ETHIOPIAN ROADS AUTHORITY

SHIRE-SHERAO-HUMERA-LUGDI ROAD UPGRADING PROJECT

LOT 2: ADIGOSHU- LUGDI
EXTENSION OF TIME AND CORRESPONDING COST ASSESSMENT REPORT
FOR THE PROPOSED VARIATION ORDERS
1. INTRODUCTION
The Contractor of the subject project, Hunan Huanda Road and Bridge corporation has submitted
his first claim under the title “Extension of Time and Cost claim against disruption of progress
due to security problem” in relation to the occurrence of landmine incident at project site which
was occurred on December 06, 2007. The Contractor’s submission is an extension of time of
41.5 calendar days and compensation cost of ETB 5,200,311.86 and USD 22,082.75. As per the
Engineer’s assessment and the Employer’s approval, the Contractor’s request for extension of
time and additional cost is not accepted and same was communicated to him. The Contractor was
mentioned his disagreement on the Engineer’s determination and has notified the Employer that
he will refer the case to the DRE. We have raised this issue to remind ERA to include the issue if
the two parties are agreed to settle the outstanding claims amicably.
It is to be recalled that the Feasibility Study, Environmental and Social Impact Assessment and
Detailed Engineering Design of the project was performed by Intercontinental Consultants and
Technocrats Pvt. Ltd (ICT), New Delhi, India in association with TransComm Technologies
Ethiopia Ltd (TCTEL). CORE Consulting Engineers P.L.C has conducted detail design review
based on the information available during that time and submitted the design review report on
February 29, 2008 for ERA’s comment and/or approval. After approval by ERA the road has
been constructed accordingly. As you are well aware, last year’s rainfall throughout the country
was exceptionally adverse and many drainage structures were overtopped in a number of projects
and the same was observed in our project especially in the Humera – Lugdi direction.
Since the available cross drainage structures in the existing road of Humera – Lugdi direction are
not sufficient, flood plains were created adjacent to the crossing structures due to deposition of
sediments. Besides, big gullies are formed in the left direction of the road as the channel migrates
laterally and due to the erodible nature of the soil in that section. The works contract of the
subject project does not include the last 4km section of the road after Lugdi up to Sudanese
border. Based on the request of Humera town municipality to widen the road cross-section by
including median in the town section and extending end of the town section by one km up to
Tekeze River Bridge, you have instructed us to submit the design and cost estimate for your
review and approval. You have transferred construction of Humera town section and Ruwian
Bridge with the approach road from Dansha – Humera project to Adigoshu – Lugdi project. We
have prepared the design and cost estimate of the above works and submitted to your office for
your comments and approval. After we have received your approval we will issue the variation
orders.
Therefore, the purpose of this report is to conduct detail assessment on the Contractor’s
submissions in accordance with the contract document, the prevailing law and actual site
condition and determination of the Extension of Time and corresponding cost in relation to the
variation orders; and to forward our opinion and recommendation on the issues.

