THE MAIN CAUSAL FACTORS OF CONSTRUCTION CLAIMS UNDER FIDIC CONTRACT IN INDONESIA1

Dr. Sarwono Hardjomuljadi Special Advisor to the Minister, Ministry of Public Works Jl. Pattimura 20 Jakarta Selatan Indonesia
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ABSTRACT
In the construction industry in Indonesia, most of claims submitted by the contractor especially in the public sector construction will finally create disputes between the employer and the contractor. Claims and disputes arising during the construction were largely due to the uncertainties inherent in the projects and were not due to the use of certain conditions of contract. This paper presents the causal factors of Construction Claims in Indonesia, based on the research through the questionnaire distributed among the users of FIDIC Conditions of Contract from the construction society i.e. employer, engineer and contractor. The result showed that the possession of site and the changing in design were the main causal factor of claims in Indonesia. Besides those causal factors, the different interpretation also created disputes Construction Contract using the FIDIC Conditions of Contract accommodates all variations through the clauses of variation and sets up the procedure on how to submit a claim related to the variation and/or the impact of variations by the contractor. That is the reason why the multilateral development bank endorse and support the development of FIDIC Conditions of Contract for Construction, MDB Harmonised Edition as a fair and balanced conditions of contract.. No matter what kind of conditions of contract was used, the bad understanding of the contract, particularly General Conditions of Contract was one of the main causal factors of disputes often occurred and became an obstacle to the construction services development in Indonesia. This could be avoided only by a good knowledge and deeper understanding generally on the philosophy of the construction contract and particularly on the FIDIC Conditions of Contract. Key Words: Main causal factors, Claims, FIDIC Conditions of Contract.

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Presented at FIDIC-JICA International Construction Management Training, Jakarta, 26th 29th July 2010. Special Advisor to the Minister of Public Works Republic of Indonesia. Vice Chairman, Indonesian National Board for Construction Services Development. Lecturer on Construction Contract Administration, S2 & S1 Tarumanagara University, Jakarta Lecturer on Construction Contract Administration, S2 Parahyangan University, Bandung

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Electronic copy available at: http://ssrn.com/abstract=1898436

1.

Background

Most of the final contract prices for large projects in Indonesia are higher than the original contract prices but still under the appraisal cost prepared by the lending institution-borrowerdesign consultant as seen in the table below with the example of hydro electric power plants projects in Indonesia. Since a hydro electric power plant project covers most of construction such as dam, tunnels, channels, roads, buildings etc., the writer considers that it may represent the construction in general and it could be used as the basis of further discussion. Table. 1: Original and final contract prices of the hydro electric power plants construction in Indonesia3
No 1 2 3 4 5 6 7 8 9 Project Name Saguling HEPP Cirata HEPP Bakaru HEPP Singkarak HEPP Kotapanjang HEPP Besai HEPP Musi HEPP Sipansihaporas HEPP Renun HEPP Contract Price (Equivalent. IDR) Original Final 112,666,840,010 IDR 223,725,333,750 147,454,542,000 IDR 294,868,371,000 46,363,050,000 IDR 106,498,314,000 164,543,673,285 IDR 274,732,481,931 110,291,088,890 IDR 151,990,912,374 79,793,043,480 IDR 180,363,563.910 120,805,734,387 IDR 413,294,161,780 163,305,435,568 IDR 259,611,561,745 161,561,617,760 IDR 752,799,541,027 Appraisal 235,909,375,000 325,978,887,050 169,756,290,000 203,713,500,000 129,657,185,200 227,700,000,000 206,625,760,000 399,079,687,500 590,686,322,000

