Could provisions in FIDIC contracts giving relief for ‘Force Majeure’ or ‘Exceptional Events’ provide relief to contractors suffering as a result of price escalation? It is well documented that construction and engineering projects around the globe are being affected by extreme and sometimes unprecedented price escalation. This is for many reasons including the Covid-19 pandemic and the Russo-Ukrainian conflict.
Up until the spring of 2020, a FIDIC 1999 Sub-Clause 13.7 [Adjustments for Changes in Legislation][1] claim was just one of many issues to be resolved, for example, in a delay and disruption claim or a Cost claim. However, the focus it receives in the context of Covid-19 is drastically different. Many in the industry are using the changes in legislation provision to seek financial compensation in a situation that would otherwise potentially only attract an extension of time.[2] Awarding Cost for Covid-19 events regardless of the circumstances may seem to some (Contractors mostly, though there are Employers and Engineers who agree) like the appropriate thing to do, but whether it is correct according to the Contract is a different question.
Much has already been written concerning the new FIDIC forms of contract published in December 2017. They are approximately 50 % longer and sought to set out the various procedure in much greater detail with the object of both encouraging good practice and reducing the scope for disputes. Numerous minor amendments have also been made. The purpose of this article is to look in more detail at the provisions dealing with Variations, these being amongst the most frequently scrutinised in practice.
Clause 14 deals with all aspects of payment. It also deals with the Statement at Completion, the Final Payment Certificate, Discharge and Cessation of the Employer’s Liability. The Clause provides that this is a re-measurement contract and that the quantities stated in the Bill of Quantities are estimated. There is provision for an advance payment to be made to the Contract. Applications for Interim Payment Certificates are made monthly and these must be supported by documents and a report on progress. Unless the amount assessed is less than the minimum amount set out in the Appendix to Tender, the Engineer has 28 days to issue an Interim Payment Certificate, which states the amount the Engineer fairly determines to be due. The Employer thereafter has an obligation to pay the amount certified, in the currencies named in the Appendix to Tender. In the event that payment is not received the Contractor can claim financing charges compounded monthly. Fifty per cent of the retention monies are paid when the Taking-Over Certificate is issued. Where there are Sections then a proportion is paid. The balance of retention is paid on the expiry of the latest Defects Notification Period or, where there are Sections, a proportion at the expiry of the Defects Notification Period for that Section. Within 84 days of receiving the Taking-Over Certificate the Contractor submits a Statement at Completion. This must include an estimate of all sums which the Contractor considers due. Within 56 days of receiving a Performance Certificate, the Contractor submits a Final Statement. The Contractor must also submit with the Final Statement a written discharge which confirms that the total of the Final Statement represents full and final settlement of all moneys due. The Engineer then issues to the Employer a Final Payment Certificate. The Contract states that the Employer shall have no liability to the Contractor except to the extent that the Contractor has included an amount expressly for that matter in the Final Statement and also the Statement at Completion.
Click through to read Corbett & Co.'s helpful commentary on FIDIC 1999 book Clause 15
