ADB FIDIC Training 8-10 June 2004 Manila

FIDIC
Contracts for Construction Works
and

Dispute Resolution Mechanisms in Project Administration

Gwyn Owen
BSc MSc CEng FICE FConsE FCIArb

Chartered Arbitrator, Adjudicator, Mediator www.gwynowen.com

Contents
        

Introduction FIDIC Documents Risk Procurement Strategy First 100 days Responsibilities Nominated s/c Staff & labour

        

Plant & Materials Commencement Delays Taking Over Measurement Guarantees Claims Short Form Disputes

FIDIC
AN INTRODUCTION
 

  

Founded in 1913 Expanded in 1945 to include 40 national associations Published first Conditions of Contract in 1957 In 2004 has 64 member associations Headquarters in Switzerland Web Site : www.fidic.org

FIDIC
AN INTRODUCTION


Pre 1957 no internationally recognised contract conditions First red book based on UK ICE conditions FIDIC has international committees to improve contracts

FIDIC Documents
 

   

Old rainbow books needed revision Changes within International Projects & Contracting Standardisation Clauses to meet current practice Update Engineer Introduce Disputes Adjudication Board

Contract Documents 1999



Conditions of Contract for Construction (Red Book) Conditions of Contract for Plant & Design Build (Yellow Book) Conditions of Contract for EPC Turnkey Projects (Silver Book) Short Form of Contracts (Green Book)

FIDIC Contracts Whats Changed?



Simple Language
20 Clauses & 163 Sub Clauses

   

Engineer instead of Employers Representative Cl.1.1.2.4 Employer's Claims Cl.2.5 Contractors Claims Cl.20.1 Value Engineering Cl.13.2 QUALITY & PROCEDURES:
Cl.4.9, 4.18, 6.7, 8.3, 13.2 & 13.3

FIDIC Document Format

      

Acknowledgements Foreword & Charts General Conditions DAB Conditions Guidance Notes Forms of Agreement Appendix to Tender

FIDIC Document Usage

Conditions of Contract for Construction


Works designed by Employer or Engineer Contractor Constructs in accordance with designs provided May include some design elements

FIDIC Document Usage

Conditions of Contract for Plant & Design Build
   

Electrical & Mechanical Plant May include building and engineering Design & Execution of works Contractor designs and constructs in accordance with Employers Requirements Engineer Administers

Plant & Design Build



General Comments:
Contractor will economise Employer will supervise No good for Employer Variations Good for Lump Sum Design Savings Employer responsible for ER errors Risk Shared

FIDIC Document Usage

Conditions of Contract for EPC/Turnkey Projects
   

Process or Power Plant Infrastructure Projects High Degree of Certainty Contractor has total responsibility for Design & Execution Administered by Employer

EPC/Turnkey
General Comments
Not suitable when:
   

No time to tender Much underground works If Employer wishes to supervise If payments need to be administered

FIDIC Document Usage

Short Form of Contract
  

 

Small capital value projects Simple content Contractor constructs to Employers designs No Particular Conditions No Impartial Engineer

FIDIC Document Usage

COMMUNICATIONS


Cl.1.3:
Approvals, Certificates, Consents, Determinations, Notices, Requests

  

In Writing Delivered Not be unreasonably withheld or delayed Copies

RISK

ALLOCATION OF RISK

Scope / Cost of Change

CONTRACTUAL RISKS
 All contracts contain risks  FIDIC allocates responsibilities  Key Requirement:
o o o

Understand General Conditions Understand Particular Conditions Set out responsibilities

RISK OVERVIEW
 Contractual Risk Overview:
o o o o o o o o

Strategy Identify Evaluate Mitigate Plan Response Report Management Close out review

CLAIMS RISKS LOCAL LAWS

 Incorporate provisions of local laws into Particular Conditions  FIDIC Guidance Notes give general advice  Complex task

CONTRACTUAL RISKS
  

Cl.1.5 Priority of Documents Employers Documents have priority Care in Prequalification PDB & EPCT note that Financial Risk for design with Contractor but resolution will be in favour of Employer Contract Agreement is high priority Commencement Date binding under Cl.1.1.3.2 & 8.1 Cl.3.3 PDB & Cons empower Engineer to make Decisions EPC no such authority

