2) Construction Law - Lecture Notes - Chapter 2

FTVET, 2023 March 2023
FDRE TVET INSTITUTE
Department of Building Construction Technology

Organized by: Belachew Asteray (PhD)
MSc program- Construction Technology and Management

Construction Contracts Law (CoTM 525)
CHAPTER TWO
ADVANCED CONSTRUCTION CONTRACTS AND
APPLICABLE LAWS AS APPLIED TO
CONSTRUCTION PROJECTS
By: Belachew Asteray (PhD)
March 2023
March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 1
CHAPTER TWO
ADVANCED CONSTRUCTION CONTRACTS AND APPLICABLE LAWS
AS APPLIED TO CONSTRUCTION PROJECTS
2.1. Overview of Contracts in Construction Projects
2.2. Contract Document and Legal Considerations

2.3. Construction Contract Types: Local and International
Practices
2.4. Local Construction Contracts and Laws: Analysis of Case
Studies
2.5. International Construction Contracts and Laws: Analysis of
Case Studies
2.6. Sub-contracting: Local and International Practices
2.7. Construction Audit
Organized by: Belachew Asteray(PhD) 1

2.1. Overview of Contracts in Construction Projects

• In general, a Contract is
• an agreement or willful promise between two parties
• legally enforceable at law for both parties

• obligations to be distinct from those required by law.
• “Enforceable at law” means that if the agreement reached
between the two parties breached (deviations occur from the
promises) by one of the parties, the aggrieved party may bring a
legal action against the other to demand the enforcement of its
rights with the support of law.
• However, not all agreements or promises are contracts. Some may
lack enforceability at law.
2.1. Overview of Contracts in Construction Projects …

• The general Law of Contract is governed under the Civil Code
from Article 1675-Article 2026.
• A contract is
• an agreement whereby two or more persons as between
themselves create, vary or extinguish obligations of a
proprietary nature ( Article 1675 of the Civil Code).
• The definition contains the following elements:
• the contract is an agreement;
• The agreement is to be made between two or more persons;
• the agreement is binding between such two or more persons;
• The agreement is to create, vary & extinguish obligations;
• The agreement is to create obligations;
• That the nature of obligations is proprietary.


• Contract can be between
• Individuals
• Businesses/public institutions
• Businesses/public institutions to individual
• Contracts can be of:
• Civil,
• Commercial,
• Industrial (labour relation),
• economic (construction contract) or
• others.

• Contracts can be
• Bilateral or unilateral
• Bilateral: obligations on both parties

• Unilateral: a promise made by one party in return for the
performance of an act by the other party
• Executory or executed
• Executory: a contract that has not been fully
performed.
• Executed: a contract that has already been
performed.


is
• a legally binding agreement between the parties identified
in the agreement
• to fulfil all the terms and conditions outlined in the
agreement.
• Contracts can be made
• Orally and
• in writing.

• According to Article 1678 (Elements of Contract) of the Civil
Code:
• 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.
• The following are the fundamental elements of contract:
• Capacity of the contracting parties;
• Consent of the contracting parties;
• Object of the contract; and
• Form of contract, if any;


• Capacity (Article 1678(a) of the Civil Code…
• Capacity means competence to enter in to a legally binding
agreement.
• Parties entering in to an agreement or contract shall,

therefore, be capable of contracting.
• Legal capacity is of two types:
i. Personal (Own) capacity and
ii. Representative(Agent) capacity.
• Capacity of persons is legally presumed unless the
contrary is proved.

•Persons could be:-
• natural (physical) persons or

• juridical (legal) persons
• Natural Persons
• Natural or physical persons are human beings.
• Their legal capacity is determined by law.
• The scope of capacity of physical persons is relatively
unlimited unless the contrary is proved.
• Physical persons are the subject of rights & duties from
birth to death (Article 1 of the Civil Code).


• Legal Persons
• Legal persons are of two types in terms of determining their coming in to
being & their legal capacity:
• By legislation (In case of public bodies)

• The existence of public bodies (Ministries, Commissions, Bureaus,
Authorities, Agencies …) & their legal capacity to enter in to
contract & bind themselves emanates from the Civil Code & the
special legal instrument (legislation), which establishes that
specific public body.
• By registration (In case of non-public bodies)
• The legal capacity of non-public bodies (PLC’s, Share Companies,
Corporations…) & their legal existence comes in to being by
registration. The act of registration by competent public authority
confers legal personality & therewith (limited) legal capacity to
enter into contract & bind themselves.

• The following may not have (legal) capacity to enter in to contract & bind
themselves:
• Minors (under the age of 18);

• Companies adjudged or declared bankrupt;
• Judicially interdicted persons;
• Legally interdicted persons;
• Persons, whose civil rights are suspended by the judgment of the court;
• Non-nationals, unless permitted by law or special prerogative;
• Non-authorized Agents;
• Agents, whose Power of Attorney has been revoked;
• Agents, the Scope of their Power of Attorney does not cover the intended
transaction (ex. Tendering or Negotiation or Contract Signing, …)


• Natural persons or legal persons may enter in to contract
• directly by themselves (in their own capacity) or

• through other persons called Agents.
• The power of agents (i.e. their representative capacity)
should always be checked, with respect to construction
project, at:
The Power of Attorney creates a
• The tendering stage;
derivative legal capacity for agents.
• The negotiation stage;
• The contract signing stage and
• The Contract implementation stage.

• A contract concluded by the person not capable under the
law may be invalidated at the request of such incapable

person, who is party to the contract.


• Consent (Article 1678 (a) and Article 1679- Article 1710 of the Civil Code)
• Consent
• is a declared will of the individual to enter in to contract.
• is the willingness of the parties to enter in to a legally binding

relation.
• Consent of the intended contracting parties decomposes in to :-

• Offer and
• Acceptance.

• Consent …
• Offer
• Is a proposal expressing the declared willingness of the offeror

to enter in to an agreement, if the offer is accepted.
• is a legal process which is a declaration of willingness or
intent to be bound by specific terms set out.
• Acceptance
• is a declaration of will to enter in to a legally binding contract.
• By acceptance, a contract shall be completed, where the offeree
accepts the offer without any reservation.


• Consent…

• Consent…
Legal Sanction
•Defects in consent:
• Mistake (Art. 1697-1703 of the Civil Code) –law or fact
• Fraud (Art. 1704-1705 of the Civil Code)
• a false representation conduct made knowingly or recklessly
• Duress (Art. 1706-1709 of the Civil Code)
• a threat of imminent danger- future or immidate


• Object of Contracts
•Object of Contracts
• Stated in Article 1678 (b),
• Article 1711 – Article 1718 of the Civil Code.

•The object of contract is the very obligations of
the contracting parties
•For Example: in the construction contract
• the obligations of the Employer and the
Contractor

• Object of Contracts…
• The possible objects
• The obligations of the contracting parties could be divided in to two broad

terms: Promises and Considerations.


• Promises and Considerations in Construction Contracts
• In the construction contract, the whole purpose of all parts of the
contract documents is to sufficiently define the object of the

construction contract, i.e. the very respective obligations of the
contractor & the employer.
Contract documents
• the BOQ,
• the Drawing,
• the Technical Specification,
• the Conditions of Contract (both
General and Special Conditions of
Contract), and
• other documents

• Promises and Considerations in Construction Contracts…
• In the construction contract, the obligations are the very promises &
considerations of the contractor & the employer.

• The contractual obligation of the contractor (i.e. Promises)
What to do: i.e. to construct:- In terms of its:-
• water supply dam & • scope;
systems; or
• quality;
• irrigation dam; or
• Hydropower dam; or • cost;
• other hydraulic structures; or • time;
• road; or • safety; and
• building; or • Other aspects of its
• other type of structures; promises


• Promises and Considerations in Construction Contracts…
• Obligations of the Employer
• The Payment, obligation to do, or (Considerations) and other

contractual rewarding obligations of the Employer:
• Payment obligation • other obligations in terms of
• extent of contract price • other benefits,
• types of payment • exchanges, &
• timing for payment
• conditions of payment
• rewards.
• other related issues

• The object of contract shall be lawful.
• If the contract found to be unlawful or immoral, the legal remedy
available is invalidation of the contract at the request of any contracting

party or interested third party (Art. 1808(2) of the Civil Code).


• Form of Contracts
• Form of Contract under the Civil Code
• Article 1678 (c)
• Article 1719 – Article 1730

• Form of Contracts…
• Form may mean types of contract.
• Form may also mean the making of the contract orally or
in writing.
• in certain prescribed form
• with the validity & proof of the contract itself.





• Effects of Contracts
• Effects of contract may have two dimensions:
• The time when the contract is considered bound by the
contracting parties; and

• relates to the effectiveness of the contract
• The fulfillment or performance of the set of promises
prescribed in the contract
• related to the performance of obligations of the contracting
parties under the contract
• Effects of contract may bring
• Contractual effects and /or
• Legal effects;

• Effects of Contracts…
• Major Areas of Effects of Contract in the Civil Code
• Effects of contract basically concerned with the following
four issues:
1. Interpretation of Contracts (Article 1732-Article 1739)
2. Performance of Contracts (Article 1740-Article 1762)
3. Variation of Contracts (Article 1675 & Article 1763-1770)
4. Non-performance of Contracts (Article 1771-1805)


1. Interpretation of Contracts (Article 1732-Article 1739)
• Interpretation is the process of determining the true
meaning of a written document.

1. Interpretation of Contracts…
• Formal interpretation • Informal interpretation
• By the Conditions of Contract itself

• By the court; • under the Harmonised Edition
• By the arbitral • Sub-Clause 1.1 Definitions; and
• Sub-Clause1.2 Interpretation
tribunal; • By the contracting parties themselves
• In case of negotiation or other forms of amicable dispute settlement;
• Sub-clause 20.6 of the • Article 3307-Article 3324 of the Civil Code;-Compromise
Harmonized Edition & • Article 274-Article 280 of the Civil Procedure Code; Compromise
the applicable law. • By the Engineer
• by giving Clarification for ambiguities or discrepancies in the Contract Document
• under the Harmonised Edition- Clause 1.5- Priority of Documents
• by Determination -under the Harmonised Edition
• Clause 3.5 cum Clause 20.1 on the Claims of the Contractor;
• Clause 2.5 on the Claims of the Employer ; and
• on any requests of the Contractor & of the Employer;
• By the Adjudicator (DB)

• Clause 20.3 of the FIDIC Harmonized Edition


2. Performance of Contracts (Article 1740-Article 1762)
• Performance of Contract may mean the carrying out or
discharge of the obligation under taken by the contracting

parties.

2. Performance of Contracts…
• Under the Construction Contracts, the effect of contract is
fulfilled by performance of the very contractual

obligations of the contracting parties:
• the Contractor must execute the works
• within the time for completion,
• within the cost agreed,
• as per the quality specified…; and
• the Employer have to pay fully the Contract price, and any
other sums agreed in or implied from the contract, to the
Contractor.


2. Performance of Contracts…

3. Variation of Contracts (Article 1675 & Article 1763-1770)
• Variation of Contract could be done:
1. By the contracting parties, contractual variation, (as a rule); or

2. By the Court, judicial variation, (as an exception)
• Variation of Contract by the Parties
• The contracting parties, in principle, are free to create & vary their contractual agreement
( Article 1675 of the Civil Code).
• Variation of contract & its effect are regulated under the Conditions of Contract
(Harmonized
• Variation ofEdition Sub-clause
contract, under the13-Variations & Adjustments).
construction contract, may result from:-
• Requirement change by the Employer
• Design change by the Engineer
• Proposal by the Contractor


3. Variation of Contracts…
• Judicial Variation of Contract (Article 1763-Article 1770 of the Civil Code)
• Judicial variation or variation of contracts by the court is not

allowed, in principle (Article 1763 of the Civil Code).
• Contracts may get their effect through judicial variation, by way of

exception, however (Article 1763 of the Civil Code).
• Judicial variation of Contracts, as opposed to variation of Contract
by the parties, is regulated by the applicable law.

