THE MAIN CAUSAL FACTORS OF CONSTRUCTION CLAIMS

UNDER FIDIC CONTRACT IN INDONESIA1

2
Dr. Sarwono Hardjomuljadi
Special Advisor to the Minister,
Ministry of Public Works
Jl. Pattimura 20
Jakarta Selatan
Indonesia

ABSTRACT

In the construction industry in Indonesia, most of claims submitted by the contractor especially in the
public sector construction will finally create disputes between the employer and the contractor. Claims and
disputes arising during the construction were largely due to the uncertainties inherent in the projects and
were not due to the use of certain conditions of contract.

This paper presents the causal factors of Construction Claims in Indonesia, based on the research through
the questionnaire distributed among the users of FIDIC Conditions of Contract from the construction
society i.e. employer, engineer and contractor. The result showed that the possession of site and the
changing in design were the main causal factor of claims in Indonesia. Besides those causal factors, the
different interpretation also created disputes

Construction Contract using the FIDIC Conditions of Contract accommodates all variations through the
clauses of variation and sets up the procedure on how to submit a claim related to the variation and/or the
impact of variations by the contractor. That is the reason why the multilateral development bank endorse
and support the development of FIDIC Conditions of Contract for Construction, MDB Harmonised Edition
as a fair and balanced conditions of contract..

No matter what kind of conditions of contract was used, the bad understanding of the contract, particularly
General Conditions of Contract was one of the main causal factors of disputes often occurred and became
an obstacle to the construction services development in Indonesia. This could be avoided only by a good
knowledge and deeper understanding generally on the philosophy of the construction contract and
particularly on the FIDIC Conditions of Contract.

Key Words: Main causal factors, Claims, FIDIC Conditions of Contract.

1
Presented at FIDIC-JICA International Construction Management Training, Jakarta, 26th – 29th July 2010.
2
Special Advisor to the Minister of Public Works Republic of Indonesia.
Vice Chairman, Indonesian National Board for Construction Services Development.
Lecturer on Construction Contract Administration, S2 & S1 Tarumanagara University, Jakarta
Lecturer on Construction Contract Administration, S2 Parahyangan University, Bandung

Electronic copy available at: http://ssrn.com/abstract=1898436

1. Background

Most of the final contract prices for large projects in Indonesia are higher than the original
contract prices but still under the appraisal cost prepared by the lending institution-borrower-
design consultant as seen in the table below with the example of hydro electric power plants
projects in Indonesia.

Since a hydro electric power plant project covers most of construction such as dam, tunnels,
channels, roads, buildings etc., the writer considers that it may represent the construction in
general and it could be used as the basis of further discussion.

Table. 1: Original and final contract prices of the hydro electric power plants construction in
No Project Name
1 Saguling HEPP
2 Cirata HEPP
3 Bakaru HEPP
4 Singkarak HEPP
5 Kotapanjang HEPP
6 Besai HEPP
7 Musi HEPP
8 Sipansihaporas HEPP
9 Renun HEPP
Indonesia3
Contract Price (Equivalent. IDR)
Original Final Appraisal
IDR 112,666,840,010 IDR 223,725,333,750 IDR 235,909,375,000
IDR 147,454,542,000 IDR 294,868,371,000 IDR 325,978,887,050
IDR 46,363,050,000 IDR 106,498,314,000 IDR 169,756,290,000
IDR 164,543,673,285 IDR 274,732,481,931 IDR 203,713,500,000
IDR 110,291,088,890 IDR 151,990,912,374 IDR 129,657,185,200
IDR 79,793,043,480 IDR 180,363,563.910 IDR 227,700,000,000
IDR 120,805,734,387 IDR 413,294,161,780 IDR 206,625,760,000
IDR 163,305,435,568 IDR 259,611,561,745 IDR 399,079,687,500
IDR 161,561,617,760 IDR 752,799,541,027 IDR 590,686,322,000

1.1. Main causal factors of the claims

Disputes in the construction industry arise from the unsettled claims, mainly due to the
unavailability of contemporary record and the different interpretation on contract.

