Understanding Variations in FIDIC Red Book 2017 for Lump Sum Contracts | BOQ vs Drawings

Understanding Variations in FIDIC Red Book 2017 for Lump Sum Contracts

The FIDIC Red Book 2017 provides a comprehensive framework for managing construction contracts, especially concerning variations in lump sum contracts. This article explores how to handle quantity discrepancies and variations with reference to the Bill of Quantities (BOQ) and tender drawings.

BOQ and Tender Drawings: Basis of Lump Sum Price

In a lump sum contract, the Contractor agrees to complete the works for a fixed price based on the BOQ and tender drawings provided during tendering. The lump sum price covers all the works described in the contract documents, regardless of discrepancies between BOQ quantities and actual quantities.

Variations and Quantity Discrepancies

Variations are changes to the originally agreed works, which may arise due to design changes, unforeseen conditions, or additional Employer requirements. Clause 13.1 of the FIDIC Red Book defines variations as any changes to the works, including quantity changes.

Employer’s Approach to Variations

When a variation order is issued, the Employer may want to compare latest measured quantities against original BOQ quantities. However, in a lump sum contract, this approach may not be correct. Variations should be compared with the scope of works defined in the tender drawings and specifications.

Contractual Basis for Handling Variations

1. Tender Drawings and Scope: The tender drawings and specifications define the scope of works. Discrepancies between BOQ quantities and tender drawings should be resolved using the tender drawings.

2. Valuation of Variations: Clause 13.3 outlines variation valuation methods, considering contract rates, the nature of the variation, and other relevant circumstances. BOQ rates may serve as a basis, but actual quantities should align with the tender drawings.

3. Lump Sum Nature: The Contractor is responsible for completing all works for the lump sum price, regardless of actual quantities. Variations should be evaluated based on their impact on the scope of works, not just quantity discrepancies.

Practical Implications

Insisting on comparing quantities based on latest measurements against the original BOQ quantities can lead to disputes. The correct approach, as per FIDIC Red Book 2017, is to:

- Refer to Tender Drawings: Use tender drawings and specifications as the primary reference.

- Evaluate Variations Fairly: Consider the nature and impact of variations, using contract rates for valuation.

Attorney-General for Hong Kong v. Humphreys Estate (Queen’s Gardens) Ltd (1987)

• Jurisdiction: Hong Kong
• Summary: The case established that where there is a conflict between the contract documents, the tender drawings should take precedence over the BOQ. This supports the argument that variations should be assessed based on the scope of work defined in the tender drawings.

Mirant Asia-Pacific Construction (Hong Kong) Ltd v. Ove Arup & Partners International Ltd (2007)

• Jurisdiction: Hong Kong
• Summary: The case dealt with the interpretation of lump sum contracts and the responsibilities of the contractor to manage discrepancies within the agreed lump sum unless a formal variation is issued.

Frenesius Kabi Contract Manufacturing v. P. & T. Contracts Ltd (2016)

• Jurisdiction: UK
• Summary: This case dealt with discrepancies between the BOQ and the actual quantities required to complete the works. The court highlighted that in lump sum contracts, the contractor is obligated to complete the work regardless of discrepancies, reinforcing the principle that the lump sum price governs unless significant variations are ordered.

In conclusion, under the FIDIC Red Book 2017, variations in a lump sum contract should be managed by referring to the tender drawings and the overall scope of works, rather than solely relying on BOQ quantities. This ensures fair valuation and reduces potential disputes, maintaining the integrity of the lump sum contract. Proper application of these principles is crucial for successful contract management and project delivery.