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CONTRACT ADMINISTRATION OF

INFRASTRUCTURE PROJECTS
Presented by:
Stuart Cullen
BSc PgDip FCIArb
Senior Consultant Hill International
Kumar Arumugam
MBA, BEng (Hons) Electrical, PGDipArb, FCIArb, MRICS
Managing Consultant Hill International

Page 1

CONTENT & STRUCTURE


Session 1 (9.00 10.00) Introduction
Session 2 (10.30 12.30) Tools & Methods of Working

Session 3 (13.30 15.00) Kick Off, Sub-Contracting, Variations, Delay &


Extension of Time

Session 4 (15.30 17.00) Disruption & Loss of Productivity, Payment


Claims, Practical Completion

Page 2

INTRODUCTIONS

Your name

Your company and profession

Your personal objectives for the course

Page 5

RISKS AND CHALLENGES

Employer / Contractor relationship


Stakeholder and risk-taker

Formality Contract
Employers requirements

Key success factors delivery


On time, on cost and to specification

Page 6

SETTING THE SCENE

Page 7

SETTING THE SCENE


RISKS AND CHALLENGES
COMPLEXITIES in the building of the new National Stadium have
pushed back the completion date for the $1.33 billion Sports Hub.

Most of the hub will be completed by April as originally targeted,


but a few more weeks are needed for testing and certifying the
stadium's retractable roof and moveable seating. This will not
affect the stadium's first event, which is being planned for June
[Source: The Straits Times Published on Feb 19, 2014 6:00 AM ]

Page 8

SETTING THE SCENE

Page 9

SETTING THE SCENE

Page 10

SETTING THE SCENE

Page 11

SETTING THE SCENE

Sydney Opera House original estimated cost to build the Opera House
was AUS $7m in 1957 and expected to be completed in five years
(1962).
The project was started in 1959 and the value escalated to AUS $102m
and was completed in 1973.
Not only did the budget over-run to 15 times the original estimate, but it
also took 14 years to complete.
The main factor which affected this project was insufficient planning
during the design stage.
This led to a series of errors during construction, which effectively
caused a domino effect. Hence, increasing the cost and pushing back
the completion date.

Page 12

SETTING THE SCENE


Reasons Why Organisations Fail To Manage Contracts:
1.

Poorly drafted contracts

2.

Inadequate resources are assigned to contract management

3.

The customer team does not match the provider team in terms of either skills or

experience (or both)


4.

The context, complexities and dependencies of the contract are not well understood

5.

There is a failure to check provider assumptions

6.

A focus on current arrangements rather than what is possible or the potential for
improvement

7.

A failure to monitor and manage retained risks (statutory, political and commercial).

[Source: Contract management guidelines Office of Government Commerce 2002 (available online at www.ogc.gov.uk)]

Page 13

SETTING THE SCENE


Contract Administration Is More Out Of Control Than You Think:
1. Have all your contracts gone through the appropriate approval process before
they were signed?
2. What is the expiry dates of all your contracts?
3. Can you easily locate any specific contract you are looking for?
4. Are your financial systems updated whenever a contractual risk event occurs?
5. Are you certain that you are not losing any money due to cost leakages in your
contract administration?
[Source: Kirk Krappe and Gopi Kallayil- Contract Management Is More out of Control Than You Think Journal of Contract Management /
April 2003]

Page 14

RISKS AND CHALLENGES


Project

No. Of Cases

Avg. cost overrun%

Rail

58

44.7

Bridges & Tunnels

33

33.8

Road

167

20.4

[Source Cost Underestimation in Public Works Projects: Error or Lie? By Bent Flyvbjerg, Mette Skamris Holm, Sren Buhl
Journal of the American Planning Association, Vol. 68, No. 3, pp. 279-295Summer 2002]

In 9 out of 10 transportation infrastructure projects, costs are


underestimated.
For all project types, actual costs are on average 28% higher
than estimated costs

Page 15

SETTING THE SCENE

Extent of the time overrun in projects with respect to original schedule


Projects with overrun
Total cost (Rs. Cr.)
Sector
Cost
Range
Original Anticipated
Proj
Proj
cost
(Months)
overrun( %)
Atomic Energy
4
29,228.3
34,066.3
16.6 3
11 - 44

Civil Aviation

4,123.2

5,435.0

31.8 3

10 - 23

Coal

48

27,241.5

30,628.5

12.4 17

9 - 48

Fertilisers

5,317.4

5,317.4

0.0 3

1-8

Mines

4,091.5

4,401.8

7.6 1

30 - 30

Steel

15

41,398.4

68,455.6

65.4 4

17 - 36

Petrochemicals

5,460.6

5,460.6

0.0 0

Petroleum

75

161,799.3

169,936.2

5.0 37

2 - 120

Power

84

180,274.3

186,358.4

3.4 47

2 - 90

10

Railways

136

66,510.0

133,785.1

101.2 29

2 - 213

11

Road Transport & Highways

136

73,440.5

75,245.7

2.5 94

4 - 106

12

Shipping & Ports

26

18,451.4

19,434.9

5.3 14

2 - 93

13

Telecommunications

41

20,026.0

20,650.7

3.1 21

4 - 72

14

Urban Development

52,921.2

68,412.4

29.3 2

12 - 15

15

Water Resources

542.9

1,187.0

118.6 1

60 - 60

No

Total

584

690,826.4

828,775.5

20.0

276

Page 16

SETTING THE SCENE

Extent of the time overrun in projects with respect to original schedule


Projects with overrun
Total cost (USD Millions)
Sector
Cost
Range
Original Anticipated
Proj
Proj
cost
(Months)
overrun( %)
Atomic Energy
4
16.6 3
11 - 44
4,752.66
5,539.34

Civil Aviation

Coal

48

Fertilisers

No

670.45

883.76

4,429.59

4,980.33

864.63

Mines

Steel

15

Petrochemicals

Petroleum

31.8 3

10 - 23

12.4 17

9 - 48

864.63

0.0 3

1-8

665.30

715.75

7.6 1

30 - 30

6,731.57

11,131.19

65.4 4

17 - 36

887.92

887.92

0.0 0

75

26,309.31

27,632.40

5.0 37

2 - 120

Power

84

29,313.43

30,302.73

3.4 47

2 - 90

10

Railways

136

10,814.83

21,754.07

101.2 29

2 - 213

11

Road Transport & Highways

136

11,941.76

12,235.29

2.5 94

4 - 106

12

Shipping & Ports

26

3,000.28

3,160.20

5.3 14

2 - 93

13

Telecommunications

41

3,256.32

3,357.90

3.1 21

4 - 72

14

Urban Development

8,605.23

11,124.17

29.3 2

12 - 15

15

Water Resources

88.28

193.01

118.6 1

60 - 60

Total

584

112,331.5

134,762.7

20.0

276

Page 17

SETTING THE SCENE

[Source: Study on the Quantification of Delay Factors in Construction Industry K. L. Ravisankar, Dr. S. AnandaKumar, V.
Krishnamoorthy (International Journal of Emerging Technology and Advanced Engineering Volume 4, Issue 1, January 2014)]

Page 18

COURSE OBJECTIVES (1.00)


1.

Recognise good and bad practice.

2.

Appreciate the need for good record keeping.

3.

Provide other parties to a Contract with necessary information.

4.

Avoid claims being barred.

5.

Collect factual data to support monetary and time claims.

6.

Avoid pitfalls and common oversights.

7.

Take early action to maintain control.

8.

Be aware of action to be taken at prescribed milestones and events.

9.

Avoid disputes by administering the Contract professionally.

10. Understand various commercial processes.


Page 19

OVERVIEW (3.00)

Many procurement models

Generic - rather than a specific project or procurement model.

Focus of Course is during Construction phase

Perspective of Contract Administrator employed by a Contractor,


where the Principal is the Designer.

Legal aspects avoided.

Page 20

CORE TOPICS (3.00)

Documents forming a Contract.

Contract Document security.

Contract document ambiguities.

Separable Portions.

Contract Analysis and Tools.

Recording Flow of Information.

Notifications and Bars.

General Record Keeping.

Correspondence and Minutes of Meetings.

Subcontracting.

Physical Conditions.

Variations.

Contract programme and Construction


Programmes.

Delay and Extension of Time.


Page 21

Cost of Delay.

Disruption and Loss of Productivity.

Continued..

Interim and Final Payment.

CORE TOPICS (3.00)

Rise and Fall.

Free Issue Equipment and Materials.

Compliance with the Law and Regulations.

Management Documents.

Insurances.

Performance Undertakings, Guarantees and


Warranties.

Practical Completion.

Discussion at various stages.

Page 22

DEFINITIONS (4.00)

Principal The Client/Employer including representatives and


designers.

Contractor Includes representatives, and subcontractors.

Contract Administrator A single person or a team.

Page 23

NATURE OF INFRASTRUCTURE PROJECTS (5.00)


1. Transportation Roads, railways, airports, seaports.
2. Energy Electricity, gas, coal, hydro.

3. Water Supply, drainage, sewage, irrigation, flood control.


4. Communications Telephone, cabling, television, mobile phone
networks.
Physically larger than other projects.
Contract documents more complex and voluminous
Usually based on drawings and specifications.
Usually no Bills of Quantity.
Page 24

NATURE OF INFRASTRUCTURE PROJECTS

Rail projects are a key driver of investment growth in


Singapore with a doubling of the metro system by 2030,
contributing to an estimated $16 bn to be spent over the
[Source PWC - A Summary of South East Asian Infrastructure Spending: Outlook to 2025]
coming decades.

