. He can price any risks for unknowns within that scope.

According to your question, the contractor ‘knew that the initially designed number of units were subject to change later’. You do not however say to what extent did the contractor ‘know what will be changed’. It is unreasonable to expect the contractor to execute work that he did not know what to expect at the time of submitting his tender. Without investigating all the documents forming part of the contract it is not possible to give any authoritative response. However do not expect the contractor to accede to do everything that the employer asks for except such work is within the scope that the contractor offered to do within the contract sum.

Reply

Troy Dias on March 20, 2011 at 11:53 am.

Whist I still maintain my opinion that BQ should not use to identify the Scope of Works, in the same context I further disagree with you that BQ quantity should be used for the purpose of valuing variations.

Generally, in relation to the valuation of variations, standard forms include two important provisions; (a) variations should be measured and (b) valued using rates and prices contained in the Contract (if applicable). Thus, in both omissions and additions, quantities should be measured using the Contract Drawings and the revised Drawings. On the same token and in extreme cases, you could deduct more than the Contract Price in case of a variation. For example in a curtain walling contract (lump sum price of 5 million) with BQ includes only one item for curtain walling (1,000 m2 and 5,000 per m2) and CA instructed to change the curtain walling to cladding (rate = 5,050 per m2). In this case, if the measured quantity is only 1,050 m2, then actually the Contract Price will be increased by 52,500 as the omitted value exceeds the Contract Price.

Reply

Haris Deen on March 27, 2011 at 8:17 am.

Thank you Troy,
What the contract states will override any other considerations. If the contract makes the BOQ a contract document, then it will be part of the scope. Nevertheless, if the contract is a Lump Sum contract, the re-measurable elements are only those mentioned in the BOQ as being re-measurable and that includes provisional sums, provisional items, prime cost sums, and contingencies.

Reply

Troy Dias on March 27, 2011 at 2:35 pm.

Thanks Dr. Deen for your response. My point is about valuation of variations (i.e. we should measure both omissions and additions, and BQ quanitities should not be used for this purpose).

Reply

saman welagedara on March 27, 2011 at 9:22 pm.

I suggest , in a variation, ommissions or additions to be remeasured . But, if any item to be removed completely, then the ommited value to be limited to BOQ value of that perticular item. It is not fare to ask contractor to bear any money which he is not priced for.

Reply

Troy Dias on March 27, 2011 at 9:28 pm.

Dear Dr. Deen,
I think I didn’t express my points clearly in relation to lump sum contracts. Since FIDIC forms are not meant for lump sum contracts, I consider JCT forms (in particular with and without quantities forms) are more appropriate to use for the clarification of the issues.

In JCT with quantities, quantities forms part of the Contract, thus, any error in the quantities and/or description becomes a variation. However, when it comes to value variations assuming there isn’t any error in the Bill Quantity, you can use the BQ quantity for both omissions and additions. In this form, in the event an item included in the BQ but such work is not required for the Works (i.e. not in the Drawings or Specification) can be omitted as it is considered as an error in the BQ.

On the other form, quantities do not form part of the Contract and the Contracts Bills are merely considered as “Schedule of Rates” (sometimes we include the Contract Bills as a Contract Document, however, it is still considered as “Schedule of Rates”). In this form, variations are valued using the Drawings. However, even if the Contract Bill is listed as a Contract Document, in this situation we don’t use BQ quantities for omissions or additions. In the event provisional quantities are included in the Contract, we shall omit the BQ quantity and measure the quantity from the Drawings for additions. Further, you can’t omit an item included in the Contract Bills (or Schedule of Rates) which is not included in the Drawings or Specification.

Please note that I don’t have copies of both forms with me to quote relevant clauses but I appreciate your advice on the above issues if possible please email me the relevant clauses of those documents.

I think the main problem the problem is (especially in Middle Eastern countries), we attempt to convert FIDIC forms (which are for re-measurement contracts) in to lump sum contracts (with or without quantities) without amending the essential clauses. I personnel don’t like to use this approach but I think it is time for ME to use JCT forms for lump sum contracts.

Reply

Foong on March 31, 2011 at 8:05 pm.

Dear Dr. Deen, i’m a bit confused as for a lump sum contract based on drawing and specifications but with the BoQ to be part of the contract document and that the quantities do not form part of the contract,
(i) whether the description of items provided in the BoQ also considered part of the specification that we have to provide, i.e material specs stated in the BoQ.
(ii) or in the absence of specs provided in the drawings, whether can we argued that pricing of the project is based on whatever specs proposed by us, in which we deemed is within the pricing range.

Reply

Haris Deen on April 5, 2011 at 2:15 pm.

Dear Foong,
Thank you for your query, I apologise for the delay in responding because your message was lodged in my hotmail folder which I rarely open.

I respond to your queries in the same order that you have indicated as follows:
(i) If the Contract (you have not mentioned the Form of Contract) states that the BOQ is a part of the Contract but not the Quantities contained therein, then the contract is flawed. The BOQ is what it is “a Bill of Quantities”. Therefore, in my view to exclude the quantities contained in a document while making the document itself part of the contract, in my opinion is flawed. The principle associated with the BOQ was established in the case of London Steam Saw Mills Ltd v Lorden (1900) where it was held that the quantities in the BOQ in a LS contract are not measurable except in the case of variations. (This was based on GC Works 1 Form of Contract). As far as descriptions and specifications contained in the BOQ are concerned it was established in the following cases that what is stated in the Conditions will over ride what is stated elsewhere. (Gleesons Contractors Ltd v Hillingdon Borough Council (1970) – JCT 1963 Form and Gold v Fotheringham Ltd (1958) – GC Wks. 1 Form).

(ii) In a LS Contract the Contractor will be required to do what is “indispensably essential” to complete the works – Williams v Fitzmaurice – However, the phrase “indispensably essential” is subjective and can be misused. Therefore it is established that what is indispensably essential for a palace will be different for a factory building, office building or warehouse. Taking the case cited above it concerns flooring. Therefore the flooring which was not included in the BOQ which was a contract document can be of the minimum requirement for the type of building. On the other point: No the Contractor cannot claim something he has assumed in pricing such an item if he has not indicated what he has assumed when submitting his tender.

Reply

Bruce Parry on May 10, 2011 at 11:32 am.

I am interested in the continued applicability of Williams v Fitzmaurice (1858) under English Law I assume that the doctrine of indipensability has not been amended by statute or superior decision.

I have a situation where the supplier of power plant equipment excluded civil works BUT only the supplier can provide the civil works design for foundations etc. for the supplied power plant equipment i.e. the designs are indispensable.
As the supply subcontract is lump sum and under English law it would appear that the indispensable rule applies and that the subcontractor cannot refuse to provide the necessary designs.

Reply

Haris Deen on May 11, 2011 at 9:38 am.

Dear Bruce,
Without looking at the Conditions upon which the contract was awarded I cannot commit to any authoritative answer. However:

1. The facts supplied by you indicate that the contract was for supply only, the civil works being excluded. If this is the case, then the supplier is obligated only to supply the goods in good order, free of defects under the lump sum.

2. If on the other hand the contract states that the supply includes installation, then it would have been upto the supplier to inquire where and how the equipment should be installed in order to ascertain his responsibilities, in which case he would been told the extent of his involvement in the installation process. In this situation if the supplier went ahead without inquiring as to the nature and method of installation it can be fairly reasonably assumed that he knew of the requirement and Williams v Fitzmaurice will apply.

3. It is normal practice to provide information as to civil works where supply contracts for mechanical and electrical installations, Also normally civil works or builders works are provided separately. Going by the norms of the industry it is unreasonable to insist upon the supplier to provide the foundations when it is not his responsibility.

Having said all the above, I must once again reiterate that it will all depend on what the contract states. You need to check the contract, and see where your case will fit in.

