Académique Documents
Professionnel Documents
Culture Documents
SLQS Journal
Editorial Committee
Ajantha Premarathna FRICS, FIQS(SL), ACIArb.
Dhammika T. Gamage
Editorial Policy
We, the editorial committee reserve the right to select, reject, edit, and excerpt articles at our sole discretion. We will
publish no article which, in the opinion of the editorial committee, can be reasonably interpreted as insulting or offensive
to any individual or group. We will not return unsolicited manuscripts. The opinions expressed in articles contained in the
SLQS Journal are the opinions of individual authors and not necessarily those of the SLQS Journal editorial committee.
Articles are provided for the general interest of the quantity surveying and contract administration community, but the
information contained therein does not constitute legal advice and should not be relied on as such. Neither the SLQS nor
the individual authors assume any responsibility for the accuracy of information reported.
The editorial committee assumes no responsibility for failure to report any matter inadvertently omitted or withheld from
it. The mode of citation utilised within the articles and for the bibliography would be the Chicago method.
Email your own creations to journal@slqs-uae.org with your passport size photograph and brief profile of yourself which
should not be more than 35 words.
February 2010
SLQS JOURNAL
CONTENTS
Page
Editorial
Differences in Concepts between 1987 Red Book & 1999 Red Book
Editions of the FIDIC Forms
Hasaranga Fonseka BSc., MSc ACIArb, CCE
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15
Can Time Bar Clause (20.1 FIDIC 1999) Lead to Lose Contractors Rights?
Mahinda Ranatunga, BSc QS(Hons), MCIArb, CCE, Pg. Dip.(Arb & Const. Law)
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23
27
30
Punyamalie De Silva
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38
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February 2010
Editorial
Dear Sri Lankan Quantity Surveyors
Prior to writing this editorial, I was looking back on our greatly successful commemorations of the
Silver Jubilee of the SLQS get-together, one of the most notable of which was Prof. Samaratungas
Continuing Professional Development Programme, Variations and Valuation of Variations under
the ICTAD and FIDIC Forms of Contract conducted in Colombo, followed by our recent Silver
Jubilee get-together held on December 2009. Likewise, this edition of SLQS Journal was dedicated
to commemorate the Silver Jubilee celebration of the SLQS-UAE get-togethers in the year of
2009.
We, the SLQS, are exceptionally pleased to announce our success with the publication of the SLQS
Journal as planned, an event long overdue and of significance to the Sri Lankan quantity surveying
community in the United Arab Emirates and the world at large.
We wish to thank all those of you responsible for the overwhelming response to our request; all
of those articles were a tremendous pleasure to read. Also, it was with great satisfaction that we
observed the outpouring of interest generated by the participants of the earlier workshop Sound
Contract Administration, by providing many articles which will be published in future issues. We
would like to mention that we have many more submissions of high quality than we are able to
accommodate within one volume, and the selection of the articles printed within is in no way a
rejection of other articles of equal quality.
In this edition, we found that two authors have taken a look through a different perspective at their
journey through the construction industry. The Relationship between Management and Personal
Management Competencies by Punyamalie De Silva and Is the Rent is Leading the Construction?
by Wasantha Edirisinghe are unique and noteworthy articles concerning the direct and indirect
influences on the construction industry.
Also, we consider it necessary to again discuss the appropriate length of articles. We should say
that, as we have more submissions of high quality than we may be able to accommodate within one
volume, the ideal length is around 3,000 words but should not exceed 5,000 words.
We trust that it is essential to remind you that this journal is designed to encourage interest in
all matters relating to contract administration, with an emphasis on matters of theory and onboard issues arising from the relationship of contract administration to other disciplines in the
construction industry. The subject matter of the articles will consist mainly of, but not be limited
to contractual matters. However, it is not the purpose of this journal to concentrate solely on drily
academia-oriented matters.
We eagerly anticipate future articles from you, our readers, for our forthcoming journals.
On behalf of the editorial committee,
Dhammika T. Gamage
February 2010
SLQS JOURNAL
Under the sub clauses 2.4 of the 1999 Red Book the
risk of inadequate employers financial arrangements
has been recognized and upon the contractors
request, if the employer fails to comply with this
requirement then the contractor is entitled to
suspend or reduce the rate of work and ultimately
to terminate the contract. There is no corresponding
provision in respect of the employers financial
arrangements under the fourth edition of the Red
Book.
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Contd.
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Contactors claims
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(a)
(b)
i.
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-
References
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Consideration
of Contractual Entitlement;
Typically construction contracts contain provisions
entitling the contractor to an extension of time on the
occurrence of a particular event provided the progress of the
works of time for completion is delayed as a consequence.
