WHEN DOES A VARIATION IN CONSTRUCTION BECOME A SEPARATE CONTRACT?

Variations Clause
Most standard forms of contract include a clause under which the employer or his representative is able to issue an instruction to the contractor to vary the works which are described in the contract. A change in shape of the scheme, the introduction of different materials, revised timing and sequence are all usually provided for by the variations clause. It will also usually include a mechanism for evaluating the financial effect of the variation and there is normally provision for adjusting the completion date. In the absence of such a clause the employer could be in a difficulty should a variation to the works be required. The contractor could either refuse to carry out the work or undertake the work and insist upon payment on a quantum meruit or fair valuation basis. Calculation of the price for the extra work applying this method could involve payment well in excess of the contract rates. [Read more…]

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Estimating Techniques

Estimate in Phases

One of the most difficult aspects of estimating projects is that you do not know exactly what work will be needed in the distant future. It can be difficult to define and estimate work that will be done three months from now. It’s harder to estimate six months in the future. Nine months is even harder. The reason is that decisions made and deliverables produced earlier in the project have an impact on what the work looks like further along. Therefore, there is more and more estimating uncertainty associated with work that is farther and farther out in the future. [Read more…]

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Importance of contractor progress payment terms

It has been said that an army marches on its stomach. Contractors and subcontractors in the construction industry run on cash. Lord Denning many years ago made the oft repeated phrase that cash flow is the lifeblood of the construction industry and this sentiment is still relevant today. Estimators when preparing tenders usually concentrate on building profits into the price. Of equal importance is the amount of working capital required to fund the contract and the need to keep the amount to a minimum. The payment terms are therefore crucial to every contractor and subcontractor. Certification and payment should be the subject of careful strategy and planning. [Read more…]

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CMGUIDE is the MEDIA PARTNER of the second FIDIC Contract Users’ conference

Get to grips with the ins and outs of using FIDIC contracts at an event designed by FIDIC and featuring FIDIC speakers.

The 2nd annual FIDIC Middle East Contract Users’ conference is taking place on Wednesday 23rd & Thursday 24th February 2011 in at the InterContinental Abu Dhabi.

Cmguide readers get a 10% discount to attend! Quote VIP Code: KW8116CMGP or visit:
http://www.informaglobalevents.com/KW8116CMGP [Read more…]

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Security of payment

By Dr Jay Palmos

To date, both the public and private sector’s attempts to resolve this problem have failed. Security of Payment (SOP) style legislation has successfully solved this issue in other jurisdictions, and should be considered in Dubai before we lose the best sub-contractors and suppliers to other more reliably paying regions. Just last month, Laing O’Rourke closed its Middle East division of 20 000. The loss of this and other superior-grade contractors signifies that the presently available source of high-quality contractors has diminished. [Read more…]

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What is Conciliation?

By Dennis Brand

Conciliation is a form of alternative dispute resolution (ADR) process whereby the parties to a dispute agree to utilize the services of a conciliator, who then meets with each of the parties separately in an attempt to resolve their differences. Conciliation differs from arbitration in that the conciliation process, of itself, has no legal standing, and differs from mediation in that the parties seldom, if ever, actually face each other across the table in the presence of a conciliator.

[Read more…]

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Contractors will have to be patient if they want to benefit from Qatar’s World Cup

By Stuart Matthews
 FIFA has made the people of Qatar very happy and that happiness is spreading quickly. Judging by the regional response to the country’s winning World Cup bid, the population of the GCC can barely wait the twelve years until the first kick-off of the 2022 FIFA World Cup. [Read more…]

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Project finance: how to secure it

By Martin Preston
THE majority of the features of a project finance loan agreement are the same as a corporate loan agreement. However, because the basis on which the lenders are advancing the loan is the forecast revenues of the project, rather than the assets or creditworthiness of the sponsors, the risks taken by the lenders and, therefore, the controls that they require under the loan agreement, are greater than would be required under a corporate loan agreement. Inevitably, some of these additional controls impact on the construction contract.

[Read more…]

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Front end advice

Despite the harsh lessons learnt over the latter part of 2009 and first quarter of 2010 it is still patently obvious that parties to contracts are falling into a number of age old pitfalls, many of whom are convinced that they have no other viable choice but to accept top-down back-to-back arrangements and in some cases a scramble of documents that barely resemble a contract at all.

There is still an overwhelming market tendency to order mobilisation and commence work on the back of a very brief Letter of Intent (LOI), particularly if the commissioned works are minor works or low value. This is a particularly high risk practice. [Read more…]

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Dispute boards: the missing link?

   Leonora Riesenburg.

After the Dispute Review Board (DRB) Foundation and Society of Construction Law (Gulf) met to discuss dispute boards and their function in the local market, many praised the ‘checks and balances’ proffered by the mechanism.

[Read more…]

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