The best way to avoid the disputes, particularly to reduce its impact, is firstly to understand the
main causal factors of claims and then the employer should try to find the pre contract strategy
and to improve the monitoring system of the project. Both parties i.e. the employer with the
assistance of the engineer and the contractor should have good and organized records and detailed
particulars to be kept as the supporting tool for the negotiation, and/or other Alternative Dispute
Resolution (ADR) or for the litigation. Document of claims should be presented in a clear and
less complicated way to ensure that it could be easily understood by the parties including the third
party appointed as the ADR board member (if any).

This paper will present the result of the research by Sarwono (2008)4 on the main causal factors
of the construction claims in Indonesia with reference to the hydro power projects. Since a hydro
power project consists of many field of civil engineering construction i.e. tunnels, roads,
buildings, waterways, dams etc. it could be considered as suitable and proper to be used as a
comprehensive reference for various construction projects. The result was validated by the
experts and experienced engineers involved in various civil engineering construction projects.

3
State Electricity Corporation of Indonesia (1988-2005): “Completion Reports”, Jakarta.
4
Hardjomuljadi, Sarwono (2009): “Pre Contract Strategy for Minimizing Construction Claims Impact
on Hydro Electric Power Plant Projects in Indonesia” , Dissertation, Jakarta.

Electronic copy available at: http://ssrn.com/abstract=1898436

Based on the study conducted by Sarwono (2008), it was proved that the main causal factors of
construction claims under the contracts using FIDIC Conditions of Contract are as follows:

1. Constructive change orders

2. Variation orders
3. Inadequate site investigation
4. Oral change orders by employer
5. Possession of site
6. Changes in design
7. Subsurface conditions of geology
8. Other contractors’ interference and delay
9. Inefficiency and disruption

From the diagram below, the first layer causal factors or the most frequent circumstances are
Constructive Changes Order and Inadequate Site Investigation which are affected by the second
and third layer causal factors i.e. Changes in Design, Oral Changes Order by the Employer,
Possession of Site but on the other side Variation Order is a means of claim settlement. Those
causal factors are related to contractual or legal matters and in order to minimize claim and
dispute, special attention should be given to such circumstances and an engineered conditions
contract is undoubtedly required.

90,3%
81,7%
+
CONSTRUCTIVE CHANGES IN DESIGN
CHANGES ORDER
+
88,2%
+
+
-
VARIATION ORDER

55,4%
CLAIM

INADEQUATE SITE + ORAL CHANGES ORDER + POSSESSION OF SITE

INVESTIGATION BY EMPLOYER

72,6%
64,7%

Figure 01: Relationship between claim and its causal factors in hydro electric power projects 5

5
Hardjomuljadi, Sarwono (2009): “Pre Contract Strategy for Minimizing Construction Claims Impact
on Hydro Electric Power Plant Projects in Indonesia” , Dissertation, Jakarta.

Electronic copy available at: http://ssrn.com/abstract=1898436

1.2. The analysis of the third layer causal factors

The analysis on the third layer casual factors i.e. possession of site and changes in design found
that there are some causal factors able to be controlled through the management decision but
other causal factors lie beyond the control.

1.2.1. Possession of site

Based on the research by Sarwono (1999) 6, there are three major elements related to the
possession of site i.e. the land acquisition, the availability of infrastructure and the availability of
other utilities those should be planned and provided in due time.

0000
Additional Cost & Extension
of Time

1000
Possession of Site

1101
Land Acquisition

1201 1202
Planning/Regulation of Land Cultural Approach
Use.

1301 1302
Regional Government Staff Capability
Action.