For example FIDIC 1987 provides for an entitlement
for extension of time in the event of : late drawings(
clause 6.4) ,adverse physical conditions (Clause 12.2),
discovery of fossils or antiques( Clause 27.1), suspension
of work ( Clause 40.2) ,failure to give possession of site (
Clause 42.2), additional or extra work ( Clause 44.1 (a))
, delay referred to in these conditions ( Clause 44.1 ( b)
), exceptional adverse climatic conditions ( Clause 44.1
( c) ), any special circumstances, other than through
the default of the contractor ( Clause 44.1 (d)), and ,
contractors suspension of the works(Clause 69.4).
Considerations of Contractual Compliances
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the time. Occasionally, the submission of notice and/
or detailed particulars will be expressed to be a condition
precedent. The contractors failure to comply waives his
entitlement to claim an extension of time and owners
liability ceases. For this reason therefore, it is critical to
comply with the contract from the start of the project at
all levels. In addition, further submissions may be required
for particular events. For instance: Clause 6.3 of FIDIC
1987 (Disruption of Progress) requires the contractor to
give notice to the engineer, with a copy to the employer,
whenever planning or execution of the works is likely to
be delayed or disrupted unless any further drawing or
instructions is issued by the engineer within a reasonable
time. The notice shall include details of the drawings
or instructions required and of why and by when it is
required and of any delay or disruption it may suffer.
14
Statement of Claim:
Substantiation of Claim:
February 2010
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A Case Study
Preamble
A contract for the construction of a new leisure centre included a PC sum for the design, fabrication and installation of
a very large sectional climbing wall, and the architect subsequently invited specialist tenders for the work. The tender
prices were closely grouped, and the architect subsequently issued an instruction to the contractor to place an order for
the work with the lowest tenderer. A nominated sub contract was subsequently signed between the main contractor
and the specialist, and a collateral warranty was put into place between the specialist and the employer under which
the specialist undertook:
to use all due skill and care in the design of the wall
to carry out the works in such a way that the main contractor would not become entitled to an extension of
time.
Installation of the wall is shown on the contractors program as lying on the critical path and the main contractor is
entitled to an extension of time for any delays by the nominated sub contractors.
The specialist company fails to commence installation on the agreed date despite a number of telephone calls from
the contractor and despite the fact that the architect has reason to believe that at least some of the wall sections have
already been fabricated. The specialist subsequently contacts the architect to say that they have discovered a serious
error in their price. They state that they are not prepared to fulfill the contract unless the contract price is increased by
some 75%.
The case study is to analyze the legal position from the point of view of all of the parties involved, citing relevant case
law as appropriate and advise the architect how he should proceed.
Introduction
In nominating a sub contractor for the project, the
contract administrator has followed the formal steps in
accordance with the main contract which has been signed
between the employer and the main contractor.
Main contractor has been instructed by the contract
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Under JCT 98 form, this nomination has been considered
as a nominated sub contract because in various ways it
fulfills the requirements of nominated sub contract, such
as bill of quantities showing the relevant scope as PC
sum , contract administrator issuing an instruction on
the expenditure of such PC sum, etc.
After the completion of forming of sub contract agreement,
the employer has entered into a collateral warranty with
the nominated sub contractor, in which the main terms
to read as, the nominated sub contractor should use all
due skill and care in the design of the scope specified
and carry out the works in such a way that the main
contractor would not become entitled to an extension of
time due to any delay of nominated sub contractor.
Accordingly, as per clause 35 of JCT 98 form this
nominated sub contract has been formed and the terms
and conditions are accepted in the following order:
1. Sub contractor has tendered on form NSC/T
2. Colatteral warranty has been formed as NSC/W and
is incorporated to the sub contract agreement
3. Contract administrator has formally nominated the
sub contractor on NSC / N
4. Completing the above (1) , (2) & (3), the main
contractor and the nominated sub contractor are
bound by the terms of sub contract NSC / C
The Contract administrator, in this case, the architect
is responsible for administration of various financial and
commercial provisions such as payments, variations and
completion of the relevant sub contract.
With all above it is clear that the steps which have been
taken by the contract administrator and the employer
are according to the form of contract adopted for the
project.
The estimated cost of the relevant sectional climbing wall
has been included in the bills of quantity as a PC sum. The
main contractor is entitled for the percentage or any fixed
amount set out in the bills of quantity against the value
of actual work done by the nominated sub contractor
for attendance, coordination and supervision. The
existing general facilities such as site facilities, scaffolding,
temporary roads, power supply etc., will be covered by
the said percentage of fixed fee.
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Dispute
The specialist nominated sub contractor was not able to
meet the contractual obligations due to the following:
1. Failing to commence the works on an agreed date
2. The contractors notification of his inability to
perform the contract due to erroneous contract
price.
Failing to commence on an agreed date, nominated
sub contractor has created a back ground of a claim
for extension of time from the main contractor, as the
particular works are on the critical path of the main
contractors program.