• The Ethiopian court may vary the terms of the contract:
• Where it is expressly provided by law (Article 1763);
•
• Where a special relationship between the contracting parties exists
(Article 1766);


• The Ethiopian court may vary the terms of the contract:
• Where one of the contracting parties is a state or one of its institutions (Article 1767)
• Where it is partially impossible to perform the contract (Article 1768);

4. Non-performance of Contracts (Article 1771-1805)
•Non-performance of contracts means
• the failure of the contracting party or parties to carry out

the obligations they have undertaken under the contract.


4. Non-performance of Contracts …
• Non-performance involves the following legal concepts:
• Notice requirement
• Notice necessary (Article 1772-Article 1774)

4. Non-performance of Contracts …
• Notice requirement;
• Notice unnecessary (Article 1775)


4. Non-performance of Contracts…
• Specific performance (Article 1776-Article 1783)

• Cancellation of contract;
• Cancellation by court (Article 1784-Article 1785);


• Cancellation of contract;
• Cancellation by the contracting party (Article 1786-Article 17890);

• Damages;
• Liability for damages (Article 1791-Article 1798)
• Quantum of damages (Article 1799-Article 1805)
• Damages may be requested due to

• Non-performance of the contract; and
• 2023
March Invalidation of the contract.
CoTM 525 Organized by: Belachew Asteray (PhD) 46


• Extinction of Obligations

• Extinction of Obligations…
• As per the Civil Code, the obligations of the contracting parties may come to
an end on the following grounds.
• By performance of the contract (Article 1808 & 1740-Article 1762)

• By invalidation of the contract (Article 1807 & Article 1808-1818)
• By cancellation of the contract (Article 1807 & Article 1808-1818)
• By termination of the contract (Article 1807 & Article 1808-1818)
• By remission of debt (Article 1825)
• By novation (Article 1807 & Article 1826-1830)
• By set-off (Article1807 & Article 1831- 1841)
• By merger (Article1807 & Article 1842-1844)
• By limitation of action (Article 1807 & Article 1845-1856)


• By performance of the contract
• This is the case where the Contractor & the Employer under the
Construction Contract perform all of their obligations under the said
Contract.
• By invalidation of the contract
• Invalidation of contract may result with respect to void & voidable
contracts.
• A contract is voidable due to vices of or defects in consent & incapacity.
That is the contract was concluded as a result of mistake, duress, or fraud.
• By cancellation
• Cancellation of contract may result from non performance of contract.
• The contract may be cancelled by the party to the contract or by the court.
• By termination
• A contract could be terminated by both parties to the contract (jointly) or by
one of them (unilaterally).

• By remission of debt
• Remission of debt results where the creditor releases the debtor from its
obligation.
• By novation
• Novation occurs where the parties agree to substitute therefore a new obligation
which differs from the original one on account of its object or nature.
• By set-off
• Set-off occurs where two persons owe debt to one another.
• By merger
• Merger shall occur & the obligation shall extinguish where the positions of
creditor & debtor are merged in the same person.
• By limitation of action
• This is the effect of time on rights, unless exercised within the legally allowable
time.
• The creditor may lose his rights unless he demands within a given time.


• Proof in Relation to Contracts (Article 2001-Article 2026)
• Proof or evidence is important to prove the existence or non
existence of a given fact, which is disputed or denied.
• Admitted facts do not need proof.

• Laws do not require proof.
• The form of proof in relation to Construction Contract could be:
• Documentary evidence;
• Factual witness;
• Expert opinion;
• Project site visit;
• Others, if any;

• Proof in Relation to Contracts (Article 2001-Article 2026)
• The form of proof in relation to Construction Contract
Documentary evidence The records may appear in diverse forms:
• The Construction Contract itself; • Correspondences or Exchange of Letters;

• Records in relation to the Time aspect of the project; • Notices;
• Records in relation to the Cost aspect of the project; • Reports;
• Records in relation to the Quality aspect of the project; • Minutes of Meeting;
• Records in relation to the Safety aspect of the project; • Site Diary;
• Records in relation to Payment aspect of the Contract; • Site Instructions;
• Records in relation to Site & Access thereto; • Payment Certificates or related documents;
• Records in relation to other contractual or legal obligations • Executed Standard Forms;
of the Contractor and/or the Employer; • Others, if any;
• Records in relation to Variation;
• Outside Records;
• Others, if any;
• Factual Witness Statements are prepared by those who have a direct factual knowledge about a given aspect
of the project ( ex, time, payment, …)
• Expert Witness Reports are prepared & submitted to court or arbitral tribunal to show some professional
conclusions about the disputed matter.

2.2.Contract Document and Legal Considerations

• The contract documents are some of the most important
pieces that help ensure a successful project.
• No matter what the construction, having a solid contract

represents one of the first steps toward the success of the
project.
• Construction “Contract Documents” are legally-binding
written documents that define
• the roles and responsibilities of contracting parties,
• description and scope of “Work/service/good” under the
construction Contract.

• Components of Construction Contract Document
• Contract Agreement:
• It's an essential component of the contract documents.
• It's the main document to which most other documents attach or

reference.
• A construction contract agreement is a document that sets a date and
specifies which parties are going to participate in the construction
process.
• Usually, the contract agreement is signed between the Owner of the
project and the contractor or supplier that is providing the requested
services or works.
• Contract agreement contains several sections of clauses defining the
scope, terms, and conditions of such agreement.


• Components of Construction Contract Document…
• Project Description: a blurb or extract of what the project is about
• Contract Price:
• the type of contract price been awarded and

• the total amount of money being contracted.
• Payment Basis:
• How the money is going to be paid to the service provider.
• Either on a monthly basis or whatever payment method is preferred, it should also
specify what percentage of money should be retained on every application for payment.
• It will also define when the payment is due, the penalty for late payments, interest
being accrued and other applicable situations related to the payment and invoicing
terms.
• Construction Schedule or Calendar:
• The total of days or how the project schedule will be divided.
• It should describe either calendar days or business days and can be presented either
through a CPM, Gantt Chart, or just a bar chart.
• Contract Document List:
•March
A2023
list of all contract documents that form part of the contract agreement.

• Construction Scope:
• Description of all activities including some descriptions of things that will form
part of the project. The scope normally can be measured or quantifiable.

• Construction Conditions & Responsibilities:
• The section of conditions and responsibilities is the one that sets responsibilities
for the owner and the contractor, and the extents of who is responsible for
providing documents and information.
• It contains specific terms for liens, penalties, withholding, arbitration rules and
specific instructions on how to process claims and proceed with disputes.
• Contract Laws:
• Governing laws, liens requirements, claims procedures, arbitration procedures,
insurance, substantial completion requirements, final completion, and liquidated
damages.
• It can also provide procedures on how to terminate or suspend the work and the
agreement
March 2023 with the contractor.


• Conditions of Contract
• Construction Contract: Conditions of contract are terms which rule the
relationships between the owner and the contractor, define each party’s rights and
obligations, specify method of payment and determine actions required when
existing any disputes between the owner and the contractor.
• General Conditions of Contract: They are standard terms that suit the
majority of projects, they include:
• Definition of the project
• Contract components
• Rights and responsibilities for the owner and the contractor
• Project schedule
• Payment method
• Warranty and delay penalty

• Special Conditions of Contract
• They are the modifications required to suit the uniqueness of the project,
make the contract flexible for the nature of the project and achieve project
objectives.
• This is usually an extension of the contract and an addendum to the
general conditions.
• It should specify certain conditions and clauses that pertain to each
particular project or job.
• Pay special attention to specific instructions and requirements on how to
perform the work.
• Signed Technical Proposals/documents–Approaches and
Methodology,
• Signed Financial Proposals-


• Typical Tender (Contract) Documents
• The tender documents become contract documents if completed by the
prospective contractor, and finally agreed & signed by the parties .
• The Legal Part • The Commercial Part • The Technical Part

• The Contract Agreement; • The Performance Security • The Technical
• The (latest) Minutes of Meeting, Form
Specifications;
if any; • The Payment Security
Form; • The Drawing;
• The Letter of Acceptance(Award) • The Bill of Quantities;
• The Advance Payment
• The Tender (NB: Including the
Guarantee Form • Schedule of
Appendix to Tender, if any); • The Bid Security Form;
• The Special Conditions of Requirements, if any;
• The Insurance Forms
Contract • Others, if any.
• The Retention Money
• The General Conditions of Security Form
Contract • Others, if any
• Others, if any;
2.3. Construction Contract Types

• Construction contract types are usually defined by
• the way, the disbursement is going to be made and
• details other specific terms, like duration, quality,
specifications, and several other items.

• These major contract types can have many variations and
can be customized to meet the specific needs of the
project.
• One of the characteristics of construction projects is uniqueness.
• Every project has its special circumstances, so it’s important to
select the contract type which suits the project.
• The process of selecting the type of contract is developed by the
owner.

2.3. Construction Contract Types…

• Factors which affect the selection of construction contract are:
1. Project objectives:
• The type of contract should meet with project objectives.

2. Project constraints:
• There is no any construction project without constraints.
• Thus, project constraints should be considered while selecting
type of construction contracts.
3. Project delivery method:
• Project delivery method determines the relationships
between parties getting involved in the project and how they
interact with each other from project initiation to project
closure.

• Types of Construction Contracts
• There are many types of contracts used in construction.
• Each type has its advantages and disadvantages with respect to

the owner and the contractor.
• They are categorized in two major groups as per method of
payment to the contractor.
• Price-based Construction Contracts
1. Lump Sum Construction Contract
2. Unit Price Construction Contract
• Cost-based Construction Contracts
3. Cost Plus Construction Contract
4. Target Cost Construction
March 2023
Contract


1. Lump Sum Construction Contract
• In this type, the contractor bids a single fixed price for overall
activities in the project scope.
• The contractor is responsible for estimating project costs from

drawings then adds overhead and his profit to determine the price of
the project.
• All risks are assigned to the contractor, there isn’t any risk carried by
the owner.
• The contractor has incentive in this contract as he is rewarded for early
finish and there is penalty for late finish.
• This contract is ideal when the project scope is well defined at the
design stage because there is limited flexibility for modifying the
design during construction period.

2. Unit Price Construction Contract
• The total price of the project in unit price contract is based
on the price of each item’s unit.

• The contractor is paid as per the rates of items specified
in the bill of quantity.
• The risk is shared with the contractor and the owner.
• This type of contract has more flexibility for design
changing than the lump sum contract.
• The construction of the project can be started before
finishing the designs so the total cost of the project will be
uncertain at the early stages of the project.


3. Cost Plus Construction Contract
• The contractor is paid based on the actual cost of the project including direct
and indirect costs plus specific fee. This fee could be a fixed fee or
percentage of costs.
• All risks are assigned to the owner and he gets involved with the contractor
in the management of the project.
• The contractor has no risk in case of increasing the cost of the project, also
there isn’t any incentive for early finish.
• This type of contract is ideal when the project scope is uncertain in the
early stages of the project.
• The contractor can start the execution of the project before finishing the
design. It is impossible to estimate the cost of the project before the
construction has been finished.

