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Contract Management

with particular reference to


Construction Contracts
(Part – I)

Project Engineering and Management


Module II

Prepared by

Ajay Kumar Singhal


and
Joy Mukherjee

On behalf of

Simplex Infrastructures
Limited

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Introduction

Construction is a large, volatile industry. It requires tremendous capital outlays


but generally offers low rates of returns with least profitability, particularly in
relation to the amount of risk imposed. The state of economy and high interest
rates has made owners much more anxious to hold down original capital outlay,
and avoid additional costs. Revisions have been made to Owner-Consultant
agreements, designed to take out the control of funds from the consultant's
hands. Revisions are made to Standard Contract Forms intended to transfer
increased liability to the contractors and sub-contractors, as well as require more
onerous warranties. Stiffer competition prevails for reasons noted earlier.

Timely completion of construction projects without cost over-run and as per the
quality intended is essential for any project. Experience and case studies show
that still we are facing with considerable delay and cost over-run in projects;
mainly due to shortcomings in contractual arrangements, delay in decision
making, improper and/or lack of communication etc. during implementation.
Therefore, Contract Management warrants specific attention and is of utmost
importance.

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Contents
Part – I (Contract)

¾ Contract Management – Introduction : Page 4

¾ Contract : Page 5 to 9
o Interpretation – Clause
o Documents forming part of Contract
o Formation of Contract
o Essential of a Contract

¾ Types of Contracts : Page 10 to 12

¾ FIDIC Contract : Page 13 to 17


o Introduction
o Traditional FIDIC Forms of Contract
o 1999 Suit of FIDIC Forms of Contract
o About FIDIC Part – I & II

¾ In detail about Old Red Book - FIDIC Contract : Page 17 to 32


o Essential Features and Concepts of FIDIC
o Various Important Sub-Clauses
o Important Documents / Information’s Required to
be submitted
o Events Entitling Contractor, Extension of Time
and Cost
o Events Entitling Contractor, Cost Alone
o Other Important Sub-Clauses of FIDIC

¾ Major changes incorporated in New Red Book : Page 33 to 38


as compared to Old Red Book

¾ Functional responsibilities in administering Contracts : Page 39 to 40

¾ Pitfalls in Construction Projects : Page 41

¾ Typical Set of Records : Page 42

¾ Tips : Page 43

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Contract Management - Introduction
Contract management is a process, which enables all the parties to a contract to
meet their obligations in order to deliver the objectives required from the contract.
It continues throughout the life of a contract and involves managing proactively to
anticipate future needs as well as reacting positively to situations that arise.

The purpose of contract management is to obtain the services as agreed upon in


the contract and achieve value for money. This means optimizing the efficiency,
effectiveness and economy of the services or relationship described by the
contract, balancing costs against risks and actively managing the customer –
provider (client – contractor) relationship. Thus, the aim and objective of
Contract Management is a “Zero Dispute” stage of project completion within
quality, time frame and budgeted cost by adopting safe practices.

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Contract
As per the Contract Act, an agreement enforceable by law is a contract.
A Promise is an accepted Proposal;
An Agreement is a Promise and
An Agreement enforceable by law is a contract.

Interpretation – Clause :
As per ICA, 1872 the following words and expressions are used in the following
senses, unless a contrary intention appears from the context:-

Sc.2. (a) “PROPOSAL”: When one person signifies to another his willingness to
do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, he is said to make a proposal;

Sc.2. (b) “PROMISE”: When the person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted. A proposal, when
accepted, becomes a promise;

Sc.2. (c) “PROMISOR” and “PROMISEE”: The person making the proposal is
called the “promisor”, and the person accepting the proposal is called the
“promisee”;

Sc.2. (d) “CONSIDERATION”: When, at the desire of the promisor, the promisee
or any other person has done or abstained from doing, or does or abstains from
doing, or promises to do or abstain from doing, something, such act or abstinence
or promise is called a consideration for the promise;

Consideration is essential to the validity of every contract. The consideration should be


something which not only the parties regard but the law can also regard as having some
value. It must be real and not illusory, whether adequate or not.

Sc.2. (e) “AGREEMENT”: Every promise and every set of promises, forming the
consideration for each other, is an agreement;

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Sc.2. (f) “RECIPROCAL PROMISES”: Promises which form the consideration or
part of the consideration for each other, are called reciprocal promises;

Sc.2. (g) “VOID AGREEMENT”: An agreement not enforceable by law is said to


be void;

Sc.2. (h) “CONTRACT”: An agreement enforceable by law is a contract;

Sc.2. (i) “VOIDABLE CONTRACT”: An agreement which is enforceable by law at


the option of one or more of the parties thereto, but not at the option of the other
or others, is a voidable contract;

Sc.2. (j) “VOID CONTRACT”: A contract which ceases to be enforceable by law


becomes void when it ceases to be enforceable.
From the above we can infer that:
“All Contracts are agreement but all agreements being not enforceable by
law cannot be a contract”

An agreement becomes a contract when :


• There is some consideration.
• The parties are competent to contract.
• There is free consent of both parties.
• Their object is lawful.

The term contract does not mean only the short agreement to which the
signatures of the parties are affixed, but, includes all other documents and
correspondence which are mentioned to form integral part of the agreement.
That is why it is customary to refer to them as contract documents.

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Documents generally forming part of the Contract:

i. Contract Agreement;
ii. Letter of Acceptance (LOA) & Notice to proceed (NTP);
iii. Contractors’ bid/ Tender Doc.
iv. Contract data;
v. Conditions of contract
a. Conditions of Particular Applications.
b. General Conditions of Contract.
c. Any other set of conditions namely: Project Specific Conditions,
Special Conditions of Contract, subsequent amendments incorporated
etc.
vi. Specifications;
vii. Drawings;
viii. Bill of Qualities.

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Formation of Contract
In fact is both an art and science and do call upon to exercise necessary skills to
avoid post-execution complications though, it is an illusory concept since how so
ever strongly one words the clauses of the contract, the ingenuity of mind will
always find some lacuna.

Our first act in formation of a contract is to invite tenders through a Tender Notice,
which is an invitation for “offer”. The tender submitted by contractor is the “offer”.
Offer that is finally accepted is a contract.

STEPS INVOLVED IN FORMATION OF CONTRACT:

• Proposal and its communication;

• Acceptance of proposal and its communication;

• Agreement by mutual promises;

• Contract;**

** PN: A Contract can never be conditional acceptance. Sc.7 of ICA says


“Acceptance must be absolute”.

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Essentials of a Contract
Essential elements of a (valid) contract are-

• An agreement;

• Offer and acceptance;

• Lawful consideration;

• Capacity to enter into contract, i.e. competence of the parties;

• Free consent of both parties;

• Lawful object and

• Intention to create a legal relationship.