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By demanding an increased price for the works under the
sub contract, the nominated sub contractor has expressed
repudiation from the project. The justification which he
has provided is not accepted as per the law of contract. As
he entered into a legally binding contract, it is not possible
to withdraw the offer stating that there was a mistake in
pricing. The sub contractor is bound to complete the
scope set out in the contract at the agreed contract price
within the contract period.
Responsibility of the losses and damages due to repudiation
of a nominated sub contractor, additional costs due to
inflation, and disruption to the main contractors program
etc. shall be borne by the employer, mainly according to
the court decisions made as follows:
House of Lords in North West Regional Hospital Board v TA
Bickerton & Sons Ltd (1970) held that any increased cost
arisen due to the repudiation of nominated sub contractor
should be borne by the employer as the nomination is a
responsibility of employer, at the event of a withdrawal of
a nominated sub contractor from the project.
A nominated sub contractor has liabilities in contract and
in tort. This is covered by the nomination procedure of
sub contractor, by adding a direct agreement between the
employer and the nominated sub contractor. The collateral
warranty plays the role of such agreement between them,
to enable the employer to cover any damages of delays or
any other due to breach of contract. With the collateral
agreement, a collateral contract forms and it will cover
the employers rights with some established assurances
made by the nominated sub contractor. Such assurances
are legally binding and can be presented at courts. The
case of Shanklin Pier Co Ltd v Detel Products Ltd (1951)
which held that the sub contractor was liable for damages
due to the breach of collateral contract is an example.
Even if any direct contractual link is not available
between the nominated sub contractor and the employer,
a potential claim will be possible to exist in the tort of the
negligence. Such claim shall be based on physical damages.
However, in the event of an employer appointing the
nominated sub contractor, it will provide an additional
value of a relationship of proximity that the nominated
sub contractor has a duty of care in tort not to create pure
economic losses through negligence performance of the
sub contract. Junior Books Ltd. v Veitchi Co. Ltd (1983).
February 2010
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Main Contractors responsibility towards
mitigation of delays and subsequent losses
Main contractor shall take the necessary actions for
mitigation of delays in the contract. In this particular
case, the main contractor has placed telephone calls
to nominated sub contractor to remind him about his
delays of the commencement of works. It is necessary to
check what contractual terms are available to measure the
validity of such action in order to mitigate the additional
cost from any delays. As telephone calls are not accepted
as recorded evidence in contracts, such action towards
mitigation will be challenged against a possible claim from
the main contractor. If the methods of notices are limited
to letters, fax or other in writing systems in the contract,
the main contractor will be liable for the damages for not
taking reasonable steps for mitigation of losses. These
measures of mitigation action by the main contractor are
to be valued by the contract administrator.
Following losses and damages to the employer could
occur due to the above dispute:
1. Re-nomination and re-tendering cost , in the event
of termination of sub contract
2. Cost of extension of time , if , to be granted to the
main contractor due to the delay by the nominated
sub contractor
3. Liquidated damages due to the overall delay of the
project due to the delays by the nominated sub
contractor.
In the event of the main contractor being liable for the
delays (under lack of necessary actions for mitigation),
the following additional costs will be generated , which
are to be recovered from the nominated sub contractor.
1. Extra costs for the required acceleration to the
progress of the work to cover the delays in order to
avoid possible liquidated damages
2. Any other costs related to the breach of sub
contract.
Conclusion
The Contract administrator, in this case the architect shall
proceed as follows towards the mitigation of any losses
to the employer due to delays by the nominated sub
contractor;
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Is Rent Leading Construction?
Wsantha Edirisinghe BSc (Hons)
Currently working as Senior Quantity Surveyor
ASSOCIATE MEMBER of Association of Practicing
Quantity Surveyors & Estimators Sri Lanka
References:
(1) The total present value (PV) of a time series of cash flows.
(2) Cost of clearing the site and rebuilding to the new highest and best use.
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Diagram 1: The timing of Redevelopment
(4) the value of the next best alternative forgone as the result of making a decision.
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Thus, considering the present capital value of current use,
the timing for redevelopment would tend to delay. The
income of the building being greater than the operating
cost, indicates that the net income of the buildings is
positive. Also, the higher interest rate which influences
to discount rate to calculate the present capital value of
existing use.
February 2010
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The public sector
The public sector development is non profit making
or is only semi commercial. They take a longer, wider
view than the private developers. In the most economic
developments, the given constraints will be those
showing the greatest returns in aesthetics or function to
the community for the minimum capital invested. Also,
only public developers have received special privileges,
including extensive powers of compulsory purchase
(under legislation, such as the Community Land Act 1975
which abolished in 1980 in UK).
However, the development in public sector depends on
the historical, social or architectural or prestige views.
Thus, the public sector does not start the redevelopment
as soon as it reaches the economics obsolescence condition
in the building as private sector.
