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FIDIC Lecture - Pursuing or Defending Claims Under FIDIC Contracts - Regionally & Internationally
FIDIC Lecture - Pursuing or Defending Claims Under FIDIC Contracts - Regionally & Internationally
ESTABLISHING
CAUSE-EFFECT
LINK
(Slide
A contractor mustTHE
be able
to demonstrate,
through
a
4)
cause-effect analysis, how one or many of such causes
resulted in a cost or schedule impact to the contractor.
In addition, it is also important to evaluate the timing of
causes as well as potential impacts to the critical path,
if any.
For example, in one case, a contractor was claiming late
drawings by the Engineer as a reason of overall project
delay.
Based on a programme analysis, it was confirmed that
there was no impact on any project activity which
resulted in an overall delay of the project milestones.
Therefore, the contractor's claims were unsupported
and disapproved due to lack of a cause-and-effect
analysis which provided an evidence of the contractors
contentions.
For obvious reasons, global claims are usually
discouraged and difficult to substantiate. For example,
multitude of causes such as, design delays, design
errors, variations, poor project management decisions,
late possession of site etc. Whereas a direct causal link
with particular items of the losses is difficult to
establish.
Tier 1 of the procedure for settlement of claims is specified in Sub-Clause 20.1 titled
Contractors Claims.
The procedure for contractors claims has been dealt at length by earlier panelists and
therefore will not be repeated here.
Sub-Clause 20.1 requires the Engineer to carry out an Engineers Determination of the
contractors claims pursuant to Sub-Clause 3.5.
Similarly employers claims (pursuant to Sub-Clause 2.5, as discussed earlier) should
also be Determined by the Engineer pursuant to Sub-Clause 3.5.
Thus either partys claims must be Determined by the Engineer.
Although defined by FIDIC as the Employers Personnel and stipulated to act on
behalf of the Employer, the Engineer is expected to issue a FAIR Determination.
Referring party must comply with the respective specified procedures. Failing which, the
request for a Determination may be disapproved.
Once the Engineer issues a Determination, both parties (the Contractor and the
Employer) shall give effect thereto unless and until the same shall be revised by the
higher tiers of the procedure for settlement of claims.
Tier 2 of the procedure for settlement of claims (DAB) is specified in Sub-Clauses 20.2, 20.3 & 20.4.
Sub-Clause 20.2 stipulates a procedure for the appointment of a DAB, which shall be either a sole
member or three members.
Sub-Clause 20.3 stipulates a procedure to overcome disagreements in respect of appointment of a DAB.
The DAB members should be independent and impartial.
Where a party disputes an Engineers Determination, the party may, pursuant to Sub-Clause 20.4, refer
the dispute to the DAB for its Decision.
The DAB will Adjudicate the dispute and within 84 days (or such period as may be agreed by the Parties
and DAB) after receiving the reference, a Decision will be given by the DAB.
The Decision given by the DAB shall be binding and therefore both parties (the Contractor and the
Employer) shall give effect thereto unless and until the same shall be revised by the higher tiers of the
procedure for settlement of claims.
Notwithstanding the case where a DAB Decision has been given in favour of the Employer, the
Contractor shall, unless the Contract has already been repudiated or terminated etc., continue to
proceed with the Works with due expedition and without delay.
Where a party is dissatisfied with the DABs Decision, then this party may, within 28 days after
receiving the Decision, give a notice, pursuant to Sub-Clause 20.4, to the other party of its
dissatisfaction.
Where DAB has not given a Decision, the rights of the parties remain unaltered in respect of further
remedies available under the Contract. A notice of dissatisfaction must still be issued.
Where a Decision by the DAB has been given, and no notice of dissatisfaction has been given by either
party, then the Decision shall become final and binding.
The primary objective of time-bar on a notice is to alert the other party such that the
cause of notice may be prevented, if possible. A secondary objective is to permit the
evaluation of a claim contemporaneously, such that memories are fresh and that this may
actually be of help to the contractors.
Both objectives are important and should remain in place. However, a possible alternative
could be an early warning notice as defined by the NEC3 Contract forms. The objective
to timely alert remains intact without actually having punitive consequences for the
contractors.
The time-bar on submission of claim particulars and on the period permitted to the
Engineer for an assessment and Determination should remain unchanged as these have
obvious benefits for both parties.
The use of dispute boards (e.g. DABs) in the construction industry has over
many years significantly contributed to the avoidance and early resolution of
disputes. The great benefit of using a standing dispute board is that its
members may be called upon as soon as a problem arises and help the parties
resolve their differences before they become polarized in their views.
The dispute avoidance role of a standing board should be emphasized: the DAB
encourages the parties to solve their own problems, creating an atmosphere
where the parties communicate and recourse to the advisory role of the dispute
board. Resolving conflicts at an early stage, or even before they arise, is an
obvious benefit that greatly reduces costs such as legal fees, and reduces loss
of productive time and goodwill between the parties.
It is not uncommon that one of the parties will resist the appointment of a DAB.
This may be to avoid the costs associated with DAB or otherwise. With the
obvious benefits of a DAB (especially of a standing Board), it may be prudent to
bind the parties to setup a DAB at the outset of a project. Alternatively punitive
deductions (or reimbursements, as the case maybe) could be linked thereto.
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