Thailand
Malaysia

New Zealand
Singapore

Page 25

NATURE OF INFRASTRUCTURE PROJECTS

Overall, infrastructure spending in Indonesia is expected to


grow to around $165 bn by 2025, with growth in public
investment spending expected to grow by around 7% per year.
[Source PWC - A Summary of South East Asian Infrastructure Spending: Outlook to 2025]

Indonesia

Malaysia
Philippines

Page 26

NATURE OF INFRASTRUCTURE PROJECTS


Singapore

[Source PWC - A Summary of South East Asian Infrastructure Spending: Outlook to 2025]

Page 27

NATURE OF INFRASTRUCTURE PROJECTS


Malaysia

[Source PWC - A Summary of South East Asian Infrastructure Spending: Outlook to 2025]

Page 28

NATURE OF INFRASTRUCTURE PROJECTS


Indonesia

[Source PWC - A Summary of South East Asian Infrastructure Spending: Outlook to 2025]

Page 29

NATURE OF INFRASTRUCTURE PROJECTS


RAIL SYSTEMS
IN THE REGION

Page 30

FORMS OF CONTRACT (6.00)

Standard forms - Usually used for smaller projects with no


unusual features.

Hybrid forms - Standard forms modified to cater for specific


features.

Home Grown (bespoke) forms - Written specifically for larger


complex projects.

FIDIC and NEC forms

Page 31

CONTRACT ADMINISTRATION (7.00)

Loose term

Manage contractual and commercial relationships between parties

Different backgrounds and skills. May involve specialist Quantity Surveyors


and Programmers.

On infrastructure projects there is a high probability of design changes

High probability of claims

Avoid dispute by administering the Contract professionally.

Issue Notices as required by the Contract

Provide information

Keep good records


Page 32

CONTRACT ADMINISTRATION (7.00)


Responsibilities and Roles (7.01)
The head Contract with the Principal.

Subcontractors, Suppliers and Fabricators.

Plant and equipment providers.

Progress claim compilation.

Valuation of Variations.

Claims preparation.

Delay and Extension of Time Claims.

Internal cost reporting.


Page 33

CONTRACT ADMINISTRATION (7.00)

Cost analysis and delay analysis usually require specialist skills of


Quantity Surveyor and Programmers respectively(7.02)

Page 34

DOCUMENTS FORMING A CONTRACT (8.00)

Tender Process (8.01)

Documents are complex and voluminous

Documents could include: (8.02)


Deed of Agreement.
General Conditions of Contract.
Schedules to the General Conditions.
Commercial details.
Special conditions.
Specifications.
Drawings. Continued
Page 35

DOCUMENTS FORMING A
CONTRACT

Schedules and copies of tender correspondence and


documents incorporated into the Contract.
Work Method Statements.
Environmental Requirements.
Workplace Behavioural Requirements.

Occupational Health and Safety Requirements.


Community Liaison Requirements.
Quality Assurance Requirements.
Testing and Commissioning Requirements

Entire Contract When determining the contract scope of work,


extraneous documents may be excluded. (8.03)

Bills of Quantity If qualified for information. (8.04)


Page 36

CONTRACT DOCUMENT SECURITY (9.00)

Keep original signed Contract in a secure place off site (9.01)

Keep a complete copy on site (9.01)

Keep a loose leaf for making copies (9.01)

Check Contract documents for completeness (9.02)

Page 37

CONTRACT DOCUMENT AMBIGUITIES (10.00)

Possibility of ambiguities between or within documents (10.01)

Notification (10.01)

Feed back from other staff essential (10.01)

Principal to provide interpretation (10.01)

Order of precedence of documents set out in Contract (10.02)

General rule - usually document with highest quality or detail


prevails (10.02)

Page 38

SEPARABLE PORTIONS (11.00)

Features of Separable Portion (11.01)


Descriptions of the Separable Portions.
Access and commencement dates
Practical Completion dates
Liquidated Damages
A Contract Sum for each Separable Portion
Different start and finish of Defects Liability Periods
Different Warranty Periods
Separate Insurance requirements
Separate Performance Guarantees
Separate Retention Sums
Page 39

EXAMPLE

SEPARABLE PORTIONS

Page 40

EXAMPLE

SEPARABLE PORTIONS

Page 41

SEPARABLE PORTIONS (11.00)

Awareness of action by Contract Administrator (11.02)


Prepare Progress Claims showing a breakdown of values
related to each Separable Portion.
Deal with Extension of Time claims related to individual
Separable Portions.

Provide Documentation specified by the Contract as a precondition of achievement of Practical Completion for
individual Separable Portions.

Page 42

Discussion
1. What are the key features of an entire contract?
2. What are the practical implications of an entire contract when
assessing whether or not a variation has occurred?
3. What are the disadvantages if Contract documents are broken up
and not controlled?
4. What action should be taken if ambiguities are discovered within
a Contract document?
5. Apart from order of precedence what other criteria can be
applied when determining precedence?
6. What are some of the procedural actions that must be taken with
regard to Separable Portions?

Page 43

CONTRACT ANALYSIS AND TOOLS (12.00)

Understand interrelationships of various


parts of Contract documents (12.01)

Analyse the Contract documents. (12.02)


Annotate a spare copy of the Contract
by cross-references to various
relevant sections/clauses.
Continued..

Page 44

CONTRACT ANALYSIS AND TOOLS

Time periods in the Conditions of Contract: Sub-Clauses 1.1.1.3, 1.13.1, 4.2, 8.1,
8.2, 8.3, 8.4, 8.7, 9, 10.1, 11, 11.3, 11.9, 11.10, 14.1, 14.2, 14.4, 20.2.
Progress Requirements: Sub-Clauses 2.1, 2.5, 3.5, 8.1, 8.3, 8.4, 8.6, 14.6, 20.1, 20.4.
Workmanship procedures: Sub-Clauses 2.5, 7.1, 7.3, 7.4, 7.5, 7.6, 10.2.
Procedures at Completion of Works: Sub-Clauses 9, 10.1, 11.4.
Procedures during Defects Notification Period: Sub-Clauses 2.5, 10.1, 11.1, 11.3,
11.6, 11.8, 11.9,
Procedures for advance payment: Sub-Clauses 14.2, 14.3, 14.7, 14.8, 16.1, 16.2.
Payment procedures: Sub-Clauses 4.2, 14.3, 14.6, 14.7, 14.8, 16.1, 16.2.
Procedures for Payment at Completion of Works: Sub-Clauses 8.2, 10.1, 14.6,
14.10.
Procedures for final payment: Sub-Clauses 14.7, 14.9, 14.11, 14.12, 14.13.
Claims by the Contractor: Sub-Clauses 1.3, 1.9, 3.5, 8.3, 8.4,
Claims by the Employer: Sub-Clauses 2.5, 3.5, 14.14, 20.4.
Procedures for disputes: Sub-Clauses 20.4, 20.5, 20.6.
[Source: FIDIC users' guide: A practical guide to the 1999 Red and Yellow Books]

Page 45

CONTRACT ANALYSIS AND TOOLS (12.00)


Prepare a separate Schedule of Events
requiring Notification that may trigger the
need to submit Notices or contractual
action to be taken by the Contractor.
Prepare flowcharts of specific Notice
requirements and other contractual
actions prescribed by a Contract.
Distribute the Schedule of Events
requiring Notification and Flowcharts to
other interested members of staff.
Page 46

EXAMPLE

CONTRACT ANALYSIS AND TOOLS

Page 47

EXAMPLE

CONTRACT ANALYSIS AND TOOLS

Page 48

EXAMPLE

CONTRACT ANALYSIS AND TOOLS

Page 49

EXAMPLE

CONTRACT ANALYSIS AND TOOLS

Page 50

EXAMPLE

Schedule of Events Requiring Notification (12.03)

Project:

Event

Contract Information to be provided


Clause(s) in Notice

Variation,
arising
from issue
of a
drawing or
document
by the
Principal.

xxx

Reference to drawing or
document containing the
change.
Date that drawing or
document issued.
Reference to equivalent
Contract drawing or
document.
Details of the change.
Nature of change, add omit,
character, lines/levels,
manner of performance.
Any other facts.
Legal or contractual basis
of the claim.
Calculation or estimate of
monetary amount involved.

Time for issue


of Notice

Comments

xxx days from


receipt of
drawing or
document.

Barred if not issued


within prescribed
time.

Page 51

Within each activity box identify relevant clause(s) of the Contract.

EXAMPLE

Example of a
Flow Chart
(12.04)

Physical
condition
encountered

Contractor
immediately
issues notice
to Principal

Principal
directs
work to be
undertaken

MONEY

Within
specified time

Contractor issues notice of


intention to claim payment as
a Variation or as a general
Claim, whichever the Contract
provides for.
Contractor issues a notice that
the work will incur delay costs
(if the work is delayed and
will involve additional costs)

TIME

Within
specified
time

Within
specified
time

Contractor
issues a notice
of Delay (if
the work is
delayed)
Contractor issues
notice of Extension
of Time (if
Completion is or
will be delayed)
At specified
intervals

Contractor issues further


notices of Extension of
Time if delay continues

Page 52

Information feed back from Supervisors (12.05)

It is important that a Contract Administrator is constantly provided


with necessary information by front line supervisors.