4. Target Cost Construction Contract
• Target cost contract has mutual features of the lump sum and cost
plus contracts.
• The contractor is paid based on the actual costs plus a certain fee
either fixed or percentage of total cost in case of the cost of the
project doesn’t exceed certain target cost specified by the owner.
• There is risk carried by the contractor in case of increase in cost
of construction project.
• The contractor is also rewarded a percentage of any savings
between target and actual cost.


• Construction Contract Delivery Systems
• the way project owners together with project regulators and
financiers determine the assignment of responsibilities to

Project Stakeholders along the Construction Process.
• It is often determined during the basic planning phase of
the Construction Project.
• Project delivery systems are basically classified in to two
broad areas:
a) Force Account and
b) Outsourced.

Construction Contract Delivery Systems
• Force Account • Outsourcing
• When the project owners • Design-Bid-Build (D-B-B)
engage themselves to • Design-Build (D-B)

undertake the project, it is • Construction Management (CM At Free &
At Risk)
called a force account
• Design –Build- Operate (D-B-O)
delivery system.
• Design-Build-Operate-Maintain (D-B-O-
• Such a system is often M)
promoted if the Project • Design-Build-Finance-Operate (D-B-F-O)
Owners believe that there is • Full Delivery or Program Management
a comparative advantage • Build-Own-Operate (B-O-T)
in cost time & quality. • Build Own Operate Transfer(B-O-O-T)


• Categories for Outsourcing Delivery Methods
• Based on: Integration, Segmentation & Financing
Integrated Process Delivery • External Financing

Methods Methods
Design-Build-Operate • Design-Build-Finance-Operate
Design-Build-Operate-Maintain • Build-Own-Operate
Design-Build-Finance-Operate • Build-Own-Operate-Transfer
• Segmented Delivery Methods
• Design-Bid-Build
• Design-Build
• Construction Management
• Pure Operations & Maintenance (O&M)

• Design-Bid-Build
• After Project Owners did prepare the Basic Planning that identifies construction project
programs, they call upon the participation of Design and/or Supervision Consultants.
• This Consultant will carry out the design together with the necessary tender documents
which will be the basis for tendering to select Contractors.
• This process is called Design-Bid-Build and hence the name for such delivery system.
• Advantages • Disadvantages
• Long history of acceptance • Innovation not optimized
• Usually cost overruns
• Open competition
• Disputes between parties
• Distinct roles are clear • Client retains risks
• Owner flexibility • Usually low bid-incentive for change orders
• Easy to tender • Owner responsible for errors & omissions


• Design-Build or Turnkey
• Design Build reduces numbers of procurement processes
engaged in the fragmented process and employ only one

procurement process and a single contractor to provide the entire
Construction Implementation Process (Design & Construction
Implementations).
• In this arrangement, both the design & construction liability rests
with the Contractor.
• In the design-build process, the contracting parties:
• There is lack of an independent certification role in the contract.
• There is no architect or contract administrator to settle differences.
• There is no independent quantity surveyor responsible for
preparing the basis up on which contractors tender.

• Design-Build or Turnkey…
• Advantages • Disadvantages
• Single source responsibility both for design • Limiting competition

& construction • High tendering costs
• Integrating design & construction • New method &
• Reduction in administration unfamiliarity
• Innovation
• Client needs quicker
• Cost savings
• Constructability optimized decision making
• Most risks transferred to the design-builder • Clients bringing design
• Usually guaranteed maximum price (GMP) requirements(30%)(reduce
• Design reflects s design innovation)


• Construction Management (CM)
• Under Construction Management, the Owner contracts separately,
but somewhat simultaneously, with a design consultant and with a

firm whose primary expertise is construction (the Construction
Manager).
• The owner procures the management services of the Construction
Manager (in most cases a general contracting construction firm)
early in the design phase.
• CM is of two types:
• CM At Free/as Agent &
• CM At Risk/as Constructor.
• This distinction determines the contractual approach to CM.

• Construction Manager (CM) as Agent
• This is a form of CM under which the Construction Manager acts as an agent of,
and advisor to, the Owner.

• The Owner enters in to multiple trade contracts with the trade contractors
& suppliers.
• The Construction Manager is retained on a fee for services basis & acts on the
Owner’s behalf in managing & coordinating the trade contracts in the best
interests of the Owner.
• The Owner retains all of the contracting risks inherent in each of the trade
contracts.
• It essentially involves the Owner acting as its own general contractor, with the
assistance of a Construction Manager.
• This form of CM is sometimes also referred to as the “CM as Advisor” or “owner
contacted form of CM”.


• Construction Manger (CM) At Risk (as Constructor)
• This is a form of CM under which the Construction Manager
enters in to multiple trade contracts with the trade contractors

& suppliers.
• The Construction Manager assumes responsibility for the
performance of the trade contracts (subcontracts) much as a
general contractor under the traditional method, and is paid for the
trade contract work on a cost reimbursable basis.
• The Construction Manager may, or may not, also provide a
guaranteed maximum price & schedule to the Owner under a cost
plus type of arrangement, or enter into a stipulated price
contract, when the design is sufficiently complete.

Advantages Disadvantages
CM At Free CM At Free
• Provides a managing & administering for all phases of a • No contractual relationship with trade
project;
contractors;
• Treats planning, design, construction as an integrated
tasks; • No contractual responsibility for
• Some costs & schedule control; outcomes of a project;
CM At Risk • Client retains the risks;
• Good for clients with insufficient staff; CM At Risk
• Owner flexibility; • Duplication of administration & additional
• Responsible for time & cost overrun; paperwork;
• Holds & manages the trade contractors; • More paper work for the client;
• Constructability design review; • Some duplication of administration;
• Same legal position as a General Contractor; • Fast tracking difficult to control with designer
• Provides a guaranteed maximum price (GMP); & CM;
• Works closely as a teaming effort & encouraging • Sometimes difficult to manage all phased
partnering & trust; packages with costs, changes & schedules;


• Design-Build-Operate (D-B-O)
• According to FIDIC, the D-B-O approach to contracting combines
design, construction, and long term (ex. 20 years) operation

(and maintenance) of a facility in to one single contract awarded
to a single contractor (who will usually be a joint venture or
consortium representing all the skills for in a D-B-O arrangement).
• The FIDIC has now prepared conditions of contract which
facilitate the D-B-O process.

• Advantages of D-B-O
• Time
• With possibilities to overlap some design & build activities, it will be

possible to minimize delays & optimize the smooth flow of
construction activities.
• Finance
• With cost restraints & commitments & other risks being carried by the
contractor, there is less risk of price over-run.
• Quality
• With the contractor responsible for 20 years operation, he has an interest
to design & build quality plant with low operation & maintenance costs.
• Not only will then plant be “fit for purpose” but it will be built to last.


• Full Delivery or Program Management
• Under full delivery method, the selected contractor shall under
take the whole range of activities from thought to finish &

operation inclusive of maintenance.
• The possible activities include:
• Planning & acquisition;
• Finance;
• Design;
• Construction;
• Operation;
• Maintenance;
• Upkeep & Improvements;

• Full Delivery or Program Management …
• Advantages • Disadvantage
• Shorter time to project competition; • Difficult to tender & not

• Fully integrated process from project knowing the costs;
inception;
• Compatibility issues wit
• Maximization of planning & reduction
of problems during execution; client;
• Knowledgeable alternative funding • Quality based selection
sources; process(Negotiated);
• Good for large & complex projects; • Client needs to make
• Single source expertise; decisions quicker;


• Build-Operate-Transfer (BOT)
• BOT is a form of procurement and contract delivery system that
promotes Public Private Partnership ( PPP) in which a private

company is contracted to finance, design, construct, operate for a
certain period ( usually 10 years) and transfer the facility to the
Project Owner.
• The typical BOT project contract is the process whereby a
government grants a concession to a project development
company to develop & operate what would normally be a public
sector project, for a given period of time known as the
concession period.
• BOT project involves a potentially complex contractual structure.

Conditions of Contract with respect to the Contract Delivery Systems
• Design-Bid-Build:
• The Ministry of Works & Urban Development Conditions of Contract for Construction
Works(1994), under which the contractor is responsible for construction;
• The PPA Conditions of Contract for Works (2011), under which the contractor is
responsible for construction;
• FIDIC Conditions of Contract for Construction for Building and Engineering Works
(1999 the New Red Book) under which the contractor is responsible for construction;
• FIDIC MDB Harmonized Edition 2006 Conditions of Contract for Construction(the Red
Book) under which the contractor is responsible for construction;


Conditions of Contract with respect to the Contract Delivery Systems…
• Design-Build
• FIDIC Conditions of Contract for plant and Design –Build for Electrical & Mechanical
Plant, and for Building & Engineering Works (the New Yellow Book 1999) under which
the contractor is responsible both for design & construction.
• Engineer-Procure-Construct (EPC)
• FIDIC Conditions of Contract for EPC/Turnkey Projects (the Silver Book, 1999), under
which the contractor is responsible for design, construction and/or financing, operation.
This may also be adaptable to BOT & other related arrangements.
• Design-Build-Operate
• The FIDIC New Conditions of Contract for Design Build & Operate, under preparation,
under the intended contractual arrangement, the contractor is to be responsible for
design, build & operate a given facility.
2.4. Local Construction Contracts and Laws

• Public Procurement Agency (PPA-2011)
• SBD Consultancy
• Standard Bidding Document For Procurement of Consultancy Services Request for Proposals
(RFP) National Competitive Bidding (NCB)
• Standard Bidding Document For Procurement of Consultancy Services Request for Proposals
(RFP) International Competitive Bidding (ICB)
• SBD Works
• Standard Bidding Document (SBD) For Procurement of Works For International Competitive
Biddings (ICB)
• Standard Bidding Document (SBD) For Procurement of Works For National Competitive Biddings
(NCB)
• SBD Goods
• Standard Bidding Document (SBD) For Procurement of Goods and Related Services For
International Competitive Biddings (ICB)
• Standard Bidding Document (SBD) For Procurement of Goods and Related Services For National
Competitive Biddings (NCB)
• MINISTRY OF WORKS AND URBAN DEVELOPMENT STANDARD
CONDITIONS OF CONTRACT FOR CONSTRUCTION OF CIVIL
WORK PROJECTS (DECEMBER, 1994)

2.4. Local Construction Contracts and Laws

• PPA 2011 Standard Bidding Document (SBD) – General Structure
Part 1 Bidding Procedures I
Section 1. Instructions to Bidders I

Section 2. Bid Data Sheet II
Section 3. Evaluation Methodology and Criteria III
Section 4. Bidding Forms IV
Section 5. Eligible Countries V
Part 2 Schedule of Requirement VI
Section 6. Schedule of Requirements VI
Part 3 Contract VII
Section 7. General Conditions of Contract VII
Section 8. Special Conditions of Contract VIII
Section 9. Contract Forms IX
2.4. Local Construction Contracts and Laws…

PPA-2011: Basic Structures
General Conditions of Contract: WORKS- General Conditions of Contract: Consultancy Services
National/International Competitive Bidding National/International Competitive Bidding

A. General Provisions (Clause 1-6) A. General Provisions (Clause 1-6)
B. The Contract (Clause 7-29) B. The Contract (Clause 7-30)
C. Obligations of the Public Body (Clause 30-33) C. Obligations of the Public Body (Clause 31-35)
D. Obligations of the Contractor (Clause 34-58) D. Payments to the Consultant (Clause 36-42)
E. Payments to the Contractor (Clause 59-69) E. Obligations of the Consultant (Clause 43-55)
F. Performance of the Contract (Clause 70-83) F. Performance of the Contract (Clause 56-68)
G. Acceptance and Defects Liability (Clause 84-89) G. Fairness and Good Faith (Clause 69-70)

PPA 2011 –Works…

• Obligations of the Public Body
• Clause 30 Assistance and Supply of Documents
• Sub Clause 30.1- copies of laws, regulations and information on local

customs, orders or by-laws of the Federal Democratic Republic of
Ethiopia, which may affect the Contractor in the performance of his
obligations under the Contract.
• Sub Clause 30.2- all efforts necessary to facilitate the procurement by
the Contractor of:
a) all required visas and permits, including work and residence permits, and
such other documents as shall be necessary to enable the Contractor, Sub-
Contractors or Personnel to carry out the Works;
b) any such other assistance as may be specified in the SCC.

