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Deletion of scope of work

26 replies [Last post]
Karim Mounir
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Hi,
We are bound by FIDIC 99 - 1st edition, our contract is based on re-measurement basis.
The client sent us a letter informing that he will delete nearly 13% of the project original value. These works will not be executed at this stage neither by us nor by other contractor.
He wants us to advise about the time and cost impact of this alteration.

For the time aspect, the point is can the deletion of these works lead to shortening the approved duration of the project and leads to shifting of the the completion date?

What I believe is the fact is that the client changes his mind suddenly, but still both of us have to abide by the contract / extended completion date approved earlier.

What do you think?

Regards,
Karim

Replies

Samer Zawaydeh
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Dear Karim,

What actions have you taken so far?

Best,

Samer
Karim Mounir
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Thanks Andrew, Samir, Mike, Ravi,.............
Samer Zawaydeh
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Dear Karim,

If you can type the exact instructions in your Engineer’s letter, we can assist more.

Best Regards,

Samer
Andrew Flowerdew
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Karim,

Back to your first post –

“He [the Engineer/Employer] wants us [YOU] to advise about the time and cost impact of this alteration.

It sounds like the Engineer/Employer is asking for YOUR proposal as per Cl13.3. (Red Book) – he’s currently not seeking to try and impose something on you, he’s asking you what you think the effects are.

So first things, first - submit your proposal. Unless the landscaping works are on the critical path there will be no reduction in time required to complete the project, therefore your submission as per Cl 13.3(b) will show no change to the completion date.

If the works are on the critical path you will have to think about it a bit more but it’s possibly not an insurmountable problem if other events have caused delays, etc.

Then see what the reply is and go from there.
Samer Zawaydeh
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Dear Karim,

I would like to bring to your attention that in submitting you Cost for this variation, you will need to report the following on a monthly basis:

1. Direct Cost.
2. Site Overheads
3. Head Office overheads

Then you can report the profit based on the above cost. You will need to present all the supporting documents of course and then add the % profit.

Good luck,

Samer
Samer Zawaydeh
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Dear Karim,

Stay within the time frame for responses required by FIDIC. Otherwise, the Client can reject your claims and your job will become more difficult.

Yes you are correct, you will need to study the Time impact well and present it to your client. Try to use more than one method to study the impact.

The DAB is the cheapest method to solve disputes. Canceling it and going to another entity might be a local method to resolve disputes. The spirit of method on the other hand would be very similar. FIDIC calls its DAB, and your locals call it Chamber of Commerce. In essence, you will have a wise/ expert person for solving these issues. Make sure that you prepare for all the requirements of DAB while you study the requirements of the Chamber of Commerce.

Good luck,

Samer
Karim Mounir
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Hi Samer/ Raviraj ,

But I have to submit the cost impact of such deletion in the first and then the engineer should determine in view of the contract, true?
(btw there are particular conditions to the FIDIC 99 in our contract, they deleted the DAB and stated that all the disputes shall go to the chamber of commerce).

Regards,
Karim

Samer Zawaydeh
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Dear Karim,

You can also ask the Engineer to make a determination under clause 3.5. This is the first thing that a dispute board will be asking for in case that you want to take it into the next level.

Good Luck,

Samer
A D
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What if client is not sure, when he has to start the landscaping works? Consider the following classic example:

In one of the existing project in UAE, water level has increased from 1.8m to 0.6m. This is a major problem in low lying areas and because of which water is not draining out. It has resulted in creation of lake instead of a garden. May be because there is no sub-surface drainage. Client is now studying weather by just providing a perforated pipe and then connecting to sewarage line, will solve the problem or not. That means there will be change in teh sewarage netywork design. If sewarage network construction is already completed, then where water shud b discharged out?

Theren r lot of options, which client hav to look for. If its going to take time, then there is no point in giving them suspension of works instruction, and increase the contractors overhead and leading to further claim and so, building up more frustration for both contractor as well as client.

Neway, as far as karim’s query is concerned, post # 6 and post # 13 are more relevant.