1401
BEYOND THE
CONTROL 1402
MANAGEMENT
DECISION

Figure 03: Possession of Site – Land Acquisition

6
Sarwono Hardjomuljadi (1999): “The Importance of Management Decision in the Applications of FIDIC
Conditions of Contract for Civil Engineering Works 4th edition”, Pikitring Sumut & Aceh.

4
0000
Additional Cost & Extension of Time

1000
Possession of Site

1102
Infrastructure Availability

1203 1204
Contractor’s Capability Planning of Interfacing

1303 1304 1305 1306

Financial Ability Human Resources Equipment Availability Planning Capability

1407 1408
BEYOND THE MANAGEMENT
CONTROL. DECISION

1403 1404 1405 1406

Financial Management Contract’s Price Contract’s Escalation Recruitment /
Clause Employment System

1501 1502 1503 1504

BEYOND THE Bid Evaluation. Government Decision BEYOND THE
CONTROL. CONTROL

1601 1602
MANAGEMENT BEYOND THE
DECISION CONTROL

Figure 04: Possession of Site – Infrastructure availability

5
0000
Additional cost & Extension of Time

1000
Possession of Site

1103
Other Utilities

1205 1206
Telecommunication Electric Power Supply
Availability Availability

1307
Condition in the Specification

1409
Specification’s Preparation.

1503
MANAGEMENT
DECISION
.

Figure 05: Possession of Site – Other utilities

6
1.2.2. Changes in design

0000
Additional Cost & Extension of Time

4000
Variations

4101 4102
Formal Change Constructive Change

4201 4202 4203 4204

Ommission, Ammend Change the Any kind
Increase, or Previously Quality of Necessary for
Decrease of Approved Material Completion of the
quantity. Drawing Work

Drawing
4301
MANAGEMENT
DECISION

4205 4206 4207 4208 4209

Constructive Unspecified Inaccurate Over- Improper
Acceleration Administrative Information inspection Rejection
Requirement

4302 4303 4304

BEYOND THE Data/information Knowledge and
CONTROL Collected during Experience of
Tender Preparation Supervisor

4401
Staff Capability

4501
MANAGEMENT
DECISION

Figure 06: Changes/ Variations

7
3. Conditions of Contract
3.1. Definitions

Based on Black Law Dictionary (Bryan A. Garner, 2004) 7 “Contract is an agreement between
two or more parties creating obligations that are enforceable or otherwise recognizable at law”,
while Oxford Dictionary of Law (Elizabeth A. Martin and Jonathan Law, 2006)8 mentioned
“Contract is a legally binding agreement. Agreement arises as a result of “offer and acceptance”,
but a number of other requirements must be satisfied for an agreement to be legally binding”.
Construction Contracts Dictionary (Chow Kok Fong, 2006)9 mentioned that “Contract is a legally
binding agreement formed when one party accepts an offer made by another and which fulfills
the conditions”.

Besides the above definitions, (John Adriaanse 2007)10 said that “A variety of factors makes a
construction contract different from most other types of contracts. These include the length of the
project, its complexity, its size and the fact that the price agreed and the amount of work done
may change as it proceeds”.

Contract is based on some conditions established. Garner stated that “Conditions is a future and
uncertain event on which the existence or extent of an obligation or liability depends; an
uncertain act or event that triggers or negates a duty to render a promised performance”
Henkin 2005 11 said “The Conditions of contract is intended to regulate the relationship between
the parties to the contract; it defines the parties and their responsibilities to each other as well as
their responsibilities for various aspects of the contract. In several standards conditions of
contract, the liabilities of each of the parties and the respective risk s to be taken by them are
usually implicit in the defined responsibilities, but because of the complexity it is preferable to
those liabilities to be explicitly defined”. In this case FIDIC Conditions of Contract explicitly
defined all liabilities of the parties and also supported by the so called “claim management
rules”12 in order to avoid disputes.