FIDIC RELATIONSHIPS

CONTRACTUAL RISKS
   

  

Cl.1.9 Drawings Cl.2.1 Site Cl.4.7 Setting Out Cl.4.12 Unforeseeable Cl.4.24 Fossils Cl.7.4 Testing Cl.8.4 EoT

 

Cl.8.4 Adverse Climatic Conditions Cl.13.7 Legislation Cl.13.8 Changes in Cost Cl.14.8 Delayed payments Cl.19.4 Force Majeure

Contract Selection Basic Principles Red Book

   

 

Design by Employer Works to be Re-Measured ReEmployer appoints Engineer Engineer can vary the works but not change the Contract Engineers Determinations Cl.3.5 DAB appointed within 28 days

Contract Selection Basic Principles Red Book



Additional Documents Cl.1.5 Priority Importance of Particular Conditions

PCC priority over GC PCC provides all relevant conditions and Law Contradictions between documents

BoQ re-measured works re-

Contract Selection Basic Principles Yellow Book

      

Employers Requirements Contractor Designs & Builds ER errors Employers risk Fixed sum contract Administered by Engineer Variations by Engineer Cl.5 & 12 differ from Red Book

PROCUREMENT

PROCUREMENT PROCEDURE
 Establish Strategy
 Procurement method  Form of Tender  Time Schedules

 Prequalify
   

Invitation Documents Analysis Selection

 Notify

PROCUREMENT PROCEDURE
     

Prepare tender Documents Issue Site Visit Questions Submission & Opening Adjudication

PROCUREMENT PROCEDURE
Award Contract Issue Letter of Acceptance Performance Security Contract Agreement Notify unsuccessful tenderers

    

PROJECT STRATEGY Definitions



General Provisions Cl.1

Definitions of words Persons include corporations & other legal entities Letter of Acceptance Employers Requirements (YB) Goods Contractor

Cl.1.3

PROJECT STRATEGY Definitions



Cl.1.4 Law & Language

Compatibility

Cl.1.9
Delays to drawings (RB) Errors to ER (YB) Confidentiality (SB)

PROJECT STRATEGY Project Control Issues

      

Cl.1.9 Delay to details Cl.2.4 Finance Details Cl.2.5 Employers Claims Cl.3.3 Instructions by Engineer Cl.4.1 Method Statement Cl.4.21 Reporting Cl.8.3 Programme

PROJECT STRATEGY Project Control Issues

  

Cl.12.1 Measurement Cl.13 Variations & Value Engineering Cl.14 Payments

Planning Funding & Budget Disbursement approval

 

Cl.18 Insurances Cl.20 Contractors Claims / Records

FIDIC THE FIRST 100 DAYS

AN INTRODUCTION

The First Hundred Days of a New FIDIC contract

 Pre Award Phase  Award to Commencement Date  Commencement Date to CD + 28 Days

THE FIRST 100 DAYS

Pre Award Check List General

    
Document negotiated changes Prioritise and sign changes Cl 1.5 Agree terms of insurances Cl 18.2 Agree DAB membership Confirm communication and addresses Cl 1.3

Pre Award Checklist Engineers Duties & Authority

 Employer names Engineer  Employers constraints on Engineers Authority Cl 3.1  Delegation of Engineers Authority to Resident Engineer Cl 3.2  Engineers Determination Cl 3.5

Pre Award Checklist Employers Risks

Right of Access - Cl 2.1  Provision of Specifications Cl 1.8  Supply of Drawings Cl 1.9


Award to Commencement Date

 Formal Letter of Acceptance signed Cl 1.1.1.3  Contract Agreement - Cl 1.1.1.2, 1.6  Date on which the Contract becomes legally binding  Instruction of Commencement Date Engineer Cl 8.1 7 days notice  Time for Completion Cl 1.1.3.3

Award to Commencement Date Check List Contractors obligations

   
Performance Security Cl 4.2 Consent for sub-contractors subCommencement of sub-contract wks subCompliance with applicable laws, etc prior to Commencement