Cheers,
Samer Zawaydeh
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Dear Karim,

If the development is going to end at one point in the future, and the Landscape works should be executed as per your scope of work, then it is prudent to issue a suspension of works under clause 8.8 instead of omission of your scope.

It depends on the time frame of course, but he basic idea is that your company has a Contract to complete that scope.

What is the best interest of both parties?

Best Regards,

Samer
A D
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Karim,

May i ask you on which development project u r working on??
Karim Mounir
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Hi Samer,
The client owns the development area, he’ll sell the plots to the developers in order for them to construct their buildings.
As a result, he thought that execution of landscaping features at this stage will be of no use as these features will be destroyed by the equipments, labors, construction activities, ...

That’s why they will delete the scope of landscaping now.

Regards,
Karim
Samer Zawaydeh
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Dear Karim,

Your client can not omit your scope of work and give it to another Contractor. This is a legal issue. You know that, correct?

Best Regards,

Samer
Karim Mounir
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Hi RAJESHKUMAR,

Due to the magnitude of the omitted work (nearly 13%), this will definitely affect the time for completion.

What I was searching for was similar cases or opinions sustains that any omission of work shall not indeed lead to reduction of the time for completion.

The client wants to remove most of the landscaping features from our scope of work in the development area as the plots will be developed by other contractors soon after completion of our works.

Regards,
Karim
RAJESHKUMAR RAJEN...
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Dear Karim

You have not indicated whether the FIDIC contract has been amended by Conditions of Particular Application, which is very common. Accordingly I can only advise in respect of the standard provisions.

Pursuant to sub-clause 13.1 (Variation and Adjustment - Right to vary) of the FIDIC 1999 form of contract, variations may be initiated by the Engineer. I note your indication that the letter is from the Employer. If this is the case, perhaps the first action ought to be to confirm with the Engineer that this is intended as an Engineer’s variation.

A variation can be a change to exclude work (reference sub-clause 13.1(d)) and, pursuant to sub-clause 13.3 (variation procedure), the Contractor in the absence of a request for a proposal should be considering necessary modifications to the programme and evaluation of the Variation.

Omission of work can, in the proper circumstances, warrant a reduction in the Time for Completion. If you consider that it should not, I would suggest that you ought to be issuing a notification of claim pursuant to sub-clause 20.1 (CLAIMS, DISPUTE & ARBITRATION - CONTRACTOR’S CLAIM) and preparing your documentation to evidence that a reduction in the Time for Completion is not warranted, or is limited despite the extent of the proposed scope reduction.

This would apply even if the original Time for Completion has been extended under sub-clause 8.4(EXTENSION OF TIME FOR COMPLETION)

In my experience it is often the case that an earlier extension of Time has benefited both Parties by remedying what might otherwise have been a difficult situation of resolving the respective liabilities in circumstances where each Party has contributed to a delay. Does the potential reduction in time affect you in this way?


Best regards,
Rajeshkumar
(after discussed with experienced peoples)
Karim Mounir
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Thanks for all of your valuable inputs.

Regrds,
Karim
Samer Zawaydeh
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Dear Karim,

You can use the following clauses in FIDIC 1999:

(1/7) Assignment: where both parties must agree to the reduction of the scope of work.

(8/3) Program: since the orginal program of works does not represent the current scope, you will need to submit a new program of works.

(13/3) Variation Procedure: Since the Engineer informed you with the requested reduction in scope, the Contractor must response as soon as possible with three actions:
a) Description of Works to be omitted.
b) Modification needed to Program of Works and its effect on the Duration of the Contract.
c) Contractor proposal for the cost of this variation.

Good luck,

Samer
RAJESHKUMAR RAJEN...
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The employer have full rights to delete some part of work
at the same time the contractor have rights to claim for General overheads & site Overheads for the full contract period
Karim Mounir
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Hi Samer,

Well, if the client want to omit a scope of 13% from the org. contract price, then he has the rights to do so - however he has to compensate the contractor with the overhead and profit for the deleted work to say the least (as I understood from the case of Abbey Developments Ltd v PP Brickwork Ltd shown earlier in other post, http://www.adjudication.co.uk/cases/PDFs/164%20Abbey%20Developments%20v%...)