The General Conditions of Contract for public sector projects currently used in Indonesia vary
from Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken known as
AV 41 (translated into Indonesian by Soekarsono Malangjoedo) to FIDIC Conditions of Contract
for Works of Civil Engineering Construction published by Federation Internationale des
Ingenieurs Conseils, Geneva, Switzerland. Most of conditions of contract for public sector and
private sector construction work in Indonesia was “tailor-made” and has not been standardized.

The use of standardized conditions of contract in public sector construction contract in Indonesia
will make the parties get familiar to the contract, reduce the unnecessary effort in the procurement
process and improve the efficiency in the contract administration activity. The use of standardized
conditions of contract will be advantageous for both the employer and the contractor since the
parties need not spend too much time in examining the conditions of contract of different
projects.

7
Bryan A.Garner (2004): “Black’s Law Dictionary”, Thomson West
8
Elizabeth A Martin and Jonathan Law (2006): “Oxford Dictionary of Law”, Oxford University Press
9
Chow Kok Fong (2006):” Construction Contracts Dictionary”, Sweet & Maxwell Asia
10
John Adriaanse (2007): “Construction Contract Law”
11
Henry Henkin (2005): “ Drafting Engineering Contracts”, Elsevier Applied Science,
12
Axel-Volkmar Jaeger and Gotz-Sebastian Hok (2010):”FIDIC – A Guide for Practitioners”, Springer

8
So far, big projects in Indonesia were constructed and financed by international lending
institutions such as the World Bank, Asian Development Bank (ADB), New JICA formerly Japan
Bank for International Cooperation (JBIC). The international lending institutions usually require
the use of FIDIC Conditions of Contract for Works of Civil Engineering Construction published
by Federation Internationale des Ingenieurs Conseils, Geneva, Switzerland. JICA in particular
still adopt I their Standard Bidding Document, the FIDIC Conditions of Contract 4th edition (1987
amended 1992) which is actually have some difference in the philosophy, which ca be seen in the
comparison as follows.

As explained above, most conditions of contract in public sector being used in Indonesia was
“tailor made”, where some clauses in the FIDIC Conditions of Contract were deleted or replaced
by newly made clauses for Employer’s sake and the Contractor was in the position of “take it or
leave it”. Even though the intention was to protect the employer, this action was mostly than none
creating the disputes in the future, because the contractor would obviously try to minimize the
loss.

If the disputes cannot be solved by the parties and then come to the litigation process i.e. the
court, whatever the decision is, the employer will always become the looser. If the decision is for
the contractor’s sake, the employer has to pay the penalties and if the decision is for the
employer’s sake, there is a possibility that the completion will be delayed since the contractor has
no enough resources to conduct the construction until completion and another possibility is the
bad quality of construction result due to the financial difficulties. With such understanding, the
best effort should be given to establish a fair and balanced conditions of contract. The easiest and
fastest way is by using the acknowledged international standard conditions of contract i.e. FIDIC
General Conditions of Contract, from “Work of Civil Engineering Construction (1987) - Short
Form of Contract (1999) – Construction (1999) – EPC/Turnkey Project (1999) until MDB
Harmonised Edition (2006) and others”. To come to the National Standards, the last three
conditions of contract were translated and published in Bahasa Indonesia which in the future will
become the embryo of such National Standards.

FIDIC Conditions of Contract is an engineered conditions of contract required by the

international lending institution, unfortunately in Indonesia there is a misperception in the
employer side that the use of FIDIC Conditions of Contract facilitates the contractor in submitting
their claims which used to create disputes. In the writer’s opinion the spirit of equality between
employer and contractor should not allow such misperception. The clause allowing the contractor
to submit claim and the clause of Unforeseeable Physical Conditions and the like are clauses
provided so the contractor can recover their loss, but the latest clause some times interpreted by
the contractor as the entry gate to the claim. The clauses in FIDIC GCC give room for the
contractual changes but the parties should first understand the original scope of works or the
original extent of the contract agreed by both parties at the time of bid and was signed as a
contract agreement. If during the construction period there are no changes in the scope of work as
well as the contract itself, it meant that no time adjustment is required. It should be clearly
recognized that once the original scope of works was changed during the construction period, it
means that additional and/or extra works are placed and consequently cost and time adjustment
are required.