Award to Commencement Date Check List Employers obligations

 Obtaining planning, zoning etc permits for the Permanent Works Cl 1.13  Ensuring that the Contractor will have right of access to and possession of all parts of the Site

Commencement Date to + 28 Employers Actions

 

Right of access & possession Cl 2.1 Ensuring Employers personnel are aware of responsibilities Cl 2.3 Preparing evidence of Employers financial arrangements Cl 2.4 Provision of copies of the Contract and Drawings Cl 1.8 & 1.9

Commencement Date to + 28 Engineers Responsibilities



Advising Contractor of Engineers Authority and Delegations Cl 3.2 Ensuring assistants are suitably qualified Providing reference survey points, lines and necessary data Cl 4.7

Commencement Date to + 28 Contractors Responsibilities



General obligations adequacy, stability & safety Cl 4.1 Provide Performance Security prior to access to Site Cl 4.2 Submit name of Contractors Representative for consent Cl 4.3

Commencement Date to + 28 Contractors Responsibilities



Give notice of any delegation of CRs responsibilities Obtain consent for sub-contractors subnot named in Contract Cl 4.4 Give notice of commencement of subsub-contract work

Commencement Date to + 28 Contractors Responsibilities



Provide details of suppliers not named in Contract (see Cl 4.16) Make objections to any Nominated SubSub-contractors who the Contractor does not wish to employ Submit detailed time programme within 28 days of receipt of the notice to commence Cl 8.3

Commencement Date to + 28 Contractors Responsibilities



  

Give notice of probable future events or circumstances which may increase price or delay completion Confirm working hours Cl 6.5 Site health & safety facilities Cl 6.7 Appoint Accident Prevention Officer

RESPONSIBILITIES

Responsibilities Employer


Cl.2
Provides Access to the Site


(not access & other areas Cl.14.15 & 14.23)

Assists Contractor with Permits Financial Arrangements



See Variations & Cl.16.1 Suspension (strike out??)

Notice of Claims


Appoints the Engineer Cl.3.1

Responsibilities Employer
 

Cl.14.7 make Payments !! Cl.20.2 appointment of DAB members

Responsibilities Engineer
  

Exercises stated authority Employers Approval PC When he exercises specific authority deemed to have Employers approval Acts for Employer
Cl.3.5 Fair Determination

Responsibilities Engineer


Cl.3
Employer undertakes not to impose further constraints (Breach of Contract) No authority to amend contract Acts for Employer No authority to relieve the parties of duties or obligations etc.

Responsibilities Engineer


Cl.3
Delegation except Cl.3.5 Instructions in writing


Oral confirmation by contractor written

Employer instructions to Engineer Determination

  

Consult agreement fair determination Give notice Give effect unless Cl.20

Responsibilities Engineer
      

Cl.4.1 Method Statements Cl.8.1 Give Commencement Notice Cl.8.6 Rate of Progress Cl.12.1 Measurement Cl.13.1 Variations Cl.14.6 Interim Payment Certificates Cl.20.1 Records / Determination

Responsibilities Contractor


Cl.4
Execute & Complete the Works
   

Cl.8.1 due expedition & without delay Adequacy & safety Method Statement Fit for purpose

Performance Bond Engineers Approval of Representative May delegate Fluent in language Sub Contractor approval

Responsibilities Contractor


Setting Out to lines & levels of Engineer Quality Assurance

Details in Specification Procedures Compliance documents

Responsibilities Contractor


Site data
Costs included Risk Inspections All relevant data obligation Care in Tender failure to provide

Sufficiency of Contract Amount

Responsibilities Contractor


Unforeseeable Physical Conditions

Excludes climatic conditions


Cl.8.4 & 17.3h

Extension of time Payment of cost



(see Cl.1.1.4.3 includes off site) (as a general rule not included where risk is not the fault of either party)

No profit


Responsibilities Contractor
 

Transport to site Protection of the Environment

Emissions Surface discharges Effluent Local Law

Responsibilities Contractor
 

Progress Report Monthly 6 copies

See also (Cl.4.9 procedures) and: Cl. 6.7 Accident Records Cl. 6.10 Personnel Cl.14.3 Application for payment Cl.20.1 Contemporary records

