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🎯 Purpose of Clause 13.2: Value Engineering in FIDIC
“Clause 13.2 encourages the Contractor to propose beneficial changes to the design or execution of the Works that could lead to:
- Faster completion,
- Cost savings (to the Employer),
- Improved efficiency or value,
- Or any other benefit to the Employer.
Promotes Contractor Innovation: Contractors can suggest ideas that improve the project’s speed, cost, or quality—tapping into real-world expertise.
Shared Benefits: Cost savings and other advantages are typically shared—creating win-win incentives.
Employer Remains in Control: No proposal is adopted without Employer approval—protecting the project’s goals.
Test Your Knowledge:
📚 Learn more about variations, value engineering, and cost management in FIDIC:
Variations & Adjustments: FIDIC 13.0
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Clause 13.1: Right to Vary
📘 Breakdown of Clause 13.2 – FIDIC Value Engineering
Clause 13.2 empowers the Contractor to proactively suggest improvements that may:
✅ Accelerate completion
✅ Reduce cost to the Employer
✅ Improve efficiency/value
✅ Or deliver any other Employer benefit
✅ Accelerate completion
✅ Reduce cost to the Employer
✅ Improve efficiency/value
✅ Or deliver any other Employer benefit
🔎 FIDIC 1999 – Clause 13.2 Highlights
“The Contractor may, at any time, submit to the Engineer a written proposal which (in the Contractor’s opinion) will, if adopted:
- accelerate completion,
- reduce the cost to the Employer of executing, maintaining or operating the Works,
- improve the efficiency or value to the Employer of the completed Works,
- or otherwise be of benefit to the Employer.”
📌 Procedure:
- Contractor submits the proposal to the Engineer
- Engineer consults the Employer
- If accepted, it becomes a Variation under Clause 13.1
- Contractor bears proposal costs
- 💰 Employer savings = 50% shared with Contractor (unless agreed otherwise)
📕 FIDIC 2017 – Clause 13.2 Highlights
“The Contractor may, at any time, submit to the Engineer a written proposal which (in the Contractor’s opinion) will, if adopted:
- (a) accelerate completion;
- (b) reduce the cost to the Employer;
- (c) improve the efficiency or value to the Employer; or
- (d) otherwise be of benefit to the Employer.
📌 Key Additions:
- Structure mirrors 1999 almost verbatim
- Proposal must be prepared at Contractor’s cost
- Engineer reviews + consults Employer
- Accepted changes = Variation
- 📝 Savings share is defined in Contract Data (more flexibility)
- 📎 New Clause: Employer may use the proposal even if Contractor gains no benefit (unless otherwise agreed)
Key Interpretations & Implications of Clause 13.2
Positive Intent:
- Encourages cost-saving ideas from Contractors
- Brings construction-driven innovation to Employer
- Rewards early contractor involvement
Watchpoints:
- No set saving share % in 2017—must negotiate
- Employer can reject proposals—even if valuable
- Proposal prep cost is Contractor’s risk
| Aspect | FIDIC 1999 (Verbatim) |
FIDIC 2017 (Verbatim) |
Key Differences & Notes |
|---|---|---|---|
| Initiation | “The Contractor may, at any time, submit to the Engineer a written proposal…” | “The Contractor may, at any time, submit to the Engineer a written proposal…” | ✅ Same broad intent – Contractor-initiated proposals |
| Purpose of Proposal | “…which (in the Contractor’s opinion) will, if adopted, (i) accelerate completion, (ii) reduce the cost… (iii) improve the efficiency or value… (iv) otherwise be of benefit…” | “…which (in the Contractor’s opinion) will, if adopted: accelerate completion; reduce the cost…; improve the efficiency or value…; or otherwise be of benefit…” | 📝 2017 structure is clearer, aims are identical |
| Submission Details | “…shall include the items listed in Sub-Clause 13.3 [Variation Procedure].” | “…shall include the details as stated in sub-paragraphs (a) to (c) of Sub-Clause 13.3.1 [Variation by Instruction].” | 🔍 2017 uses sub-clauses for clarity |
| Engineer’s Role | “The Engineer shall, as soon as practicable… respond with approval, disapproval or comments.” | “The Engineer shall… respond by giving a Notice… The Engineer’s consent or otherwise shall be at the sole discretion of the Employer.” | 🚨 2017: Employer, not Engineer, has the final say |
| Follow-Up Action | “The Contractor shall not delay any work whilst awaiting a response.” | “The Contractor shall not delay any work while awaiting a response.” | 🔁 Consistent: Don’t delay works |
| If Approved | Not specified beyond Engineer’s approval | “If the Engineer gives consent… the Engineer shall then instruct a Variation…” | ✅ 2017: Step-by-step process for cost/benefit sharing |
🔎 Interpretation Highlights
-
Control and Discretion:
- 1999: Engineer could independently approve/disapprove.