In the Economic Obsolescence situation, the value
of a cleared site crosses over the current use of value (in
year Y in the diagram - 1). But it can be noticed that
the Physical Obsolescence will occur at in the year
Z. Hence, up to year Z the operating costs are not
exceeding the gross annual return (A in the diagram - 1)
in the current building. If the operation cost exceeds the
gross annual return, it can happen in a situation such as
the physical fabric of the building being deteriorated or it
becoming technologically out dated. Hence in the public
sector the redevelopment can be delayed by changing
conditions.
Thus, in the public sector, the redevelopment may tend to
delay in several conditions such as,
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Social Benefits.
February 2010
SLQS JOURNAL
Can Time Bar Clause (20.1 FIDIC 1999)
Lead to Lose Contractors Rights?
Mahinda Ranatunga. BSc QS(Hons), MCIArb, CCE, Pg. Dip.(Arb & Const. Law)
Mahinda Ranatunga is a Member of Chartered Institute of Arbitrators, Certified Cost Engineer and a
Quantity Surveyor for the Golden Arrow Interiors, UAE. He has completed his BSc in Quantity Surveying
at the University of Moratuwa in December 2000. Further he has earned a post graduate diploma in arbitration and construction law. His Masters degree in Construction Law and Arbitration is presently underway
(final year) at Robert Gordon University, Scotland. His experience in the construction industry counts
nearly 10 years in Sri Lanka, Qatar and the United Arab Emirates.
References
David Chappel, Derek Marshal, Vencent Powel-Smith & Simon cavender, Building Contract Dictionary, 3rd edition,
Blackwell Science.
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clause, then unless the employer waived the requirements
of the clause, the contractor would not be entitled to an
extension of time. Scottish case of City Inn Ltd v. Shepherd
Construction Ltd, Outer House (2001), was held by Lord
MacFadyen and he stated;
The fact that the contractor is laid under an obligation
to comply with clause 13.8.1, rather that merely given an
option to do so, does not in my opinion deprive compliance
with clause 13.8.1 of the character of a condition precedent
to entitlement to an extension of time. None-compliance
with the condition precedent may in many situation results
in a party to a contract losing a benefit, which he would
otherwise have gained, or incurring a liability, which he
would otherwise have gained, or incurring a liability, which
he would otherwise have avoided. The benefit lost or the
liability incurred may not be in any way commensurate with
any loss inflicted on the other party by the failure to comply
with the condition. The law does not, on that account, regard
the loss or liability as a penalty for the failure to comply with
the condition. In my opinion, it would be wrong to regard
the liquidated damages to which the defendants remained
liable because they failed to comply with clause 13.8.1, and
thus lost their entitlement to an extension of time, as being a
penalty for that failure.
In the Australian case Turner Corporation Ltd (Receiver
and Manager Appointed) v. Austotal Pty Ltd (1998), the
delay caused by the employer and the contractor failed to
serve notice which is a condition precedent. They stated;
if the builder, having a right to claim an extension of time
fails to do so, it cannot claim that the act of prevention which
would have entitled it to an extension of time for practical
completion resulted in its inability to complete by that time.
A party to a contract cannot rely on preventing conducting of
the other party where it failed to exercise contractual rights
which have negated the effect of that preventing conduct.
The prevention principle infers that a party can not take
advantage of its own wrong in enforcing a contract. Gillian
Birky and Albert Point have described this principle in
their book of Good Practice Guide : Extension of Time,
as; The prevention principle provides that where one
party to a contract has, by any act or omission, prevented
the other party from performing a particular obligation
under the contract, they cannot insist upon the performance
of that obligation by the other party. Therefore, where an
employer is responsible for any delay to the project (referred
to as an act of prevention) they cannot hold the contract to
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Sub-clause 1.3 of FIDIC 1999 has unambiguously
stated that notices shall be in writing. This sub-clause
is not amended by any other clause in the contract in
respect of notice to intend to claim extension of time. By
considering court decision and phrase of this sub-clause,
a minute of meeting would not constitute a delay notice.
In the case of Gaymark, the notice requirement was
unusual and it required the contractor to overcome
a threshold of burden of proof . In the case of City
Inn, it appears to have been significant that this clause
did not impose an excessive burden on the contractor.
There are three types of delay event (1) risk events, (2)
instruction for extra works and (3) employers defaults
including breaches of contract. Risk events; in the case
of Humber Oils Terminal Ltd v. Hersent Offshore Ltd,
20BLR 22 (1981), a notice was necessary to allow the
employer to make decisions which could be of crucial
importance for the future implementation of the contract.
Instruction for extra works; in the case of City Inn, the
notice clause required the contractor not to carry out the
instruction if he gave notice. The employers breaches;
it is suggested that the prevention principle will prevail.
