BSc Thesis Compares Local vs. Int'l Construction Contracts

Addis Ababa University
Department of Construction Technology and

Management
B.Sc. Thesis on
Comparison of Local Vs. International
Conditions of Contract for
construction works
Advisor: Dr. Eng. Wubishet Jekale

Approving Signature: __________________
presented by
Ermias Mesfin Rekik Makonnen
Selamawit Berhe Tesfa Tilahun
August, 2006
Acknowledgement
Our heartfelt appreciation goes to Dr. Wubshet Jakale, who gave us invaluable
advice and guidance toward the ultimate goal of this paper.
We would also like to thank the World Bank and African Development Banks for
providing their Standard Conditions of Contracts, without which our paper
would have been incomplete.
Our thanks also go to Eng. Zerfu Tesfaye, (of ERA) for his endless
resourcefulness and Eng. Ismael Ibrahim for his boundless suggestions which
made our paper what it is now.
We should also mention all those who invested their precious time filling out our
questionnaires and giving us, in person, all the useful information related to our
specific concern.
Finally, we would like to express our deepest gratitude to our friends and
families for their admirable support throughout the whole journey of this project.
AAU, Technology South Faculty, Department of Construction Technology and Management 1

Abstract
This paper aims to identify the differences in local and international Standard
Conditions of Contract and assess their impacts. The FIDIC, fourth Edition
reprinted 1992, World Bank, 2004 adoption of the FIDIC document with
amendments, the Ministry of Works and Urban Development (MoWUD’s)
Standard Conditions and the FIDIC MDB Harmonized Construction Contracts
were the documents examined for comparison.
The desk study classifies the contents of the Standard Conditions in eight
categories. It then sets the provisions of the Standard Conditions in the context of
Ethiopian law and identifies the need for and application of provisions in the
clauses. Further down the line, the desk study concentrates on specific clauses
and identifies the differences in these clauses, their sub-clauses, paragraphs and
sentences.
The field survey, in the form of a questionnaire, identified the impacts of such
differences. The practical application of the provisions and the practice in the
absence of explicit provisions is explored in this section which finally led to the
conclusions and recommendations.
A harmonization of the Standard Conditions, from the perspective of the

MoWUD provisions, is then recommended. The harmonization was suggested as
a means of standardizing the Standard Conditions and amending particular
clauses with respect to provisions in other Standard conditions. Stakeholders’
need to read and understand the provisions of the Standard Condition is
asserted.

Table of Contents
Acknowledgement........................................................................................................... 1
Table of Contents............................................................................................................ 3
Introduction ..................................................................................................................... 5
Background .................................................................................................................. 5
Research goals.............................................................................................................. 6
Method of research ..................................................................................................... 7
Contents of the paper ................................................................................................. 8
Chapter I - Literature Review ....................................................................................... 9
Essentials of a valid contract..................................................................................... 9
I. Formation of Contract............................................................................................. 9
1. Offer and Acceptance ....................................................................................... 10
2. Consideration..................................................................................................... 11
3. Capacity to contract........................................................................................... 11
4. The object of the contract ................................................................................ 11
5. Formalities.......................................................................................................... 12
II Contract terms........................................................................................................ 13
III. Variations of contracts ....................................................................................... 13
IV. Privity of Contracts ............................................................................................ 14
V. Discharge of Contracts........................................................................................ 14
Construction Contracts ............................................................................................ 16
Fédération Internationale des Ingénieurs-Conseils (FIDIC)........................ 20
ICE Condition of Contract (sixth Edition, 1991).............................................. 21
The World Bank Condition of Procurement of Works.................................. 21
European Development Fund (EDF) Condition of Procurement ................ 21
Local Condition of Contract................................................................................ 21
Contents of Conditions of Contracts..................................................................... 22
1. Definitions and Interpretations ..................................................................... 24
2. Contract Documents ......................................................................................... 24
3. Rights, Obligations and defaults of parties to the contract ...................... 26
4. Construction Works.......................................................................................... 27
5. Measurement, Certificates and payment.................................................. 28
6. Alterations and Claims ................................................................................ 30
7. Remedial rights ............................................................................................. 31
8. Others .................................................................................................................. 34
Chapter II - Research Design and Methodology .................................................... 36
A chronological description of methodology...................................................... 36
Rationale of Research Questions ........................................................................... 39
The Research Sample ............................................................................................... 42
Method of Analysis .................................................................................................. 42
I. Engineer and Engineer's Representative .......................................................... 46
1. Engineer's Duty and Authority .................................................................. 46

2. Instructions in writing ..................................................................................... 49
3. Replacement of the Engineer.......................................................................... 51
4. Impartiality of the Engineer............................................................................ 52
5. Variations ........................................................................................................... 54
6. Power of Engineer to fix rates......................................................................... 56
II. Alterations Additions and Omissions ............................................................. 60
1. Payment in applicable currencies .................................................................. 60
2. Right to Vary...................................................................................................... 61
3. Variations ........................................................................................................... 62
4. Instructions for Variations .............................................................................. 63
5. Value Engineering ............................................................................................ 63
6. Valuation of Variations ................................................................................... 63
III. Procedures for claims......................................................................................... 64
1. Procedures for Claims ...................................................................................... 64
2. Notice of Claims................................................................................................ 65
IV. Settlement of Disputes...................................................................................... 65
1. Decisions (recommendations) before arbitration....................................... 65
2. Amicable Settlement ........................................................................................ 67
3. Arbitration.......................................................................................................... 68
V. Time related clauses ............................................................................................ 70
I. Extension of time ............................................................................................... 70
a. Not Foreseeable Physical Obstructions or Conditions.......................... 70
b. Fossils.............................................................................................................. 71
c. Engineer's Determination where Tests not Provided for...................... 71
d. Employer's risk.............................................................................................. 71
e. Default of Employer ..................................................................................... 72
II. Varying timeframes......................................................................................... 73
a. Default of the Employer .............................................................................. 73
b. Procedure for claims..................................................................................... 73
VI. Change in cost and Legislation........................................................................ 74
1. Increase or Decrease of cost ............................................................................ 74
2. Subsequent legislation .................................................................................... 76
Chapter IV - Conclusions and Recommendations ................................................. 77
Appendix I - Research Proposal ................................................................................. 80
Appendix II - Questionnaire *.................................................................................... 86
Appendix III: Percentile assessment of responses to questionnaire .................. 94

Introduction
Background
Construction projects are characterised by business relationships and
commitments that are spread over wide time horizons. Large-scale engineering
projects have distant time horizons and require significant up-front
commitments, while posing large potential downside losses. (Floricel S, Miller R.,
2001)
It is this complex nature of construction projects that has necessitated

construction contracts that define the relationship, obligations and rights of
parties as well as the legal, financial and technical aspects of the project. The
contracts then will harness the interests of the parties over a wide span of time. A
primary body of rules for the conduct of the construction process is derived from
the provisions of contracts. (Bartholomew, 2001)
Such construction Contracts are usually formulated based on the provisions of

General and Particular Conditions prepared by professional associations,
financiers, and institutions or as is the case in Ethiopia, by regulatory bodies. The
most prevalent forms of such General Conditions are those prepared by
Fédération Internationale des Ingénieurs-Conseils (FIDIC), IEC Conditions,
Ministries (for example, Ministry of Works and Urban Development), and the
like.
The Contract Conditions formulated by different parties share a common feature

in that they all tend to be founded largely on the self-interest of the association or
institution that devised them. This has, in general, led to a distrustful
relationship between different Contract Conditions manifested in squabbles on
representation and afforded rights. The atmosphere created because of this fact

has not been conducive for cooperation or harmony in proceeding to the next
levels of Contract formulation nor administration.
Their limitation is also in the fact that it is hard to expect them to address every
eventuality that may occur throughout the life of a construction project. At best,
the contract conditions serve as models from which individual project
stakeholders can devise better fitted contract documents.
Further down the line, provisions in various bid documents vary since the
standard conditions that they arise from are different. This will inevitably create
inefficiencies and uncertainties amongst the users of the documents, and
increases the possibility of disputes.
Ethiopia is among the least developed countries in the world which are
dependent on foreign aid to carry out large construction projects. Several donors
are involved in the financing of such projects in our country. This has led to
differences in regulatory and planning frameworks adopted by each donor
agency. Such framework differences are also manifested in Standard Conditions
of Contract adopted, not only between local and international Standard
Conditions but also among those adopted by particular donors. This has created
several problems like duplication of efforts, the need to adapt to different states
of mind for different conditions of contract, lack of capacity, and long and slow
decision-making processes.
Research goals
Our study recognises that the problems stated in the previous section are
significant as are the benefits of standardisation. Harmonization of the existing
documents is necessitated to avoid adversarial relationships, ambiguity and
conflict that have been observed in practice. This paper will explore such
modification in both the general and standard conditions of contract.

The goal of this paper is to improve the regulatory framework of the construction
industry with respect to the Standard Conditions of Contract. This is to be done
by harmonising the various provisions of the contract documents into a single
policy or provision and making amendments whenever called for.
The objective, concurrently, is to identify differences in the Ethiopian General

Conditions (MoWUD), FIDIC, 1992 amended by World Bank Particular
Conditions (2004), FIDIC (red book, fourth edition reprinted, 1992) and FIDIC
MDB Harmonized Construction Contracts.
The research questions are

o Which clauses of the Standard Conditions of Contract differ in cases of
local and international projects?
o What are the impacts of such differences in the construction industry?
Method of research
Acknowledging the fact that the topic of our study is related to Contract
Management Concepts, we investigated literature on this issue and brought our
findings to the paper’s context. We then studied each Standard Condition to
organize the clauses into a group of eight. (Refer to literature review, pp 18)
What followed was a comprehensive comparison of the Standard Conditions of

Contract to identify the differences and concurrences. These differences were
then organised under topics and subtopics and the most relevant differences
were differentiated.
A questionnaire was consequently prepared which comprised of questions

related to the differences identified as having more weight. A selected study
population received and responded to the questionnaire.

We then analyzed the responses and matched the practitioners’ suggestions to
come up with our recommendation on the step forward.
Contents of the paper

Chapter One is the literature review in which Contracts are defined according to
Ethiopian law and the importance of the various clauses and sub-clauses is
justified with relevant literature.
The second chapter details the adopted methodology step by step. The rationale
of the research questions is ascertained and each section of the questionnaire is
discussed in detail.
The third chapter contains the main body of the paper which discusses the
differences, summarises the responses to the questionnaire and finally forwards
recommendations.
Chapter Four is the final chapter which comprises of the conclusion whereby
solutions to the identified problem are suggested.

Chapter I - Literature Review
Essentials of a valid contract

A contract is a commitment. It is an agreement between two parties which gives
rise to obligations that are enforceable by law. The basic purpose of a written
contract is to define exactly and explicitly the rights and obligations of each
party thereof. (Clough, Rickard H., 1975) These obligations moreover, should be
distinct from those required by law.
No valid contract shall exist unless:

(a) the parties are capable of contracting and give their consent sustainable at
law;
(b) the object of the contract is sufficiently defined and is possible and lawful;
(c) the contract is made in the form prescribed by law, if any.
(Civil Code of Ethiopia, 1960, Article 1678)
It is an accepted rule of law that a person has a duty to read and understand a
contract before accepting it and his/her failure to do so will not excuse her/his
ignorance of the contents. With this in mind, let us look at the basic contents of
contracts and their major characteristics especially from the perspective of
Ethiopian law.
I. Formation of Contract
There are essential requirements with respect to the nature and circumstances of
the commitment that must be fulfilled for a contract to be valid. The following
are some of the essential features:

1. Offer and Acceptance
An offer in law is an indication of the terms upon which a party is willing to
contract an expression of willingness to do so if an acceptance is given of those
terms. (P.D.V. Marah, year unspecified)
An acceptance of an offer only becomes effective when it has been

communicated to the person having made the offer. If the offer prescribes the
form or manner in which the acceptance is to be made then the acceptance must
be made in that manner, or in a way which is at least as beneficial to the party
making the offer. (P.D.V. Marah, year unspecified).
According to the Civil Code of Ethiopia the offer or acceptance may be made orally or
in writing or by signs normally in use or by a conduct such that, in the circumstances of
the case, there is no doubt as to the party's agreement. (Article 1681 (1))
An offer may and can be withdrawn at any time unless there is a separate
contract under which it is to be kept open. However, revocation of the offer is
only effective when it has been communicated to the person to whom the offer
was made. The acceptance must be in the same terms as the offer and it must be
unequivocal. If the acceptance does not fulfill this criterion, it is considered to be
a counter-offer which is unto the offer or to accept or reject.
An offer then remains open unless it is terminated by

• a refusal or rejection by the party to which it was made;
• failure of condition subject to which the offer was made;
• failure to communicate acceptance within a reasonable length of time or
within the offer time;
• death of the offeror or the offeree.

2. Consideration
Consideration is the requirement that an act or promise of one party be given in
exchange for the act or promise of the other in order for a binding contract to
exist. (P.D.V. Marah, year unspecified) Consideration involves a benefit moving
from the offeree to the offeror in exchange for the promise.
The general rules which validate consideration are: ((A.A.Kwakye,1996)

• Consideration must be real, but need not be adequate and must move
from the promisee (i.e. parties intending to enter into contract must
provide the consideration)
• Consideration must not be vague and must not be past
• Consideration must be legal and something beyond the promisee's
existing obligations to the promisor
• Consideration must be possible (i.e. it must be capable of fulfillment at the
time the contract is made)
3. Capacity to contract
Capacity means the legal competence of parties to enter into legally binding
contract. In general, every citizen of the country has the status to enter into
contractual agreement. This excludes minors (those under the age of 18, under
the Ethiopian law), mentally ill and incompetent individuals and those who
enter into contract under the influence of alcohol or other drugs.
4. The object of the contract

The object of a contract, which is what the contract aspires to achieve, needs to
be clearly defined. A contract shall be of no effect where the obligations of the parties or
one of them cannot be ascertained with sufficient precision. (Civil Code of Ethiopia,
Article 1714, (1))

The object of a contract must also be possible. A contract shall be of no effect where
the obligations of the parties or one of them relate to a thing or fact which is impossible
and such impossibility is absolute and insuperable. (Article 1715)
A valid contract must be legally enforceable. A contract shall be of no effect w here

the obligation of the parties or of one of them are unlawful or immoral. (Articel 1716)
Contracts become illegal by law when they consist of
• agreements to commit crimes or civil wrongs
• agreements which may injure the state
• agreements which limit a person's ability to carry out their trade
• promotion of corruption
5. Formalities
The requirement of formalities depends on the nature of the contract. Some
contracts must be in writing or in a form acceptable by law. Such provision for
forms of contract is stipulated in the Civil Code of Ethiopia in Article 1719:
(1) Unless otherwise provided, no special form shall be required and a contract
shall be valid where the parties agree.
(2) Where a special form is expressly prescribed by law such form shall be
observed.
(3) The parties may stipulate that the contract shall be made in a special form.
Whenever these formalities require that the contract to be in the form of writing,
the law also has provisions toward these:
A contract which the parties agree to make in special form not required by law shall not
be deemed to be completed until it is made in the agreed form. (Article 1726)
Article 1727 pertains to contracts which should be in written form:

(1) Any contract required to be in writing shall be supported by a special document
signed by all parties bound by the contract.
(2) It shall be of no effect unless it is attested by two witnesses.

