Ref: DEL/NKB/ICB-01/SO/DB/xxxx

Date: December 07, 2016

Chairman Dispute Board
Construction of New Khanki Barrage & Auxiliary Works Project
House No. 186, Street No. 03,
Sector E-4, Phase-7,
Hayatabad, Peshawar, Pakistan
Email: sardarmirafridi@gmail.com
Phone: 0334-8607908

Attention: Mr. Sardar Mir Afridi

Dear Sir,

PUNJAB IRRIGATED AGRICULTURE INVESTMENT PROGRAM, PROJECT-2

CONSTRUCTION OF NEW KHANKI BARRAGE AND AUXILIARY WORKS
Contract No: NKB/ICB-01
REQUEST №: 2 TO OBTAIN DISPUTE BOARD’S DECISION REGARDING THE
CONTRACTOR’S ENTITLEMENT
FOR EXTRA COST ON IMPORT OF GGBF SLAG DUE TO COUNTRY-WIDE SHORTAGE OF
POZZOLANIC MATERIAL (GGBF SLAG)
“REPLY TO THE ENGINEER’S STATEMENT”

Reference :
1) Email Message from Chairman DB Dated: November 28, 2016
2) Email Message from Chairman DB Dated: November 23, 2016
3) 5065044/SMEC/0.39/4160-2016 Dated: November 21, 2016
4) 932-16/HPMO/PMO Dated: November 16, 2016
5) SMA/NKB/DB/53 Dated: October 25, 2016
6) DEL/NKB/ICB-01/SO/DB/4421 Dated: October 21, 2016

Further to your e-mail of November 28, 2016 & November 23, 2016 advising us to submit the
Contractor’s reply to the Dispute Board with copies to the Employer and the Engineer, we submit the
seriatim response to the points raised by the Engineer in his statement vide letter at Ref-02), as
under:

a. The position taken by the Engineer: The Contractor’s dispute is based on the inefficiency of
Pakistan Steel Mill in maintaining supply of raw material, whereas approval of source of GGBF Slag
Suppliers did not show any constraint or relevancy of supply with the Pakistan Steel Mill (PSM). PSM is not
referred into Contract or any documents as a game player.

The Contractor’s reply: Pakistan Steel Mills (PSM) has the pivotal role as far as provision of raw
material to the manufacturers of GGBF Slag Units in the country is concerned. Significantly, it is the sole
source of supply of Slag (raw material) to produce GGBF Slag in bulk quantity for last four decades thus
the relevance is beyond any question being indubitable rather indefeasible. As a prudent Contractor, we
did obtain assurances of GGBF Slag production units for the continuous supply of GGBF Slag in accordance
with the Contractor’s Baseline Programme.

b. The position taken by the Engineer: The Contractor has invoked Sub-Clause19 of GC for the
entitlement of his cost claim, whereas the Engineer considers that purported shortage of GGBF Slag by one
of his Suppliers in the country do not fulfill the conditions of Clause19 and these circumstances do not fall
under Force Majeure.
 The Contractor’s reply: The Engineer's attention is drawn towards Sub-Clause 19.1-Force
Majeure which ‘inter alia’ states that ‘Force Majeure’ means an exceptional event or
circumstance:

(a) which is beyond a Party's control,

(b) which such Party could not reasonably have provided against before entering into the
Contract,
(c) which, having arisen, such Party could not reasonably have avoided or overcome, and
(d) which is not substantially attributable to the other Party.

The above mentioned excerpt is evident that shortage of GGBF Slag in the Country do fulfill
the conditions of said Clause.

Furthermore the term “Force Majeure” as defined globally is:

 "Force Majeure" describes those uncontrollable events that are not the fault of any party and
that make it difficult or impossible to carry out normal business.

 "Force Majeure" exempts the contracting parties from fulfilling their contractual obligations for
causes that could not be anticipated and/or are beyond their control. These causes usually
include act of God, act of man, act of parliament, and other impersonal events or occurrences.

 "Force majeure”: Certain events, beyond the control of the parties, may inhibit the parties from
fulfilling their duties and obligations under the project agreements. To avoid the resultant breach
of contract, parties may prefer to excuse contractual obligations to the extent that they have
been so inhibited.

 The term “Force Majeure” relates to the law is frequently used in construction contracts to
protect the parties in the event that a segment of the contract cannot be performed due to
causes that are outside the control of the parties, It is an event that no human foresight could
anticipate or which, if anticipated, is too strong to be controlled

c. The position taken by the Engineer: The Contractor has stated under item-5 of History contained
in Contractor’s submission that the stocks of the approved sources partially helped in minimizing the
affects in the beginning yet reached a point where production units refused to cater for any further
requirements of the Contractor. In support of his statement the Contractor has attached a letter of M/s
Thatta Cement wherein the supplier has warned the Contractor and has stated that “our future supplies
are subject to supplies of Slag from PSM which appears unlikely in the immediate future.
It does not appear anywhere in the documents, whether the other approved source (M/s Nukhshi
Pakistan) has also shown his inability to supply the slag.

