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54753429 Fidic Training

54753429 Fidic Training

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ADB FIDIC Training 8-10 June 2004 Manila

Contracts for Construction Works

Dispute Resolution Mechanisms in Project Administration
Gwyn Owen

Chartered Arbitrator, Adjudicator, Mediator www.gwynowen.com


Introduction FIDIC Documents Risk Procurement Strategy First 100 days Responsibilities Nominated s/c Staff & labour 


Plant & Materials Commencement Delays Taking Over Measurement Guarantees Claims Short Form Disputes

fidic.FIDIC AN INTRODUCTION       Founded in 1913 Expanded in 1945 to include 40 national associations Published first Conditions of Contract in 1957 In 2004 has 64 member associations Headquarters in Switzerland Web Site : www.org .

FIDIC AN INTRODUCTION    Pre 1957 ± no internationally recognised contract conditions First ³red book´ based on UK ICE conditions FIDIC has international committees to improve contracts .

FIDIC Documents       Old ³rainbow books´ needed revision Changes within International Projects & Contracting Standardisation Clauses to meet current practice Update ³Engineer´ Introduce ³Disputes Adjudication Board´ .

Contract Documents 1999     Conditions of Contract for Construction (Red Book) Conditions of Contract for Plant & Design Build (Yellow Book) Conditions of Contract for EPC Turnkey Projects (Silver Book) Short Form of Contracts (Green Book) .

FIDIC Contracts What¶s Changed?  Simple Language ‡ 20 Clauses & 163 Sub Clauses      Engineer instead of Employer¶s Representative Cl.1.5 Contractor¶s Claims Cl.4 Employer's Claims Cl.7.1.4. 13.2 & 13.2. 8. 4.18. Value Engineering Cl.3.3 .20.2 QUALITY & PROCEDURES: ‡ Cl.9.

FIDIC Document Format        Acknowledgements Foreword & Charts General Conditions DAB Conditions Guidance Notes Forms of Agreement Appendix to Tender .

FIDIC Document Usage Conditions of Contract for Construction    Works designed by Employer or Engineer Contractor Constructs in accordance with designs provided May include some design elements .

FIDIC Document Usage Conditions of Contract for Plant & Design Build      Electrical & Mechanical Plant May include building and engineering Design & Execution of works Contractor designs and constructs in accordance with Employer¶s Requirements Engineer Administers .

Plant & Design Build  General Comments: ‡ Contractor will economise ‡ Employer will supervise ‡ No good for Employer Variations ‡ Good for Lump Sum ‡ Design Savings ‡ Employer responsible for ER errors ‡ Risk Shared .

FIDIC Document Usage Conditions of Contract for EPC/Turnkey Projects      Process or Power Plant Infrastructure Projects High Degree of Certainty Contractor has total responsibility for Design & Execution Administered by Employer .

EPC/Turnkey General Comments ‡ Not suitable when:      No time to tender Much underground works If Employer wishes to supervise If payments need to be administered .

FIDIC Document Usage Short Form of Contract      Small capital value projects Simple content Contractor constructs to Employer¶s designs No ³Particular Conditions´ No ³Impartial´ Engineer .

FIDIC Document Usage

‡ Approvals, Certificates, Consents, Determinations, Notices, Requests 


In Writing Delivered Not be unreasonably withheld or delayed Copies



Scope / Cost of Change .

CONTRACTUAL RISKS  All contracts contain risks  FIDIC allocates responsibilities  Key Requirement: o o o Understand General Conditions Understand Particular Conditions Set out responsibilities .

RISK OVERVIEW  Contractual Risk Overview: o o o o o o o o Strategy Identify Evaluate Mitigate Plan Response Report Management Close out review .

CLAIMS RISKS LOCAL LAWS  Incorporate provisions of local laws into Particular Conditions  FIDIC Guidance Notes give general advice  Complex task . PDB & Cons empower Engineer to make Decisions ± EPC no such authority .1.1 Cl.2 & 8.1.CONTRACTUAL RISKS      Cl.5 Priority of Documents Employer¶s Documents have priority Care in Prequalification PDB & EPCT ± note that Financial Risk for design with Contractor but resolution will be in favour of Employer ³Contract Agreement´ is high priority ± Commencement Date binding under Cl.


