Oct 12-Q&A-1

Please see my comments below:From: Ludy [mailto:l.beato@alu-nasa.
com]
Sent: Tuesday, November 13, 2012 4:51 PM
To: sam99@eim.ae
Subject: RE: CAAC - Q&A
Dear Prof. Sam,

First of all I would like to thank you for your utmost support to your alumni.
I am one of your Alumni of CA/AC held just recently. I have a question and need your
advice.
We are in the Final Account Stage in one of our projects, both parties already agreed with
the Final Contract Value until we received the Final Account Summary that the Client
applied to us a maximum LD and lots of back charges.
To summarize:
Original Contract Value is
AED
60,000,000.00 Comprising of 3 Buildings
Total Approved Variations
(20,000,000.00) Sum of positive and
negative mainly due to the omission of 1 Building
Final Contract Value
40,000,000.00
Less: 10% LD
(4,000,000.00)
10% Retention
(4,000,000.00)
Back Charges
(800,000.00)
Previous Payments
(36,000,000.00)
Balance Payable
(4,800,000.00)
My question is, as a nominated sub-contractor Isnt it too late if we claim for the loss of
profit and over head due to the omission of 1 Bldg.?
Since the governing contract is FIDIC 4th Edition. Can we apply the Clause 52.3, since
the total amount of the omitted Bldg. is exceeding 15%?
If your Subcontract has a Clause similar to 52.3, yes you can claim the Head Office
Overhead Under-recovery from the Main Contractor. But it is very unlikely that such a
Clause exists as you are a Nominated Subcontractor (for work covered by a Provisional
Sum in the Main Contract). Since the Main Contractor cannot claim it from the Employer
because the work is covered by a Provisional Sum in the Main Contract, and as such are
excluded from 52.3 calculations, usually such clauses are not written into nominated
subcontracts.
However, as discussed during the Advanced Class, you have a remedy. That is to claim
damages for breach of contract on the grounds of unjust de-scoping, to get not only
overhead under-recovery (as in 52.3) but also loss of profit. Main Contractor has a similar
remedy against the Employer. True that the Main Contract would no doubt state that the
Employer/Engineer can spend the whole, part or not at all of any Provisional Sum, but
that is prior to instructing the work under the Provisional Sum. After instructing the work,
if it, part of it, is omitted, then that would amount to de-scoping. Please refer to the Dubai
Court of Cassation case in your notes of Session III of the Advanced Course.
Regards,
Prof. Sam.
Prof. Indrawansa Samaratunga PhD, DSc
FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng
Chartered Surveyor, Chartered QS, Chartered Manager, Chartered Builder
Arbitrator / Mediator - London Court of International Arbitration

Arbitrator / Expert - Dubai International Arbitration Centre, UAE
Middle East Representative - Australian Inst. of Qty. Surveyors
PO Box 23461, Dubai, UAE. T +971 50 4588949 F +971 4 3378668
Kind regards,
Lourdes
From: Monif Loutfy [mailto:monif@loutfy.com]
Sent: Friday, November 30, 2012 6:49 PM
To: Prof. Sam
Subject: Re: For SCA Alumni - Email from Prof Aymen - BUiD - MSc (CLDR)
Hi Prof. Sam
Thanks for the useful question and answers. I am keeping mine to a later stage, however a
bit confusing subject if you could comment on.
Project is around 409 large luxurious villas, completion is around 96% and 60% obtained
authority approvals, due to reasons beyond this question Employer due to default of
Contractor terminated Contract. The task that I am involved in is to prepare a BOQ for
the remaining works which almost 4%. Works are mainly complete and attended to snag
lists available for each of 409 villa ( typical snags cleaning, damaged tiles, touch ups....),
as built survey is available % wise for each activity of original BOQ, progress layouts for
each activity per villa, etc....and could be made available to the new bidder ....original
contract was a lump sum
but the confusion is how to quantify these works where Employer is interested with
standard measurements in sqm, numbers, lm etc...to ensure new bidder giving best
price...I wonder how to transfer snag lists to quantities, ( not no of villas) (example what
if a hinge was found missing in a door and was not recorded in the sang...) what if during
testing and commission one pump exploded, while it was approved earlier and was
working fine...
I believe no standard of measurement is available for this task, if re-measured contract
can work with employer seeking lowest price and sure with almost Zero risk, with low
profile contractors ...( who will blame any additional works later, the BOQ preparation
party)
A BOQ can be prepared. However you cannot state in the Preamble to the BOQ that it is
prepared in accordance with any known Standard Method of Measurements. The description of
each item should state the exact work to be performed or rectification to be carried out in
sufficient detail for the Tenderer to identify the labour, material and equipment required to carry
out that item. Where it is not practical to identify the Unit as m, m2, m3 or nr, it would be Item or
Sum.
Regards,
Prof. Sam.

