Step 2: Change In Design
Before issuance of acceptance letter, both parties have to agree, if the proposal includes a change in design of part of the Permanent Works, that the Contractor:
- carry out design of this part on its own cost,
- submit specification and drawings in accordance with procedures specified in the contract,
- take responsibility for this part till completion and fit for such purposes for which the part is intended in the Contract,
- submit as-built drawing of this part before issuance of Taking over certificate refer▬►FIDIC, Multilateral Development Bank Harmonized Edition March 2006, Clause 13: VARIATIONS AND ADJUSTMENTS, Sub-Clause 13.2: Value Engineering(a) and (b)
13.0 Variations and Adjustments
13.1 Right to Vary
Variations may be initiated by the Engineer at any time prior to issuing the Taking-Over Certificate for the Works, either by an instruction or by a request for the Contractor to submit a proposal. The Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice to the Engineer stating (with supporting particulars) that (i) the Contractor cannot readily obtain the Goods required for the Variation, or (ii) such 40 © FIDIC 2006. MDB Harmonised Conditions of Contract for Construction March 2006 - General Conditions. For participating development bank financed contract use only. No reproduction of this document is permitted.
Variation triggers a substantial change in the sequence or progress of the Works. Upon receiving this notice, the Engineer shall cancel, confirm or vary the instruction.
Each Variation may include:
13.2 Value Engineering
The Contractor may, at any time, submit to the Engineer a written proposal which (in the Contractor’s opinion) will, if adopted, (i) accelerate completion, (ii) reduce the cost to the Employer of executing, maintaining or operating the Works, (iii) improve the efficiency or value to the Employer of the completed Works, or (iv) otherwise be of benefit to the Employer.
The proposal shall be prepared at the cost of the Contractor and shall include the items listed in Sub-Clause 13.3 [ Variation Procedure ].
If a proposal, which is approved by the Engineer, includes a change in the design of part of the Permanent Works, then unless otherwise agreed by both Parties:
-
the Contractor shall design this part,
-
sub-paragraphs (a) to (d) of Sub-Clause 4.1 [ Contractor’s General Obligations ]
shall apply, and
-
if this change results in a reduction in the contract value of this part, the Engineer shall proceed in accordance with Sub-Clause 3.5 [ Determinations ] to agree or determine a fee, which shall be included in the Contract Price. This fee shall be half (50%) of the difference between the following amounts:
- such reduction in contract value, resulting from the change, excluding adjustments under Sub-Clause 13.7 [ Adjustments for Changes in Legislation ] and Sub-Clause 13.8 [ Adjustments for Changes in Cost ], and
- the reduction (if any) in the value to the Employer of the varied works, taking account of any reductions in quality, anticipated life or operational efficiencies. However, if amount (i) is less than amount (ii), there shall not be a fee.
13.3 Variation Procedure
If the Engineer requests a proposal, prior to instructing a Variation, the Contractor shall respond in writing as soon as practicable, either by giving reasons why he cannot comply (if this is the case) or by submitting:
13.4 Payment in Applicable
If the Contract provides for payment of the Contract Price in more than one currency, Currencies then whenever an adjustment is agreed, approved or determined as stated above, the amount payable in each of the applicable currencies shall be specified. For this purpose, reference shall be made to the actual or expected currency proportions of the Cost of the varied work, and to the proportions of various currencies specified for payment of the Contract Price.
13.5 Provisional Sums
Each Provisional Sum shall only be used, in whole or in part, in accordance with the Engineer’s instructions, and the Contract Price shall be adjusted accordingly. The total sum paid to the Contractor shall include only such amounts, for the work, supplies or services to which the Provisional Sum relates, as the Engineer shall have instructed. For each Provisional Sum, the Engineer may instruct:
13.6 Daywork
For work of a minor or incidental nature, the Engineer may instruct that a Variation shall be executed on a daywork basis. The work shall then be valued in accordance with the Daywork Schedule included in the Contract, and the following procedure shall apply. If a Daywork Schedule is not included in the Contract, this Sub-Clause shall not apply.
Before ordering Goods for the work, the Contractor shall submit quotations to the 42 © FIDIC 2006. MDB Harmonised Conditions of Contract for Construction March 2006 - General Conditions.