24 Fossils Cl. Adverse Climatic Conditions Cl.4.7 Setting Out Cl.1 Site Cl.CONTRACTUAL RISKS        Cl.4 EoT      Cl.7 Legislation Cl.4.4 Force Majeure . Drawings Cl.12 Unforeseeable Cl.4 Testing Cl.8 Changes in Cost Cl.8 Delayed payments Cl.1.2.

3.Contract Selection Basic Principles ± Red Book       Design by Employer Works to be Re-Measured ReEmployer appoints Engineer Engineer can vary the works ± but not change the Contract Engineer¶s ³Determinations´ Cl.5 DAB appointed within 28 days .

1.Contract Selection Basic Principles ± Red Book   Additional Documents ± Cl.5 Priority Importance of Particular Conditions ‡ PCC priority over GC ‡ PCC provides all relevant conditions and Law ‡ Contradictions between documents  BoQ ± re-measured works re- .

Contract Selection Basic Principles ± Yellow Book        Employers Requirements Contractor Designs & Builds ER errors ± Employer¶s risk Fixed sum contract Administered by Engineer Variations by Engineer Cl.5 & 12 differ from Red Book .


PROCUREMENT PROCEDURE  Establish Strategy  Procurement method  Form of Tender  Time Schedules  Prequalify     Invitation Documents Analysis Selection  Notify .

PROCUREMENT PROCEDURE       Prepare tender Documents Issue Site Visit Questions Submission & Opening Adjudication .

PROCUREMENT PROCEDURE Award Contract Issue Letter of Acceptance Performance Security Contract Agreement Notify unsuccessful tenderers      .

1.3 .1 ‡ Definitions of words ‡ Persons include corporations & other legal entities ‡ Letter of Acceptance ‡ Employer¶s Requirements (YB) ‡ Goods ± Contractor  Cl.PROJECT STRATEGY Definitions  General Provisions Cl.

PROJECT STRATEGY Definitions  Cl.4 Law & Language ‡ Compatibility  Cl.1.1.9 ‡ Delays to drawings (RB) ‡ Errors to ER (YB) ‡ Confidentiality (SB) .

4.1 Method Statement Cl.8.9 Delay to details Cl.PROJECT STRATEGY Project Control Issues        Cl.3 Instructions by Engineer Cl. Programme .5 Employers Claims Cl.4 Finance Details Cl.4.21 Reporting Cl.

PROJECT STRATEGY Project Control Issues    Cl.18 Insurances Cl.20 Contractor¶s Claims / Records .14 Payments ‡ Planning ‡ Funding & Budget ‡ Disbursement approval   Cl.12.13 Variations & Value Engineering Cl.1 Measurement Cl.


The First Hundred Days of a New FIDIC contract  Pre Award Phase  Award to Commencement Date  Commencement Date to CD + 28 Days .


Pre Award Check List General 
Document negotiated changes Prioritise and sign changes ± Cl 1.5 Agree terms of insurances ± Cl 18.2 Agree DAB membership Confirm communication and addresses ± Cl 1.3

Pre Award Checklist Engineer¶s Duties & Authority 
Employer names Engineer  Employer¶s constraints on Engineer¶s Authority ± Cl 3.1  Delegation of Engineer¶s Authority to Resident Engineer ± Cl 3.2  Engineer¶s Determination ± Cl 3.5

Pre Award Checklist Employer¶s Risks
Right of Access - Cl 2.1  Provision of Specifications ± Cl 1.8  Supply of Drawings ± Cl 1.9 

Award to Commencement Date 
Formal Letter of Acceptance signed ± Cl  Contract Agreement - Cl, 1.6  Date on which the Contract becomes legally binding  Instruction of Commencement Date ± Engineer Cl 8.1 ± 7 days notice  Time for Completion ± Cl

Award to Commencement Date Check List Contractor¶s obligations 
Performance Security ± Cl 4.2 Consent for sub-contractors subCommencement of sub-contract wks subCompliance with applicable laws, etc prior to Commencement

Award to Commencement Date Check List Employer¶s obligations 
Obtaining planning, zoning etc permits for the Permanent Works ± Cl 1.13  Ensuring that the Contractor will have right of access to and possession of all parts of the Site

8 & 1.1 Ensuring Employer¶s personnel are aware of responsibilities ± Cl 2.4 Provision of copies of the Contract and Drawings Cl 1.9 .3 Preparing evidence of Employer¶s financial arrangements ± Cl 2.Commencement Date to + 28 Employer¶s Actions     Right of access & possession ± Cl 2.