• Obligations of the Public Body…
• Clause 31. Access to the Site
• Sub Clause 31.1 The Public Body shall, in due time and in conformity
with the progress of the works, place the site and access thereto at the
disposal of the Contractor in accordance with the program of
implementation of tasks


• Clause 32 Payment
• Sub Clause 32.1- the Public Body shall make to the Contractor such
payments and in such manner as is provided by GCC Paragraph E
(Payments to the Contractor) of this Contract.
• Sub Clause 59.1 currency as specified in the SCC.
• Clause 6o Advance Payment
• Clause 61. Retention Monies
• Clause 62. Price Adjustments
• Clause 64. -Interim payment
• Clause 65 -Final Statement of Account

• Clause 6o Advance Payment
• Sub Clause 60.1 issue an advance payment which shall not exceed
30% of the total contract price.
• (a) The conclusion of the Contract;
• (b) Provision of the Performance Security in accordance
with GCC Clause 58; and by
• (c) Provision of an advance payment security in an amount
equal to the advance payment they receive


• Clause 61. Retention Monies
• Sub Clause 61.1 retain as stipulated in the SCC, provided that it

shall, in no case, exceed 10% of the contract price.
• Sub Clause 61.2 Can be substituted by a retention guarantee
• Sub Clause 61.3 shall be released within 45 days of the issuing
of the signed final statement of account
• 62. Price Adjustments
• Sub Clause 62.1 Adjustments of contract prices shall be allowed after twelve
(12) months from the effective date of the Contract where it is verified that the
performance of the contract requires more than 18 months.

• Clause 64. -Interim payment
• Sub Clause 64.1 -Contractor shall submit monthly statement for

interim payment to the Engineer
• Sub Clause 64.5 Within 30 days of receipt of the said statement
for interim payment, it shall be approved or amended in such
manner that, in the Engineer's opinion, the application reflects the
amount due to the Contractor in accordance with the Contract.


• Clause 65. Final Statement of Account
• Sub Clause 65.1 Unless otherwise agreed in the SCC, the Contractor
shall not later than 90 days after the issue of the Final Acceptance
Certificate referred to in GCC Clause 89, submit to the Engineer a
draft final statement of account with supporting documents
showing in detail the value of the work done in accordance with
the Contract.
• Sub Clause 65.2 Within 60 days after receipt of the draft final
statement of account and of all information reasonably required
for its verification, the Engineer shall prepare the final statement of
account, which determines:

• Clause 33 Delayed Payments to the Contractor's Staff
• Sub Clause 33.1- Where there is a delay in the payment to the

Contractor's employees of wages, salaries, allowances and
contributions,
• the Public Body may give notice to the Contractor that within 15
days of the notice the Contractor has to pay such wages, salaries,
allowances and contributions.


• The Engineer
• Clause 30.3- the Engineer shall provide to the Contractor a copy of the
drawings prepared for the implementation of tasks as well as two
copies of the specifications and other contract documents

• within 30 days of the signing of the Contract,
• free of charge,.
• Clause 30.5- The Engineer shall have authority to issue to the
Contractor administrative orders incorporating such supplementary
documents and instructions as shall be necessary for the proper and
adequate execution of the works and the remedying of any defects
therein.

• Obligations of the Contractor
• PART D - Obligations of the Contractor


• Obligations of the Contractor…
• Clause 34. General Obligations

• Sub Clause 34.1 shall design the works to the extent
stated in the Contract, and execute, complete and remedy any
defects in the works.
• with due care and diligence, and in accordance with the
provisions of the Contract
• shall provide all control and supervision of the works,
personnel, materials, plant, equipment and all other items

• Sub Clause 34.2: shall take full responsibility for the adequacy,
stability and safety of all operations and methods of construction

under the Contract.
• Sub Clause 34.3: shall respect and abide by all laws and regulations
in force in the Federal Democratic Republic of Ethiopia and shall ensure
that his personnel, their dependants, and his local employees also
respect and abide by all such laws and regulations.
• shall indemnify the Public Body against any claims and
proceedings arising from any infringement by the Contractor, its
Sub-Contractors or their employees of such laws and regulations.


• Sub Clause 34.4
• The Contractor shall ensure that Works conform to applicable

environmental and quality standards, that no chemical or
other product/equipment is used in such a way as to cause
negative impact on the environment in general and
occupational health hazards and shall employ the most recent
technology, safe and effective equipment, machinery,
materials and methods, as necessary.

• Sub Clause 34.5
• The Contractor shall obtain the Public Body's prior approval

in writing before taking any of the following actions:
• (a) Entering into a subcontract for carrying out any part of
the Works, it being understood that the Contractor shall
remain fully liable for carrying out the Works by the Sub-
Contractor;
• (b) Any other action that may be specified in the SCC.


• Sub Clause 34.6
• The Contractor shall comply with any administrative orders given by

the Engineer.

• Sub Clause 34.7
• The Contractor shall treat all documents and information received in

connection with the contract as private and confidential, and shall not,
save in so far as may be necessary for the purposes of the
performance thereof, publish or disclose any particulars of the
contract without the prior consent in writing of the Public Body or the
specific contract manager after consultation with the Public Body.
• If any disagreement arises as to the necessity for any publication or
disclosure for the purpose of the contract, the decision of the Public
Body shall be final.

2.4. Local Construction Contracts and Laws…

MoWUD: Basic Structures
MINISTRY OF WORKS AND URBAN DEVELOPMENT STANDARD CONDITIONS OF CONTRACT FOR
CONSTRUCTION OF CIVIL WORK PROJECTS (DECEMBER, 1994)
 DEFINITIONS AND INTERPRETATION  PLANT, TEMPORARY WORKS AND

 ENGINEER AND ENGINEER'S REPRESENTATIVE MATERIALS
 ASSIGNMENT AND SUB-LETTING  PROVISIONAL SUMS
 CONTRACT DOCUMENTS  NOMINATED SUB-CONTRACTORS
 GENERAL OBLIGATIONS  CERTIFICATES AND PAYMENT
 MATERIALS AND WORKMANSHIP  REMEDIES AND POWERS
 COMMENCEMENT TIME AND DELAYS  SPECIAL RISKS
 MAINTENANCE AND DEFECTS  FRUSTRATION
 ALTERATIONS, ADDITIONS AND OMISSIONS  SETTLEMENT OF DISPUTES
 NOTICES
 CHANGES IN COST AND LEGISLATION
 OTHER MATTERS
2.5. International Construction Contracts and Laws

• There are different standard conditions of contract developed by
certain institutions or recommended by international financing or
development institutions;
• by FIDIC (Fédération internationale des Ingénieurs - Conseils)

• by European Union
• by African Development Bank
• by the World Bank
• Standard Conditions of Contract developed by FIDIC:
• Conditions of Contract for Civil Engineering Works (Red Book);
• Conditions of Contract for Electrical & Mechanical Works (Yellow Book);
• Conditions of Sub-Contract for Works of Civil Engineering Construction;
• Conditions of Contract for Design-Build & Turnkey (Orange Book);
• Conditions of Contract for Consultancy Services (White Book);
• The
March 2023 Sub-Consultancy Agreement;


• By European Union (through the European Development Fund
(EDF);
• General Regulations for Works, Supply & Service Contracts financed by
the EDF;
• General Conditions for Works Contracts financed by EDF;
• General Conditions for Supply Contracts financed by EDF;
• General Conditions for Service Contracts financed by EDF;
• By the African Development Bank/Fund (for the procurement of
Works, Goods & Services);
• By the World Bank. These are Standard Bidding Documents for
the procurement works of civil engineering construction.

• The FIDIC (Federation International Des Ingenieurs-Conseils)
• an international federation of national association of independent
consulting engineers.
• founded in 1913 by five national associations of independent consulting

engineers within Europe.
• The objectives of forming the federation were to promote in common the
professional interests of the member associations and to disseminate
information of interest to members of its component national
associations;
• It has begun to prepare & disseminate standard conditions of contract
since 1957 for international use.
• The FIDIC Conditions of Contract is based on the concepts of the
Common Law Legal System.
• Recently (1999 & 2006) FIDIC has published many conditions of
contract.


FIDIC
Fédération internationale des Ingénieurs - Conseils
•Contract Conditions for the Construction Market:

• Red Book
• Yellow Book
• Silver Book Editions: 1987, 1999 (2006)
• Green Book
• White Book
• Orange Book
FIDIC: Multilateral Development

Bank(MDB) Harmonized Edition,
June, 2010, FIDIC.

Conditions of Contract for
Construction: For Building
and Engineering Works
Designed by the Employer
• Important Features
• Delivery System: design, bid & build
(DBB).
• the payment system followed being ad
measurement or BOQ based;


FIDIC: Structure/ Contents of MDB-FIDIC
(2010) Edition
The MDB-FIDIC (2010) Edition is divided into Twenty
Clauses/ sections:
• Clause 1: General Provisions

• Clause 2: The Employer
• Clause 3: The Engineer
• Clause 4: The Contractor
• Clause 5: Nominated Subcontractors
• Clause 6: Staff & Labour
• Clause 7: Plant, Materials & Workmanship
• Clause 8: Commencement, Delays & Suspension
• Clause 9: Tests on Completion

(2010) Edition…
• Clause 10: Employer’s Taking Over
• Clause 11: Defects Liability

• Clause 12: Measurement and Evaluation
• Clause 13: Variations & Adjustments
• Clause 14: Contract Price & Payment
• Clause 15: Termination by Employer
• Clause 16: Suspension & Termination by Contractor
• Clause 17: Risk & Responsibility
• Clause 18: Insurance
• Clause 19: Force Majeure
• Clause 20: Claims, Disputes & Arbitration


(2010) Edition
• This condition of contract has been

supported by two appendices.

• The appendices are related to
Dispute Board.
• General Conditions of Dispute
Board Agreement; and
• Procedural Rules; i.e. in relation
to the Dispute Board;
Part 2- Contractual Duties of the 3C

under MDB-FIDIC (2010) Edition

a) Rights and Obligations the Client/
Employer


Part 2- Contractual Duties of the 3C under FIDIC…
• Obligations the Client/Employer…
• Giving Possession of the Site & Access thereto
• Clause 2.1 providing access to the Site to the Contractor;
• However, the Employer may withhold any such right or possession

until the Performance Security has been received.
• Clause 4.10 providing Site Data to the Contractor;
• all relevant data in the Employer’s possession on sub-surface and
hydrological conditions at the Site, including environmental
aspects.
• Clause 4.13 providing rights of way & facilities to the Contractor;
• provide effective access to and possession of the Site including
special and/or temporary rights-of-way which are necessary for the
Works.