Crucial for Contract Administrator to be able to issue Notices


promptly

Page 53

EXAMPLE

Schedule of Events requiring Supervisor feedback


Project:
Activity/Event
Hard rock
Waterlogged rock
Running water
Verbal instruction
Instruction by Principals
supervisor/engineer to change physical
work
Instruction by Principals
supervisor/engineer to do the work
differently
Instruction by Principals
supervisor/engineer to use different
plant or methods
Delay caused by:
Hard rock
Waterlogged rock
Running water
etc

Reason information required

Contract maximum
notice period
Immediate
Immediate
Immediate
Immediate
x days

Physical condition
Physical condition
Physical condition
Confirm in writing
Potential Variation

Contract
clause #
xxx
xxx
xxx
xxx
xxx

x days

Potential Variation

xxx

x days

Potential Variation

xxx

x days
x days
x days
x days

Potential Delay/EOT claim


Potential Delay/EOT claim
Potential Delay/EOT claim
Potential Delay/EOT claim

xxx
xxx
xxx
xxx

Page 54

RECORDING FLOW OF INFORMATION (13.00)

Programmes may include milestone when information such as


drawings need to be provided.

Programmes are updated which could change dates

Information Transmittal Register should be compiled (13.01)

Interactive and iterative document

Information conveyed on a Register could include:


Nature of information required (Eg: drawings for a specific
part of the works).
Activity(s) involved.

Page 55

RECORDING FLOW OF INFORMATION (13.00)


Any lead time involved.
(Eg: design required to enable fabrication).
Date requested.
Date required.
Date received.
Transmittal reference.
Details and repercussions if Date required not being
achieved.

Essential to state Date required so as to measure any overrun.

Give Principal reasonable time to respond.


Page 56

EXAMPLE

RECORDING FLOW OF INFORMATION

Page 57

EXAMPLE

Example of an Information Transmittal Register(13.02)


Project :
Status date : 31 May 2013
Information Activity
Lead
required
involved
time
(if
any)
1 wk
Reo
Columns
drawing for C5-8 at GF.
columns
Weld type
details

2 wks
Stiffeners
to beam B1

Date
requested

Date
required

Date
received

8/5/13

15/5/13

14/5/13

16/5/13

23/5/13

Not yet
received

Transmittal
Reference

Comments

RFI # xx
Reo Schedule
xxx dated
14/5/13
Email dated
16/5/13

Fabricate off site.

Received by required
date
Fabricate off site.
At status date, details
not received by
required date.

Dimensions Start
on grid A-1 formwork to
slab level 1.

22/5/13

5/6/13

Not yet
received

RFI # xx

Lead time will be


reduced. May delay
work on site.
No delay at status date

Page 58

RECORDING FLOW OF INFORMATION (13.00)

Request For Information (RFI) raised for a specific issue (13.03)

Again, essential to provide latest Date required (13.03)

Page 59

EXAMPLE

Example of an RFI for a Specific Issue (13.04)


REQUEST FOR INFORMATION
Project:
RFI number: xxx
Date of Issue of RFI: 8/5/13
From: Contractor
To: Principals Representative
Information requested:
Reo drawing for columns C5-8 at GF outstanding.
Work activities involved:
Columns C5-8 at GF.
Date information required: 15/5/13
Reply from: Principals Representative
Date of Reply: 14/5/13
Details of Reply:
Reo Schedule xxx dated 14/5/13.

Page 60

Discussion
1. What could a Contracts Administrator do to understand and
educate others with regard to contractual interrelationships
between events and communication of those events to the
Principal?
2. What are the advantages of involving front line supervisors in the
Notification process?
3. What purpose would an Information Transmittal Register serve?
4. What is the most important feature of a Request For
Information?

Page 61

NOTIFICATION AND BARS (14.00)

A direction from Principal can trigger the need for a formal notice
(14.01)

This can include changes to drawings (14.01)

Strict notification requirements are common (14.02)

Purpose to alert Principal (14.02)

Could impact time and money (14.02)

Compliance essential to preserve Contractors rights. (14.02)

Compliance essential to avoid bars (14.02)


Page 62

NOTIFICATION AND BARS

[FIDIC 20.1]

If the Contractor fails to give notice of a claim


within such period of 28 days, the Time for
Completion shall not be extended, the Contractor
shall not be entitled to additional payment, and
the Employer shall be discharged from all liability
in connection with the claim..

Page 63

NOTIFICATION AND TIME BARS - SINGAPORE


Claim
Clause
Notify

SIA 2011
Time
23.(2)
Architect

Timing

within 28 days of
any event

Bars

condition precedent
to notify

Delay
Events

23.(1)(a) to (q)

Response

Any time up to Final


Certificate
Entitlement In 1 month an in
Indication
principle decision on
entitlement

POSSCOC 2008
Time
14.3
Superintending
Officer
within 60 days of the
occurrence of such
event
conditions precedent
to notify & give
further details

REDAS 2010
Claims (time)
16.2.1
Employer's
Representative
28 days from the
date of the event

FIDIC 1999
Claims (time)
20.1
Engineer

condition precedent
to notify & give full
detailed particulars

Failure to notify no
entitlement

14.2(a) to (q)

16.1.1 to 16.1.4

(not stated)

within a reasonable
time
In 28 days an in
principle decision on
entitlement On
written request

(1.9), (2.1), (4.12),


(4.24), (7.4), (8.9),
(16.1), (13.7), (17.3),
(19.4)
(not stated)

In 60 days an in
principle decision on
entitlement

Within 28 days after


the becoming aware

(not stated)

Page 64

NOTIFICATION AND TIME BARS - MALAYSIA


Claim
Clause
Notify
Timing

Bars
Delay
Events

Response

PAM 2006
Time
23.(1)a
Architect

PWD 203A 2010


Time
43.1
Superintending
Officer
28 days from the
becomes reasonably
date of the AI, CAI or apparent there is
start of the event,
delayed, give written
whichever is earlier notice forthwith

CIDB 2000
Time
24.2(a)
Superintending
Officer
30 days of the
occurrence of such
event

FIDIC 1999
Time & Cost
20.1
Engineer

Failure to notify no
entitlement
(1.9), (2.1), (4.12),
(4.24), (7.4), (8.9),
(16.1), (13.7), (17.3),
(19.4)
(not stated)

condition precedent
to notify
23.8(a) to (x)

(not stated)

(not stated)

43.1(a) to (j)

24.1(a) to (q)

within 6 weeks of
having sufficient
particulars

so soon as
he is able to
estimate the length
of the delay
(not stated)

prior to the expiry of


the Time for
Completion

Entitlement (not stated)


Indication

Within 28 days after


the becoming aware

(not stated)
In 30 days an in
principle decision on
entitlement
Page 65

EXAMPLE

Notices with Commercial or Time implications (14.03)


Event

Probability of a
requirement to Notify
within a prescribed
number of days
YES

Probability of a strict
Bar if prescribed
requirements are not
complied with
NO

Immediately
YES
YES
YES - if a claim made
under Claims.
NO - if Extension of
Time has been granted.

YES
YES
YES
YES - if a claim made
under Claims.
NO - if Extension of
Time has been granted.

Changes to the Law and Regulations.

YES

YES

Claims.
Disputes. Principals request for the Contractor
to provide further particulars.

YES
YES

YES
YES

Ambiguities within or between Contract


documents.
Changed site conditions.
Claimed Variations.
Delay and Extension of Time.
Delay costs.

Page 66

NOTICES

Page 67

WHY ARE NOTICES REQUIRED?


Contractual Compliance.
Pre-condition to a claim.
Flags up the start of an event possibly leading to a claim.
Warns the Employer of possible problems such as
programme delays and extra costs.
Employer can set aside risk money to cover costs of possible
claims.
Enables Employer to decide on mitigation measures and
allows planning of remaining works to proceed.

Page 68

WHAT MAKES A GOOD NOTICE

A Notice must contain sufficient information such that it can be


read and understood at a later date.
It should contain:
A subheading at the top of the letter. (Notice of .)
A unique Reference and date.
Signature of authorised person (Project Manager)
Each notice must be self contained and make sense, with out
resorting to detective work.
Be confined to the simple facts.
Outline the effect on programme and costs as soon as
possible.

Page 69

EXAMPLE

EXAMPLE
Does the Notice do the
job?.

To The Employer

No date, reference or subheading.


Discussions with whom?

Where is level 3?

What other trades?

Which programme is effected?.

What is the actual effect?

What is the disruption?

Is a claim being registered or


not!!
Not signed.

Further to our discussions yesterday


onsite, we confirm our notice to you that
we are unable to commence our
installations on level 3, due to lack of
readiness of other trades. This may well
effect our programme and will certainly
cause disruption for which we reserve the
right to seek costs if necessary
regards
Site Manager

Page 70

EXAMPLE

EXAMPLE
Our Ref: Notification/STBLD/005
Dear Sir
15 October 2013
Notice of delay and disruption
ST Building - Installation of compressor skid
We refer to discussions on site on the 14 October 2013 (ref: Cunningham, Smith) regarding
the remedial works (floor strengthening) currently being undertaken by your civil contractor
(name) within the Steam Turbine Building, third floor (+11m level, adjacent to grid 11/ S1).