It must be noted, writing is not essential for the clarity of a contract, except where
a specific statue requires writing.
E.g.

• Contract for sale of immovable property must be in writing, stamped and


registered.

• Promise to pay a time barred loan should be in writing, as per the Limitation
Act.

• An Arbitration agreement/ clause must be in writing.

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Types of Contracts

Unit Rate/ Unit Price Contract :


This is also called item rate contract / value contract / measurement contract
or schedule rate contract. In this type, the contractors are required to quote
rates for individual items of work on the basis of schedule of quantities
furnished by the department. This schedule indicates full description of the
items, estimated quantities and their units. The Contractors are required to
express rates and work out the cost against each item and thereby draw up
the total amount tendered for the work.

Percentage Rate Contract :


In this form of contract, the department prepares schedule of items with
quantities, rates, unit and amount shown therein. The Contractors are required
to offer percentage above, below or at par with the rates given in the schedule.
The percentage quoted by Contractor is applicable on the overall schedule.

Cost plus Percentage Contract :


Cost plus percentage contract are generally adopted when conditions are such
that the rates of labour, material etc. are liable to fluctuate and there is an
element of uncertainty in the scope of the work. In this type of contracts there
is an arrangement between the Owner and the Contractor by which the parties
agree that the work ordered would be completed and paid for on the basis of
actual cost incurred plus a fixed percentage as profit.

One of the problems which cost plus percentage contract poses is calculation
of cost. While calculating, the cost of labour or material may present no
problems but costing of workshop and office overheads, etc., may present
problems.

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Lump Sum Contract :
In a lump sum contract, the owner has essentially assigned all the risk to the
contractor, who in turn can be expected to ask for a higher mark-up in order to
take care of unforeseen contingencies. Beside the fixed lump sum price, other
commitments are often made by the contractor in the form of submittals such
as a specific schedule, the management reporting system or a quality control
program. If the actual cost of the project is underestimated, the
underestimated cost will reduce the contractor’s profit by that amount. An
overestimate has an opposite effect, but may reduce the chance of being a
low bidder for the project.

Turnkey / EPC Contract :


This type of contract arrangement (also known as ‘package deal’, ‘cle-en-
main’, or EPC) places the duty to design, engineering, procurement,
construction of the facility and thereafter preparation of start-up procedures, to
create operational manuals and training people to operate the facility etc. on
the Contractor.

The term ‘turnkey’ tends to mean the most extreme form of placing design and
construction responsibility on the Contractor, such that after completion the
Employer only needs to turn the key to commence operation of the
constructed facility.

BOT Contract :
The concept of Build, Operate and Transfer (BOT) project is the most viable
way of building up the National network. NHAI brought this concept into
practice in the year 2000. Under the BOT scheme, the projects are offered on
concession for a specific time period and this concession period involves both
implementation and operation & maintenance of the project.

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Basic differences from other conventional projects/ contracts:
• The returns are spread over a longer period.
• Sound financial & engineering skills are warranted.
• No protection against any price variation during implementation period.
• Cost and time overrun upsets the returns.
• EOT granted by authority does not provide much remedy.

FIDIC Form of Contract :


Federation Internationale Des Ingenieurs Conseil (i.e. The International
Federation of Consulting Engineers) published standard forms of construction
contract for international use which are fairly balanced and equitable so far as
the rights and obligations of both the parties are concerned.

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FIDIC Contract - Introduction
• FIDIC stands for “Federation Internationale Des Ingenieurs-Counseils”
which is the organization who publish and maintain the documents. It is
French short form for the “International Federation of Consulting
Engineers”.

• FIDIC was originally derived from the British Institution of Civil Engineers
(ICE) standard form of contract.

• FIDIC was founded in Belgium in 1913 by three European countries. The


original founding countries were France, Belgium and Switzerland. At
present membership is drawn from 74 countries.

Traditional FIDIC Forms of Contract :


The three books are –

1) Red Book : For Works of Civil Engineering Construction.


4th Edition, 1987; Reprinted in 1988 & 1992 with amendments.

• This is recommended for building or engineering works


designed by the Employer or by his representative i.e.
Engineer.

• The Contractor constructs the works in accordance with a design provided


by the Employer.

• However, the works may include some elements of Contractor-designed


civil, mechanical, electrical and/or construction works.

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2) Yellow Book : For Electrical and Mechanical works.
3rd Edition; 1987 reprinted.

• This is recommended for the provision of electrical and/or


mechanical plant, and for the design and execution of building
or engineering works.

• The Contractor designs and provides, in accordance with the Employer’s


requirements, plant and/or other works; which may include any combination
of civil, mechanical, electrical and/or construction works.

3) Orange Book : For Design – Build and Turnkey.


1st Edition; 1995.

• This is recommended where Contractor takes total


responsibility for the design and execution of an engineering
project.

• The Contractor carries out all the Engineering, Procurement and


Construction (EPC) : providing a fully-equipped facility, ready for operation
(at the “turn of the key”).

During updating its traditional books, FIDIC has noted that certain projects have
fallen outside the scope of the existing Books. Accordingly FIDIC has not only
updated the Standard forms but has expanded the range, and has” in September
1999 – published a suite of four new Standard Forms of Contract which are
suitable for the great majority of construction and plant installation projects
around the world.

The existing Books will still be available as long as there is a demand, but it is
expected that the new suite will supercede and expand the range of the existing
Books.

However, the previous edition of the Red Book (the fourth edition) continues to be
widely used and it seems likely that the 1999 edition will not replace it in the
medium term, at least in certain parts of the world.

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1999 Suit of FIDIC Forms of Contract :
The four books are -

1) Red Book : Conditions of Contract for Construction.

For Building & Engineering works, Designed by the Employer. (an update of old
Red Book) 1st Edition; 1999

The new Red Book is the traditional form for civil engineering construction in
which the Contractor constructs to the Employer's design. There is however
provision for the Contractor to carry out design where specified. The form
maintains the role of the Engineer and the payment mechanism is based on
measure and value. The new Red Book revises the previous Red Book version
and incorporates current thinking on the management of contracts.

2) Yellow Book : Conditions of Contract for Plant and Design-Build Projects.

For Electrical & Mechanical Plant, and for Building & Engineering works,
Designed by the Contractor. (replaces both old Yellow & Orange Book) 1st
Edition; 1999

The new Yellow Book replaces the existing Yellow and Orange Books. It is
intended to be used for Design and Build contracts and for Plant Contracts. The
Engineer administers the contract and payment is on periods or installments of
the Lump Sum.

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3) Silver Book : Conditions of Contract for EPC Turnkey Projects.

1st Edition; 1999

The Silver Book is an entirely new FIDIC form for BOT and similar projects. It is
intended to be used on fixed-price turn key projects. There is no Engineer,
instead the Employer deals directly with the Contractor. Risk is placed largely with
the Contractor. Payment is on periods or installments of the Lump Sum.