IDR IDR IDR IDR IDR IDR IDR IDR IDR

IDR IDR IDR IDR IDR IDR IDR IDR IDR

1.1. Main causal factors of the claims Disputes in the construction industry arise from the unsettled claims, mainly due to the unavailability of contemporary record and the different interpretation on contract. The best way to avoid the disputes, particularly to reduce its impact, is firstly to understand the main causal factors of claims and then the employer should try to find the pre contract strategy and to improve the monitoring system of the project. Both parties i.e. the employer with the assistance of the engineer and the contractor should have good and organized records and detailed particulars to be kept as the supporting tool for the negotiation, and/or other Alternative Dispute Resolution (ADR) or for the litigation. Document of claims should be presented in a clear and less complicated way to ensure that it could be easily understood by the parties including the third party appointed as the ADR board member (if any). This paper will present the result of the research by Sarwono (2008)4 on the main causal factors of the construction claims in Indonesia with reference to the hydro power projects. Since a hydro power project consists of many field of civil engineering construction i.e. tunnels, roads, buildings, waterways, dams etc. it could be considered as suitable and proper to be used as a comprehensive reference for various construction projects. The result was validated by the experts and experienced engineers involved in various civil engineering construction projects.

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State Electricity Corporation of Indonesia (1988-2005): Completion Reports, Jakarta. Hardjomuljadi, Sarwono (2009): Pre Contract Strategy for Minimizing Construction Claims Impact on Hydro Electric Power Plant Projects in Indonesia , Dissertation, Jakarta.

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Electronic copy available at: http://ssrn.com/abstract=1898436

Based on the study conducted by Sarwono (2008), it was proved that the main causal factors of construction claims under the contracts using FIDIC Conditions of Contract are as follows: 1. Constructive change orders 2. Variation orders 3. Inadequate site investigation 4. Oral change orders by employer 5. Possession of site 6. Changes in design 7. Subsurface conditions of geology 8. Other contractors interference and delay 9. Inefficiency and disruption From the diagram below, the first layer causal factors or the most frequent circumstances are Constructive Changes Order and Inadequate Site Investigation which are affected by the second and third layer causal factors i.e. Changes in Design, Oral Changes Order by the Employer, Possession of Site but on the other side Variation Order is a means of claim settlement. Those causal factors are related to contractual or legal matters and in order to minimize claim and dispute, special attention should be given to such circumstances and an engineered conditions contract is undoubtedly required.

90,3% +
CONSTRUCTIVE CHANGES ORDER

81,7%
CHANGES IN DESIGN

+ + -

88,2% +
VARIATION ORDER

55,4%
CLAIM

+
INADEQUATE SITE INVESTIGATION

+ 72,6%

ORAL CHANGES ORDER BY EMPLOYER

+ 64,7%

POSSESSION OF SITE

Figure 01: Relationship between claim and its causal factors in hydro electric power projects 5

Hardjomuljadi, Sarwono (2009): Pre Contract Strategy for Minimizing Construction Claims Impact on Hydro Electric Power Plant Projects in Indonesia , Dissertation, Jakarta.

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Electronic copy available at: http://ssrn.com/abstract=1898436

1.2.

The analysis of the third layer causal factors

The analysis on the third layer casual factors i.e. possession of site and changes in design found that there are some causal factors able to be controlled through the management decision but other causal factors lie beyond the control. 1.2.1. Possession of site Based on the research by Sarwono (1999) 6, there are three major elements related to the possession of site i.e. the land acquisition, the availability of infrastructure and the availability of other utilities those should be planned and provided in due time.

0000 Additional Cost & Extension of Time

1000 Possession of Site

1101 Land Acquisition

1201 Planning/Regulation of Land Use.

1202 Cultural Approach

1301 Regional Government Action.

1302 Staff Capability

1401 BEYOND THE CONTROL

1402 MANAGEMENT DECISION

Figure 03: Possession of Site Land Acquisition

Sarwono Hardjomuljadi (1999): The Importance of Management Decision in the Applications of FIDIC Conditions of Contract for Civil Engineering Works 4th edition, Pikitring Sumut & Aceh.

0000 Additional Cost & Extension of Time

1000 Possession of Site

1102 Infrastructure Availability

1203 Contractors Capability

1204 Planning of Interfacing

1303 Financial Ability

1304 Human Resources

1305 Equipment Availability

1306 Planning Capability

1407 BEYOND THE CONTROL.

1408 MANAGEMENT DECISION

1403 Financial Management

1404 Contracts Price

1405 Contracts Escalation Clause

1406 Recruitment / Employment System

1501 BEYOND THE CONTROL.

1502 Bid Evaluation.

1503 Government Decision

1504 BEYOND THE CONTROL

1601 MANAGEMENT DECISION

1602 BEYOND THE CONTROL

Figure 04: Possession of Site Infrastructure availability

0000 Additional cost & Extension of Time

1000 Possession of Site

1103 Other Utilities

1205 Telecommunication Availability

1206 Electric Power Supply Availability

1307 Condition in the Specification

1409 Specifications Preparation.

1503 MANAGEMENT DECISION

.