2 Ensuring assistants are suitably qualified Providing reference survey points.Commencement Date to + 28 Engineer¶s Responsibilities    Advising Contractor of Engineer¶s Authority and Delegations ± Cl 3. lines and necessary data ± Cl 4.7 .

Commencement Date to + 28 Contractor¶s Responsibilities    General obligations ± adequacy.1 Provide Performance Security prior to access to Site ± Cl 4.2 Submit name of Contractor¶s Representative for consent ± Cl 4.3 . stability & safety ± Cl 4.

4 Give notice of commencement of subsub-contract work .Commencement Date to + 28 Contractor¶s Responsibilities    Give notice of any delegation of CR¶s responsibilities Obtain consent for sub-contractors subnot named in Contract ± Cl 4.

16) Make objections to any Nominated SubSub-contractors who the Contractor does not wish to employ Submit detailed time programme within 28 days of receipt of the notice to commence ± Cl 8.Commencement Date to + 28 Contractor¶s Responsibilities    Provide details of suppliers not named in Contract (see Cl 4.3 .

7 Appoint Accident Prevention Officer .Commencement Date to + 28 Contractor¶s Responsibilities     Give notice of probable future events or circumstances which may increase price or delay completion Confirm working hours ± Cl 6.5 Site health & safety facilities ± Cl 6.


16.15 & 14.1 .2 ‡ Provides Access to the Site  (not access & other areas ± Cl.23) ‡ Assists Contractor with Permits ‡ Financial Arrangements  See Variations & Cl.14.Responsibilities Employer  Cl.1 Suspension (strike out??) ‡ Notice of Claims  Appoints the Engineer Cl.3.

2 appointment of DAB members .20.Responsibilities Employer   Cl.14.7 make Payments !! Cl.

3.5 ± ³Fair Determination´ .Responsibilities Engineer     Exercises stated authority Employer¶s Approval ± PC When he exercises specific authority deemed to have Employer¶s approval Acts for Employer ‡ Cl.

Responsibilities Engineer  Cl.3 ‡ Employer undertakes not to impose further constraints (Breach of Contract) ‡ No authority to amend contract ‡ Acts for Employer ‡ No authority to relieve the parties of duties or obligations etc. .

3.20 .Responsibilities Engineer  Cl.3 ‡ Delegation ± except Cl.5 ‡ Instructions in writing  Oral ± confirmation by contractor ± written ‡ Employer instructions to Engineer ‡ Determination    Consult ± agreement ± fair determination Give notice Give effect unless Cl.

1 Give Commencement Notice Cl.6 Interim Payment Certificates Cl.13.Responsibilities Engineer        Cl.8.20.1 Method Statements Cl.14.1 Measurement Cl.6 Rate of Progress Cl.8.1 Variations Cl.12.4.1 Records / Determination .

8.Responsibilities Contractor  Cl.1 due expedition & without delay Adequacy & safety Method Statement Fit for purpose ‡ ‡ ‡ ‡ ‡ Performance Bond Engineer¶s Approval of Representative May delegate Fluent in language Sub Contractor approval .4 ‡ Execute & Complete the Works     Cl.

Responsibilities Contractor   Setting Out to lines & levels of Engineer Quality Assurance ‡ Details in Specification ‡ Procedures ‡ Compliance documents .

Responsibilities Contractor  Site data ‡ Costs included ‡ Risk ‡ Inspections ‡ All relevant data ± obligation ‡ Care in Tender ± failure to provide  Sufficiency of Contract Amount .

Responsibilities Contractor  Unforeseeable Physical Conditions ‡ Excludes climatic conditions  Cl. & 17.3h ‡ Extension of time ‡ Payment of cost  (see Cl.3 includes off site) (as a general rule not included where risk is not the fault of either party) ‡ No profit  .1.

Responsibilities Contractor   Transport to site Protection of the Environment ‡ Emissions ‡ Surface discharges ‡ Effluent ‡ Local Law .

1 Contemporary records . 6.7 Accident Records ‡ Cl.4.3 Application for payment ‡ Cl.20.10 Personnel ‡ Cl.14.9 procedures) and: ‡ Cl. 6.Responsibilities Contractor   Progress Report Monthly ± 6 copies ‡ See also (Cl.

5 & 20.1 Safety statistics Progress .Responsibilities Contractor  Progress Report: ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Charts Photographs Manufacturing report Personnel QA documents Claims Cl.2.