Kindly comment .....

Regards
Monif Loutfy
----- Original Message ----From: Subz Ferny
To: sam99@eim.ae
Date: Thu, 29 Nov 2012 12:27:06 +0400
Subject: Construction Cost Data Collection
Dear Professor Sam,
I am a QS currently working for a respectable company in Dubai.
Actually I am facing one barrier to my carrier growth.
It has been 2.5 years since I have started working in Dubai, initially I was just taking off quantities but now I am given
more responsibilities more of post contract works which I fought my way through, so I wont get stuck in measurements.
I lack experience on construction rates.
We do not have a construction cost data base. Once I tried to create a system but I had to skip it as I was busy with a
certain project. I simply wanted to ask you how I can increase my knowledge on this? Some times I feel I did a mistake by
joining a consultant company before joining a contractor due to this issue.
I thought of opening a blog where people can freely input there rates if they prefer, but then i do not know how far or how
practical it would be.
I want to be confident enough soon, before i lost the battle at the right age.
There fore can you be kind enough to advice me on how I can achieve this.
I would be glad to here from you as I respect you and bless you for the wonderful work you are doing for us.
Unlike in other countries where you can find a published price index or Standard Prices/Rates for
the construction industry, in the UAE it is a challenge. I understand that an entity (Municipality or
other) in Abu Dhabi has started compiling a Price Index, but don't know whether this is published
yet. I will try to find out and also will circulate this among the SCA Alumni and see whether
anyone has any information on this. Look out for the future Q&A to the Alumni and you may find
this out if I come to know about it.
The only options available are :-
- your idea of starting a blog could be useful

- being an employee of a Consultant you will get an opportunity to deal with tender evaluation
during which you will see the rates/prices of different contractors for the same work, from which
you should be able to build up a reasonable range of rates/prices for work items.
- during your study programme (at the Uni or Poly) your course would have included text books
and other material on Standard Norms to build-up rates. You will have to build-up your own
library of rates using those Norms and applying the current market prices of basic materials like,
cement, sand, aggregate, steel, timber, tiles, paint etc. which would not be that difficult to get
from Building Material suppliers by floating enquiries or from colleagues working with
Contractors/Subcontractors.
Regards,
Prof. Sam.

Subashini.
----- Original Message ----From: Nidal Hasson
To: "Dr. Sam" <sam99@emirates.net.ae>
Date: Mon, 03 Dec 2012 11:47:39 +0400
Subject: Clarification about CoC
Dear Professor Sam,