Good Luck

Reply

A Fallon on June 7, 2011 at 11:59 am.

In Saudi Arabia they have a tendency to execute lump sum contracts while attaching supporting successful contractor’s as- bid quantities and unit prices for payment purposes or to evaluate changes by use of the unit prices. Being a lump sum contract I do not understand why incorporating the supporting BOQ and or bid data.
I had a case where the contractor had an EPC project. The engineering portion was to be completed by contractor based on conceptual plans FEED. During the detail design client did minor modification affecting quantities. For instance Building locations were modified which could not be construed as a change because the client had considered the buildings in the original FEED concept and the length of utility between buildings would be paid under the As Bid unit prices by increasing or decreasing the affected quantities after procurement and construction and payment. Contractor went along with client and completed design without formal request for a deviation as they felt they would be compensated later under the actual quantity and unit prices.
Contractor orders parts and materials and months later when the construction work is due to start for some portions of the work, Client decides to delete some major equipments and associated improvements from the scope of work and requested a credit for the deleted work.

Client now wants to delete and be credited for the quantities associated with the approved design engineering completed by contractor. When the client changed the building locations it had actually increased the distance between buildings considerably but now refused to accept credit for the As-BID BOQ quantities. Contractor is now being requested to give a credit that exceeded their bid. Client says contractor should have requested a change-deviation months before when the design deviation occurred in order for their concern to be valid. Another issue the client raised is that the contract is a lump sum and that even though the As-Bid BOQ was inserted in the contract it meant nothing to the contract. However, Client used the BOQ as the basis to develop and approve monthly payment invoices throughout 70% of the work but when the contractor attempted to give a credit for the deleted work items based on this As-Bid BOQ and Payment cash flow schedule that reflected the actual work items, client refused to accept the contractor credit based on this basis.

Attaching BOQs to Lump Sum price contracts without validation of quantities and prices and proper Summary of Negotiations before enterlng into a Contract is a mistake. It is better to sign a contract with just one number.

Reply

Haris Deen on June 12, 2011 at 12:51 pm.

Dear Fallon,
As I understand from your explanation, the contract is a design and build (D&B) contract based on a concept provided by the Client and the bid documents included amongst other things the contractor’s BOQ. You do not mention the type of contract used. I assume that it would be FIDIC.

Your explanation also suggests that the Client made changes during the detail design stage which “affected the quantities”.

Before dealing with the rest of the explanation, later on you also state that the contract was based on “Lump Sum” (LS), suggesting that the LS was fixed prior to the detaile design stage. If this is the case this is an important issue in deciding any claim.

Now going back to the second paragraph of your query, you state that the building locations were modified “which could not be considered as a change” but continue to assert that the minor modifications to the quantities occured. If that is the case, the scope has not changed and the contractor cannot expect to get anything more than the LS price (if he has executed the Works to the complete satisfaction of the Client) and the Client also cannot deduct anything from the LS.

Assuming that the case is as stated above, the contractor is within his rights to order the parts and materials as stated by you in the third paragraph. If the Client decides at this stage that he needs to vary the scope, of course under FIDIC he is within his rights to do so. In such an event the contractor must be compensated for the materials that he has ordered and brought on site at the time of the Client’s decision to vary the scope. At the same time the Client will be entitled to obtain credit for the deleted works and, since the contractor has submitted a priced BOQ with his bid documents which are now part of the contract, this can be used to determine the extent of the deletion.
What you state iin your fourth paragraph is confusing. You are saying that the distances between the buildings has increased due to the change and the Client “is refusing to give credit”!! Why should the Clinet give any credit? If at all the Client should pay the contractor for any extra work involved by change in scope. Furthermore, the contractor should have protected his rights by requesting a change order when the Client instructed the change. However, this should not prevent the contractor from claiming his rights, because by conduct the Clinet has accepted the scope change, irrespective of whether the contractor requested the change order or not.

A priced BOQ attached to bid documents does not constitute or indicate scope of what is required to be done. The BOQ is only a document that is indicative and used for controlling payments and variations. Please read my article carefully.

Reply

Cagdas Evren Bayrak on June 16, 2011 at 12:19 pm.

Dear Mr. Deen,

With all due respect, I am also of the opinion that, submission of BOQ’s during tender phase gives Tenderers the impression that (even clearly its purpose is stated) the BOQ is contractual, and it is hard to explain people that, they are supposed to do everything written in their contract as “lump sum” but get paid on BOQ items basis. It has, and it will, mislead people to think that their responsibilities are bound with what is stated in the BOQ.
I think that, in lump sum contracts the payments / remuneration shall ne through a “Schedule of Prices”. If still a BOQ is desired for valuations, etc., it might be requested after the Tender is awarded, i.e. from the Contractor, not the Tenderers. I seriously hesitate on using “Lump Sum Contract with Bill of Quantities” even though it’s widely used, especially in the Gulf region.

Reply

Dr. Haris Deen on June 20, 2011 at 12:23 pm.

Dear Cagdas,

Thank you for the comments. However, please remember, the problem is not with using the “Lump Sum” contract form but with the conditions attached to it. Also how the contract itself is interpreted and administered. There is no way that one can genaralise what is contained in a contract. We can though state what needs to be included in a contract to define the scope. To this extent the BOQ should not be used to define the scope. However, once again I stress that what is stated in the contract will override any other considerations, and if the contract states that the BOQ is to be considered a contract document, then that will be the case.

Reply

Lakshminarayanan on August 15, 2011 at 2:41 pm.

Dear Sir, Kindly clarify the following query!.
I am involved in a bespoke contract agreed after tendering process initiated by Client. The Client issued bid documents with tender drawings, detailed scope and BoQ. The BoQ contains several line items and various plants related to electrical, civil and mechanical. Some Civil works items are indicated as Lumpsum items, for e.g. excavation, demolition and cartaway, Duct banks, Building water supply system etc. In the tender phase, the building was to be constructed at certain surface level and post award it was decided that in order to meet with local authoritys requirement, the substation level had to be increased by almost 1.5 meters (up wards). Due to this change, Contractor incurred additional expense to bring in extra fill from outside. When a claim was submitted stating that as per tender phase estimation, no (less) fill material was considered and due to change during detailed design the new cost is not foreseen and therefore must be compensated. Client argues that in such event to consider this claim, then Contractor shall calculate the reduction of excavation quantity (please note that both back fill as well excavation was Lumpsum item as per BoQ). Also, tender drawings indicated duct banks on 4 locations, but during detailed design phase it was commonly agreed to make the duct banks in 3 locations. Now, Client wants Contractor to calculate the reduction in length and consider as varied quantity. Kindly advise what should be Contractor’s action now?

Reply

Amr Saleh on November 4, 2011 at 8:40 am.

There are other types of contracts that I have encountered where the schedule of prices includes several lump sum items, for example a Contract for constructing a university campus, with L.S item for the lecture rooms building, L.S item for the gym building, L.S item for the administration building, etc

How can we categorize this contract, what if there is an error and one building is mentioned twice in the schedule of the prices ?

Reply

syed sharf desnavi on November 17, 2011 at 11:52 am.

Dear Sir,

My project is 6 reservoir Contract is EPC as per General Condition of Contract Qatar. In the BoQ Included some reservoir as optional item now client has decided to delete the optional item from BoQ. My Question is can we deduct the prelims amount.

Reply

Dr. Haris Deen on November 17, 2011 at 1:20 pm.

Dear Seyed Sherif.

No. You cannot deduct or adjust the preliminary items unless the deleted works actually reduces the contract period. The preliminary items are priced over the period of contract and not in respect of work to be executed.

Reply

syed sharf desnavi on February 25, 2012 at 3:22 pm.