Figure 05: Possession of Site Other utilities

1.2.2. Changes in design

0000 Additional Cost & Extension of Time

4000 Variations

4101 Formal Change

4102 Constructive Change

4201 Ommission, Increase, or Decrease of quantity.

4202 Ammend Previously Approved Drawing Drawing 4301 MANAGEMENT DECISION

4203 Change the Quality of Material

4204 Any kind Necessary for Completion of the Work

4205 Constructive Acceleration

4206 Unspecified Administrative Requirement

4207 Inaccurate Information

4208 Overinspection

4209 Improper Rejection

4302 BEYOND THE CONTROL

4303 Data/information Collected during Tender Preparation

4304 Knowledge and Experience of Supervisor

4401 Staff Capability

4501 MANAGEMENT DECISION

Figure 06: Changes/ Variations

3. Conditions of Contract
3.1. Definitions Based on Black Law Dictionary (Bryan A. Garner, 2004) 7 Contract is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law, while Oxford Dictionary of Law (Elizabeth A. Martin and Jonathan Law, 2006)8 mentioned Contract is a legally binding agreement. Agreement arises as a result of offer and acceptance, but a number of other requirements must be satisfied for an agre ement to be legally binding. Construction Contracts Dictionary (Chow Kok Fong, 2006)9 mentioned that Contract is a legally binding agreement formed when one party accepts an offer made by another and which fulfills the conditions. Besides the above definitions, (John Adriaanse 2007)10 said that A variety of factors makes a construction contract different from most other types of contracts. These include the length of the project, its complexity, its size and the fact that the price agreed and the amount of work done may change as it proceeds. Contract is based on some conditions established. Garner stated that Conditions is a future and uncertain event on which the existence or extent of an obligation or liability depends; an uncertain act or event that triggers or negates a duty to render a promised performance Henkin 2005 11 said The Conditions of contract is intended to regulate the relationship between the parties to the contract; it defines the parties and their responsibilities to each other as well as their responsibilities for various aspects of the contract. In several standards conditions of contract, the liabilities of each of the parties and the respective risk s to be taken by them are usually implicit in the defined responsibilities, but because of the complexity it is preferable to those liabilities to be explicitly defined. In this case FIDIC Conditions of Contract explicitly defined all liabilities of the parties and also supported by the so called claim management rules12 in order to avoid disputes. The General Conditions of Contract for public sector projects currently used in Indonesia vary from Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken known as AV 41 (translated into Indonesian by Soekarsono Malangjoedo) to FIDIC Conditions of Contract for Works of Civil Engineering Construction published by Federation Internationale des Ingenieurs Conseils, Geneva, Switzerland. Most of conditions of contract for public sector and private sector construction work in Indonesia was tailor-made and has not been standardized. The use of standardized conditions of contract in public sector construction contract in Indonesia will make the parties get familiar to the contract, reduce the unnecessary effort in the procurement process and improve the efficiency in the contract administration activity. The use of standardized conditions of contract will be advantageous for both the employer and the contractor since the parties need not spend too much time in examining the conditions of contract of different projects.

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Bryan A.Garner (2004): Blacks Law Dictionary, Thomson West Elizabeth A Martin and Jonathan Law (2006): Oxford Dictionary of Law, Oxford University Press 9 Chow Kok Fong (2006): Construction Contracts Dictionary, Sweet & Maxwell Asia 10 John Adriaanse (2007): Construction Contract Law 11 Henry Henkin (2005): Drafting Engineering Contracts, Elsevier Applied Science, 12 Axel-Volkmar Jaeger and Gotz-Sebastian Hok (2010):FIDIC A Guide for Practitioners, Springer

