FIDIC 2016 Day02-1010 Variations Under FIDIC Forms, Adrias Tan

Adrias TanMSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Senior Legal Counsel, Hyundai Engg & Construction Co Ltd

Variations Under FIDIC Forms

© 2016 Adrias Tan MSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Adrias TanMSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Senior Legal Counsel, Hyundai Engineering & Construction Co LtdFellow, Chartered Institute of ArbitratorsFellow, Singapore Institute of ArbitratorsFellow, Singapore Institute of Builders

Member, Society of Construction Law, UKMember, Society of Construction Law, SingaporeAssociate Member, Singapore Academy of Law

Associate Lecturer, Royal Melbourne Institute of Technology (SIM Singapore)Panel of Arbitrators, SIArb

Variations give Contractor a right to additional money. How does entitlement to compensation interrelate with other FIDIC clauses? Can Contractor avoid the problems associated with Clause 20.1 notice by claiming as a Variation instead?• Variations compared to “Claims” under FIDIC.• Does Contractor have to give notice under clause 20 in order

to get money or time for a Variation?• Does Contractor have a choice as to whether it recovers as a

Variation or a “Claim”?• Different approaches to valuing variations and “Claims”• Claiming for Variation in absence of an Engineer’s instruction


Variations Under FIDIC FormsADRIAS TAN

Variations Under FIDIC FormsVariations Compared to Claims

• Definition of Variation― Defined as any change in form, character, kind, quality,

quantity, line, level, position, alignment, or dimension of existing work or any additional work which vary the Original Scope and Extent of Works that the Engineer finds necessary, appropriate or desirable to complete the works

― May be initiated by Employer’s Representative at any time during the Contract Period, either by instruction or by a request for the Contractor to submit a proposal



• Contractual Basis for Variations– Changes in quantities of any item of work included in the

Contract– Changes to quality and other characteristics of any item of

work– Changes to levels, positions and/or dimensions of any part of

work– Omission of any work unless it is to be carried out by others– Any additional work, Plant, Materials or services necessary for

Permanent Works, including any associated Tests on Completion, boreholes and other testing and exploratory work

– Changes to sequence or timing of execution of works



• Engineer’s Instruction– If Engineer’s Instruction constitutes as Variation, then

contract provisions on Variations and Adjustments shall apply

– Contractor may be requested to submit a proposal constituting as a Variation

– Engineer’s Instruction constituting as a Variation issued for an approved Contractor’s Value Engineering Proposal

– Variations evaluated in accordance with the Contract provisions governing Measurement and Evaluation, for re-measurement of the as-built Works executed



• Definition of Claims– Claims arise when Contractor considers himself to be

entitled to time, cost and compensation for reasonable profit, under any FIDIC Clauses or otherwise in connection with the Contract

– Claims can also incur cost or time implications arising from Variations, such as abortive works, disruption, prolongation, suspension, re-engineering works




• Contractual Basis for Claims– Delayed drawings or instructions– Right of access– Setting out– Unforeseen physical conditions– Fossils– Testing– Extension of Time for Completion– Loss and Expense due to

Variations– Delay caused by Authorities

– Suspension of works– Evaluation and

Measurement– Omissions– Value Engineering – Interference with

tests on completion– Changes in legislation– Employer’s Risks


• Scope of Claims– loss and expense claims, breaches under general law, or

under the prevailing Conditions of Contract– Time related claims, extension of the Time for

Completion– Time related costs, loss and expense– Contractor notifies Engineer where work has been

delayed by reasons beyond his control– Failure to do so would render Contractor liable for

liquidated damages for delay



• Variations and Claims Conflated– Distinction between evaluation of Variation Claims under

Clause 12 [Measurement and Evaluation] and Claims for Additional Compensation arising from Variations such as abortive works, prolongation, suspension, disruption, delay under Clause 20.1

– Claims for Variations not administered under Clause 20.1, a commonly misunderstood procedure

– Claims for Compensation due to Additional Costs arising from Variations administered under Clause 20.1


