Variation by Value Engineering under the 1999 FIDIC Red Book

“By the help of Value Engineering, the Contractors use their experience and knowledge for the advantage of both themselves and the Employer.”

Value Engineering has been widely used in the construction industry for many years.

Speeding up completion, reducing the cost of the project, improving efficiency and providing benefits for the Employer are some of the outputs of “Value Engineering”.

The Engineer determines and the Employer pays a fee to the Contractor which is arised from the Variation by Value Engineering.

In this document, you will find the key issues and the procedures for Variation by Value Engineering in accordance with the 1999 FIDIC Red Book.

1   The Contractor Submits the Proposal

The Contractor may submit to the Engineer a written proposal regarding the value engineering at any phase of the project.

1.1 The Details of the Proposal

The proposal;

► Speeds up completion.

► Reduces the cost of the project through its lifetime.

► Improves efficiency.

► Provides benefits for the Employer.

The proposal is to include the elements listed in Sub-Clause 13.3 [Variation Procedure] [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 Sub-Clause 8.3 [Programme] and to the Time for Completion.

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

2   The Engineer’s Response to the Contractor’s Proposal

The Engineer is to respond with approval, disapproval or comments to the Contractor’s proposal in the context of “Value Engineering”.

3   The Contractor Executes the Variation

If the proposal 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 and;

Sub-paragraphs (a) to (d) of Sub-Clause 4.1 shall apply [2].

(a) The Contractor shall submit to the Engineer the Contractor’s Documents for this part in accordance with the procedures specified in the Contract.

(b) These Contractor’s Documents shall be in accordance with the Specification and Drawings, shall be written in the language for communications defined in Sub-Clause 1.4 [Law and Language] and shall include additional information required by the Engineer to add  to the Drawings for co-ordination of each Party’s design.

(c) The Contractor shall be responsible for this part and it shall when the Works are completed be fit for such purposes for which the part is intended as are specified in the Contract.

(d) Prior to the commencement of the Tests on Completion, the Contractor shall submit to the Engineer the “as-built” documents and operation and maintenance manuals in accordance with the Specification and in sufficient detail for the Employer to operate,maintain, dismantle, reassemble, adjust and repair this part of the Works. Such part shall not be considered to be completed for the purposes of taking-over under Sub-Clause 10.1 [Taking Over of the Works and Sections] until these documents and manuals have been submitted to the Engineer.

4   The Employer Pays a Fee to the Contractor

The Contractor will be entitled to get a fee, if [3];

This change results in a reduction in the contract value of this part, the Engineer shall proceed in accordance with Sub-Clause 3.5 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:

(i)  Such reduction in contract value, resulting from change, excluding adjustments under Sub-Clause 13.7 and Sub-Clause 13.8.

(ii)  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.

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 4.1 [Contractor’s General Obligations] of the 1999 FIDIC Red Book.

3. The same Sub-Paragraph letters are used as in Sub-Clause 13.2 [Value Engineering] 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.

This information may not be reproduced or translated without the prior written permission of eayglobal.com

For further information please contact eay@eayglobal.com