1. Financial Clauses
and
Procedures

2. CLAUSES 12, 13 & 14 Measurement and Evaluation
Variations and Adjustments
Contract Price and Payments

3. Payment Modalities
Lump Sum
Re-measurement
Cost reimbursement

4. Lump Sum Scope of the work and the amount is well defined.
Contractor agrees to work for a pre-determined lump sum.

5. Lump Sum
tem
Nr.
Description
Unit
Qty
Rate
Amount

6. Lump Sum – Advantages & Disadvantages
Cost commitment is known at the outset
Relatively easy contractor selection
Fully defined scope
Contractor assumes greatest risks
Time required for producing full scope
Changes difficult and potentially costly

7. Re- measurement
The scope of the work is generally well defined but the amount of work is indefinite.
Sufficiently detailed scope of work to allow contractor to calculate unit rates.

8. Measure & Pay
tem
Nr.
Description
Unit
Qty
Rate
Amount

9. Measure & Pay Advantages & Disadvantages
Scope need not be as accurate
Cost per unit of production predetermined
Flexibility- scope & quantity can be varied.
Final cost not clearly known

10. Cost Reimbursement
Contractor is paid all what he spends plus OH & Profit.
Minimal pre-determined scope definition.
Clear and explicit definition of what constitutes reimbursable costs.
Co-operative atmosphere and a competent and trustworthy contractor.
Close audit and quality supervision and direction by the Client.

11. Cost Reimbursement
Item
Nr.
Schedule
Rate
Unit

12. Cost Reimbursement Advantages & Disadvantages
Useful when the scope cannot be specified in advance
Minimal pre-determined scope definition permits early start
Final cost unknown
Buyer retains risk
Reduces ability to compare contractor’s bids

13. Contract Price and Payment
15 sub clauses relate to this vital sector
Sub Clause 14.1 – Contract Price may be represented through Bill of Quantities (re-measured) or Schedules
Sub Clause 14.2 – Anticipates that advance payment will be made and procedures provided

14. Measurement and Evaluation (Clauses 12.1 and 12.2)
Measurements is undertaken by the Engineer, giving notice to the Contractor’s Representative to attend etc.
Measurement shall be net actual quantities

15. Evaluation by Engineer (Clauses 12.3 and 12.4)
Sub Clause Provides the basis for the Engineer to determine the value of each item of work
The rates specified in the Contract will apply unless there are no appropriate rates for a new item of work
New Rates may be determined where items a) and b) of Sub Clause 12.3 apply
Sub Clause 12.4 provides for possible compensation to Contractor relating to omissions of work

16. Variations and Adjustments (Clause13)
Engineer has right to vary under Sub Clause 13.1 and with details of types of issues covered
Opportunity for Contractor to submit “Value Engineering” change. Risk of development with Contractor and any savings are split 50:50
Sub Clause 13.3 sets out procedure required to be followed if Engineer requests proposal prior to instructing Variation

17. Provisional Sums (Clause 13.5)
Include the provisional sum of Dhr. 120 (one hundred and twenty Dirhams) for connecting end of drain to be the soakage pit.
Prov. Sum

18. Prime Cost Sum
Include the prime cost sum of Dhr. 800 (eight hundred Dirhams) for patent partitions to be executed by nominated sub-contractors.
Add for profit
General attendance
PC Sum %
Item

19. Prime Cost Sum (Contd…)
Include the prime cost sum of Dhr. 55 (fifty-five Dirhams) for ironmongery to be supplied by nominated supplier.
Add for profit
PC Sum %

20. Adjustment of PC & Provisional Sums
Omissions Additions
Prime cost sum for patent partitions
Add for profit (10%)
General attendance
Emirates Interior Ltd., A/C No. 2134
Profit (10%)
Total
Less omission
Net addition C/F to Grand Summary
800.00
80.00
120.00
850.00
85.00
120.00
( )
55.00

21. Daywork (Clause 13.6)
Day-work means payment for actual hours spent carrying out an operation as against payments made based on prices given in the tender.

