FIDIC Claims & Disputes Resolution Under FIDIC 99 REDBOOK PDF

12/11/2009
CLAIMS &
DISPUTES RESOLUTION
UNDER FIDIC 99
REDBOOK
Suranga Jayasena
Senior Lecturer
Department of Building Economic
University of Moratuwa
CLAUSE 20
suranga@becon.mrt.ac.lk 1
12/11/2009
CLAUSE 20
... is all about Claims and Disputes Resolution
pages 58 to 62
CLAIM FLOWCHART
Claim Event, Clause 20.1

Circumstance Yes Contractor gives notice
arisen to the Engineer
describing the event or
circumstance giving
No rise to the Claim,
within 28 days
Contractor becomes
aware or should have
No Claim
become aware of the
Claim
12/11/2009
Clause 20.1 Clause 20.1

Contractor gives notice Contractor provides
to the Engineer Engineer with detailed
describing the event or particulars and within
circumstance giving 42 days and final claim
rise to the Claim, Yes within 28 days after
within 28 days end of effect if
Contractor becomes continuing event and
aware or should have complies with other
become aware of the contractual
Claim requirements
No No

Claim Fails Claim approved may be
The Employer is limited, if failure has
discharged from all prevented or prejudice
liability in connection the proper
with the Claim investigation of Claim
Clause 20.1
Contractor provides
Engineer with detailed
particulars and within
42 days and final claim
within 28 days after
Dispute end of effect if
continuing event and
complies with other
contractual
No requirements
No
Clause 20.1
Clause 20.4 Claim approved is
Contractor is satisfied limited, if failure has
Yes
with Engineer’s prevented or prejudice
decision the proper
investigation of Claim
12/11/2009
Clause 20.1
Clause 20.1 Contractor provides
The Engineer Engineer with detailed
(dis)approves, or gives Yes particulars and within
opinion on the Claim 42 days and final claim
within 42 days within 28 days after
end of effect if
continuing event and
complies with other
contractual
requirements

The Engineer Yes Contractor is satisfied
(dis)approves, or gives with Engineer’s
opinion on the Claim decision
within 42 days
No No
Contractor does not

tolerate Engineer’s Yes Dispute
delay in decision
No
No No

The Engineer Yes Contractor is satisfied
(dis)approves, or gives with Engineer’s
opinion on the Claim decision
12/11/2009
20.4
Determination
Certification
Instructions Dispute
Valuations
Opinion
Recall...
CLAUSE 20
... is all about Claims and Disputes Resolution
However ... Typical sequence shown in

beginning of the document is useful
12/11/2009
TYPICAL SEQUENCE OF DISPUTE EVENTS

ENVISAGED IN CLAUSE 20
8.1 20.2 20.4 20.4 20.6

Commencement Parties appoint A Party refers a A Party issues a A Party initiate
Date the DAB dispute to the “notice of arbitration
DAB dissatisfaction”
Parties present
submissions to the Amicable settlement
DAB
<28d <84d <28d >56d
DAB gives Arbitrators

its decision appointed
20.2
PARTIES APPOINT THE DAB
Within 28 days of Date of Commencement?
... by the date stated in Appendix to Tender.

(28 days in example in sample forms)
Guidance for Particular Conditions – “It is preferable,

but not essential, to agree before the Letter of
Acceptance”
A list of potential members may be included in tender
12/11/2009
20.2
PARTIES APPOINT THE DAB ... CONTINUED ...
Parties jointly appoint a DAB
DAB comprises one or three member stated in Appendix
If not stated nor agreed, it shall be three
If three, each party nominate one member for

approval of other party, two members appoint
chairman
Each part pay one-half of DAB remuniration
20.2
What if parties fail to agree DAB?
An appointing entity is named in Appendix to Tender 20.3
What if date of appointment not stated in Appendix?
Might go for “ad-hoc” DAB > i.e. only appointed if and

when a particular dispute arises.
What if appointing entity not stated in Appendix?
?
12/11/2009
20.2
Parties may appoint members to be available to