II Contract terms
The terms of contract are provisions or stipulations in a valid contract describing
some aspects of the agreement between the parties to contract.
((A.A.Kwakye,1996) The terms define the rights and obligations of the parties in
accordance with their agreement. The terms can either be express, implied or
statutory. Their definition of these terms is as below: ((A.A.Kwakye,1996)
Exclusion terms: are words expressly agreed by the parties to contract and
by which they intend to be bound. The words must be expressed orally or
recorded in handwriting, typing or printing by the parties.
Implied terms: Implied terms are contract terms which are not written
down in a contract or openly expressed at the time the contract is made,
but which the law implies.
Statutory terms: Statutory terms are terms which are imparted into
contracts by legislation. The Civil Code of Ethiopia, Procurement law and
other pertinent legislation are examples of these.
Contract terms can also be either:
- Conditions – fundamental to the contract. Failure to adhere to a condition
may result in a breach and/or damages.
- Warranties – are subsidiary to the main contract. A breach of a warranty
will only result in the injured party suing for damages.
III. Variations of contracts

Contracts are protected by Ethiopian law in that no court may vary a contract or
alter its terms on the ground of equity except in such cases are expressly provided by law.
(Article 1763) Article 1764 further states that a contract shall remain in force
notwithstanding that the conditions of its performance have changed and the
obligations assumed by a party have become more onerous than they foresaw.

IV. Privity of Contracts
Contract liability flows from the existence of a contract. Without a contractual
relationship there can be no sustainable legal cause of action for breach of
contract or to seek redress under contract liability. The existence of this
contractual relationship is called Privity of Contract. (Bartholomew, 2001)
V. Discharge of Contracts
Events that may result in the discharge of contracts can be categorized into four
groups:
1. Performance
In order to be fully discharged from a contract the parties must have
completed all the obligations set in terms of contract. Other causes of
extinction are where (Article 1807)
(1) The contract in which it is provided is invalidated or cancelled; or
(2) The parties or one of them enforce a provision made in the contract
for the termination of the contract; or
(3) The parties agree to substitute a new obligation for the original
obligation; or
(4) The debtor’s obligation is set off by an obligation owing from the
creditor; or
(5) The positions of creditor and debtor are merged in the same person;
or
(6) Performance of the contract has not been demanded within a fixed
period.
2. Agreement
Under this classification fall Mutual Agreement, Novation and Accord &
Satisfaction.

Mutual agreement: a contract may terminate where the parties so agree.
This termination, according to Article 1819, should have no retrospective
effect.
Novation: According to Article 1826, an obligation may be extinguished by
the principle of Novation when the parties agree to substitute therefore a new
obligation which differs from the original one on account of its object or nature.
By Accord and Satisfaction: The parties may accept performance that is
different from what was agreed on in the original contract.
3. Breach
Breach of contract occurs when a party fails to carryout its fundamental
contractual obligations under the contract. Breach of contract by one party
may result in forced performance, an entitlement to damages or in a right to
cancellation. Where a party does not carry out his obligations under the contract, the
other party may, according to the circumstances of the case, require the enforcement
of the contract or the cancellation of the contract or in certain cases may himself
cancel the contract. (Article 1771, (1)) He may in addition require that the damage
caused to him by nonperformance be made good. (Article 1771, (2))
A party to the contract that is invoking nonperformance of the contract,
however, should give notice to the other party aforehand and in default
require him by notice to carry out his obligations as stated in the contract.
4. Frustration
Occurs when the contract was executable at time of agreement but
subsequent events, over which the contracting parties have no control, make
it impossible to fulfill the contract obligations.
The Ethiopian Civil Code deals with the issue of frustration under Article
1792, Force Majeure.

Force majeure results from an occurrence which the debtor could normally not foresee
and which prevents him absolutely from performing his obligations.
The occurrences which constitute cases of force majeure are also stated in
Article 1793:
(a) the unforeseeable act of a third party for whom the debtor is not
responsible; or
(b) an official prohibition preventing the performance of the contract; or
(c) a natural catastrophe such as an earthquake, lightning or floods; or
(d) international or civil war; or
(e) the death or a serious accident or unexpected serious illness of the debtor.
Unless otherwise expressly agreed, the following occurrences do not account
for force majeure (Article 1794)
(a) a strike or lockout taking place in the undertaking of a party or affecting the
branch of business in which he carries out his activities; or
(b) an increase or reduction in the price of raw materials necessary for the
performance of the contract; or
(c) the enactment of new legislation whereby the obligations of the debtor become
more onerous.
Construction Contracts
Construction contracts are the written agreements signed by the contracting
parties (mainly an owner and a contractor), which bind them, defining
relationships and obligations. (O'Reilly 1996)
The design of the project contract has a major impact on the economic success of
both parties and on the behavior of the parties in their attempt to maximize their
upside or protect themselves from a downside. (C.V. Branconi and C.H. Loch,
2003)

The complex nature of major projects together with their risks require detailed
and carefully written contracts that define (as precisely as possible) the legal,
financial and technical aspects of the results an behavior desired by the
contracting parties. (Bubshait and Almohawis, 1994)
With one or two relatively limited exceptions, the law relating to construction
contracts worldwide in the common law world is free of direct statutory
intervention. (G. A. Hughes and J. N. Barber, 1985) Ethiopia, on the other hand,
applies Civil Law which has codes that set down principles of law. The laws
governing construction projects are specifically stated in the Civil Code of
Ethiopia, 1960, as Contracts for works and labor relating to work to be done in
connection with the building, repair, or installation or immovables (Articles 3019 –
3040) and Contracts for Public Works (Articles 3244 – 3296).
These construction contracts are governed by the law of Contract, while they cut
across the law of extra-contractual liability (tort) and the law of property with
respect to their legal provenance. (Ismael, 2006)
According to FIDIC 1987 and MoWUD 1994, “contract” means the Contract
Agreement, the Letter of Acceptance, the Letter of Tender, these Conditions, the
Specification, the Drawings, the Schedules, and the further documents (if any)
which are listed in the Contract Agreement or in the Letter of Acceptance.
In construction contracts, express terms take the following forms:

1. The agreement: This is the written details of the project and the agreed
sum payable for its completion.
2. The conditions of contract: These are the detailed provisions governing the
execution and administration of the project. These we deal with in the
form of FIDIC (red book)...

3. Drawings: This is a document delineating the plan shape of the project
as well as its design details.
4. Specification or bill of quantities: A document describing the quality of the
materials/workmanship as well s the quantity of works required.
In the absence of express terms, the following term will be implied in a

construction contract.
That the building contractor will execute the works in a workmanlike manner and
complete within a reasonable period of time.
Most construction contracts are supplemented by general conditions. The general

conditions, sometimes called the General Provisions, specify the manner and
procedures for implementing provisions of the construction contract within the
context of the construction industry. These conditions are intended to govern
and regulate the requirements of the formal contract or agreement. They do not
serve as a waiver of any legal rights that either party to the contract may
otherwise possess.(FISK,1994).
The purpose of the general condition is to establish the legal responsibilities,

obligation, authority and rights of all parties involved in the project. As the name
implies this conditions are general in nature and apply to any construction
project (Gould-Joyce, 2000). Nevertheless, most projects have special
requirements which will necessitate some specific changes. These specific
changes, additions and amendments are included in the particular conditions of
the contract. Thus the general conditions are linked with the conditions of
particular Applications, referred to as part II, by the corresponding numbering of
the clauses, so that part I and II together comprises the conditions governing the
right and obligations of the parties.

These general conditions can be incorporated in the project specifications of the
particular construction project. Alternatively, these may also be contained in a
separate document attached to the construction contract. Specific conditions of
contract, in this instant are set off from the general conditions.
The general conditions of construction contracts vary from one set to another.
This is largely due to the different requirements of the agency that originated
them. However, most address similar issues, although they may not do so in the
same manner.
The importance of the general conditions of contract is paramount because of the

legal consequences they entail. This is best manifested in the first page of the AIA
Document A201, General Conditions of the Contract for Construction which
states; ‘This document has important legal consequences; consultation with an
attorney is encouraged.’
The advantage of the adaptation of Standard Conditions is that with the passage
of time individuals using them become familiar with their overall content as well
as their particular strengths and weaknesses. (N.J.Smith, 1995)
The intention of Standard conditions is that a common approach by the parties to

all contracts will be achieved and likewise, a standard interpretation of the risks
and responsibilities involved. (Tesfaye Ayele, 2003)
The most frequently used standard forms of conditions of contract in

Construction works on international contracts are

Fédération Internationale des Ingénieurs-Conseils (FIDIC)
The International Federation of National Associations of Independent Consulting
Engineers (FIDIC's) standard conditions are adopted by a number of
stakeholders working on an international basis. There are four types of
consulting forms of contracts in the FIDIC family; these are the Green, Red,
Yellow, and Silver Books.
The Green Book is for smaller projects while the other three are applicable for
bigger and more complex projects. The Yellow Book is a condition used for
Design -Build type of contracts where the Contractor designs and builds the
project. The Design-Build assignment is based on a list of requirements which
exonerates the employer from many risks.
The Silver Book is for private financed projects where the contractor takes
responsibilities for an incalculable amount of risk. Build Operate Transfer type of
projects employ the provisions of this book.
The Orange Book is an amended form of the Red Book for Design-Build or Build-
Operate-Transfer (BOT) projects. The contractor, in this case, is involved in the
conception, design, construction, operation and maintenance of the project.
The Red Book, the major focus of this paper, is used for admeasurement
contracts where the employer designs the project and thus assumes the risks for
it. The Red Book form of contract, for works and Civil Engineering construction,
comprises two parts. Part I of the 'General Conditions' define the rights and
obligations of the parties and provide definitive information about the
Contractual-legal relationships between the parties to the contract. Part II,
'Conditions of Particular Application' are clauses specifically drafted to meet the

needs of the particular project. This includes the conditions unique to the locality
of the project.
ICE Condition of Contract (sixth Edition, 1991)

The Institution of Civil Engineer Standard Form of Contract is particularly
suitable for general Civil Engineering works and addresses issues of risk
allocation and claims. It includes forms of tender, agreement and bond for use in
connection with works of civil engineering construction, and is issued jointly by
the Institution of Civil Engineers, the Association of Consulting Engineers and
the Federation of Civil Engineering Contractors.
The World Bank Condition of Procurement of Works

The World Bank has adopted the FIDIC conditions of contract for its projects and
amends the provisions in this document by way of guidelines that lay down
policies and procedures to be strictly followed during procurement of works or
services financed by the International Bank for Reconstruction and Development
(IBRD) and its affiliate, the International Development Association (IDA).
European Development Fund (EDF) Condition of Procurement

The condition of works contracts financed by the European Development Fund
has general and special conditions of contract. It has provisions quiet similar to
the FIDIC and lays out the rights and obligations of the parties thereof.
Local Condition of Contract

The Ministry of Works and Urban Development (MoWUD) has adopted the
FIDIC Conditions with some adaptation to the Ethiopian context. It is the
document used in local procurement of Construction Contracts.

All the above listed standard forms of conditions have a common objective of
sharing risks equitably among the parties to the contract and formulating
guidelines as to the role of the parties.
Contents of Conditions of Contracts

Standard conditions of contract are thorough contractual codes that address all
practices and contingencies normally to be encountered in construction works.
These Conditions are recommended for general use for the purpose of
construction of civil engineering construction works where tenders are invited.
(FIDIC Conditions, 1992)
The basic scope of coverage of conditions of contract is similar in both local and
international general conditions of contract for construction works. We have
chosen to group these conditions for the purpose of our desk study as following:
1. Definitions and interpretations

2. Contract Documents
Priority of Contract Documents
Language and law
Custody of Drawings
3. Rights, Obligations and defaults of parties to the contract
General Obligations
Engineer and Engineer’s representative
Assignment to Subcontracting
4. Construction Works
Labor
Materials, Plant and Workmanship
Suspension
Commencement and Delay

Contractor’s Equipment, Temporary Works and Materials
Nominated Subcontractor
5. Measurement, Certificates and payment
Measurement
Certificates and Payment
Provisional Sum
6. Alterations and Claims
Alterations, Additions and Omissions
Procedures for Claims
Change in Cost and Legislation
7. Remedial Rights
Remedies
Default of Employer
Defects Liability Period
Insurance
Retention
Settlement of dispute
8. Others
Special Risks
Release from performance
Notice
Currency and Rate of Exchange
Change in cost and legislation
Other matters

1. Definitions and Interpretations
To ease coping with problems and to save repetitious cross referencing, a
number of definitions should be first explained. The contents page acts as a
useful guide to where the main provisions occur with these contents being
broken down in all cases in the secondary division and occasionally even further.
There is no easy way of finding every occurrence of a term in documents even
though these may be highly significant.
In general, the definitions actually given in this clause are self explanatory. When
they are given elsewhere, comment is made at the point concerned.
Construction contracts are subject to broader principles of interpretation than

most other contracts. Courts, in case of conflicts between parties to the contract,
are frequently unfamiliar with the specialized rules that have evolved in the
construction industry and often rely upon the testimony of experts in the subject
area to guide them in forming a decision.
Definitions and interpretations in contract documents help them to clearly notify
the responsibilities duties and authorities of the parties. Definitions and
interpretations may help also create clear, unambiguous and complete
documents.(Fisk,1994)
2. Contract Documents
The contract document consists of various documents, letter of acceptance, the
tender document, particular conditions of contract, general condition of contract,
specifications, drawings, bill of quantities and other documents forming part of
the contract, in ranking order of priority. The documents forming the contract are
to be taken as mutually explanatory of one another. Establishing the order of
precedence of the various documents contained will help to set a hierarchy of
importance while reviewing contracts when contradictions arise between them.

The documents which are brought together form the evidence of a contract
legally agreed by the parties and therefore signed, are as such termed contract
documents (A.A.Kwakye,1996)
Upon being engaged to provide resident inspection on a project, the resident

Consultants or Consultants representative should obtain a complete set of all
contract documents, including all contract drawings, standard drawings,
specifications, and specification addenda and copies of all reference
specifications, standards or test requirements cited (Fisk,1994).
The medium or language of communication between parties to the contract

should be acceptably stated in the general provisions and duly followed
throughout the execution of contract. Local and international laws that have a
direct and indirect effect on the contract should also be taken into note, and
exceptions should not be ignored.
The complex nature of construction dictates a form of contract that is relatively

lengthy in order to describe precisely the legal, financial and technical
provisions. Construction contracts involving public or government bodies are
regulated by statue as to content and procedure(Clough, Rickard.h, 1975) .
In general, parties to a contract in construction as in any other industry prefer

contract documents whose arrangement, form and content are familiar to them.
So standardization of contract documents has done much to eliminate areas of
disagreement among Owners, Consultants and Constructors.