Thanks Dr. Deen for your valuable response.
Just I want to give full details same as mention in the EPC contract for this project

The project is primarily composed of construction of 7no new reservoir and optional item of demolition old reservoirs and replaces them with new reservoir in case requiested by client

1) Brief scope of work; (optional) in case requested by client demolition and replace by new reservoir including all work

2) Notes on pricing; All BOQ item including optional item shall be accounted for in the total tender offer/price appears on the form tender and the Grand summary page of the BOQ.

3) Time for completion;
a) New reservoir and associated work shall be completed within 20 month from the effective date of contract
b) Optional reservoir and associated work shall be completed within 22
Month from the effective date of contract

Client decide to delete optional item from contract .what is your advice for below primary items
In the preliminary
Contract administration; costs to superintendence administration coordination
All costs reports documentation through the construction period
As-built Documentation
Laboratory tests

Regards,
syed sharf desnavi

Reply

Renard Baudrillard on December 13, 2011 at 1:22 pm.

Dr. Deen,

I would appreciate your clarifying the following in your response to Kasun on 20 February 2011:

You state that “The Contractor cannot be unjustly enriched for work that he has not executed. The item not fully executed can be deleted by the Engineer from the BOQ and the contract sum adjusted accordingly.”

I am assuming that by “fully executed” you mean executed at all and not partially executed given your subsequent comments. For if the item is to be deemed superfluous, it must mean that it is not executable – a qualitative question – and not partially executable – a quantitative question.

But this is where I think most of the disagreement arises in LS contract administration in the Middle East. At what point does a reduction in scope (amenable to omission by the Engineer) end and remeasurement begin?

If there is an item in the BOQ (that is stipulated to be a contract doc) for laying 20,000 sq. m of interlock tile and the Contractor ends up executing 10,000 sq. m because site conditions end up differing from drawings based upon which the tender was prepared, is this a reduction in scope? Suppose the Contractor executes 19,000 sq. m for the same reason?

As I see it, the issue is an equitable one – is the Contractor unjustly enriched? For there is no hard and fast rule.

In the first scenario, where the quantity was halved, I believe the general sense is that paying the contractor for the full quantity would be a windfall and the contractor must raise a defense to unjust enrichment in the form you prescribed – arguing that the value was shifted from an unquantified item.

In the second scenario, where the actual quantity was 5% less than the BOQ quantity, any omission would be tantamount to remeasurement, which generally speaking is not contractually permitted under typical LS contracts.

If I am incorrect, that is if in adjudicating these types of disagreements some “common” law has emerged – what is the test?

If I am correct, that is if determining whether we’re confronted with a valid reduction in scope versus a remeasurement turns on the issue of unjust enrichment, then I believe a more thorough examination of this legal concept must be more broadly disseminated to the Middle Eastern CA community.

Reply

munavvar on January 24, 2012 at 5:47 pm.

Dear Mr. Haris Deen,
Very ice to read your article. Very interesting. Can you clarify something. Specially the case is for middle east. Lump sum contract. Like plaster to block work for receiving water proof behind retaining wall. I did not price it during tender, but I was asked to say it is included as it is a rule that no item can be excluded, so I did so. Now the site requirement is plaster is not required and water proof can be done without it. Now does the engineer have the right to deduct the price of plaster taking the rate of normal plaster from the BOQ. The drawing shows that plaster should be done to receive water proof. The Engineer says since it has been shown in drawing but not done at site since it was not required it shall be deducted. I would agree if I had priced it but it has not been priced and I stated its included in my price. What is your opinion.
Thanks

Reply

darren cain on February 23, 2012 at 11:36 am.

Thanks for your article. Very informative. What about the situation where a lump sum (bespoke) Contract contains a handwritten notation that the “BOQ is guaranteed and forms part of the Subcontract”?

Do you consider the construction of such a statement to mean that at the end of the Project the contract price will be adjusted (up or down) following a reameasure of the “as-built” Project?

Many thanks

Darren (from Australia)

Reply

Dr. Haris Deen on February 27, 2012 at 9:36 pm.

Dear Darren,

Thank you very much visiting my blog all the way from Australia. On your questions, please also keep track of the Q&A section because there are authoritative answers therein.

Now coming to your specific question regarding the statement that the “BOQ is guaranteed and forms part of the Subcontract” is very interesting. I believe that this a document produced by the Main Contractor for the subcontractors to price. The idea of providing such a qualification is to ensure that tendering subcontractors all price at the same level and the same document and therefore comparison is easy. However, by doing so what the Main Contractor is in fact saying is that he is warranting the quantities contained in the BOQ as accurate, any inaccuracy therefore will amount to misrepresentation (Wood, R.D; Claims under GC Works 1).

The position of the BOQ in a Lump Sum Contract is the same insofar as the scope is concerned. The quantities are not to be re-measured and the Subcontractor (in your case) will have to be paid for all the works described therein as long as he has executed them (of course subject to adjustment of provisional sums, provisional items, prime cost sums and contingencies)

If the quantities warranted are grossly incorrect then the Subcontractor will have a claim for misrepresentation under the common law of Australia.

It is therefore clear that, irrespective of what the qualifications are, no remeasurement is warranted in a lump sum contract where there is no change in the scope.

Having stated the above, I would hasten to add that what is stated in the Contract read as a whole will override any other considerations.

Reply

Gus on March 7, 2012 at 4:41 pm.

Thank you for your article and information:
I always worked with FIDIC re-measured contracts and recently came across a lump sum one. For Earthwork : The BoQ calls for excavation up to a certain depth but the actual excavation depth came three times the BoQ depth and the corresponding quantity. This will also affect the backfill quantity, basement walls, waterproofing, etc…
How can we claim the additional quantities?
thanks

Reply

Dr. Haris Deen on March 8, 2012 at 9:34 am.

The response to this question depends on what the contract states. Is the BOQ a contract document? If so, does the contract state that the quantities stated therein are to be taken as accurate quantities?

In a Lump Sum Contract the quantities are not to be re-measured whatever circumstance. This is a Contractor’s risk. However if the Employer warrants that the quantities in the BOQ are to be takem as accurate quantities, then the contractor will have a claim for gross undermeasurements as a breach of warranty.

Reply

Dalien on March 26, 2012 at 6:49 pm.

Dear all,
Thanks for all the above valuable exchange of ideas and explanations.
However, my question is relating a particular case which I could not find in the above messages.
An EPCM lump sum contract signed on the basis of all the risks are transferred onto contractor side. The contractor also is required to comply with all owner specifications and request approval for any deviation.
The contractor actually suffering an extra cost due to increase of quantities of steel structure and civil works.
There is no contractual mechanism through the contract, (apparently) that would allow contractor to recover his losses.
The question
is, can the contractor by any mean recover his losses?
Thanks
Dalien

Reply

Dr. Haris Deen on March 27, 2012 at 9:00 am.

Dear Dalien,
In the first place without reading all the documents forming part of the contract, I cannot give you an authoritative response.

However, if as you state, the Contractor entered into a contract accepting all the risks, then it can be fairly assumed that he (the Contractor) priced all the risks associated with whatever is required to execute the contracted scope. After accepting the conditions and signing the contract freely, he cannot now complain that he is incurring losses. That is teh name of the game.

However, if the additional works which are not part of the contracted work are instructed, the Contractor will have a claim for these additional scope works and can be successful in his claim.

Reply

Dalien on March 27, 2012 at 10:47 am.

Dear Dr. Haris Deen ,
Thank you for your quick response.
I wish I could give you more details but this will take time and the subject is very urgent and hot.
However, is it possible to have your opinion on the fact that, these increased quantities are actually representing more than 35% of contractor bid ones? Of course contractor had a huge mistake during bidding, but since this mistake is considered as (huge), what consideration it can be given to it? Moreover, if contractor pretends that client was deeply involved during bidding period in the detailed bid clarifications, then he could notice probably the contractor mistake, but by saying nothing, does that give a valid credit to contractor for claiming adjustment of contract price?