• Appointing an Engineer
• Clause 3.1
• The Employer shall appoint the Engineer who shall carry

out the duties assigned to him in the Contract.


• Supplying Instructions to the Carrying out of the Works
(i.e. instructions, information, consents, approvals,
notices…)
• Clause 1.13 (a)
• Obtaining the planning, zoning, building permits or similar
permissions for the Permanent Works, and any other
permissions described in the Specification as having been
(or to be) obtained by the Employer; and
• the Employer shall indemnify and hold the Contractor
harmless against and from the consequences of any
failure to do so;

• Payment Obligation
• Payment of the Contract Price
• Clause 14.2 cum Clause 14.7(a) in relation to Advance Payment

(the Contractor should submits a guarantee);
• The Employer shall pay to the Contractor:
• (a) the first instalment of the advance payment within 42 days
after issuing the Letter of Acceptance or within 21 days after
receiving the documents in accordance with Sub-Clause 4.2
[Performance Security] and Sub-Clause 14.2 [Advance
Payment], whichever is later;
• Clause 14.7(b) in relation to Interim Payment;
• Clause 14.13 cum Clause 14.7(c ) in relation to Final Payment;
• Clause 14.9 in relation to the first half of the Retention Money;
• Clause 14.9 in relation to the second half of the Retention Money;


•Other Payment Obligations…
• due to delay
• in issuing drawings & instructions by the Engineer;

• caused in providing access to the Site;
• caused by unforeseeable physical conditions;
• due to error in Setting out;
• discovery & reporting of Fossils;
• Testing for which the Employer is responsible;
• suspension of Works;
• interference with Tests on Completion;

• Other Payment Obligations …
• further tests for which the Employer is responsible;
• Adjustment for Changes in Legislation;

• Adjustment for Changes in Cost;
• additional payment to the Contractor derived from savings due
to the effects of Value Engineering;
• financing charges in case of delay in payment;
• entitlement to a balance of costs, if any, in case of termination
of the Contract by the Employer due to the default of the
Contractor,


• Other Payment Obligations…
• Clause 1.9(b) payment of cost & profit due to delay in issuing drawings &
instructions by the Engineer;
• Clause 2.1(b) payment of cost & profit due to delay caused in providing access
to the Site;
• Clause 4.7 payment of cost & profit due to error in Setting out;
• Clause 4.12(b) payment of cost due to delay caused by unforeseeable physical
conditions;
• Clause 4.24(b) payment of cost in case of discovery & reporting of Fossils;
• Clause 7.4(b) payment of cost in case of Testing for which the Employer is
responsible;
• Clause 8.9(b) payment of cost in case of suspension of Works;
• Clause 10.3(b) payment of cost & profit in case of interference with Tests on
Completion;

• Clause 11.6 payment of cost in case of further tests for which the Employer
is responsible;
• Clause 13.7 cum 14.3(b) payment of cost in case of Adjustment for Changes
in Legislation;
• Clause 13.8 payment of cost in case of Adjustment for Changes in Cost;
• Clause 14.3(a) cum Clause 13.2 payment of additional payment to the
Contractor derived from savings due to the effects of Value Engineering;
• Clause 14.8 payment of financing charges in case of delay in payment;
• Clause 15.4( c ) entitlement to a balance of costs, if any, in case of
termination of the Contract by the Employer due to the default of the
Contractor, after completion of the Works by the Employer or another
contractor;


• Clause 16.1(b) payment of cost & profit in case of suspension &
reduction of the progress of the Works by the Contractor;

• Clause 16.4 payment of any loss or damage sustained by the
Contractor due to termination of the Contract by the Contractor due to
the default of the Employer;
• Clause 17.4(b)cum Clause 17.3(f) & (g) payment of cost & profit in
case of Employer’s risks;
• Clause 19.7 payment of costs in relation to Plant, Materials, other
costs & liabilities, cost of removal of the Temporary Works, cost of the
repatriation of Contractor’s Personnel;
• Clause 20.1 cum Clause 14.3 payment of claims;

• Taking Over / Acceptance Obligation
• Clause 10
• relative to actual Taking Over;

• Clause 10.1 Taking Over of the Works and Sections
• The Contractor may apply by notice to the Engineer for a Taking-Over Certificate not
earlier than 14 days before the Works will, in the Contractor’s opinion, be complete and
ready for taking over.
• The Engineer shall, within 28 days after receiving the Contractor’s application:
• (a) issue the Taking-Over Certificate to the Contractor, stating the date on which the
Works or Section were completed in accordance with the Contract,
• (b) reject the application, giving reasons and specifying the work required to be done by
the Contractor to enable the Taking-Over Certificate to be issued.
• Clause 10.2 Taking Over of Parts of the Works
• The Engineer may, at the sole discretion of the Employer, issue a Taking-
Over Certificate for any part of the Permanent Works.


• Taking Over / Acceptance Obligation…
•Clause 10
• Clause 10.3 Interference with Tests on Completion

• If the Contractor is prevented, for more than 14 days,
from carrying out the Tests on Completion by a cause for
which the Employer is responsible, the Employer shall be
deemed to have taken over the Works or Section (as the
case may be) on the date when the Tests on Completion
would otherwise have been completed.

• Supplying instructions, information, consents, approvals, notices…
• Clause 2.2 - Laws, permits, licenses or approvals;
• The Employer shall provide, at the request of the Contractor, such

reasonable assistance as to allow the Contractor to obtain properly:
• (a) to give copies of the Laws of the Country which are relevant to
the Contract but are not readily available, and
• (b) to issue any permits, licenses or approvals required by the
Laws of the Country:
i. which the Contractor is required to obtain under Sub-Clause 1.13
[Compliance with Laws],
ii. for the delivery of Goods, including clearance through customs, and
iii. for the export of Contractor’s Equipment when it is removed from the
Site.


• Supplying instructions, information, consents, approvals,
notices…
•Clause 2.4
• Submission of evidence or information on the
Employer’s financial arrangement;
•Clause 2.5
• Notice of claim by the Employer;
•Clause 4.2
• Approval of the form & financial institution for the
Performance Security;

• Clause 15.2 To Issue Notice of termination;
• The Employer shall be entitled to terminate the Contract if the Contractor:

• (a) fails to comply with Sub-Clause 4.2 [Performance Security] or with a notice under Sub-
Clause 15.1 [Notice to Correct],
• (b) abandons the Works or otherwise plainly demonstrates the intention not to continue
performance of his obligations under the Contract,
• (c) without reasonable excuse fails:
• (i) to proceed with the Works in accordance with Clause 8 [Commencement, Delays and Suspension],
or
• (ii) to comply with a notice issued under Sub-Clause 7.5 [Rejection] or Sub-Clause 7.6 [Remedial
Work], within 28 days after receiving it,
• (d) subcontracts the whole of the Works or assigns the Contract without the required
agreement,
• (e) becomes bankrupt or insolvent, goes into liquidation, or
• (f) gives or offers to give (directly or indirectly) to any person any bribe, gift, gratuity,
commission or other thing of value, as an inducement or reward:


• Clause 15.2 Notice of termination;
• (a) fails to comply with Sub-Clause 4.2 [Performance Security] or with a notice under Sub-Clause 15.1
[Notice to Correct],
• The Contractor shall deliver the Performance Security to the Employer within 28 days after receiving the Letter of
Acceptance (Sub-Clause 4.2 ).
• (b) abandons the Works or otherwise plainly demonstrates the intention not to continue performance
of his obligations under the Contract,
• (i) to proceed with the Works in accordance with Clause 8 [Commencement, Delays and Suspension]
• Clause 8.1 Commencement of Works -Except as otherwise specified in the Particular Conditions of Contract, the
Commencement Date shall be the date at which the following precedent conditions have all been fulfilled and the Engineer’s
notification recording the agreement of both Parties on such fulfilment and instructing to commence the Work is received by
the Contractor:
• Clause 8.2 Time for Completion- The Contractor shall complete the whole of the Works, and each Section (if any), within the
Time for Completion for the Works
• Clause 8.3 Programme- The Contractor shall submit a detailed time programme to the Engineer within 28 days after
receiving the notice under Sub-Clause 8.1 [Commencement of Works].
• Clause 8.8 Suspension of Work- The Engineer may at any time instruct the Contractor to suspend progress of part or all of
the Works. During such suspension, the Contractor shall protect, store and secure such part or the Works against any
deterioration, loss or damage.


• (ii) to comply with a notice issued under Sub-Clause 7.5 [Rejection] or Sub-Clause 7.6 [Remedial Work], within 28
days after receiving it,
• 7.5 Rejection- If, as a result of an examination, inspection, measurement or testing, any Plant, Materials or workmanship is
found to be defective or otherwise not in accordance with the Contract, the Engineer may reject the Plant, Materials or
workmanship by giving notice to the Contractor, with reasons. The Contractor shall then promptly make good the defect and
ensure that the rejected item complies with the Contract. If the Engineer requires this Plant, Materials or workmanship to be
retested, the tests shall be repeated under the same terms and conditions. If the rejection and retesting cause the Employer to
incur additional costs, the Contractor shall subject to SubClause 2.5 [Employer’s Claims] pay these costs to the Employer.
• 7.6 Remedial Work: Notwithstanding any previous test or certification, the Engineer may instruct the Contractor to:
• (a) remove from the Site and replace any Plant or Materials which is not in accordance with the Contract,
• (b) remove and re-execute any other work which is not in accordance with the Contract, and
• (c) execute any work which is urgently required for the safety of the Works, whether because of an accident,
unforeseeable event or otherwise.
• The Contractor shall comply with the instruction within a reasonable time, which shall be the time (if any) specified in
the instruction, or immediately if urgency is specified under sub-paragraph (c).
• If the Contractor fails to comply with the instruction, the Employer shall be entitled to employ and pay other persons to
carry out the work. Except to the extent that the Contractor would have been entitled to payment for the work, the
Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay to the Employer all costs arising from this failure.