The remedial works are preventing Contractor Ltd from installing the compressor skid in
accordance with the planned schedule of work (ref programme xxx), and will delay the first
fire date currently scheduled for the 12 November 2013.
We are unable to confirm the extent of the delay and disruption at this time and seek your
urgent attention to this matter. Please advise when access for mechanical installation will
be available.
We will advise the impact of this delay as soon as the full details are known and hereby
give notice of our intention to make a claim for additional payment and time in accordance
with clause xx of the general conditions of contract.
Page 71

EXAMPLE

NOTICES

Signed by an authorised
signatory or a registered
delegate

Page 72

NOTICES

Make sure each letter and notice will stand on its own merit to
protect during the project and at the end, when claims may well
prevail.

Always be polite and state only the facts, do not get emotional
or go off on a tangent by stating irrelevant facts. Keep to the
point.

Page 73

EXAMPLE

NOTICES

Page 74

NOTICES

Features of a typical notice (14.03)

Best assessment of cost and time if short notice period (14.03)

Other Notices (14.04)


Request to appoint designers.
Name of Contractors Representative and any subsequent
changes.
Damage to property.
Potential insurance claim.

Page 75

NOTICES
Carry out tests.
Carry out pre-commissioning and commissioning.
Pre-notice of Practical Completion.
Pre-Notice of Final Completion.

Be aware of time and absolute Bars (14.05)

Pro-Forma Notices (14.06)

Page 76

EXAMPLE

Page 77

Benefits Of An Efficient Notification Regime(14.07)

The Principal is regularly updated.

The Principal is put in a position to take mitigating action and/or

adjust budgets.

Which facilitates early settlement of legitimate claims maintains


cash flow.

And may avoid a major claim at the end of the project.

Page 78

Discussion
1. What can be the consequences of failing to issue a formal Notice
in relation to prescribed events?
2. What can be the benefits if Notice requirements are complied
with?

Page 79

GENERAL RECORD KEEPING (15.00)

Good records are essential (15.00)

Record facts (15.00)

Will avoid arguments (15.00)

Keep Principal informed (15.04)

Submit records to Principal contemporaneously (15.04)

If signed for record purposes only means no liability


acknowledged but is still a record. (15.04)
Page 80

CORRESPONDENCE AND MINUTES OF


MEETINGS (16.00)
Maintain a chronological master file
Agree Minutes of Meetings early
Minutes of meetings are records of conversations
Request written instructions

Page 81

EXAMPLE

Request written
instructions
Or
confirm verbal
instructions

Page 82

RECORD

Types of reporting
Diaries
Daily Reports - site
Progress Photographs
Minutes of meeting
Notes of Conversations
Labour and Plant
returns
Schedules
Progress Reports
Employer
Sub-contractor
Supplier

The requirement for good records


cannot be understated.
Events that occur in the process
of performing the work potentially
have a contractual significance.
Contemporaneous records record
the events at the time they
happened and are invaluable,
provided they are legible and
factual.
NEVER write on records
remember that they may be
disclosed during the claims
process

Page 83

EXAMPLE

RECORD, RECORD
The Special Comments section
of the daily report is an excellent
vehicle to record significant events
as they occur. There is no
substitute for contemporaneous
documentation.
Special Comments may be:

Project N a me:

________________________

Employer:

Area of Work:

Shift:

Report N o.:

Da te:

Wea ther:
.

Pa ge:

Description of Work Pla nned for Toda y*

Description of
work planned
today

Problems/problem resolution.
Extreme weather and affected work.
Interferences.
Delays.
Instructions to Contractor by Employer or Engineer. If
instructions are not followed, state the specific reason.
Instructions given to sub-contractors.

..

of

Description of Work Performed Toda y*

Description of
work performed
today

Specia l Comments:*

Changes to work, including directed changes and changes due


to the actions or inactions of others.

Accidents or other significant events.


Late or hold drawings/information/approvals.
Work interruptions.

Even minor items affecting or potentially affecting Contractors


work.
Individuals, especially Employer or Engineer personnel present
or aware of significant or potentially significant events.

DAILY REPORT

SPECIAL
COMMENTS

Reported by:

Da te

Reviewed by:
Da te

x
x

Page 84

EXAMPLE

RECORD, RECORD, RECORD

Date and time taken

Photographer

Reference number

Programme activity

Complete details of the


subject matter

DATE: 26.JUNE 2013.

Position from which it was


taken

TIME: 13:27
PHOTO BY: T SITE ENGINEER.
REF NUMBER: KOM/PETROL STATION/005.
PROGRAMME REF: PET-004.
DETAILS: Underground concrete pit to house petrol and diesel tanks
completed up to cover level. Ready to accept tank installation.
Note Surrounding road and pavement areas still shows no progress.
Services trenches to petrol pump station outstanding.

POSITION OF PHOTO: Looking North West towards petrol pump station.

Page 85

Discussion
1.
2.
3.
4.
5.

What is the prime purpose of maintaining accurate records?


What are the advantages of submitting records to the Principal?
What is a key feature of a correspondence filing system?
What are the advantages of settling Minutes of meetings early?
What are the disadvantages of lack of adequate records?

Page 86

TOOLS
The Contract document is the most important item in the toolbox
of the Contract Administrator.

It must therefore be used wisely and with understanding, to make


it the most valuable tool in the box
Its terms and conditions constitute the rules, so everyone
involved must be familiar with these rules

Page 87

BE PREPARED
Review the Contract by all contract administration Staff
Prepare a Contract Execution Plan

Prepare templates for written communications (avoid verbal)


List where written actions required from Contractor, Employer,
Engineer
Confirm key dates for programme (commencement, information &
plant items by employer, stage completion, taking over, patent &

latent defect liability)


Page 88

BEST FOOT FORWARD


Generate team spirit from the very beginning (We have to build
this project with each other, not in spite of each other!)

The Adversarial approach (we/they) is out. It is now the


Collaborative or Partnering approach.
We need to work together in an effort to: expect the unexpected,
anticipate the unpredictable, know the unforeseeable.
We both must be aware of things that can increase costs, need
more time, or adversely affect quality of the project.

Page 89

PROJECT START UP Kick Off Meeting

Site Establishment (offices, yards, labs, laydown areas, workshops etc.)


Both Parties representatives (names & contact details, all parties)
Progress Meetings (regular date(s) each month, attendees, avoid too many)
Programme (not a contract document, Contractor obliged to produce, update)
Measurement & Certification (monthly procedure with timetable & calendar)
Variations & Site Instructions (note powers of, and limitations on Engineer)
Security (fencing & gates plus access control, also Performance bonds)
Waste & Environmental issues (Environmental Management Plan)
Labour Relations (Unionised labour ? Community & Authority liaison)
Insurances (Contract All Risk, Public Liability, Prof. Indemnity, Asset insurances)
Health & Safety (Employers, Contractors, Designers legal obligations)
Other ..

Page 90

CHANGE MANAGEMENT INFLUENCE


Project
Control Budget
Planning
Approval
Estimate
Maximum
Optimum
Influence
Influence

Start
Construction
Decreasing
Influence

Minimum
Influence

Max
Change Management Influence
Min

Engineering
Prelim. Design
and
Estimating and
Estimating
Procurement
STAGE 1
Assessment

Project Engineering
Procurement and
Cost Analysis
STAGE 2
Solution

Construction
and
Cost Analysis
STAGE 3
Implementation

Page 91

SUBCONTRACTING (17.00)
Two basic models for a Contractor to source its
productive resources
1. In-house.
2. Subcontract.

Page 92

SUBCONTRACTING (17.00)
In-house (17.01)

Under this model, for the core work, the Contractor:

Employs its own labour force.


Employs plant and equipment from its own pool.
Purchases materials directly from suppliers.
Subcontracts specialised work only.

Page 93

SUBCONTRACTING (In-house)
Disadvantages

Advantages

Direct control of supervision,


and labour costs.
Less exposure to unit cost
risk.
Lower overall cost due to
elimination of Subcontractor
overheads and profit.
Elimination of project staff to
administer Subcontractors.

May need to hire and fire labour


depending on work continuity.
Could mean losing key employees.
Plant yard needed to store plant
and equipment between projects.
Shortages of labour and peaks may
demand hiring of contract labour at
a premium.
Shortages of Contractors own plant
may demand hire of plant at a
premium.
More permanent staff may be
required to procure materials,
administer payrolls and maintain
plant.
Page 94

SUBCONTRACTING (17.00)
Subcontract (17.02)

Under this model the Contractor:


Employs Subcontractors to carry out the bulk of productive
work including procurement of labour, plant and purchase of
materials.
In theory, this model is intended to transfer risk to
Subcontractors. However unless administered astutely, risk
may revert to the Contractor

Page 95

SUBCONTRACTING (Out)
Disadvantages

Advantages

Flexibility, if the Contractor does


not have any or sufficient labour
on its payroll.
Flexibility, if the Contractor does
not have any or sufficient plant in
its pool.
Theoretically, risk is transferred
to Subcontractors.
No requirement for a
Contractors offsite resources
such as plant yard and
maintenance staff.
Less permanent staff to
administer payrolls.

Indirect control of supervision of


Subcontracted work.
Higher overall cost due to
Subcontractor overheads and
profit.
More project staff to administer
Subcontractors.
Potential for more exposure to
unit cost risk (discussed below).
Potential for contractual disparity.
Potential for LD disparity.