1 .1 Value Engineering Cl.20.3 Application for Payment Cl.9.Responsibilities Contractor   Security Staff & Labour ‡ Facilities / Health & Safety     Tests on Completion Cl.13.14.3 Contemporary records Cl.

5.3 .13 Payment Cl.Nominated Subcontractors    Clause 5 Applies to Subcontractors and suppliers nominated by Employer or as instructed by the Engineer under Cl.

recourses.Nominated Subcontractors  Grounds to object Cl.2 ‡ Reasonable Objection ‡ Supporting details ‡ Lack of competence.5. financial strength ‡ Lack of indemnity ‡ Lack of obligations and liability .

3) .4d & 13.6.7   Rates of pay & conditions NO Poaching !! (Cl.8.Staff & Labour   Clause 6 Engagement of Staff & Labour ‡ Payment. housing feeding & transport ‡ Cl.

Staff & Labour     Labour Laws (including immigration) Working Hours (days of rest) Facilities (including Employer¶s Personnel) Health & Safety ‡ Medical staff & facilities ‡ Accident prevention officer ‡ Records .

skilled.4.3 ± Contractor¶s Representative Cl.8 ± Superintendence (Language) Personnel ± qualified.Staff & Labour     Cl.4.9 procedures) .6. experienced Records monthly (cl.


Plant Materials & Workmanship   Cl.7 Execution of works as specified ‡ Recognised good practice ‡ Proper facilities ‡ Non hazardous materials  Samples ‡ For consent ‡ Labelled origin / intended use .

safety equipment ‡ Give notice and provide opportunity ‡ Testing ± may proceed after notice ‡ Delay claim ‡ Test Reports & Certificates .Plant Materials & Workmanship  Inspection: ‡ Access to locations of natural materials ‡ Place of manufacture ‡ Provide access. facilities. permissions.

8.5 Remedial works Ownership of Plant & Materials ‡ Local law ‡ When delivered ‡ When contractor entitled to payment under Cl.10 (suspension)  Royalties .2.Plant Materials & Workmanship    Rejection ± Retest ± costs Cl.


8. Delays & Suspension   Contract becomes effective when Letter of Acceptance has been received by Contractor Cl.Commencement.1 Commencement Date ‡ Engineer SHALL ‡ Contractor SHALL  Engineer determines the date or 42 days after the LA .

1 .2 Fundamental obligation to complete within Time for Completion ‡ Includes all of Works ‡ Includes all tests ‡ See Cl.Completion  Cl.8.10.

8.Programme  Programme of Works Cl.3 ‡ Within 28 days ‡ Specific requirements of programme ‡ Methods of execution ‡ Details of personnel & equipment   Engineer does not approve (21 days) Employer may rely on programme .

Future events Revisions to programme Monthly progress charts Engineer may request a revised programme .Programme     Specific. Probable.

5 Engineer¶s Determination .Extension of Time  Contractor SHALL be entitled ‡ ‡ ‡ ‡ ‡ ‡ ‡ Not dependant upon further decision If no extension then ³time at large´ Variation Sub Clause giving delay Exceptionally adverse climatic conditions Unforeseeable shortages personnel & goods Employer¶s delay   Cl.1 Cl.20.3.

13 shall not be unreasonably withheld or delayed Delays by authorities .5 give time limits to Engineer to Determine ± or Cl.20.1 & 3.Extension of Time   Cl.

Rate of Progress    Engineer may instruct submission of revised programme Contractor to proceed with due expedition and without delay Delay Damages ‡ Failure to complete by due date ‡ Delay damages ‡ Limit of damages  Suspension ± Engineer may instruct .


11.4 .9 ‡ Contractor shall give 21 days notice ‡ Tests carried out within 14 days of notice ‡ Certified report  Delayed tests ‡ Employer Cl.3 apply ‡ Contractor to complete 21 days after notice  Failure ‡ Retest ‡ Cl.4 or 10.Tests on Completion  Cl.7.

Taking Over Responsibilities  Responsibilities under Financing Agreement ‡ Proper use of funds ‡ Proper management of construction ‡ Final payment  Responsibilities under the Contract: ‡ Before Taking Over ‡ After Taking Over .

1 The Employer SHALL take over when: ‡ Works completed ‡ Tests completed ‡ TO certificate issued .10.Taking Over Responsibilities  Before Taking Over: ‡ Take over on Completion ‡ Tests on Completion ‡ Contractor¶s request for TO Certificate  Cl.