Variations Under FIDIC FormsClause 20.1 Notice for Variation Claims

• Prevailing Express Contract Provisions– Cost compensation for Variations evaluated pursuant

with contract provisions on Measurement and Evaluation, for re-measurement of as-built Works executed, including omission

– Contract Bills of Quantities Unit Rates, Schedule of Rates used for varied work similar in nature and executed under similar circumstances

– Adjustment based on new rates or price derived from relevant prices with reasonable adjustments or from reasonable cost of work including reasonable profit



• Henry Boot Constr v GEC Alstom Combined Cycles– Humphrey Lloyd QC ruled that variations do not have to

be valued fairly but in accordance with contract terms and rates agreed even if it meant that bill rates were unduly favourable to the parties

– no express provisions requiring Contractor to notify Engineer in order to get compensation for works executed under an instruction constituting as a Variation

– When Engineer requires the Works to be measured, reasonable notice given to Contractor if attendance or assistance or additional particulars are required



• Henry Boot Constr v GEC Alstom Combined Cycles– Such measurement and evaluation do not provide for any

other compensation such as abortive works, re-engineering works, costs related to disruption, prolongation, suspension, idling costs and such like, arising from the Variations

– Under Clause 20, Contractor is contractually obliged to notify Engineer for such claims arising out of complying with such Variations



• Henry Boot Constr v GEC Alstom Combined Cycles– Under Clause 20.1, Contractor is contractually obliged to

notify Engineer if the Variation will constitute:• any time implications arising out of complying with

Variations, any entitlement to an extension of the Time for Completion, the Contractual Completion Date will be delayed due to such Valid Variations, such as substantial change in the quantity of an item of work in the Contract

• abortive works, re-engineering works, costs related to disruption, prolongation, suspension, idling costs


Variations Under FIDIC FormsRecovering as a Variation or a Claim

– Whether claim for compensation is a Variation or a Claim– Compensation for Variations for costs related to as-built

works, evaluated and re-measured under contractual provisions such as Clause 12 [Measurement and Evaluation]

– Claims arising from Variations and additional costs may include loss and expense, and time related claims such as EOT and EOT related costs, all of which are not encapsulated in Clause 12 but necessarily incurred as a result of the various factors

– Contractor may engage two approaches in seeking compensation as a Variation and / or as a Claim


Variations Under FIDIC FormsValuing Variations

– Variations evaluated using methods of measurement of net actual as-built quantity of Permanent Works, using BQ Unit Rates, Schedule of Rates or other applicable rates

– Contractual procedure for evaluation of variations enshrined in FIDIC Form under [Measurement and Evaluation] clauses. Onus on Engineer and Cost Consultants to measure and evaluate the variations

– Contentious issue arises when Engineer imposes Clause 20.1 relating to detailed particulars of a Claim to compel Contractor to submit such details and supporting particulars for the Engineer’s review and evaluation before approving the variation claims


Variations Under FIDIC FormsValuing Claims

– Genesis of Claims lies in several Contract Condition Clauses

– Claim for compensation due to variations is for additional costs like loss and expense, time related claims for EOT and EOT related costs, disruption, prolongation and suspension costs, which are not encapsulated in Evaluation of Variations but necessarily incurred

– Claims evaluated based on actual costs incurred, subject to detailed supporting particulars of the basis of the claim and additional payment claimed due under the relevant provision of the Contract



• Loss and Expense Claims– Delayed drawings or instructions– Abortive Works– Costs due to disruption, prolongation, suspension, idling

time– Re-engineering and pre-planning works– Substantial changes in quantities and contract price

above certain percentage requiring adjustment of the contract unit rates



• Heads of Claims– Direct Costs, indirect costs – subject to strict proof– Overheads, financing charges and interests, FG Minter v

Welsh Health Technical Services Organisation– Profit and Loss of Profit

• Global Claims– Crosby & Sons Ltd v Portland Urban District Council– Onus on Contractor to particularise detailed claims, not

just a scientific thesis and academically compelling argument to substantiate the claims