Responsibilities Contractor


Progress Report:
Charts Photographs Manufacturing report Personnel QA documents Claims Cl.2.5 & 20.1 Safety statistics Progress

Responsibilities Contractor
 

Security Staff & Labour

Facilities / Health & Safety

   

Tests on Completion Cl.9.1 Value Engineering Cl.13.3 Application for Payment Cl.14.3 Contemporary records Cl.20.1

Nominated Subcontractors
 

Clause 5 Applies to Subcontractors and suppliers nominated by Employer or as instructed by the Engineer under Cl.13 Payment Cl.5.3

Nominated Subcontractors


Grounds to object Cl.5.2

Reasonable Objection Supporting details Lack of competence, recourses, financial strength Lack of indemnity Lack of obligations and liability

Staff & Labour

 

Clause 6 Engagement of Staff & Labour

Payment, housing feeding & transport Cl.8.4d & 13.7

 

Rates of pay & conditions NO Poaching !! (Cl.6.3)

Staff & Labour

  

Labour Laws (including immigration) Working Hours (days of rest) Facilities (including Employers Personnel) Health & Safety
Medical staff & facilities Accident prevention officer Records

Staff & Labour

  

Cl.4.3 Contractors Representative Cl.6.8 Superintendence (Language) Personnel qualified, skilled, experienced Records monthly (cl.4.9 procedures)

PLANT & MATERIALS

Plant Materials & Workmanship

 

Cl.7 Execution of works as specified

Recognised good practice Proper facilities Non hazardous materials

Samples
For consent Labelled origin / intended use

Plant Materials & Workmanship



Inspection:
Access to locations of natural materials Place of manufacture Provide access, facilities, permissions, safety equipment Give notice and provide opportunity Testing may proceed after notice Delay claim Test Reports & Certificates

Plant Materials & Workmanship

  

Rejection Retest costs Cl.2.5 Remedial works Ownership of Plant & Materials
Local law When delivered When contractor entitled to payment under Cl.8.10 (suspension)

Royalties

COMMENCEMENT & DELAYS

Commencement, Delays & Suspension



Contract becomes effective when Letter of Acceptance has been received by Contractor Cl.8.1 Commencement Date
Engineer SHALL Contractor SHALL

Engineer determines the date or 42 days after the LA

Completion


Cl.8.2 Fundamental obligation to complete within Time for Completion

Includes all of Works Includes all tests See Cl.10.1

Programme


Programme of Works Cl.8.3

Within 28 days Specific requirements of programme Methods of execution Details of personnel & equipment

 

Engineer does not approve (21 days) Employer may rely on programme

Programme
   

Specific, Probable, Future events Revisions to programme Monthly progress charts Engineer may request a revised programme

Extension of Time


Contractor SHALL be entitled

Not dependant upon further decision If no extension then time at large Variation Sub Clause giving delay Exceptionally adverse climatic conditions Unforeseeable shortages personnel & goods Employers delay

 

Cl.20.1 Cl.3.5 Engineers Determination

Extension of Time


Cl.20.1 & 3.5 give time limits to Engineer to Determine or Cl.13 shall not be unreasonably withheld or delayed Delays by authorities

Rate of Progress
 

Engineer may instruct submission of revised programme Contractor to proceed with due expedition and without delay Delay Damages
Failure to complete by due date Delay damages Limit of damages

Suspension Engineer may instruct

TESTS, DEFECTS & TAKING OVER

Tests on Completion


Cl.9
Contractor shall give 21 days notice Tests carried out within 14 days of notice Certified report

Delayed tests
Employer Cl.7.4 or 10.3 apply Contractor to complete 21 days after notice

Failure
Retest Cl.11.4

Taking Over Responsibilities



Responsibilities under Financing Agreement

Proper use of funds Proper management of construction Final payment

Responsibilities under the Contract:

Before Taking Over After Taking Over

Taking Over Responsibilities



Before Taking Over:

Take over on Completion Tests on Completion Contractors request for TO Certificate