3. Rights, Obligations and defaults of parties to the contract
The contractual participants to a construction project are the client (who is the
instigator) construction consultants of various specializations (who act as the
client’s professional advisors) and the constructors (who construct).
General Rights, Obligations

The above group of participants takes on and manages the sequence of distinct
but interrelated activities of the construction project from beginning to the end. A
construction project, to all intents and purposes, is the production of capital
goods and, like other capital investment, involves careful planning and decision
making. Hence, its production is the result of many months of processes that
required briefing, planning, engineering, designing, funding, budgeting and
negotiating. Conversely, unlike any other capital investment, wrong decisions
made earlier in the construction process are expensive to change and therefore a
careful definition of the client's objective and responsibilities of each participant
at the pre-contract stage is required (A.A. Kwakye,1996)
Engineer and engineer’s representative

In this section are defined clearly the duties, responsibility, and the power of the
engineer and the engineer representative. The engineer and the engineer’s
representative shall carry out duties in issuing decisions, certificates and orders
as are specified in the contract.
The effective management of a construction operation can only be achieved
through a well-coordinated team effort. The Resident Consultants or the
Consultant’s Representative are vital members of that team, without whom there
would normally be no direct involvement in the construction of the project by
the Owner (Fisk,1994)

4. Construction Works
This section defines the effective utilization of the resources engaged in the
construction process.
Labor
All relevant labor laws applicable to the contractors personnel's, including laws
related to their employment, health, safety, well fair and legal rights are included
in this part.
The construction team for a complex building project may represent a large
manufacturing and marketing concern while on the other hand a labor intensive
activity may call on little by way of plant and finance to support it. (Turner 1981)
Materials, Plant and Workmanship

To make sure all the materials, plants and workmanship are done in accordance
with the contract, tests and examinations are provided.
Construction materials control is fully one half of what construction inspection is

all about. The other half is control over workmanship. Many inspectors
understand quality construction when they see it, or proper materials when they
see them, but fail to understand what their authority and responsibility require
them to do. The implication often too firmly implanted on some inspectors’
minds is that they are on the job to assure that the project will be constructed
with only the ‘best’ quality material and the ‘highest’ quality of
workmanship.(Fisk,1994)
Commencement and Delay

For a timely completion of a project, the client should give site to the constructors
for commencement of the work according to the schedule. The time and date of
commencement should be communicated to the concerned parties using the
media of communication agreed upon in the contract. The various delays or

reasons which may lead to extension of time or loss and expense under contracts
should be identified. However, it is still necessary to demonstrate that an actual
effect of delay or loss and expense has been cause by the item identified. Events
resulting in delay may be conceptually categorized into those which are the
responsibility of the employer or the architect on his behalf or events which are
not usually the responsibility of either party, so that they are effectively neutral.
Suspension
Work may be suspended in whole or in part, and the nature of a suspension is to
cease all or part of the work without actual contract termination. The owner may
order the constructors in writing to suspend or delay, or interrupt all or part of
the work for as long as deemed necessary. However, if the work is delayed or
suspended for a longer period than specified, the constructors may claim an
adjustment in price for delay damage as well as additional time.(Fisk,1994)
Nominated Subcontractors
A nominated subcontract is a subcontractor but with whom the architect/client
has a special concern. In the first instance, the client/architect has reserved to
himself rather than delegate to the constructors final selection and approval of
such a person after the contract has been placed, either by providing for a prime
cost or by naming the sub-constructors. (Turner, 1981)
5. Measurement, Certificates and payment

The works executed should be accurately measured to grant proper
considerations. The time for issuance of all payments and certificates are also
stated.
On building construction, the constructors will normally advise the owner or

Consultants when substantial completion has been achieved so inspection is held

and a list of items called a punch list requiring completion or correction is
compiled then the Consultants issues a certificate of substantial
completion(Clough, Rickard.h, 1975).
Measurement
The amount of work performed by the constructer will be measured for the
purpose of payments and certificates. The measured quantities of all works
should be in accordance with the contract.
Certificates and Payment

It is customary that contracts of more than very limited duration require the
owner or construction tendered to make periodic payment or cost
reimbursements to the constructors during the construction period.
In general, constructors must make application for progress payment a
prescribed number of days before it is due or on completion of designated
phases of the work. In the former, each payment is based on the value of work
put into place including those performed by subcontractors during a prescribed
period of time. In the later, a fixed amount of money or designated percentage of
total contract becomes due as each prescribed construction stage is finished.
Depending on contract terms, the request may be submitted to Consultants or

directly to the owner and when its is his representative the Consultants will
check the payment request and issue a certificate of payment and send to on the
owner or lending institution (Clough, Rickard.h, 1975) .
Provisional Sum
Provisional sums are often used to cover work which cannot be described and
given in measured or other items, such as in a specification. The power to include
sums depends on the contractual provisions on this issue, as does on an
understanding of what they really are. In the case of defined sums, the
constructors may be deemed to have made due allowance in programming,

planning and pricing preliminaries, while in the case of undefined sums, he may
be deemed not have made any allowance. The force of contractual rules on
provisional sums is firstly to affect the way in which provisional sums are
expended. Secondly, they also intrude into areas of contract provision that are
outside the scope and method of measurement, by speaking of programming
and planning which cannot be read as solely affecting pricing matters. (Dennis F.
Turner and Alan Turner, 1999)
6. Alterations and Claims
Alterations: Additions and Omissions

A contract change is one of the most important aspects of contract
administration. By definition, it alters the contract work from the award under
the competitive bidding process and, therefore, requires clear explanation and
careful consideration.
A contract change is a formal, written directive or agreement which amends a

contract in order to address contingencies affecting the performance and
completion of the contract including but not limited to such matters as extra
work, increase or decrease in quantities, addition or alterations to plans, special
provisions or specifications, and adjustments or alterations specifically provided
for in the contract.
A contract change has three parts. The first part is the written approval of the
change. The second part is the written directive to the contractor to perform the
work involved in the change. The third part is the obligation of funds necessary
to pay for that work. (www.dot.state.il.us)

Procedures for Claims
Claims are differences arising out of the performance of the work that might lead to the
later filling of a formal claim by the constructor if the difference cannot be resolved in
the field.(Fisk,1994)
From a Client's or a consultant's viewpoint, 'claims' may be those parts of settlement of a

final account with a contractor that often have not led to early or to easy solution.
(Dennis & Alan Turner, 1994)
Typically, claims fall into a few general categories (Gould-Joyce,2000):
• they can be the result of disagreement about whether a specific item was covered
under the contract document or an extra cost to the constructor.
• they can arise over concealed or unknown conditions when there is disagreement
about whether the constructor should have anticipated them.
• they can also occur over delays in the jobs and disagreements about who caused
them
The contract usually prescribes the procedure for processing the claim once the
contractor has properly submitted it. In some contracts, these procedures are relatively
straight forward, resulting in reasonably prompt consideration of the claim by the
owner's engineer or construction manager. Owners usually awaits the recommendation
of the Engineer or Construction Manager before communicating their position or the
claim back to the Contractor, either accepting it, denying it, or accepting in part or
denying in part. The contractor then must either accept the owner's decisiosn or dispute
it, and invoke the dispute resolution procedure of the contract, usually within a stated
number of days after receiving the decision. (Bartholomew, 2002)
7. Remedial rights
Dispute resolution
Disputes generally arise after the failure of one or more project participants to
fulfill their contractual obligations. No construction project is free from problems
and when problems are not immediately solved as they arise, they Disputes

generally arise after the failure of one or more project participants to fulfill their
contractual obligations. No construction project is free from problems and when
problems are not immediately solved as they arise, they can become major issues
which eventually end up in court or before arbitration for resolution. Thus it
becomes extremely costly. (Turner, 1981)
Disputes may arise over the claimed effects of the issue of many variations, over
extensions of time claimed but not given, over disruption and often prolongation
of the works, over loss and/or expense claimed to have arisen as an effect of the
prolongation and/or disruption, over liquidated or unliquidated damages etc. In
the midst of 'expense based' claims, disputes may arise from different
interpretation by the parties over extension of time, deduction or not of
liquidated damages, valuation of variations, even interpretation of instruction as
variations or not...etc (Dennis & Alan Turner, 1999)
The express term of contract should provide solution to any contractual disputes
that arise between the parties by reference to the contract terms appropriate to
the circumstances. But since some difficulties may arise in the definition of the
express terms and their relation to the legalities of events or events causing the
dispute; it is likely to result in the need for a third party (court, arbitration, or
mediator) to assist in the resolution of the disputes.(Turner,1981)
It should be the policy of the Consultants or owner to consider the merits of a

potential claim at the earliest possible time. As soon as the Resident Consultants
has knowledge of the existence of a dispute that may lead to the filing of a
potential claim, the situation should be discussed with the constructors. If the
resident Consultants determines that the constructor’s preliminary arguments
are valid, such corrective measures should be taken as are within the scope of the
inspector’s authority under the contract, including the possibility of making

recommendation to the Consultants or owner to submit change orders to
alleviate the problem.
In the event that the resident Consultants cannot resolve the differences in the
field, the problem should be discussed with the Consultants or the owner. If the
difference still cannot be resolved within the terms of the contract, the
constructors should be reminded of the provisions of the contract documents
relating to the time and methods to file claims, and such reminder should be
recorded in the resident Consultant’s diary.(Fisk,1994)
Defects Liability Period

Modern building and civil structures are complex undertakings and involve the
use of a great variety of engineering methods and processes. Therefore most
projects face the possibility of defects and defective works, which generally
results in structures that cannot perform their originally intended
roles.(www.scitation.aip .org)
Defects liability period means the period in which quality of construction is

tested/verified. This period would be generally twelve month. During defects
liability period, the contractor will be liable to rectify any defects noticed in the
construction like seepage of pipes, crack in the walls etc. the client will retain a
portion of the consideration amount which will be released only after the lapse
of defects liability period. (www.indiavarta.com)
Retention
Many construction contracts provide that a certain percentage of each progress
payment will be retained by the owner. A typical 10% is retained and kept by the
owner until job completion and acceptance by the owner after final complete
payment is made. Owners look on retention as further protection against
eventualities such as the cost of remedying defective work, settlement of liens or

other payment claims from parties paid by the constructors, liquidity damage
and similar claims against the constructors (Clough, Rickard.h, 1975).
8. Others
Release from Performance
A contract is a legally binding agreement between two or more persons. The
agreement will be enforced by the courts. Release from performance occurs due
to performance (completion of obligation), agreement, breach and frustration as
stated earlier.
Special risk
In a contractual sense, a special risk (Force Majeure) means a condition beyond a
party's control. In addition to owner-caused delays, acts of God, war, riots, labor
strikes, inability to obtain critical materials when all proper procurement actions
have been taken and other similar situations are common conditions of Force
Majeure. (Bartholomew, 2001)
Since such conditions are not the contractor's fault, the contract relief for
conditions of Force Majeure normally is an extension of contract time to avoid ht
unfair assessment of liquidated damages. The delay may also be compensable.
Notice
In any successful relationship either personal or professional relies on good
communication between the parties. A construction team is no different. They
are many methods for communication, formal of informal. International
communications are
Notice to proceed is the formal communication under the construction contract.

It forms the bases of a legal contract between the owner and the contractor.
Because negotiation of the provisions of the contract usually takes a certain

amount of time, this notice allows the work to begin before the actual contract is
signed (Gould-Joyce, 2000).
Most contracts contain a provision the contractor claiming entitlement to a time

extension must file notice of claim (Bartholomew, 2002).
Currency and Rate of Exchange

The currency and rate of exchange to be used in the business transaction aspect
of the construction work need to be specified. The parties to the contract need to
be guided by the actual or expected currencies of cost as compared to
proportions of currencies in which the original Contract Price was payable.
When this is not provided for, serious distortions may occur.
Change in cost and legislation

Ups and downs in material, labour and equipment prices are likely to occur in
the project lifetime. These then have to be properly addressed to protect
stakeholders from accruing costs that may lead to bankruptcy.

Chapter II - Research Design and Methodology
This chapter will describe the research methods applied for this study. It will
dissect our every approach and justify adoption of particular methods.
As stated earlier, the main aim of this paper is to bring constructive change to the
standard conditions of contract adopted in the country by harmonising them into
a single all-rounded document that is able to address thoroughly every possible
event in the construction process. Our paper thus identified differences in the
desk study and assessed impacts via the field survey. Our approach to achieve
that has been as follows.
A chronological description of methodology

Before delving into the actual research work, we did some background research
on contract planning, procurement management and contract management. We
looked at the latest delivery Systems, procurement methods and contract types
presently shaping contractual relationships the world over.
Contract administration concepts from contract formulation and administration

to closing were our next areas of interest. Procurement preparation methods,
subsequent tendering procedures and tender evaluation criteria were then
investigated. We considered provisions in international documents such as
United Nations Commission on International Trade Law (UNCITRAL's) codes.
Local legal codes and proclamations were also considered in this part of our
study with the proclamation of Procedures of Public Procurement (2005) at the
forefront.
The next step was to look into the provisions in the Civil Code of Ethiopia, 1960
on Administrative Contracts. This helped us to interpret and place in context
both the national and international Standard Conditions from the perspective of
Ethiopian law.

Simultaneous with the literature review, we gathered documents of the
Ethiopian General Conditions (MoWUD), FIDIC (red book, fourth edition
reprinted, 1992) FIDIC MDB Harmonized Construction Contracts and the new
Ethiopian General Conditions issued by Public Procurement Agency (PPA) in
January 2006. In our preliminary review of this Standard Conditions, we noticed
that we needed to group clauses together in keeping with their close
relationships. We thus came up with the eight categories sited in our literature
review. (Refer to literature review, pp 18)
What followed was a comprehensive comparison of the Standard Conditions of

Contract to identify the differences and concurrences. We used an all rounded
approach in identifying differences in clauses, sub-clauses, paragraphs and
sentences o f the General and Particular Conditions.
We employed various parameters in identifying and reviewing the differences in

the General Conditions. Difference in placement of clauses was not treated as a
difference with much impact. We thus went through with our own categories
(incorporated in the literature review) and regrouped such articles together to
see if their contents entailed any differences.
Our comparative study did not incorporate such clauses whose apparent
difference was only of structure. Other laws which have primacy over our
standard conditions abridge the seemingly different connotations. An example is
in the Variations clause where FIDIC, 1987 elaborates that omission of works is
interpreted as excluding those to be carried out by the Employer or by another
contractor. The MoWUD conditions are lacking in exhaustive or enumerative
listings of what omission consists of. However, the Civil Code, which is on a
higher hierarchy of laws has already provided for what such omissions exclude.