replace members resign or be terminated
Otherwise, replacement be similar to new

appointment
Termination shall only be by mutual agreement of

Parties
usually DAB expires when discharge become effective
20.2
DAB members must be selected carefully, because
Parties empowers the DAB to reach decisions with which

they undertake to comply, and
A DAB member cannot normally be removed except with

the agreement of both parties (20.2 last para)
12/11/2009
A “FULL-TERM” DAB
Appointed before Contractor commence Works
Visit the Site on a regular basis
Also available to assist in avoiding disputes during

these visits
20.2 Para 7 – “if at any time the Parties so agree, they may
jointly refer a matter to DAB for it to give its opinion. Neither
party shall consult DAB on any matter without the
agreement of the other party
DAB: “FULL-TERM” OR “AD-HOC”

Red Book General Conditions are for “full-term” – see 20.2
Parties may decide on appropriate model by

considering (among other things):
Extent of Contractor’s Activities off-site – paying DAB may not

economical
Extent of uncertainties in scope of works – underground

tunnelling – a full-term DAB most appropriate
Extent of Variations expected – full-term
Magnitude of the Contract – No. of DAB members 1 or 3
12/11/2009
20.4
OBTAINING ADB’S DECISION
20.4 Reads “if a dispute (of any kind whatsoever)
arises between the Parties ....
in connection with or arising out of the Contract
or the execution of the Works
including any dispute as to any certificate,
determination, instruction, opinion or valuation
of the Engineer ...
may refer the dispute in writing
to the DAB for decision”
20.4
OBTAINING ADB’S DECISION ... CONTINUED ...
No matter can be referred to DAB unless it is in
dispute
but, no formal notice of dispute required
If matter is still in discussion or only interim
determination given
other party may assert that “no dispute”
DAB to find if dispute has arisen – see if
agreement achieved under sc 3.5
12/11/2009
THE MATTER HAS DEVELOPED INTO A

DISPUTE
When ...
Final determination rejected
Discussions discontinued without agreement
Party decline to participate in discussion
Party decline to reach agreement as per sc3.5
So little progress being achieved that it is clear
that agreement is unlikely
20.4
WRITTEN REFERENCE TO DAB
The Written Submission by Claimant
For the decision of DAB
Describes the situation
Sets out the principles of the matter in dispute
What Claimant wishes the DAB’s decision to be
A copy must be passed to the other party

(Respondent) and Engineer
12/11/2009
20.4
DAB’S DECISION
within 84 days after receiving the original
reference, or
within such other period as may be proposed by
the DAB and approved by both parties
approvals must not be unreasonably withheld or
delayed
for complex matters DAB may propose to give

decisions in stages
shall be reasoned and stated that it given under

sub-clause 20.4
20.4
DAB’S DECISION ... CONTINUED ...
Note that DAB decision shall be admissible in
evidence in arbitration. sc 20.6
Therefore well reasoned decision preferred
The Contractor shall execute the Works while

DAB proceeding.
The decision shall be binding on both parties
12/11/2009
20.4
DISSATISFACTION ON DAB’S DECISION
The Party must give a formal “notice of

dissatisfaction” within 28 days.
It establishes the claimant the right to commence
arbitration.
Unless the notice given within 28 days, decision
become final and binding.
20.5
AMICABLE SETTLEMENT
During first 56 days after notice
Parties should attempt amicable settlement
DAB should not get involve in amicable
settlement procedure.
If no amicable settlement (or attempt thereto),
.....
the dispute shall be finally settled by
international arbitration sc 20.6
12/11/2009
20.7
WHAT IF...
Formal notice of dissatisfaction NOT given,
DAB decision became final and binding
a Party FAILS to comply with decision
Other Party may refer THIS FAILURE directly

to arbitration,
without having to refer again to DAB or try

amicable settlement
20.8
WHAT IF...
a dispute occurs, but
no DAB is in place, either by
the word ‘otherwise’ shall be used to
expiry or otherwise cover failure of appointing DAB due to
defect in document. E.g. “the
appointing entity is non-existent”
the dispute may be referred directly to

arbitration under sc 20.6
However, there is still room for amicable

settlement
12/11/2009
20.6
ARBITRATION
Unless otherwise agreed by both parties
Rules of International Chamber of Commerce
Three arbitrators
Language be language defined in 1.4
Shall commence before or after completion