4) Green Book : Short Form of Contract.

1st Edition; 1999

The Green Book is an entirely new FIDIC form and adopts the overall risk
philosophy of the Red and Yellow Books. It is intended for contracts of relatively
small value, short construction time or involving simple or repetitive work. There is
no Engineer and the payment mechanism is required to be specified in the
Appendix to the Form of Agreement, but payment is at monthly intervals. It doe’s
not matter who provided the design. Also it doe’s not matter whether the project
involves construction, electrical, mechanical, or other engineering work.

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About FIDIC Part – I & II
While framing FIDIC Conditions, it was recognized that while there are numerous
Clauses which will be generally applicable but there are some Clauses which
must necessarily vary to take into account of the circumstances and locality of the
Works. The Clauses of general application have been grouped together and are
referred as Part I – General Conditions. The guidelines are given in FIDIC book to
prepare a Part II document (i.e. Conditions of Particular Application (COPA))
which needs to be specially drafted to suit each individual contract.

The General Conditions are linked with COPA, by the corresponding numbering
of the Clauses, so that Parts I and II together comprise the Conditions governing
the rights and obligations of the parties.

In detail about

Red Book : Conditions for Works of Civil


Engineering Construction

Fourth edition, 1987; Reprinted in 1988 with editorial amendments;


Reprinted in 1992 with further amendments.

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Essential Features and Concepts of FIDIC
¾ Based on domestic contract.

¾ General Conditions not applicable can be disregarded.

¾ Legal concepts are based on the common law system.

¾ Conditions are fairly balanced and equitable to both the parties, so far as
the rights and obligations are concerned.

¾ Concept of responsibility and liability based on sharing of risks. Risk


sharing is balanced. Risk is allocated to the party that is best able to bear
and control that risk.

¾ Supervision of works and administration of the contract by Engineer, who is


appointed by the Employer.

¾ Dual functions of Engineer – an agent of the Employer and also an


independent and impartial person.

¾ Engineer is not a party to the Contract and the FIDIC Conditions impose
obligations on the Employer that the Engineer duly performs.

¾ Employer should not restrict the powers of the Engineer other than the
situations where specific approval of the Employer is provided in the
contract. He should not influence or interfere with the functioning of the
Engineer.

¾ Compensation and time extension allowed when uncalculated hindrances


occur.

¾ All claims, from either Party, have to follow a procedure.

¾ Work must continue, regardless of differences: amicable settlement


encouraged.

¾ If a dispute arises, reference to DRB (Dispute Review Board).

¾ Dispute resolution procedure is: DRB >>> amicable settlement >>>


Arbitration.
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Various Important Sub-Clauses

Instructions in Writing (Sub-Clause 2.5) –


Sub-Clause 2.5, contains the necessary obligation for the Engineer to give his
instructions in writing or, if the Engineer considers it necessary that instructions are
given orally, the Contractor shall comply with such instruction. These oral instructions
need to be confirmed in writing as soon as possible thereafter. It should be noted also
that where the Engineer does not give written confirmation of an instruction to the
Contractor then the Contractor, within 7 days, may himself confirm to the Engineer that
he has received such an instruction. If the Engineer fails, in writing, to contradict such a
notice within 7 days the instruction is deemed to have been given by the Engineer to the
Contractor.

Priority of Contract Documents (Sub-Clause 5.2) –


The several documents, forming the Contract are to be taken as mutually explanatory of
one another, but in case of ambiguities or discrepancies, the priority of the documents
forming the Contract shall be as follows:

1) Contract Agreement;
2) Letter of Acceptance (LOA) and Notice to Proceed (NTP);
3) Tender Document;
4) Conditions of Particular Application (COPA) - Part – II;
5) General Conditions of Contract i.e. FIDIC - Part – I;
6) Specification;
7) Drawings;
8) Priced Bill of Quantities.

Notice of Claims (Sub-Clause 53.1 / 53.2 / 53.3 / 53.4 / 53.5) –


A Contractor intending to make a claim for additional payment must give notice that he
will do so within 28 days of the event. Thereafter he must keep records including any
records required by the Engineer, who will be entitled to inspect such records. Within 28
or an agreed number of days of the Contractor's notice, he should send a detailed claim
to the Engineer. If the claim has a continuing effect, he should send regular interim
claims followed by a final claim once the effects cease. If the Contractor fails to give
notice, keep records or provide details, his entitlement will be limited by what can be
proved from the records that do exist.

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Important Documents / Information’s Required to be
submitted by Contractor

Programme to be Submitted (Sub-Clause 14.1) –


Once the Contract has been awarded a detailed Construction Programme need to be
submitted within the specified time period as indicated in Part – II (COPA). Generally,
within 28 days from the date of receipt of Letter of Acceptance (LOA).

Do not forget to mention the followings in Construction Schedule –

1) Date of Commencement.
2) Planned date of issue of Good For Construction Drawings.
3) Planned date of Obstruction free Possession of land.
4) Link site possession with Contractual handing-over schedule (wherever
applicable).
5) Planned date of Approval of Mix Designs.
6) Planned date of Approval of Design and Drawing (if applicable).
7) Planned date of any other approval / information required as applicable.

This will help while applying for Extension of Time.

Cash Flow Estimate to be Submitted (Sub-Clause 14.3) –

Once the Contract has been awarded a detailed Cash Flow Estimate need to be
submitted within the specified time period as indicated in Part – II (COPA). Generally,
within 28 days from the date of receipt of Letter of Acceptance (LOA).

The Employer will require a cash-flow estimate to enable him to ensure that funding is
available when required. It is also in the interests of the Contractor that the Employer
should be aware of the dates when payments are expected to be due to the Contractor.

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Events Entitling Contractor, Extension of Time and Cost
Notices / Information's Required To Be Given by Contractor -

FIDIC Clause Requirement for giving Notice / Information’s


6.3 / 6.4 Disruption of Progress / Delays and Cost of Delay of Drawings : If
the planning or execution of the Contractor's works is likely to be
hampered because of late issue of drawings or instructions by the
Engineer, it is important that the notice is given to Engineer informing
that late issue will have certain cost and time effects.

12.2 Not Foreseeable Physical Obstructions or Conditions : In spite of


the pre-tender investigations of the Site by the parties, the Contractor
may encounter unforeseen physical obstructions or physical conditions,
other than climatic conditions. The Contractor is required to give the
earliest possible notice to the Engineer.