Cl.10.1 The Employer SHALL take over when:

Works completed Tests completed TO certificate issued

Employers Taking Over



Cl.10
TO Certificate issued when works completed and ready for intended purpose Minor outstanding work may be completed after issue of TOC

 

Contractor may apply for TOC within 14 days of Works being complete Sectional Completion Engineer may
Issue TOC Reject application giving reasons

Failure of Engineer to issue TOC or reject

Within 28 days TOC deemed to be issued

Employers Taking Over



Sectional Taking Over

Tests Cost due to STO Delay Damages reduced after STO Certificate issued Reduction in ratio of value of STO Works No difference to maximum damages

Reinstatement of ground or surface

Employers Taking Over



Taking Over Certificate

Appendix listing all minor defects Listing all works yet to be carried out

Contractor responsible to carry out repairs before end of Defects Notification Period

Defects Liability


Cl.11
Provides procedures and responsibilities under the Defects Notification Period Works are accepted by Engineer on the issuance of Performance Certificate

Defects Liability


Works & Documents completed

Fair wear & tear accepted Complete all o/s work in TOC Remedy defects & damage notified by the end of the DNP

 

Remedy works at Contractors cost Extension to DNP

Max 2 years, or Suspension Cl.8.8 or 16.1

Defects Liability


Failure to Remedy
Reasonable notice Carry out work himself or by others Contractor has no responsibility Reduction in Contract Price Recover all sums paid & costs

Removal
Further Tests Right of access Contractor to search

Performance Certificate


Performance Certificate
Contractors obligations complete Engineer to issue Date Issue within 28 days of DNP expiry After submission of all documentation All tests complete All remedying works complete

Constitutes Acceptance of Works

Liability for fulfilment of obligations Removal of equipment, rubbish etc Contractor may be liable for latent defects

Measurement, Evaluation & Variations

 

 

This clause only applies to Red Book Yellow Book Cl.12 deals with tests after completion Measurement by Engineer Standard method of measurement as specified in schedules

Measurement, Evaluation & Variations



Cl.12.3 Basis of evaluation

Rates in contract will apply New rates may be determined
   

Qty changed more than 10% Variation Not specified No appropriate rate

Reasonable Cost & Profit



Cl.12.4 Compensation

Measurement, Evaluation & Variations

  

Under Yellow Book no such clauses Cl.13.3 Determinations Means of measurement may be necessary Payment schedule linked to milestones Cl.14.4

Variations


Cl.13.1 Engineer has the right to vary

Prior to issue of TO certificate List of variation inclusions

Value Engineering Cl.13.2

Development risk with Contractor Savings 50/50

Variation Procedure


Engineer requests proposal from Contractor

Contractor responds with:
  

Description Programme Evaluation

Work proceeds without delay

Variation due to Legislation

 

Local law at Base Date Cl.20.1 claim

Extension of time Payment of cost

Contract Price & Payment



Considerations:
Payment schedules Disbursement approval Particular Conditions Budgeting
 

Funding availability Additional Costs / Variations

Contract Price & Payment



Advance payment
Design Mobilisation Funding facilitation

Interim payments
56 days

Final Payment
84 days

Contract Price & Payment



Aid funding requires:

Authority approval Timing Variations Routine audit checks Time to transfer funds Advance notice of change

Contract Price & Payment



 

Cl.14 requires prompt action within time constraints Finance costs will lead to claims Alter Cl.14 by Particular Conditions to suit funding authority

Contract Price & Payment



Financial planning:
Check estimates & budgets Prepare draft payment schedules Update estimates & programme Check funding Cl.14.4 estimates each 90 days

Budget Forecast


Engineer prepares for Employer

Regular intervals Updated budget Report of changes

Data for report:

Cl.2.4, 2.5, 3.5, 4.21, 8.3, 13.1, 13.3, 14.3, 13.8, 14.3, 14.6, 20.1, 20.4

Contract Price & Payment



Cl.14 Contract Price

Measured and will vary Red Book Fixed Lump Sum Yellow Book Fixed Lump Sum Silver Book Lump Sum or Remeasure Green Book