We have not also covered differences that resulted from lack of clarity and where
implied terms can be deduced and inherently agreed upon by all parties of the
contract. An instance of such lack of clarity is in the Right to Vary clause where
FIDIC, 1987 summarizes its terms as additional work of any kind necessary for
the completion of works’. The MDB Harmonized Edition, on the other hand,
clarifies what is implied by this as any additional work, Plant, Materials or
services necessary for the Permanent Works, including many associated Tests on
Completion, boreholes and other testing and explanatory work etc.
Next, with our preliminary conversations and encounters with practicing

professionals and our advisor, we were able to select our area of concentration.
We chose to meticulously address a limited number of clauses (in accordance
with our initial classification) thereby simplifying our questionnaire, instead of
broadening our horizon to incorporate every clause.
The clauses we devoted more attention to were:

o Engineer and Engineer's Representative
o Alterations: Additions and Omissions
o Procedures for claims
o Settlement of Disputes
o Time related clauses
A questionnaire (to be covered in more detail in the next section) was prepared
based on our findings of the comparative study of the topics stated above.
During its distribution, however, we found out that we had to retune our targets
because of a technical glitch.
The World Bank, like other Multilateral Development Banks (MDB) uses the
FIDIC, 1992 Conditions and introduces additional amendment clauses
(mandatory, optional and recommended annotations) in the Particular
Conditions.

However, Multilateral Development Banks (including African Development
Bank and the World Bank) had in 2005 resolved to harmonize their tender
documents on an international basis while being based on FIDIC, 1999. The
harmonized document, thereafter named the FIDIC MDB Harmonized
Construction Contracts, incorporated the standard wordings which previously
were additional clauses in MDBs' Particular Conditions.
What we had initially been able to obtain from the World Bank Procurement
Department was the MDB Harmonized Edition which still remains to be put in
practice. We thus had to review our work in light of this finding and incorporate
the FIDIC, 1992 document as amended by World Bank Particular Conditions
(2004) as a major document for comparison. We continued to still include the
unpractised MDB Harmonized Edition. Our choice was made in recognition of
the benefits of the harmonisation effort made by the Multilateral Development
Banks.
Our review is now based on the Ethiopian General Conditions (MoWUD), FIDIC
(red book, fourth edition reprinted, 1992) and MDB Harmonized Construction
Contracts. The new Ethiopian General Conditions issued by Public Procurement
Agency (PPA) in January 2006 have been incorporated in our discussion.
With overwhelming feedback from the questionnaire that advised us to address

the issue of price escalation during the lifetime of projects, we eventually decided
to consider Change in Cost and Legislation as part of the clauses of significant
difference and interviews were conducted on this issue.
Rationale of Research Questions

The questionnaire was divided into four parts: Powers and obligations of the
Engineer, Variation, Procedure for Claims and settlement of disputes, and Time
related clauses. Each section will be discussed next.

Powers and Obligations of the Engineer
This part of the questionnaire addresses questions related to powers, rights and
authorities afforded to the Engineer in Construction projects with respect to the
Contractor and the Employer.
The pertinence of this section is related to our identification of the gulf between
the economic policy of the country which encourages private controlled
businesses and the pervasive role of the government in monitoring activities.
In these clauses lie major differences of the Standard Conditions which
determine the role of government bodies (such as MoWUD), the Engineer (in
relation to the Engineer's technical expertise) and the Employer (as the initiator
and financier of the project).
The first two sets of questions gear the respondents toward identifying which
parties should limit the powers of which and investigate the validation of
instructions that are not in writing. The third set of questions tests the position of
the Contractor (to contradict, make suggestions, bargain on and contest) the
assignment of a replacement Engineer and the need or not for authentication of
this rights in the Standard Conditions.
The fourth set gathers the opinion of respondents on the pragmatism of

Impartiality of Engineer and was devised to identify (if any) procedures that may
guarantee impartiality of the Engineer.
The Engineer's right to change the sequence and timing of construction is next
explored with respect to the predictability of the construction process and the
Contractor's role in receiving and executing such instructions.
The applicability of provisional rates when disagreement arises in the valuation

of variations is questioned in the fifth and final set of this section. Here, the

efficiency and promptness of provisional rates and their role in lubricating the
relationship between the Engineer and the Contractor are questioned.
Variation
The Contractor has usually been obliged to execute any variation instruction
issued by the Engineer as long as the variation order is necessary for the
Contract. However, based on the FIDIC MDB Harmonized Edition condition,
this section of the questionnaire explores what more rights can be afforded the
Contractor to justifiably not execute variation orders. This part of the
questionnaire was designed to also help identify the stigma harboured by non-
contractors against giving up more rights to the Contractor.
Procedure for Claims and Settlement of disputes

The first set of questions determines what the impact of inadequate provisions
for procedure of claims has been in the industry in Ethiopia. The reluctance of
parties to claim, even when validated and the consequences are addressed in the
questions
The next set explores what the possible application and outcome of a dispute
board would be whenever disputes arise. It is a minute survey of how many
practitioners are for the establishment of dispute boards for individual projects.
Time related clauses

We deemed this section of the questionnaire to be relevant since most
construction projects in Ethiopia are characterised by untimely completion that
result from delay within the project life. We devised the questions in such a way
as to determine what the contribution of the timeframe provisions in the
Standard Conditions are to the situation.

The Research Sample
Our research sample can be divided into three categories as:
o Private practitioners: contractors and consultants
o Financiers
o Government bodies
A sample was selected, using snowball method, from the three categories based
on relevant experience in contract administration, use of various Standard
Conditions and prestige of the organisation and/or individuals.
We divided the private sector practitioners into three depending on their

specialisation as those involved in building works, road construction projects
and water works.
From the government bodies, we distributed our questionnaires to the Road

Authorities and Ministries. Financiers such as the World Bank also received our
questionnaires.
After identifying 32 such addressees, we were able to distribute only 28

questionnaires. The remaining four could not be reached due to physical absence
or were reluctant to receive the questionnaire. We were eventually able to collect
20 responses while the rest were lost in prevarication. Some respondents excused
themselves after being overwhelmed by tender procedures.
Method of Analysis
We used a descriptive method of analysis and employed inductive reasoning.
The qualitative data was analysed using the frequency method in our discussion
and percentile representation is in the appendix.

Chapter III- Differences in the Standard Conditions and
Discussion
As stated in the chapter on methodology the comparative study of the different
conditions was made to incorporate the FIDIC MDB Harmonized Construction
Contracts, even if these have not yet been practically tested in Ethiopia. This was
in recognition of the potential of the harmonized edition which articulated in the
General Conditions, the mandatory, optional and recommended clauses that had
previously been provided to amend the FIDIC, 1992 conditions.
Our review was thus based on the Ethiopian General Conditions (MoWUD),
FIDIC, 1992 amended by World Bank Particular Conditions (2004), FIDIC (red
book, fourth edition reprinted, 1992) and MDB Harmonized Construction
Contracts. The new Ethiopian General Conditions issued by Public Procurement
Agency (PPA) in January 2006 have been incorporated in our discussion.
We employed an all rounded method of analyzing every provision in all the

above stated documents. The parameters employed in assessing the differences
are stated in pp 32 under A chronological description of methodology section.
Because of our choice to specialise on a sample of the provisions, the following
discussion is an abridged version of our original comparison better suited for our
purpose. It revolves around the following provisions:
o Engineer and Engineer's Representative
o Alterations: Additions and Omissions
o Procedures for claims
o Settlement of Disputes
o Time related clauses
o Change in cost and Legislation

Although we have compiled and carefully investigated other clauses these have
not been included in this paper. Other differences included in this section have
not been discussed because they were deemed to be hierarchically lower (in
importance) than those clauses that were incorporated in the questionnaire.
Discussing their differences, without assessing their impacts was thus rejected.
Our study recognizes that the problems that arise from the differences in the
Standard Conditions are significant. The way out suggested after much
deliberation is a harmonization of the contracts.
Harmonisation on an international level could be the best remedy but may not be
practicable because of the high cost it entails. Radical change in the standard
conditions is an arduous task and difficult to recommend since practitioners are
already accustomed to these documents. Years of application have tried and
tested undisputed applicability and importance of the Standard Condition.
However, harmonization of the existing documents is necessitated to avoid

adversarial relationships, ambiguity and conflict that have been observed in
practice. This paper will explore such modification in both the general and
standard conditions of contract from the perspective of the MoWUD Conditions
of Contract.
Our recommendation in this section and in the conclusion aim for the MoWUD
Conditions to benefit from the experiences gained in applying clauses that are
absent in them but are present in FIDIC and MDB Harmonised Conditions. This
is because Harmonisation is an opportunity to make other amendments that are
improvements on earlier clauses applied in General and Particular Conditions.
One document can share from the experience of application of its other
contemporaries. We believe that taking the best advantages of the other
provisions will not only strengthen the MoWUD documents but also increase
their acceptance in the Construction Industry.

Fusing different provisions in various contract documents into a single policy or
provision (in this case from the perspective of MoWUD) will also avoid gaps and
other misunderstandings including possible duplication of effort.
Use of the harmonised conditions is likely to reduce the number of additions and
amendments to be included in the Particular Conditions. Nevertheless, most
projects will have special requirements which will necessitate some specific
changes. The need for Particular conditions can thus not be compromised
because of harmonisation of General Conditions.
Consulting engineers, architects, contractors, construction managers and contract

specialists are among the beneficiaries of such harmonisation. The beneficiaries
thus need to be included in any such effort via a participatory approach, no
matter how much cost is to be accrued in the process. Their adept technical skills
and observations that span over years of application are needed to guarantee the
eventual success of harmonisation.
The harmony of contracts is insignificant if not backed by a procurement system

that ensures their proper application. The application of the General Conditions
should be in compliance with the criteria of transparency, economy and
efficiency necessary for an optimal use of scarce public funds. Close at heart to
this paper is the need for a structured legal framework that can serve as the
proper platform for the application of the work in harmonizing the varying
contract documents.

I. Engineer and Engineer's Representative
1. Engineer's Duty and Authority

All documents state that the Engineer shall carry out the duties specified in the
contract. In addition to these the FIDIC MDB harmonised condition states the
need to inform the contractor of any changes made by the employer on the
authority of the Engineer (sub-clause 3.1). But the major difference lies in the
need for specific approval before the Engineer can exercise his authority.
MoWUD states which authorities need to be approved by the Ministry in the

General Conditions, whereas in FIDIC the particulars that need approval of the
employer shall be stated in the particular condition.
MDB harmonized states authorities which

(a) are deemed to have been approved by the Employer whenever the
Engineer exercise it and
(b) need the specific approval of the Employer before the Engineer can
take action in the General Condition.
The World Bank(2004) in its particular conditions provides most of these MDB
Harmonised provisions as an optional clause. Explanations are given in the notes
and additional clause part for the provisions of these optional clauses as, the
FIDIC Part II example is not sufficiently explicit for the purposes of this provision.
FIDIC Engineer's Duties and Authority (Sub-Clause2.1)

MoWUD Duties and power of the Engineers (Sub- Clause 2.1)
MDB Harmonized Conditions Engineer's Duties and Authority (Sub-
Clause3.1)

Proponents of the MoWUD provisions appreciated its orientation toward
protecting government and public interest. They recommended it as best for
government financed projects to control the budget. They recognized the
ministry's monitoring role was instituted to make sure that the public funds are
not siphoned off by 'unholy alliance' of the Contractor and the Engineer.
Some recognized the ministry's limitations and especially its lack of manpower
to regulate and coordinate consultants and contractors. The same orientation
toward government/public interests has allegedly created impartiality on its
part. The government system was also criticized for its stringency and
infeasibility.
MoWUD's involvement also questions the Engineer's confidence since the

Engineer has to go through the ministry for approval on many of his authorities.
This is a time-taking process in light of the long approval process. With respect
to the timeframe stated in the standard condition, this could cause claims for
extension of time by contractors.
The MoWUD provision was in addition condemned since it decreases the

employer's involvement even if the employer is the financier. The
marginalization of the employer is likely to create a gap of information between
the parties.
FIDIC was recommended for its ability to cater to all parties of the contractor and
many types of contracts. More authority is afforded to the Engineer for the
determination and the Employer is kept notified of his decisions. This was said
to facilitate the work since prompt decisions can be made. For further restrictions
FIDIC's Particular Conditions come in handy in delimiting which authorities
need to be checked by the Employer.

The problem noted in the FIDIC provision lies in Engineers' likelihood to decide
on their own interests which may compete with that of the employer. Some
argued that giving full rights to the Engineer may lead to the abuse of rights.
The World Bank, 2004 document adds optional clauses which further clarify the
FIDIC provisions. This outlines the authorities that optionally need to be
approved by the employer/financier in a set of environments. This ensures that
those decisions with financial impact will not be made without the employer's
knowledge.
The MDB Harmonized Edition goes one step ahead by including these
provisions in the General Conditions further empowering the employer who
possesses the money to decide on major issues instead of the agent- the Engineer.
The absence of an external authority saves time and avoids unnecessary delays.
The client agreement on the project activity will also make it easier to settle
disputes.
We are of the belief that powers and authorities of the Engineer are crucial to
keeping the work in compliance with some quality standard. Except where
otherwise specifically stated and subject to any restrictions in the Special
Conditions of Contract, the Engineer will decide contractual matters between the
Employer and the Contractor in the role representing the Employer.
Technical adeptness qualifies the Engineer's to be authoritative on everyday

decisions of technical nature. But this authority has to be restricted with time and
financial impacts in mind in order to keep the project expenditure within a
budget/economy. The approval requirement may vary from project to project
depending on the size and complexity of the project. The limits and issues
needing approval need to be project specific. The capacity and experience of the
engineer should also be a requirement for the limitation of approval.