20.4 The Employer's Risks are :

(a) war, hostilities (whether war be declared or not), invasion (attack), act
of foreign enemies,

(b) rebellion, revolution, insurrection, or military or usurped power, or civil


war,

(c) ionizing radiations, or contamination by radio-activity from any


nuclear fuel, or from any nuclear waste from the combustion of nuclear
fuel, radio-active toxic explosive, or other hazardous properties of any
explosive nuclear assembly or nuclear component thereof,

(d) pressure waves caused by aircraft or other aerial devices traveling at


sonic or supersonic speeds,

(e) riot, commotion or disorder, unless solely restricted to employees of


the Contractor or of his Subcontractors and arising from the conduct of
the Works,

(f) loss or damage due to the use or occupation by the Employer of any
Section or part of the Permanent Works, except as may be provided for
in the Contract,

(g) loss or damage to the extent that it is due to the design of the Works,
other than any part of the design provided by the Contractor or for which
the Contractor is responsible,

(h) any operation of the forces of nature against which an experienced


contractor could not reasonably have been expected to take precautions.

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Events Entitling Contractor, Extension of Time and Cost
Notices / Information's Required To Be Given by Contractor –

FIDIC Clause Requirement for giving Notice / Information’s


20.4 / 20.3 / This clause should be read in conjunction with clause 65 (Special
65 Risks). Clause 65 makes it clear that the Contractor is not liable for the
consequences of Special Risks upon the works or other property nor for
injury or loss of life.

However, pursuant to clause 20.3, the Contractor is obliged to rectify the


damage caused by the Employer's Risks at the Employer's expense,
only if required by the Engineer to do so.

Clause 65.3 also, entitles the Contractor to payment for rectifying the
damage "so far as may be required by the Engineer or as may be
necessary for the completion of the Works“.

27.1 Fossils: For the purpose of the Contract all articles of geological or
archeological interest discovered on the Site are considered the property
of the Employer. Sometimes contractor suffers, delays and cost due to
Engineer instruction relating to discovery of fossils/antiquities etc.

29.1 Interference with Traffic and Adjoining Properties: The Contractor


should comply with all local legislation and regulations and the rules of
all public bodies and companies affected by the works. The Contractor
will indemnify the Employer against any breaches, but the Employer will
be responsible for and will indemnify the Contractor in respect of matters
such as planning permission.

36.5 Engineer’s Determination where Tests not Provided for: Where


provision of Tests are not provided in Contract but tests conducted and it
is found that materials, plant or workmanship are in accordance with the
provisions of the Contract.

40.1 / 40.2 / Engineer’s Determination following Suspension / Suspension


40.3 lasting more than 84 days: If the progress of the Works or any part
thereof is suspended on the instructions of the Engineer and if
permission to resume work is not given within a period of 84 days then,
unless the Contractor is responsible for the suspension, the Contractor
may, by notice to the Engineer, require permission, within 28 days, to
proceed. If such permission is not granted, the Contractor may elect to
treat the suspended work as omitted or, where all work has been
suspended, treat the Contract as repudiated (rejected).

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Events Entitling Contractor, Extension of Time and Cost
Notices / Information's Required To Be Given by Contractor -

FIDIC Clause Requirement for giving Notice / Information’s


42.1 / 42.2 Possession of Site and access Thereto/Failure to Give Possession :
If the Employer fails to provide the Possession of Site (or portions
thereof where appropriate) and Access Thereto in accordance with the
requirements of the contract / programme.

44.1 / 44.2 / Extension of Time for Completion : In the event of delay on account of
44.3 causes given in various clauses the Contractor is entitled for extension
of time.

- Contractor is required to notify to Engineer with a copy to Employer,


within 28 days after such event has first arisen.

- Further, within 28 days after such notification, Contractor to submit


detailed particulars of any extension of time to which he considers
himself entitled.

- However, where an event has a continuing effect, Contractor has to


submit interim particulars at intervals of not more than 28 days and
final particulars within 28 days of the end of the effects resulting from
event.

51 / 52 Variations : Where the Contractor intends to claim extra payment in


respect of the varied work, i.e.

(a) increase or decrease of the quantity of any work included in the


Contract,
(b) omission of any work (but not if the omitted work is to be carried out
by the Employer or by another contractor),
(c ) change the character or quality or kind of any work,
(d) change the levels, lines, position and dimensions on any part of the
works,
(e) execute additional works of any kind necessary for the completion of
the works, or
(f) change any specified sequence or timing of construction of any part of
the works.

69.4 Contractor’s Entitlement to Suspend Work : Contractor’s entitlement


to suspend work or reduce the rate of work where the Employer fails to
pay to the Contractor his due amount. (Here due payment means -
Employer fails to pay, the Contractor the amount due under any
certificate of the Engineer within 28 days after the expiry of the time
stated in Sub-Clause 60.10 within which payment is to be made).

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Events Entitling Contractor, Cost Alone
Notices / Information's Required To Be Given by Contractor -

FIDIC Clause Requirement for giving Notice / Information’s


17.1 Setting-Out : Incorrect setting out data given to Contractor by Engineer
(i.e. position, levels, dimensions or alignment of any part of the works).

20.3 Loss or Damage Due to Employer’s Risks : Any loss or damage


happening from any of the risks defined in Sub-Clause 20.4, Employer’s
Risks.

38.2 Uncovering and Making Openings : The Engineer may require, as a


consequence of later discovery, that work already covered up be
uncovered and inspected and tested. Contractor incurs costs for testing
or uncovering works and such tests or uncovering shows that the
Contractor’s works were not defective.

50.1 Contractor to Search : This clause permits the Engineer to instruct the
Contractor to search for the cause of a defect, shrinkage or other fault in
the Works emerging prior to the end of the Defects Liability Period.
Depending on whose responsibility the fault turns out to be, the
Contractor either bears the cost himself or receives additional payment.

58 Provisional Sums : "Provisional sum" is defined. The Contractor will be


entitled to the sum determined by the Engineer in respect of work
covered by the provisional sums. The Engineer may issue instructions in
relation to provisional sums for work or the supply of materials etc either
by the Contractor who is to be paid pursuant to clause 52 (Valuation of
variations) or by a nominated Subcontractor who is to be paid pursuant
to clause 59.4 (Payments to nominated Subcontractors).

65.3 / 65.5 Damage to Works by Special Risks : Replacement or rectification of


materials or Contractor’s equipments and/or rectification of damage
caused to works or any materials or plant on or near or in transit to the
site, or any of the contractor’s equipment by Employer’s Risks as defined
in Sub-Clause 20.4 of FIDIC.

70.2 Subsequent Legislation : Any affect upon the cost of the works
resulting from changes in the any National or State Statute, Ordinance,
Decree or other Law or any regulation or bye-law of any local or other
duly constituted authority, or the introduction of any such State Statute,
Ordinance, Decree, Law, regulation or bye-law, occurring after the date
28 days prior to the Tender date, are to be established and added to or
deducted from the contract price.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


4.1 Subcontracting : The Contractor shall not subcontract the whole of the
works. Also except otherwise provided by the Contract, the Contractor
shall not subcontract any part of the works without the prior consent of
the Engineer. The Contractor shall not be required to obtain such
consent for –

a) the provision of labour.

b) the purchase of materials which are in accordance with the standards


specified in the Contract, or

c) the subcontracting of any part of the Works for which the


Subcontractor is named in the Contract.