Page 96

SUBCONTRACTING (Out)

Disparity between Tender and Subcontract prices Subcontractors are either unwilling or unable to perform the work
at the tendered prices or open for acceptance expired(17.02.01)

Variation price differentials Rates and prices in head Contract,


may be different to those in Subcontracts. (17.02.02)

Avoid contractual disparity when writing Hybrid and Home Grown


Subcontracts (17.02.03)

Approval of Principal is required to appoint major Subcontractors


(17.03)

Page 97

Discussion
1. What are some advantages of in-house productive resources?
2. What are some of the disadvantages of in-house productive
resources?
3. What is the commercial risk to a Contractor between the time of
receiving prices from Subcontractors at the time of tender and at
actual appointment?
4. What is the price risk to a Contractor when valuing a variation
carried out by a Subcontractor incorporated in a variation claim to
the Principal?
5. What should be avoided when writing Subcontracts?
6. What is the commercial risk if a subcontractor causes delay to
the overall project?
Page 98

PHYSICAL CONDITIONS (18.00)

Making of reasonable enquiries at the time of tender (18.01)

Different physical conditions may be encountered during the work


(18.02)

Notification must be given immediately or forthwith (18.03)

Notification must be provided before the actual conditions are


disturbed (18.03)

Page 99

PHYSICAL CONDITIONS
[FIDIC 4.12]
If the Contractor encounters adverse physical conditions which he
considers to have been Unforeseeable, the Contractor shall give
notice to the Engineer as soon as practicable.
This notice shall describe the physical conditions, so that they can
be inspected by the Engineer, and shall set out the reasons why the
Contractor considers them to be Unforeseeable.
("Unforeseeable" means not reasonably foreseeable by an
experienced contractor by the date for submission of the Tender.)
Page 100

PHYSICAL CONDITIONS (18.00)

Notification to include: (18.03)


Conditions deemed to have been included for in the Contract.
Conditions actually encountered.
Identification of the differences.
Anything the Contractor proposes to overcome the changed
conditions.
Any impact on execution of the Works.
Any impact upon timing of the Works.
Any cost adjustment impact.
Principal should be availed to opportunity to consider mitigation
and issue instructions (18.03)

Page 101

PHYSICAL CONDITIONS
POSSCOC 2008

REDAS 2010

FIDIC 1999

Title

SIA 2011 &


PAM 2006 &
CIDB 2000 &
PWD203A 2010
(not stated)

Adverse Physical
Conditions

Site Conditions
(deemed to have
satisfied himself)

Unforeseeable
Physical
Conditions

Claim
Clause
Notify

(not stated)
(not stated)
(not stated)

(not stated)
2.7.1.1
(not stated)

Time & Cost


4.12
Engineer

Timing

(not stated)

(not stated)

Bars

(not stated)

Time & Cost


5.2
Supervising
Officer
forthwith give
notice in writing
Yes, subject to 14
Yes

(not stated)

notice soon as
practicable
Yes, subject to
20.1
Yes

(not stated)

(not stated)

By determination

(not stated)
Delay
Events
Response (not stated)

(not stated)

Page 102

Discussion
1. What action must a Contractor take upon being aware of
changed physical conditions, and when?
2. What action can a Principal take upon being made aware of
changed physical conditions?

Page 103

VARIATIONS (19.00)
Addition, increase, decrease
Additional work.
Increase the quantity of work.
Decrease the quantity of work.
Omission or deletion.
Remove work (usually replace with something else).
Delete work altogether.
Change the character.
Eg - Change a solid steel member to a lattice configuration
= Less tonnage but more labour

Page 104

Definitions (19.01)
Change the quality.
Eg - Change from 304 grade SS to 316 grade SS.
Change lines, levels, positions or dimensions.
Can result from design changes manifested in drawing revisions. Usually
results in a change of quantity.
Change in the manner in which the work is carried out.
Using different equipment.
Using different techniques.
Eg - Transfer work from workshop to site.

Page 105

Definitions (19.01)

Change in the conditions under which


the work is carried out.
Eg - Change from dayshift to night shift.
Eg - Change from working in dry conditions to wet conditions.
Demolish work already built.
Demolition may be involved arising from a change.
Can also include removal of materials say for work no longer required as a
result of a design change.

Page 106

Causes Of Variations (19.02)


Can include:

A change proposed by the Principal.

Requested by the Contractor arising from a formal direction,


letter, email or verbal.

Requested by the Contractor arising from the design process.

Requested by the Contractor for the Contractors convenience.

Changed Physical conditions.

Page 107

Methods Of Valuation (19.03)


Can include:

Agreement prior to the changed work being carried out.

Valuation based on a schedule of rates and prices included in the


Contract.

Valuation based on reasonable rates and prices.

Valuation based on Subcontractor quotations (pass through).

Daywork valuation based on recorded labour time, materials and


plant.

Page 108

Preliminaries, Offsite Overheads And Profit


(19.03.01)

What resources are included in any percentage addition. Eg:


Charge-hand.
Section foreman.
Supervisor.

Page 109

Variation Proposed By The Principal (19.04)

Process (19.04.01)
Principal proposes variation and requests a quotation
Contractor responds with quote, effects on timing, or other effects

Valuation (19.04.02)
By agreement of the price submitted by the Contractor.
Based on a schedule of rates and prices included in the Contract.
Based on reasonable rates and prices.
Daywork - valued based on recorded labour time, materials and
plant. A Daywork valuation will usually only apply if the Principal
has given prior approval of that method.

Keep records in any event (19.04.03)


Page 110

Variation Requested By The Contractor


Arising From Directions (19.05)

May not be avenue to claim within the Variation clause (19.05.01 )

Claim via Claims clause (19.05.02)

May be strict Notification requirements (19.05.03)

Monitor correspondence (19.05.04)

Directions that can cause a Variation may be via:(19.05.04)


Correspondence
Verbally (confirm verbal directions immediately)

Minutes of Meetings
Page 111

Variation Requested By The Contractor Arising


From Directions (19.05)

Details required if Variation claimed via Claims clause:


(19.05.04)

Details of the facts that give rise to the claim


Details of the direction that gives rise to the claim
Details of the Legal or contractual basis of the claim
Details of the monetary amount claimed
Separately under Time Requirements provide details of any

time impact
Page 112

Variation Requested By The Contractor Arising


From Design Changes (19.06)

Design teams for each party (19.06.01)

Design evolves and is iterative (19.06.01)

Design may not be immediately transparent (19.06.01)

Need to monitor correspondence and transmittals (19.06.01)

Issued for Construction drawings should be compared against


Contract drawings (19.06.01)
Page 113

Variation Requested By The Contractor Arising


From Design Changes (19.06)

Workshop drawings - can change due to influence of Principal


(19.06.02)

Monitor design and drawings at various stages. (19.06.03)

Notify changes early (19.06.04)

Failure to notify may prejudice rights to claim a Variation. (19.06.04)

Details required in Notice same as above (19.06.05)


Page 114

Discussion
1. Apart from a Variation raised by the Principal, by what other
means can a Variation arise?
2. Apart from a Variation raised by the Principal, what immediate
action must a Contract Administrator take when discovering a
potential Variation?
3. By what means can a Contract Administrator discover whether a
potential Variation has arisen?
4. What are the disadvantages of a Contract Administrator failing to
discover a potential Variation at the earliest opportunity?

Page 115

CONTRACT PROGRAMME
AND CONSTRUCTION PROGRAMMES (20.00)

Contract programme (20.01)

Construction programme may become Contract Baseline


programme (20.02- 20.04)

Features of a Construction programme (20.05)

Baseline activities.
Updates of baseline activities.
Critical path(s).
Format (usually time scaled network).
Predecessor and successor links and logic.
Page 116

CONTRACT PROGRAMME
AND CONSTRUCTION PROGRAMMES (20.00)
(Continued) Features of a Construction programme
Float.

Key milestone dates.


Key milestone interface dates for major subcontractors and
suppliers.

Key milestone interface dates for provision of information


Key milestone interface dates for the design process.
A contract calendar.
Page 117

CONTRACT PROGRAMME
AND CONSTRUCTION PROGRAMMES (20.00)

Specialist programmers (20.06)

Contract Administrator monitor Construction


programme and updates (20.07)

Contract Administrator inform programmers


of Variations and other events (20.08)

Ensure programmes include a Status date

in addition to the print date (20.09)

Principal may request proposals to


overcome delays (20.09)
Page 118

DELAY AND EXTENSION OF TIME (21.00)

Stages of dealing with Delay and Extension of Time (21.01)


1. Gathering of facts.
2. Notifications.
3. programme analysis.

Types of delay could include (21.02)


Neutral delays (such as inclement weather).
Delays for which the Principal is ultimately responsible (such
as late information, variations, suspension, site conditions and
changes to the Law).
Delays for which the Contractor is responsible (such as failure
to progress the work).
Page 119

DELAY AND EXTENSION OF TIME (21.00)

Difference between Delay and Extension of Time. (21.03)


Delay - can be either prolongation or slippage to a single or a
group of activities, which may not necessarily result in
prolongation of the overall project or Separable Portions.
Extension of Time - is prolongation of the overall project or
Separable Portions caused by Delays to a single or a group of
activities.