- 2017: Employer now has final say—even if Engineer agrees. 🚨 Centralized control.
-
Cost Efficiency Incentive:
- Both editions incentivize Contractor-initiated proposals that reduce costs or improve outcomes.
- 2017 allows benefit-sharing in Particular Conditions—but must be defined.
-
Ambiguity in Approval Criteria:
- 2017: Approval is “at the sole discretion of the Employer”—contractors should negotiate for clear, fair criteria.
🌍 Cross-Referencing Clause 13.2 with Key FIDIC 2017 Clauses
A. Clause 13.1 (Right to Vary)
Best friends: Clause 13.2 lets the Contractor suggest changes, but only 13.1 (via the Engineer) can legally vary the Works. The process pipeline:
Contractor proposes (13.2)
⟶
Engineer reviews/Employer consents
⟶
Engineer instructs (13.3.1)
⟶
Variation under 13.1
Tip: Clause 13.2 opens the door, but only Clause 13.3.1 makes a Variation official!
B. Clause 3.7 (Agreement or Determination)
The Referee: If there’s a dispute over savings, benefit-sharing, or impacts of a value engineering proposal, Clause 3.7 lets the Engineer consult both sides and (if needed) make a fair determination.
🚨 BUT: In 2017, the Employer’s decision still rules. If the Employer says “no thanks,” Clause 3.7 can’t force acceptance!
C. Clause 13.3.1 (Variation by Instruction)
The Engine Room: Once the Employer/Engineer agree, 13.3.1 is used to formalize the Variation, covering costs, programme, and savings sharing.
D. Clause 20 (Claims)
The Dispute Route: If there’s a disagreement on entitlement or savings split after a value engineering Variation, Clause 20 lets either party raise a Claim. (Notice in 28 days, submit details, Engineer determines. Still unresolved? DAAB or arbitration under Clause 21.)
Don’t Forget:
Clause 4.1 (General Obligations) — all proposals must still meet contract standards.
Clause 8.5 (Time for Completion) — value engineering can affect timelines.
Clause 1.15 (Limitation of Liability) — can impact risk allocation if the proposal causes defects.
Clause 4.1 (General Obligations) — all proposals must still meet contract standards.
Clause 8.5 (Time for Completion) — value engineering can affect timelines.
Clause 1.15 (Limitation of Liability) — can impact risk allocation if the proposal causes defects.
Contractor proposes
⟶
Engineer reviews
⟶
Employer consents
⟶
Variation issued
⟶
Executed (13.3.1)
⟶
Entitlement via 3.7
⟶
Claim route (20)
🛠️ Suggestions for Clarity & Improvement – Clause 13.2
Let’s make Clause 13.2 clearer and more balanced—while aligning with FIDIC Golden Principles!
🔍 A. Ambiguities in the Current Wording
“Benefit to the Employer” — Too Vague?
Leaves full discretion to Employer; can be used to reject Contractor proposals without cause.
No Timeline for Engineer’s Response
Proposals may face delays—no deadline means Contractor’s planning suffers.
Cost Sharing Percentage = Unclear
No default: Contractor might get zero unless Contract Data fills the gap.