There has been some discussion regarding whether the
prevention principle is to be considered a rule of law or
rule of contractual construction. In case of Alghussein
Establishment v. Eton College, (1998) 1 WLR 587, rule
of contractual construction would take very clear words
indeed for one party to be entitled to obtain a contractual
benefit as a result of their own contractual default. In
the case of SMK Cabinets v. Hili Modern Electrics Pty
Ltd (1984) VR 391, even if prevention is considered a
rule of law, it is one which can be modified by express
contractual consent. In the case of Koch Hightex GmbH v.
New Millennium Experience Company Ltd, 1999, CA, the
court may refuse to hold the condition precedent clause
if it would be contrary to commercial sense in a special
situation, but held that the clause was not a condition
precedent, even though it read. In my view, condition
precedent notice requirements would be commercially
sensible, reasonable and fair for risk events and instruction
for extra works, but it would not be a commercially viable
clause for employers breaches.
However, the position under UAE remains to be tested.
Until the law is settle in this area, both the employer and
the contractor need to think very carefully to entering
enter into contract with clause 20.1 FIDIC 1999.
Bibliography
Case Laws
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Society of Construction Law
Hamish Lal, April 2002, Extension of Time: The
Conflict Between The Prevention Principle and
Notice Requirement as Condition Precedent, Society of
Construction Law
Nicholas Gould, Making A Claim Under The FIDIC
Form Of Contract. What is Clause 20 All About?, Fenwick
Elliot Solicitors, United Kingdom, 04 December 2007.
Brodie McAdam, Apportionment and City Inn: Save it
for the Scots, COBRA2008, RICS Construction and
Building Research Conference, September 2008.
Internet Resources
http://www.westlaw.com
http://www.info4education.com
http://www.scl.org.uk
http://sixthformlaw.inf/
http://www.wikipedia.org
http://www.contractjournal.com
http://www.brewerconsulting.co.uk
http://www.alway-associates.co.uk
http://www.mondaq.com
http://rics.org/cobra
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Valuation of Variation under Lump-Sum
Contracts
R.M Duminda Nishantha Kumara
Duninda is a holder of High National Diploma in Quantity Surveying & Building Economics, ICBT
Campus and also City & Guilds Higher Diploma. He is currently working as a Quantity Surveyor for Al
Jaber (ALEC) L.E.G.T Engineering & Contracting LLC.
Introduction
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to the original work, the contractor argued that the
contract rate should apply. Employer argued that a
fair valuation should be made for additional piling.
Court held, that the work is of similar character
and executed under similar conditions to the work
priced in BOQ and therefore the BOQ rates will
apply. The fact is that BOQ rates being too high
or too low is irrelevant. From this sub-clause parties
to the contract have agreed that they will use value
variations.
b) If the contract does not contain such applicable
rates, the rates and prices in the contract shall be
used as the basis for valuation, the process known
as Pro-rata basis. Using appropriate mathematics or
logic, new appropriate rates and prices should be
adopted from the rates and prices contained within
the contract so far as may be reasonable.
c) In case both these options fail, suitable rates or prices
shall be agreed upon between the engineer and the
contractor.
d) In case of all these options failing the engineer
shall fix rates or prices according to his opinion
as appropriate and shall notify the contractor
accordingly, with a copy to the employer as per the
this clause.
Variations shall be measured in accordance with the
method of measurement used in the original contract,
which may be SMM7, CESMM3, or POMI etc.
It is apparent that agreeing or fixing rates or prices
would take some time. To alleviate the negative effect
on contractors cash flow, the engineer shall determine
provisional rates or prices to enable on-account payments
to be included in monthly payment applications.
28
Item A
Boundary Wall
m
Figure -1
100.00
Item
A-1
150.00 M
Figure -02
100.00 5,000.00
+5,000.00
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3. Figure-3 illustrates bill of quantities without
provision for tenderer to price an adjustment as
above. The contractor does not have a place to
include his/her price adjustments. Thus, contractor
has to adjust rates against the given quantity until
the amount reaches the required amount. Therefore,
the contractor has provision to ask for new rates for
additions and omissions in the contract.
Item A Boundary Wall 150.00
66.67
10,000.00
Figure - 3
Conclusion
Reference
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The latest focus on management is people and organization
management. It developed since each work tends to be
different and the organizations need different strategies
to achieve each objective.
C. Handy suggested the relationship between management
and organization theory by identifying the key variables
which manager needs to struggle; i.e.
People
Work and structure
System and procedures
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complexity and differences in cultures it is very difficult
to control the work force, therefore it should lead to
uncertainty. To work out those things we need to have all
direction communication. People are moving and there
are thousands of memos, ad-hoc to track in document
controlling; therefore there should be a proper way to
manage documents. Thats why most of the reputed
companies are adopting Management Information
System. It is a subfield of the Management Science
Perspective. Joan Woodward and his team concluded
establishing technology as a key role to be a major variable
affecting the organization structure (Cole, 2006, p.85).