10.1 / 10.2 Performance Security : Contractor to obtain security for his proper
performance of the contract and provide to the Employer such security
within 28 days after the receipt of the Letter of acceptance. The
performance security shall be valid until the Contractor has executed
and completed the works and remedied any defects therein in
accordance with the Contract.

11.1 Inspection of Site : The Employer shall have made available to the
Contractor, before the submission of the Tender, such data on
hydrological and subsurface conditions as have been obtained by or on
behalf of the Employer from investigations undertaken relevant to the
Works but the Contractor shall be responsible for his own interpretation
thereof.

20.1 / 20.2 Care of Works / Responsibility to Rectify Loss or Damage : The


Contractor is fully responsible for the care of the works, from the
commencement date until the works or any section or part is taken over
by the Employer. The Contractor will also take responsibility for any
outstanding works which he undertakes to finish during the Defects
Liability Period.

The Contractor is to rectify at his own cost any damage to the works
before they are taken over unless caused by one of the Employer's risks.
He will also rectify any damage done by him during the Defects Liability
Period including damage done during a search.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


21.1 / 21.2 / Insurance of Works and Contractor’s Equipment : The Contractor is
21.3 / 21.4 to insure 15% of the full replacement value of the works to cover
reinstatement as well as professional fees, demolition etc and will also
insure the replacement value of his own equipment.
The insurance is to be in the joint names of the Contractor and the
Employer and is to cover all risks other than Employer's risks (a) - (d)
from the start of work on site until taking-over of the works. It must also
cover the Contractor's operations in the Defects Liability Period and
when searching.

The Contractor and the Employer will bear losses in relation to their own
risks to the extent that their losses are not paid for by the insurer.

25.1 Insurance : The Contractor shall prove to the Employer before starting
work that the required policies of insurance have been taken out. He will
also supply the policies to the Employer within 84 days of the
Commencement Date. The Engineer should be kept informed. The
Contractor's policies must be with insurers and in terms approved by the
Employer.

If the Contractor fails to provide or maintain the policies, the Employer


may do so and deduct the premiums from sums due to the Contractor.

30.3 Transport of Materials or Plant : Whenever, any damage is caused to


any bridge or road used for transportation by Contractor.

31.2 Facilities for Other Contractors : In a project with more than one
organization present on the Site at any one time and another agency
wish to use the services of works, it shall be notified accordingly.

If the other contractors request that the Engineer makes roads available
which the Contractor is obliged to maintain or if the Contractor permits
use of Temporary Works or Contractor's Equipment or provides any
other services, the Contractor is to be paid.

37.1 / 37.3 Inspection and Testing : The Engineer is to have access to the site
and off-site factories etc. The Contractor is to help to obtain such
access.

The Engineer may inspect and test materials and Plant and the
Contractor shall obtain permission for such inspections and testing
where it is to take place off-site. Inspection and testing will not relieve
the Contractor of his responsibilities. If the Engineer has not attended
the tests, he shall accept the said readings as accurate.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


39.1 / 39.2 Removal of Improper Work, Materials or Plant : The Engineer may order the
removal and replacement of any materials, plant, work or design by the
Contractor which are not in accordance with the contract.

If the Contractor fails to comply with the Engineer's instructions within the time
stated or a reasonable time, the Employer may employ others to execute the
work at the Contractor's expense.

42.3 Rights of Way and Facilities : The Contractor shall bear all costs and charges
for special or temporary rights of way required by him in connection with
access to the Site.

43.1 Time for Completion : This clause provides the basic obligation upon the
Contractor to complete the works on time. He must substantially complete the
whole of the works within the given period subject to any extensions granted. If
the project has been divided up into Sections, then he must complete each
Section within the specified period, again subject to any extensions.

46.1 Rate of Progress : If for any reason, which does not entitle the Contractor to
an extension of time, the rate of progress of the Works or any Section is at any
time, in the opinion of the Engineer, too slow to comply with the Time for
Completion, the Engineer shall so notify the Contractor who shall thereupon
take such steps as are necessary, subject to the consent of the Engineer, to
expedite progress so as to comply with the Time for Completion. The
Contractor shall not be entitled to any additional payment for taking such steps.

47.1 / 47.2 Liquidated Damages for Delay : If the Contractor fails to complete the whole
or any specified Section of the Works by the due date, the Employer may
deduct or recover from the Contractor the daily amount specified in the contract
up to a given maximum amount. If the works are handed over on a piecemeal
basis, the amount of liquidated damages is reduced proportionately.

48.1 / 48.2 / Taking-Over Certificate : When the whole of the Works have been
48.3 substantially completed and have satisfactorily passed any Tests on
Completion prescribed by the Contract, the Contractor may give a notice to that
effect to the Engineer, with a copy to the Employer, accompanied by a written
undertaking to finish with due expedition any outstanding work during the
Defects Liability Period. Such notice and undertaking shall be deemed to be a
request by the Contractor for the Engineer to issue a Taking-Over Certificate in
respect of the Works.

Taking-Over Certificates may be issued in respect of specified Sections or


parts of the Works, which are either complete or are incomplete but have been
taken over by the Employer.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


49.1 / 49.2 / Defects Liability : This clause defines the Defects Liability Period as an
49.3 / 49.4 agreed period, usually six or twelve months running from the date or
dates of the Taking-Over Certificate. The Contractor is obliged to
complete any outstanding work and remedy any defects during or shortly
after this period. Unless any remedial work undertaken by the Contractor
was due to a cause which was not the Contractor's responsibility, he
receives no extra payment for works executed during this period. If the
Contractor remedies defects not of his making, he is paid as if the work
was a variation. If the Contractor fails to carry out the remedial works
within a reasonable time, the Employer can take on alternative
contractors to execute the works and charge the Contractor the cost of
remedying the Contractor's defects.

51.1 / 51.2 Variations : This clause empowers the Engineer to order additions,
omissions and/or changes to the Works. Such variations are to be
valued in accordance with clause 52 unless the need for the variation
arose through some default of the Contractor. The Contractor should
obtain a written instruction from the Engineer unless the variation is
simply an increase or decrease in the quantities stated in the bill of
quantities.

