FIDIC: international construction contract 273

Traditionally variations have been valued after the works are completed with initial valuation
based on the rates contained in the (BofQ) or pro-rata thereto. These rates are often considered
inappropriate and the variation is valued on a ‘fair and reasonable basis’.
The FIDIC new Red Book introduces the concept of requiring the contractor to submit a
proposal before the varied work is instructed. This is a fundamental change in philosophy for if
the value of the variation and associated programme implications are accepted by the engineer
prior to instruction the risk is shifted from the employer to contractor. The contractor thus has
the incentive to work efficiently on the varied work.
The author recollects on a project based on the FIDIC form the contractor’s representative
being asked by the engineer to give a quotation for a major variation. The initial lump-sum
quotation of £300,000 was rejected, likewise a more detailed quotation in the sum of
£400,000. Eventually the contractor was instructed to carry out the work on dayworks basis –
final sum £500,000! From the employer’s viewpoint settling early often means settling cheaply.
It is easy for contractors to underestimate the anticipated final cost and time implication of a
variation, particularly if subcontractors are involved.

Payment in applicable currencies (sub-clause 13.4)

This sub-clause permits reimbursement in more than one currency, if appropriate for a
variation under sub-clause 13. The contract currency proportions may or may not be appropriate
to the variation; however, they should still be taken into account in the evaluation of the
variation.
The author recollects that the contractor was required to include for three currencies in the
tender bid on the Teesside Jetties project for Phillips Petroleum. Under this FIDIC Contract the bid
included: UK Sterling for the main work, German Deutschmarks (which covered the purchase of
24”54” large diameter piles from Mannesmann) and Dutch Guilders (which covered the
purchase of the oil-loading arms from OWECo in Holland).

Provisional sums (sub-clause 13.5)

Each provisional sum should be used only in whole or part in accordance with the engineer’s
instructions. Provisional sums are often included in the BofQ for parts of the works which are
not required to be priced at the contractor’s risk, for example, for uncertain works, removal of
contaminated ground etc.
The provisional sum can be executed by the contractor and valued under clause 13.3
[variation procedure] or by a nominated subcontractor, as defined in clause 5 [nominated
subcontractors] and valued on a cost-plus basis.

Daywork (sub-clause 13.6)

For work of a minor or incidental nature, the engineer may instruct that a variation be executed
on a daywork basis to be valued in accordance with the daywork schedule included in the
contract.
Daywork is usually instructed for work which cannot easily be measured, for example, search
for and locate services – if location not as per drawings. The labour, materials and construction
equipment involved in the work should be recorded on a daily basis and signed by the engineer.
A priced summary of the dayworks should be submitted to the engineer prior to their inclusion
each month in the next statement under sub-clause 14.3 [application for interim payment
certificates].