I would like to thank you very much for your very distinguished efforts, particularly to your
method of teaching and your dedication & commitment thereafter when answering our
questions.
Would you please clarify the exact meaning of Sub-clause 13.2(c)(ii) of FIDIC Conditions of
Contract for Construction- First Edition 1999 and furnish us with an example as how to
evaluate such amount, if possible.
For instance the alternative Air Conditioning Unit that you proposed, may have a shorter life for its
compressor and therefore the compressor has to be replaced sooner than in the specified
one. Consequently during a given life-cycle it would cost the employer more in replacement,
which is the reduction in the value to the Employer. Your proposal of the alternative A/c Unit may
have produced a saving of AED 500 initially (from the Contract Price) but may cost him AED 700
additional costs over a 20 year project life for replacing the compressor 3 times instead of twice if
the specified one was used.
For the purpose of 13.2 (c) (ii) you have to carry out a life-cycle costing of the originally specified
version and your new proposal and show that there is a benefit to the Employer, in addition to
achieving a reduction under 13.2 (c) (i), in order to get the Contractor's fee of 50% of that
reduction.
If the replacement costs amount to AED 700 as given above then the Contractor is not entitled to
any fee. If the replacement costs amount to AED 300/- then the Contractor would be entitled to
AED 100/- (i.e 50% of 500 - 300).
You may recall that during the Advanced Class I mentioned about the attempts in FIDIC 1999 to
try and give its contents in a simpler language (though, in doing so they messed up other things),
evident in avoidance of expressions such as repudiation, antecedent breach etc (found in FIDIC4th. Contents of 13.2 (c) (ii) show how they try to refer to some aspects of life-cycle costing.
Regards,
Prof. Sam.

Best regards,
Nidal Hassoun
Sr. Contracts Manager
----- Original Message ----From: Omar Joudeh

To: "sam99@eim.ae" <sam99@eim.ae>
Date: Thu, 18 Oct 2012 10:35:22 +0400
Subject: Re: Q&A plus Message
Dear prof. Sam;
I enrolled in the master course of Construction law and dispute resolution in Robert Gordon University (distance learning)
and I need your advise on the recommended books that may boost my knowledge in construction law.
CONGRATULATIONS ! It is better to follow the University's recommended list of reading, but the following
may be useful:Contract Law - Ewan McKendrick - PALGRAVE publications
Learning Legal Rules - James A. Holland & Julian S. Web - Blackstone Press Ltd
The Law of Evidence - I. H. Dennis - SWEET & MAXWELL
FIDIC 4th, A Practical Legal Guide - E. C. Corbett - SWEET & MAXWELL
Regards,
Prof. Sam.

Best Regards
Omar K. Joudeh M.Sc. M.E, MEM

Sr. MEP Project Manager
From: Omran Mahmoud : BS [mailto:Omran.Mahmoud@musanada.com]

Sent: Wednesday, October 17, 2012 1:38 PM
To: 'Prof. Sam'
Subject: RE: Some more Q&A
Dear Sir,
Good after noon,
Thanks a lot for your kindness and encouragement , could you please advise
in the following case:A contractor signed a contract for schools package ( including 4 schools)
based on Abu Dhabi contract form that is modeled on FIDIC 1999 (Lump sum
contract). BOQ for one school includes an item for structural steel purlin with
a unit rate 155 AED and BOQ quantities is 1995 LM. The contractor was
instructed to delete steel work partially in one place, other two places in the
school remains as per contract. The actual deleted quantity from that portion
is 1283 LM where remaining quantity is 2100 LM ( total quantity as per
drawing is 3383 LM). When it comes to evaluating that variation ,
contractor argued that BOQ unit rate cant be applied as the actual quantities
is more than mentioned in the contract BOQ and the other three schools in
the package includes unit rates 55 & 65 AED for similar item. Our stand is
that quantity is the responsibility of the contractor and unit rate should be
respected in LS contract.
Please advise what rate should be used providing that the contract is
traditional approach designed by employer and is a lump sum contract.
Description
BOQ quantity Drawing quantity
Structural steel purlins 1995
3383
BOQ unit rate

155 AED
Unit rate in market price is around 70 AED , no adjustment is allowed in the

BOQ.
Whilst the quantity error exists, since a place has not been provided in the
BOQ, for the tenderers to allow for the error, as discussed during Session 1 of
SCA (Boundary Wall example), the Contractor can ask for a revised rate to
value the omission. The revised rate would be 155 x 1995 / 3383 = 91.41
Regards,
Prof. Sam.