So far, big projects in Indonesia were constructed and financed by international lending institutions such as the World Bank, Asian Development Bank (ADB), New JICA formerly Japan Bank for International Cooperation (JBIC). The international lending institutions usually require the use of FIDIC Conditions of Contract for Works of Civil Engineering Construction published by Federation Internationale des Ingenieurs Conseils, Geneva, Switzerland. JICA in particular still adopt I their Standard Bidding Document, the FIDIC Conditions of Contract 4th edition (1987 amended 1992) which is actually have some difference in the philosophy, which ca be seen in the comparison as follows. As explained above, most conditions of contract in public sector being used in Indonesia was tailor made, where some clauses in the FIDIC Conditions of Contract were deleted or replaced by newly made clauses for Employers sake and the Contractor was in the position of take it or leave it. Even though the intention was to protect the employer, this action was mostly than none creating the disputes in the future, because the contractor would obviously try to minimize the loss. If the disputes cannot be solved by the parties and then come to the litigation process i.e. the court, whatever the decision is, the employer will always become the looser. If the decision is for the contractors sake, the employer has to pay the penalties and if the decision is for the employers sake, there is a possibility that the completion will be delayed since the contractor has no enough resources to conduct the construction until completion and another possibility is the bad quality of construction result due to the financial difficulties. With such understanding, the best effort should be given to establish a fair and balanced conditions of contract. The easiest and fastest way is by using the acknowledged international standard conditions of contract i.e. FIDIC General Conditions of Contract, from Work of Civil Engineering Construction (1987) - Short Form of Contract (1999) Construction (1999) EPC/Turnkey Project (1999) until MDB Harmonised Edition (2006) and others. To come to the National Standards, the last three conditions of contract were translated and published in Bahasa Indonesia which in the future will become the embryo of such National Standards. FIDIC Conditions of Contract is an engineered conditions of contract required by the international lending institution, unfortunately in Indonesia there is a misperception in the employer side that the use of FIDIC Conditions of Contract facilitates the contractor in submitting their claims which used to create disputes. In the writers opinion the spirit of equality between employer and contractor should not allow such misperception. The clause allowing the contractor to submit claim and the clause of Unforeseeable Physical Conditions and the like are clauses provided so the contractor can recover their loss, but the latest clause some times interpreted by the contractor as the entry gate to the claim. The clauses in FIDIC GCC give room for the contractual changes but the parties should first understand the original scope of works or the original extent of the contract agreed by both parties at the time of bid and was signed as a contract agreement. If during the construction period there are no changes in the scope of work as well as the contract itself, it meant that no time adjustment is required. It should be clearly recognized that once the original scope of works was changed during the construction period, it means that additional and/or extra works are placed and consequently cost and time adjustment are required. The writer experienced in using FIDIC GCC for Works of Civil Engineering Construction, starting from the 2nd edition 1969 for Saguling Hydro Electric Power Plant Project, the 3rd edition 1977 for Cirata Hydro Electric Power Plant Project, the 4th edition 1987 amended 1992 for Renun Hydro Electric Power Plant Project and the FIDIC GCC for Construction 1st edition 1999 for

Upper Cisokan Pumped Storage Power Plant Project. Based on the writers observation, many clauses had been developed and become more fair and balanced, for example:

3.2. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: POSSESSION OF SITE

FIDIC GCC for Work of Civil Engineering Construction 2nd edition (1969) Clause 42 (1): Possession of Site.
42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the Contractor is to be given possession from time to time and the order in which such portions shall be made available to him and subject to any requirement in the Contract as may be required to enable the contractor to commence and poceed with the construction of the Works in accordance with the programme referred to in Clause 14 hereof, from time to time as the Works proceed give to the Contractor possession of such further portion of the site If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 3rd edition (1977) Clause 42 (1): Possession of Site
42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the Contractor is to be given possession from time to time and the order in which such portions shall be made available to him and subject to any requirement in the Contract as may be required to enable the contractor to commence and proceed with the construction of the Works in accordance with the programme referred to in Clause 14 hereof.from time to time as the Works proceed give to the Contractor possession of such further portion of the site. If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 4th edition (1987 amended 1992) Clause 42.1: Possession of Site and Access Thereto
42.1 Safe insofar as the Contract may prescribe: (a) the extent of portions of the Site of which the Contractor is to be given possession from time to time, and (b) the order in which such portions shall be made available to the Contractor and subject to any requirement in the Contract as to the order in which the Works shall be executed give the Contractor possession of: (c) so much of the Site (d) such access as, in accordance with the Contract, is to be provided by the Employer as may be required to enable the Contractor to commence and proceed with the execution of the Works in accordance with the programme referred to in Clause 14, if any.. The Employer will, from time to time as the Works proceed, give to the Contractor possession of such further portions of the Site as may be required to enable the Contractor to proceed with the execution of the Works with due dispatch 42.2 If the Contractor suffers delay and/or incurs costs from failure on the part of the Employer to give possession in accordance with the terms of Sub-Clause 42.1, the Engineer shall, after due consultation with the Employer and the Contractor, determine: (a) any extension of time to which the Contractor is entitled under Clause 44, and (b) the amount of such costs, which shall be added to the Contract Price..