Thanks again

Reply

Steven on March 30, 2012 at 6:46 am.

Dr Deen

I have two questions:

1) Is there any practical or substantive difference between a contract expressed as a “lump sum measure and value” contract to a “schedule of rates contract” where both contracts contain what is often the case called a “Schedule of Rates – Bill of Quantities”. Does it depend on whether the quantities have been provided by the client or the take-offs are the contractor’s own?

2) I am reviewing a civil contract which provdes that the principal does not give any representation or warranty concerning the completenes of the schedule of rates or the accuracy of the estimated quantities shown in the schedule of rates. However a limit of accuracy does apply to the contract rates. It is a lump sum and SoR contract, but the only lump sum component will be fixed preliminaries and all other costs will be provided as rates in a BoQ. The Principal has supplied the quantities. Do I need to make it clear that this is a SoR contract as opposed ot a lump sum? Or as per above, can I call it a lump sum measure and value? If a lump sum m&v – does this mean that the contractor takes risks on items notwithstanding that a limit of accruacy will apply on all rates? Do I need to make it clear that the quanities are Principal supplied and the BoQ forms part of the contract?

I hope this isn’t too confusing.

Thank you
Steven (Australia)

Reply

Dr. Haris Deen on April 4, 2012 at 10:15 am.

Thank you Steven for contacting all the way from ‘Down Under’.

1. My understanding of a “Lump Sum” contract of whatever nature is that for the “Lump Sum” stated in the contract the contractor is required to complete the works providing whatever is indispensably required for its construction (Ref: Williams v Fitzmaurice). However a “Lump Sum” measure and value can only mean measuring the executed works for interim payments. Any interpretation otherwise would mean introducing a ‘re-measure element’ to a “Lump Sum’ contract. A schedule of rates is a very useful instrument in the evaluation of variations and if included should be used only for that purpose. Of course having said this I must clarify that what is stated in the conditions or particular conditions of the contract will override any other considerations.

2. The second question relates to a Lump Sum Schedule of Rates Contract. This can only mean that the Lump Sum contract price is somewhat fixed as an upper limit, something like a Guranteed Maximum, although not the same depending on what the contract says. The quantities are not warranteed to be accurate but estimated quantities to be re-measured. The only lump sum part as you mention is the Preliminaries BOQ. This is perfectly in order, but must be clearly defined in the contract conditions as to how this should be administered.
The contractor’s risk is only in relation to the lump sum portions and not to the re-measured portions. Again what is stated in the conditions or particular conditions of the contract will override any other considerations.

Reply

Naveen on April 4, 2012 at 11:15 am.

Dr Deen

I am working in the Middle East Public Sector as a Q.S. The contract I am referring to is a JCT Lum sum contract without quantities .The Tenderer was given the Schedule of Item for the contract or u can say a blank Bill of Quantities and the specifications.The Tenderer is supposed to calculate quantities from the drawings and insert his rate as per the specifications.

During Tender evaluation,it is found that the lowest Tenderer has calculated quantities on the lower side as compared to other Tenderers & also as compared to the quantities calculated by us for Budget estimate.
The Tenderer was offered a opportunity to explain the deviation in quantities but has failed to justfy the same.
Should he disqualified which I firmly believe or should his bid be accepted since the contract is as per the Lump sum contract & is based on Drawings and specifications?

Reply

Dr. Haris Deen on September 26, 2012 at 9:32 am.

Dear Naveen,
Thank you for your query. The procedure stated in the JCT for correction of arithmetical errors in a tender is the universally accepted principle.
In every tender, whether under the JCT, FIDIC or any other Condition of Contract, the basic principle is that what is stated in the Form of Tender (FOT) is the tender sum, however computed or calculated. If this sum is different when any arithmetic check is made on the BOQ or other computation, and errors noted, whether such errors make a difference in the bottom line total, that is carried to the FOT or not, the error must be intimated to the tenderer and he must be asked whether he is prepared to stand by his tender or withdraw same.
FIDIC does not indicate any methodology for dealing with arithmetic errors in this manner, because FIDIC is intended for international use and the principles involved will depended on the culture and policies of the country or client opting to use FIDIC. For example, in most countries of the Middle East, where the arithmetic check reveals a lesser amount in the bottom line total than that stated in the FOT, then the tenderer is asked to reduce his bid to that amount. On the other hand if the bottom line figure is higher that what is stated in the FOT, the tenderer is asked to accept the FOT sum with corrections to the BOQ.
You will therefore see that there is no hard and fast rule. I would however, support the JCT methodology.

Reply

Gus on April 5, 2012 at 1:10 pm.

Dear Dr. Deen:
I work for a General Contractor and recently I submitted a value Engineering proposal to replace concrete retaining walls (stone cladded finish) with Earth retaining system (geogrid walls where stone cladding is not required). Our contract FIDIC 87, states that savings are split 50/50 between Employer and contractor. When the numbers were worked out for the proposal, stone caldding was not included. After the approval was granted from the Employer through a variation order, we tried to claim the saving on the stone cladding. The Engineer (who also missed the stone cladding while reviewing our proposal) is refusing stating that stone cladding is not included in the value engineering structural system and thus unwilling to share the saving with us. Please provide some feedbackl on whether or not stone cladding saving shall be shared 50/50.
Thank you.

Reply

Gary Jones on April 11, 2012 at 10:03 am.

Dear Sir, one a lump sum contract is in place, how would you expect the relationship to be between both parties i.e. owner and contractor. For example should the owner actively try and work with the contractor to ensure that the contact price is doable, since we often see the owner trying to control the contractor such that it almost ends up like a reimbursable condition with a lump sum contract. Basically what I am trying to say is how much should we allow the owner to get involved with the actual works during EPC?

Reply

Dr. Haris Deen on April 21, 2012 at 11:12 am.

Dear Gary,
Whatever the nature of the procurement strategy is, whether lump sum or re-measured or something else, project managers always like to work as a team with everybody involving in project execution towards a common goal.

However from your question am I to understand that the Employer is interfering to the detriment of the project? In any event, there is no way that the Contractor can prevent the Employer’s involvement to oversee or ensure that his requirements are met. If such involvement causes variationa or causes the Contractor to incur costs that were not foreseen then the Employer must pay the Contractor these costs.

When the Contractor submits his tender, it is his responsibility to ensure that the Contract Price is “doable”. Similarly, if the Contract Price was so low that would cause problems for the Contractor and knowing this full well, the Employer has awarded the Contract, then the Employer must suffer the consequences as much as the Contractor. There is no such responsibility on the Employer to support a Contractor who submits a low tender.

The Contractor cannot prevent the Owner’s involvement to any degree.

Reply

Dinesh Subasinghe on April 18, 2012 at 10:49 am.

Dear Sir,

1.If the contract is Lump Sum all the variations can be re-measured?, which are apart from the provsional sum and optional items.
2.In the same lump sum project Consultant used to revised the contract sum when issuing the variation order, hence still is it valid to re-measure?

Kindly help me on this.

Thanks
Dinesh

Reply

Dr. Haris Deen on April 23, 2012 at 12:09 pm.

Dear Dinesh,

Yes, variations irrespective of the nature of the contract – lump sum or re-measured, usually are treated as re-measured unless the Engineer and the Contractor agree a lump sum price prior to execution of the variation.

If you are referring to the Qatar General Conditions, then Clause 51 gives the right to the Engineer to issue instructions that will vary the Contract Price without vitiating or invalidating the Contract. Therefore, the practice of indicating a change in the contract price in a VO is usually acceptable and good practice.

Reply

Dr. Haris Deen on June 19, 2012 at 1:06 pm.