• Supplying instructions, information, consents, approvals,
notices…

• (d) subcontracts the whole of the Works or assigns the Contract without the required
agreement,
• (e) becomes bankrupt or insolvent, goes into liquidation, has a receiving or
administration order made against him, compounds with his creditors, or carries on
business under a receiver, trustee or manager for the benefit of his creditors, or if any
act is done or event occurs which (under applicable Laws) has a similar effect to any
of these acts or events, or
• (f) gives or offers to give (directly or indirectly) to any person any bribe, gift,
gratuity, commission or other thing of value, as an inducement or reward:
• (i) for doing or forbearing to do any action in relation to the Contract, or
• (ii) for showing or forbearing to show favour or disfavour to any person in relation to the
Contract,

•Clause 18.1
• in relation to approval of the insurance institution &

form of the insurance policy;
•Clause 20.4
• in relation to notice of dissatisfaction with decision of
the Dispute Board (DB);


• Not Interfering with the Progress of the Works
• Clause 1.13
• failure to secure the required planning, zoning & other permits;

• Clause 2.1
• failure to give possession of Site & access thereto;
• Clause 4.6 Co-operation
• not to cause delay to the Contractor due to the Employer,
Employer’s Personnel & Employer’s other contractors;
• Clause 1.9 Delayed Drawings or Instructions
• issuing instruction or drawing by the Engineer;
• Clause 13.3
• making variations or other substantive change to the quantity of
Works;

• Nomination of Specialist Sub-contractors & Suppliers
• Clause 5 cum Clause 13.5
• Permitting the Contractor to Carryout the Whole of the Works

• Clause 12.4 ordering omission of the Works not for the purpose of awarding
the omitted part to be completed by other contractors or itself;
• Clause 13.1(d) in relation to omission of works unless it is to be carried out by
others;
• Clause 4.1 in relation to the Contractor’s general obligation to execute &
complete the whole of the Works & not to interfere therewith by the Employer;
• Supplying Materials & Carrying out Works, if these form Part of the
Works
• Clause 4.6 in relation to employing other contractors to carry out works not
forming part of the Contract with the Contractor;
• Clause 4.20 in relation to supplying Employer’s Equipment & Free-Issue –
Materials to the Contractor,
March 2023
indeed against payment;


• Indemnity Obligation
• Clause 4.2 in relation to Performance security resulting from a claim
under the Performance Security to the extent to which the Employer was
not entitled to make the claim there under;

• Clause 17.1 in relation to indemnity relative to bodily injury, sickness,
diseases or death, for which the Employer is responsible under the
Contract;
• Clause 17.5 in relation to Intellectual & industrial property
rights(infringement of rights);
• Insurance Obligation
• Clause 17.3 in relation to Employer’s Risks (if the test of insurability has
passed & capable of insuring);
• Clause 18.1 in relation to general requirements for insurance, the
Employer as “insuring party” under the Contract;

• Rights the Client/Employer
•Clause 3.4 Replacement of the Engineer
• If the Employer intends to replace the Engineer, the
Employer shall, not less than 21 days before the intended

date of replacement, give notice to the Contractor of the
name, address and relevant experience of the intended
replacement Engineer.


• Rights the Client/Employer
• Taking Contractual Remedies
• Delay Damages
• Clause 8.7 in relation to delay by the Contractor in completing the Works within the time for
completion or as extended;
• This is equivalent to liquidated damages;
• Indemnities
• Clause 1.13 in relation to the Contractor’s failure to comply with laws;
• Clause 4.14 in relation to the Contractor’s responsibility for the acts or defaults of any sub-
contractor, his agents or employees;
• Clause 4.16(c) in relation to the transport of Goods;
• Clause 17.1 in relation to bodily injury, sickness, diseases, or death of any person …;
• Clause 17.5 in relation to claims pertaining to intellectual & industrial property rights;
• Deduction from the Contract Price
• Clause 4.19 in relation to the cost of electricity, water & gas;
• Clause 4.20 in relation to Employer’s Equipment & Free-issue-Materials;
• Clause 15.4(c) in relation to payments (of the balance, if any) after termination of the
Contract by the Employer due to default of the Contractor;
• Clause 11.4(c) in relation to failure to remedying defects by the Contractor;

• Rights the Client/Employer…
• Taking Contractual Remedies …
• Time Extension
• Clause 11.3 in relation to Defects Notification Period;

• Suspension
• Clause 8.8 in relation to suspension of the Performance of the Works;
• Termination
• Clause 11.4(c ) in relation to Tests on Completion;
• Clause 15.2 in relation to defaults of the Contractor;
• Clause 15.2(f) in relation to corruptive practices of the Contractor;
• Clause 15.6 in relation to corruptive practices of the Contractor;


Rights and Obligations the Engineer

• Obligations of the Engineer…
• Clause 3.1 Engineer’s Duties and Authority
• the Engineer shall be deemed to act for the Employer;
• The Engineer shall obtain the specific approval of the Employer before
taking action under the following Sub-Clauses of these Conditions:
• (A) Sub-Clause 4.12: agreeing or determining an extension of time and/or
additional cost.
• (B) Sub-Clause 13.1: instructing a Variation, except;
• (i) in an emergency situation as determined by the Engineer, or
• (ii) if such a Variation would increase the Accepted Contract Amount by less
than the percentage specified in the Contract Data.
• (C) Sub-Clause 13.3: approving a proposal for Variation submitted by the
Contractor in accordance with Sub-Clause 13.1 or 13.2.
• (D) Sub-Clause 13.4: specifying the amount payable in each of the applicable
currencies.


• Clause 3.1 Engineer’s Duties and Authority…
• If an emergency occurs affecting the safety of life or of
the Works or of adjoining property, he may, without

relieving the Contractor of any of his duties and
responsibility under the Contract, instruct the
Contractor to execute all such work or to do all such
things as may, in the opinion of the Engineer, be
necessary to abate or reduce the risk.
• The Engineer shall determine an addition to the Contract
Price, in respect of such instruction, in accordance with
Clause 13 and shall notify the Contractor accordingly, with
a copy to the Employer.

•Clause 3.2 Delegation by the Engineer
•assign duties and delegate authority to assistants,
and may also revoke such assignment or

delegation.
• The assignment, delegation or revocation shall be in
writing and shall not take effect until copies have been
received by both Parties.
• the Engineer shall not delegate the authority to
determine any matter in accordance with Sub-Clause
3.5 [Determinations].


• Clause 3.3 Instructions of the Engineer
• The Engineer may issue to the Contractor (at any time) instructions
and additional or modified Drawings which may be necessary for
the execution of the Works and the remedying of any defects, all in
accordance with the Contract.
• The Contractor shall only take instructions from the Engineer, or
from an assistant.
• If an instruction constitutes a Variation, Clause 13 [Variations
and Adjustments] shall apply.
• Clause 13.3 Variation Procedure
• The Engineer shall, as soon as practicable after receiving such
proposal (under SubClause 13.2 [Value Engineering] or
otherwise), respond with approval, disapproval or comments.
• Each Variation shall be evaluated in accordance with Clause 12
[Measurement and Evaluation]

• Clause 12.3 Evaluation
• The Engineer shall proceed in accordance with Sub-Clause
3.5 [Determinations] to agree or determine the Contract

Price by evaluating each item of work,
• applying the measurement agreed or determined in
accordance with the above Sub-Clauses 12.1 and 12.2 and
the appropriate rate or price for the item.


• Rights of the Engineer…
• Clause 12.1 Works to be Measured
• The Engineer shall be give notice to the Contractor’s
Representative, and can get a person who shall:

• (a) promptly either attend or send another qualified
representative to assist the Engineer in making the
measurement, and
• (b) supply any particulars requested by the Engineer.

• Rights of the Engineer…
• Clause 13.1 Right to Vary
• Variations may be initiated by the Engineer at any time prior to issuing the Taking-
Over Certificate for the Works, either by an instruction or by a request for the
Contractor to submit a proposal.

• Each Variation may include:
• (a) changes to the quantities of any item of work included in the Contract (however,
such changes do not necessarily constitute a Variation),
• (b) changes to the quality and other characteristics of any item of work,
• (c) changes to the levels, positions and/or dimensions of any part of the Works,
• (d) omission of any work unless it is to be carried out by others,
• (e) any additional work, Plant, Materials or services necessary for the Permanent
Works, including any associated Tests on Completion, boreholes and other testing and
exploratory work, or
• (f) changes to the sequence or timing of the execution of the Works.


Rights and Obligations the Contractor

• Obligations of the Contractor
• Clause 4.1 Contractor’s General Obligations –Performance
• The Contractor shall
• design (to the extent specified in the Contract), execute and complete the Works in
accordance with the Contract and with the Engineer’s instructions, and shall remedy any
defects in the Works.
• provide the Plant and Contractor’s Documents specified in the Contract, and all
Contractor’s Personnel, Goods, consumables and other things and services
• responsible for the adequacy, stability and safety of all Site operations and of all
methods of construction.
• responsible for all Contractor’s Documents, Temporary Works, and such design of
each item of Plant and Materials as is required for the item to be in accordance with the
Contract.
• submit details of the arrangements and methods which the Contractor proposes to
adopt for the execution of the Works whenever required by the Engineer.


• Completion Obligation
• Basic Obligation
• Clause 4.1 During Performance Period

• Completion of the whole of the Works in accordance with the Contract up to Take Over(Clause 10) of the
Works
• Clause 11.1 During Defects Liability Period
• Executing outstanding works; and
• Remedying of defects & damages in the works;
• Extent of Completion Obligation
• Clause 15.1 to execute variations orders;
• Clause 17. 4 rectification of losses or damages to the works arising out of the Employer’s
Risks;
• Clause 7.6 executing remedial or urgent works;
• Clause 9.1 cum Clause 8.2(a) carrying out of works to achieve tests on completion for the
purpose of Taking Over (Clause 8.29b));

• Completion Obligation…
• Excuses from Completion Obligation
• Clause 19. 7 due to legal or physical impossibility;

• Clause 17. 3 in case of the occurrence of the Employer’s Risks;
• Clause 8.8 in case of suspension of the Works by the Employer;
• Clause 16.1 in case of legitimate suspension of the Works by the Contractor;
• Clause 16.2 in case of termination of the Contract by the Contractor due to the
default of the Employer;
• Clause 15.5 in case of termination of the Contract by the Employer for its
convenience;
• Clause 8.11 in case of termination of the Contract for the whole of the Works due to
prolonged suspension caused by the Employer;
• Clause 19.6 in case of optional termination of the Contract by the Contractor or by
the Employer due to prevention of performance by force majeure;


• Quality Performance Obligation
• Clause 4.1 & Clause 7.1 using materials, plant & workmanship
as provided in the Contract specifically in the Technical

Specifications;
• Timely Performance Obligation
• Commencement Clause 8.1 (Commencement of the Works);
• Progress: Clause 8.1 cum Clause 8.6 (Rate of Progress)
• Completion: Clause 8.2 (Time for Completion);
• Passing of Tests on Completion: Clause 9 (Tests on
Completion)

•Obligation to provide Securities

•Clause 4.2 in relation to Performance Security;
•Clause 14.2 in relation to Advance Payment

Guarantee;
•Clause 14.9 in relation to Retention Money
Guarantee;


• Obligation to provide Indemnities
• Clause 1.13 in relation to compliance with laws;
• Clause 4.14 in relation to avoidance of interference the convenience of the

public or the access to & use & occupation of all roads & footpaths…;
• Clause 4.16 in relation to transport of goods;
• Clause 17.1 in relation to bodily injury, sickness, diseases or death, of any
person whatsoever arising out of or in the course of or by reason of the
Contractor’s design(if any), the execution & completion of the Works &
remedying of any defects therein;
• Clause 17.5 in relation to intellectual & industrial property rights against &
from any other claim which arises out of or in relation to the manufacture,
use, sale or import of any Goods, or any design for which the Contractor is
responsible;

• Obligation to provide Insurance
• Clause 18.1 in relation to general requirements (choice of the
insurer, terms of insurance, making the insurance in the joint

name, providing the policy, providing evidence for the payment
of premium, use of the insurance money for the purpose of the
Contract,…) in providing specific insurance arrangement;
• Clause 18.2 in relation to insurance of Works & Contractor’s
Equipment;
• Clause 18.3 in relation to insurance against injury to persons
& damage to property;
• Clause 18.4 in relation to insurance for Contractor’s Personnel;


• Administrative Obligation
• Clause 1.6 entering into a Contract Agreement;
• Clause 1.7(a) securing prior consent for assignment from the Employer;
• Clause 3.5 duty to consult with the Engineer;
• Clause 4.4(b) securing prior consent from the Engineer for Sub-contracting;
• Clause 4.6 providing appropriate opportunities for the Employer’s Personnel and
any other contractors employed by the Employer & for personnel of public
authorities;
• Clause 6.1-making arrangement for the engagement of staff & labour;
• Clause 6.1 Affording opportunity of access to the Site to the Engineer, other
personnel & for the public authorities;
• Clause 7.8 payment of royalties;
• Clause 20.5 attempting amicable settlement;