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FIDIC GCC for Construction 1st edition (1999) Clause 2.1: Right of Access to the Site
2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within the time stated in the Appendix to Tender. However the Employer may withhold any such right or possession until the Performance Security has been received. If no such time is stated in the Appendix to Tender, the Employer shall give the Contractor right of access to, and possession of, the Site within such times as may be required to enable the Contractor to proceed in accordance with the programme submitted under Sub-Clause 8.3 [Programme] If the Contractor suffers delay and/or incurs Costs as a result of failure by the Employer to give any such right or possession within such time, the Contractor shall give notice to the Engineer and shall be entitled subject to Sub-Clause 20.1 [Contractors Claim] to: (a) an extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and (b) payment of any such Cost plus reasonable profit, which shall be included in the Contract Price. After receiving this notice, the Engineer shall proceed in accordance with Sub-Clause 3. [Determination] to agree or determine these matters. However, if and to the extent that the Employers failure was caused by any error or delay by the Contractor, including an error in, or delay in the submission of, any of the Contractors Documents, the Contractor shall not be entitled to such extension of time, Cost or profit

FIDIC GCC for Construction MDB Harmonised edition (2006) 13 Clause 2.1: Right of Access to the Site
2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within the time stated in the Contract Data. However t he Employer may withhold any such right or possession until the Performance Security has been received. If no such time is stated in the Contract Data, the Employer shall give the Contractor right of access to, and possession of, the Site within such times as required to enable the Contractor to proceed without disruption in accordance with the programme submitted under Sub-Clause 8.3 [Programme]

FIDIC 1st edition 1999 facilitates this factor by Clause 2.1 [Right of Access to the Site]. The spirit of this clause is giving Right of Access to and possession of the Site within such times as may be required to enable the contractor to proceed in accordance with the programme submitted under Clause 8.3 [Programme]. In case that the Employer cannot fulfill his obligation, the contractor shall be entitled to, subject to Clause 20.1 [Contractors Claim], an extension of time and/or payment of any such cost incurred because of the failure to get the access and/or the possession.

3.3. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: VARIATIONS Other main causal factor of claims is Changes in Design and/or Variations. This factor is also accommodated by FIDIC GCC for Construction Clause 13 [Variations and Adjustment]. Engineer has an important role in Changes in Design besides the Possession of Site.
FIDIC GCC for Work of Civil Engineering Construction 2nd edition (1969)
Clause 51(1): Variations 51 (1) The Engineer shall make any variation of the form quality or quantity of the Works or any part thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall in his
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Federation Internationale Des Ingenieur Conseils (2006): General Conditions of Contract For Construction, Multilateral Development Bank Harmonised Edition

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opinion be desirable shall have power to order the Contractor to do and the Contractorshall do any of the following: (a) increase and decrease the quantity of any work included in the Contract (b) omit any such work (c) change the character or quality or kind of any such work (d) change the levels lines position and dimensions of any part of the Works and (e) execute additional work of any kind necessary for the completion of the Works and no such variation shall in any way vitiate or invalidate the Contract but the value (if any) of all such variations shall be taken into account in ascertaining the amount of the Contract Price. (2) No such variations shall be made by the Contractor without an order in writing of the Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of any work where such increase and decrease is not the result of an order given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.