Dear Dinesh,
Yes Variations irrespective of the nature of the contract – lump sum or re-measured, usually is treated as re-measured unless the Engineer and the Contractor agree a lump sum price prior to execution of the variation.

If you are refering to the Qatar General Conditions, then Clause 51 gives the right to the Engineer to issue instructions that will vary the Contract Price without vitiating or invalidating the Contract. Therefoe, the practice of indicating a change in the contract price in a VO is usually acceptable and good practice.

Reply

Naveen on April 23, 2012 at 12:52 pm.

Dear Dr Deen

I have observed that correction of arithmetical errors of Tender bids during Tender Evaluation are dealt with differently in Lumpsum JCT & FIDIC Building contracts.
The contract I am referring to is the contract without quantities wherein the drawings and specifications form the basis of the contract and the Tenderer is given a Blank Bill of Quantity with schedule of items and rates and quantity to be filled in .
In FIDIC the SOR are arithmetically checked and if any errors in SOR the Form of Tender sum is corrected and the Tenderer has to abide by the new Form of Tender sum. If the Tenderer does not agree to correct the errors the bid is disqualified.

But in JCT as per Series 2 ,Practice Note 6, the bid submitted by the lowest Tenderer shall be opened and checked arithmetically.There are two alternatives to deal with arithmetical errors.
First option is that the arithmetical errors should be pointed out to the lowest Tenderer and he has option to stand by the original Form of Tender sum or else withdraw.That is no correction in price is permitted.If the Tenderer elects to stand by his tender then the total amount of error is expressed as percentage of the correct total of the BOQ.
In the 2nd option, correction of Tender price is permitted.In both cases opportunity is given to the lowest Tenderer to stand by his original Form of Tender sum but this is not the case in FIDIC wherein no opportunity is given to the lowest Tenderer to stand by his original Tender bid price i.e Form of Tender sum.

How is it that there are two so divergent ways of dealing with arithmetical errors in building contracts? Which do u feel is the correct way to go about dealing with arithmetical errors in Tender bids for Lump sum building contracts based on drawings and specifications? Is it correct to alter the Form of Tender sum for arithmetical errors in Lump sum Building JCT contracts without quantities?

Reply

Gus on April 24, 2012 at 12:17 pm.

Dear Dr. Deen:
I work for a General Contractor and recently I submitted a value Engineering proposal to replace concrete retaining walls (stone cladded finish) with Earth retaining system (geogrid walls where stone cladding is not required). Our contract FIDIC 87, states that savings are split 50/50 between Employer and contractor. When the numbers were worked out for the proposal, stone caldding was not included. After the approval was granted from the Employer through a variation order, we tried to claim the saving on the stone cladding. The Engineer (who also missed the stone cladding while reviewing our proposal) is refusing stating that stone cladding is not included in the value engineering structural system and thus unwilling to share the saving with us. Please provide some feedbackl on whether or not stone cladding saving shall be shared 50/50.
Thank you.

Reply

Dr. Haris Deen on September 26, 2012 at 9:33 am.

Dear Ghassan,
Thank you for your query. I believe that I have already responded to this query. However, any VE proposal under FIDIC should take into account all that is removed or deleted in replacement of the alternative work. In your case the stone cladding was part of the works priced for. Therefore, irrespective of whether you and the consultant, inadvertently failed to take into account the stone cladding during the VE assessment, does not matter. In calculating the final analysis everything that constitutes the deleted work should be taken into account and similarly everything that constitutes the replacement works must also be taken into account. You should ask the consultant, if the intention was the deletion only of the said works, then would he have not taken the stone cladding into account to make the saving?

Reply

Muhammad on April 24, 2012 at 1:54 pm.

Dear Dr. Deen,

Nice and interesting to read your article. I am new into project management. I have a query which is little bit different and awkward.
In one of my projects (which is Lumpsum Contract), I have changed the original structural steel to Pre engineered Building with the consent of the Client. At the end of the day, the quantity of steel as per the revised design was 40% lower than what was in the original design.
The client demands for a negative variaton to be deducted from the other positive vairations. Is the client right? Or I am eligible for the quantities as per original design.

Reply

Dr. Haris Deen on April 26, 2012 at 9:29 am.

Dear Muhammad,
I am flattered that Project Managers also visit my blog. Keep doing so, because very soon I will be writing on Project Management as well.

Coming to your question you have not stated the Form of Contract upon which your contract was awarded. However my response is as follows:

1. Irrespective of the form of contract, what you have suggested is a change in the scope and in a lump sum contract a change in scope will be treated as a variation. The net result (addition or deletion) can be decided on re-measure basis (as this is a scope change) or as a lump sum adjustment. Since the proposal to change the scope came from you as contractor, then the Employer has the right to ask for a reduction as in your case, or if the change itself results in an increase, the Employer can refuse to pay the increase, depending on what you as contractor agree with the Employer. On the other hand if the scope change was instructed by the Engineer and results in an addition or reduction beyond the permitted 20% in aggregate – under Qatari Law 26, then you as contractor will be entitled for new rates on the work which exceeds beyond 20%. That means, if the aggregate value of the varied works, say works out to 50% of the contract sum, then upto 20% of this value the Engineer will apply the contract rates. The next 30% will have to be agreed with the contractor.

2. If the Form of Contract used is the FIDIC Red Book, it could have been possible for you to have offered this as a value engineering proposal. In which case if approved you would have been able to share the savings at 50% to each party. That would be only after deducting your design and other costs.

Reply

Musa A ALNATOOR on May 15, 2012 at 5:47 pm.

Dear Dr Haris Deen,

I hope you remember me as one of your students in “Claims Seminar in Qatar” last April, I will appreciate if you advise me about the following case:

I am a contractor with LS contract, BOQ is not mentioned as a contract document , but there is a BOQ signed and stamped by the two parties (again it is not mentioned anywhere that it is a contract document) – I am new to the company- now the client is asking to change some items like Aluminium works to uPVC, they want to buy materials themselves and let me fix, in addition he delayed decision in many submittals (delay documented). Can you help me in dealing with this?

Reply

Dr. Haris Deen on September 26, 2012 at 9:31 am.

Dear Musa A Alnatoor
The BQ if included, whether stated as part of the contract or not, should nevertheless be accepted as a contract document for reference as both parties have stamped and accepted the BQ as such by signing and stamping the document. However, the BQ should not be used to decide the scope of work to be executed because, as you say that it is not mentioned as forming part of the contract.
It is usual (and accepted practice) in the construction industry to use the BQ (if provided) for pricing variations. It is perfectly in order for the client to vary the materials for different or in your case cheaper materials to effect savings. However, by procuring the uPVC materials himself the client has denied the contractor (yourselves) from any trade discount or profits that you might have made from the procurement of the materials. Therefore, in my opinion, you are entitles to receive profits on the cost of the materials. I am afraid that I cannot help you any further on this matter without knowing all the facts by investigating all the documents within the contract.

Reply

Mourad KRICHEN on June 5, 2012 at 3:16 pm.

Dear Dr. Deen,

I had really appreciated the ‘hot debate’ that you had initiated concerning the variations in Lump Sum Contracts.

I had also noticed that on several occasions, you had insisted upon the principle that ‘ALL DEPENDS ON WHAT IT IS STIPULATED IN THE CONTRACT CONCLUDED BETWEEN PARTIES’.

Actually, I do not fully agree with you at this respect. Parties may conclude on an agreement and sign it; however, courts may not consider some of its terms and/or conditions although parties had previously accepted them. In other words, I want to say that a Contract does not make the law (nor justice). An Employer can not, from one hand, offer to his Contractor an agreement on a lump sum basis, then from the other hand he entitles himself in the same agreement to ‘review’ up/down the lump sum amount subject to the variations that he may order during the performance of the Contract. This is unquestionably an UNFAIR DEAL, and courts may decide unexpected awards at this respect. Surely, the issue is more critical (from the Contractor’s side) when it comes to variations reducing the amount of the Lump Sum; however, we must keep in mind that even for the case of variations resulting in a increase in the lump sum amount, not all Contractors are motivated to perform them (one of the reasons is related to their very busy workload plan).