Thanks in advance and best regards,

Omran Mahmoud
Senior Quantity Surveyor
----- Original Message ----From: Bimal Fernando
To: sam99@eim.ae
Date: Mon, 26 Nov 2012 09:50:17 +0530
Subject: Re: SCA - Past Q&A
Dear Prof.
thanks for sending the Q&A.
WRT to the following Q&A (yellow highlighted below) what would be the situation that the employer is not actually aware
of the engineers instruction, and such instruction is not essential for the completion of the work. Can a contractor assume
that all instructions given by the engineer is deemed to be accepted by the employer.
1. Since the Engineer is not authorized to instruct changes which are neither necessary nor appropriate as could be
inferred from the first sentence in Sub-Clause 51.1 (of FIDIC - 4th, old ICTAD and similar forms of contracts), the
Employer has a remedy to recover his costs/losses (such as unnecessary additional payment to contractor) by suing the
Engineer, if it is found that the Engineer has instructed such changes without Employer's knowledge.
2. Therefore, the Contractor can comply with such an instruction by relying on his obligation under Sub-Clause 13.1, and
demand payment for the work done. Employer cannot refuse payment as the Employer is deemed to have given approval
for the Engineer's instruction as found in the proviso stipulated by the second sentence on Sub-Clause 2.1(b).
3. Though Sub-Clause 2.1(b) has a reference to Part II of the Conditions, even if the necessity to obtain Employer's
approval is not stated in Part II, an obligation of the Engineer to obtain such approval could still be implied, especially
because the change is neither necessary nor appropriate.
4. Also the failure to obtain Employer's approval or to keep the Employer informed that such changes are being instructed
too can be construed as a default/breach of the Engineer, thus giving the Employer a right of action similar to that stated
in item 1 above.
5. It is not only the essential things that the Engineer can instruct. Things which are appropriate (but not essential) too can
be instructed as stated in the first paragraph of Sub-Clause 51.1, and therefore the Contractor cannot be blamed for
following an instruction which is not essential to complete the Works (whilst his obligation under 13.1 exists), whereas the
Engineer is to be blamed for issuing it if it is neither essential nor appropriate.
In reply to your question, from the above you will find that it does not matter whether or not the Employer accepted the
Engineer's instruction, but the contractor can comply with it and can demand payment under the contract from the
Employer (because the Employer has a remedy to recover it from the Engineer under the contract between the Employer
and the Engineer), notwithstanding the Contractor's alternative right in law to bring a tortious action against the Engineer
for his negligence in either instructing unnecessary/inappropriate things and/or not obtaining Employer's approval for it.
Regards,
Prof. Sam.


thanks
Bimal Fernando - Sri Lanka
1. Assuming that the Engineer has given a instruction to carry out a certain job urgently and there
is a cost implication for this. My question is, can we proceed with the work even though that the
cost is not yet submitted? And what will be our assurance to claim the anticipated amount or be
certified considering that our cost implication/variation is already submitted? If the conditions of contract are
similar to FIDIC, you should proceed with any (necessary/appropriate) variation instructed by the Engineer,
without waiting for approval of its cost implication. Employer has an obligation to pay the appropriate price
for such variation (not what you ask for but the value calculated in accordance with the contract). If however
the variation is for additional work (which is not necessary to complete the original Works), then you are not
under any obligation to proceed with such additional work and therefore you can negotiate the price before
starting such work.
From:
john soosai <johnvinceans@yahoo.com>
Sent:
28-Sep-2012 08:29:37 +0400
To:
"sam99@eim.ae" <sam99@eim.ae> ,
Cc:
Subject:
Legislation Change
Wishing you a very Good Day, Prof. Sam,
Thank you for your continuous support.
Prof., the Main Contractor (MC) has a Lump Sum Contract with the Government to build
a double track electrified railway project in Malaysia.
There is a Legislation change as a result, the Government Sales Tax was increased from
5% to 6% during the construction period and the Consultant acting on behalf of the
Government acknowledges it is a variation.
Therefore, MC submitted the actual costs incurred on the net increase i.e.1% for their
approval on the following service providers for eg :
Mobile phone services/telephone services/security services/consultancy
services/Insurance Services/Survey Services etc.
The Consultant responded that he is unable to assess the quantum and in order to
evaluate, the Consultant is requesting from the MC, what is the base cost in respect of the
original 5% Service tax cost element that the Main Contractor has allowed in the
Contract Sum.
The level of breakdown the Consultant is requesting at the time of tender is not available
nor it is feasible to provide the breakdown now. This is not an acceptable excuse. The
Contractor should show the difference between the two builds-up. If the tender details are
not available, the original build-up should be created again using sensible data.
My question is : Is absolute proof required to substantiate this simple variation ?
No, but even to decide on a balance of probabilities, the Contractor should still provide
sufficient details to the Engineer. Moreover the existing rates/prices are used as a basis to
value variations and therefore the Contractor is required to show how much he built into
the existing prices in the first place.
Even if this was not treated as a Variation but treated as a fluctuation under Clause 70 (of
FIDIC-4th type of contract), the difference in cost has to be still demonstrated to get the
reimbursement.
Regards,
Prof. Sam.