FIDIC GCC for Work of Civil Engineering Construction 3rd edition (1977)
Clause 51(1): Variations 51 (1) The Engineer shall make any variation of the form, quality or quantity of the Works or any part thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall, in his opinion be desirable, he shall have power to order the Contractor to do and the Contractor shall do any of the following: (a) increase and decrease the quantity of any work included in the Contract (b) omit any such work (c) change the character or quality or kind of any such work (d) change the levels, lines, position and dimensions of any part of the Works, and (e) execute additional work of any kind necessary for the completion of the Works and no such variation shall in any way vitiate or invalidate the Contract, but the value, if any, of all such variations shall be taken into account in ascertaining the amount of the Contract Price. (2) No such variations shall be made by the Contractor without an order in writing of the Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of any work where such increase and decrease is not the result of an order given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.

FIDIC GCC for Work of Civil Engineering Construction 4th edition (1987 amende 1992)
Clause 51.1: Variations 51.1 The Engineer shall make any variation of the form, quality or quantity of the Works or any part thereof that may, in his opinion be necessary and for that purpose, or if for any other reason it shall, in his opinion be appropriate,, he shall have the authority to order the Contractor to do and the Contractor shall do any of the following: (a) increase and decrease the quantity of any work included in the Contract (b) omit any such work (but not if the omitted work is to be carried out by the Employer or by another contractor). (c) change the character or quality or kind of any such work (d) change the levels, lines, position and dimensions of any part of the Works (e) execute additional work of any kind necessary for the completion of the Works (f) change any specified sequence or timing of construction of any part of the Works. No such variation shall in any way vitiate or invalidate the Contract, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to

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vary the Works is necessitated by some default of or breach of contract by the Contractor or for which he is responsible, any additional cost attributable to such default shall be borne by the Contractor. 51.2 The Contractor shall not make any such variation without an instruction of the Engineer . Provided that no instruction shall be required for increase and decrease in the quantity of any work where such increase or decrease is not the result of an instruction given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.

FIDIC GCC for Construction 1st edition (1999)

,Clause 13.1: Right to Vary 13.1 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 request for the Contractor to submit a proposal. The Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice to the Engineer stating (with supporting particulars) that the Contractor cannot readily obtain the Goods required for the Variation. Upon receiving this notice, the Engineer shall cancel, confirm or vary the instruction. 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 Compl,etion, boreholes and other testing and exploratory work, or (f) changes to the sequence or timing of the execution of the Works. The Contractor shall not make any alteration and/or modification of the Permanent Works, unless and until the Engineer instructs or approves of the Work.

6. CONCLUSION
1. Comparing the appraisal cost, contract cost and final cost of most projects using FIDIC GCC Indonesia, it was found that most of the final costs were higher than contract costs but lower than the appraisal costs. The analyses showed that: the appraisal cost was high because the designer prepared a very conservative price analysis the contract price was low because the contractor tried to get the project first and get the compensation later through claims. the final contract price was higher than the original contract prices because the original contract price was sometimes too low, but since the final contract price was lower than the appraisal costs meant that the final contract price was still reasonable. 2. It is understandable that the most important thing is that there is an offer and acceptance agreed by parties, whatever the contract is. Especially for the construction contract, good conditions of contract should accommodate the possibility of changes which might occur but with the minimum potential disputes occurrence and in this case FIDIC GCC fits the criteria. 3. In the FIDIC Conditions of Contract there are clauses containing employer, engineer and contractors obligation to be fulfilled by each parties in completing the project in due manner and if the parties properly execute their duties, there will be surely no disputes.

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4. The different interpretation of the contract is not the problem faced only by the non English speaking countries but also by the English speaking people due to the inadequate capability in interpreting contract and/or legal terms. The success in handling construction contract using certain standard conditions of contract depends on the experience in using the similar conditions. 5. The improvement of FIDIC GCC from time to time enables both contractor and employer to protect their interest, providing that the parties strictly follow the contracts requirement. 6. Since the FIDIC GCC clauses varied from time to time, we require the sustainable trainings to improve the users knowledge and capability in interpreting the conditions those are very essential in handling the construction project.