Last one is organizational uncertainty. People are the
greatest asset in the construction companies (Carrillo et.
Al., 2000).Therefore, the uncertainty depends on people.
By using theories of Humanistic perspective, skilled
people can be retained for a long time in one organization.
In the Middle East lots of professionals change their jobs
frequently due various reasons like salaries, working
hours, etc. The majority of them are expatriate and their
retention depends on the social reasons, political reasons
and the exchange rate. Also nobody has an initial plan to
stay a long duration here because they work on contract
by contract basis. McGregors theory of X and Y can apply
to this situation but still it needs to be modified according
to the uncertainty of the job.
The above described five situations can be identified as
Turbulent Environment in modern Management. To
response to this turbulent environment, Groak (1992)
identifies the following solutions to be used in the
organization environment.
Carrillo,P.M.,Anumba,C.J.
and
kamara,J.
M.(2000),Knowledge
management
for
construction: key IT and contextual issues, in
Gudnason , G(Ed.),proceedings of the Inter.Conf.
on Construction IT, Icelandic Building Research
Institute, Reykjavik, Iceland, 28-30 June,pp.15565
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http://ivythesis.typepad.com/term_paper_
topics/2008/05/why-is-an-under.html
White, Frost and others -v- Chief Constable of South Yorkshire and
others [1999]
The House considered claims by police officers who had suffered psychiatric injury after tending
the victims of the Hillsborough tragedy.
Held: An employer has a duty to protect his employees from physical but not psychiatric harm
unless there was also a physical injury. A rescuer, not himself exposed to physical risk by being
involved in a rescue was a secondary victim, and as such not entitled to claim. Primary victims are
victims who are imperilled or reasonably believe themselves to be imperilled by the defendants
negligence. Lord Steyn: (T)he law on the recovery of compensation for pure psychiatric harm
is a patchwork quilt of distinctions which are difficult to justify In my view the only sensible
general strategy for the courts is to say thus far and no further. The only prudent course is to treat
the pragmatic categories as reflected in [case law] as settled for the time being, but by and large
to leave any expansion or development in this corner of the law to Parliament. In reality there
are no refined analytical tools which will enable the courts to draw lines by way of compromise
solution in a way that is coherent and morally defensible. It must be left to Parliament to
undertake the task of radical law reform.
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Definition
Under Clause 1.1 sub clause (c) (1) FIDIC standard form
of contracts explains, Commencement Date and Clause
1.1 sub clause (c) (2) explains Time for Completion,
which means the time for completion, the execution
of and passing the tests on Completion of the Works
or any section or part thereof as stated in the Contract
(or as extended under Clause 44) calculated from the
commencement date.
Claim
Extension of Time
Securing a Right
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Even Clause 44.2 expresses that the engineer is not bound
to make any determination unless the contractor has,
a) Within 28 days after such event has first arisen
notified the Engineer with a copy to the Employer,
and
b) Within 28 days, or such other reasonable time as may
be agreed by the Engineer, after such notification,
submitted to the Engineer detailed particulars of any
extension of time which he may consider himself
entitled.
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of time has to be priced under site overheads. Mainly
these are preliminary items of the project. Head office
overhead costs which are not specific to one site have
to be priced separately and several methods have been
introduced by various experts to calculate the head office
overheads component.
Hudson formula is the one of such famous formulas
which illustrated below:
Head
Office =
Overheads
H.O. Profit%
100
Contract Sum
Contract Period
(weeks)
Period
X of delay
(weeks)
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Introduction;
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1.1.1 Determination of rules of procedure
(Article 19)
According to the Article 19 of the law, the parties are free
to agree on the procedure to be followed by the arbitral
tribunal in conducting the proceedings. If the parties fail
to agree on such procedure, the arbitral tribunal may
conduct the arbitration in such a manner as considered
appropriate according to the law.
1.1.2 Determination of the place of arbitration
(Article 20)
In accordance with Article 20 of the law the parties are
fee to agree on the place of arbitration (If the place of
arbitration is not stated in the Contract). Failing to do so,
the place of arbitration shall be determined by the arbitral
tribunal after considering the circumstances of the case
and the convenience of the parties.
Notwithstanding the provision of the above paragraph,
the arbitral tribunal may unless otherwise agreed by the
parties, meet at any place it considers appropriate for
consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of goods, and
other property of documents.
1.1.3 Determination of language or languages to be
used in the arbitration. (Article 22)
If the contract does not state the language or languages to
be used in the arbitration, in accordance with Article 22
of the law, the parties are free to agree on the language or
languages to be used in the arbitral proceedings. Failing
such agreement, the arbitral tribunal shall determine the
language or language to be used in the proceedings.