10 ‡ TO Certificate issued when works completed and ready for intended purpose ‡ Minor outstanding work may be completed after issue of TOC    Contractor may apply for TOC within 14 days of Works being complete Sectional Completion Engineer may ‡ Issue TOC Reject application giving reasons  Failure of Engineer to issue TOC or reject ‡ Within 28 days ‡ TOC deemed to be issued .Employer¶s Taking Over  Cl.

Employer¶s Taking Over  Sectional Taking Over ‡ Tests ‡ Cost due to STO ‡ Delay Damages reduced after STO Certificate issued ‡ Reduction in ratio of value of STO Works ‡ No difference to maximum damages  Reinstatement of ground or surface .

Employer¶s Taking Over  Taking Over Certificate ‡ Appendix listing all minor defects ‡ Listing all works yet to be carried out  Contractor responsible to carry out repairs before end of Defects Notification Period .

Defects Liability  Cl.11 ‡ Provides procedures and responsibilities under the Defects Notification Period ‡ Works are accepted by Engineer on the issuance of Performance Certificate .

8 or 16.8. or ‡ Suspension Cl.Defects Liability  Works & Documents completed ‡ Fair wear & tear accepted ‡ Complete all o/s work in TOC ‡ Remedy defects & damage notified by the end of the DNP   Remedy works at Contractor¶s cost Extension to DNP ‡ Max 2 years.1 .

Defects Liability  Failure to Remedy ‡ ‡ ‡ ‡ ‡ Reasonable notice Carry out work himself or by others Contractor has no responsibility Reduction in Contract Price Recover all sums paid & costs  Removal ‡ Further Tests ‡ Right of access ‡ Contractor to search .

Performance Certificate  Performance Certificate ‡ ‡ ‡ ‡ ‡ ‡ ‡ Contractor¶s obligations complete Engineer to issue Date Issue within 28 days of DNP expiry After submission of all documentation All tests complete All remedying works complete  Constitutes Acceptance of Works ‡ Liability for fulfilment of obligations ‡ Removal of equipment. rubbish etc« ‡ Contractor may be liable for latent defects .

Evaluation & Variations     This clause only applies to Red Book Yellow Book Cl.Measurement.12 deals with tests after completion Measurement by Engineer Standard method of measurement as specified in schedules .

Evaluation & Variations  Cl.3 Basis of evaluation ‡ Rates in contract will apply ‡ New rates may be determined     Qty changed more than 10% Variation Not specified No appropriate rate ‡ Reasonable Cost & Profit  Cl.12.Measurement.12.4 Compensation .

4 .13.3 Determinations Means of measurement may be necessary Payment schedule linked to ³milestones´ Cl.14.Measurement. Evaluation & Variations     Under Yellow Book no such clauses Cl.

13.2 ‡ Development risk with Contractor ‡ Savings 50/50 .13.1 Engineer has the right to vary ‡ Prior to issue of TO certificate ‡ List of variation inclusions  Value Engineering Cl.Variations  Cl.

Variation Procedure  Engineer requests proposal from Contractor ‡ Contractor responds with:    Description Programme Evaluation ‡ Work proceeds without delay .

Variation due to Legislation   Local law at Base Date Cl.20.1 claim ‡ Extension of time ‡ Payment of cost .

Contract Price & Payment  Considerations: ‡ Payment schedules ‡ Disbursement approval ‡ Particular Conditions ‡ Budgeting   Funding availability Additional Costs / Variations .

Contract Price & Payment  Advance payment ‡ Design ‡ Mobilisation ‡ Funding facilitation  Interim payments ‡ 56 days  Final Payment ‡ 84 days .

Contract Price & Payment  Aid funding requires: ‡ Authority approval ‡ Timing ‡ Variations ‡ Routine audit checks ‡ Time to transfer funds ‡ Advance notice of change .

Contract Price & Payment    Cl.14 requires prompt action within time constraints Finance costs will lead to claims Alter Cl.14 by Particular Conditions to suit funding authority .

14.Contract Price & Payment  Financial planning: ‡ Check estimates & budgets ‡ Prepare draft payment schedules ‡ Update estimates & programme ‡ Check funding ‡ Cl.4 estimates each 90 days .

5.3. 14. 20.8. 13.1.3. 13. 3.5.2. 2. 13.1.3. 4.21. 8. 14.4.4 .Budget Forecast  Engineer prepares for Employer ‡ Regular intervals ‡ Updated budget ‡ Report of changes  Data for report: ‡ Cl.3.6. 14. 20.