52.1 / 52.2 / Valuation of Variations : The value of variations is ascertained by this


52. 3 / 52.4 clause. The starting point is that the rates and prices set out in the
contract should be used as far as possible, failing which suitable
alternative rates are either agreed or fixed by the Engineer. Contractor
must give notice within 14 days of the instruction and before he starts
the work if he intends to claim extra payment for the variation. Similarly,
the Engineer must give notice in the case of an omission. If at the end of
the project, it is found that the variations amount to more than 15% of the
contract price (as adjusted), an addition or omission to the contract sum
may be agreed or determined by the Engineer in respect of the
Contractor's overheads. The Engineer is empowered to issue
instructions that variations be executed on day work, at the rates and
prices set out in the contract.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


54 Contractor’s Equipment, Temporary Works and Materials : All
equipment, temporary works and materials that the Contractor brings
onto site are to be for the exclusive use of the works and may only be
removed with the consent of the Engineer. The Employer will not
generally be liable for loss or damage to the equipment, temporary
works or materials. The Employer will use his best endeavors to help the
Contractor obtain clearance of his equipment etc. through customs and,
where equipment has been imported for the works, to help the
Contractor obtain permission to re-export the equipment etc. when
finished with. All equipment hire agreements must permit the Employer
to take over the hiring of the equipment in the event of a termination
under clause 63 (Default of Contractor).

56.1 Works to be Measured : The Engineer shall value the Works in


accordance with clause 60 by measurement. When any measurement is
to take place, the Engineer is to give notice to the Contractor who will
attend to assist the measurement and provide particulars. If the
Contractor fails to attend, the Engineer's measurement will be taken as
correct.

57.1 / 57.2 Method of Measurement / Breakdown of Lump Sum Items : This


clause provides for the Works to be measured net unless the contract
says otherwise. The Contractor is required to give a breakdown of the
lump sum items in his tender within four weeks of the letter of
acceptance.

59 Nominated Subcontractors : The Contractor need not employ any


nominated Subcontractor against whom he has reasonable objection or
who refuses to enter into a sub-contract which is back to back with the
main contract and which indemnifies the Contractor in respect of the
nominated Subcontractor's breaches and against the negligence of his
workmen and misuse of any Temporary Works.

The Engineer is entitled to proof that certified sums have been paid to
nominated Subcontractors before issuing any further certificate. Unless
the Contractor shows he has reasonable grounds for refusing to make
such a payment and proves that he has so notified the nominated
Subcontractor, the Employer may make direct payments and deduct the
equivalent sum from the Contractor. The Engineer is to show the
deduction on the next certificate which should not be delayed.

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


60.1 to 60.10 Certificates and Payment : Each month, the Contractor has to submit
six copies of his monthly valuation including on-site materials,
fluctuations and claims.

Interim certificates shall be paid within 28 days of their delivery to the


Employer and the Final Certificate within 56 days. Interest will
accumulate on late payment at the rate stated in the Appendix.

The Engineer will not certify unless the net amount of the certificate
would exceed the minimum amount set out in the Appendix and the
Contractor has submitted his performance security.

Half of the retention money will be certified upon the issue of the Taking-
Over Certificate or a proportion of the retention money if the Taking-Over
Certificate relates to a Section or part only.

The other half will be certified at the end of the last Defects Liability
Period. However, if there is any outstanding defect or search to be
undertaken, the Engineer may continue to retain enough of the retention
money to cover the cost of the work to be executed.

The Engineer is entitled to correct or modify interim certificates, including


by the omission or reduction in the value of items.

The Employer will not be liable to the Contractor for any claim which was
not referred to in the Final Statement and, unless the claim arose after
the date of substantial completion, the Statement at Completion.

70.1 Increase or Decrease of Cost : The rise and fall in the cost of labour,
materials etc is to be taken into account in accordance with a
fluctuations clause as set out in Part II (COPA). That is called Price
Adjustment or Escalation and the formula for calculating the amount is
usually defined in Part – II (COPA)

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Other Important Sub-Clauses of FIDIC

FIDIC Clause Requirement for giving Notice / Information’s


67.1 to 67.4 Settlement of Disputes : This clause is the disputes clause and
introduces a 3-stage process. Any dispute should be referred in writing
to the Engineer who is given 84 days in which to give his decision.
Unless the contract has come to an end, the Contractor continues to
execute the Works and both parties must give effect to the Engineer's
decision. If either party is dissatisfied with the decision or the Engineer
fails to make a decision, they have 70 days in which to give notice of
their intention to commence arbitration. If they fail to give such notice,
the Engineer's decision will become final and binding upon the parties.
For 56 days after the notice of arbitration is given, the parties try to settle
the dispute amicably.
If neither the Engineer's decision nor the attempts at amicable
settlement have succeeded in resolving the dispute, the matter is
referred to arbitration under the rules of the ICC. The arbitrator will have
power to look into any decision of the Engineer and replace any
certificates etc. that the Engineer has made. The parties may use fresh
evidence and arguments and may call the Engineer as a witness. The
arbitration may be commenced before or after the completion of the
Works.
However, generally Sub-Clause 67.1 is substituted in COPA with
“Disputes Review Board”. In this … If any dispute arises between the
Employer and the Contractor in connection with, or arising out of, the
Contract or the execution of the Works, whether during the execution of
the Works or after their completion and whether before or after the
repudiation or other termination of Contract, including any disagreement
by either party with any action, inaction, opinion, instruction,
determination, certificate or valuation of the Engineer, the matter in
dispute shall, in the first place be referred to the DRB.

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Dispute Review Boards

Dispute Review Boards are very useful in construction contracts. The traditional
methods of resolution of dispute come after the fact, (when the project is complete and
the parties have already become adversaries). On the other hand, a Dispute Review
Board visits the job site regularly during construction and is kept advised of contract as it
progresses.

If a dispute arises, the Board recommends settlement, soon after the dispute occurs and
before any adversarial attitude grows.

Normally, the Dispute Review Board consists of three members. One member is
appointed by each party. The third member (who becomes the Chairman) is selected by
the two members and approved by the parties. The members are expected to have :

(a) experience with the type of construction,


(b) familiarity with interpreting contract documents, and
(c) adequate background in the construction industry. They must not have any
affiliation with the parties.

The Board, after recording the parties' submissions, suggests a settlement. If it is not
acceptable to both the parties, they can make a request to the Board to make further
efforts, or pursue litigation or arbitration, as the case may be.

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Major changes incorporated in 1999 Form of
Contract as compared to Old Red Book

Old Red Book : For Works of Civil Engineering Construction.


4th Edition, 1987; Reprinted in 1988 & 1992 with amendments.

New Red Book : Conditions of Contract for Construction.


For Building & Engineering works, Designed by the Employer.
(an update of old Red Book), 1st Edition; 1999

Sub-Clause 1.1.2.6 : Employer’s Personnel - the Engineer, his assistant and


other employees of Engineer are now part of the Employer personnel.

Sub-Clause 1.1.3.7 : Defects Notification Period - Defect Liability Period has


now been changed to Defects Notification Period. The Employer is also expressly
entitled to extent the Defects Notification Period upto 2 years, if the works after taking
over cannot be used for the purpose for which these were intended, due to defects or
damages (Sub-Clause 11.3). Such an express provision is not provided in the Fourth
Edition, 1987. 3.