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 2. BASIC CONTRACT DATA OF THE WORKS CONTRACT
Project Name:
Project Location:
Project Length:
Type of work:
Funded by:
Employer:
Contractor:
Letter of Acceptance issued:
Date of Signing of Contract:
Date of Commencement:
Currency:
Conditions of Contract:
Technical Specifications:
Original Total Contract Price:
Value of Variation Order :
Estimated Final Contract Sum:
Advance payment issued so far:
Start Repayment of Advance:
Monthly Recovery of Advance:
Full Recovery of Advance:
Minimum Amount of Interim
Payment:
Percentage of Retention Money:
Amount of Liquidated Damages :
Limit of Liquidated Damages:
Time for Construction:
Defects Liability Period:
Original Contract Completion Date:
Extension of Time:
Current Contract Completion Date:
Settlement of Disputes:
Shire – Shiraro – Humera - Lugdi Road Upgrading Project
Lot 2: Adigoshu - Lugdi
Tigray National Regional State
157 km
Construction of Asphalt concrete wearing course on 7 m
carriageway width and 2 m gravel shoulder widths on both
sides. In town sections, 3.5 m parking lanes and 1.5
footways are provided instead of shoulders.
Federal Government of Ethiopia
Ethiopian Roads Authority
Hunan Huanda Road and Bridge corporation [HHRBC]
March 08, 2007
April 10, 2007
July 10, 2007
Ethiopian Birr [ETB] and Chinese [CNY]
FIDIC Fourth Edition 1987, amended 1992, Part I General
Conditions of Contract inline with Part II Conditions of
Particular Application.
Standard Technical Specifications 2002 edition published
by Ethiopian Roads Authority inline with Special Provisions
to Technical Specifications for this project.
ETB 627,709,145.85 [including VAT and Contingency]
ETB 13,363,970.37 [including VAT and Contingency]
ETB 650,943,991.41 [including VAT and Contingency]
ETB 108,946,808.97 [20% contract price less VAT and
provisional sum]
After certification of 30% of the Contract Price
40% of the amount of monthly IPC
Prior to the time when 80% of the contract price has been
certified for payment
ETB 2,000,000.00
10% of Interim payment certificates
0.1% of contract price
10% of the final contract price
1280 Calendar Days
365 Calendar Days
January 09, 2011
None so far
January 09, 2011
The Chairman of the International Chamber of Commerce,
Paris
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3. EXTENSION OF TIME AND TIME RELATED COST ASSESSMENT
3.1 THE PROPOSED VARIATION ORDERS
We have summarized the cost estimate of the above mentioned works as shown in the table
below.

Amount (Birr)
I/No Description
Contract Final Difference
A Adigoshu – Lugdi Project

The last 4km, after Lugdi up to Sudanese border.

a) Earth Works 0 9,175,246.28 9,175,246.28

b) Pavement 0 3,312,434.02 3,312,434.02

1 c) Asphalt Work 0 2,541,860.00 2,541,860.00

d) Minor Drainage Structures 0 724,544.91 724,544.91

e) Major Drainage Structures 0 0 0.00

Group Total 15,754,085.21 15,754,085.21

Humera – Lugdi section.
a) Earth Works 42,398,501.66 87,993,020.06 45,594,518.40
b) Pavement
39,039,236.25 37,922,932.81 -1,116,303.44
2 c) Asphalt Work
31,952,331.66 29,198,380.64 -2,753,951.02
d) Minor Drainage Structures
17,332,978.36 18,181,094.87 848,116.51
e) Major Drainage Structures 1,180,728.10 20,905,062.57 19,724,334.47
Group Total 131,903,776.03 194,200,490.95 62,296,714.92
Humera town section widening.
a) Earth Works
5,506,025.83 6,567,542.66 1,061,516.83
b) Pavement 6,173,893.94 5,476,530.47 -697,363.47
3 c) Asphalt Work
4,260,310.89 6,511,340.00 2,251,029.11
d) Minor Drainage Structures
18,366,699.09 19,470,706.20 1,104,007.11
e) Major Drainage Structures
0 0 0.00
Group Total 34,306,929.75 38,026,119.33 3,719,189.58

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 Humera town additional 1 km.
a) Earth Works
0 2,201,600.05 2,201,600.05
b) Pavement 0 1,687,972.53 1,687,972.53
4 c) Asphalt Work
0 1,752,500.35 1,752,500.35
d) Minor Drainage Structures
0 2,152,246.95 2,152,246.95
e) Major Drainage Structures
0 8,620,042.00 8,620,042.00
Group Total 0 16,414,361.88 16,414,361.88
Adigoshu - Humera section.
a) Earth Works 56,200,538.73 93,552,873.67 37,352,334.94
b) Pavement 81,192,032.53 81,281,737.81 89,705.28
c) Asphalt Work 70,295,129.65 69,694,580.35 -600,549.30
5
d) Minor Drainage Structures
43,138,909.03 42,024,888.74 -1,114,020.29
e) Major Drainage Structures
13,834,290.61 18,686,184.27 4,851,893.66