1.1.4 Determination of submission of Statements
of Claim and Defence Statements (Article 23)
In accordance with Article 23 of the law, within the
period agreed by the parties or determined by the arbitral
tribunal, opportunity to each party to submit statements
of supporting documents or references to the evidence
of his/her claim is provided. (In an exceptional case,
arbitration may proceed without any such documents.)
Unless otherwise not objected by the other party, any
party can amend or supplement its claim or defend
during the course of the arbitral proceedings.
February 2010
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attendance is required in order to assist the parties in
assisting/presenting their cases. They are advocates or
witnesses. If anyone else wishes to attend the hearing, the
agreement of all other parties should be obtained first.
If any party fails to attend or be represented at the hearing
of which due notice has been given, the arbitral tribunal
may continue to proceed in the absence of such party
(Article 25).
Smoking, drinking coffee, tea, soda etc. or eating at the
hearing are not allowed. Do not address the parties on
first name basis. Dress as you would in Court.
c)
d)
e)
f )
g)
h)
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Abstract
Disputes are a common feature of the construction industry. As resolution methods for such disputes the usages
of Alternative Dispute Resolution (ADR) methods such as arbitration, adjudication, mediation and negotiation in
construction industry have gained great momentum during the recent years in Sri Lanka. This research is the result of a
survey that was conducted to understand the performance of critical attributes in current ADR practices in Sri Lankan
construction industry.
The findings of this research provide both practitioners and academics within the construction industry an insight
into the perception of ADR methods currently available in Sri Lanka. Further it provides information, which ensures
a better understanding of the impact of dispute resolution process upon the construction industry and this helps the
participants connected with the construction industry to identify potential problem areas in dispute resolution.
Key words: Alternative Dispute Resolution (ADR), Construction Industry, Negotiation, Mediation, Adjudication,
Arbitration.
Introduction
Disputes are a common feature of the construction
industry (Ashworth, 2002). Construction work is a
complex process that can confound the most intricate
management systems requiring the coordinated effort
of a temporarily assembled task force. Inevitably this
complexity creates disputes (Cheung et al, 2000). Not
like the other manufacturing industries the output of the
construction industry - building and civil construction
works that have been constructed on different sites, create
their own special difficulties. Therefore, disputes can arise
not only because of the human nature, but also due to
the aforesaid special circumstances (Turner and Turner,
1999). Cheung (1999) states that in present days complex
construction projects, resolving disputes have become an
inevitable part of project management.
Earlier most disputes were settled on the job site at an
informal meeting between the relevant parties. It is to
the contractors advantage to resolve the disputes directly
with the employer in an amicable nature. Other methods
of dispute resolution tend to have unpleasant side effects
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Wimalachandra (2007) defined ADR as any form
or procedure, whether formal or informal, whereby
parties can resolve their disputes instead of litigation
before courts of law. Justice Wimalachandra further
mentioned numerous advantages of ADR like flexibility,
confidentiality, cost savings, informality, low antagonism
between the parties and time saving.
ADR methods were not new to the Sri Lankan
community since the days of ancient kings, though it was
not applied exactly in the present context. The ancient
methods of disputes resolution change their mechanisms
according to the modern business requirement as well
as international usages (Abeyaratne, 2006). Currently
there are several ADR methods used and adopted by
stakeholders in the construction industry in Sri Lanka.
Negotiation, Mediation, Adjudication and Arbitration
can be identified as widely used and recognized ADR
methods (De Zylva, 2006).
The practicing of ADR methods can be indicated as a
stair step way (Oreilly and Mawdesley, 1994; Cheung,
1999). According to Chung (1999) this rising steps in the
chart intimate the escalating levels in hostility and cost
associated with the various forms of dispute resolution.
Many authors (Omar, 2007; Uff, 2005) support this stair
step model, (figure 1), in construction related dispute
resolution.
Arbitration
Adjudication/
Administrative
Decisions
Mediation
Negotiation
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attributes in ADR, the outcome of the research technique
should be easy to analyze, quantify, compare and contrast.
Therefore, questionnaire survey was selected as appropriate
technique to carryout the research study. In this research,
the questionnaire was framed in to three basic sections.
The objective of each section can be identified as follows;
Section 01: Intended to elicit the background
information of the respondent;
In this section, it was asked to fill the respondents
names (optional), name and the type of the organization,
their profession and their working experience in the
construction industry as well as in dispute resolution.
Section 02: Intended to evaluate the importance of the
critical attributes affecting the ADR;
In this section the respondent were to rate each critical
factor which was mentioned in the research problem on a
7-point scale (Not importance to very high importance).
Section 03: Intended to scale the agreement level with
the positive aspects of the critical attributes of ADR
methods;
In this section the level of agreement was compared
and contrasted with the positive aspects of the above
mentioned critical attributes of each ADR method by
using a 5-point scale (Very low degree of agreement to
very high degree of agreement).