Advance Payment


Cl.14.2 Advance payment

Interest free loan for mobilisation
  

Guarantee Application Cl.14.3 Performance Security approved by Employer Commence after when certificates >10% Deductions 25% of each Certificate

Repayment
 

Interim Payment


Cl.14.3 Application
6 copies In a form approved (Cl.4.9) Cl.4.21 List of items (a) (g) Note : Cl.20 items included

Interim Payment


Cl.14.4 Schedule of payments:

Payment dates not recommended Engineer determination Cl.3.5 Cross guarantees Milestones preferred

Interim Payment


Cl.14.6 Issue of IPC

Engineer determines FAIRLY IPC SHALL not be withheld

Cl.14.7 Payment
IPC paid within 56 days after Engineer receives Statement

Cl.14.8 Interest on late payments

Non Payment


Cl.16.1 Suspension
Engineer fails to certify Employer does not provide Cl.2.4 details Non payment 21 days notice

Cl.16.2 Termination

Guarantees & Bonds

 

Cl.4.2 Performance Security Contractor finance

Guarantee by Employer No Cl.8.1 notice before Guarantee

Cl.14.2 Advance Payment Guarantee

Risk & Responsibility

 

 

Cl.17.1 Basis for Indemnity Cl.17.2 Full responsibility for Works & Goods until TO Certificate Cl.17.3 Employers Risks Cl.17.4 Compensation & Claims

Insurance


Cl.18
Employer to approve insurers Agreed terms Currency Payments to be used to rectify loss Cl.18.3 Appendix minimum amount

Force Majeure


Basic Principles:
Exceptional event Not reasonably provided against Not reasonable to overcome / avoid Not attributable to either party Beyond control of affected party

Force Majeure


Cl.19.1 Definitions
(i) (iv) man made

Cl.19.4 Consequences
EoT Man made cost Man made in country cost Cl.19.6 Termination

CLAIMS & CONTRACTUAL PROCEDURES

CAUSES OF CLAIMS FOR CONTRACTORS

      
Unforeseeable ground conditions Delayed drawings Delayed payment Lack of possession of site Consequence of risk Suspension Force Majeure

CONTRACTORS CLAIM PROCEDURE

 Clause 20.1
o o o o

Sets out Contractor procedure Condition Precedent Not later than 28 days Sets out Engineer procedure

CONTRACTORS CLAIM PROCEDURE

 Contractor gives notice
o

Within 28 days Engineer may monitor Engineer may instruct further records Supporting documents Within 42 days of event

 Contractor keeps contemporary records

o o

 Fully detailed claim

o o

CAUSES OF CLAIMS FOR EMPLOYERS

    
Quality below Specification Delay in Completion Date Slow Rate of Progress Defective Materials Failures of Tests

EMPLOYERS CLAIM PROCEDURE

 Employer gives notice
o

As soon as practicable No obligation to respond

 Contractor Receives Notice

o

 Engineer proceeds with Cl.3.5  Contractor can dispute if dissatisfied  Engineers determination applied to Certificate of Payment

CONTEMPORARY RECORDS
    
Crucial for determination of claim Records for any future dispute Contractor obliged to keep records Procedure for this work Employer & Engineer to agree Engineers actions

CONTRACTORS CLAIM PROCEDURE

 Cl.20.1 continuing procedure  After 42 days:
o o o

Claim submission is considered interim Further monthly claims Final claim with 28 days of end of effects

CONTRACTORS CLAIM PROCEDURE

 Engineers Response:
o o o

Within 42 days of receiving claim Approval / Disapproval Detailed comments

 May ask for further details  Proceed with Cl.3.5  May certify interim sums

CLAUSE 3.5 DETERMINATIONS

 Engineer makes a Determination  Makes his own evaluation  Shall NOT delegate Cl.3.5 authority

CLAUSE 3.5 DETERMINATION PROCEDURE

 Engineer shall consult both Parties  Try to reach agreement  Give notice with supporting particulars  Where no agreement then Engineer makes a FAIR determination