Group Total 264,660,900.55 305,240,264.84 40,579,364.29

Total of Section A 430,871,606.33 569,635,322.21 138,763,715.88

B Transferred from Dansha – Humera Project
Humera town section.
a) Earth Works 5,131,304.61 5,131,304.61
b) Pavement 7,820,394.55 7,820,394.55
1 c) Asphalt Work 9,589,428.00 9,589,428.00
d) Minor Drainage Structures 24,865,492.72 24,865,492.72
e) Major Drainage Structures 0 0.00
Group Total 47,406,619.88 47,406,619.88
Ruwian Bridge approach
a) Earth Works 1,589,326.79 1,589,326.79
b) Pavement 795,586.00 795,586.00
2 c) Asphalt Work 635,465.00 635,465.00
d) Minor Drainage Structures 400,000.00 400,000.00
e) Major Drainage Structures 0 0.00
Group Total 3,420,377.79 3,420,377.79
Ruwian Bridge Structure
3 a) Major Drainage Structures 8,012,444.12 8,012,444.12
Group Total 8,012,444.12 8,012,444.12
Total of Section B 58,839,441.79 58,839,441.79

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We have further summarized the outcome of the above analysis to indicate the revised contract
amount along with the different variations and increase in quantities due to under estimation of
quantities in the original contract.

I/No Description Amount (Birr)

1. Variation due to the last 4km, after Lugdi up to Sudanese border 15,754,085.21
2. Variation due to design revision from Adigoshu to Lugdi 21,015,008.57
3. Variation due to design change in Humera Town 20,133,551.47
4. Increase in quantities due to under estimation in original design 81,861,070.63
5. Variation due to transferred work from Dansha – Humera project 58,839,441.80
Total 197,603,157.68

3.2 EXTENSION OF TIME ASSESSMENT

The bases for the Extension of Time determination are GCC Sub-Clause 6.4 and Sub - Clause
44.1 “Extension of time for Completion”

In the event of:

(a) The amount or nature of extra or additional work,,… or being such as fairly to entitle the
Contractor to an extension of the Time for Completion of the Works, or any Section or part
thereof, the Engineer shall, after due consultation with the Employer and the Contractor,
determine the amount of such extension and shall notify the Contractor accordingly, with a copy
to the Employer.

We have calculated the time required to complete the work for each pay item based on
production rates from the original cost breakdown, revised work programme on October 2009
and revised work programme on September 2010. Even though the time required for some
activities seems very large due to various reasons, we have considered construction of earth
works as critical activity. The other activities like construction of the 10 Bridge Structures and
minor drainage structures can be performed by increasing the number of crews. Accordingly, the
time required to complete the earth works is 595 working days. We have used a factor of 1.18 to
change working days to calendar days. Thus, the total calendar days required for the work with is
700 starting from the issuance date of the variation orders. Since the contract completion date of
the project is January 09, 2011, the effective entitlement of the EOT to the Contractor will be
700 calendar days. For detail assessment of EOT for each activity with the options, please refer
to the attached sheets.

From the above assessment, it is clearly seen that the Contractor may deserve minimum of 700
calendar days of extension of time based on the above basic assumptions.

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3.3 TIME RELATED COST ASSESSMENT

We have identified the possible major financial head of claims and analyzed each of them in
detail as indicated hereunder. We have analyzed the financial claims based on the minimum 700
calendar days EOT identified in the above section.

a) Prolongation Cost

We have calculated the recoverable overhead using the well known Corrected Hudson formula.

Recoverable Overhead = (OH percentage) Net Contract Sum (Prolongation Period)

Contract Period

Recoverable Overhead = (25%) 470,781,859.39 (700)

= ETB 64,364,707.33
1280

The prolongation cost is taken as a percentage of the recoverable overheads and as per our
experience in other contracts and standard texts available; this value ranges from 25% to 40% for
a standard 3- years Contract. We have adopted the maximum amount of prolongation cost that
can be incurred by the Contractor as follows:

Prolongation Cost = (40%) (Recoverable Overhead)