I would highly recommend that all parties to an agreement must give high consideration to the way they draft that agreement in such a manner to make it based on a clear FAIR offer to all of them.

In conclusion, I want to sat that Employers being ‘too’ smart in the way they draft their agreements may not always work out as they would have wished.

Mourad KRICHEN
Contracts & Procurement Engineer

Reply

Dr. Haris Deen on September 26, 2012 at 9:30 am.

Dear Mourad,

Thank you for your comments on my articles on the Lump Sum contract principle and documentation. You do not however support your opinion with authority. You are advised to read my articles on the laissez faire doctrine in the formation of contracts.

This doctrine has been succinctly explained by the British Judge Sir George Jessel MR in the case of Printing and Numerical Registering v Simpson (1875) LR 19 Eq 462 thus:

“If there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of Justice”

Furthermore Lord Pearson in Trolloppe & Colls Ltd v North-West Metropolitan Regional Hospital Board [1973] stated:

“The basic principle is that the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvements might be.”

Therefore you can see that all documents forming part of the contract will be enforced by the courts, unless the contract has been entered into under duress.

Reply

Robert H Drouin on July 7, 2012 at 8:20 pm.

Dear Dr. Deen,

Thank you for the very interesting and helpful blog !

As I discovered your site while searching advises and definitions, I would like your opinion on a contractual and legal matter:

We have a Lump Sum construction contract were we must indicate our manpower, amongst other quantities information and itemised details, which we did, through the overall estimated man-hours and histograms by trade. There is no where mention of man-hours in the whole document, but only manpower.

In the definition of terms, neither “man-hour” nor “manpower” are shown.

Although the Client said this is not necessary in his control system,he is requiring that we produce our man-hours per item of the construction scope of work. As we are on a Lump Sum, we fear that the Client may come back during the project to try and compensate some change orders with hours that we have gained in productive items (in case of substancial claim and if the overall productivity was good, it happened that the justice would only compensate for the actual difference between the bidded hours and actual hours spent, which would generate a large loss for the contractor).

What are the risks and negative impact that may occur if we present our detailed man-hours per item?

Could you please give me your opinion on the matter?

Thanking you in anticipation and best regards,

Robert Drouin,
P. Eng, MBA

Reply

Dr. Haris Deen on September 25, 2012 at 10:15 pm.

Dear Robert,
Sorry for the delay in responding. Firstly, I was researching for any cases to support my response, but I could not find any specific ones. However, following the rulings in San Paolo and Williams v Fitzmaurice, any lump sum contract is executed on the basis that the contractor has to execute all that indispensably required to complete a known scope of works. Extending this principle it is reasonable to suggest that how the contractor has priced the bid in a lump sum contract is a matter for the bidder and should not affect the payment terms. Having said this, I must clarify that project managers often require the breakdown of the rates in the manner you have stated. This is purely for the purpose of evaluating variations and should not be used for valuing the utilisation of resources in execution of the Works. This is the best I can do without access to all the documents forming part of the contract.

Reply

Michael on September 11, 2012 at 7:34 pm.

Dr Deen,
I have read your article and the comments with interest.
I have a query however regarding JCT intermediate Building Contract 2005.
We have a refurbishment project where the client has provided drawings, specification and a schedule of works with descriptions and provisional quantities for nearly all the items on the project.
These quantities have then in many cases been drastically reduced (up to 80%) as a lot of the works were not required. The clients QS is valuing the items on a pro-rata basis leaving us with a massive under recovery.
There are no detailed bills and some items do not have quantities at all.
Should the contract be considered lump sum in such circumstances and is the client allowed to deduct the value of the extensive works that were not required in such a manner.
What is your view
Regards
Michael

Reply

khristine on November 14, 2012 at 4:01 pm.

Good day!

I would like to ask regarding the manpower issue.
We advise the contractor to execute some additional jobs then they will claim it through time sheet basis. When I received their variation order, they have included in their claim the Project Manager. My question is, are they allowed to claim for the Project Manager? These additional job is not part of the Lump Sum Contract. This is my first time to encounter a variation including the Project Manager.

Thanks.

Rgds,
tine

Reply

Nasir Saleem on March 5, 2013 at 10:05 am.

In our Lump Sum Contract it is mentioned that the haulage distance for dumping the excavated material from the Construction Site to the Dump Site (tip) (to be provided by the Client) is 45km.

The Client however provided a Dump Site which is about 22km from the Construction Site and he is claiming savings (reduction to Contract price) based on this. Is the Client’s request for savings in this instance valid considering that this is a Lump Sum Contract?

Reply

Dr. Haris Deen on March 26, 2013 at 7:53 am.

Dear Nasir Saleem,
In a Lump Sum contract the risks are shared by both sides and as such if the haulage distance was more than what is stated in the contract the Engineer will use the argument that this was a lump sum contract and no extra charge will be considered. Using the same logic and argument, the Engineer cannot deduct anything for the reduction in the haulage distance.
Dr. Haris Deen

Reply

Ihab Khairy on March 6, 2013 at 12:26 pm.

Dear sir,

I am Eng. Ihab khairy, 13 years QS experience, and i have one question:

If the contractor are received a site work instruction for additional works, and the project is Lumpsum project, so the additonal quantity should be measured from the shop drawings, but i am asking about the omission quantities, the contractor should be measured it from tender drawings? or omit the BOQ quantities for same item? please clarify

Reply

Dr. Haris Deen on March 26, 2013 at 8:00 am.

Dear Ihab Khairy,
The item to be deducted is not re-measured, It is completely deducted from the Contract according to the BOQ – Because you do not measure lump sum items. However for the additions – since the scope is different you must measure the work to be executed from the IFC drawings and price the item accordingly. The quantity may be equal to, less than or more than what was deleted. It does not matter.
Dr. Haris Deen

Reply

zeid on March 25, 2013 at 11:12 pm.

Dear Dr. Deen,

I have a question regarding variations in lump sum contract.

First the consultant is following the BOQ, Drawings & specs. for every single item.

we got a variation with a similar items that exists in the BOQ, are we entitled to quote the same unit rates for the new variation knowing that the tendering stage done before six months.

Thank You & Regards,

Zeid

Reply

Dr. Haris Deen on March 26, 2013 at 7:45 am.

Dear Zeid,
To give you a proper answer, I need to know the Conditions of Contract upon which your query is based and the country in order to connect it with the law,

Generally all conditions of contract stipulate that variations of similar nature to what is provided in the BOQ as an iten will be priced at the rate or price in the BOQ or Schedule of Prices. The fact that it is a lump sum contract does not matter as what is stated in the conditions of contract will override any other consideration.
Dr. Haris Deen

Reply

Mountasser on April 16, 2013 at 11:25 am.

“Such contract the contractor’s obligation is defined in wide terms. His obligation is to complete the whole of the works. The works have not been described in great detailed as would be in a bill of quantities. “The shorter and simpler the description of the work to be carried out, the more difficult it will be for the contractor to contend that work is extra” (Uff, 2009). The additional work for the foundations will not entitle the contractor to an extension of time because it is part of the widely defined scope of works and therefore included in the original time for completion. “Such necessary works are not extras, for they are impliedly included in the lump sum” (Furst and Ramsey, 2006). This is clearly demonstrated in Sharpe v San Paulo Railway Company where the contractor had agreed to build a railway between fixed termini for a lump sum. Included in the lump sum was excavation of just over two million cubic yards which was calculated by the engineer. It turned out that actual volume of excavation was in fact just over four million cubic yards. The contractors claimed they were entitled to a great deal more due to the understated engineer’s specification. However the court of appeal held that the contractors could not claim for the additional excavation. As per Sir W.M. James, L.J.:
In this case the contractors undertook to make the railway, not to do certain works; but they undertook to complete the whole line, with everything that was requisite for the purpose of completion, from the beginning to the end; and they undertook to do it for a lump sum …”
That is the risk that the contractor takes on a widely defined scope of work and he must judge for himself and be satisfied that he has allowed for all that would be necessary to complete the works.”