DISSATISFACTION WITH Cl.3.5 DETERMINATION

 Dispute : Refer to Dispute Adjudication Board  No definition of Dispute
o o o o

Rejection of Determination No agreement with continued discussion One party declines to discuss No progress in protracted discussion

 Subsequent procedure - Clause 20.4

FIDIC Short Form

 Recommended for projects without problems  Small Capital Value <$0.5M  Simple or repetitive works  No specialist subcontractors  Short duration  No Impartial Engineer  Named Adjudicator

FIDIC Short Form



Increased responsibility on Employer

Define project Undertake design Scope of works Supervision Avoid letters of intent / acceptance Offer & Acceptance in Appendix

FIDIC Short Form

  

Priority of documents undefined No ruling language Cl.2.4 to avoid argument

approval only used for Cl.4.4 & 14.2

Cl.4.4 Performance Bond - no model

FIDIC Short Form



Risk & Claims

Cl.6.1 lists all Employers Liabilities No bad weather claim EoT Cl.7.3 to avoid time at large Cl.10.3 Early Warning

FIDIC Short Form

  

Taking Over no sectional handover No defined Defects period 12mths Employer may vary - Cl.10
Lump sum Rates Daywork

FIDIC Short Form



Contract price Cl.11

Lump Sum LS with schedule of rates LS with BoQ Remeasurement with BoQ Cost reimbursable

Consider valuation methods

FIDIC Short Form



Dispute resolution
Amicable settlement Adjudication Dissatisfaction 28 days Arbitration

Alternative Dispute Resolution ADR - Overview

Alternative Dispute Resolution ADR - Overview

   

Confrontational Litigation Win Win methods ADR Methods:

Mediation Conciliation Adjudication Arbitration

DISPUTE RESOLUTION under FIDIC

 Dispute not defined by FIDIC
o o

Where 2 parties can not agree Where something needs to be decided

 Certificates, Determinations, Instructions, Variations  FIDIC encourages resolution by agreement Cl.3.5  No agreement - Dispute

Amicable Settlement


Cl.20.5 no definition
56 days Direct negotiation Conciliation Mediation Do not involve the DAB Consensual No obligation costs ??

Mediation
      

No facility in FIDIC contracts Consensual procedure Confidential Very successful Short time frame Low cost Involve decision makers

ENGINEERS DECISION
 Red & Yellow Books provide for an alternative to the DAB  Engineers Decision  Delete Cl.20.2 & 20.3 make substitute wording  Impartiality, Independence ??

ADJUDICATION
   

Encourage the resolution of disputes Statutory / non statutory Provides a decision in a short time Binding
Give effect May be changed by amicable settlement May be changed by arbitration

Contractually enforceable

ARBITRATION
      
Clause 20.6 Final settlement ICC 3 arbitrators Language Open up & review No limits to evidence DAB Decision shall be admitted

ICC ARBITRATION
 Place to be agreed in Particular Conditions  Each party nominates 1 arbitrator and chairman selected or agreed  ICC court will formally appoint  ICC fee scales & administration costs  ICC rules govern initial referral then arbitrators set the procedure

ARBITRATORS AWARD

 Final & Binding  1958 New York Convention for enforcement of awards

Dispute Adjudication Board

 Rules set out in Red and Yellow books  Ad hoc rules apply to the resolution of a referred dispute only  1 or 3 person board
 Independent & Impartial  Decisions or advice & opinion

ADVANTAGES OF THE DAB

        Resolves disputes in 84 days Lower costs than Arbitration or Litigation Impartiality Real time assessment Improves standards Provides clarity Diffuses problems (win win) Encourages competitiveness in tenders

DISPUTE ADJUDICATION BOARD

 Functions:
o o o o o

Become Familiar Visit the site Keep up to date Encourage resolution of issues When a dispute is referred:
o o o o o

Act Fairly & Impartially Convene a hearing Deliberate Prepare a Decision Avoid unnecessary delay or expense

FORMATION OF DAB

FORMATION OF DAB RELEVANT DOCUMENTATION

 Cl. 20.2 & 20.3  General Conditions of DAA
o o o

Red Book - full term Yellow Book ad-hoc adInterchangeable

 Dispute Adjudication Agreement  Tripartite Agreement

General Conditions of DAA

 Employer decides (at tender stage)
o o o o

What type of DAB How many members Period to agree selection Third party nominator

