How to Value Variations under the 1999 FIDIC Red Book

“Whether the construction project is small or large, variations frequently occur.” 

In our case, the need for variation arises during the course of the project.

The Engineer requests a proposal from the Contractor regarding the Variation.

The Contractor submits the proposal.

The Engineer approves the proposal and instructs Variation.

The Contractor executes the Works strictly in accordance with the instruction.

But, the effects of these changes doubles the quantity of the earthworks under the contract.

After the execution; measurement and evaluation take place for the payment.

By applying the measurement determined and the appropriate rate or price, the Engineer evaluates the Works.

In this document, you will find the key issues and the procedure to be followed while valuing variations under the 1999 FIDIC Red Book.

1   The Engineer Requests a Variation Proposal 

Before instructing a Variation, the Engineer may request a proposal from the Contractor.

While the Contractor is to comply with the “Engineer’s Instructions”, the Contractor is not obliged to comply with the “Engineer’s Requests”.

2   The Contractor Submits a Proposal

The proposal is to include [1];

(a) A description of the proposed work to be performed and a programme for its execution.

(b) The Contractor’s proposal for any necessary modifications to the programme according to the Sub-Clause 8.3 [Programme] and to the Time for Completion.

(c) The Contractor’s proposal for evaluation of the Variation.

3   The Engineer Instructs the Variation

Upon receiving the Contractor’s Proposal, the Engineer is to respond with approval, disapproval or comments. 

After approving the proposal, the Engineer instructs the Variation.

The Contractor is not to delay any work while waiting for the Engineer’s response.

4   Notice for the Measurement of the Works

Clause 12 [Measurement and Evaluation] will be applied for evaluation of the Variation.

The Engineer is to give a Notice to the Contractor’s Representative for the measurement of the works.

5   Measurement Procedure

The details to be considered are [2];

Measurement shall be made of the net actual quantity of each item of the Permanent Works, and,

The method of measurement shall be in accordance with the Bill of Quantities or other applicable schedules.

Measurement Process

1. While realizing the measurement, the Contractor’s Representative is to;
➤ Attend or send a qualified representative to assist the Engineer.
➤ Provide the particulars that are required  by the Engineer.

2. If the Contractor fails to attend or send a representative,  the measurement made is to be accepted as accurate.

Measurement from Records

Except as otherwise stated in the Contract, if the permanent works are to be measured from records, these records should be prepared by the Engineer.

1. The Contractor is to attend to examine and agree the records with the Engineer, and shall sign the same when agreed.

2. If the Contractor fails to attend, the records are to be accepted as accurate.

In case of Unagreement

If the Contractor examines the measurement records but does not agree with the Engineer regarding the  measurement.

1. The Contractor is to give a Notice to the Engineer  in relation with the records’ being inaccurate. If the Contractor fails to give a Notice to the Engineer within 14 days after being requested to examine the records, the records are to be accepted as accurate.

2. After receiving  a Contractor’s Notice; Engineer is to review the records and either confirm or vary them.

6  Selecting the Appropriate Rate or Price

The appropriate rate or price for each item is  to be specified in the Contract or specified for similar work (if there is no such an item).

A new rate or price is to be appropriate for an item of work if [3]:

(a)/(i) The measured quantity of the item is changed by more than 10 % from the quantity of this item in the Bill of Quantities or other Schedule.

(ii) This change in quantity multiplied by such specified rate for this item exceeds 0.01% of the Accepted Contract Amount.

(iii) This change in quantity directly changes the Cost per unit quantity of this item by more than 1 %, and

(iv) This item is not specified in the Contract as a “fixed rate item”:

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(b)/(i) The work is instructed under Clause 13 [Variations and Adjustments].

(ii) No rate or price is specified in the Contract for this item, and

(iii) No specified rate or price is appropriate because the item of work is not of similar character,  or is not executed under similar conditions, as any item in the Contract.

Each new rate or price is to be produced from any relevant rates or prices that are specified in the Contract with fair adjustments in accordance with the above mentioned paragraphs.

Otherwise, it is to be derived from the reasonable cost of executing the work and profit, assessing any other relevant matters.

7   Evaluation of the Works

By evaluating each item of the work, the Engineer is to proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine the Contract Price applying;

1. The measurement agreed or determined in accordance with Sub-Clause 12.1 [Works to be Measured] and 12.2 [Methods of Measurement].

2.  The appropriate rate or price for the item.

FOOTNOTES

1. The same Sub-Paragraph letters are used as in Sub-Clause 13.3 [Variation Procedure] of the 1999 FIDIC Red Book.

2. The same Sub-Paragraph letters are used as in Sub-Clause 12.2 [Method of Measurement] of the 1999 FIDIC Red Book.

3. The same Sub-Paragraph letters are used as in Sub-Clause 12.3 [Evaluation] of the 1999 FIDIC Red Book.

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

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