This is quoted article from other essay but useful,

great job

thanx D. Haris

Mountasser

Reply

Archana Mayadunne on May 12, 2013 at 4:53 pm.

I’m having this issue in pricing this tender for a design & build contract. As the contract BOQ cannot be changed, when a tender drawing revised, what will be the process on including those in BOQ for pricing?
And what if i price the given BOQ from Client without altering anything in BOQ and price properly my alternative offer? i’m little confused here. Kindly request anyone to help me out.
I’m in Qatar & 66538470 is my mobile number. I request early advice as i have to submit the tender within another two weeks.

Thanks & Regards,
Mayadunne

Reply

rey on May 19, 2013 at 12:44 pm.

Sir Harris,
I have a question pertaining to “Art. 16 of Law No. 8 of 1986 amended by Law No. 26 of 2005 restricts the right of the engineer to increase or decrease the works by more than 20% of the contract sum”.
My questions are?
- We have a project here in Qatar using Qatar GCOC Lump sum contract. non in the contract mentioned that in exceeding 20% of variation contractor has the mandatory right to make his own BOQ (meaning deleted the existing BOQ and prepare according to his rate, e.g duct works was quoted as “1 lot” since there is an additional floor required by client they replaced the 1 lot to m2) i told them to use or priced the ductwork with thesame unit 1 lot.
- Is it a mandatory law the 20% limit for variation even it is not mentioned in Particular conditions of Contract & can you elaborate this law.
- I ordered the contractor to use the BOQ rate as reference rate for those item the same in the BOQ and use new rate for new items substantiated with quotatiuon to be agreed by both parties.
- Can i quantify the excess to 20% for all new items only with the new rate & use the same rate for all items already in the BOQ?
Hope you can reply the soonest possible time.

Thank you in advance,
Rey of QATAR

Reply

admin on May 22, 2013 at 6:20 pm.

Dear Rey,
Thank you very much for your query. There are two issues connected with your question.
Firstly, Law No. 26 is intended to protect Contractors, particularly in respect of lump sum contracts. Please remember that the 20% increase or decrease is from the total contract sum and not from individual items. Also it does not mean that the Engineer cannot increase or decrease the scope of contract beyond 20% either way. He can, but the Engineer must compensate the contrator for loss of profit if there was a decrease and different rates if there was an increase.

In your case,I would not allow the contractor to re-measure the ducting on m2 basis when he has submitted a “Lot” price. He must be made to provide a proper breakdown of the “lot” price to obtain a rate. Keeping in mind that Law 26 applies only when the omissions or additions are in excess of 20% of the total contract sum – not on individula items, it is not acceptable to re-measure any part of the work in alump sum contract. You may request a BOQ only for the changes while deleting the omitted works wholly from the contract BOQ.
New rates are only for the work in excess of 20% and not for all the work, although changed.
Where, BOQ rates are applicable they can be used only upto 20% and new rates for the work in excess of 20%.

Reply

Leonard Nzeduru on May 31, 2013 at 8:54 pm.

Dear Haris,
I signed a Lump Sum Contract to rehabilitate a hospital in October, 2011. The contract is in 3 phases as the client did not want to close the entire facility during the rehabilitation.

The BOQ provision for plumbing, tiles and a few other aspects were exhausted in phase 1 as the other 2 phases has been in use since the rehabilitation commenced. Who pays for the provision of these items as we are currently rehabilitating phase 2.

Thank you as I await your reply,
Leonard, Abuja!

Reply

Emmanuel Tinkasiimire on June 11, 2013 at 1:02 am.

Iam supervising a consultant who is executing a lump sum contract for the design and supervision of a 12 storey office block. The ToR indicated an estimated current and projected built area of 10,000sq.m but has increased to 50,000sq.m. after the design. All the other items in the statement of requirements have remained unchanged. Payments are pegged on deliverables like; Inception Report, Conceptual Designs, Scheme Design, Final Design Report, Tender action, Supervision e.t.c, but in percentages. Would you think that the consultant is entitled to a corresponding increase in fees as he is insisting?

Reply

vicktor on June 16, 2013 at 3:17 pm.

Hi
If an item in boq is 500m2 for painting and if in reality as a contractor I have done 5000m2 am I entitled to get compensation claims for the same. We r operating a lumpsum contract in oman. Also I had quoted higher price fir Grc but the client citing the same modified it and changed it with new rates. Also while signing contract the client said we r reducing 50% Of the blockwork quantity as we are reducing the no. Of walls. But the quantity itself was wrong and I executed the full but they r clearing the same 50 less. What is ur take on these 3 issues. 1 painting 2grc 3 block.
Regards

Reply

vicktor on June 16, 2013 at 3:23 pm.

Dear sir
Another instance happened to me. Missing items in boq but specified in drawing. What is the heirarchy in a lumpsum contract. Should I execute something which I have not quoted for.

Reply

Harsha on June 24, 2013 at 2:26 pm.

Dear Sir,

please describe what happen in the Lump -Sum Contract one boq item mentioned 50m Cable Length, but at the time of executions qty of cable is 125m. if contractor can variations order?
please note at time of quoting not provide the cable path or site layout.

BR
Harsha

Reply

Simon Mattimoe on August 20, 2013 at 1:59 pm.

Dr. Harris Dean,
We are currently working on a Lump Sum Contract.
We are “back to back” with our sub contractors.
The client issued stage D information including a schematic. The Stage D estimation did not show any earthing cable sizes. We made an allowance of 95mm. The total allowance for the earthing installation was £40,000 including earth bars, cables and terminations This is clearly identified in the Contract pricing schedule.
The client issued Stage E information. The new stage E information upon which the contract is based showed all earthing cables as 300mm on the schematic in small writing at the edge of the page.
The sub contractors estimator appears to have missed the change from the 95mm cable to the 300mm cable.
The client now wishes to reduce his 300mm cable to lower sizes.
The client is seeking monies for this reduction.
Each meter that we give back based on a 300mm cable means that we are giving back more than we had included within the bid.
Within our quantified schedule of rates which forms an appendix to the contract (although containing errors) clearly states 95mm. However the schematics from the designer clearly show 300mm cable.
Is there an argument to only omit the 95mm cable that was included? Is there a case for “what didn’t go in can’t come out”?
Normally under a lump sum contract we would value the variations on their own merit. If we do this on this occasion we will give back more than what we have allowed as well as still having to buy the smaller earth cables, earth bars and terminations with -£ Money.
We wish to present a case on behalf of our sub contractor to avoid any possibility of punishing them further and ultimately ensure that they don’t go out of business!

Reply

Dr. Haris Deen on September 19, 2013 at 7:05 am.

Dear Simon,
I am afraid that any argument that you present in support your sub-contractor is likely to fail, unless you have requested clarification of cable sizes at the tender stage and 95 mm was confirmed. Or if you had stated that in the absence of cable sizes you had priced the earthing cables for 95 mm, then you can fight a case. It appears from your comment that neither of the above has happened, therefore it would appear that you might have difficulties here. However, you may use your quatified schedule as a basis and put forward an argument, using any pricing notes that your sub-contractor might have, and supported by prices from recognised cable suppliers that the prices of 95mm and 300 mm cables are obviously different, then an arbitrator might support your case as a genuine mistake, depending on the nature of the argument that you are prepared to put. Good luck

Reply

Amar on August 29, 2013 at 3:35 pm.