For the time aspect, (contractual wise) is there any clauses in FIDIC 99 1st edition stating that client can shift the completion date after omitting scope of work or even any similar cases that I can refer to???

My point is the completion date is bounding for all the parties involved in the project, as Mike said earlier EOT award sets your new contract completion date, which cannot be reduced by omission of work unless it is wrapped up in a new EOT claim for delaying events (ie. from the client side).

Regards,
Karim
Samer Zawaydeh
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Dear Karim,

What are you going to do at site if your scope is reduced by 13%? You want to complete as quick as possible to reduce your overheads and close the project with a profit.

There are many different ways to ask for EOT, and you want to present what is favorable to you. And of course, the Client has the right to submit their own claims for a -ve time extension, if that is what they want, to handover the project at an earlier date.

It is better to work a plan to the agreement of all sides.

Good luck,

Samer
Mike Testro
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Hi Karim

My earlier response still holds - your EOT award sets your new contract completion date.

This cannot be reduced by ommission of work unless it is wrapped up in a new EOT claim for delaying events.

Best regards

Mike Testro
A D
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Hi Karim,

Plz check Clause 13.3: Variation procedure

First of all, variation can be a omission of part of works.

Employer can ask for a proposal showing time and cost impact for any omission of works.

The Contractor shall respond in writing as soon as practicable, either by giving reasons why he cannot comply by submitting a proposal for any modification to the programme according to Sub-Clause 8.3 and to the Time for Completion.

U just cant simply ask for the increase in duration for the remaning activities because u have float in your hand. You can either explain that equipemnets/resources are not available to do a particyular task before so and so date OR can prove that ommitted works are not in the critical path and so, there wont be any change in duratuion of the project.

But, yes, CLIENT can always ask for the proposal if a part of the works are omitted from the original scope of work, but it is not mandatory for a contractor to reduce the timeframe because of a ommission.

Cheers,

rav
A D
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Hi Karim,

Plz check Clause 13.3: Variation procedure

First of all, variation can be a omission of part of works.

Employer can ask for a proposal showing time and cost impact for any omission of works.

The Contractor shall respond in writing as soon as practicable, either by giving reasons why he cannot comply by submitting a proposal for any modification to the programme according to Sub-Clause 8.3 and to the Time for Completion.

U just cant simply ask for the increase in duration for the remaning activities because u have float in your hand. You can either explain that equipemnets/resources are not available to do a particyular task before so and so date OR can prove that ommitted works are not in the critical path and so, there wont be any change in duratuion of the project.

But, yes, Contractor can always ask for the proposal if a part of the works are omitted from the original scope of work, but it is not mandatory for a contractor to reduce the timeframe because of a ommission.

Cheers,

rav
Karim Mounir
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Hi,

Samer - you mean that the client can claim the contractor (ie. such as issuing a -ve CO)?
Is this a common / acceptable approach ?, what forces the contractor to accept squeezing the original duration of the project due to unforeseen change of scope, the client should bear the consequences of this matter.

Mike - EOT was previously approved, the issue was settled and a new completion date was agreed earlier. Later on the client wanted to delete some items from the org. BOQ.

Regards,
Karim
Samer Zawaydeh
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Dear Karim,

For each project, you have the triple constraints; time, cost and scope.

If you have an approved schedule, and the deleted activities are Critical Path Activities, then deleting them will change the duration of the project.

The best option here is to do "As-Planned/ Impacted" analysis. Start with deleting every activity and checking the impact, and evaluate the final impacted schedule if it makes sense.

Good luck,

Samer
Mike Testro
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Hi Karim

The only way an ommission of works can reduce the contract period is when the ommission is taken into account when assessing an extension of time.

So the simple answer is - No EOT - No time reduction.

Best regards

Mike Testro