Shall not prevent executing obligation of contract
during the proceedings
::: BREAK :::
We’ll try something practical now
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1001110101001001011111100010101111111001101001010100101
011110100101010100101010110100 0 1 0 0 0 0
12/11/2009
CASE
PROPOSED SCHOOL BUILDING FOR SEEVALI COLLEGE
Variation Instructions were issued changing the Ground Floor

walls to block work from brick work which was in original
contract. No block work was found in ground floor level in the
original contract but upper floor partition walls in the original
contract was similar type.
Contractor asked for the same rate from the upper floor block
work but the Engineer rejected it and approved rate of his own
schedule of prices (used for Engineer’s Estimate) which is less
than claimed rate.
TASK 01
Write the cover letter for referring the matter to DAB
You may make necessary assumptions
12/11/2009
<< Date >>
<< Adjudicator1 >> - chairman (member)

<< Adjudicator2 >> - member
<< Adjudicator3 >> - member
Dispute Adjudication Board

Proposed School Building for Seevali College
<< Address >>
Dear Sirs,
REFERENCE TO ADJUDICATION
...............
.....
We are not in agreement with the rates determined by the Engineer for
Block work (varied item) at Ground Floor Level we carried out under the
above contract. Therefore a dispute has arisen between the parties to the
above Contract and pursuant to Sub-clause 20.4 we refer the dispute to
DAB for its decision. The detail claim is attached herewith.
Thank you.
Yours faithfully,
<< Contractor >>
cc: << Employer >>

<< Engineer >>
12/11/2009
TASK 02
Write the Adjudication Submission
You may make necessary assumptions
TASK 02 - TIPS
How much to write - Keep it short but clear
Format – Not strict, but you may use something similar to
arbitration submissions
Order –
Introduce parties and contract
DAB appointed
Contractual provision 1,
Contractual provision 2,
Occurance, your statement
........
Dispute
Your claim for decision by DAB
12/11/2009
In the matter of Adjudication

Dispute Between
ABC Construction,
No 9, Road Lane
Colombo 20
Contractor/Claimant
and
Seevali College,
111/1, Lane Road
Colombo 19.
Employer/Respondent
STATEMENT OF CLAIM
........
1. The Contractor is a civil engineering contractor registered under
ICTAD as a Grade C-5. The Employer is a public school in Colombo.
2. By a contract dated 09th October 2009 (‘the Contract’), The Contractor
undertook to construct and complete certain building works, namely
“the Construction of Proposed School Building for Seevali College”
(‘the Works’) in consideration for payment by the Employer on
measure and pay basis without price fluctuation adjustment for the
priced bills of quantities bid by the contractor, at the time and in the
manner prescribed by the contract.
12/11/2009
3. The Contract Incorporates the FIDIC Conditions of Contract for
Construction, First Edition 1999 (‘the FIDIC Conditions’).
4. The Dispute Adjudication Board (‘the DAB’) was appointed by a
tripartite agreement signed on 15th October 2009.
5. Sub-clause 13.1 of the FIDIC Conditions provides that Variations may
be initiated by the Engineer and the Contractor shall execute and be
bound by each Variation.
6. On 28th October during a site visit, the Engineer instructed a
Variation changing all ground floor walls to block work from brick
work specified in the Contract.
12/11/2009
7. Sub-clause 3.3 of the FIDIC Conditions provides that in the event
Engineer gives oral instructions the Contractor shall confirm the said
instruction by writing.
8. Sub-clause 13.3 of the FIDIC Conditions provides that each Variation
shall be evaluated in accordance with Clause 12 [Measurement and
Evaluation].
9. Sub-clause 12.3 of the FIDIC Conditions provides that the appropriate
rate for an item shall be the rate specified for similar work.
10. The Contractor confirmed the Variation instructions and notified the
applicable rate to be the rate of similar work in the Contract – BOQ
Item 2.34: Block Work Walls at Second Floor level, by his letter to the
Engineer dated 01st November 2009.
12/11/2009
11. The Contractor included the block work quantity with applicable rate
to its Interim Statement dated 31st December 2009.
12. Sub-clause 14.6 of the FIDIC Conditions provides that the Engineer
shall issue an Interim Payment Certificate which shall state the
amount which the Engineer fairly determines to be due.
13. The Engineer, in the Interim Payment Certificate, had not certified
the rate applied for Variation and had determined a lower rate.
14. The Engineer failed to certify payment to the Contractor of sums to
which it is entitled pursuant to the said Sub-clause 12.3; which sums
amount to Rs. 115,000.00.
PARTICULARS
<<< Include a brief calculation here, annex if there are detailed calculations>>
15. Accordingly, the Contractor claims Rs. 115,000.00 under Sub-clause
12.3 of the Contract, plus interest thereon at the rate of three
percentage points above the discount rate of the Central Bank of Sri
Lanka, compounded monthly, pursuant to Sub-clause 14.8 of the
Contract.
12/11/2009
16. I certify on behalf of the Contractor that the facts stated in this
Statement of Claim are true to the best of my knowledge and belief.
..........................................................
Muralitharan, M.
Project Coordinator
ABC Construction
No 9, Road Lane
Colombo 20
WELL--DONE
WELL