The writer experienced in using FIDIC GCC for Works of Civil Engineering Construction,
starting from the 2nd edition 1969 for Saguling Hydro Electric Power Plant Project, the 3rd edition
1977 for Cirata Hydro Electric Power Plant Project, the 4th edition 1987 amended 1992 for Renun
Hydro Electric Power Plant Project and the FIDIC GCC for Construction 1st edition 1999 for

9
Upper Cisokan Pumped Storage Power Plant Project. Based on the writer’s observation, many
clauses had been developed and become more fair and balanced, for example:

3.2. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: POSSESSION OF SITE

FIDIC GCC for Work of Civil Engineering Construction 2nd edition (1969)
Clause 42 (1): Possession of Site.
42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the
Contractor is to be given possession from time to time and the order in which such portions shall be made
available to him and subject to any requirement in the Contract……………………as may be required to
enable the contractor to commence and poceed with the construction of the Works in accordance with the
programme referred to in Clause 14 hereof,……………… from time to time as the Works proceed give to
the Contractor possession of such further portion of the site
If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession
in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion
of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum
shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 3rd edition (1977)
Clause 42 (1): Possession of Site
42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the
Contractor is to be given possession from time to time and the order in which such portions shall be made
available to him and subject to any requirement in the Contract……………………as may be required to
enable the contractor to commence and proceed with the construction of the Works in accordance with the
programme referred to in Clause 14 hereof………………….from time to time as the Works proceed give to
the Contractor possession of such further portion of the site.
If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession
in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion
of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum
shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 4th edition (1987 amended 1992)
Clause 42.1: Possession of Site and Access Thereto
42.1 Safe insofar as the Contract may prescribe:
(a) the extent of portions of the Site of which the Contractor is to be given possession from time to time, and
(b) the order in which such portions shall be made available to the Contractor and subject to any
requirement in the Contract as to the order in which the Works shall be executed…
give the Contractor possession of:
(c) so much of the Site
(d) such access as, in accordance with the Contract, is to be provided by the Employer as may be required
to enable the Contractor to commence and proceed with the execution of the Works in accordance with the
programme referred to in Clause 14, if any…..
The Employer will, from time to time as the Works proceed, give to the Contractor possession of such
further portions of the Site as may be required to enable the Contractor to proceed with the execution of the
Works with due dispatch…………

42.2 If the Contractor suffers delay and/or incurs costs from failure on the part of the Employer to give
possession in accordance with the terms of Sub-Clause 42.1, the Engineer shall, after due consultation with
the Employer and the Contractor, determine:
(a) any extension of time to which the Contractor is entitled under Clause 44, and
(b) the amount of such costs, which shall be added to the Contract Price..

10
FIDIC GCC for Construction 1st edition (1999)
Clause 2.1: Right of Access to the Site
2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within
the time stated in the Appendix to Tender. ……………However the Employer may withhold any such right
or possession until the Performance Security has been received.

If no such time is stated in the Appendix to Tender, the Employer shall give the Contractor right of access
to, and possession of, the Site within such times as may be required to enable the Contractor to proceed in
accordance with the programme submitted under Sub-Clause 8.3 [Programme]

If the Contractor suffers delay and/or incurs Costs as a result of failure by the Employer to give any such
right or possession within such time, the Contractor shall give notice to the Engineer and shall be entitled
subject to Sub-Clause 20.1 [Contractor’s Claim] to:
(a) an extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4
[Extension of Time for Completion], and
(b) payment of any such Cost plus reasonable profit, which shall be included in the Contract Price.