The Contractor’s reply: Letter from M/S Thatta Cement was attached as an indicator of the
predicament the productions units of GGBF Slag were in; however, letter from 2 nd approved source i.e.
M/S Nukshi is also attached hereto vide Annex - 1.

d. The position taken by the Engineer: The Contractor has stated under item-8 of History stated by
Contractor in his submission that he had started the purchasing of GGBF Slag from the two approved
sources (i-e, M/s Nukshi Pakistan Slag Cement Industries & M/s Thatta Cement) but has not specified the
dates of start of procurement from these approved sources. This may be needed to identify the impact on
procurement of Slag due to delay in issuance of IFC drawings.
 The Contractor’s reply: Dates of start of procurement from these approved sources are as follow;
 The Contractor received first Delivery of GGBF from M/S Nukkshi on December 12, 2013.
 The Contractor received first Delivery of GGBF from M/S Thatta on February 03, 2014.
 The Contractor received first Delivery of GGBF from M/S Mehtab on June 20, 2014.

e. The position taken by the Engineer: The Contractor has not provided any detail of procurement of
GGBF Slag to establish shortage of the material. He submitted an interim claim amounting to Rs
20,586,021 for two purchase Orders only placed on May 30, 2014 & August 5, 2014and has not mentioned
anywhere; how much quantity he has procured from abroad and when this event was ceased.

The Contractor’s reply: The question under focus is the “Contractor’s Entitlement”; however, these
figurative details pertain to evaluation as such shall be provided at the time of pricing following the
accepted entitlement.

f. The position taken by the Engineer: The Contractor has raised a point at para-7 of analysis of
Dispute given by the Contractor in his submission that he was left with no option but either to carry out
the work with slow pace due to slower supply of the slag or go for to import slag to avoid any stoppage in
the continuity of Concrete Works. The Engineer considers that the Contractor has so many other options.
At the first instance, he may have procured the aggregates conforming to specified Standards. He may use
other additives and options as has been proposed by the Consulting Material Specialist.

The Contractor’s reply: The Contractor virtually was left with no other option as mentioned above.
While nitpicking the situation, the Engineer perhaps is either oblivious of the technical perspective for the
use of GGBF Slag or purposely for his convenience has ignored the fact it is not only the deleterious
‘Aggregate’ calling for use of GGBF Slag but also it is the “Heat of Hydration” menace in the Concrete,
which is an exothermic reaction that results in release of substantial heat in mass Concrete leading to
cracking essentially requires pozzolans to be used.
Pertinently the Contractor also ensured use of non-deleterious Aggregate from Margala Source but
incorporation of GGBF Slag even then was also advised by the Engineer certainly with a view to combat
heat of hydration in the Concrete.
(Report of the Specialist over results of petrography of the Aggregate Samples jointly taken by the
Engineer & the Contractor dated: May 28, 2014 & November 12, 2014 are attached hereof at Annex-2 for
ease of reference.)

g. The position taken by the Engineer: The Contractor while concluding the outcome at page 24 of
analysis of Dispute given by the Contractor in his submission that the Engineer was not in a position to
furnish IFC drawings due to non-approval of his Draft Review Report by the Employer and due to non-
issuance of IFC drawings, the Contractor was precluded to place the procurement order for GGBF Slag. The
Engineer considers that the Contractor’s own facilities particularly material warehouse were under
construction and he himself was not in a position to place orders at that stage of the Contract.

The Contractor’s reply: The Engineer instead of prioritizing the merits has taken a strange position,
which 'prime facie is block-like approach to state that though it is on record that the Engineer kept the
Drawings IFC on-hold waiting for approval of his Draft Design Review Report by the Employer yet have
accused that the Contractor was also not poised to have a leap on commencement for the Concreting. It is
merely a hypothesis whereas the fact on ground is that the Contractor had completed his warehouse in
December 2013 and the batching Plants had already been installed in October 2013, as the PCC blocks
were being cast at that time. Undeniable fact is that further delay occurred due to non-availability of
Drawings IFC.

h. The position taken by the Engineer: The Engineer believes that delay in issuance of IFC drawings
did not hold the Contractor to procure the aggregates of required specifications without deleterious
malign.
 The Contractor’s reply: As above vide answer to point ‘g’.

i. The position taken by the Engineer: There was no acceptable condition/binding of the approved
Slag Suppliers that their supply would be dependent with the full functioning of Pakistan Steel Mill. In fact
he was the suppliers and would have taken raw material from wherever around the World.