Thus, although the employer is relieved of minute details, the Employer must be
able to have the final say on decisions above a certain financial and time limits.
The General conditions, accordingly, should list which authorities need to be
passed by the Employer while the financial and time limits can be stated in the
Particular Conditions.
The new Contract Conditions issued by the Public Procurement Agency (PPA,
2006), which has eliminated MoWUD's monitoring role with no public agency
substitution. PPA, 2006 has improved the MoWUD provisions in being more
lenient toward the Engineer's authorities while providing limitations such as sub
clauses 38.2(change in the Bill of Quantities and activity schedule):
The Engineer shall not adjust rates from changes in quantities if there by
the Initial Contract Price is exceeded by more than 15 percent, except with
the prior approval of the Employer.
2. Instructions in writing
FIDIC (1987) and the MDB harmonised conditions have separate clauses for
Instructions in writing which state the number of days in which a written
instruction should be provided by the Engineer. FIDIC (1987) provides a time
frame of 7 days while the Harmonised Conditions have a timeframe of 2 days.
Similar time frames also apply for the period within which the contractor is to
confirm or reject the written instructions of the Engineer in writing.
The MoWUD Standard Condition does not have a separate clause for
Instructions in Writing although the need for written instructions to be
performed is stated in the following clauses:
o Order for Variations to be in writing (sub- clause 51.2 ) (with
timeframe)
o Boreholes and exploratory excavations (sub- clause 51.2 )

And in clause 41 (Commencement of works) it is included by stating the
contractors obligation to commence the work after the receipt of written order
from the engineer.
In many other clauses, the need for instructions is explicitly stated but the form
of instruction (be it written or otherwise) is not expressly specified.
FIDIC Instructions in Writing (Sub-Clause2.5)

MDB Harmonized Conditions Instructions of the Engineer (Sub-
Clause3.3)
MoWUD's more detailed approach on how to provide instructions in writing

was recommended by many since it gives adequate room for clarity and avoids
misunderstandings in the interpretations of the clauses. It also provides separate
timeframe for different issues depending on their weight.
FIDIC was, on the other hand, commended by those who emphasized the need
for proper recording and referencing of all instructions. The same practitioners
agreed that the timeframe provided by FIDIC is adequate in the context of the
project life.
It should be noted that basic contract terms require all instructions to be in

writing in order to be valid. This is one of the methods by which all parties to the
contract are held accountable for their actions in the long term. This is especially
true in case of delays and claims, where it is necessary to determine the
responsible party via validated written documents.
The MoWUD conditions specify the need for written instruction in only two
clauses (variations and borehole and Exploratory Excavation) how other
instructions are to be communicated remains ambiguous. Such ambiguity needs
resolution in the General Conditions which was provided for in the new PPA,
2006 document which states:

'Communications between parties that are referred to in the Conditions
shall be effective only when in writing. A notice shall be effective only
when it is delivered.'
What remains, in our opinion, is a particular specification of a timeframe in

which such written communication is to be made. The MDB Harmonized
conditions provide a 2 days timeframe, which in the Ethiopian Context is
impractical.
Thus all instructions should be in writing with a realistic timeframe, taking into
account the communication problem in our country. It is also possible if
considered to be necessary, to amend the dates in the particular conditions
3. Replacement of the Engineer

If the employer intends to replace the engineer, the employer shall notify the
contractor of the name, address and relevant experience of the intended
replacement engineer. The contractor has the right to raise objections against the
replacement engineer.
This is not expressly stated in all practiced General Conditions in our country
(MoWud and FIDIC, 1987) but is explicitly present in FIDIC MDB harmonised
condition.
MDB Harmonized Conditions Replacement of the Engineer (Sub-

Clause3.4)
We incorporated this issue in our questionnaire, even though it was only

provided in the MDB Harmonized Edition, to understand the practice in the
industry and what problems have been encountered when attempting to replace
the Engineer.

The responses showed that not many problems have been encountered in
Ethiopia because the Contractor has been underprivileged in many concerns.
Many recognised the potential of this clause in avoiding adversarial relationship
between the contractor and the replaced engineer.
Others saw a potential threat for the employer to be in a weaker position to

replace the engineer when noticing conflict of interest between the Employer and
the contractor. Those who resisted such change claimed that the existence of such
clauses and the contractor's awareness of it may cause greater problems.
According to current practice, if the engineer is incompetent the need for change
or replacement will be paramount but it is not within the contractor's mandate to
initiate the issue. The Employer can terminate the Engineer's contract after
informing MoWUD and selection procedures will follow anew after the
termination has been justified. The contractor is not consulted throughout the
process and remains marginalized in the decision making.
However, we believe that if such rights are afforded to the

Contractor, coordination between the Replaced Engineer and the Contractor will
forge a meaningful working relationship between them. Such inclusion will also
make the Contract Conditions appear more even-handed toward the Contractor.
4. Impartiality of the Engineer

FIDIC, 1987 and the MDB harmonised conditions have provisions toward the
alleged impartiality of the Engineer in his decisions, expression, determination of
value and while taking actions which may affect the rights and obligations of the
Employer and the Contractor. The MoWUD General Conditions have no explicit
provisions concerning this clause.
(FIDIC) – Engineers to act impartially (clause 2.6)

(MDB harmonised) – Determination (clause 3.5)

According to the experience of those using the MoWUD provisions, though this
clause is not explicitly stated in the contract, the engineer is considered to act
impartially. However, this has resulted in partiality of the MoWUD condition
because it tries to protect the government/ public interest they favours more
employers than contractors.
On the other hand, some of the respondents believe the absence of this provision
has no effect under the Ethiopian environment where the construction contract
law is not practiced well.
Contract documents are prepared in such a way that both the rights of the
Contractor and the Employer are balanced and equally to be respected.
However, the impartiality of the Engineer in administering the contract should
still be asserted.
All Engineers stand for impartiality while it has been seen in practice that many
favour the interest of the Employer since they act as faithful advisors of the
Employer. This frequently creates disagreement between them and Contractors,
in which case Contractors' rights become highly suppressed. The Contractor will
not request any of his legal rights from fear of loosing a potential client. Legal
claims and intentions of claims are not entertained according to the standard
conditions most of the time.
The Employer and the Contractor have resorted to other venues to keep the
Engineer's partiality in check. In the case of the employer, he can terminate the
engineer citing default in executing his obligations under the consultancy
agreement entered between the two parties.
The Contractor, on the other hand, can resort to clause 67 of the standard
conditions of contract (Settlement of Disputes) when he feels the decision of the

Engineer as contrary to the terms of the contract. He can lodge his grievances as
dispute items to be resolved by MoWUD under arbitral award.
We, like most of our respondents, agree upon the relevance of this clause. There,
however, is a persistent doubt as to how far such impartiality can realistically be
practiced. Even if its applicability had not been under question, impartiality
would still depend on various factors such as experience, ethics, individual
motives and professional integrity of the Engineer.
The standard Conditions can play a great role in delimiting impartiality and
guiding Engineers on how to stick to impartial practices while administering
contracts.
PPA of Ethiopia, 2006 has legally verified the practice of the industry in the
Disputes clause which states:
If the Contractor believes that a decision taken by the Engineer was either
outside the authority given to the Engineer by the Contract or that the
decision was wrongly taken, the decision shall be referred to the
Adjudicator within 14 days of the notification of the Engineer’s decision.
5. Variations
FIDIC, 1987 and MDB Harmonized Conditions state that the Engineer can
instruct the Contractor to change any specified sequence or timing of
construction of any part of the Works. The MoWUD Conditions do not expressly
stated provisions toward this.
FIDIC Variations (Sub-clause 51.1)

MDB harmonised Right to Vary (Sub-clause 13.1)

Some respondents argued that the sequence of the work is so obvious in building
construction that it does not need to be changed. Those in the opposite camp
pointed to the technical problems that arise when the contractor tries to organise
his work as he wishes.
The practice in the industry, in the absence of such provisions in the MoWUD
conditions, is very similar to the provisions in FIDIC, 1987. The Engineer
requests the Contractor to submit a comprehensive program showing a sequence
of work, the manpower development, the equipment and machinery layout
together with the cash flow requirement. In order to hit the Contract's target, the
Engineer reserves the right to revise the work program and change the specified
sequence and time. The Engineer can also change the sequence and time if the
employer requested the completion of a certain part earlier than previously
contracted. The Contractor is then warranted to claim for variation for both
cases.
In the absence this provision in the MoWUD Standard Condition, and a practice
that operates on its own accord (however similar to the FIDIC Conditions),
ambiguities are likely to arise. Therefore the Standard Condition should have an
expressly stated clause that authorizes the Engineer to change a specified
sequence and time of works. The Engineer shall submit his justifiable reasons for
doing so in order not to unnecessarily interfere with the rights and
responsibilities of the Contractor. . If otherwise the contractor should be allowed
to contradict. The Contractor, on the other hand should be allowed to claim for
variation of works due to change in sequence and time.
PPA of Ethiopia's, 2006 provisions related to this are:

Instructions (Sub-clause 23.1)
The Contractor shall carry out all instructions of the Engineer, which
comply with the applicable laws where the Site is located.

Program (Sub-clause 27.4)
The Engineer’s approval of the Program shall not alter the Contractor’s
obligations. The Contractor may revise the Program and submit it to the
Engineer again at any time. A revised Program shall show the effect of
Variations and Compensation Events.
6. Power of Engineer to fix rates

FIDIC, 1987 stresses on the need for the Engineer to consult and notify the
Employer of throughout the proceedings of agreement on price or rate of
variations. The Engineer is also obliged to notify the Employer in the case of
disagreement concerning the price or rate of variations. A similar accentuation
on the need to notify the Employer is not expressly present in both MoWUD and
MDB harmonised General Conditions. Moreover, no variation work is to be done
unless the Contractor notifies the Engineer or the Engineer notifies the
Contractor, within 14 days, of his intention to claim extra payment or vary a rate
or price.
The MoWUD conditions, on the other hand, state that the Contractor shall give the
varied rate to the Engineer within 30 days and the Engineer shall give his comments on
the varied rate from the Contractor and forward the document for approval to the
Ministry of Works & Urban Development (MoWUD) within 15 days.
The World Bank, 2004 recommends the addition of a third paragraph to

establish thresholds below which changes in rates or prices do not apply, by
modifying FIDIC's Sub-Clause 52.2( Power to Engineer to Fix Rates)as: no change
in the rate or price for any item contained in the Contract shall be considered
unless such item accounts for an amount more than 2 percent of the Contract
Price, and the actual quantity of work executed under the item exceeds or falls
short of the quantity set out in the Bill of Quantities by more than 25 percent.
FIDIC Power of Engineer to fix rates (Sub-clause 52.2)

MoWUD Power of Engineer to Fix Rates (Sub-clause 52.2. (c))
World Bank Mandatory Clauses Power of Engineer to fix rates (Sub-
clause 52.2)
The provisions in all the three Standard Conditions are best fitted for different types of
projects depending on their context. MoWUD is useful to control budget and

recommended for government projects to protect it from the possible alliance of
the contractor and the engineer in matters pertaining to money.
Nevertheless, the range and scope of powers vested on the ministry on issues
which are subject to its prior approval are so wide and varied; it invariably takes
up quite sometime to obtain the ministry's 'go ahead' or 'no objection'.
The ministry, which has the final mandate to fix the prices, lacks a price index
/updated prices for material equipment and labour costs. Practitioners, who
have been frustrated by the inaccurate calculation that resulted from this, have
given in to carelessness and negligence in their price submittals to the ministry.
Unpredictable price escalation yet remains to be taken into genuine account and
thus there usually is a high range of difference in the prices on the contract
documents and those apparent in the market.
Another handicap of the MoWUD provisions, according to our study population,

is that there is little room for negotiation and no independent venue to dispute
the decision of the Engineer, which has already been approved by MoWUD (the
arbiter).
Mowud condition was prepared at a time when most construction organisations

were under national control. The conditions were subsequently viewed by some
as containing obsolete provisions which do not suite the current economic policy
of the country, which encourages award of contracts to private companies.

On the other hand, since the private sector can monitor its own construction
ventures, FIDIC and the MDB Harmonised Edition are best fitted for private
financed projects. In road construction and other fast-tracked projects
consultation with employer and contractor might take some time and hence it
will be appropriate to reasonably compensate the contractor using provisional
rates.
Going through a governmental body to get prices approved has an effect of

limiting the role of the Engineer. This is contrary to our original assumption that
decisions on issues of technical nature (and cost needs a technical breakdown)
should lie with the Engineer. Allowing these decisions to shift more to the
Engineer will solve the problems occurring due to the inefficient capacity of the
ministry. MoWUD also lacks the required professional excellence to undertake
such duties and responsibilities. The role of the MoWUD should only be to
prepare guidelines. All standard disciplines of capacity building and routine
works shall be handled by individual ministries and those with acquired
experience. The Ethiopian Roads Authority (ERA) now enjoys autonomy
accordingly.
The contractor should, in all fairness, be given a chance to explain his cost
breakdown based on current and justified data. This recognizes the possibility of
Contractor's more at hand knowledge of prices and methodology of the work
which the Engineer and the Employer may not know.
MoWUD is not completely free of corrupt practices and there is no guarantee

that embezzlement might not occur. In addition, some form of controlling
mechanism becomes mandatory because of a purported lack of professional
integrity and ethical standard of the parties to the contract.

It is our recommendation that the MoWUD Conditions should be updated to
fit and address the dynamic situation of the country. This may be done by
harmonising the MoWUD Conditions with the FIDIC provisions, which
recommended a price base index that is to be revised at least every three
months. This can serve as a controlling mechanism and MoWUD's
involvement should only be to prepare guideline for appropriate prices
fixing. The Engineer can then rely upon the price base index to calculate costs
for varied works and the Contractor can easily accept it without further
arrangements.
PPA of Ethiopia's, 2006 provisions under Sub-clauses 38. 1 to 38.3Changes in the

Bill of Quantities for Ad measurement Contracts are as follows:
1.1 If the final quantity of the work done differs from the quantity in the Bill of
Quantities for the particular item by more than 25 percent, provided the
change exceeds 5 percent of the Initial Contract Price, the Engineer shall
adjust the rate to allow for the change.
1.2 The Engineer shall not adjust rates from changes in quantities if thereby the
Initial Contract Price is exceeded by more than 15 percent, except with the
prior approval of the Employer.
1.3 If requested by the Engineer, the Contractor shall provide the Engineer with
a detailed cost breakdown of any rate in the Bill of Quantities

II. Alterations Additions and Omissions
1. Payment in applicable currencies

The World Bank, 2004 Mandatory clauses and MDB Harmonized Conditions
expressly state that where the Contract provides for the payment of the Contract
Price in more than one currency, the amount or proportion payable in each of the
applicable currencies shall be specified when the rates or prices are agreed, fixed,
or determined.
World Bank, 2004 Explanatory Notes (justifying the above provision in

addition to the FIDIC Conditions)
The purpose of this additional provision ... is to make sure that, when
rates for variations are agreed, fixed, or determined in accordance with
these sub-clauses, the amounts payable in various currencies are specified
at the same time, and that in so doing, the parties (or the Consultant) will
be guided by the actual or expected currencies of cost to the Contractor
rather than being bound by the proportions of currencies in which the
original Contract Price is payable (which could lead to serious
distortions). Conversely, where varied work is varied at rates and prices
already set out in the Contract, ... the payment for that type of varied work
is to be made in the proportions of currencies in which the original
Contract Price is payable.
There are no expressly stated provisions (in relation to variation) in both FIDIC,
1987 and MoWUD General Conditions.
MDB Harmonized Conditions Payment in applicable currencies

(Sub-Clause 13.4)
World Bank Mandatory Clauses Power of Engineer to fix rates (Sub-
clause 52.2) and Variations Exceeding 15 Percent (Sub-clause 52.3)