After receiving this notice, the Engineer shall proceed in accordance with Sub-Clause 3. [Determination]
to agree or determine these matters. However, if and to the extent that the Employer’s failure was caused
by any error or delay by the Contractor, including an error in, or delay in the submission of, any of the
Contractor’s Documents, the Contractor shall not be entitled to such extension of time, Cost or profit

FIDIC GCC for Construction MDB Harmonised edition (2006) 13

Clause 2.1: Right of Access to the Site
2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within
the time stated in the Contract Data. ……………However the Employer may withhold any such right or
possession until the Performance Security has been received.

If no such time is stated in the Contract Data, the Employer shall give the Contractor right of access to,
and possession of, the Site within such times as required to enable the Contractor to proceed without
disruption in accordance with the programme submitted under Sub-Clause 8.3 [Programme]

FIDIC 1st edition 1999 facilitates this factor by Clause 2.1 [Right of Access to the Site]. The spirit
of this clause is giving Right of Access to and possession of the Site within such times as may be
required to enable the contractor to proceed in accordance with the programme submitted under
Clause 8.3 [Programme]. In case that the Employer cannot fulfill his obligation, the contractor
shall be entitled to, subject to Clause 20.1 [Contractor’s Claim], an extension of time and/or
payment of any such cost incurred because of the failure to get the access and/or the possession.

3.3. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: VARIATIONS

Other main causal factor of claims is Changes in Design and/or Variations. This factor is
also accommodated by FIDIC GCC for Construction Clause 13 [Variations and
Adjustment]. Engineer has an important role in Changes in Design besides the Possession
of Site.

FIDIC GCC for Work of Civil Engineering Construction 2nd edition (1969)
Clause 51(1): Variations
51 (1) The Engineer shall make any variation of the form quality or quantity of the Works or any part
thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall in his

13
Federation Internationale Des Ingenieur Conseils (2006): “General Conditions of Contract For
Construction”, Multilateral Development Bank Harmonised Edition

11
opinion be desirable shall have power to order the Contractor to do and the Contractorshall do any of the
following:
(a) increase and decrease the quantity of any work included in the Contract
(b) omit any such work
(c) change the character or quality or kind of any such work
(d) change the levels lines position and dimensions of any part of the Works and
(e) execute additional work of any kind necessary for the completion of the Works

and no such variation shall in any way vitiate or invalidate the Contract but the value (if any) of all such
variations shall be taken into account in ascertaining the amount of the Contract Price.

(2) No such variations shall be made by the Contractor without an order in writing of the
Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of
any work where such increase and decrease is not the result of an order given under this Clause, but is the
result of the quantities exceeding or being less than those stated in the Bill of Quantities……………….

FIDIC GCC for Work of Civil Engineering Construction 3rd edition (1977)
Clause 51(1): Variations
51 (1) The Engineer shall make any variation of the form, quality or quantity of the Works or any
part thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall, in
his opinion be desirable, he shall have power to order the Contractor to do and the Contractor shall do any
of the following:
(a) increase and decrease the quantity of any work included in the Contract
(b) omit any such work
(c) change the character or quality or kind of any such work
(d) change the levels, lines, position and dimensions of any part of the Works, and
(e) execute additional work of any kind necessary for the completion of the Works

and no such variation shall in any way vitiate or invalidate the Contract, but the value, if any, of all such
variations shall be taken into account in ascertaining the amount of the Contract Price.

(2) No such variations shall be made by the Contractor without an order in writing of the
Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of
any work where such increase and decrease is not the result of an order given under this Clause, but is the
result of the quantities exceeding or being less than those stated in the Bill of Quantities……………….

FIDIC GCC for Work of Civil Engineering Construction 4th edition (1987 amende 1992)
Clause 51.1: Variations
51.1 The Engineer shall make any variation of the form, quality or quantity of the Works or any part
thereof that may, in his opinion be necessary and for that purpose, or if for any other reason it shall, in his
opinion be appropriate,, he shall have the authority to order the Contractor to do and the Contractor shall
do any of the following:
(a) increase and decrease the quantity of any work included in the Contract
(b) omit any such 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 such work
(d) change the levels, lines, position and dimensions of any part of the Works
(e) execute additional work of any kind necessary for the completion of the Works
(f) change any specified sequence or timing of construction of any part of the Works.