REFERENCES
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. American Institute of Architect, General Conditions of the Contract for Construction, A201, Washington D.C., 1997 Building and Construction Authority of Singapore, Public Sector Standard Conditions of Contract for Construction Works, 5th Edition, Singapore, 2006 FIDIC, General Conditions of Contract for Civil Engineering Works, 2nd Edition, Chow, Kok Fong, Construction Contracts Dictionary, Sweet & Maxwell Asia, 1 st Edition, Singapore, 2006 FIDIC, General Conditions of Contract for Civil Engineering Works, 3rd Edition, FIDIC, General Conditions of Contract for Civil Engineering Works, 4th Edition, Geneva, 1987, amended 1992 FIDIC, General Conditions of Contract for Construction, 1st Edition, Geneva, 1999 FIDIC, General Conditions of Contract forEPC/Turnkey Project, 1st Edition, Geneva, 1999 FIDIC, General Conditions of Contract for Construction, MDB Harmonised Edition, 1 st Edition, Geneva, 2006 Garner, Bryan A., Blacks Law Dictionary, Thomson West, St. Paul , 2004 Hardjomuljadi, Sarwono, Pre Contract Strategy for Minimizing Construction Claims Impact on Hydro Electric Power Plant Projects in Indonesia , Dissertation, Jakarta, 2009 Hardjomuljadi, Sarwono; Siregar, Parasman and Sarwono, Susan, Renewable Energy: Hydro Power and Notes on Its Development in Indonesia, ISBN: 979-99900-8-4, PT PLN (Persero), Jakarta, 2008 Hardjomuljadi, Sarwono, Tunneling, From Construction Method till Construction Claim Cases, ISBN: 978979-1203-08-1, Polagrade, Jakarta, 2007 Hardjomuljadi, Sarwono; Abdulkadir, Ariono and Takei, Masaru, Construction Claim Strategy based on FIDIC Conditions of Contract, ISBN:979-97749-2-6, Polagrade, Jakarta, 2006. Hardjomuljadi, Sarwono, The Importance of Management Decision in the Application of FIDIC Conditions of Contract for Civil Engineering Works 4th edition, Pikitring Sumut & Aceh, 1999 Henkin, Henry, Drafting Engineering Contracts, Elsevier Applied Science, 2005 Jaeger, Axel V and Hok, Gotz S, FIDIC-Guide for Practitioners, Springer, 2010 Martin, Elizabeth A. and Law, Jonathan, Dictionary of Law, Oxford University Press, New York, 2007 Soekarsono Malangjoedo, Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken , Badan Penerbit Pekerjaan Umum, Jakarta, 1978 Standards Australia, General Conditions of Contract AS 4000-1997, Amendment 3, Sydney, 2005

21. State Electricity Corporation of Indonesia (1988): Completion Report of Saguling HEPP, The New Japan Engineering Consultant Inc. 22. State Electricity Corporation of Indonesia (1990): Completion Report of Cirata HEPP, The New Japan Engineering Consultant Inc. 23. State Electricity Corporation of Indonesia (2005): Completion Report of Renun HEPP, Nippon Koei Co.Ltd.
The Author Dr. Sarwono Hardjomuljadi, graduated in Civil Engineering from University of Parahyangan, Bandung, got the Doctor degree from Tarumanagara University, Jakarta, now the Special Advisor to the Minister of Public Works, Republic of Indonesia, Vice Chairman of National Construction Services Development Board of Indonesia, the Director for General Affair and HRD of Geo Dipa Energi - the joint venture company of Pertamina PLN-,. Formerly worked for Indonesia State Electricity Corporation (PLN) up to the position of Deputy Director and then Vice President. He was involved in the construction of Saguling HEPP, Cirata HEPP and Renun HEPP as the project manager. He is the Asean Chartered Professional Engineer (ACPE), Principal Professional Engineer in Water Resources Development (PU-SDA) and Associate Member of Chartered Institution of Arbitrator (ACIArb). He is also the Dispute Adjudication Board and expert witness of some construction projects. In the education field, he is the lecturer at the Post Graduate Program at Tarumanagara University, Jakarta and Parahyangan University, Bandung.

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