2. Right to Vary
Exceptions to the Contractor's obligations to be bound by and execute each
variation are not expressly stated in all practiced General Conditions in our
country (MoWUD and FIDIC, 1987) but are explicitly present in FIDIC MDB
harmonised condition.
MDB harmonised Right to Vary (Sub-clause 13.1)
Many of our respondents agreed that variations are by definition necessary for
the contract and thus should be carried out by the Contractor according to
Variation clauses. All other works not necessary for contract should be done by
supplementary contract or a new tender and the Contractor's contradiction to the
varied work made by the will be handled as a claim.
However, there is also the concurrent argument that forced or non-scheduled

variation may seriously incur the contractor loss if it is without his permission.
Contractors are also forced to work for a lower prices since work orders
considered as variations are treated as per contract price whatsoever the time of
order not considering price escalation.
The usual practice for application of variation orders starts with the Contractor
sending current and updated cost breakdown to the Engineer followed by
negotiations for new prices. Sometimes the rate may be revised as per Sub-
Clause 72 (d) of MoWUD Conditions (Change in Cost and Legislation). Unless
the engineer is willing to accept the document the situation will mostly end up in
argument.
The Engineer, to resolve the stalemate, proceeds to coerce the Contractor by

withholding payments. If agreements cannot be reached at all, then the Engineer
terminates the project according to Default of the contractor provisions. One

respondent even sited examples where the employer exercised the right to have
the work done by another contractor.
As in World Bank’s practice, the contractor by FIDIC sub-clause 26.1 (compliance

with statues and regulations) is obliged to comply with statues and regulations
which empowers him to contradict Engineer's instruction against it.
The situation has been resolved to our satisfaction in the MDB Harmonized
Edition, which states under Sub-clause 13:
The contractor shall execute and be bound by each variation, unless the
contractor promptly gives notice to the Engineer stating (with supporting
particulars) that (i) the contractor cannot readily obtain the Goods
required for the variation or (ii) such variation triggers a substantial
change in the sequence or progress of the works.
PPA of Ethiopia's, 2006 has no provisions for the contradiction of the variation.
But the change in rate for the relevant items of work due to the change in time of
order is considered in this section. It is stated under Sub-clauses 40.2 as
If the cost per unit of quantity changes, or if the nature or timing of the
work in the Variation does not correspond with items in the Bill of
Quantities, the quotation by the Contractor shall be in the form of new
rates for the relevant items of work.
3. Variations
FIDIC, 1987 has additional provisions for variations which arise because of
breach or default of Contractor and any additional cost attributable to such
default shall be borne by the contractor. The clause is not expressly stated both in
MDB harmonised and MoWUD conditions.
FIDIC Variations (Sub-clause 51.1)

4. Instructions for Variations
MoWUD specifies a time frame of 7 days for the contractor to confirm in writing
to the Engineer and 14 days for Engineer to contradict. Such explicitly stated
provisions are not present in FIDIC, 1987 and MDB harmonised Conditions
under Variation.
MoWUD Order for Variations to be in writing (sub- clause 51.2)
5. Value Engineering
Value engineering is a management technique which stimulates the proper
execution of the work in the benefit of the Employer. The MDB harmonised
condition has a separate sub-clause concerned with Value Engineering and its
application thereof. There are no explicit provision with respect to Value
Engineering in both FIDIC, 1987 and MoWUD Conditions.
MDB harmonised condition Value Engineering (Sub-clause 13.2)
6. Valuation of Variations
a. FIDIC and MDB Harmonized Conditions have provisions for provisional rates
and prices for interim payments until agreement is reached on rates/prices that
are not directly available in the contract. There are no expressly stated provisions
with regard to this in MoWUD Conditions.
FIDIC Valuations of Variations (Sub-clause 52.1)

MDB Harmonized Condition Variation Procedure (Sub-clause 13.3) and
Measurement and Evaluation (Clause 12)

b. The MDB Harmonized Condition has additional provisions with regards to
Variation procedure if the Engineer requires a proposal prior to instructing a
variation. This is not expressly stated in both FIDIC and MoWUD.
MDB Harmonized Conditions Variation Procedure (Sub-clause 13.3)
III. Procedures for claims
1. Procedures for Claims
Under this clause the FIDIC, 1987 and MDB Harmonized Conditions of contract
clarify the procedures for claim in detail while the MoWUD conditions of
contract categorises Claim under the Variation clause without much detail on
how to address and resolve Claims.
FIDIC Procedure for Claims (Clause 53)

MoWUD Claims (Sub-clause 52.5)
The absence of expressly stated procedure of claims in the MoWUD Conditions

was designated problematic by literally all of our respondents. It was found
during application to cause confusion and ambiguity in interpretation coupled
with the insufficient capacity of the Construction industry with this respect.
Since the procedures for claim submission are not known and Contractors do not
know the rights they are afforded by this condition, many refrain from filing
claims. Even if they do the result is discouraging (many argue Employers are
favoured in terms of bargaining power) which finally leads to litigation and
arbitration.
MoWUD should, in our opinion, be harmonized with the FIDIC, 1987 and MDB
Harmonized Edition to encompass detailed provisions on how to submit and

handle claims. This will work out the internationally accepted provisions to suit
the Ethiopian context. MoWUD should also consider allowing entitlements to
extension of time based on justifiable claims.
2. Notice of Claims
Both FIDIC, 1987 & MoWUD stipulate that the Contractor shall claim for only
addition of payment. There are no expressly stated statements that pertain to
claims for time extension. The MDB Harmonized Conditions, on the other hand,
expressly state that the Contractor is entitled to claim for extension of time for
completion.
FIDIC Notice of Claims (Clause 53.1)

MoWUD Claims (Sub-clause 52.5)
MDB Harmonized Conditions Contractor's claims (Sub-clause 20.1)
IV. Settlement of Disputes
1. Decisions (recommendations) before arbitration

FIDIC, 1987 states that whenever disputes arise between the Employer and the
Contractor, the dispute should in the first place be referred in writing to the
Engineer with a copy to the other party. The Engineer shall then give notice of
his decision to the Employer and Contractor within 84 days. If either party is
dissatisfied with the Engineer's decision or 70 days have passed after the expiry
of the said 84 days, then the party may pursue arbitration after informing the
Engineer of his intention. If no party notifies of intent to commence arbitration
then the Engineer's decision becomes final and binding.

The World Bank, 2004 Mandatory Clauses present alternative versions of FIDIC's
Settlement of Disputes clauses (67.1 to 67.4). The first version is 'Dispute Review
Board' and the second version is called 'Disputes Review Expert'.
The Employer shall select one of the two versions to include in the final bidding
documents (and delete the version that is not selected). In selecting between
Version 1 and Version 2, the Employer should take into account the following
considerations:
(a) Version 1 provides for disputes between the parties to be referred, in the
first place, to a Disputes Review Board (“the Board”) consisting of three
members. Details are provided in this version concerning the selection and
appointment procedure of the members of the board and their relevant
qualifications. The particular conditions further clarify the rules and
procedures for the functions of the board.
The Recommendation (and not decision as was the case in FIDIC, 1987) of the
Board shall be binding on both parties unless revised. If either the Employer or
the Contractor is dissatisfied with any Recommendation of the Board, or if the
Board fails to issue its Recommendation within 56 days, then the parties may
resort to arbitration after giving notice of their intention. (Timeframes for
procedure have been provided)
Version 1 is mandatory for contracts estimated to cost more than US$50 million
and for contracts referred to in the Procurement Schedule of the Loan
Agreement.
(b) Version 2 is essentially identical to Version 1, except that it provides for

such disputes to be referred to a single Disputes Review Expert (“DRE”). The
DRE shall be a person experienced with the type of construction involved in
the Works and with the interpretation of contractual documents and shall be
selected by agreement between the Employer and the Contractor.

For contracts estimated to cost less than US$50 million, the Employer may select
either Version 1 or Version 2, depending on the Employer’s regulatory
framework and preferences. Contracts smaller than US $10 million are
recommended to employ “the Adjudicator”.
Version 1 was selected in the MDB Harmonized Conditions.
The MoWUD General Conditions state that whenever a dispute arises, it should
in the first place be referred to and settled by the Engineer. The Engineer shall
then give notice of his decision to the Employer and Contractor within 90 days. If
either party is dissatisfied with the Engineer's decision or additional 90 days
have passed after the expiry of the said 90 days, then the dispute may be referred
to and be finally settled by MoWUD or his Authorized Representative as an
arbitrator. The decisions of the Ministry shall be final and binding.
FIDIC Engineer's Decision (Clause 67.1)

MoWUD Settlement of Disputes by Arbitration (Clause 67)
MDB Harmonized Conditions Appointment of Dispute Board (Sub-
clause 20.2)
World Bank Mandatory Clauses Disputes Review Board and Disputes
Review Expert (Sub-clause 67.1)
2. Amicable Settlement
FIDIC, 1987 and the MDB Harmonized Conditions have a separate clause which
advocates amicable settlement before the start of arbitration procedure. It is also
recommended here to start the arbitration after 56 days of notification of intent to
pursue arbitration. The World Bank Mandatory Clauses have deleted this sub-
clause. MoWUD Conditions do not have such explicit advocacy of amicable
settlement.
FIDIC Amicable Settlement (Sub- clause 67.2)

MDB Harmonized Conditions Amicable Settlement (Sub- Clause 20.5)

3. Arbitration
FIDIC, 1987 specify that once arbitration is chosen, the dispute shall be settled
under the Rules of Conciliation and Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed under such Rules.
The World Bank Mandatory Clause replaces this sub-clause with its own
provisions in which it states that for contracts with foreign Contractors the
following shall apply:
o United Nations Commission on International Trade Law (UNCITRAL)
Arbitration rules,
o Rules of Conciliation and Arbitration of the International Chamber of
Commerce (ICC)
o Rules of Arbitration Institute of the Stockholm Chamber of Commerce
o Rules of the London Court of International Arbitration
Any dispute between the Employer and a domestic Contractor arising in
connection with the present Contract shall be referred to adjudication or
arbitration in accordance with the laws of the Employer’s country.
The MDB Harmonized Conditions under the Arbitration clause state that for
contracts with foreign contractors, international arbitration with proceedings
administered by the institution appointed in the contract data or in accordance
with UNCITRAL arbitration rules should be applied. The conditions further
stipulate the place and language of the arbitration. For contracts with domestic
contractors, arbitration is to be conducted in accordance with the laws of the
Employer's country.
The MoWUD conditions have no explicitly written rules to be followed in

conducting the arbitration.

FIDIC Arbitration (Clause 67.3)
MoWUD Settlement of Disputes by Arbitration (Clause 67)
MDB Harmonized Conditions Arbitration (Sub-clause 20.6)
World Bank Mandatory Clauses Arbitration Proceedings (sub-clause
67.3.1) and Rules of Procedure (Sub-clause 67.3.2)
The World Bank mandatory clauses were the source of the dispute board
suggestion to handle disputes. The board, some argued, is cost effective, and has
various stages of dispute resolution opportunities.
Since the dispute board is selected by the parties to the contract, (to be neutral
and non-governmental) some impartiality and detail investigation on the
disputed issue can be maintained.
The dispute board, nonetheless, should be established depending on the value of

the contract and complexity. It has, for example, to be replaced by a dispute
resolution expert for medium sized contracts.
Those contending for FIDIC, 1987 provisions appreciated its time saving quality
which they believe is much higher than establishing a dispute board. FIDIC,
according to them, advocates amicable settlement more strongly.
Alternatively, the MoWUD conditions are best suited for the Ethiopian peculiar
code for litigation, where other forms of arbitration (other than the ministry)
would have taken much longer. It should be noted concurrently that MoWUD
has failed in many instances to be a fair arbiter because it roots for interest of the
government. Even when not leaning toward the government, the ministry
endorsees the analysis and suggestions transmitted by the Engineer.
MoWUD is also overwhelmed by countless number of disputes. It is staffed by

an inadequate number of competent professionals who under any circumstance
would encounter difficulty in correctly interpreting the contracts against the

objective conditions of the dispute. This has led to a cumbersome and time
consuming dispute resolution process. MoWUD thus tends to pressure both
disputing parties to drop the cases.
PPA of Ethiopia's, 2006 has provided Adjudicator as a dispute board to settle

dispute before commencement of arbitration stated in clause 2(Disputes) as:
If the Contractor believes that a decision taken by the Engineer was either
outside the authority given to the Engineer by the Contract or that the
decision was wrongly taken, the decision shall be referred to the
Adjudicator within 14 days of the notification of the Engineer’s decision.
V. Time related clauses
I. Extension of time
a. Not Foreseeable Physical Obstructions or Conditions
According to FIDIC, 1987 and MDB Harmonized Conditions, the Engineer, if
convinced that the physical conditions could not have been foreseen by an
experienced Contractor determine any extension of time and amount of any costs
incurred to which the Contractor is entitled. MoWUD, on the other hand
acknowledges only imbursement for incurred costs because of unforeseeable
physical conditions.
FIDIC Not Foreseeable Physical Obstructions or Conditions (Sub-Clause

12.2)
MoWUD Sufficiency of Tender (Clause 12)
MDB Harmonized Conditions Unforeseeable Physical Conditions (Sub-
clause 4.12)

b. Fossils
According to FIDIC, 1987 and MDB Harmonized Conditions, if by reason of
discovery of fossils the Contractor suffers delay and/or incurs costs then the
Engineer shall determine both extension of time and add to the Contract price
the amount of such costs. The MoWUD condition, on the other hand, only allows
for payment for incurred costs because of fossil discovery on site.
FIDIC Fossils (Sub-Clause 27.1)

MoWUD Fossils (Clause 27)
MDB Harmonized Conditions Fossils (Sub-clause 4.24)
c. Engineer's Determination where Tests not Provided for

According to FIDIC, 1987 and MDB Harmonized Conditions, if tests are carried
out which are not so intended or provided for, or were required by the Engineer
to be carried out at a different place then the Engineer shall determine both
extension of time and add to the Contract Price the amount of costs incurred.
MoWUD states that only the cost is to be borne by the Employer without
granting an extension of time.
FIDIC Engineer's Determination where Tests not Provided for (Sub-

Clause 36.5)
MoWUD Cost of tests not provided for (Sub- Clause 36.4)
MDB Harmonized Conditions Testing (Sub-clause 7.4)
d. Employer's risk
Entitlement to time extension based on loss or damage due to Employer's risk is
not expressly stated in all practiced General Conditions in our country (MoWud
and FIDIC, 1987) but is explicitly present in MDB harmonised condition.
FIDIC Loss or Damage Due to Employer's Risks (Sub-Clause 20.3)

MoWUD Care of Works (Sub- Clause 20.1)

MDB Harmonized Conditions Consequences of Employer's risks (Sub-
clause 17.4)
e. Default of Employer
The FIDIC, 1987 and MDB Harmonized Conditions state that if the Contractor
suspends work or reduces the rate of work because of Default of Employer, then
the Engineer shall determine an extension of time and add to the Contract Price
the amount of costs incurred by Contractor because of Default of Employer. The
MoWUD provision however explicitly states only the payment of costs incurred
in the event of termination because of Default of Employer.
FIDIC Contractor's Entitlement to Suspend Work (Sub-Clause 69.4)