A Delay may not result in Extension of Time but could still involve
additional cost (21.04)

Contract Administrator must monitor events and take early action


(21.05)
Page 120

Delay (21.06)

Notice of Delay - Give Notice within specified times of


commencement of the occurrence causing a delay, or
promptly, or as soon as is practicable. (21.06.01)
Provide facts and information such as: (21.06.02)
Details of the cause of a potential Delay, such as a variation,
change of design, inclement weather etc, including dates of
events and documents.
Identify work activities affected by the above if possible
cross- reference to an activity number on a relevant current
programme.
Explain the nature of any impact upon affected activities, such
as Delay to the start or prolongation.
An analysis or estimate of any potential Delay time to the
affected activities.
Page 121

EXAMPLE

Example
of a
Notice
of Delay

NOTICE OF DELAY (21.07)


Delay Notice numberxxx.
Project name.
Project number
Separable Portion ..(if applicable).
Date.
To: Principals Representative...
Principal
Contractor..
The Contractor hereby notifies the occurrence of a Delay in accordance with Clause numberxxx of the
General Conditions of Contract
Particulars of Delay.
Redesign of the Mezzanine structural slab (contract drawing xxx and construction drawing xxx) has resulted in
quantity increases in the following order of magnitude:
Concrete 659 869 = 210m3.
Formwork 1,243 1,406 = 163m2.
Reo 67 132 = 65 tonne.
Work will be prolonged for the following reasons:
1. Increased quantity will require the slab to be poured in 6 sections instead of 4 sections. Time required
for additional 2 pours is - 2 days.
2. Increased quantity will prolong the formwork activity by a period of - 3 days.
3. Increased quantity will prolong the reinforcement activity by -12 days.
Activity(s) affected by the Delay Mezzanine slab.
Estimated duration of the Delay17 working days
Signed.
Contractors Representative

Page 122

Extension of Time Claim (21.08)

Effect of Extension of Time Sets new dates for completion and relieves

Contractor of Liquidated Damages (21.08.01)

Written claim required to include: (21.08.02)


1. Particulars of the Delay and the occurrence causing the Delay.
2. Identification of affected activities.
3. Whether those activities are critical to maintenance of progress.
4. An analysis/calculation of the number days Extension of Time claimed

Page 123

Extension of Time Claim (21.08)

Notification (claim) required within specified number of days from


commencement of the occurrence causing a delay, or after the
delay occurs. Days are not to be counted from the first Notice of
Delay. (21.08.03)

Particulars may be the same as Delay Notice (21.08.04)

Criticality (21.08.05)

Page 124

EXAMPLE

Example of an Extension of Time claim (21.09)


CLAIM FOR EXTENSION OF TIME
Extension of Time Claim number xxx..
Project name.
Project number
Separable Portion(if applicable).
Date.
To: Principals Representative...
Principal
Contractor..
In accordance with Clause number xxx of the General Conditions of Contractthe Contractor hereby
notifies that the Contractor is being delayed in carrying out the Work and is or will be delayed in
reaching the date for Practical Completion for the following reasons:
Particulars of Delay Re-design of the Mezzanine structural slab(contract drawing xxx and
construction drawing xxx) resulted in additional quantities of concrete, formwork and reinforcement.
The additional work will prolong the work by a period of 17 working days, all as detailed in Delay
Notice number xxx.
Activity(s) affected by the Delay Mezzanine structural slab.
Reasons why the date for Practical completion is or will be delayed
The Mezzanine slab is activity xxx on program xxx status dated xxx, which is critical to completion of
the Works. Refer to the analysis on the attached program xxx - status date xxx.
The Contractor claims Extension of Time of 17 working days.
Signed
Contractors Representative

Page 125

Extension of Time Claim

Submit further notices of claim at specified intervals if delay


continues (21.10)
Commencement
V Delay - 30 days

2-5 days
Notice of Delay
14 days
EOT Claim
Every 7 days
Further EOT Claims

Counting days - programme days different to calendar days


(21.11)

Page 126

Granting Extension of Time (21.12)

Principal may grant EOT within a specified time (21.12.01)

Contractors contribution to delay may be taken into account if


Contractor: (21.12.02)
Contributed to a Delay.
Failed to take reasonable action to preclude, avoid or minimise a Delay.

Concurrent Delay Contract Administrator should monitor


potential concurrent delays (21.12.03)

Time at Large Failure of Principal to grant Extension of Time


will not set time at large (21.12.04)

Unilateral Extension of Time Principal may grant at any time


(21.12.05)
Page 127

Direction to Compress (21.13)

Principal may direct compression and request a cost proposal


(21.13.01-03)

Delay and Extension of Time Register (21.14)

Essential to maintain a Delay and Extension of Time Register

Share Register with Principal

Page 128

EXAMPLE

Example of a Delay/EOT Register (21.15)


Project:
EOT#

Description
of Delay

Activity
delayed

Aware of
delay on

Date of
Delay
notice
Cl xxx

Date of
further
Delay
notice
Cl xxx

Start of
Delay

Finish
Number
of Delay of days
Delay

Date of
EOT claim
Cl xxx

Page 129

EXAMPLE

Contd,
Date of
further
EOT claim
Cl xxx

Critical path
EOT days
activity(s) effected claimed

Adjusted
completion
date claimed

EOT days
granted

Adjusted
completion
date granted

Comments

Page 130

Discussion
1. What is the difference between a Contract Programme and a
Construction Programme?
2. Under what circumstances can the status of a Construction
Programme change?
3. What is a typical contractual requirement for inclusions in an
updated Construction Programme to be submitted to the
Principal by a Contractor?
4. What is the significant difference between Delay and Extension
of Time?

Page 131

Discussion
5. What actions must a Contract Administrator take upon the
discovery of a Delay?
6. What are the disadvantages of not taking appropriate action?
7. What is the link between Delay and Extension of Time?
8. What actions must a Contract Administrator take if a claim for
Extension of Time is made?
9. What are the implications of concurrent delay?
10. What contractual process is involved when a Principal directs
compression?

Page 132

COST OF DELAY (22.00)

Compensable delay. e.g.: (22.01)


Late provision of information.
Variations.
Suspension of the work.
Changed site conditions.

Changes to the Law.

Non-compensable delay. e.g.: (22.02)


Inclement weather

Payment confined to Delays that result in Extension of Time


(22.03)

Other Delay costs may be claimable but may need to be made


under the Claims clause.(22.03)
Page 133

Methods of Calculation (22.04)


Method 1 - Applying pre-agreed all in rates

In some cases there may be varying rates reflecting different


levels of resources at different times of the duration of the project,
and may take into account escalation in prices.

This is the simplest method of valuation being a multiplication of


numbers of days by the appropriate rate.

Page 134

Methods of Calculation (22.04)


Method 2 - Applying pre-agreed hourly/daily rates for the various
resources
Again there may be different rates for different times.
This method requires compilation of a schedule of actual
resources engaged on the subject works at the time of each
Delay.
The numbers of days that each qualifying resource is delayed is
then multiplied by the appropriate pre-agreed rate per day.
If pre-agreed percentages for offsite overheads and/or profit
margin are applicable, these are best applied at the end of the
calculation.

Page 135

Methods of Calculation (22.04)


Method 3 - Calculating the cost of delay
Cost may be defined at the Definitions or Interpretations
section of a Contract, usually as reasonable costs incurred
which means reasonable actual demonstrated costs, excluding
offsite overheads and profit.

Instead of applying pre-agreed unit rates, it will be necessary to


support the cost of each resource by production of records such
as wages/salary records and invoices.

This method can be more complex than the pre-agreed unit rate
method above, for the reason that the cost per resource could
vary during the currency of a particular Delay.
Page 136

Methods of Calculation (22.04)


Method 3 (Continued)
The numbers of days that each qualifying resource is delayed is
then multiplied by the actual cost per day.

If the Contract provides pre-agreed percentages for offsite


overheads and/or profit these are best applied at the end of the
calculation.

If the Contract does not include pre-agreed percentages for


offsite overheads and/or profit, then reasonable percentages
could be applied.

Page 137

Example of a Delay cost Calculation


All in Rate Method 1. (22.05)
Contract Schedule of All In Delay Rates.
Phase

Phase 1
Phase 1
Phase 2
Phase 2
Phase 2

Equivalent
month
Month 1
Month 2
Month 3
Month 4
Month 5

Rate per
working
day
$1,500
$1,500
$2,000
$2,000
$2,000

Delay cost Calculation.


Delay #

Phase

Month

1
2
3

1
2
2

2
3
4

Delay
(working
days)
5
2
10

Rate per day

Delay cost

$1,500
$2,000
$2,000

$7,500
$4,000
$20,000

Page 138

Example of a Delay cost Calculation


Daily Unit Rates Method 2. (22.06)
Contract Schedule of Daily Rates.
Resource

Staff member 1
Staff member 2
Staff member 3
Offices (hire)
Ablutions (hire)
Canteen (hire)
Stores (hire)
Plant item 1
Plant item 2
Plant item 3

Rate per
working
day
Phase 1
$825
$550
$400
$55
$30
$45
$30
$275
$85
$45

Rate per
working
day
Phase 2
$850
$575
$425
$60
$35
$50
$35
$300
$90
$50

Delay cost Calculation.