Prolongation Cost = (40%) (64,364,707.33) = ETB 25,745,882.93

Original Contract Amount (Incl. VAT & Contingency) 627,709,145.85

Allowance for Overhead & Profit in Tender
Allowance for Overhead in Tender
Contract Price Net of Overhead
Original Contract Period
Period of Prolongation
Recoverable Overhead
Prolongation Cost
30%
25%
ETB 470,781,859.39
1280 calendar days
700 calendar days
ETB 64,364,707.33
ETB 25,745,882.93

b) Cost of Idle Machinery

The Contractor has already mobilized and installed Asphalt Plant and asphalt work has been
commenced in the project. Thus, unless all the earth work and structure works are fully
completed, he may not complete the asphalt work and demobilize the equipments from the
project. This shows that the asphalt crew will be idle for some additional periods of time.
Besides, he may also claim the mobilization and demobilization costs within the project and idle
equipment costs for the other activities. Since these costs may not be major, we have considered
only the idle equipment and labour costs of the asphalt team as shown hereunder. The rates to be
used for valuation should be either rental rates or flat depreciation cost for the owned equipments
after analyzing site records with respect to working, down and idle equipment. For the time
being, we have used the day work rates of equipments for our analysis. We have assumed that 26

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days per month and 8 hours per day as working hours for calculation. Thus, the total hours is
(595) (8) = 4,760 hours. Due to the Contractor’s poor efficiency, these hours may be reduced by
70%. Thus, we used 30% of the time that is 1400 hours for determination of idle machinery cost.

Number No. of Hourly

I/No Description Amount (ETB)
Required hours Rate
Equipment
1. Asphalt concrete plant mix 1 1400 2500 3,500,000.00
2. Pressure bitumen distributor 1 1400 187 261,800.00
3. Bitumen tanker 1 1400 298 417,200.00
4. Pneumatic roller 2 1400 497 1,391,600.00
5. Tandem vibrating roller 1 1400 497 695,800.00
6. Tractor vibrating roller 1 1400 497 695,800.00
Sub-Total Equipment 6,962,200.00
Labour

1. Plant operator and drivers 7 1400 15.3 149,940.00

Sub-Total Labour 149,940.00
Total Equipment and Labour 7,112,140.00

c) Unit Rate Revision to the Employer

The Employer may request rate revision based on Sub-Clause 52.3 (a) of the GCC. Sub-Clause
52.3 ‘Variations Exceeding 15 percent’ (a) of the GCC states that;

“If … it is found that as a result of all varied work valued under sub-clause 52.1 and 52.2 …
there have been additions to or deductions from the Contract Price which taken together are in
excess of 15 percent of the Effective Contract Price, … then there shall be added to or deducted
from the Contract Price such further sum as may be agreed between the Contractor and the
Engineer,.. having regard to the Contractor’s site and general overhead costs of the
Contract…”

From the above clause it is clearly seen that the rate revision request by the Employer can be
based on the fixed component of the Contractor’s overhead cost. We have estimated in the above
section that the fixed element of the Contractor’s overhead would be a maximum of 60% of his
overhead cost. Thus;

Fixed OH = (60%) (Recoverable OH) = .6 (64,364,707.33) = ETB 38,618,824.40

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As this fixed overhead had been planned to be used for the Original Contract Period, 1280 days,
the over-recovered amount of the fixed component of the Contractor’s overhead with the revised
Contract Period, 1280 + 700 = 1980 days, shall be as shown hereunder, on a pro-rota basis:

Revised Contract Period - 1

Over Recovered OH = Original Contract Period (Fixed OH)

1980 - 1
Over Recovered OH = 1280 (38,618,824.40) = ETB 21,119,669.59

From this amount only certain items will qualify for 15% quantity increment and 2% effect in the
contract amount for rate revision request by the Employer. Hence, the total amount of
recoverable OH by the Employer should reduce from this amount. However, we have used this
amount for our assessment.

Summary of Time Related Cost

Cost to the Contractor

Prolongation Cost ETB 25,745,882.93
Cost of Idle Machinery ETB 7,112,140.00
Total (A) ETB 32,858,022.93
Cost to the Employer
Excess Recoverable Overhead Cost ETB 21,119,669.59
Total (B) ETB 21,119,669.59

Difference (A-B) ETB 11,738,353.34

4. CONCLUSION AND RECOMMENDATION

From the above assessment it is clearly seen that the Contractor may deserve minimum 700
calendar days. Regarding the financial claim, based on our assessment with the minimum 700
calendar days EOT as indicated in the above table, the amount recoverable by the Contractor is
ETB 32,858,022.93 and by the Employer is ETB 21,119,669.59.

Based on the above facts, we have the opinion that the Contractor may deserve EOT of 700
calendar days and net cost of ETB 11,738,353.34.

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