Sub-Clause 14.1 : The Contract Price - is now defined to include adjustment


and the Engineer is required to agree or determine the contract price under Sub-Clause
12.3, whereas as per the provision in Fourth Edition, 1987, the contract price was
defined as the sum stated in the letter of acceptance.

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Sub-Clause 2.1 : Right of Access to the Site - as per this Sub-Clause, the
Employer is required to give access to, and possession of, all parts of the site within the
days specified in Appendix to Tender. As per Sub Clause 1.1.6.7, site includes the area
on which the permanent works are to be executed as well as other areas set aside for
the Contractor’s use in the contract for use of storage or for any other purpose needed
for execution of work. Incase, the Employer fails to give right to access to and/or
possession of site within the specified period, the Contractor will be entitled to an
extension of time as well as his cost and reasonable profit provided the delay is not
attributable on the part of the Contractor [Sub-Clause 2.1 & 20.1 (Contractor’s Claim)]. In
the old Red Book the provision is given for extension of time for cost in the event of
delay in giving possession of site by the Employer and not the profit.

Sub-Clause 2.2 : Permits, Licenses or Approvals - it is obligatory on the part


of the Employer to assist the Contractor in obtaining copies of law of the country and in
connection with the applications for any permit, license or approval required by such
laws.

Though it is not clear under this Sub-Clause, if the assistance of the Employer fails to
achieve the desired result, whether this will entitle the Contractor to raise a claim against
the Employer, but as per the provision of Sub-Clause 8.5 (Delays Caused by
Authorities), read in conjunction with Sub-Clause 20.1 (Contractor’s Claim), if the delay
or disruption by the authority results in a claim the Contractor shall be entitled for the
same under Sub-Clause 8.5.

Sub-Clause 2.3 : Employer’s Personnel - provides responsibility of the


Employer to ensue that his personnel and other contractors co-operate with the
Contractor’s efforts in the operation at site as well as for protection of environment and
safety procedure.

Sub-Clause 2.4 : Employer’s Financial Arrangements - under this Sub-


clause the Employer is now required to submit reasonable evidence within this 28 days
after receipt of request from Contractor that financial arrangements have been made to
ensure payment to the Contractor in accordance with the payment schedule failing
which the Contractor can give 21 days notice to suspend work or reduce rate of work as
per Sub-Clause 16.1 (Contractor’s Entitlement to Suspend Work). Further, if the
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Contractor does not receive reasonable evidence within 42 days after giving the
aforesaid notice of 21 days, then he will be entitled to terminate the contract as per the
provision under Sub-Clause 16.2 (Termination by Contractor).

The Contractor is also now entitled under Sub-Clause 16.1 to suspend or reduce the
rate of work after giving 21 days notice to the Employer where the Engineer fails to
certify an interim payment certificate. Whereas, under the provision of old Red Book
Sub-Clause 69.4, the Contractor was only entitled to suspend or reduce the rate of work
in the event the Employer had failed to pay the amount due under the certificate of
payment.

Sub-Clause 2.5 : Employer’s Claim - under this Sub-clause, if the Employer


considers himself to be entitled to any claim or for extension of Defects Notification
Period, in that case either the Employer or the Engineer must give notice together with
full particulars to the Contractor. Such particulars should specify cause or basis of the
claim together with full substantiation of the amount claimed and /or extension of Defects
Notification Period where the Employer considers himself to be entitled explaining the
basis on which the extension is warranted. The Employer does not have right to set up
such claim against the certified amount or otherwise claim against the Contractor except
where the determinations has been got done from the Engineer in accordance with
provision of Sub Clause 2.5. There was no such clear provision in the Fourth Edition,
1987.

Sub-Clause 3.2 : Delegation by the Engineer - as per the provision of this


Sub-Clause, the Engineer now cannot delegate this authority without the consent of both
parties. Whereas, he was entitled to do so of his own and without consent of both the
parties under Fourth Edition, 1987.

Sub-Clause 3.4 : Replacement of the Engineer - in accordance with the


provision of this Sub-clause, the Employer is now entitled to replace the Engineer after
giving 42 days notice to the Contractor. However, Employer shall not replace the
Engineer with a person against whom the Contractor raises reasonable objection by
giving notice to the Employer, with supporting particulars. There was no such provision
in the Fourth Edition.

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Sub-Clause 3.5 : Determinations - the Engineer is now required to act on behalf
of the Employer. The provision relating to functioning of the Engineer in independent and
impartial capacity where he is required to give decision, opinion and approval as per the
Sub-Clause 2.5 of old Red Book has now been dispensed with. However, under Sub-
Clause 3.5, the Engineer is duty bound to make fair determination in accordance with
the provision of the contract taking into account all the relevant circumstances. Though
no time limit on determination by Engineer has been prescribed but according to the
provision of Sub-Clause 1.3 (Communications), the determination should not be
unreasonably delayed.

Sub-Clause 13.7 : Adjustments for Changes in Legislation - according to


this Sub-Clause, Contractor is entitled for an extension of time and for payment of any
such cost resulting from a change in the laws of the country or in the judicial or official or
governmental interpretation of such laws, made after the base date. Whereas, there was
no such express provision in Fourth Edition, 1987.

Sub-Clause 14.8 : Delayed Payment - provides that in case the Contractor is not
paid on time, he will be entitled for payment of financial charges to be calculated at the
annual rate of 3 percentage points above the discounted rate of Central Bank of the
Country (which is Reserve Bank in case of India).

Sub-Clause 20.1 : Contractor’s Claims - under this Sub-Clause, the Engineer


is now expressly required to respond with approval or disapproval with detailed
comments within 42 days after receiving a claim or any further particulars supporting a
previous claim of the Contractor. There was no such express requirement under old Red
Book for the Engineer to respond on merits of the Contractor’s claim at all, except in
case of a dispute under Sub-Clause 67.

Sub Clause 4.21 : Progress Reports - now imposes an obligation on the


Contractor to submit detailed monthly progress report to the Engineer each within 7 days
after last date of the period to which it relates. This monthly report is to include charts,
detailed description of progress, photographs - showing status of manufacture and of
progress on the site. The progress report shall also include records of Contractor’s
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personnel and equipments, list of notices given under Sub-Clause 2.5 (Employer’s
Claim) and Sub-Clause 20.1 (Contractor’s Claim) including position regarding safety,
environmental aspects, public relations, comparison of actual and planned progress and
remedial measures adopted to overcome the delay, if any. As per Sub-Clause 14.3
(Application for Interim Payment Certificates), the monthly progress report is required to
be submitted along with Contractor’s statement for interim payments and the failure of
the contractor to do so may result in delay in such payments to him. There was no such
provision in the old Red Book.