The Purposeful selective sampling was the method of
sampling for this research as the information asked
from the survey requires in depth knowledge and sound
experiences about ADR methods. The questionnaire was
distributed to the respondents at their work places. The
completed questionnaires were collected by the researcher
later.
44
Wi
Where,
Wi
Vij
Fi
n
= ( Vij *Fi) / n
- Mean Weighted Rating on i th attribute
- Rating for i th attribute from the j th
respondent (According to Seven scale rating)
- Frequency of Responses in i th attribute
- Total number of respondents
Severity Index
The severity index computation is used to compare and
contrast the agreement level of the positive factors of
critical attributes affecting each ADR method.
S.I. i = ( Wi * Lij) / n
Where,
S.I. i - Severity index value on i th attribute.
Wi - Mean Weighted Rating on i th attribute
Lij
- Level of Agreement for the positive aspect of i th
attribute from the j th respondent in each ADR
method (According to Five scale rating)n
- Total number of responses
Sample Distribution
The questionnaires were distributed equally among
clients, consultants and contracting organizations after
communicating to them the aim and the objectives of
the study by the researcher. An acceptable number of
responses (47) were given by the respondents (Shown in
Table 1).
Table 1: Responses in questionnaire survey
Type of
Organization
Questionnaire
Percentage %
Distributed
Responded
Consultant
30
17
56.7
Client
Contractor
30
30
16
14
53.3
46.7
Total
90
47
Number
Percentage %
17
16
14
47
36.2
34.0
29.8
100.0
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It is evident that each organization type approximately
represents one third (1/3) of respective types of
respondents in the survey (Refer table 2). Therefore, the
survey results are not biased towards one organization
type and are representative of the industry as a whole.
Percentage %
Engineer
22
46.8
QS
18
38.3
Architect
8.5
Lawyer
6.4
Total
47
100.0
Profession
Number
Percentage
%
Cumulative
percentage %
Not Provided
2.2
2.1
0 5 Years
6.5
8.5
6 10 Years
10.9
19.1
11 15 Years
15.2
34.0
16 20 Years
19.6
53.2
Over 20 Years
22
47.8
100.0
Total
47
100.0
Rank
6.34
Obtaining fairness
Bindingness of the decision/
Settlement
Enforceability of the decision/
Settlement
Confidentiality of the process
6.32
6.11
6.04
6.00
5.96
5.51
5.47
Preservation of relationship
5.38
5.26
10
5.23
11
5.02
12
Attribute
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Weighting
1
2
3
4
Required time
duration is low
Low cost
involvement
Relationship
between parties
are preserved
Apply flexible
procedure
Confidential
process
Enforceable
decision/
settlement
5.51
5.38
5.47
6
6.04
In
Arbitration
6.34
In
Adjudication
In
Mediation
Level of Agreement
Very low degree of agreement
In
Negotiation
Positive factor
of the Critical
Attributes
Importance
(Mean Weighted
Ratings)
23.01
21.87
20.29
13.95
22.92
19.40
15.21
11.35
23.78
20.39
17.32
14.15
24.45
21.11
17.01
13.46
24.42
22.14
22.56
22.32
13.77
14.50
17.46
27.90
5.96
Secure the
privacy of the
proceedings
22.17
21.87
21.63
21.16
6.32
Fairness
decision/
settlement can
obtain
23.64
23.38
23.64
23.26
6.11
Parties are
bound by the
decision
14.36
15.34
20.47
28.23
5.23
22.96
19.19
15.95
15.11
18.88
17.82
15.51
13.86
21.51
18.88
15.10
11.99
21.32
19.66
18.51
18.06
Mean
importance
Weighting
46
Level of
Agreement
Severity of
the attributes
5.02
5.26
Parties can
control the
procedure
High width of
remedy
Can obtain
creative
remedies
Average
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The computed figures of the severity index have shown
the severity of the attributes in dispute resolution along
with the positive aspect of critical attributes. The above
results further highlighted its following features.
1. Highest severity index value was obtained by
Arbitration in the attribute of Binding of the
decision. (The industry strongly believes the outcome
of Arbitration as binding.)
2. Lowest severity index was obtained by Low cost
involvement in Arbitration. (The industry does not
believe the statement of low cost involvement in
Arbitration.)
3. Other than the sixth and ninth attributes
(Enforceability of the decision and Binding of the
decision) other attributes follow the stair step model
described above.
Conclusions
Decrease
Speedy solution
Relationship
Flexibility
Control
Width of Remedy
Creativeness of the remedy
Arbitration
Increase
Bindingness
Enforceability
Cost and Hostility
Adjudication
Constant
Confidentiality
Privacy
Fairness
Mediation
Negotiation
Figure 3: Modified Stair-step model
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References
48