The Contractor’s reply: The Engineer’s gem of advice as above is highly regarded by the Contractor
but for the GGBF Slag producing units, this is no more than a canard thus for them is puerile suggestion
commercially.

The position taken by the Engineer: As stated in the Background of the Dispute, it was one of the
options among others additives suggested by the Consulting Material Specialist to make the concrete in
conformity with the Specifications as laid down under Sub-Clauses 4.3.1 to 4.9 of TS. GGBF Slag was not an
essential ingredient of the Concrete and could have been avoided altogether by bringing aggregates
conforming to specified Standards in the first instance.

The Contractor’s reply: Concisely answered as above vide our answer at “f”.

The Contractor’s reply to the Engineer’s Analysis and Contractual Explanation:

 The position taken by the Engineer: As stated in the Background of the Dispute, it was
one of the options among others additives suggested by the Consulting Material Specialist to
make the concrete in conformity with the Specifications as laid down under Sub-Clauses 4.3.1 to
4.9 of TS. GGBF Slag was not an essential ingredient of the Concrete and could have been avoided
altogether by bringing aggregates conforming to specified Standards in the first instance.

The Contractor’s reply: The Contractor is in disagreement with the Engineer’s stance that
GGBF Slag was not an essential ingredient of the Concrete. The Contractor has experience of
having carried out massive volumes of concrete and it is revealed that GGBF Slag is not only used
to reduce Alkali Silica Reactivity but improves the durability of structures when mixed with OPC
in concrete, besides it reduces heat of hydration and minimize the thermal cracks. The GGBF
Concrete system is environmental friendly and the concrete so produced also demonstrates the
attributes of high performance concrete.

 The position taken by the Engineer : ….the Engineer explicitly clarified that no additional
cost or EOT would be allowed to the Contractor as supply of materials for the Works (whether
locally manufactured or imported) was his sole obligation under the Contract. Furthermore, M/s
Thatta did clearly mention in his Company Profile (attached with the Contractor’s request for
approval of sources), that they were capable of meeting national and international demand
amicably. The Suppliers have never ever shown that their supply would be subject to the
availability of raw material from PSM or functioning of PSM.

The Contractor’s reply: As an experienced Contractor, we are well aware of our obligations
under the Contract besides have thorough perception of all the dynamics of marketing; however,
the Engineer should also be cognizant of the extremities in the fragile economy of the country
that is taking abrupt down slides and the plight of state owned Pakistan Steel Mill (PSM) landing
in shambles since recent past. The Contractor, to the extent which was practicable (taking
account of cost and time), obtained all necessary information concerning matters relating to
availability of GGBF Slag before Base Data while submitting the Bid. The Contractor faced
shortage in supply / availability of Slag in local market in the beginning of year 2014 (almost two
years after the Base Date) that gave rise to a situation in which the Contractor has been suffering
loss of time and cost/additional expense due to importation of material from outside the country
in the interest of the Project. Apt to mention that GGBF Slag is produced by use of Slag provided
by PSM whether mentioned by any Supplier or not.

 The position taken by the Engineer: ….the Contractor himself was late as per his baseline
schedule in executing /preparing his own facilities at site. The Contractor’s Monthly Progress
Report for the month of November shows that his material warehouse at Site was still under
 construction and only superstructure brickwork was completed at then up to Nov, 2013.
Moreover, there were concurrent delay on the part of the Contractor which was driving progress
of the Works [Exhibit-9]. The Engineer is of the view-point that the Contractor can place Purchase
Orders based on Tender Drawings as stipulated under Sub-Clause 6.10 of SP.

The Contractor’s reply: The Engineer's inference is not illustrating the true picture of the
Contractor’s progress. Infact, the Contractor had completed Warehouse in December 2013 and
the Batching Plants had been installed in October 2013; evidently, the PCC blocks were being cast
at that time. The Contractor does not agree with the Engineer’s stance that there were
concurrent delays on the part of the Contractor; significantly, delay provision of Drawings IFC to
the Contractor resulted in huge demand of GGBF Slag to be fulfilled by the production units in a
shorter/ limited period.
The Engineer ought to have been well aware of Sub-Clause 6.20 of Special Provisions stating that:
“After award of the Contract, the Tender Drawings will be replaced by Drawings Issued for
Construction including Supplementary Specifications if necessary…….”
In presence of such an explicit stipulation how the Contractor could have moved ahead when
there were likelihood of any changes therein.