 List of candidates in tender ??  Employer to be ready to nominate

Formation of DAB


Cl.20.2 Formation
1 or 3 members Each party nominates one member Parties consult members and agree a chairman List of potential members in tender

No Agreement
FIDIC President will nominate Due consultation with parties

DAB OBLIGATIONS
 Act Fairly  Act Impartially  Give parties a reasonable opportunity to pout their case & respond  Adopt procedures:
o o

Avoid unnecessary delay Avoid unnecessary expense

DAB MEMBERS
QUALITIES
o o o o o

Experience Contract Knowledge Language DR Experience Procedural Knowledge

o o o o o

Qualifications Availability Impartiality Independence Lawyers

WARRANTIES & OBLIGATIONS

 General Conditions Cl.3 & 4  Warranties:
o o o

Experienced in Work Experienced in Documentation Fluent in Language of communications Independent Confidential Available

 Obligations:
o o o

PAYMENT OF MEMBERS
General Conditions Cl.6 Retainer per calendar month Daily Fee Reasonable expenses Taxes in country of contract Retainer reduced by 50% after taking over  Ad hoc DAB no retainer

     

PAYMENT OF MEMBERS
 Payment method:
o

Retainer & airfares - quarterly in advance Other fees after site visits / hearing

 Contractor pays in full within 56 days  Employer reimburses Contractor

ANNEX : PROCEDURAL RULES

 Monitor progress reports against project documents  Site visits
o o o o o o

Timing Agenda / scheduling / travel arrangements Keep up to date Progress Problems Claims

ANNEX : PROCEDURAL RULES

 Site visits with Parties : co-ordinated coby Employer  DAB shall prepare a report  Contract & Project documents  Monthly report

DISPUTE REFERRAL
 Clause 20.4 read together with Procedural Rules  Referred in writing stating Clause  Sent to chairman  84 days to Decide  Reasoned Decision  Unanimous

DAB DECISION PROCEDURES

      
Referral of Dispute Preliminary Issues Claimants position paper Respondents Response Claimants Reply to Response Copies to the other party DAB to set time table

DAB DECISION PROCEDURES

 Parties empower the DAB to:
o o o o o o o

Establish procedure Decide jurisdiction Conduct a hearing Take initiative facts & other matters Specialist knowledge Decide payment of finance charges Decide Relief

DAB OBLIGATIONS IN MAKING A DECISION

 Act Fairly  Act Impartially  Give parties a reasonable opportunity to pout their case & respond  Adopt procedures:
o o

Avoid unnecessary delay Avoid unnecessary expense

DAB HEARING
     
Adopt inquisitorial procedure Refuse admission to hearings Proceed in absence of any party Not formal (no oaths) Evidence Written summaries

DAB HEARING
 Typical hearing:
o o o o

Procedural issues Preliminary issues Jurisdictional issues Oral presentation by Claimant

o o

Witness submissions Respondent questions Witness submissions Respondent questions

Oral presentation by Respondent

o o

o o

Respondents summing up Claimants summing up

 Chairman does not end meeting until parties have confirmed they have nothing further to add

DAB DECISION
 DAB meets in private  Endeavour to reach a unanimous decision  Failure of a member to attend  Decision issued in writing and signed with reasons

FORMAT OF DAB DECISION

          Preambles State given under clause 20.4 Confidential document state circulation Short document Details of parties and contract Summary of dispute Procedure Reasoning : contract clauses Decision Signed & dated

POST DECISION
 Shall be binding promptly give effect  May be reversed by amicable settlement or arbitration  Dissatisfaction 28 days  Otherwise after 28 days - binding  Failure to comply arbitration  Compliance is a contractual obligation

ENFORCEMENT (non statutory)

  

Contractual obligation Cl.20.4 Notice of dissatisfaction Breach of contract

Cl.14.3 Cl.14.6 Cl.14.7 Cl.16.1 Cl.16.2 application for IPC Issue of IPC Payment Suspension - Termination