Increase cost above fixed price allowances

Dear Skan,

What are the clauses in your Contract supporting the Claim for compensation due to inflation?

Can you please state them out.

Thank you,

Samer

Hi Samer,

This is a make up question based on an articles I read.
I tried to find something on the BCIS and thry to see whether I can use the data etc but can’t make head or tail with those categories & indices.

Just asking to see whether anyone else had any experience and willing toshare or provide guidance as to use the BCIS data


Thanks

If you like, assume that all the clauses are towards a successful claim but how ti work out the figures?

Dear Skan,

The cost increase is regulated in my Country. The Ministry of Public Works issues memorandum every few months regarding the cost increase and the amount of compensation that is allowed to the Contractor or if it is a negative compensation, then it will deduction from the unit prices in favor of the Owner. These formula for compensation are based on the average selling prices of the suppliers during a specific period.

If you are lucky enough to have the compensation clause included in your Contract, then you will get your claims for increases in cost of raw material during the Contract period paid.

Hope the answer was clear. Remember that the Contract is an agreement between the two parties, and each should be protection their interest during the Contract duration by anticipating the negative risk and taking the necessary measure to reduce its negative effect on the project.


Good luck,

Samer

Hi Samer,

Thanks

Just amatter of interest, there is something in UK called "Nido"???

Apparently, QS used to work out every month etc? not sure just talking to a retured QS who mentioned this

Anyone know more & can explain?
Is this BCIS the same?
How does all these work?

Hi Skan

NIDO was an inflation calculator for UK contracts that allowed price fluctuations - it was in use in the 1960 -1970 period and was the bane of all junior site QS of that time.
No wonder your old QS remembered it - the rest of us have been trying to forget it ever since.

If you are allowed price inflation in your contract the simplest way of calculating your entitlement is to download the recorded average inflation figures for your country - state - from the date of your contract to the extended period - set down month by month. Google your Ministry of Finance or thw World Bank or whatever.

Now you set down two cost curves generated from your programme:

1. As Planned
2. As Built with the delay.

The difference between the two curves - set down in a spreadsheet - will tell you the extra cost for each month.

Now apply the national inflation % for each month to the difference between Planned and As Built and total the result.

Be prepared for some negative results if the two curves change places.

Best regards

Mike Testro

Dear Mike,

This is a very important point, both sides of the Contract can benefit from the price fluctuation. If the prices go down, the Client can have some savings on his Contract.

Best Regards,

Samer

Hi All

Its not just inflation on local currencies.

On international projects changes in exchange rates can also be a quantum heading in an EOT claim.

I recently worked on an EOT claim for an Italian cladding company in contract with a French main contractor for an office building for an American client built in Russia.

The contract was in dollars but my clients costs were mostly euros. The exchange rate changed dramatically during the extended time period and the claim heading for Exchange Rate differences exceeded $1m.

Best regards

Mike Testro

Hi everyone,

Can anyone share a format on CLAIMS OF TIME EXTENSION? Any input is much appreciated. Thank you.

Best regards,

Elorde Custodio

Dear Elorde,

Your claim should be based on certain events. Your should keep a log as a minimum of all these events. It can be due to unforeseen ground conditions, weather, extra quantities, delays, instruction of the Engineer, change in regulations, changes by client, delays because of other trades, etc.

Let us know more specifics and we can assist.

Good luck,

Samer

Hi,

In my case in UK where can I get the info?
Any examples you can show so I can understand an work it out myself? you can PM me.

What is used now in UK if Nido is no longer used?
I though BCIS but to be honest I do not have assess to it and not even sure where yiou can get the stuff. Just heard BCIS data(table)

Thanks

Hi Skan,

This is a very general question, but I will give you an example of the Unforeseen ground conditions (actual examples);

You have the soil report and the foundation design is issued based on the soil report. Contractor (you) start digging and you find out that actual soil bearing capacity can not be as per specified in the soil report.

Engineer’s visual inspection confirms with your conclusion. Engineer asks for another soil investigation report. New soil bearing capacity varies in the same plot as per actual reading. This calls for a redesign of the foundation to increase the contact surface where the bearing capacity is less. The procedure takes 3 weeks. Contractor submitted a written request for the three weeks time extension without any financial consequences and the Engineer and the Owner approved the request and the time extension is issued.

Let me know is the above is clear, and if you need any future examples for any other case.

Good Luck,

Samer