For participating development bank financed contract use only. No reproduction of this document is permitted. Engineer. When applying for payment, the Contractor shall submit invoices, vouchers and accounts or receipts for any Goods.
Except for any items for which the Daywork Schedule specifies that payment is not due, the Contractor shall deliver each day to the Engineer accurate statements in duplicate which shall include the following details of the resources used in executing the previous day’s work:
13.7 Adjustments for Changes in Legislation
The Contract Price shall be adjusted to take account of any increase or decrease in Cost resulting from a change in the Laws of the Country (including the introduction of new Laws and the repeal or modification of existing Laws) or in the judicial or official governmental interpretation of such Laws, made after the Base Date, which affect the Contractor in the performance of obligations under the Contract.
If the Contractor suffers (or will suffer) delay and/or incurs (or will incur) additional Cost as a result of these changes in the Laws or in such interpretations, made after the Base Date, the Contractor shall give notice to the Engineer and shall be entitled subject to Sub-Clause 20.1 [ Contractor’s Claims ] to:
13.8 Adjustments for Changes in Cost
In this Sub-Clause, “table of adjustment data” means the completed table of adjustment data for local and foreign currencies included in the Schedules. If there is no such table of adjustment data, this Sub-Clause shall not apply. If this Sub-Clause applies, the amounts payable to the Contractor shall be adjusted for rises or falls in the cost of labour, Goods and other inputs to the Works, by the addition or deduction of the amounts determined by the formulae prescribed in this Sub-Clause. To the extent that full compensation for any rise or fall in Costs is not covered by the provisions of this or other Clauses, the Accepted Contract Amount shall be deemed to have included amounts to cover the contingency of other rises and falls in costs.
© FIDIC 2006. MDB Harmonised Conditions of Contract for Construction March 2006 - General Conditions.
For participating development bank financed contract use only. No reproduction of this document is permitted.
The adjustment to be applied to the amount otherwise payable to the Contractor, as valued in accordance with the appropriate Schedule and certified in Payment Certificates, shall be determined from formulae for each of the currencies in which the Contract Price is payable. No adjustment is to be applied to work valued on the basis of Cost or current prices. The formulae shall be of the following general type: Pn = a + b Ln + c En + d Mn + ......
Lo Eo Mo where “Pn” is the adjustment multiplier to be applied to the estimated contract value in the relevant currency of the work carried out in period “n”, this period being a month unless otherwise stated in the Contract Data;
“a” is a fixed coefficient, stated in the relevant table of adjustment data, representing the non-adjustable portion in contractual payments;
“b”, “c”, “d”, … are coefficients representing the estimated proportion of each cost element related to the execution of the Works, as stated in the relevant table of adjustment data; such tabulated cost elements may be indicative of resources such as labour, equipment and materials;
“Ln”, “En”, “Mn”, … are the current cost indices or reference prices for period “n”, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates); and
“Lo”, “Eo”, “Mo”, … are the base cost indices or reference prices, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the Base Date.
The cost indices or reference prices stated in the table of adjustment data shall be used. If their source is in doubt, it shall be determined by the Engineer. For this purpose, reference shall be made to the values of the indices at stated dates for the purposes of clarification of the source; although these dates (and thus these values) may not correspond to the base cost indices. In cases where the “currency of index” is not the relevant currency of payment, each index shall be converted into the relevant currency of payment at the selling rate, established by the central bank of the Country, of this relevant currency on the above date for which the index is required to be applicable.
Until such time as each current cost index is available, the Engineer shall determine a provisional index for the issue of Interim Payment Certificates. When a current cost index is available, the adjustment shall be recalculated accordingly. If the Contractor fails to complete the Works within the Time for Completion, adjustment of prices thereafter shall be made using either (i) each index or price applicable on the date 49 days prior to the expiry of the Time for Completion of the Works, or (ii) the current index or price: whichever is more favourable to the Employer. The weightings (coefficients) for each of the factors of cost stated in the table(s) of adjustment data shall only be adjusted if they have been rendered unreasonable, unbalanced or inapplicable, as a result of Variations.
© FIDIC 2006. MDB Harmonised Conditions of Contract for Construction March 2006 - General Conditions. For participating development bank financed contract use only. No reproduction of this document is permitted.