14 Contract Price ‡ Measured and will vary ± Red Book ‡ Fixed Lump Sum ± Yellow Book ‡ Fixed Lump Sum ± Silver Book ‡ Lump Sum or Remeasure ± Green Book .Contract Price & Payment  Cl.

14.3 Performance Security ± approved by Employer Commence after when certificates >10% Deductions 25% of each Certificate ‡ Repayment   .Advance Payment  Cl.2 Advance payment ‡ Interest free loan for mobilisation    Guarantee Application Cl.14.

14.Interim Payment  Cl.4.4.20 items included .21 ‡ List of items (a) ± (g) ‡ Note : Cl.3 Application ‡ 6 copies ‡ In a form approved (Cl.9) ‡ Cl.

4 Schedule of payments: ‡ Payment dates not recommended ‡ Engineer determination Cl.3.5 ‡ Cross guarantees ‡ Milestones preferred .Interim Payment  Cl.14.

7 Payment ‡ IPC paid within 56 days after Engineer receives Statement  Cl.14.14.Interim Payment  Cl.8 Interest on late payments .14.6 Issue of IPC ‡ Engineer determines FAIRLY ‡ IPC SHALL not be withheld  Cl.

2.2 Termination .Non Payment  Cl.1 Suspension ‡ Engineer fails to certify ‡ Employer does not provide Cl.16.4 details ‡ Non payment ‡ 21 days notice  Cl.16.

1 notice before Guarantee  Cl.8.Guarantees & Bonds   Cl.2 Advance Payment Guarantee .14.4.2 Performance Security Contractor finance ‡ Guarantee by Employer ‡ No Cl.

17.17.Risk & Responsibility     Cl.3 Employer¶s Risks Cl.1 Basis for Indemnity Cl.4 Compensation & Claims .17.2 Full responsibility for Works & Goods until TO Certificate Cl.17.

Insurance  Cl.18 ‡ Employer to approve insurers ‡ Agreed terms ‡ Currency ‡ Payments to be used to rectify loss ‡ Cl.3 ± Appendix minimum amount .18.

Force Majeure  Basic Principles: ‡ Exceptional event ‡ Not reasonably provided against ‡ Not reasonable to overcome / avoid ‡ Not attributable to either party ‡ Beyond control of affected party .

4 Consequences ‡ EoT ‡ Man made ± cost ‡ Man made in country ± cost ‡ Cl.1 Definitions ‡ (i) ± (iv) man made  Cl.Force Majeure  Cl.19.19.6 Termination .19.


CAUSES OF CLAIMS FOR CONTRACTORS        Unforeseeable ground conditions Delayed drawings Delayed payment Lack of possession of site Consequence of risk Suspension Force Majeure .

1 o o o o Sets out Contractor procedure Condition Precedent Not later than 28 days Sets out Engineer procedure .CONTRACTOR¶S CLAIM PROCEDURE  Clause 20.

CONTRACTOR¶S CLAIM PROCEDURE  Contractor gives notice o Within 28 days Engineer may monitor Engineer may instruct further records Supporting documents Within 42 days of event  Contractor keeps contemporary records o o  Fully detailed claim o o .

CAUSES OF CLAIMS FOR EMPLOYERS      Quality below Specification Delay in Completion Date Slow Rate of Progress Defective Materials Failures of Tests .

3.EMPLOYER¶S CLAIM PROCEDURE  Employer gives notice o As soon as practicable No obligation to respond  Contractor Receives Notice o  Engineer proceeds with Cl.5  Contractor can dispute if dissatisfied  Engineer¶s determination applied to Certificate of Payment .

CONTEMPORARY RECORDS      Crucial for determination of claim Records for any future dispute Contractor obliged to keep records Procedure for this work Employer & Engineer to agree Engineer¶s actions .

20.1 continuing procedure  After 42 days: o o o Claim submission is considered interim Further monthly claims Final claim with 28 days of end of effects .CONTRACTOR¶S CLAIM PROCEDURE  Cl.

3.5  May certify interim sums .CONTRACTOR¶S CLAIM PROCEDURE  Engineer¶s Response: o o o Within 42 days of receiving claim Approval / Disapproval Detailed comments  May ask for further details  Proceed with Cl.

5 DETERMINATIONS  Engineer makes a Determination  Makes his own evaluation  Shall NOT delegate Cl.CLAUSE 3.5 authority .3.

