27 Oct The Employer, New Gold Mining, and the Contractor, Quick Construction, entered into a FIDIC 1999 Conditions of Contract For Plant and Design Build (“Yellow Book”) contract. The works comprises the design and construction of a new waste-water treatment plant.

The Employer, New Gold Mining, and the Contractor, Quick Construction, entered into a FIDIC 1999 Conditions of Contract For Plant and Design Build (“Yellow Book”) contract. The works comprises the design and construction of a new waste-water treatment plant.

 

The Appendix to Tender, issued together with the Invitation to Tender, contained the following entries:

 

13.8

Adjustment for

 

Changes in Cost

 

The Contract Price is not subject to Contract Price Adjustment

14.2 Advance Payment Advance Payment by the Employer is 15% of the Accepted Contract Amount for this Contract

The Particular Conditions of Contract, issued together with the Invitation to Tender, contained amongst others, the following:

 

13.8

13.8.1

 

Adjustment for Changes in Cost

 

Deleted and replaced by: The price is fixed and firm with the exception of

 

Forex fluctuations.

 

   

 

13.8.2 Method of price adjustment for Forex

 

fluctuations

 

The value of any Plant and Materials imported from outside South Africa shall be inserted in Schedule 2.6 “Schedule of Imported Equipment” as found in Book 2 of 4. Any Plant and Materials not inserted in this

 

schedule shall be deemed to be manufactured in South Africa for the purposes of forex variation calculations.

 

   

 

13.8.2.1 Plant and

 

Materials imported from outside South Africa

 

Adjustment to the Contract price for the supply, delivery and storage of

 

any Plant and Materials imported from outside the Republic of South Africa will be permitted only in respect of the following variables:

 

 

 

Variations in Rates of Exchange, and

 

 

 

Variations in Customs Surcharge and Customs Duty

 

   

14.1

The Contract

 

Price

 

Delete Sub-Paragraphs (c) and (d) and replace with the following:

 

 

 

(c) Prices entered in the Schedules of Quantities, together with any schedule of rates for which provision is made in a Schedule, will be used for calculating the value of completed works for the purpose of interim payments or for determining the value of changes, omissions and additions for variation instructions when in the opinion of the Engineer such prices are applicable.

 

 

 

 

The amounts of work and material given in the Schedules of

 

Quantities are not to be considered as limiting or extending the amount of work to be done or material to be supplied by the Contractor.

 

 

 

The percentage completion of the amounts of work and materials given in the Schedules of Quantities shall be determined by the Engineer for interim payment certificates when checking the Contractor’s Statement referred to in Sub-Clauses 14.3 and 14.6.

 

   

14.4

Schedule of

 

Payments

 

Delete this Sub-Clause

When submitting its offer, the Contractor put forward the below-mentioned amendments to the contract. These changes were accepted by the employer.

 

13.8

Adjustment for

 

Changes in Cost

 

The Contract Price is fixed and firm provided the Contractor is not

 

delayed in executing the project through no fault of the Contractor. Should the Contractor be delayed in the execution of the Contract mutually agreed escalation indices will be applied with the tender Base Date (i.e., May 2019).

 

   

14.2

Advance

 

Payment

 

Replace 15% with 30%

   

14.3

Interim

 

Payment certificates

 

Payment terms will be as follows:

 

30% of Contract Price on award of Contract as an Advance Payment against an advance payment bond.

 

15% of Contract Price on proof of shipping documents of the DAF Unit

 

10% of Contract Price on proof of shipping documents of the membranes

 

10% of Contract Price on the delivery of the membranes to Site

 

5% of the Contract Price on the delivery of the DAF Unite to Site

 

10% of the Contract Price on Plant ready for commissioning

 

10% of the Contract Price on completion of commissioning

 

10% of the Contract Price on successful completion of the Performance Test.

 

The duration of the project has been extended, amongst others due to variations instructed by the Engineer. Delays have also been experienced to completion due to changed circumstances stemming from COVID-19. These included the introduction of new legislation by the Government of the Country where the site is situated. The contractor made an allowance for possible price increases when he submitted his initial price to the Employer. Due to all of these delays, however, the Contractor is faced with losses on the project since the cost of Plant and Materials have escalated.

 

 

 

Question 1(d) The Employer has suspended the work due to the impact of COVID 19. Since the Employer is, itself, experiencing financial difficulties, the Employer wants to Contractor to repay the full amount that it has paid to it on the basis it was merely an advance payment. Advise the Employer of its prospects of success in getting the Contractor to repay the amount in question.

 

 

 

 

 

Question 1(b)

 

 

 

Would it have been preferential, in your opinion, for the Parties, to enter into a Reb Book instead of the Yellow book given the fact that cost or Plant and Materials have become subject to huge fluctuation in price?