Your comments on this matter is greatly appreciated.

Thank you.
Regards,
John Soosai
Dear Prof. Sam,

Good day..
Thank you for keeping in touch. I will pass this invitation to my colleagues.
I have some questions about COST PLUS FIXED FEE CONTRACT:
Too vast a topic for this short Q&A forum but few short replies are given below
What is a Cost Plus Fixed Fee Contract? A contract under which the total cost incurred by
the contractor is reimbursed by the Employer and additionally a fixed sum of money
(agreed at the time of entering into the contract) is paid as contractors profit.
What are the advantages and disadvantages of this type of contract?
Advantages to the Employer The contract can be awarded and the contractor can start
work, whilst the design is still in progress and therefore shorter overall project
completion (design+build). Contractors expertise can be made available to the design
team during design stage. Post contract quality control would be easier as the contractor
would not try to do cheap work.
Advantages to the Contractor Speculative estimating is avoided. Unlikely to make a
loss. Price fluctuations are reimbursed. Claims are reimbursed. Dealing with variations
avoided/minimized.
Disadvantages - There is no cost certainty to the Employer. There is no incentive for the
Contractor to keep the costs low. More commercial staff is required by both parties to
administrate the contract. Inability to establish actual cost in countries where there are no
price control on building materials (and where contractors can easily produce suppliers
invoices of any price they wish !)
What are the things to be considered in particular when entering this type of contract?
Employer - Avoid if possible and wait until the design is complete so that tenders can be
invited to get competitive prices and cost certainty. How is the actual cost going to be
determined, based on invoices for basic labour/material/equipment prices or a schedule
agreed at the time of entering into contract ? Necessity for strict cost control. Write into
the contract, the provisions for open-book accounting requirements.
Contractor Try to agree staffing levels prior to entering into contract to avoid
Employers/Consultants complains alleging unnecessary staff levels. Write into the
contract provisions to get OH&P for additional work (otherwise the contractor would get
only the fixed fee, however much additional work he does !). Clarify whether the Fixed
Fee is only for Profit and if so insist that Head Office Overheads is a cost to be
reimbursed and the formula for it, or agree the Fixed Fee for OH&P.
Regards,
Prof. Sam.

This is new to me. Your inputs will be well appreciated.
Thank you very much

regards,
Marisol Balictar
SCA Alumni
From: Ajay Ruhela [mailto:ap.ruhela@gmail.com]
Sent: Monday, November 19, 2012 11:24 AM
To: sam99@eim.ae
Subject: Question
Dear Sir,
A very Good Morning to you and thank you for all your tremendous efforts towards the
knowledge sharing.
I have a question regarding Extension of Time.
Scenario is I am involved in a project from a client side and there have been a lot of
delays incurred in the project and mitigation of the delays by the Contractor seems not
possible. So, I was discussing with the client and found few of the works which may be
deleted of the total scope without hindering the functionability of the Project. So, that we
may save a lot of time and get the project delivery in time. Now, my question is, if we
adopt this way to reduce the time line of the project, what is the way out to impose
penalty on the Contractor for their default in delaying the project line?
Mitigation is to be attempted by both parties to the Contract. The deletion of part of the
scope is likely to be considered as a mitigation measure by the Employer, and therefore
levying any penalties may not be possible (as the original completion date would be
achieved).
The Employers remedy may be to claim damages for breach of contract by the
contractor, but for this purpose, Employer has to prove his loss, which may not be
possible as the intended use (function) of the project is not affected.
Regards,
Prof. Sam.