🧠 B. Golden Principle-Aligned Enhancements (GP1–GP5)
- ✅GP1: Duties/Roles intact—Engineer/Contractor entitlements preserved.
- ✅GP2: Clear & unambiguous—no grey zones, defined timelines.
- ✅GP3: Balanced risk—fair savings sharing for Contractors’ efforts.
- ✅GP4: Reasonable timeframe—set response deadline (e.g. 14 days).
- ✅GP5: Don’t block DAAB—dispute route under Clause 20 & 21 is preserved.
✍️ C. Sample Particular Conditions – Modified Wording for Clause 13.2
13.2 Value Engineering
The Contractor may, at any time, submit to the Engineer a written proposal which, in the Contractor’s opinion, will, if adopted:
(a) accelerate completion;
(b) reduce the cost to the Employer of executing, maintaining, or operating the Works;
(c) improve the long-term efficiency, sustainability, or life-cycle value of the Works; or
(d) otherwise be demonstrably beneficial to the Employer, provided such benefit is quantifiable.
The proposal shall include supporting technical justifications, cost estimates, and any effects on the Time for Completion.
The Engineer shall provide a reasoned response to the Contractor within 14 days of receipt of the proposal.
If the proposal is accepted, the Engineer shall instruct a Variation under Sub-Clause 13.3.1.
Unless otherwise stated in the Contract Data, the Contractor shall be entitled to [50%] of any net reduction in the cost to the Employer arising from the accepted proposal.
If the Parties disagree on the amount of savings or the entitlement, the matter shall be determined by the Engineer in accordance with Sub-Clause 3.7, and may be referred to the DAAB under Clause 21, subject to prior submission of a Claim under Clause 20.
🔎 Notes on the Modified Clause:
- •Benefit must be quantifiable—removes the ambiguity of “benefit to Employer.”
- •14-day Engineer response—keeps process moving, supports planning.
- •Default 50% cost sharing—prevents reward gaps if Contract Data is silent.
- •Preserves dispute route—engineer decides first (3.7), then DAAB (21) via Claim (20).
🔗 Clause 13.2 Value Engineering – Interactive Flowchart
1️⃣ Initiation of Clause 13.2 Value Engineering
Recognizing the opportunity or need for value engineering within the project. This is where the process begins.
2️⃣ Contractor’s Proposal Submission
The Contractor prepares and submits a detailed value engineering proposal, highlighting benefits and potential savings.
3️⃣ Engineer’s Proposal Evaluation
The Engineer reviews the proposal for feasibility and alignment with project objectives.
4️⃣ Proposal Approved
If found beneficial, the proposal is approved and moves to implementation.
5️⃣ Implementation of Value Engineering
Changes in design, materials, or construction methods are applied as per the approved proposal.
6️⃣ Shared Savings Mechanism
The mechanism for sharing cost savings between Contractor and Employer is determined and applied.
7️⃣ Technical Implementation
Ensuring all technical aspects (e.g., new technology, construction techniques) are successfully integrated into the project.
8️⃣ Cost Analysis and Savings Estimation
Detailed cost analysis is performed to determine the actual savings realized.
9️⃣ Proposal Rejected
If the proposal is found unsuitable, it is rejected and does not proceed to implementation.
🔁 Feedback to Contractor
The Engineer provides clear reasons for rejection and suggests improvements.
🔄 Revised Proposal Submission
The Contractor, after considering feedback, can submit a revised value engineering proposal for further review.
✅ Clause 13.2 (Value Engineering) Checklist
📄 Clause 13.2 Value Engineering – Sample Letters
Sample Letter 1: Contractor Submitting a Value Engineering Proposal
Subject: Submission of Value Engineering Proposal under Sub-Clause 13.2 – [Proposal Title]
To: The Engineer
[Engineer’s Name]
[Engineer’s Address]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Project: [Project Name]
Sub-Clause Reference: Sub-Clause 13.2 – Value Engineering
Our Ref: [Contractor’s Letter Ref]
Dear [Engineer’s Name],
We hereby submit a Value Engineering Proposal under Sub-Clause 13.2 of the Conditions of Contract.