 The position taken by the Engineer: The contemporary record shows that the Contractor
has not claimed any time against this event while submitting his requests for Extension of Time
and has foregone altogether this event, might be due to the fact that it had no impact practically
on his progress of Works. Question arises how the Contractor can raise cost claim, if he has not
claimed any delay time due to the above said event notified under Sub-Clause 19.2 of GC.

The Contractor’s reply: Yes the Contractor did not claim extension of time against this event
in his submitted Requests for Extension of Time since the Contractor ‘inter alia’ had other delays
of substance attributable to the Engineer/ Employer and deemed it appropriate to uphold timely
completion of the Project above all and opted for import of GGBF Slag in addition to the local
supply which directly caused incurrence of additional outlay putting the Contractor under severe
financial duress.

The Engineer’s contention that how cost can be claimed when the extension of time had not
been requested by the Contractor is an amazing statement. Although it is devoid of any
contractual rationale yet we may submit that Cost Claim is altogether a different proposition;
however, we assume that the Engineer is confused among the Prolongation Cost Claim and other
Cost claims, which calls for rectification of approach accordingly.

When Prolongation Cost Claim is discussed, the Engineer comes-up with strange explanation that
compensability test should be applied prior to evaluation thereof despite the fact that
determination by the Engineer per se state that certain period is determined as delay attributable
to the Employer/ the Engineer and there is no ambiguity of any concurrency but here the
situation is contrary to his stance taken earlier for processing of prolongation cost claim
submitted by the Contractor as now states that without submittal of EOT request the cost Claim
cannot be raised.

 The position taken by the Engineer: However, in this notice, the Contractor did not
specify the specific relevant clause of 8.4(d) of GC whereas pursuant to para-3 of Sub-Clause
20.1of GC, it was required to specify in the original notice or giving a separate notice under this
Sub-Clause for claiming EOT. The record shows that the Contractor has ignored this event also
and has not included in his EOT submissions, might be considering that it was his sole obligation
to arrange Slag.

The Contractor’s reply: The last Para of the Contractor’s notice to the Engineer vide letter
No. 497 dated February 07, 2014 states;
 “Foregoing in view, it is evident that the Contractor has encountered incurrence of the additional
financial outlay, which will persist as well while facing procrastination to get supplies on account
of delay involved in Import of the GGBF Slag. Therefore, keeping this situation in focus being
unprecedented and unforeseen, the Contractor considers himself to be entitled to extension of time
as well as to the additional payment under relevant provisions of the Contract in lieu thereof as
such hereby giving notice in accordance with Sub-Clause 20.1 of COC to claim the aforesaid
entitlements in due course of time.”

As per FIDIC Guidelines elaborating Sub-Clauses 8.4 & 20.1 of GC, the Contractor’s consideration
of entitlement for extension of time and associated cost is not subject to anyone’s opinion. Our
notice vide letter No. 497 is in consonance with the Contract thus hold germane.

 The position taken by the Engineer: The Engineer, therefore, takes the position that the
Contractor is not entitled for any additional cost and his claim raised due to purported shortage
of Slag due to slow functioning of Pakistan Steel Mill is not justified under the ambit of the
Contract.

The Contractor’s reply: As far as the Contractor’s obligation under the Contract to provide
goods is concerned: of course, the Contractor has never been reluctant in compliance therewith
but GGBF Slag’s scarcity has been occasioned by non-availability of raw materials to the
manufacturers of GGBF Slag from almost non-functional Pakistan Steel Mil (PSM) owned by the
Government. The situation got exacerbated when the Engineer, acting on behalf of the
Employer, failed to issue requisite Drawings IFC within reasonable time despite numerous
notifications by the Contractor. The Contractor was constrained not to place order in a situation
where the Engineer was frequently backing out from the date of issuance of Drawings IFC
thereby rendering the time for the execution of the Works indefinite. Due to the belated
issuance of Drawings by the Engineer the exact Slag requirement (both in terms of quantum and
timing) was worked out after obtaining Drawings IFC. The delayed issuance of the Drawings IFC
not only necessitated the huge demand of the Slag to be fulfilled in a shorter period but also
plunged the Project into the period of low production.

Regards,

__________________
Abdul Saeed Khan
Contractor’s Representative

Encl: As stated above

CC:
1) Head /Project Director, PMO, Punjab Barrages Rehabilitation and Modernization Projects, Projects Office Building,
Canal Bank, Mustafaabad (Dharampura), Lahore.

2) Mr. Abdul Majid Khan (Member Dispute Board). 436 DD, Street # 05, Phase IV, Defense Housing Authority, Lahore.

3) Mr. Manzoor Ali (Member Dispute Board). House # 143, Block-D, EME Sector DHA Lahore.

4) The Engineer NKB Consultants, House # 36, Block-G1, Johar Town Lahore.