CLAUSE 3.5 DETERMINATION PROCEDURE  Engineer shall consult both Parties  Try to reach agreement  Give notice with supporting particulars  Where no agreement then Engineer makes a FAIR determination .

DISSATISFACTION WITH Cl.Clause 20.5 DETERMINATION  Dispute : Refer to Dispute Adjudication Board  No definition of ³Dispute´ o o o o Rejection of Determination No agreement with continued discussion One party declines to discuss No progress in protracted discussion  Subsequent procedure .4 .3.

FIDIC Short Form  Recommended for projects without problems  Small Capital Value <$0.5M  Simple or repetitive works  No specialist subcontractors  Short duration  No Impartial Engineer  Named Adjudicator .

FIDIC Short Form  Increased responsibility on Employer ‡ Define project ‡ Undertake design ‡ Scope of works ‡ Supervision ‡ Avoid letters of intent / acceptance ‡ Offer & Acceptance in Appendix .

4 to avoid argument ‡ ³approval´ only used for Cl.no model .4.2  Cl.2.4.4 Performance Bond .FIDIC Short Form    Priority of documents ± undefined No ³ruling language´ Cl.4 & 14.

10.1 lists all Employers Liabilities ‡ No bad weather claim ‡ EoT Cl.7.FIDIC Short Form  Risk & Claims ‡ Cl.3 to avoid ³time at large´ ‡ Cl.3 Early Warning .6.

FIDIC Short Form    Taking Over ± no sectional handover No defined Defects period ± 12mths Employer may vary .10 ‡ Lump sum ‡ Rates ‡ Daywork .Cl.

FIDIC Short Form  Contract price Cl.11 ‡ Lump Sum ‡ LS with schedule of rates ‡ LS with BoQ ‡ Remeasurement with BoQ ‡ Cost reimbursable  Consider valuation methods .

FIDIC Short Form  Dispute resolution ‡ Amicable settlement ‡ Adjudication ‡ Dissatisfaction ± 28 days ‡ Arbitration .

Alternative Dispute Resolution ADR .Overview .

Overview     Confrontational Litigation Win ± Win methods ADR Methods: ‡ ‡ ‡ ‡ Mediation Conciliation Adjudication Arbitration .Alternative Dispute Resolution ADR .

Instructions. Determinations.Dispute .DISPUTE RESOLUTION under FIDIC  ³Dispute´ not defined by FIDIC o o Where 2 parties can not agree Where something needs to be decided  Certificates.3.5  No agreement . Variations  FIDIC encourages resolution by agreement ± Cl.

20.5 ± no definition ‡ 56 days ‡ Direct negotiation ‡ Conciliation ‡ Mediation ‡ Do not involve the DAB ‡ Consensual ‡ No obligation ± costs ?? .Amicable Settlement  Cl.

Mediation        No facility in FIDIC contracts Consensual procedure Confidential Very successful Short time frame Low cost Involve decision makers .

ENGINEERS DECISION  Red & Yellow Books provide for an alternative to the DAB  Engineer¶s Decision  Delete Cl.3 make substitute wording  Impartiality.2 & 20. Independence ?? .20.

ADJUDICATION     Encourage the resolution of disputes Statutory / non statutory Provides a decision in a short time Binding ‡ Give effect ‡ May be changed by amicable settlement ‡ May be changed by arbitration  Contractually enforceable .

ARBITRATION        Clause 20.6 Final settlement ± ICC 3 arbitrators Language Open up & review No limits to evidence DAB Decision shall be admitted .

ICC ARBITRATION  Place to be agreed in Particular Conditions  Each party nominates 1 arbitrator and chairman selected or agreed  ICC court will formally appoint  ICC fee scales & administration costs  ICC rules govern initial referral then arbitrators set the procedure .

ARBITRATOR¶S AWARD  Final & Binding  1958 New York Convention for enforcement of awards .

Dispute Adjudication Board  Rules set out in Red and Yellow books  Ad hoc ± rules apply to the resolution of a referred dispute only  1 or 3 person board  Independent & Impartial  Decisions or advice & opinion .

ADVANTAGES OF THE DAB         Resolves disputes in 84 days Lower costs than Arbitration or Litigation Impartiality Real time assessment Improves standards Provides clarity Diffuses problems (win ± win) Encourages competitiveness in tenders .

DISPUTE ADJUDICATION BOARD  Functions: o o o o o Become Familiar Visit the site Keep up to date Encourage resolution of issues When a dispute is referred: o o o o o Act Fairly & Impartially Convene a hearing Deliberate Prepare a Decision Avoid unnecessary delay or expense .