Sub-Clause 15.5 : Employer’s Entitlement to Termination - the Employer


is now entitled to terminate the contract at any time for his convenience by giving 28
days notice without showing any default of the Contractor or other justification. However,
the Employer is not entitled to terminate the Contract in order to execute the work
himself or for getting the work executed by another Contractor. After this termination, the
Contractor is entitled to be paid for the work done but not to profit on the balance work of
the contract as per the provision in Sub-Clause 19.6 (Optional Termination, Payment
and Release). Whereas, there was no such provision in the old Red Book. 19.

Sub-Clause 4.9 : Quality Assurance - imposes an obligation on the Contractor


to demonstrate as to how he will comply with the quality requirement specified in the
contract. The system to be proposed by the Contractor by submitting quality assurance
plan and other details indicating how it will meet the specified quality requirement in
every aspect. The Engineer shall be entitled to audit any aspect of the system.

Sub-Clause 20.1 : Contractor’s Claims - according to the provision of this Sub-


Clause, if the Contractor fails to give notice of a claim within such period of 28 days, he
loses his entitlement to extension of time and for additional payment and the Employer
shall be discharged from all liabilities in respect of such claims. Whereas, in 4th Edition
(old Red Book) remedy was available even if there were such defaults on the part of the
Contractor, of course limiting the claims of Contractor for determination by the Engineer
and / or arbitrators based on contemporary record. However, as per the Indian law such
failure will not legally disentitle the Contractor to seek settlement of claims through
arbitration as long as these are not time barred as per the Law of Limitation. Andhra
High Court has also given judgment upholding the above position in case of similar
provision in other Conditions of Contract used in India.
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Sub-Clause 4.23 : Contractor’s Operations on site - the Contractor is
required to confine its operation within the site and to any additional areas as agreed by
the Engineer and keep all his equipments and personnel off the adjacent land and not to
interfere with the convenience of the public. The Contractor is also required to keep the
site free from all unnecessary obstructions and shall clear away or remove any surplus
equipment or material and also to remove all rubbish and temporary works which are no
longer required.

After the completion of the work and upon the issue of taking over certificate, the
Contractor will ensure that the site is clear in all respects except that he may, however,
retain such equipment and material at site which may be required to fulfill his obligation
during the Defects Notification Period.

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Functional Responsibilities in Administering
Contracts
• Compilation of the entire Contract Document incorporating all amendments,
communication, along with proper index and maintain copies of the same at
Site Office as well as Corporate Office.

• Preparation of the Salient Features of the Contract for ready reference


during course of execution. Salient features should comprise of the details
like:
o Project Name, Contract Agreement no., Details of - Employer, Engineer
and their authorized Personnel, Engineer’s Duties and Authority, Priority
of Documents, Original Contract Value, Date of tender negotiation, Date
of Original Agreement, Date of LOA, Date of NTP, Project Completion
Period, Date of Commencement, Date of Completion, Details of
Milestones (if stipulated), EMD, Defects Liability Period, Security
deposit, Retention details, Scope of Work, Details of all Bank
Guarantee, Details of Advance Payment Clause, Mode of Recovery of
Advance paid to Contractor, Performance Certificate, Insurance,
Incentives for Early Completion (BONUS Clause) Liquidated Damages,
EOT Clause, Interim Payment Certificate, Charges for delayed payment,
Settlement Of Disputes and Arbitration clauses and other important
terms & conditions of the Contract for compliance with contractors
obligations.

• Maintain copies of original Construction Programmes (Base Programme)


which relates to the original contract period along with the copies of the
subsequent revised programmes.

• Process of evaluation by effective detailed Monitoring.

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• Maintain copies of agreed Minutes of Meetings (site meetings) with
Employer/ Engineer to appraise actual progress in relation to construction
programme and matters pertaining thereto.

• Confirmation of verbal instructions by way of affirming the same in writing


by the Contractor thereby recording the instruction conveyed verbally.

• The tender drawings from which the bills of quantities were prepared
should be available with proper reference and index.

• To maintain an updated drawing register recording the details.

• DPR should be maintained and submitted to the Engineer/Employer


recording site progress, deployment of resources, events, hindrances, etc.

• Records of all submissions made and dates of approvals received.

• For any variations / deviation, notify the Employer well in advance but not
later than the specified time in the contract.

• Ensure to obtain variation order prior to execution.

• Refrain from exchange of unscrupulous correspondence.

• Building Up Proper Correspondence


Yet another thing to be considered in the administration of contract is
correspondence. On most occasions, the correspondence may not reveal
what was intended and understood by the parties. Correspondence can be
one of the best forms of contemporary records. The style and content of
correspondence is important.

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Dated 14-Nov-2008 and Joy Mukherjee
Pitfalls in Construction Projects
Any construction project would have a continuous streak of problems coming up
and getting solved. When we talk of “pitfalls”, all types of construction jobs do
have these in plenty but certain types could have more than the other. In
infrastructure projects one experiences the same more than in a building project.

The understated areas are to keep guard against:

i) Insufficient pre-design investigations.


ii) Defective design concepts.
iii) Flawed bid document.
iv) Unrealistic specifications.
v) Errors in drawings.
vi) Incompetent sub-contractors.
vii) Incompetent supervision staff.
viii) Resource control.
ix) Market fluctuation.
x) Safety in construction.
xi) Laws governing construction.
xii) Socio-political environment.
xiii) Finance management.
xiv) Fast changes in technology.

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Dated 14-Nov-2008 and Joy Mukherjee
Typical Set of Records
• Tender and Contract document.

• Drawings issued for construction and all subsequent revisions.

• Instructions, notices, variation orders issued to contractors.

• Sub-contractor quotations, purchase orders, work orders.

• Daily records on Plant & Machinery use.

• Daily time records and production logs e.g. concrete pours etc.

• Contract Milestone schedule/ master schedule.

• Payment/ billing status under the contract.

• Contract correspondence.

• Minutes of contractual meetings.

• Minutes of site coordination meetings.

• Notice of claims for delays and/or cost by Contractor.

• Contemporary records.

• Inspection reports.

• Accident reports.

• Progress photographs.

• A filling record of all the record files that are being maintained.

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Dated 14-Nov-2008 and Joy Mukherjee
Tips

1) Be fully conversant with all the Clauses in the Contract, Technical


Specifications, Scope of works etc.

2) Monitor the job on a day to day basis.

3) Correspondence to Clients to be progressively built-up. Never fail to reply


any of Client’s letters.

4) Be on the look out to get information on certain relevant details viz.


increase in taxes, escalation, force-majeure conditions etc. which have
impact on the job.

5) Read the contract between the lines and not the lines alone for better
interpretation of the same to our advantage.

To contact, e-mail at :
ajay.singhal@simplexinfra.net
joy.mukherjee@simplexinfra.net

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Dated 14-Nov-2008 and Joy Mukherjee