Question 5

A small area of paving in a recently constructed new car park has

settled and is beginning to crack. This occurs before Completion of the
whole of the works in an ECC Option A contract. The Client is
responsible for designing the works.

a.

What should the Project Manager, Supervisor and Contractor do

next? What processes should be followed if it were a Defect?

[11 marks](9/11)

Since the settlement and crack in the paving of the new car park will
certainly impair the performance of the works when it is in use, either
the Project Manager or the Contractor notifies an early warning for
discussion as soon as possible (clause 15.1).

In parallel, the reasons for the settlement have to be found out, whether
it is a Defect or a design fault. The Project Manager will check if a
failure to comply with quality plan by the Contractor has happened.
Supervisor will review the results of any tests and inspections previously
carried out to the location of the settlement to see if errors or mistakes
had been made (clause 41.3).

The Project Manager may instruct the Supervisor to attend the early
warning meeting (clause 15.2). At the early warning meeting, all parties
will act in a spirit of mutual trust and cooperation (clause 10.2). If there
is no fault with the Contractor in compliance with the quality plan or no
anomalies was found in any tests and inspections, the Project Manager
may decide and the Supervisor will instruct the Contractor to search for
Defect in the settled paving according to clause 43.1 including doing
tests and inspections which the Scope does not require.

If any test or inspection, either before or after the instruction to search

for a Defect, reveals that the settled paving is a Defect, the Supervisor
notifies the Defect and the Contractor corrects the Defect (clause 44.1)
before the end of defect correct period (clause 44.3) and repeat doing
relevant the test or inspection (clause 41.4) to confirm the Defect will
not happen again. The Project Manager will then assess the cost
incurred in repeating the test or inspection after the Defect is found, and
the Contractor is responsible to pay for the amount assessed (clause
41.6).

Since the Defect (the settled paving) is a part of the works which is not
in accordance with the Scope (clause 11.2(6)), correcting the Defect by
the Contractor is not a compensation event (clause 60.1(1)).

Once the settlement is confirmed a Defect, Project Manager decides in

the early warning meeting that the Contractor will correct the Defect
(clause 15.3), and revises the Early Warning Register to record the
decision made (clause 15.4).

According to clause 44.4, if the new car park area has been taken over,
the Project Manager will arrange for the Client to allow the Contractor
access to and use the area where the settled paving exists if it is
needed for correcting the Defect. The defect correction period begins
when the necessary access and use have been provided by the Client.
When the notified Defect has been corrected, the Supervisor issues the
Defects Certificate (clause 44.3).

It is unlikely the Project Manager will accept a proposal to change the

Scope so that the Defect does not have to be corrected (clause 45.1)
because the area of the settled paving, though small, is in the new car
park which if not repaired and if the settlement extends further in time
may have potential risk to cause serious accident.

If the Contractor is given access to correct the Defect but does not
correct the Defect within the defect correction period, the Project
Manager assesses the cost of having the Defect corrected by other
people and the Contractor is responsible to pay the amount (clause
46.1). The Project Manager will do the same assessment if the
Contractor is not given access to correct the Defect before the defects
date (clause 46.2). In such case the Scope is treated as having been
changed to accept the Defect.
.

b.

What process should be followed if it were not a Defect?

[4 marks](4/4)

If the settled paving were not a Defect, it should be a design fault

included in the Scope provided by the Client. It states in the third bullet
point of clause 80.1 that a fault in the design contained in the Scope
provided by the Client is one of the Client’s liabilities.

If it was determined after a search for a Defect was carried out by the
Contractor upon an instruction given the Supervisor under clause 43.1,
it constitutes a compensation event under clause 60.1(10). Either the
Project Manager or the Contractor may notify a compensation event
(clauses 61.1 and 61.3).

If the Project Manager decides that the settled paving should be

rectified and repaired, it may instruct to change the Scope (clause 14.3).
Such rectification and repair is a compensation event under clause
60.1(1) and (14). The Project Manager will notify the Contractor of the
compensation event under clause 61.1 at the time of that
communication.

The above compensation events (search for a Defect and change of

Scope) will be assessed and implemented according to clauses 63 and
65 respectively.
The Contractor wishes to appoint a SubContractor and seeks
the Project Manager’s acceptance for this appointment. The Project
Manager writes to the Contractor stating that this would be an unwise
choice as the proposed SubContractor has performed badly on previous
contracts with other Contractors.

c.

What could the Project Manager do regarding the appointment of

the SubContractor?

[4 marks](4/4)

Regarding the appointment of the SubContractor, the Project Manager

does the following:

1. check the proposed subcontract documents submitted by the

Contractor and accept it (clause 26.3);

2. vet the background information (e.g. job reference, past performance

rating, criminal records, valid government registration no., etc.) of each
proposed SubContractor submitted by the Contractor and give
acceptance (clause 26.2);

unless the appointment of the SubContractor will not allow the

Contractor to Provide the Works. In this case the Project Manager
should state clearly in the notification the reason for not accepting the
SubContractor (clause 13.4), which is, the proposed SubContractor has
performed very badly on previous contracts and there is very high
chance that the same SubContractor will not be able to perform
competently to Provide the Works.

Or alternatively, before the objection notification is given, the Project

Manager may notify an early warning under clause 15.1 because the
matter in concern may risk impairing the performance of the works or
delay Completion or delay meeting a Key Date if the Sub
SubContractor is accepted.

The Contractor cannot appoint any proposed SubContractor until the

Project Manager has accepted it (clause 26.2). If the Contractor
happens to appoint a SubContractor before the Project Manager
accepts it, the Project Manager notifies such default (clause 91.2). If the
Contractor has not put this default right within four weeks, the Project
Manager may advise the Client that it may terminate the Contract
(clause 91.2).

The Contractor says that if the Project Manager objects to this

appointment additional cost would be incurred which
the Contractor would seek to recover as a compensation event.

d.

How should the Project Manager respond?

[6 marks](5/6)

According to clause 13.1, all communication should be made in a form

which can be read, copied and recorded in the language of the contract.
By just “saying”, the Contractor’s message is not properly
communicated. The Project Manager may either ignore such verbal
message or notify a early warning under clause 15.1 because the
matter in concern could increase the total of the Prices. The matter will
be discussed in the early warning meeting (clause 15.3). The Project
Manager may instruct the SubContractor to attend the early warning
meeting if its attendance would assist in deciding an appropriate action
to be taken (clause 15.2).

Under clause 26.2, the reason for not accepting the SubContractor is
that the appointment will not allow the Contractor to Provide the Works.
If it is the case, the Project Manager should notify it within the period of
reply stating clearing the reasons in sufficient details to enable the
Contractor to correct the matter (clause 13.4). If the reason for
withholding acceptance is that more information is needed to enable full
assessment, the Project Manager notifies the Contracctor for
resubmission within the period of reply. The Contractor should
understand that it is its responsibility to ensure the proposed
SubContractor is competent and is able to Provide the Works.

If the Contractor notifies that the nonacceptance of the SubContractor

will incur additional cost and is a compensation event (clause 61.3), the
Project Manager could reply under clause 61.4 to the Contractor that
non-acceptance of a proposed SubContractor is not one of the
compensation events stated in clause 60.1 and the Prices is not to be
changed.

If, however, the Project Manager withholds the acceptance of the

SubContractor for a reason not stated in the contract (clause 60.1(9)),
the Contractor may notify a compensation event under clause 61.3. If
the quotation submitted by the Contractor for this compensation event is
accepted by the Project Manager, the Prices, the Completion Date and
the Key Dates are changed accordingly (clause 66.2).