MoWUD Default of Employer (Clause 69)
MDB Harmonized Conditions Contractor's Entitlement to Suspend Work
(Sub-clause 16.1)
Though not mentioned in the MoWUD conditions, the other Conditions usually
entitle the contractor for extension of time for elapsed time related to Fossils and
Engineer's determination where tests were not provided for.
In practice, since the Engineer's representative witnesses how such cases for
fossils and the special risk situations affect the work schedule in progress,
approves reasonable time extension requests. The contractor also exercises the
right to claim for any time extension and financial claim for occurrence beyond
its capacity.
We recommend the entitlement of the contractor for extension of time caused by

events beyond its responsibility.
PPA of Ethiopia's, 2006 has provided in sub-clause 44.2 extension of time for
compensation events (listed in sub-clause 44.1) stated as:

If a Compensation Event would cause additional cost or would prevent
the work being completed before the Intended Completion Date, the
Contract Price shall be increased and/or the Intended Completion Date
shall be extended. The Engineer shall decide whether and by how much
the Contract Price shall be increased and whether and by how much the
Intended Completion Date shall be extended.
II. Varying timeframes

a. Default of the Employer
According to FIDIC, contractor shall give 14 days notice to the employer and
termination shall take place after 14 days. MoWUD has a 30 days to notice the
employer and termination shall take place after 30 days. MDB Harmonized
Conditions has a 21 day notice period and a termination period of 42 days.
FIDIC Default of Employer (Sub-Clause 69.1)

MoWUD Default of Employer (Sub Clause 69.1.d)
MDB Harmonized Conditions Contractor's Entitlement to Suspend Work
(Sub-clauses 16.1&16.2)
b. Procedure for claims

The contractor should send fully detailed particulars within 42 days in MDB
Harmonized Conditions whereas in FIDIC the contractor should send the
particulars within 28days. MoWUD on the other hand has no provisions for
procedures of claim
FIDIC Notice of claim (Sub-Clause 53.1)

MDB Harmonized Conditions Claims Disputes and arbitrations (Sub-
clauses 20.1)

There isn't a significant problem that has been observed since different projects
are led by different Standard Condition. But the time provisions of one standard
condition may be confused with another.
VI. Change in cost and Legislation
1. Increase or Decrease of cost

FIDIC provides a price adjustment for rise or fall in the cost of labour and/or
materials or any other input affecting the work as may be determined in
accordance with the particular condition.
World Bank 2004, has provisions for the price adjustment and a mathematical
formula for determining fluctuations. These provisions are recommended in the
particular conditions as;
In Works contracts financed in whole or in part by the Bank, it is mandatory

to include price adjustment provisions if the contracts extend beyond 18
months (or even shorter periods in countries with high inflation rates). The
method of price adjustment prescribed (i.e., the use of a formula) is for cases
where official or proxy indices for the fluctuation of the prices of
constructional inputs are available. Use of the “documentary evidence”
method of price adjustment is discouraged and should be applied only in
the rare cases where there are no official indices available and it is not
possible to determine proxy indices. Use of the “documentary evidence”
method will require different clauses, and care and diligence in the
checking of base price documents and actual invoices submitted by the
Contractor. If this document is used for a fixed-price contract, only Sub-
Clause 70.8 should be retained (and renumbered) with the omission of the
last sentence therein.

The World Bank also treats currency fluctuations as price escalation and
recommends their adjustment stating;
The amounts payable to the Contractor, in various currencies pursuant to
Sub-Clause 60.1 (monthly statements), shall be adjusted in respect of the
rise or fall in the cost of labour, Contractor’s Equipment, Plant, materials,
and other inputs to the Works, by applying to such amounts the formulae
prescribed in this clause.
The Explanatory Notes of the World Bank, 2004 document validate the need for
its recommendation with respect to price fluctuation saying:
This clause has been inserted in preference to the sample given in FIDIC
Part II to provide a more explicit statement of the formula and include the
concepts of a family of formulae to cater for different types of work,
broken down into formulae for the various currencies of payment.
This recommendation o f the World Bank is included in the MDB harmonised

conditions as a General Condition.
MoUWD, on the other hand, does not explicitly address an increase or decrease
in cost of labour and/or materials with respect to the country's market but rather
expressly deals with only increase or decrease of rates of wages and other
emoluments and expenses because of subsequent legislation.
FIDIC increase or decrease of cost (Sub-Clause70.1)

MoWUD increase or decrease of cost (sub-Clause70.1)
MDB Harmonized Conditions adjustments for changes in cost (sub
clause 13.8)

2. Subsequent legislation
Under this clause, both MoWUD and World Bank, 2004 FIDIC Mandatory
Clause, an additional paragraph is present that states additional costs are not to
be separately paid or credited if the same have already been taken into account
in indexing of any inputs to the Price Adjustment Formulae (World Bank, 2004)
or have already been taken into account in accordance with other provisional
sub-clauses (MoWUD). Such explicit statement is not present in FIDIC General
Conditions.
The MDB Harmonized Condition has, in addition to this, a provision for time
extension for any delays incurred due to these changes in the laws.
FIDIC subsequent legislation (Sub-Clause70.1)

MoWUD subsequent legislation (Sub-Clause70.7)
MDB Harmonized Conditions adjustment for changes in legislation( sub-
clause13.7)
Provisions on Change in Cost and Legislation were recurrently asserted as

important. Most domestic contractors are being discouraged because of
MoWUD's provisions which do not consider price escalation while foreign
contractors are simultaneously reaping the advantages of FIDIC Conditions. We
recommend that MoWUD adopt the FIDIC provisions and put into consideration
high inflation rates and price escalations in the country.
PPA of Ethiopia's, 2006 has provided a mathematical formula for adjusting

fluctuations in the cost of inputs in sub-clause 47.1.

Chapter IV - Conclusions and Recommendations
Our objective was to identify the difference in the selected Standard Conditions
of Contract and assess the impact of such differences. Focusing on the selected
areas we tried to analyze the differences of the Standard conditions in our desk
study and field survey culminating with the feedback from the questionnaires
we gathered. We consequently reached the following conclusions and
recommendations.
o Our first recommendation is for Engineers, Contractors, Consultants,

Construction Managers, Project Managers and all other concerned
professionals should closely examine and know the Standard Conditions.
Too often, these documents are not read and understood but skimmed]
through at times of pressing need.
o Most of our respondents had their reservations as to the capacity and

efficiency of MoWUD in playing the monitoring role its clauses afford it.
Our recommendation regarding such provisions is that the clauses should
afford owners their rights in their construction projects. The Employer's
duties and authorities should be clearly state. The Particular Conditions
can furthermore help the Employer delegate responsibilities as per project
capacity.
o All instructions given to the contract have to validated and documented in

writing either when issued or within a reasonable time after that. Some
idealistic timeframe provisions, like the MDB Harmonized Condition's
two days timeframe need to be revised. It is also possible, if considered to
be necessary, to amend the dates in the particular conditions taking into
account the communication problem in our country.

o The General Conditions should include a clause for Replacement of the
Engineer. Involving the Contractor in the decision making process (When
the Employer replaces the Engineer) will help to build a meaningful
working relationship between the Replaced Engineer and the Contractor.
o Most of our respondents conceded that impartiality is hard to exercise.

They suggested that impartiality can be made realistic by providing
Standard Conditions that explicitly delineate it and by guiding Engineers
on how to stick to impartial practices while administering contracts.
However, we are of the belief that the issue of impartiality exceeds any
explicit statements that provide for it in the Standard Conditions. What it
actually depends on is the behaviour and business relationship among the
stakeholders and parties to the contract.
o The Engineer should have justifiable reasons to change a specified

sequence and time of works although the MoWUD Conditions do not
currently have provisions toward these. In this provision, as well, what
matters more than the provision in the Standard Condition is the
application in practice.
o Base price indices need to be set in accordance to the market value of

labour, material and equipment. MoWUD can play the role of monitoring
the preparation and use of these price indices. This, however, will not in
isolation guarantee effectiveness. The role of consultants and the ministry
should be well defined by taking into account the disposition of parties to
one another.
o The MDB Harmonized Condition's provisions which state that the

Contractor shall execute and be bound by variations, unless the
Contractor promptly gives notice to the Engineer with supporting
particulars if the Contractor cannot readily obtain the Goods required for

the variation or if variations trigger a substantial change in the sequence
or progress of the works should be included.
o The procedures for claim should be expressly stated in MoWUD standard

Conditions of Contract to avoid confusion and misinterpretation.
o The dispute board is a better dispute settlement practice, due to its

impartiality. It must be recommended depending on the value of the
contract and complexity to settle dispute. And for medium sized contracts
the board can and shall be replaced by a dispute resolution expert. If both
parties are dissatisfied with the decision of the board, then they shall
attempt to settle the dispute amicably before the commencement of
arbitration.
o Whenever the MoWUD Conditions do not provide for time extension as

in the clauses stated in the previous section (pp 70) for events beyond the
Contractor's responsibility, which prevent the work being completed
before the Intended Completion Date, the Contractor should be entitled
for extension of time.
o No significant problem has occurred due to the different time provisions

for notices, responses and approvals in the different standard Conditions.
But the time provided should be sufficient for the particular event and
should be clearly stated.
o Adjustment of inflation rates and price escalations of labour, equipment

and material prices should be considered in MoWUD Standard
Conditions of Contracts.

References
Construction project administration, Fisk, Six Edition, 1994
Construction Project Administration in Practice, A. A. Kwakye, 1996
Building Contracts: a practical guide, Dennis F. Turner, Fourth Edition, 1981
Construction law, Michael F. James, Macmillan 1994
Building Contract Claims and disputes – Dennis F. Turner and Alan Turner
1999
Civil Code of Ethiopia, 1960
Construction Contracting, Business and Legal Principles- Stuart H.

Bartholomew, 2001
Enhancing the Management of Construction Contract Claims, Case Study

of the Ethiopian Road Projects, Tesfaye Ayele Eshete, 2002/2003,
Department of Infrastructure, The Royal Institute of Technology
Contracting for major projects: eight business levers for top management
Christof von Branconia,b, Christoph H. Lochc, International Journal of Project
Management, 2003
Statutory reform of aspects of construction law in Australia, PAUL BICK
Construction Management and Economics (1997)
Construction contracts: the cost of mistrust, Ramy Zaghloul*, Francis
Hartman, International Journal of Project Management, 2002
Various websites on the internet

Appendix I - Research Proposal
Topic
Comparison of Local Vs. International Conditions of Contract for construction works
Goal
To improve the regulatory framework of the Construction Industry with respect to Standard
Conditions of Contract
Context
Ethiopia is among the least developed countries in the world which are dependent on
foreign aid to carry out large construction projects. Several donors are involved in the
financing of such projects in our country which has led to differences in regulatory and
planning frameworks adopted by each donor agency. Such framework differences are also
manifest in General Conditions of Contract adopted, not only between local and
international General conditions of contract but also among those adopted by particular
donors. This has created several problems like duplication of efforts, the need to adapt to
different states of mind for different conditions of contract, lack of capacity, long and slow
decision making processes etc.
If efforts are put into harmonization of these differences, as is the recent practice worldwide,
developing countries such as our country can benefit through minimizing difficulties. This
thesis is therefore based on this contextual background and aims to undertake research on
the comparison of various standards of conditions to identify their differences and assess
their impacts.
Research problems
Problem statement
Improving the regulatory framework of the construction industry with respect to the
Standard Conditions of Contracts.
Research questions
o Which clauses of the Standard Conditions of Contracts differ in cases of local and
international projects?
o What are the impacts of such differences on the construction industry?
Concept
The topic is related to Contract Management concepts with a specific consideration of
Conditions of Contracts including:
o Definitions and interpretations
o Contract documents
o Obligations, Rights and Defaults of parties to the contract
o Construction Works
o Measurement Certificates and Payments
o Alterations and claims
o Surety and Settlement of Disputes
o Others

Method
Our research will involve
o Desk study of previous papers on the topic, the standard conditions of contract,
applicable rules and laws like the civil code, financial laws, World Bank and other
organization’s financial policies…etc.
o A close study of project reports (quarterly or monthly) on selected project cases
o Mixed (Quantitative and Qualitative) methods of study will be employed
o Research instruments: Semi structured interviews with professionals with relevant
experience and/or distribution of questionnaires to be filled out by similar
professionals
o Data sources: Consultants, Contractors, Clients, Regulatory Bodies (Financiers and
Public works)
o Data collection: via interviews and questionnaires as stated above and from archives
o Data analysis: Comparative study, analysis of application and differences
Objective
To identify differences and assess impacts with the sub-objectives of
o Comparing the local and international Standard Conditions of Contract,
o Assessing impacts in selected case studies,
o Analysis with the context of literature reviews
o Recommendations relevant to the context.
Processes
o Definition of topic
o Formulating proposal
o Conceptual review formulation
o Context development
o Research Instrument
o Sample identification
o Data collection
o Analysis
o Thesis writing

ITEM DURATION
ACTIVITY DESCRIPTION COMPLETION DATES
NO IN WEEKS
1 Topic - May 18, 2006
Proposal
May 20, 2006
Guidance
One and ½ May 25, 2006
2 Student Pres
week May 27, 2006
Approval
May 29, 2006
Submittal
Theoretical Review
May 25, 2006
Guidance Two and ½
3 June 8, 2006
Student Pres weeks
June 23, 2006
Go Ahead
Contextual Development
June 8, 2006
Guidance One and ½
4 June 30, 2006
Student Presentation week
July 5, 2006
Go Ahead
5 Presentation - July 5, 2006
Research Instrument and Sample
Identification
June21, 2006
6 Guidance One week
June23, 2006
Student Presentation
June23, 2006
Go ahead
Data Collection July 7, 2006
7 Two weeks
Analysis
July 7, 2006
Guidance
8 Two weeks July 21, 2006
Student Presentation
July 21, 2006
Go Ahead
Presentation
9 -
9 Theses Writing Two weeks August 4, 2006
10 Presentation - Set by the department

Resource requirements
Item
No Description Amount in ETB
1 Transportation costs 1000
2 Secretarial services 150
3 Copying and printing costs 400
4 Collection of documents 100
Total estimated cost * 1650
* The total estimated cost is to be covered by the joint account of the researching students.
Further attempts will be made to secure financial and other assistance from the Department
of Construction Technology and Management and other companies.

