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Terminate to save money

In the Open Standard
Samer ZawaydehMember for 18 years 2 months
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Hi all,

Project started during the 3rd quarter of this year when the oil prices were highest. On a small project ($5Million) would you select to terminate the Contract in order to re-tender it again and save 30-40%.

It is the same when the Contractor is losing 30-40% because of escalation in prices, but in this case, the Client is losing the 30-40% because of decrease in prices.

Thank you for your comments in advance.

Best,

Samer
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5 replies

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  1. 0
    Carlito Ogoy ·
    #1
    I think this needs a little calculation. How much do I need to pay the contractor if I will terminate the contract, and how much do I gain if I do so? Nevertheless, it depends on the contract if you are allowed to terminate it for that reason. Even suspension of work has grounds before you can apply it. Otherwise you will be facing legal difficulties with it.
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  2. 0
    Ferdinand Fincalero, PMP ·
    #2
    Nowadays, client’s are more wiser in dealing with inflation that they make it as an inclusion to contracts. With that idea, I guess the risk of terminating contracts became evitable.
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  3. 0
    Neil Tait ·
    #3
    I’d chose not to terminate, in particular if the contractor was performing.

    As mentioned below - the real cost of termination may well exceed your perceived 30-40% saving, which is already miniscule on such a small contract.

    If multi-billion I guess its a different story
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  4. 0
    Samer Zawaydeh ·
    #4
    Dear Neil,

    Actually, in the case I am working on, the work was terminated to the agreement of both parties. The client saved money and the Contractor raised his profit percentage.

    The time was right since most of the markets is down, savings are in favor of the client side.

    Best,

    Samer
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  5. 0
    Neil Tait ·
    #5
    I think you’re premature to say that the client saved money.

    He paid money for something that wasn’t completed and he didn’t get. Should he require it completed at a later date then there is a risk that he may need to pay more than the original price.

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