22. Daywork Records The minimum information recorded should include:
Hours worked by those engaged in daywork
Hours machines were hired
Material used by the Contractor for daywork purposes

23. Who Orders Daywork?
Daywork is only carried out in special situations.
Engineer will usually only request daywork in an emergency when there is insufficient time to raise a variation quotation request. The same emergency may give the Contractor insufficient time to assess and cost a variation quotation.
Another instance would be where tradesmen for a particular trade has to be brought back to do work in that trade when the work in that trade is completed.

24. Price Fluctuations (Clause 13.8)
Often construction projects, particularly, large projects are undertaken over a long period of time. It is more than likely that the price of material used in a job and the rates of pay of the workmen will increase and even in some instances fall during the life of the contract.
Rise and Fall is the adjustment made to the contract price to offset or compensate for any rises and falls that occur during the period of contract.

25. Adjustments for Changes in Cost
Extensive details provided for the use of formulae for cost variations during the contract period. Optional, determined by employer prior to Tender
Base rate reference is 28 days prior to date of tender submission
Factors provided in Appendix to Tender for each project

26. Progress Payments
The value of progress payments are determined on the actual value of work done
This method is based on actual measurement of work done or value of percentages of work done

27. Contractual Implications
(Clauses )
The conditions of contract stipulates:
When progress payments are to be made.
The method of presentation by the Contractor of his claim for progress payments (the information to be provided)
Method for fixing the estimate of the contract value of work executed including variations, unfixed materials on site, etc.,

28. Interim Payments (Cont.)
Sub Clause 14.3 – Contractor to submit a Statement for application for interim payment. Note cross reference to Sub Clause 4.21, plus requirement for 6 copies.
Sub Clause 14.6 – Sets out procedure for issue of interim Payment Certificate by the Engineer - see also chart 2

29. Payment (Clauses 14.7 & 14.8)
Sub Clause 14.7 – Payment duties of Employers plus under 14.8 the financial charges to be paid if Employer is late in payment
(3% above discount rate of Central Bank of country of the currency of payment)

30. Retention (Clauses 14.3 & 14.9) Security for client
Sub Clause 14.9 refers to Retention Money
On issuance of Taking Over Certificate, first half certified for payment by Engineer
On Expiry of Defects Notification Period, balance certified for payment by Engineer

31. Final Accounts Sub Clauses 14.10/14.11/14.12/14.13
These deal with the Statement on completion, application for Final Payment Certificate, discharge and issue of Final Payment Certificate
Sub Clause Currencies of Payment
This clause sets out the procedures if the payments are to be made in more than one currency

32. Final Accounts (Cont.)
Sub Clause requires Contractors within 84 days of Taking Over Certificate too submit a statement showing:
- Value of all work done
- Further sums considered due
- Estimate of any other amounts considered due
Engineer shall certify in accordance with Sub Clause 14.6

33. Final Accounts (Cont.)
Sub Clause 4.11 requires Contractor to submit Final Statement within 56 days of receiving Performance Certificate.
Sub Clause 4.12 Contractor to submit written discharge with Final Settlement.
Sub clause requires Engineer to issue within 28 days Final payment Certificate.

34. Exercise 1
Read Clauses 12, 13 & 14 of the Red Book and answer following questions.
Yes No
Maybe
Does the Contractor undertake the measurement of the Works in Red Book?
Should the method of measurement be stated in the Bill of Quantities
Can the Engineer demand the Contractor to give the breakdown of his rates?

35. Exercise 1 (Cont.) Yes No May be
Can the Daywork Schedule be used to agree new rates
Can the Contract Price be fixed?
Can the Engineer correct previous payment certificates?
Have Provisional Sums to be spent within the contract?

36. Exercise 2 (Group)
A contract agreement was signed based on the FIDIC 1999 Red Book on 1st February, with Commencement Date stated as 1st March. On 4th April the Contractor submitted an application for an interim payment.
On 18th April, the Engineer replied that he did not intend to issue an Interim Payment Certificate.
On what grounds can the Engineer refuse to issue an Interim Payment Certificate?

37. Thank You