Deletion Of Item From Boq In A Lumpsum Contract

[Killdaire]

I am working in Qatar for a main contractor(tender department). I would like to ask a question which was raised by my superior during submission of a bid to a Government Client.

In a Lumpsum Contract, whether the client(employer) can delete an item which is not expected to be executed? By such deletion of items whether the contractor will lose the amount he has priced against the item?. My doubt is that since the contract is Lumpsum and the BOQ is considered to be indicative, how can the client deduct the payment for the items which are priced in the BOQ even though the item is not to be executed as per drawings/specifications?

The main focus of my question is whether is it proper or justifiable for a client to include a clause that he has the right to delete any item and its price, in a lumpsum contract?  Whether fidic supports such clauses?

ANSWER: Hi Ramesh,

If the Employer clarified an item which resulted in extra work, would you expect to be paid for the extra work, or accept that it was lump sum and thus no extra payment was due?  Contracting is a two way street with a division of risk.  At least the Employer has warned you that he might delete some work, so you do your pricing in a systematic way.  

Whether it is proper or justifiable is an ethical question beyond the intention of this site.  FIDIC would not support such an action if the intention was to award the work to another contractor.  

I hope that the above is useful and you can mark me ten.  If not, please submit a follow up question with more details.

---------- FOLLOW-UP ----------

Dear Mr.Peter,

Thank you very much for a quick response. The tender document clarifies that the the BOQ(issued by client) is indicative and the client does not take the guarantee on the accuracy of the BOQ. The entire work should be executed as per the specifications and the drawings issued by the client. It further states that though any item is not covered by BOQ, but shown on drawing or specifications would be part of the Lumpsum and to be executed as part of the original scope(i.e. it would not be an extra item). In such case, whether any item priced(as part of Lumpsum)is not required to be executed(or not executed) should be paid by the client or not? What I am afraid is after signing the lumpsum contract, client gets enough time to go through the documents and if he finds an item in BOQ is superfluous(as not shown on drawing), he can issue a site instruction to delete the item and deduct the amount from the Lumpsum contract.

Here, whether the contractor is required to agree for such deduction from a Lumpsum Contract?

For example "dewatering" has been priced as 1,000,000/- in BOQ as part of Lumpsum. Later while excavation, it is revealed that dewatering is not required. Whether the client can deduct 1,000,000/- from the Lmpsum agreed against the item which is not executed?  

ANSWER: Hi Ramesh,

The work has to be done in accordance with the Specification and the Drawings, not the BoQ.  The Contractor is deemed to have visited the site and investigated the physical conditions.  Thus the Contractor should check for any omitted or superfluous items in the BoQ and adjust his price accordingly.  

If the need for dewatering is uncertain, then it would be normal to mark it as a provisional item.  If you don't have to dewater, then it is unreasonable that you should be paid for it, unless the omission was due to some technical skill that counter balanced the need.  An example would be the use of horizontal drilling rather than trenching.  A different situation would be the removal of air conditioning from a building.  

Use Pareto's rule to estimate your risk exposure regarding cancellation of any items by the Employer.  

Any deductions would be priced in accordance with the rules for variations.  If the Employer cancels an item in the BoQ, what is your loss?  However, it is a different situation if the quantities are incorrect and the Employer modifies the quantities after contract award.  I would ask a question during the tender period regarding the procedure for valuing and paying for an item that is shown as 100 units in the BoQ, but the actual quantities are 50 or 200.  

I hope that the above is useful and you can mark me ten.  If not, please submit a follow up question with more details.

---------- FOLLOW-UP ----------

Thank you, Mr. Peter. I am sorry for bothering you once again.

My understanding on “Lumpsum” till now was: 1.   The BoQ is used only for valuation and variation purposes and if there is no variation(due to modification of drawings or specifications) the Lumpsum amount will be paid to the contractor without any deduction(forget about retention, etc.).

2.   When many items “out of BoQ” are to be executed, if any item “within the BoQ” is not executed should not be deducted and to be released along with final payment.

According to your response, I realize that my above understandings were wrong.

“If the need for dewatering is uncertain, then it would be normal to mark it as a provisional item.”

The provisional items are decided by the client prior to issue of tender documents to the Contractor. The contractor does not get the liberty to mark the item as provisional.

“Any deductions would be priced in accordance with the rules for variations.”

My question was not on variation, rather an item reflected superfluous in the BoQ and priced by the Contractor as part of his lumpsum amount. Is it not painful for a contractor to accept a deduction from the Lumpsum agreed, when client gets the final product as per the originally issued drawings and specifications? Why the client should refer the BoQ where he himself agrees that the BoQ is indicative, and there can be “plus” or “minus” of items and quantities.

My simple argument is that the items which contractor missed out, I fully agree, the contractor is responsible. In the same way, any item additionally priced, by the same mistake, should not be deducted from the Lumpsum agreed.

“If the Employer cancels an item in the BoQ, what is your loss?”

Any deduction from the Lumpsum agreed “without changing the original scope of works” is a loss.

“I would ask a question during the tender period regarding the procedure for valuing and paying for an item that is shown as 100 units in the BoQ, but the actual quantities are 50 or 200.”

As per my understanding, irrespective of the quantity(50 or 200), once the item is fully executed amount entered against the item should get paid to the contractor.

Sir, Would you please give me your views on above?

[Tadao]

Hi Ramesh,

Why is a deletion not a variation and to be treated and valued as a variation?  What loss does the Contractor suffer if an item is deleted, apart from overheads and profits, which he claims as part of the variation for the deletion.  Temporary works such as dewatering are not normally included in a BoQ.  Remember, you may have under priced the item and thus are more than happy to see it deleted.  

The skill is in asking the questions during the tender period.  You can always ask if an item is provisional or should be marked as provisional.  

Really you need a real example to sort out this kind of question.

I hope that the above is useful and you can mark me ten.