FORMATION OF DAB RELEVANT DOCUMENTATION  Cl.3  General Conditions of DAA o o o Red Book .full term Yellow Book ± ad-hoc adInterchangeable  Dispute Adjudication Agreement  Tripartite Agreement .2 & 20. 20.

General Conditions of DAA  Employer decides (at tender stage) o o o o What type of DAB How many members Period to agree selection Third party nominator  List of candidates in tender ??  Employer to be ready to nominate .

Formation of DAB  Cl.20.2 Formation ‡ 1 or 3 members ‡ Each party nominates one member ‡ Parties consult members and agree a chairman ‡ List of potential members in tender  No Agreement ‡ FIDIC President will nominate ‡ Due consultation with parties .

DAB OBLIGATIONS  Act Fairly  Act Impartially  Give parties a reasonable opportunity to pout their case & respond  Adopt procedures: o o Avoid unnecessary delay Avoid unnecessary expense .

DAB MEMBERS¶ QUALITIES o o o o o Experience Contract Knowledge Language DR Experience Procedural Knowledge o o o o o Qualifications Availability Impartiality Independence Lawyers .

3 & 4  Warranties: o o o Experienced in Work Experienced in Documentation Fluent in Language of communications Independent Confidential Available  Obligations: o o o .WARRANTIES & OBLIGATIONS  General Conditions Cl.

6 Retainer per calendar month Daily Fee Reasonable expenses Taxes in country of contract Retainer reduced by 50% after taking over  Ad hoc DAB ± no retainer       .PAYMENT OF MEMBERS General Conditions Cl.

Payment method:


Retainer & airfares - quarterly in advance Other fees after site visits / hearing 

Contractor pays in full within 56 days  Employer reimburses Contractor

Monitor progress reports against project documents  Site visits
o o o o o o

Timing Agenda / scheduling / travel arrangements Keep up to date Progress Problems Claims

Site visits with Parties : co-ordinated coby Employer  DAB shall prepare a report  Contract & Project documents  Monthly report

DISPUTE REFERRAL  Clause 20.4 ± read together with Procedural Rules  Referred in writing stating Clause  Sent to chairman  84 days to Decide  Reasoned Decision  Unanimous .

DAB DECISION PROCEDURES        Referral of Dispute Preliminary Issues Claimant¶s position paper Respondent¶s Response Claimant¶s Reply to Response Copies to the other party DAB to set time table .

DAB DECISION PROCEDURES  Parties empower the DAB to: o o o o o o o Establish procedure Decide jurisdiction Conduct a hearing Take initiative facts & other matters Specialist knowledge Decide payment of finance charges Decide Relief .

DAB OBLIGATIONS IN MAKING A DECISION  Act Fairly  Act Impartially  Give parties a reasonable opportunity to pout their case & respond  Adopt procedures: o o Avoid unnecessary delay Avoid unnecessary expense .

DAB HEARING       Adopt inquisitorial procedure Refuse admission to hearings Proceed in absence of any party Not formal (no oaths) Evidence Written summaries .

DAB HEARING  Typical hearing: o o o o Procedural issues Preliminary issues Jurisdictional issues Oral presentation by Claimant o o Witness submissions Respondent questions Witness submissions Respondent questions o Oral presentation by Respondent o o o o Respondent¶s summing up Claimant¶s summing up  Chairman does not end meeting until parties have confirmed they have nothing further to add .

DAB DECISION  DAB meets in private  Endeavour to reach a unanimous decision  Failure of a member to attend  Decision issued in writing and signed with reasons .

4 Confidential document ± state circulation Short document Details of parties and contract Summary of dispute Procedure Reasoning : contract clauses Decision Signed & dated .FORMAT OF DAB DECISION           Preambles State given under clause 20.

binding  Failure to comply ± arbitration  Compliance is a contractual obligation .POST DECISION  Shall be binding « promptly give effect  May be reversed by amicable settlement or arbitration  Dissatisfaction ± 28 days  Otherwise after 28 days .

20.14.1 ‡ Cl.3 ‡ Cl.7 ‡ Cl.16.14.6 ‡ Cl.16.ENFORCEMENT (non statutory)    Contractual obligation Cl.Termination .14.4 Notice of dissatisfaction Breach of contract ‡ Cl.2 ± application for IPC ± Issue of IPC ± Payment ± Suspension .

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