No such variation shall in any way vitiate or invalidate the Contract, but the effect, if any, of all such
variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to

12
vary the Works is necessitated by some default of or breach of contract by the Contractor or for which he is
responsible, any additional cost attributable to such default shall be borne by the Contractor.

51.2 The Contractor shall not make any such variation without an instruction of the Engineer. Provided
that no instruction shall be required for increase and decrease in the quantity of any work where such
increase or decrease is not the result of an instruction given under this Clause, but is the result of the
quantities exceeding or being less than those stated in the Bill of Quantities.

FIDIC GCC for Construction 1st edition (1999)

,Clause 13.1: Right to Vary
13.1 Variations may be initiated by the Engineer at any time prior to issuing the Taking-Over Certificate
for the Works, either by an instruction or by request for the Contractor to submit a proposal.

The Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice
to the Engineer stating (with supporting particulars) that the Contractor cannot readily obtain the Goods
required for the Variation. Upon receiving this notice, the Engineer shall cancel, confirm or vary the
instruction.

Each variation may include:

(a) changes to the quantities of any item of work included in the Contract (however, such changes do not
necessarily constitute a Variation).
(b) changes to the quality and other characteristics of any item of work,
(c) changes to the levels, positions and/or dimensions of any part of the Works,
(d) omission of any work unless it is to be carried out by others,
(e) any additional work, Plant, Materials or services necessary for the Permanent Works, including any
associated Tests on Compl,etion, boreholes and other testing and exploratory work, or
(f) changes to the sequence or timing of the execution of the Works.

The Contractor shall not make any alteration and/or modification of the Permanent Works, unless and until
the Engineer instructs or approves of the Work.

6. CONCLUSION

1. Comparing the appraisal cost, contract cost and final cost of most projects using FIDIC GCC
Indonesia, it was found that most of the final costs were higher than contract costs but lower than
the appraisal costs. The analyses showed that:
 the appraisal cost was high because the designer prepared a very conservative price
analysis
 the contract price was low because the contractor tried to get the project first and get the
compensation later through claims.
 the final contract price was higher than the original contract prices because the original
contract price was sometimes too low, but since the final contract price was lower than
the appraisal costs meant that the final contract price was still reasonable.

2. It is understandable that the most important thing is that there is an offer and acceptance agreed
by parties, whatever the contract is. Especially for the construction contract, good conditions of
contract should accommodate the possibility of changes which might occur but with the
minimum potential disputes occurrence and in this case FIDIC GCC fits the criteria.

3. In the FIDIC Conditions of Contract there are clauses containing employer, engineer and
contractor’s obligation to be fulfilled by each parties in completing the project in due manner and
if the parties properly execute their duties, there will be surely no disputes.

13
4. The different interpretation of the contract is not the problem faced only by the non English
speaking countries but also by the English speaking people due to the inadequate capability in
interpreting contract and/or legal terms. The success in handling construction contract using
certain standard conditions of contract depends on the experience in using the similar conditions.

5. The improvement of FIDIC GCC from time to time enables both contractor and employer to
protect their interest, providing that the parties strictly follow the contract’s requirement.

6. Since the FIDIC GCC clauses varied from time to time, we require the sustainable trainings to
improve the user’s knowledge and capability in interpreting the conditions those are very
essential in handling the construction project.