• Obligation upon or after Completion
• Clause 11.1 remedying defects & completion of outstanding
works, if any;
• Clause 11.11 clearance of Site upon completion;
• Clause 14.10 submission of Statement at Completion to the
Engineer;
• Clause 14.11 submission of draft Final Statement to the
Engineer;
• Clause 14.11 and 14.12 submission of further information
relative to the finalization of the draft Final Statement;


• Rights of the Contractor…
• Clause 3.4 To raise objection during Replacement of the Engineer
• If the Contractor considers the intended replacement Engineer to be unsuitable, he has the
right to raise objection against him by notice to the Employer, with supporting
particulars, and the Employer shall give full and fair consideration to this objection.
• Contractual Remedies to obtain Cost
• Clause 1.9(b) due to delayed issuance of drawings & instructions to the Contractor
caused by the Engineer;
• Clause 2.1(b) due to delay caused in providing access to the Site caused by the
Employer(Initial Delay);
• Clause 4.7 due to delay suffered by the Contractor in case of error in setting out;
• Clause 4.12(b) due to delay caused by unforeseeable physical conditions;
• Clause 4.24(b) due to delay caused in case of discovery & reporting of fossils;
• Clause 7.4(b) due to delay suffered by the Contractor caused by the Employer in case of
testing;

• Contractual Remedies to obtain Cost…
• Clause 8.9(b) due to delay caused by the effect of suspension as ordered by the
Engineer;
• Clause 10.3(b) due to delay caused by the interference of the Employer with Tests on
Completion;
• Clause 11.6 due to incurring of costs by the Contractor with respect to repetition of
Tests;
• Clause 13.7 cum 14.3(b) due to incurring of cots in relation to adjustment for changes
in legislation;
• Clause 13.8 due to incurring of costs in relation to adjustment of changes in cost;
• Clause 14.3(a) cum Clause 13.2 entitlement to additional cost in case of cost
reduction in relation to Value Engineering;
• Clause 15.4( c ) getting the balance, if any, in relation to termination of the Contract
due to the default of the Contractor & the completion of the project by the Employer
or third part;


• Contractual Remedies to obtain Cost…
• Clause 16.1 (b) due to suspension of works by the Contractor, as caused
by the problem of payment & thereby incurred cost;

• Clause 16.1(b) due to reduction of the progress of the works by the
Contractor as caused by the problem of payment & thereby incurred cost;
• Clause 16.4 (c) due to termination of Contract by the Contractor due to the
default of the Employer & recovering costs incurred thereby;
• Clause 17.4(b) costs incurred due to consequences of the Employer’s
Risks;
• Clause 19.7 (b) entitlement to some payment in case of release from
performance of the Contract (Frustration);
• Clause 20.1 cum Clause 14.3(f) payment of additional payment due to
claims of the Contractor;

• Contractual Remedies …
• Profit, where applicable
• Clause 1.9(b) in case of delayed issuance of drawings & instruction by the

Engineer;
• Clause 2.1(b) in case of delay in providing access to the Site;
• Clause 4.7(b) in case of error in Setting out;
• Clause 7.4(b) in case of delay suffered by the Contractor caused by the
Employer in relation to Testing;
• Clause 10.3(b) in case of interference with Tests on Completion by the
Employer;
• Clause 16.1(b) in case of suspension & reduction of the progress of the
work by the Contractor caused by payment problem;
•March
Clause
2023 17.4(b) cum Clause 17.3(f)
CoTM 525 Organized by:&(g) in case
Belachew Asteray (PhD) of Employer’s Risks; 158


• Contractual Remedies …
• Financing Charges
• Clause 14.8 in case of delayed payment by the Employer;

• Indemnity
• Indemnity includes claims, damages, losses, & expenses including legal
fees & expenses;
• Clause 4. 2 in case of calling the Performance Security by the Employer
to the extent to which the Employer was not entitled to make the claim;
• Clause 17.1 general obligation in relation to indemnifying the
Contractor by the Employer;
• Clause 17.5 indemnifying the Contractor in relation to intellectual &
industrial property rights;

• Contractual Remedies…
• Extension of Time
• Clause 8.4(a) due to Variation;

• Clause 8.4 (c) due to exceptionally adverse climatic conditions;
• Clause 8.4 (d) due to unforeseeable shortages in the availability of
personnel, or Goods caused by epidemic or governmental action;
• Clause 8.4(e) due to any delay, impediment or prevention caused
by or attributable to the Employer, the Employer’s personnel
(including the Engineer see Clause 1.1.2.6) or the Employer’s other
contractors;
• Clause 8.4(b)cum Clause 1.9(a) due to delay in issuing drawing &
instructions by the Engineer to the Contractor;


• Extension of Time
• Clause 8.4(b) cum Clause 2.1(a) due to delay in providing access to the Site by the
Employer;
• Clause 8.4(b) Clause 4.7(a) due to delay caused due to error in Setting out;
• Clause 8.4(b) cum Clause 4.12(a) delay due to unforeseeable physical conditions;
• Clause 8.4(b)cum Clause 4.24(a) delay caused due to discovery & reporting of Fossils;
• Clause 8.4(b)cum Clause 7.4(a) delay caused by the Employer in relation to Testing;
• Clause 8.4(b)cum Clause 8.8 delay caused by suspension as ordered by the Engineer;
• Clause 8.4(b)cum Clause 8.11 delay caused due to prolonged suspension provided the
Contractor opted for resuming the performance of the Works after such prolonged
suspension;
• Clause 8.4(b)cum Clause 16.1(h) delay caused to the Contractor due to suspension or
reduction in the progress of the Works by the Contractor due to delay in payment;

• Deceleration (reduction) of the progress of the Works;
• Clause 16.1 due to delay in payment;

• Suspension of the performance of the Works;
• Clause 16.1 due to delay in payment;
• Termination of the Contract;
• Clause 8.11 cum Clause 16.2 (f) due to prolonged
suspension of the Works by the Employer;
• Clause 16.2 (a) through (j) due to the default of the
Employer;
• Clause 16.2(h) due to delay in payment & other payment
related grounds;

Communication Modalities of the 3C under FIDIC

• Overview of Communication in Construction
•Communication
•is an essential process in our day-to-day life, and

the entire world revolves around it.
•definition “who says what to whom in what
channel with what effect”. (Lasswell's Maxim)
•is exchanging of information from one point of
the project to the other point in an efficient
manner.
Communication Modalities of the 3C under FIDIC…

• Communication Modalities
•Information
• Clause 4.1(a) & (b) design information, in case where

the Contractor is required under the Contract to design
part of the permanent Works;
• Clause 4.24 geological or archeological finds(Fossils);
• Clause 5.4 submitting evidence in relation to
payments made to the nominated sub-contractors, as the
Engineer requests;
• Clause 6.10 details of Labour & Equipment;


• Communication Modalities…
• Information …
• Clause 8.3 programme & revised programme;

• Clause 12.1 particulars as requested by the Engineer in formation
pertaining to measurement of Works;
• Clause 13.5 in relation to provisional sums submission of quotations,
receipts , vouchers & accounts or receipts for substantiation of the use of
the said sums;
• Clause 13.6 on use of Day Work items, on daily basis;
• Clause 14.3 submitting monthly statements to the Engineer for payment
purposes;
• Clause 20.1 contemporary records as per the request of the Engineer;

• Notices
• Clause 1.9 giving of notices in relation to delayed drawings or instructions by the

Engineer;
• Clause 1.13 giving of all notices…in relation to the execution & completion of the
Works & remedying any defects therein;
• Clause 2.1 giving notice to the Employer in case of failure of the Employer in
providing possession of Site;
• Clause 4.2 in case of submission of the Performance Security copy to the Employer;
• Clause 4.12 in case of encountering unforeseeable physical conditions: to the
Employer;
• Clause 4.16 notice to be given to the Engineer in relation to transport of Goods &
Plant to be delivered to the Site;
• Clause 7.3 giving notice to the Engineer in case of any work is ready & before it is
covered
March 2023
up, put out of sight, or packaged for storage or transport or inspection; 166
CoTM 525 Organized by: Belachew Asteray (PhD)


• Notices…
• Clause 8.4 giving notice to the Engineer in case of request for extension of time(EOT) for
completion;
• Clause 8.9 giving notice to the Engineer in case of suspension of work instructed by the
Engineer;
• Clause 8.11 giving notice to the Engineer in case of prolonged suspension of the Works;
• Clause 10.1 giving notice to the Engineer in case of requesting the Taking Over of the
Works & Sections, if any;
• Clause 13.1 giving notice to the Engineer the reasons(with supporting particulars) not to
execute the variation order or instruction;
• Clause 17.4 giving notice to the Engineer in case of the effects or consequences of the
Employer’s Risks;
• Clause
March 2023
18.1 giving notice to the Engineer in case of submission of insurance policies
to
the Employer;

• Law and Language in FIDIC
• Clause 1.3 Communications
• Wherever these Conditions provide for the giving or issuing of approvals,

certificates, consents, determinations, notices, requests and discharges, these
communications shall be:
• (a) in writing and delivered by hand (against receipt), sent by mail or courier, or
transmitted using any of the agreed systems of electronic transmission as stated
in the Contract Data; and
• (b) delivered, sent or transmitted to the address for the recipient’s communications
as stated in the Contract Data. However:
• (i) if the recipient gives notice of another address, communications shall thereafter
be delivered accordingly; and
• (ii) if the recipient has not stated otherwise when requesting an approval or
consent, it may be sent to the address from which the request was issued.


• Law and Language in FIDIC…
• Clause 1.4 Law and Language
• The Contract shall be governed by the law of the

country or other jurisdiction stated in the Contract Data.
• The ruling language of the Contract shall be that stated
in the Contract Data.
• The language for communications shall be that stated
in the Contract Data. If no language is stated there, the
language for communications shall be the ruling
language of the Contract.