Page 139

Example of a Delay cost Calculation


Daily Unit Rates Method 2. (22.06)
Delay cost Calculation.
Delay 1.
Resource

Staff member 1
Staff member 2
Staff member 3
Offices (hire)
Ablutions (hire)
Canteen (hire)
Stores (hire)
Plant item 1
Plant item 2
Plant item 3
Total cost

Number of
working days
delay
5
5
N/A
5
5
5
5
5
5
N/A

Rate per
working day
Phase 1
$825
$550
$400
$55
$30
$45
$30
$275
$85
$45

Total cost
of delay

$4,125
$2,750
N/A
$275
$150
$225
$150
$1,375
$425
N/A
$9,475

Calculations for Delays 2 and 3 similar applying resources and rates applicable to the particular phase.
Page 140

Example of a Delay cost Calculation


Actual costs Method 3. (22.07)

Monthly rates shown as constant, but may fluctuate in reality.

Separate calculations would be prepared for the cost of each


resource per month supported by payroll records, invoices, and
timesheets.

Ensure that if working days are applied to the Delay, working


days should be divided into the total monthly cost.

Page 141

EXAMPLE

Resource
Staff member 1

Month 1
$15,000

Staff member 2

Month 2
$15,000

Month 3
$15,000

Month 4
$15,000

Month 5
$15,000

$10,000

$10,000

$10,000

$10,000

$7,000

$7,000

$7,000

Staff member 3
Offices (hire)

$1,000

$1,000

$1,000

$1,000

$1,000

Ablutions (hire)

$500

$500

$500

$500

$500

Canteen (hire)

$750

$750

$750

$750

$750

Stores (hire)

$500

$500

$500

$500

$500

Plant item 1

$5,000

$5,000

$5,000

$5,000

$5,000

$1,500

$1,500

$1,500

$1,500

$750

$750

Plant item 2
Plant item 3
Total cost per
month
Working
days/month
Average rate per
day
Delay #
Delay (working
days)
Delay Costs

$22,750

$34,250

$41,250

$42,000

$42,000

17

19

21

17

22

$1,338.23

$1,802.63

$1,964.28

$2,470.58

$1,909.09

#1
5

#2
2

#3
10

$9,013.15

$3,928.56

$24,705.80

Page 142

Quantification Qualifying Resources (22.08)

Broad brush approach unacceptable (22.08.01)


Demonstrate actual delay costs (22.08.02)
Identify resources that were actually prolonged (22.08.03)
Remove non time related costs. (22.08.04)
Averaging may be necessary (22.09)
Offsite overheads and profit if not agreed may need to be
demonstrated (22.10)
Point at which Delay costs must be assessed Should be at the
time of the delay (22.11)
Adjust notional recovery of delay costs within Variations causing
delay (22.12)
Cap on unit costs. Some Contracts include (22.13)
Page 143

Discussion
1. What causes of Delay may entitle a Contractor to payment of
extra cost?
2. Under what circumstances may cost of Delay be paid where the
Delay did not cause Extension of Time?
3. What methods of Delay cost calculation may be available?
4. What is an essential consideration when calculating actual
Delay costs?
5. At what point in the progress of the work should Delay costs be
calculated?
6. Are there circumstances where adjustments should be made to
Delay costs?
7. Why is correct counting of days important?
Page 144

DISRUPTION AND LOSS OF PRODUCTIVITY (23.00)

Claim via Delay or Disruption Costs clause if arising from Delay

and Extension of Time

Otherwise claim via Claims clause. Strict Notification required

Contracts do not usually prescribe any method of valuation

Four methods of valuation are discussed.

Apart from method 1- Factual, No method is endorsed, but are

ranked in descending order of accuracy, and credibility.

Page 145

Method 1 Factual (23.01)

This is the most credible method as it directly links actual costs


with each disruptive event. (23.01)

Notification required if made via Claims clause, providing:


(23.01.01)
Details of the facts that give rise to the claim.
Details of the direction or circumstances that gives rise to the
claim.
Details of the Legal or contractual basis of the claim.
Details of the monetary amount claimed.

Page 146

Method 1 Factual (23.01)

Cost reporting systems may record resources and hours against


various activities, but do not usually allocate resources and hours
against individual disrupted activities or relate cause and effect.
(23.01.02)

Contracts Administrator must set up a system of data gathering,


such as:(23.01.03)
Identify additional time expended on particular activities as a
result of disruption, and provide explanation.
Identify non-productive waiting time.
Identify non-productive walking time if a disrupted activity was
temporarily abandoned.

Page 147

EXAMPLE

Example of a Supervisors report recording


disrupted activities (23.02)

Project:
Name.
Supervisor.
Date.
Activity
Erect columns C1 and
C2 and beam B1.
Stopped work.

Start time
7.00am

Finish
time
9.00am

9.00am

9.45am

Dropped beam B1 and 9.45am


column C1 to ground.
Re-work

10.30am

Transfer crew

11.00am

10.30am

Details

Hrs
2.00

Bolt holes at one end of beam did not line up with fin
plate on column.
Wrote Non Conformance Report.
Requested instruction.
Verbal instruction from xxx to cut off and replace
column C1 fin plate with correct holes.
2 riggers (names)
2 T/As (names)
1 crane driver (name)
Two elevated work platforms plus 50Tonne mobile
crane all on standby, before instruction received.
Same crew as above used to drop beam B1 and drop
Column C1.
Work cutting off fin plate, fabricating new fin plate with
correct holes and welding on to column carried out by
separate crew.
Transferred crew to work on column C3 and beam B2.

0.75

0.75

0.5

If structural steel supplied as Free Issue Raise claim against Principal.


If structural steel supplied by Contractors fabricator Raise back-charge against Fabricator.
Page 148

Method 2 Measured Mile (23.03)

This method compares productivity during a non-disrupted period


with productivity during a disrupted period

This method relies on the work during the non-disrupted period


being of a similar nature to the work during the disrupted period.

Accurate records need to be maintained

Provide particularisation by extracting hours for respective


disrupted and non-disrupted activities rather than a simple
blanket comparison

Page 149

Method 3 Global (23.04)

This method deducts budget man hours from actual man hours

This method lacks particularisation

Adjustment should be made for:


Budget under-estimates
Contractor contributions to additional actual hours due to
inefficiency
Defect rectification hours and the like
Recovered via Variations and other such claims/payments

Page 150

Method 4 Loss of Productivity Factors (23.05)

Various publications contain menus of disruptive events and


assign factors to each event

Factors are said to be derived from data collected on various


projects

Calculation involves picking out appropriate disruptive events and


assigning respective factors to produce alleged lost man hours.

This method is convenient, but the factors do not specifically


relate to the project for which the claim is being made.

Page 151

Cause And Effect (23.06)

A properly presented claim for loss of productivity will establish


cause and effect

Prepare a schedule directly linking cause (Eg: waiting for


information) to effect (Eg: identify activity, labour and hours lost)

Page 152

Cause And Effect

By way of illustration .
The story of events, their cause and effect

Page 153

Cause And Effect

holding it tightly to insure a slow descent of the 500 lbs of bricks. You
will note on the accident reporting form that my weight is 135 lbs.
[setting the background to the claim]
In the vicinity of the third floor, I met the barrel which was now
proceeding downward at an equally impressive speed. [cause]
Slowed only slightly, I continued my rapid ascent, not stopping until the
fingers of my right hand were two knuckles deep into the pulley. [effect]
I began a rapid descent down the side of the building. [cause]
In the vicinity of the third floor, I met the barrel coming up. This
accounts for the two fractured ankles, broken tooth and severe
lacerations of my legs and lower body. [effect]
I again lost my composure and presence of mind and let go of the rope.
[cause ]
Page 154

Check For Double Dip With Other Claims (23.07)

If applying Methods 2, 3 or 4 check double dip with other claims


such as Variations.

Method 1 is the least likely to build in double dips for the reason
that the records should be quarantined and confined to the
disrupted event

Page 155

INTERIM AND FINAL PAYMENT CLAIMS (24.00)

Contract schedules will usually break down the Contract lump


sum into component parts. (24.01)

Check arithmetic (24.01)

Pre-payments may be made for design, mobilisation, high value


materials or major items of construction equipment (24.02)

Securities of Payments Act (24.03.01)

Page 156

Malaysian Construction Industry Payment and


Adjudication Act 2012 (CIPAA)

Source: Construction Industry Payment And Adjudication Act 2012:


Kuala Lumpur Regional Centre for Arbitration (KLRCA)
Page 157

Singapore Building and Construction Industry


Security of Payment Act 2004

Pay when paid clause in contracts


unenforceable
Payment response with 7 days (if not
stated) or max 21 days (if stated)
Payment due date 30 days (if not stated)
or max 60 days (if stated)
No payment response then 7 day dispute
settlement period, 7days thereafter notice
of adjudication
Adjudicator appointed in 7 days
Respondent submits response in 7days
Adjudication proceedings with
determination in 14 days
Payment due within 7 days
Page 158

Singapore Building and Construction Industry


Security of Payment Act 2004
Adjudication Statistics (Apr 2005 to Dec 2013)

Source: Building and Construction Authority, Singapore


Page 159

Singapore Building and Construction Industry


Security of Payment Act 2004
Adjudication Statistics (Apr 2005 to Dec 2013)

Source: Building and Construction Authority, Singapore


Page 160

Singapore Building and Construction Industry


Security of Payment Act 2004
Adjudication Statistics (Apr 2005 to Dec 2013)

Source: Building and Construction Authority, Singapore


Page 161

Singapore Building and Construction Industry


Security of Payment Act 2004
Adjudication Statistics (Apr 2005 to Dec 2013)

Source: Building and Construction Authority, Singapore


Page 162

Discussion
1. What contractual action must a Contract Administrator take when
circumstances that may give rise to a claim for loss of productivity
occur?
2. What administrative systems should be established and
maintained by a Contract Administrator.
3. Identify methods of calculation of loss of productivity.
4. What are advantages and disadvantages of each method?
5. Why is it an advantage to establish cause and effect?