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12/11/2009

... is all about Claims and Disputes Resolution

Claim Event, Clause 20.1

Clause 20.1 Clause 20.1

Clause 20.1 Clause 20.1

Clause 20.1 Clause 20.4

Contractor does not

Clause 20.1 Clause 20.4

... is all about Claims and Disputes Resolution

However ... Typical sequence shown in

TYPICAL SEQUENCE OF DISPUTE EVENTS

8.1 20.2 20.4 20.4 20.6

<28d <84d <28d >56d

DAB gives Arbitrators

Within 28 days of Date of Commencement?

... by the date stated in Appendix to Tender.

Guidance for Particular Conditions – “It is preferable,

A list of potential members may be included in tender

Parties jointly appoint a DAB

DAB comprises one or three member stated in Appendix

If not stated nor agreed, it shall be three

If three, each party nominate one member for

Each part pay one-half of DAB remuniration

What if parties fail to agree DAB?

An appointing entity is named in Appendix to Tender 20.3

What if date of appointment not stated in Appendix?

Might go for “ad-hoc” DAB > i.e. only appointed if and

What if appointing entity not stated in Appendix?

Parties may appoint members to be available to

Otherwise, replacement be similar to new

Termination shall only be by mutual agreement of

usually DAB expires when discharge become effective

DAB members must be selected carefully, because

Parties empowers the DAB to reach decisions with which

A DAB member cannot normally be removed except with

Appointed before Contractor commence Works

Visit the Site on a regular basis

Also available to assist in avoiding disputes during

DAB: “FULL-TERM” OR “AD-HOC”

Parties may decide on appropriate model by

Extent of Contractor’s Activities off-site – paying DAB may not

Extent of uncertainties in scope of works – underground

Extent of Variations expected – full-term

Magnitude of the Contract – No. of DAB members 1 or 3

to the DAB for decision”

THE MATTER HAS DEVELOPED INTO A

A copy must be passed to the other party

for complex matters DAB may propose to give

shall be reasoned and stated that it given under

The Contractor shall execute the Works while

The decision shall be binding on both parties

The Party must give a formal “notice of

Other Party may refer THIS FAILURE directly

without having to refer again to DAB or try

the dispute may be referred directly to

However, there is still room for amicable

Language be language defined in 1.4

Shall commence before or after completion

::: BREAK :::

We’ll try something practical now

Variation Instructions were issued changing the Ground Floor

Write the cover letter for referring the matter to DAB

You may make necessary assumptions