CASE STUDY: DAB IN PAKISTAN

• A Yellow Book Ed. 1999 based contract (with few amendments) was signed between the
Contractor and the Contracting Authority (hereinafter referred to as the Employer) for a
value of EUR 19 million, financed by French funds and local financing of PKR 380 million, for
the renovation of two wastewater treatment plants and the construction of a new
wastewater treatment plant, with a completion timeframe of 24 months. The contract was
implemented according to the attached schedule and was subject to numerous unexpected
obstacles.

• Month 3: the Employer finally grants Access to the site, which has been obstructed up to this
point by the presence of a refugee camp on site. This results in a three-month delay.

• Month 4: to avoid numerous claims from being made and preventing works from proceeding,
an agreement amending Sub-Clause 20.1 of the Contract is signed by the Parties eliminating
the 28-day time bar on the notice period for claims; in return the Contractor agrees to
endeavour to remain within the timeframe stipulated in the contract.

• Month 5: geotechnical surveys (of the subsoil) reveal unfavourable ground conditions,
leading to over-expenditure on foundations of 10% of the contract price.

• Month 12: the Employer's failure to pay custom duties on time causes equipment to be
withheld at customs for over two months.

• Month 14: a violent earthquake in Kashmir leads 80% of the personnel to leave the site to
join their families in the North of the country, resulting in an estimated three-month delay in
construction.

• Month 16: construction works appear to be severely delayed due to an internal dispute
between the co-contractors in the Consortium; however, no formal supporting evidence is
supplied in relation to this issue. The disagreement is cause for concern – insults are made in
site meetings, apparently in relation to defaults on payment within the consortium between
the consortium leader and the local construction Consortium member. The Engineer is at a
loss for what to do.

• Month 20: raw water has not been supplied to the wastewater treatment plant, for which
commissioning was due to go ahead at this date. Commissioning cannot go ahead; however,
works delivery from the Contractor is anyhow behind schedule. Raw water is eventually
supplied for the commissioning of the plant during Month 30, i.e. 10 months behind
schedule.

• Month 34: the Ministry responsible for the project strongly stresses to the Employer the
importance of the forthcoming elections, which are due to take place in Month 36 of the
project. The Employer is strongly and expressly advised of the importance of sending a sign
to inhabitants regarding the launch of the wastewater treatment plant, which is the first of

© Plan J Consulting – Document used with Plan J Consulting’s permission

 its kind locally. The Employer asks the Contractor to organise a grand reception for the
official inauguration of the plant, at Month 36 minus two weeks.

• Just after receiving this message verbally, the Contractor states that he does not wish to be
involved in such political considerations and makes a formal written request for a 12-month
extension of the time for completion and additional payments of EUR 5 million on the basis
of Sub-Clause 20.1 and the following points of claim: claim concerning delayed Access to Site,
claim concerning unfavourable ground conditions being unforeseeable physical conditions,
claim concerning earthquake, claim concerning unpaid customs duties, claim concerning the
delayed supply of waste water for commissioning.

• Month 35: the Engineer rejects all of these claims based on Sub-Clause 3.5 determinations,
without discussing matters with the Contractor and reminding him of the agreement signed
in Month 4. Then, in accordance with Sub-Clause 3.3, the Engineer instructs the Contractor
to organise the reception for the public inauguration of the wastewater treatment at Month
36 minus two weeks.

• The following day, the Contractor writes to the Engineer categorically refusing to clear off the
work site and prepare the inauguration, which he considers falls outside of the contract. The
parties are thus at deadlock. The Ministry becomes involved and verbally threatens to
terminate the contract and expel the Contractor. In addition, all payments are blocked.

• Given the political stakes and the growing pressure, particularly due to very critical press
articles regarding the Government's handling of this wastewater treatment plant
construction, the Engineer suggests that Sub-Clause 20.4 be applied and that the services of
a three-person Dispute Adjudication Board (DAB) be called upon; an agreement is reached
with the Contractor, under Sub-Clause 20.2, to accelerate the DAB nomination procedure
and a three-person DAB is appointed within a day and is given one day to deliver a decision.

• A dispute adjudication agreement is hurriedly signed by the Engineer, the Contractor and the
Dispute Adjudication Board only. The DAB arrives in Islamabad to undertake its investigations
and give its decisions.

• For all parties involved, the purpose of the initiated procedure is to resolve the following
issues:

• Whether or not the Contractor has the right to an extension of the time for
completion, and if so, of how long?

• Whether or not the Contractor has the right to additional payment, and if so, how
much?

• Whether or not the Contractor must organise the official inauguration of the
wastewater treatment plant.

• The DAB will have to take decisions on these matters in accordance with the FIDIC contract
rules of procedure:

© Plan J Consulting – Document used with Plan J Consulting’s permission