Appendix II - Questionnaire *
Dear sir or madam
We are fifth year students of the Department of Construction Technology and

Management currently working on a graduation thesis on the theme;
Comparison of Local and International Conditions of Contract for Construction
Works. The study has concentrated on the Standard Conditions of Contract of
FIDIC (red book, 1987), World Bank (2004) and Ministry of Works and Urban
Development (MoWUD, 1994).
We have based our research on MoWUD’s 1994 Edition instead of the newly
revised edition because it is the one being applied in the industry. However, we
will eventually incorporate the provisions under the new MoWUD document in
the conclusion of our thesis work
The goal of our study is to improve the regulatory framework of the construction
industry with respect to these Standard Conditions of Contract. We have
consequently conducted a desk study in which we have attempted to identify
differences in the aforesaid Standard Conditions of Contract. Accordingly, the
following conditions were identified as major differences and we have
concentrated on these in our questionnaire:
Powers and obligations of the Engineer
Variation
Procedure for Claims and settlement of disputes
Time related clauses
* Errata: please replace the citation 'World Bank documents' with ' FIDIC MDB Harmonized
Construction Contracts, 2005'.

After taking these differences into consideration, we are now at a stage where we
would like to assess their impacts. As a result, we have prepared this
questionnaire and request your cooperation as practicing professionals in the
industry, to supplement our desk study with your experiences and observations.
Your kind help in answering the questions hereafter is much appreciated.
Finally, we assure you that the information you shall provide is to be strictly
used for academic purpose only.
I. Powers and obligations of the Engineer
1. The three standard Conditions have different provisions for the need for
approval of the Engineer's authorities. FIDIC has left such clauses open when
referring them to the particular conditions while MoWUD states which
authorities need to be approved by the Ministry. The World Bank on the
other hand classifies the authorities into those that have been deemed
approved by the Employer whenever the Engineer exercises it and those that
need the specific approval of the Employer before the Engineer can take
action.
What impact have you noticed because of these differences?
Which provisions do you recommend of the three?
Why?
2. FIDIC and World Bank Standard Conditions have clauses which provide for
instructions in writing and provide time frames that apply to all conditions
(FIDIC 7 days' timeframe and World Bank 2 days). MoWUD, on the other
hand has separate provisions for instructions in writing for individual clauses
such as Variation (with specified timeframes of 7 days for confirmation and
14 days for Engineer's contradiction), Boreholes and Exploratory Excavations.

Please select the most appropriate way of presenting contractual
conditions
FIDIC and World Bank's general provision for all instructions in
writing
MoWUD's more detailed approach of instructions in writing for
individual clauses
Why?
Do you think the timeframes (days) provided for instructions in writing)
are adequate?
Yes No Don’t Know
If Yes, Why?
If No, Why?
3. The World Bank has an expressly stated clause for the Replacement of the
Engineer and the rights of the Contractor to this end. This provision is not as
expressly stated in both FIDIC and MoWUD Standard Conditions.
What problems have you encountered because this provision is not

present in both FIDIC and MoWUD?
What steps do you follow if and when replacing the Engineer while using
FIDIC and MoWUD Conditions of contract?
4. Both FIDIC and World Bank have explicit provisions for the Impartiality of
the Engineer (Determination). There is no explicit provision concerning this in
the MoWUD standard condition?

explicitly present in MoWUD?

What steps do you follow to apply this provision for the Impartiality of
the Engineer while using MoWUD Conditions of Contract?
Do you think the clause for Impartiality of the Engineer is relevant and
applicable in practice?
5. FIDIC and World Bank Standard Conditions expressly state the Engineer’s
right to change any specified sequence or timing of construction under the
Rights to Vary Clause. Such explicit provisions are not present in MoWUD.

explicitly present in MoWUD?
What has been your practice concerning change to the sequence or timing
of construction?
6. FIDIC states that a suitable rate and price for the varied works can be set after
consultation by the Engineer with the Employer and Contractor. In the event
of disagreement, the Engineer shall fix such other rate or price as in his
opinion.
The World Bank Standard Condition stresses on an agreed reasonable cost.

The Engineer shall determine a provisional rate until an appropriate rate or
price is determined.
The MoWUD Standard Condition, on the other hand, states that the
Contractor shall give the varied rate to the Engineer and the Engineer shall
give is comments on the varied rate from the Contractor and forwards the
document for approval to the Ministry of Works and Urban Development.
Which of the three Conditions of Contract is appropriate in the Ethiopian

context?

Why?
What are the impacts of using the MoWUD Conditions of Contract?
How do you view the application of the FIDIC and MoWUD provisions in
the context of Ethiopian law that has granted such authority to MoWUD?
Do you believe that the MoWUD provision is necessary?
Yes No Don’t Know
If Yes, Why?
If No, Why?
II. Variation
1. The World Bank is the only one among the three Standard Conditions which
has explicit provision which details the Contractor’s right to contradict
variations (Sub-Clause 13.1). Such detailed provisions are not present in
FIDIC and MoWUD Conditions.

present in MoWUD Conditions of Contract?
What steps do you follow to apply this provision while using MoWUD
Conditions of Contract?
III. Procedure for Claims and settlement of disputes
1. The MoWUD standard condition has a simplified and shortened clause for
procedure of claims. FIDIC and World Bank have expressly stated clauses
which detail the procedure to be followed in claims.

During procedure for claims, what problems have you faced because of
the absence of expressly detailed procedures in the MoWUD conditions of
contract?
Which Condition of Contract do you recommend in the Ethiopian

context?
2. When disputes arise between the Employer and the Contractor, FIDIC and
MoWUD stress the involvement of the Engineer to settle the dispute before
commencing arbitration. Under the MoWUD Standard Conditions, disputes
shall be referred to the Ministry of Works and Urban Development as an
arbitrator or elects other arbitrators.
In the World Bank Standard Conditions, if the Engineer does not respond
within the timeframe, either Party may consider that the claim is rejected by
the Engineer and any of the parties may refer it to the dispute board. The
dispute board comprising of three people should be appointed by the parties.
If this doesn’t bring about agreement, both parties shall attempt to settle the
dispute amicably before the commencement of arbitration.
Which of the provisions due you think is better equipped to settle

disputes and handle claims in the Ethiopian context?
Why?
Do you think provisions for a dispute board should be incorporated in

MoWUD?
Yes No Don’t Know
If Yes, Why?
If No, Why?

In your experience, what has been the capacity/efficiency of the Ministry
of Works and Urban Development in settling disputes?
IV. Time related clauses

1. Concerning entitlement of Contractor for extension of time, both FIDIC
and World Bank give extensions for elapsed time related to Fossils and
Engineer’s determination where tests were not provided for. MoWUD
does not have explicit entitlements in both instances. In a similar case,
the World Bank Standard Condition is the only one that grants
entitlement to time extension based on loss or damage due to
Employer’s risk.
Have you entertained extension of time due to this factors?
If yes, how?
2. Different timeframe provisions were observed throughout the three

Standard Conditions. We have taken a sample of these, which we have
considered to be more relevant.
Default of the employer

According to FIDIC, contractor shall give 14 days notice to the employer
and termination shall take place after 14 days. MoWUD has a 30 days
timeframe. The World Bank Standard Condition has a 21 day notice
period and a termination period of 42 days
Procedure for claims

The contractor should send fully detailed particulars within 42 days in
World Bank standard conditions whereas in FIDIC the contractor should
send the particulars within 28days.

What problems have you encountered because of the differences in
timeframe in the above mentioned or any other time related provisions?
Are there any differences in the Conditions of Contract which you believe are of
paramount impact but have not been incorporated in this questionnaire? Please
kindly state those below along with their impact if possible.

Appendix III: Percentile assessment of responses to questionnaire
Attached herewith are the percentile assessments of the Reponses to the

questionnaire of the field survey.
I. Powers and obligations of the Engineer

Question 1
o Impact of approval of Engineer's authorities
Delay and cost …………….46%
Time ………………………..27%
No impact …………………27%
o Recommended Standard condition of contract for this provision

FIDIC……………………………………… 27%
MoWUD…………………………………......7%
FIDIC MDB Harmonized Conditions ……53%
Question 2
o the most appropriate way of presenting contractual conditions for
instructions in writing
FIDIC……………………………………… 33%
MoWUD…………………………………....67%
o Are the timeframes provided adequate?
Yes……………………………………… 80%
No…………………………………......... 20%
Question 3
Provision for Replacement of Engineer to be included in future
No problem has been encountered…………………74%
because of absence of such provision

Accrued costs because of improper…………………80%
administration of contract
I don't know ……………………………………………12%
Negligence of the Engineer…………………………… 7%
This right should remain between …………………... 60%

the Employer and the Engineer
Engineer's technical know-how………………………. 6.67%

must be checked first
Engineer must inform the………..……………………. 6.67%

Employer to remove the Contractor
I don't know…………………………………………… 26.67%
Question 4
Impartiality of the Engineer
Engineer is in favour of Employer.……………………. 73.34%
No problem has been encountered……………………. 13.33%

because of partiality
No problem has been encountered……………………. 13.33%

because of partiality
I don't know…………………………………………….. 13.33%
Recommendations for steps to be

Followed were made by ……………………………………….. 40%
Is the clause for impartiality applicable?

Yes……………………………………… 13.3%
No…………………………………......... 60%
I don't know………………………......... 26.67%

Question 5
Engineer’s right to change any specified sequence or timing of construction
o Has it caused any problem?
No…………………………………......... 60%
Cost and time……………………......... 26.67%
Time and Delay……………………......... 60%
I don't know ..……………………......... 26.67%
o What is the current practice?
It is upto the contractor……………......... 60%
The Engineer comments on it ………….26.67%
(revises it)
I don't know ..…………………….............. 20%

Question 6
Rate and price for the varied works
o Recommended Standard condition of contract for this provision
FIDIC……………………………………… 13.3%
MoWUD…………………………………......40%
FIDIC MDB Harmonized Conditions ……26.67%
All ……………………………………………. 20%
o Impact of MoWUD Conditions

Risk of unpredictable price escalation…………………. 40%
Long process……………………………………………. 40%
I don' t know……………………………………………… 20%
o Do you believe that the MoWUD provision is necessary?

Yes……………………………………… 55.33%
No…………………………………......... 40%
I don't know………………………......... 6.67%

I. Variation
o Problems encountered while applying MoWUD Conditions
No problem…………………………… 40%
Breach……………………………......... 6.67%
Cost escalation for contractor…......... 26.67%
I don't know………………………......... 26.67%
o Steps followed to apply this provision while using MoWUD Conditions
The Engineer is obliged ………………..40%
to comply with contractors
None……………………………............ 6.67%
I don't know………………..…......... …26.67%
III. Procedure for Claims and Settlement of dispute

Question 1
o problem
Contractors refrain from ………………..33.33%
filing claims
resort to litigation & arbitration................ 26.67%
I don't know………………..…......... ………20%
No problem………………..…......... ……….20%
o Recommended Standard condition of Contract

FIDIC……………………………………… 46.67%
MoWUD…………………………………......20%
FIDIC MDB Harmonized Conditions ……6.67%
All ……………………………………………. 13.33%
I don't know………………………….……. 13.33%
Question 2
o Recommended Standard condition of Contract
FIDIC……………………………………… 26.67%
MoWUD…………………………………......33.33%
FIDIC MDB Harmonized Conditions ……40%

o Do you think provisions for a dispute board should be incorporated in
MoWUD?
Yes……………………………………… 46.67%
No…………………………………......... 33.33%
I don't know………………………......... 20%
o Capacity of MoWUD in Dispute Resolution
Poor……………….. ………………..46.67%
No comment……………................. 13.33%
I don't know………………..….......... 40%
IV. Time related clauses

o Time extension entertained
Yes……………………………………… 26.67%
No…………………………………......... 33.33%
I don't know………………………......... 40%
o problems encountered because of different provisions

No…………………………………......... 66.67%
I don't know………………………......... 33.37%

BSc Thesis Compares Local vs. Int'l Construction Contracts

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BSc Thesis Compares Local vs. Int'l Construction Contracts

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Addis Ababa University

Department of Construction Technology and

Advisor: Dr. Eng. Wubishet Jekale

AAU, Technology South Faculty, Department of Construction Technology and Management 1

A harmonization of the Standard Conditions, from the perspective of the

AAU, Technology South Faculty, Department of Construction Technology and Management 2

AAU, Technology South Faculty, Department of Construction Technology and Management 3

AAU, Technology South Faculty, Department of Construction Technology and Management 4

It is this complex nature of construction projects that has necessitated

Such construction Contracts are usually formulated based on the provisions of

The Contract Conditions formulated by different parties share a common feature

AAU, Technology South Faculty, Department of Construction Technology and Management 5

AAU, Technology South Faculty, Department of Construction Technology and Management 6

The objective, concurrently, is to identify differences in the Ethiopian General

The research questions are

What followed was a comprehensive comparison of the Standard Conditions of

A questionnaire was consequently prepared which comprised of questions

AAU, Technology South Faculty, Department of Construction Technology and Management 7

Contents of the paper

AAU, Technology South Faculty, Department of Construction Technology and Management 8

Essentials of a valid contract

No valid contract shall exist unless:

AAU, Technology South Faculty, Department of Construction Technology and Management 9

An acceptance of an offer only becomes effective when it has been

An offer then remains open unless it is terminated by

AAU, Technology South Faculty, Department of Construction Technology and Management 10

The general rules which validate consideration are: ((A.A.Kwakye,1996)

4. The object of the contract

AAU, Technology South Faculty, Department of Construction Technology and Management 11

A valid contract must be legally enforceable. A contract shall be of no effect w here

Article 1727 pertains to contracts which should be in written form:

AAU, Technology South Faculty, Department of Construction Technology and Management 12

III. Variations of contracts

AAU, Technology South Faculty, Department of Construction Technology and Management 13

AAU, Technology South Faculty, Department of Construction Technology and Management 14

AAU, Technology South Faculty, Department of Construction Technology and Management 15

AAU, Technology South Faculty, Department of Construction Technology and Management 16

In construction contracts, express terms take the following forms:

AAU, Technology South Faculty, Department of Construction Technology and Management 17

In the absence of express terms, the following term will be implied in a

Most construction contracts are supplemented by general conditions. The general

The purpose of the general condition is to establish the legal responsibilities,

AAU, Technology South Faculty, Department of Construction Technology and Management 18

The importance of the general conditions of contract is paramount because of the

The intention of Standard conditions is that a common approach by the parties to

The most frequently used standard forms of conditions of contract in

AAU, Technology South Faculty, Department of Construction Technology and Management 19

AAU, Technology South Faculty, Department of Construction Technology and Management 20

ICE Condition of Contract (sixth Edition, 1991)

The World Bank Condition of Procurement of Works

European Development Fund (EDF) Condition of Procurement

Local Condition of Contract

AAU, Technology South Faculty, Department of Construction Technology and Management 21

Contents of Conditions of Contracts

1. Definitions and interpretations

AAU, Technology South Faculty, Department of Construction Technology and Management 22

AAU, Technology South Faculty, Department of Construction Technology and Management 23

Construction contracts are subject to broader principles of interpretation than

AAU, Technology South Faculty, Department of Construction Technology and Management 24

Upon being engaged to provide resident inspection on a project, the resident

The medium or language of communication between parties to the contract

The complex nature of construction dictates a form of contract that is relatively

In general, parties to a contract in construction as in any other industry prefer