REFERENCES

1. American Institute of Architect, “ General Conditions of the Contract for Construction, A201”, Washington
D.C., 1997
2. Building and Construction Authority of Singapore, “Public Sector Standard Conditions of Contract for
Construction Works”, 5th Edition, Singapore, 2006
3. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 2nd Edition,
4. Chow, Kok Fong, ”Construction Contracts Dictionary”, Sweet & Maxwell Asia, 1 st Edition, Singapore, 2006
5. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 3rd Edition,
6. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 4th Edition, Geneva, 1987, amended 1992
7. FIDIC, “General Conditions of Contract for Construction”, 1st Edition, Geneva, 1999
8. FIDIC, “General Conditions of Contract forEPC/Turnkey Project, 1st Edition, Geneva, 1999
9. FIDIC, “General Conditions of Contract for Construction, MDB Harmonised Edition, 1 st Edition, Geneva, 2006
10. Garner, Bryan A., “Black’s Law Dictionary”, Thomson West, St. Paul , 2004
11. Hardjomuljadi, Sarwono, “Pre Contract Strategy for Minimizing Construction Claims Impact on Hydro Electric
Power Plant Projects in Indonesia” , Dissertation, Jakarta, 2009
12. Hardjomuljadi, Sarwono; Siregar, Parasman and Sarwono, Susan, “Renewable Energy: Hydro Power and
Notes on Its Development in Indonesia, ISBN: 979-99900-8-4, PT PLN (Persero), Jakarta, 2008
13. Hardjomuljadi, Sarwono, “Tunneling, From Construction Method till Construction Claim Cases”, ISBN: 978-
979-1203-08-1, Polagrade, Jakarta, 2007
14. Hardjomuljadi, Sarwono; Abdulkadir, Ariono and Takei, Masaru, “Construction Claim Strategy based on
FIDIC Conditions of Contract”, ISBN:979-97749-2-6, Polagrade, Jakarta, 2006.
15. Hardjomuljadi, Sarwono, “The Importance of Management Decision in the Application of FIDIC Conditions of
Contract for Civil Engineering Works 4th edition”, Pikitring Sumut & Aceh, 1999
16. Henkin, Henry, “Drafting Engineering Contracts”, Elsevier Applied Science, 2005
17. Jaeger, Axel V and Hok, Gotz S, “FIDIC-Guide for Practitioners”, Springer, 2010
18. Martin, Elizabeth A. and Law, Jonathan, “Dictionary of Law”, Oxford University Press, New York, 2007
19. Soekarsono Malangjoedo, “Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken”,
Badan Penerbit Pekerjaan Umum, Jakarta, 1978
20. Standards Australia, “General Conditions of Contract AS 4000-1997”, Amendment 3, Sydney, 2005
21. State Electricity Corporation of Indonesia (1988): “Completion Report of Saguling HEPP”, The
New Japan Engineering Consultant Inc.
22. State Electricity Corporation of Indonesia (1990): “Completion Report of Cirata HEPP”, The
New Japan Engineering Consultant Inc.
23. State Electricity Corporation of Indonesia (2005): “Completion Report of Renun HEPP”, Nippon
Koei Co.Ltd.

The Author
Dr. Sarwono Hardjomuljadi, graduated in Civil Engineering from University of Parahyangan, Bandung, got the Doctor degree from
Tarumanagara University, Jakarta, now the Special Advisor to the Minister of Public Works, Republic of Indonesia, Vice Chairman of
National Construction Services Development Board of Indonesia, the Director for General Affair and HRD of Geo Dipa Energi - the
joint venture company of Pertamina PLN-,. Formerly worked for Indonesia State Electricity Corporation (PLN) up to the position of
Deputy Director and then Vice President. He was involved in the construction of Saguling HEPP, Cirata HEPP and Renun HEPP as
the project manager. He is the Asean Chartered Professional Engineer (ACPE), Principal Professional Engineer in Water Resources
Development (PU-SDA) and Associate Member of Chartered Institution of Arbitrator (ACIArb). He is also the Dispute Adjudication
Board and expert witness of some construction projects. In the education field, he is the lecturer at the Post Graduate Program at
Tarumanagara University, Jakarta and Parahyangan University, Bandung.

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