Claim Management
Under FIDIC


Claim–Management: Procedure to follow
Clause 20.1: The contractor consider himself to be The contractor The contractor
entitled to any extension of the time for consider himself to consider himself to be
Completion and/or any additional payment, under be entitled to any entitled to any legal
any Clause of these Conditions or otherwise in claim in connection claim
connection with the contract. with, or arising out

of, the Contract or
If so, the contractor shall give notice to the
Engineer, describing the event or circumstances
the execution of the
giving rise to the claim.
works
28 days
Clause: 20.4: If a dispute (of any kind whatsoever) arises between the Parties in connection with, or
arising out of, the Contract or the execution of the Works, including any dispute as to any certificate,
determination, instruction, opinion or valuation of the Engineer, either Party
may refer to the dispute in writing to DB for its decision, with copies to the other Party and Engineer

Claim–Management: FIDIC-Extensions: Time + Money
The 14 Contractor’s Claims documented in the MDB FIDIC -
own fault of the Contractor has to be excluded always:
1. Clause 1.9: Delayed Drawings or Instructions
After Delay of an issued demand by the contractor

2. Clause 2.1: Right to Access to the Site
Clause 8: Commencement: after 7 but within 42 days
3. Clause 4.7: Setting Out
….if the delay could be avoided by “an experienced contractor”
4. Clause 4.12: Unforeseeable Physical Conditions

Including sub-surface and hydrological conditions not climatic
5. Clause 4.24: Fossils
All findings to the care and authority of the employer!
6. Clause 7.4: Testings
Ordered 24 h before: If the Engineer is absent they are accepted
7. Clause 8.4: Extension of Time for Completion
In 4 cases: Variations, Climatic, Shortages, Employer’s Personal

Claim–Management: FIDIC-Extensions: Time + Money

The 14 Contractor’s Claims documented in the MDB FIDIC -
own fault of the Contractor has to be excluded:
8. Clause 8.9: Consequences of suspensions

The suspension has to cause a delay!
9. Clause 10.2: Taking over of Parts of the works
Used parts without taking-over certificate are as certificated
10.Clause 10.3: Interference with Test on Completion
The contractor should not be prevented carrying out tests >14d
11.Clause 13.7: Adjustments for Changes in Legislation
Changes of laws after “Base Date” (28 d prior submission date)
12.Clause 16.1: Contractor’s Entitlement to Suspend Work

After 21 d of an issued notice of an entitled payment: Clause 14
13.Clause 17.4: Consequences of Employer’s Risks
Like war and riots, forces of nature
14.Clause 19.4: Force Majeure
Reasons compare above 17.4, notice shall be given <14 d

Claim-Management: Typical Sequence to Assert a Claim
42 d 42 d
28 d
Clause 8.4: Clause 8.4: Clause 20.1: Clause 20.1:

Contractor and 20.1: Contractor Clause 3.5: Engineer
consider Contractor issues detailed Equitable Solutionanswers with
himself to be Yes issues a notice Yes claim within approval or
entitled to a within 28 42 days disapproval
claim days within 42 days
Claim at all !!!!
Loss of the
the deadline:
Fail to observe
decision
bearing on the
May have a
the deadline:
Fail to observe
Engineer


Claim-Management: Typical Sequence of Dispute Events
Dispute Board (DB)
8.1 20.2 20.4 20.4 A Party may 20.6 A Party may

Commence- Parties appoint A Party refers to issue a “notice of initiate arbitration
ment Date
DB
(1 or 3 Prs.)
the DB
NO Dissatisfaction”
Parties present DB gives its Amicable Settlement

submissions to Clause
the 3.5:
decision Arbitrator/s
DB Equitable Solution appointed
<28 d <84 d <28 d <56 d

Claim-Management: Adjustments
Claims for Adjustments for:
• the Contract Price

• the Extension of Time for Completion


Claim-Management: Adjustments of the Contract Price
•The contract price has to be adjusted because of
changes in:
• Variations: Clause 13.1

• Legislation: Clause 13.7
• Made after the Base Date
• Will affect the Contractor in the performance of obligations
under the Contract
• Costs: Clause 13.8
• Only if there is a table included (Appendix to Tender)!
Claim-Management: Adjustments because of Variations
• Clause 13.1: Right to vary

• Variations may be initiated by the Engineer at any time

prior to issuing the Taking-Over-Certificate for the Works,
either by an instruction or by a request for the Contractor
to submit a proposal ………
=> Clause 13.2: Value Engineering

=> Clause 13.3: Variation Procedure

Claim-Management: Adjustments because of Variations

Kinds of Variations:
• (a) Changes of Quantity

• (b) Changes of Quality
• (c) Changes of levels, positions and/or dimensions
• (d) Omissions of work unless it is to be carried out by others
• (e) Any additional works for the Permanent Works
• (f) Changes of the Sequence or Timing of the
execution of the Works
Claim-Management: Adjustments
Claims for Adjustments for:
•the Contract Price

•the Extension of Time for Completion


Claim-Management: Adjustments of the Contractual Time
Risk of the Employer:
Change of Quantities Extension of Time + Costs
Change of Qualities Extension of Time + Costs
Insufficient Assistance Extension of Time + Costs

+ Payment of damages
Reasons of
Force Majeure Extension of Time + Costs
delays on site
Risk of the Contractor:

Lack of Organisation
NO Claims!!!
Insufficient Capacity
Mistakes of Workmanship
Final Helpful Messages

• A smart look into the Text of the Contract &
Understand.
• Keep a Daily Report Book and let it signed by the

Engineer!
• Confirm in writing all verbal orders!
• An un - priced Bill of Quantity should be in hands of
Resident Engineers on site!
• So he can detect additional works!
• Update carefully our Time Schedule!
• Detect the claims as soon as possible!
• Update our Skills on Key Areas of Project Management:
Procurement Guidelines, Principles, Softwares

2.6 Subcontracting
• Subcontractor is a common term used in construction.
• Due to the uniqueness of each construction project, the work force
is transient, multiple craft are involved, each project are planned
and worked in short time frames, and variety of materials and

equipments required, one single construction project is often sublet
to many subcontractors.
• Subcontractors can contribute more than 50%, and can be as much
as 90% of total project value to a construction process.
• Subcontractors are specialist in the execution of a specific job,
they act as a agents of the production system of the contractor
company in supplying materials, manpower, equipment, tools or
designs.
2.6 Subcontracting
• A subcontractor is a construction firm that contracts with a
general contractor to perform some aspect of the general
contractor’s work.
• In most construction projects, a vital role is played by
subcontractors who are hired to perform specific tasks on a
project.
• In the usual case, the general contractor will perform the basic
operations and subcontract the remainder to various specialty
contractors.

2.6 Subcontracting
• What is Subcontracting?
• Subcontracting is the practice of assigning part of the
obligations and tasks under a contract to another party known

as a subcontractor.
• Subcontracting is especially prevalent in areas where complex
projects are the norm, such as construction and information
technology.
• Subcontractors are hired by the project's general contractor,
who continues to have overall responsibility for project
completion and execution within its stipulated parameters and
deadlines.
2.6 Subcontracting
• Why Subcontract?
• Subcontracting is very useful in situations where the range of
required capabilities for a project is too diverse to be carried out
by a single general contractor.

• In such cases, subcontracting parts of the project that do not form
the general contractor's2.7. core competencies
Construction Audit may assist in
keeping costs under control and mitigate overall project risk.
• Some large government contracts or contracts that impact local
community development may require the primary contractor to
hire a certain number of subcontracting entities from the
community as part of the contract. • FIDIC
March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) • PPA 2011 186

2.7. Construction Audit

• Construction Audit is responsible for determining whether
necessary operational and financial internal controls are in place
and operating properly across the construction service.
• Types of Audits
• Construction Contract Audits
• Process Audits
• Vendor Procurement Audits
2.7. Construction Audit…

• Construction Contract Audits
• Compliance with contract terms is the focus of this audit.
• A detailed review of the contractor’s invoicing activity is
completed to insure only allowable costs have been reimbursed.

• Cost recovery opportunities identified in the audit are pursued
with the contractor.
• Audit findings are presented as follows:
• Contractor Related — cost recovery opportunities for contractually
unallowable costs reimbursed
• Project Specific — typically non-functioning internal controls creating
contract non-compliance
• Global — project specific observations which are applicable to a variety
Marchof
2023 capital projects CoTM 525 Organized by: Belachew Asteray (PhD) 188


• Process Audits
• A process audit is designed to evaluate the efficiency and
effectiveness of a particular workflow and the associated function
of the internal controls within the process.

• Examples of available process audits include:
• Bid Process — evaluate compliance with institutional Policies
and Procedures
• Funding Process — confirm funding sources are being utilized
in the manner intended
• System Implementation — serve as a team member to insure
controls are being developed

• Vendor Procurement Audits
• Operations and Maintenance provides a variety of services to the
institutions dealing with multiple vendors and contract structures.
• The price of individual transactions is varied.

• Data analysis — objective review and quantification of
General Ledger or Work Order transactions
• Contract Audits — major contracts are reviewed to evaluate
compliance with contract terms
• Process reviews


• Function
• A construction auditor’s primary function is to provide a
systematic and independent examination of data, records,
operations and performance of a construction project for a stated

purpose.
• For construction auditing this means:
• Contract review for risk mitigation and management
• Compliance with the design and/or construction contract
• Validity of the records for billing, expenses, equipment, etc.
• Accuracy of the calculations for mark-up, insurance, labor
burden, overhead, etc.

• Benefits of construction audits
• Detection of fraudulent behavior
• Increased accuracy and efficiency for future projects
• Document Lessons Learned at Close-out

• Auditing should be considered a tool and not a weapon.


• Ethiopian Practice

•S


References
• Public Procurement Agency, Standard Bidding Document, 2011
• International Federation of Consulting Engineers
http://www.fidic.org/
• FIDIC (2010) Conditions of Contract for Construction, For
Building and Engineering Works Designed by The Employer,
Multilateral Development Bank Harmonised Edition, June 2010
• Zewdu Tefera, Lecture Notes for Construction Contracts Course
• Wubishet Jekale (PhD), Lecture Notes for Construction
Procurement Management Course

Thank you!
•Questions
•Comments

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FTVET, 2023 March 2023

FDRE TVET INSTITUTE

Department of Building Construction Technology

MSc program- Construction Technology and Management

2.2. Contract Document and Legal Considerations

Organized by: Belachew Asteray(PhD) 1

2.1. Overview of Contracts in Construction Projects

• legally enforceable at law for both parties

2.1. Overview of Contracts in Construction Projects …

Organized by: Belachew Asteray(PhD) 2

2.1. Overview of Contracts in Construction Projects …

2.1. Overview of Contracts in Construction Projects …

• Bilateral: obligations on both parties

Organized by: Belachew Asteray(PhD) 3

2.1. Overview of Contracts in Construction Projects …

2.1. Overview of Contracts in Construction Projects …

• No valid contract shall exist unless

Organized by: Belachew Asteray(PhD) 4

2.1. Overview of Contracts in Construction Projects …

• Parties entering in to an agreement or contract shall,

2.1. Overview of Contracts in Construction Projects …

• natural (physical) persons or

Organized by: Belachew Asteray(PhD) 5

2.1. Overview of Contracts in Construction Projects …

• By legislation (In case of public bodies)

2.1. Overview of Contracts in Construction Projects …

• Minors (under the age of 18);

Organized by: Belachew Asteray(PhD) 6

2.1. Overview of Contracts in Construction Projects …

• directly by themselves (in their own capacity) or

2.1. Overview of Contracts in Construction Projects …

law may be invalidated at the request of such incapable

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 14

Organized by: Belachew Asteray(PhD) 7

2.1. Overview of Contracts in Construction Projects …

• is the willingness of the parties to enter in to a legally binding

• Consent of the intended contracting parties decomposes in to :-

2.1. Overview of Contracts in Construction Projects …

• Is a proposal expressing the declared willingness of the offeror

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 16

Organized by: Belachew Asteray(PhD) 8

2.1. Overview of Contracts in Construction Projects …

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 17

2.1. Overview of Contracts in Construction Projects …

Organized by: Belachew Asteray(PhD) 9

2.1. Overview of Contracts in Construction Projects …

• Article 1711 – Article 1718 of the Civil Code.

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 19

2.1. Overview of Contracts in Construction Projects …

• The obligations of the contracting parties could be divided in to two broad

Organized by: Belachew Asteray(PhD) 10

2.1. Overview of Contracts in Construction Projects …

contract documents is to sufficiently define the object of the

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 21

2.1. Overview of Contracts in Construction Projects …

considerations of the contractor & the employer.

Organized by: Belachew Asteray(PhD) 11

2.1. Overview of Contracts in Construction Projects …

• The Payment, obligation to do, or (Considerations) and other

2.1. Overview of Contracts in Construction Projects …

available is invalidation of the contract at the request of any contracting

March 2023 CoTM 525 Organized by: Belachew Asteray (PhD) 24