Page 163

EXAMPLE

PAYMENT CLAIMS
Contract
Sum

Item Description
1
2
3
4
5
6
7
8
9
10

Claimed
Amount

Preliminaries and General


Basement
Main Building Works
Ancillary Buildings
External Works
PC & Prov Sums
Sanitary and Plumbing Installation
Insurance - Work Injury Compensation
Insurance - Contractors' All Risks
Security Deposit
Sub-Total

11
12
13
14
15
16

Variations
Materials, plant and goods delivered
Unused Materials or Goods Not Delivered to Site
*Fluctuations
*Entitlements
Less Sums withheld / deductible under terms of Contract
Total Value

Page 164

INTERIM AND FINAL PAYMENT CLAIMS (24.00)

Composition of Progress Claims (24.03.02)

Progress Claims are vehicle for claiming payment of claims such

as Variations. (24.03.03)

Documents to accompany a Progress Claim (24.03.04)

Progress Certificates and Payment (24. 04)

Final Payment Claim Consolidate all claims often overlooked


(24.05-06)

Page 165

RISE AND FALL (25.00)

Fixed price Contract- Risk with Contractor (25.01)

Rise and Fall contract Risk with Principal (25.02)

Check worked examples in a Contract (25.02)

Usually dealt with by Contractors Finance Department (25.02.01)

Contract Administrator needs to understand fundamentals


(25.02.01)

Page 166

RISE AND FALL (25.00)

Value of work (25.02.02)

Variations etc subject to rise and fall adjustment if based on


Contract rates (25.02.02)

Variations etc not subject to rise and fall adjustment if based on


actual costs (25.02.02)

Fixed component (25.02.03)

Adjusted by means of published indices (25.02.04-06)

Adjustment of specified materials (25.02.07)

Foreign exchange adjustment (25.02.08)


Page 167

EXAMPLE

RISE AND FALL

Page 168

EXAMPLE

RISE AND FALL

Page 169

Discussion
1. In addition to monetary calculations, what must usually
accompany a Progress Claim?
2. What is the usual vehicle for claiming actual payment of
Variations and other Claims?
3. What event triggers submission of a Final Payment Claim?
4. What are significant required inclusions in a Final Payment
Claim?
5. Why is it important to check worked examples and base dates for
Rise and Fall formulae?

Page 170

FREE ISSUE MATERIALS (26.00)

Materials and equipment supplied free of charge by Principal


(26.01)

Not uncommon on mechanical construction projects (26.01)

Understand scope of items to be supplied (26.02)

Monitor actual scope and quality supplied (26.02)

Page 171

Discussion
1. What action should a Contract Administrator take regarding the
scope of supply?
2. What action should a Contract Administrator take regarding
actual supply?

Page 172

COMPLIANCE WITH LAW AND REGULATIONS


(27.00)

Law and Regulations prevailing at the time of Contract (27.01)

Issue Notice if change occurs (27.02)


Details of the change
Details of the impact of the change
Details of monetary and/or time impacts

Bars may apply if Notice not given


Page 173

MANAGEMENT DOCUMENTS (28.00)

Usually dealt with by Contractors other Project Management staff

Contract Administrator needs to be aware of the need to provide


certain documents at prescribed milestones (28.01)
Eg: Inspection and Testing, Pre-Commissioning, Commissioning,
Operation and Maintenance, and Training documents as a pre-condition to
achieving Practical Completion.
Eg: Documentation related to nominated Management Systems and Plans
to be included in Progress Payment submissions.

List of typical Systems and Plans (28.02)

Page 174

INSURANCES (29.00)

Usually dealt with by Contractors Commercial Department.

Contract Administrator needs to be aware of the need to provide


evidence of certain Insurances at prescribed milestones (29.02)

Failure to take out required insurances at nominated milestones


could have adverse ramifications (29.03, 29.04)

Page 175

INSURANCES (INCOTERMS)

Page 176

PERFORMANCE UNDERTAKINGS,
GUARANTEES AND WARRANTIES (30.00)

Usually dealt with by Contractors Commercial Department.

Contract Administrator needs to be aware of the need to provide


evidence of certain Undertakings etc at prescribed milestones
(30.02)

Performance Undertakings alternative to cash retention (30.03)

Page 177

PERFORMANCE UNDERTAKINGS,
GUARANTEES AND WARRANTIES (30.00)

Release Performance Undertakings at prescribed milestones


(30.03)

Parent Company Guarantees may also be required (30.04)

Warranties - May be blanket Warranty for Contractor (30.05)

Warranties Individual Warranties for specified items (30.05)

Synchronise Warranty periods of Subcontractors with Contractor


Warranty periods (30.05)
Page 178

EXAMPLE

WARRANTIES
Defects Liability Period shall mean the defects liability period
named in the Appendix to the Form of Tender calculated from the
date of substantial completion of the whole of the Work.if any part
of the Works or Section or subsystems or components of that part (of
the Works or Section) has been replaced, renewed or repaired the
defects liability period in respect of that part or subsystems or
components of that part shall start from the date such replacement,
renewal or repair has been completed to the satisfaction of the
Engineer.
AVOID EVERGREEN / ROLLING DLP

Page 179

PRACTICAL COMPLETION (30.00)


Physical Works (31.00)
Definition of Practical Completion, typically (31.01.01)
When the Works are complete except for minor omissions
and minor defects that do not prevent the Works from being
used for the intended purpose.

Pre-conditions (31.01.02)
Tests.
Pre-commissioning.
Commissioning.
Acceptance tests.
Page 180

PRACTICAL COMPLETION (31.00)


Documentation (31.02)
Documentation required as a pre-condition to Practical completion
could include (31.02.01)
Evidence of passing of various tests.
Warranty documents.
Evidence of rectification of defects (except minor defects).
Evidence completion of omissions from the Works (except minor
omissions).
As built drawings.
Maintenance manuals.
Operation manuals.
Schedules of spare parts, support equipment and tooling.
Training manuals for operation of the Works.
Page 181

PRACTICAL COMPLETION (31.00)


Documentation (Continued)
Format hard copy or electronic (31.02.02)
Consequences of failure to provide documentation (31.02.03)
Prior notice of imminent Practical Completion to Principal (31.03)
Vet punch lists for variations (31.03)
Partial release of retention money (if any) (Eg: 50%).
Partial release of Performance Guarantees.
Responsibility for certain Insurances could pass from the Contractor to the
Principal (Eg: Insurance of the Works).
However, the Contractor may be required to maintain certain Insurance
policies throughout the Defects Liability Period.

Final completion (31.05)

Further documentation may be required


Page 182

Discussion
1. What action should a Contract Administrator take in the lead up
to Practical Completion?

Page 183

Ethics (32.00)

Act ethically

Do not deliberately inflate or deflate assessments or valuations.

Explain provisional items.

Explain contingency items.

Do not be personal or belligerent in tone.

Page 184

Contract Administration Takeaway


1. The Contract Administrator should ensure that the project
team are fully aware of the contractual requirements and
obligations.
2. The obligations of all parties (employer, sub-contractors,
suppliers and contractor) shall be identified, understood and
listed at the commencement of the project.
3. The Contract Administrator should ensure that all notices or
claims between the contractor and employer, sub-contractors
or suppliers are made in accordance with the requirements of
the contract/subcontract.

Page 185

Contract Administration Takeaway


4. Correspondence shall be acknowledged promptly and
answered according to contract requirements.
5. Ensure that proper records (letters, minutes of meeting, faxes,
e-mails etc.) are made, retained and filed specifically in
respect of each and every claim.
6. During execution of the contract, the Contract Administrator
shall promptly identify and report possible problems, delays
and other changes.
7. Contractual and commercial and risks and opportunities are
analysed, documented, appropriately managed, updated and
reported on a regular basis.
Page 186

Contract Administration Takeaway


8. Contracts with the suppliers and subcontractors shall include
clearly defined scope of works, time schedules and the
relevant conditions of main contract, with suitable
allowances, to enable compliance with the main contract
requirements.
9. Ensure regular meetings are held and minuted with the
employer, subcontractors and suppliers to review and settle
claims.
10. Ensure all oral agreements with external parties are followed
by written confirmation no later than 5 working days from the
date of such agreement.
Page 187

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be reproduced by any means electronic, mechanical, photocopying or otherwise, now
known or to be devised.

RICS reserves the right to pursue any unauthorised use of its copyright materials.

Disclaimer

These materials are for general information only. Although high standards have been
used in its preparation, RICS accepts no legal responsibility for any loss or damage
suffered as a result of any inadvertent inaccuracy. These materials do not necessarily
represent RICS views and should not be relied upon without seeking independent,
professional advice. These materials should not be republished or reproduced, in whole
or in part, without prior approval by RICS.

Page 188