The objective of this proposal is to [e.g., reduce the cost of piping installation by using high-efficiency materials], which we believe will:
– [✓] Reduce execution cost by approximately ₹ [amount]
– [✓] Accelerate the Time for Completion by [X days/weeks]
– [✓] Improve long-term operational efficiency
Enclosed with this letter are the following:
1. Detailed technical justification
2. Revised drawings and/or specifications
3. Cost analysis
4. Proposed implementation schedule
5. Evaluation of impact on Employer’s Requirements
We kindly request your formal review and response to this proposal within [14 days], as per our mutually agreed timeframe or as may be stated in Particular Conditions.
Yours sincerely,
[Name]
[Title]
For and on behalf of [Contractor’s Name]
To: The Engineer
[Engineer’s Name]
[Engineer’s Address]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Project: [Project Name]
Sub-Clause Reference: Sub-Clause 13.2 – Value Engineering
Our Ref: [Contractor’s Letter Ref]
Dear [Engineer’s Name],
We hereby submit a Value Engineering Proposal under Sub-Clause 13.2 of the Conditions of Contract.
The objective of this proposal is to [e.g., reduce the cost of piping installation by using high-efficiency materials], which we believe will:
– [✓] Reduce execution cost by approximately ₹ [amount]
– [✓] Accelerate the Time for Completion by [X days/weeks]
– [✓] Improve long-term operational efficiency
Enclosed with this letter are the following:
1. Detailed technical justification
2. Revised drawings and/or specifications
3. Cost analysis
4. Proposed implementation schedule
5. Evaluation of impact on Employer’s Requirements
We kindly request your formal review and response to this proposal within [14 days], as per our mutually agreed timeframe or as may be stated in Particular Conditions.
Yours sincerely,
[Name]
[Title]
For and on behalf of [Contractor’s Name]
Sample Letter 2: Engineer’s Acknowledgment of Proposal
Subject: Acknowledgement of Value Engineering Proposal under Sub-Clause 13.2
To: [Contractor’s Name]
[Contractor’s Address]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Our Ref: [Engineer’s Letter Ref]
Dear [Contractor’s Name],
We acknowledge receipt of your letter ref [Contractor’s Ref] dated [dd/mm/yyyy], submitting a Value Engineering Proposal under Sub-Clause 13.2.
We are reviewing the submitted documents and will consult the Employer in accordance with the provisions of the Contract. A formal decision shall be communicated to you within the required timeframe.
Should further clarification or documents be needed, we will contact you promptly.
Sincerely,
[Engineer’s Name]
For and on behalf of the Engineer
To: [Contractor’s Name]
[Contractor’s Address]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Our Ref: [Engineer’s Letter Ref]
Dear [Contractor’s Name],
We acknowledge receipt of your letter ref [Contractor’s Ref] dated [dd/mm/yyyy], submitting a Value Engineering Proposal under Sub-Clause 13.2.
We are reviewing the submitted documents and will consult the Employer in accordance with the provisions of the Contract. A formal decision shall be communicated to you within the required timeframe.
Should further clarification or documents be needed, we will contact you promptly.
Sincerely,
[Engineer’s Name]
For and on behalf of the Engineer
Sample Letter 3: Engineer’s Acceptance of Proposal & Instruction of Variation
Subject: Acceptance of Value Engineering Proposal and Instruction for Variation under Sub-Clause 13.2 and 13.3.1
To: [Contractor’s Name]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Dear [Contractor’s Representative],
Further to your proposal dated [original date], submitted under Sub-Clause 13.2, and following consultation with the Employer, we confirm acceptance of the proposed modification relating to [e.g., material substitution, design improvement].
Accordingly, this letter shall serve as an instruction for a Variation under Sub-Clause 13.3.1.
Please proceed with the implementation of the accepted proposal. You are required to submit the updated programme and any further impact details, including implications for the Time for Completion.