Variations Under FIDIC FormsVariation Without Engineer’s Instruction– If an Engineer’s Instruction constitutes a Variation, the

Contract provides that the Variation shall be subject to Evaluation and Adjustment

– Scenario: when Contractor submits a Variation Claim for Engineer’s Instruction not clearly stipulated as a Variation, and Engineer disapproves the Variation, but still compelling the Contractor to comply with the Instruction

– No contract protocol for Contractor to reserve rights of claims and to protect his position in relation to such Engineer’s Instruction which ought to constitute as a Variation


Variations Under FIDIC FormsVariation Without Engineer’s Instruction– Most FIDIC Forms stipulates that the Contractor shall not

make any alteration and/or modification of the Works, unless and until the Engineer instructs or approves a Variation in writing

– Where an instruction constituting as a Variation is not expressly stated as such, and the Contractor notifies the Engineer of cost and time implications of the variation, the Engineer must respond in writing that the same ought to constitute as a Variation


Variations Under FIDIC FormsVariation Without Engineer’s Instruction– Once a Variation is approved in writing, the Contractor

shall acknowledge receipt, and the Contractor shall execute and be bound by such an approved Variation

– Each Variation shall then be evaluated in accordance with the Contract provisions governing Measurement and Evaluation


Variations Under FIDIC FormsVariation Without Engineer’s Instruction– When the Engineer disapproves or rejects a Variation, the

instruction is deemed as an invalid instruction with no contractual effect

– Complying with the instruction constituting as a Variation which the Engineer has disapproved as a Variation would disentitle the Contractor to any compensation

– Contractually, the Contractor is precluded from any rights of claims for Variations executed in the absence of an Engineer’s Instruction

– Compensation under doctrine of quantum meruit claims, doctrine of unfair enrichment, or under equity


FLOW CHART – Engineer’s Instructions Constituting as a Variation, Evaluation and Claims for Additional Payment



Interactive Voting System – Multiple Choice Questions The FIDIC Forms, or the Guidance

Notes, should provide clear and unambiguous contractual procedures to distinguish the difference between Claims for Variations and Additional Works as opposed to Claims for Compensation due to Variations and other contractual basis?1) AGREE2) NO, the present provisions are

adequate



Interactive Voting System – Multiple Choice Questions Choose one of the following scenario:

1) The Contractor must submit, pursuant to Clause 20.1, compensation claims for evaluation and remeasurement of Variation Works executed

2) The Engineer proceeds straightaway to evaluate the Variation Works upon completion pursuant to Clause 12 [Measurement and Evaluation]



Interactive Voting System – Multiple Choice Questions The FIDIC Form can be further

improved by stipulating that the Engineer, when issuing an instruction constituting as a Variation, to inform the Contractor in writing that the instruction is a Variation.1) AGREE2) Not necessary, the present

provisions are adequate



Interactive Voting System – Multiple Choice Questions The Engineer has issued an

instruction, and the Contractor has notified the Engineer that it constitutes a Variation, which the Engineer disapproves. Should the FIDIC Form include provisions for the Contractor to proceed with the instruction pending resolution of this dispute to protect the Contractor?1) YES2) NO, the Contractor must comply

without compensation

MSc | BSc(Hons) | LLB(Hons) | FCIArb | FSIArb

Adrias has more than two decades of practical working experience in the construction industry, working currently as in-house legal counsel for an MNC Company. Adrias is professionally trained in litigation, arbitration, adjudication, mediation and dispute resolution, and is an accredited arbitrator. He has handled several institutional and ad-hoc arbitral proceedings, as well as having tutored in SIArb, and conducted numerous workshops and seminars on diverse construction, contractual and legal issues including various Standard Forms of Contracts. He also lectures at the Royal Melbourne Institute of Technology, at the Singapore Institute of Management Campus teaching law subjects.email: [email protected]

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Adrias Tan

FIDIC 2016 Day02-1010 Variations Under FIDIC Forms, Adrias Tan

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