Regards,
Ajay Pal Ruhela
From: Salin Kumar [mailto:salin@eo.ae]
Sent: Monday, November 26, 2012 2:47 PM
To: sam99@eim.ae
Subject: PC Rates
Dear Prof. Sam

In one of our Lump sum project PC is for finishing items like ceramic tiles.
While calculating the actual of PC rates, is it required to go for actual quantities or we
can take the BOQ quantity.
Also is the wastage to be considered for final value.
As per our preamble: The Prime Cost will be expended at the discretion of the Engineer
and the adjustment to the Contractors rate will be the net difference between the Prime
Cost (PC) rate the description with Contractors Overhead and Profit stated in and the
actual price paid (benefit of any discount passing to Employer).
Please advise.
Consultant recommendation with BOQ quantity x Difference of (Prime Cost + 10% OHP
and Actual Cost + 10% OHP)
Example: 101 m2 x (80 + 8 (72 + 7.2) = 101 x 8.8 = 888.80 (savings)
Unless the item description or the preamble expressly states that the wastage would not
be considered in adjusting PC Rates, wastage should always be taken into account when
adjusting PC Rates. Otherwise neither the Employer would get the benefit of the saving
in the wastage when the actually paid price per m2 is less, nor the contractor would get
compensated for the increased cost of waste when it is more !
Your above calculation (after allowing for wastage) is appropriate provided that 101 m2
is the actual quantity of work to be done (and not the BOQ quantity).
Regards,
Prof. Sam.


Salin Kumar
Sr. Quantity Surveyor
____________________________________________________________________
Due to many shortcomings, in FIDIC 1999, disputes would be unavoidable if the
Contract Administrators are unaware of those shortcomings and how to deal with them.
Next Advanced Class bringing knowledge on above starts on 18th January 2013, which
also discusses the termination and suspension clauses in both FIDIC-4th and FIDIC 1999
in relation to UAE law and also the complex valuations following terminations. If you
wish to join, please send an email.

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Please see my comments below:From: Ludy [mailto:l.beato@alu-nasa.

Dear Prof. Sam,

Arbitrator / Mediator - London Court of International Arbitration

Arbitrator / Mediator - London Court of International Arbitration

Kindly comment .....

- your idea of starting a blog could be useful

Arbitrator / Mediator - London Court of International Arbitration

Dear Professor Sam,

Arbitrator / Mediator - London Court of International Arbitration

----- Original Message ----From: Omar Joudeh

Arbitrator / Mediator - London Court of International Arbitration

Omar K. Joudeh M.Sc. M.E, MEM

From: Omran Mahmoud : BS [mailto:Omran.Mahmoud@musanada.com]

BOQ unit rate

Unit rate in market price is around 70 AED , no adjustment is allowed in the

Arbitrator / Mediator - London Court of International Arbitration

Thanks in advance and best regards,

FRICS, FAIQS, FIQSSL, FCIArb, FCIOB, FCMI, FASI, FBEng

Arbitrator / Mediator - London Court of International Arbitration

Arbitrator / Mediator - London Court of International Arbitration

Your comments on this matter is greatly appreciated.

Dear Prof. Sam,

Arbitrator / Mediator - London Court of International Arbitration

This is new to me. Your inputs will be well appreciated.

Thank you very much

Arbitrator / Mediator - London Court of International Arbitration

Dear Prof. Sam

Arbitrator / Mediator - London Court of International Arbitration

Middle East Representative - Australian Inst. of Qty. Surveyors

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