The amount of cost savings and any entitlement under the Contract (including potential Contractor share) will be addressed through Sub-Clause 3.7 or as otherwise agreed.
Sincerely,
[Engineer’s Name]
Engineer under the Contract
To: [Contractor’s Name]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Dear [Contractor’s Representative],
Further to your proposal dated [original date], submitted under Sub-Clause 13.2, and following consultation with the Employer, we confirm acceptance of the proposed modification relating to [e.g., material substitution, design improvement].
Accordingly, this letter shall serve as an instruction for a Variation under Sub-Clause 13.3.1.
Please proceed with the implementation of the accepted proposal. You are required to submit the updated programme and any further impact details, including implications for the Time for Completion.
The amount of cost savings and any entitlement under the Contract (including potential Contractor share) will be addressed through Sub-Clause 3.7 or as otherwise agreed.
Sincerely,
[Engineer’s Name]
Engineer under the Contract
Sample Letter 4: Contractor Claiming Entitlement Over Disputed Savings
Subject: Notification of Claim under Sub-Clause 20.2.1 in relation to Value Engineering Proposal
To: The Engineer
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Our Ref: [Ref]
Dear [Engineer’s Name],
We refer to our approved Value Engineering Proposal dated [date], accepted under Sub-Clause 13.2, and the subsequent instruction under Sub-Clause 13.3.1.
As the Parties have not reached agreement on the Contractor’s entitlement to a share of the net cost saving, we hereby give notice of a Claim under Sub-Clause 20.2.1 for our entitlement.
We will submit all particulars of this Claim, including:
– Summary of calculations of net savings
– Proposed percentage share
– Corresponding contract references
We look forward to your determination in accordance with Sub-Clause 3.7.
Yours faithfully,
[Contractor’s Name]
[Title]
For and on behalf of [Contractor’s Company]
To: The Engineer
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Our Ref: [Ref]
Dear [Engineer’s Name],
We refer to our approved Value Engineering Proposal dated [date], accepted under Sub-Clause 13.2, and the subsequent instruction under Sub-Clause 13.3.1.
As the Parties have not reached agreement on the Contractor’s entitlement to a share of the net cost saving, we hereby give notice of a Claim under Sub-Clause 20.2.1 for our entitlement.
We will submit all particulars of this Claim, including:
– Summary of calculations of net savings
– Proposed percentage share
– Corresponding contract references
We look forward to your determination in accordance with Sub-Clause 3.7.
Yours faithfully,
[Contractor’s Name]
[Title]
For and on behalf of [Contractor’s Company]
Sample Letter 5: Engineer’s Rejection of Value Engineering Proposal
Subject: Rejection of Value Engineering Proposal under Sub-Clause 13.2
To: [Contractor’s Name]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Dear [Contractor’s Representative],
We refer to your proposal dated [dd/mm/yyyy] submitted under Sub-Clause 13.2.
Following review and consultation with the Employer, we regret to inform you that the proposal will not be adopted. The reasons for this decision include:
– [Technical concerns, e.g., reduced durability]
– [Incompatibility with Employer’s long-term operational objectives]
– [Unacceptable impact on completion schedule]
We thank you for your submission and encourage future proposals which align with project requirements and performance standards.
Yours sincerely,
[Engineer’s Name]
For and on behalf of the Engineer
To: [Contractor’s Name]
Date: [dd/mm/yyyy]
Contract: [Contract Name/Number]
Dear [Contractor’s Representative],
We refer to your proposal dated [dd/mm/yyyy] submitted under Sub-Clause 13.2.
Following review and consultation with the Employer, we regret to inform you that the proposal will not be adopted. The reasons for this decision include:
– [Technical concerns, e.g., reduced durability]
– [Incompatibility with Employer’s long-term operational objectives]
– [Unacceptable impact on completion schedule]
We thank you for your submission and encourage future proposals which align with project requirements and performance standards.
Yours sincerely,
[Engineer’s Name]
For and on behalf of the Engineer