On contract award it was realized ‘Provisional sums’ item and amount are mentioned in BoQ, but there in no clause within bespoke contract conditions for Provisional sum. Shall this item be treated as lumpsum-fixed price.
What external document would lawfully substantiated for the “Provisional sum” definition to the Client/Consultant?

Reply

Dr. Haris Deen on September 19, 2013 at 6:52 am.

Dear Amar,
No, If the sums have been stated as provisional sums in the contract BOQ and the BOQ is a contract document, then these cannot be treated as lump-sum fixed price. Please refer to FIDIC Red Book Sub-Clause 13.5

Reply

Sancho on October 12, 2013 at 1:30 pm.

Dear Harris,
This is another issue I encountered recently as a Contract Administrator in one project I am handling in MENA region. I am in the Client side.

The lump sum contract attached 2 documents – Scope of Works & BOQ. Many clauses in the contract always mentioned about the Scope of Works, but BOQ has never mentioned in any of the clauses. In one of the notes in the Scope of Works, it states that “In case of discrepancies, this Scope of Works takes precedence over the BOQ.”. The fact is that there are many discrepancies between the BOQ & the Scope of Works, BOQ favors the Contractor, Scope of Works favors the Client.

The Problem: Though all pages in the Contract were all signed by both parties, the Scope of Works (as annex to the contract) was only signed by the Client (no signature from Contractor). While in the BOQ both parties have signed.

My Question: Between these 2 conflicting documents, which should governed?

Please need your opinion.
Thanks
Sancho

Reply

Dr. Haris Deen on October 12, 2013 at 3:18 pm.

Dear Sancho,
Based on the following decided cases:
Williams v Fitzmaurice (1858) 157 ER 709
Walker v Randwick Municipal Council (1929) SR (NSW) 84 and the famous San Paolo case, no single document decides the scope. Unless I have access to all the documents submitted during the tender I cannot give a proper opinion. The BOQ does not decide the scope. The contractor will be required to do everything required for the completion of the intended projects with the minimum requirements, unless anything else is specified.
Dr. Haris Deen

Reply

Sancho on October 12, 2013 at 3:37 pm.

Dear Dr. Harris,
Thanks for reply. The Contractor refuse to do some items of work mentioned in the Scope of Works as they cannot found in the BOQ. Thus, the Contractor stands firm on BOQ as it is signed by both parties, while in the Scope of Works only the Client signed it. The project is not completed as Contractor refuse to execute unless it is treated as variation order, say “Roadway Markings & Signs” is stated in the Scope of Works but is not found in the BOQ.
Regards,
Sancho

Reply

Sancho on October 14, 2013 at 1:42 pm.

Dear Dr. Harris,

I have another inquiry. If any of the pages or its appendices of the contract not signed by one party (say only Client signed), can it still be binding? Or that particular page incompletely signed can be considered ineffective or still binding?

Our contractor dispute the Client as one clause is pushed by the client to the contractor to comply. But Contractor rejected as that particular clause page is not signed by him, only the client signed it.

Please advise.

Regards,
Sancho

Reply

Sancho on October 14, 2013 at 4:07 pm.

Dear Dr. Harris,

Another issue regarding lump sum contract wherein construction of temporary facility structures are included in the contract scope of works to be implemented by the Contractor.

My question is who will be the owner of these temporary structures after completion of the project, is it the Client or Contractor? considering that it is stated in the scope and BOQ to be provided by the Contractor. For example, the temporary security fencing of the camp, is the Contractor have the right to take it back after completion of the project? Of course he will use this one to their next project.

Reply

Vladimir on February 14, 2014 at 11:32 am.

Dear Dr. Haris,

I would appreciate some help on Lump Sum contract issue.

On a Lump Sum Fixed price contract where Pricing Schedule used to evaluate variations and for interim payment, significant mistake in quantities was noted. I will explain.

Pricing Schedule was prepared by the Consultant, but the Trade Contractor was to re-measure all quantities and add/omit any work as required and in line with tender drawings and specification.
Pricing Schedule included for 110 doors.
During the tender period addendum drawings were issued and clearly showed only 40 doors required.
The Trade contractor didn’t adjust qty of the doors and priced for 110 doors instead of 40. At the same time some other quantities were adjusted by the Trade Contractor. Lump Sum Fixed Price agreement was signed.

Can the Consultant reduce contract sum accordingly? Or shall the Trade Contractor be paid for 110 door even so only 40 door installed?

Regards
Vladimir

Reply

Dr. Haris Deen on February 14, 2014 at 7:31 pm.

Dear Vladimir,
Your case is a typical lump sum contract and you have explained your problem correctly making it easier for me to express an opinion. Let us take a hypothetical situation where your QS has indicated 40 doors in the Pricing Schedule instead of 110 doors and 110 doors are actually required, would you then agree to pay the Trade Contractor for the additional 70 doors? of course not. You will obviously adduce the argument that this is a Lump Sum Contract and the risk is with the Contractor. The same applies in the reverse case as yours. You will be in breach if you try to reduce the no. of doors now. If your QS made the mistake he must bear the consequences and the risk is with the Owner.

Reply

Faizullah on March 16, 2014 at 6:02 pm.

Dear Sir,

We have a problem in one of our Contract which is based on Qatar General Conditions of Contract. It is lump sum project. The Contractor and Employer agreed on cost and time of a variation work and VO signed by both of them. Later on it was realized that Contractor has wrongly valued the works and even the Consultant did not check and hence variation order is now closed. My question is ” Is there any way to reopen this variation order”?

thanks and regards,

Reply

Dr. Haris Deen on March 19, 2014 at 9:05 am.

Dear Faizullah,
Thank you for your query. Unfortunately the General Conditions do not provide for any corrections of a VO after agreement. Also remember that the VO is issued only after both parties have signed it, The Contractor should have noticed this before signing the VO. Having said this, if you can prove a genuine mistake the Consultant and Engineer might act reasonably to correct the VO. However, they are at liberty to reject as well since it is the Contractor’s responsibility to ensure correct pricing of the VO.
Dr. Haris Deen

Reply

Faizullah on March 19, 2014 at 9:09 am.

Dear sir,

Thanks for your response.
The error is of such a magnitude that we are even planning to take help of civil law i.e law no 22 of 2004 which says that errors are to be corrected. Please advise in light of law.

Thank and best regards

Faizullah

Reply

Dr. Haris Deen on March 19, 2014 at 12:50 pm.

Dear Faizullah,
Yes you might try under Articles 130 to 133 which states as follows:
Article 130
1. Where a contracting party commits a mistake without which he would have not given his consent to the terms of the contract, such contracting party may demand voidance of the contract if the other contracting party commits the same mistake, or knows of its occurrence, or could easily have detected such mistake.
2. However, voidance of a contract in respect of gifts may be requested without taking into account the other contracting party’s participation in the mistake or his knowledge thereof.
Article 131
The effect of the mistake shall be enforced even where it applies to the rule of law concerning any matter of the contract.

Article 132
A party whose consent was the result of a mistake may not insist on such mistake in a manner contrary to the principles of good faith. The other party may, in particular, insist on or plead to the conclusion of the intended contract, provided that substantial harm is not caused.
Article 133
The validity of the contract shall not be affected by mere arithmetical or writing mistakes. These errors must, however, be simply corrected by mutual agreement between the parties.
However it depends on how you submit your claim. The statements are important to establish mistake from both sides or malicious intent from the Engineer.

Reply

Faizullah on March 19, 2014 at 1:07 pm.

Dear Sir

Thanks for your help. My last question is that the proof of malacious intent of engineer would be difficult but it can easily be proved that Engineer was negligent in assessing or valuing the varied works.
Regards

Reply

Leave Your Comment

Your email will not be published or shared. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>