Awareness PPT - Fidic_slide_s_show 2015.ppt

Contracts and Claims Department
2015
1

What does a Contract mean?
•It is a legally binding agreement between two or more
competent parties.
•Contracts are usually written but may be spoken or implied.
•The contractual relationship is proved by:
Offer Acceptance Consideration
2

What are the different contracts types?
•The Contractor will be paid a fixed amount for the works
regardless the total quantities.
•Suitable for Projects with a well-defined scope where the risk
of different site conditions is minimal.
•More risky for the Contractor.
Fixed Price
(Lump-sum)
•The Re-measurement Contract contains a Bill of Quantities
(quantities are estimated and not final).
•Each item in the BOQ will have a certain unit rate.
•The final price of the project is dependent on the quantities
needed to carry out the work.
•More risk to the Employer (quantities) and for the Contractor
(rates)
Re-
measured
•A contract where a contractor is paid for all of its allowed
expenses plus additional payment to allow for a profit.
•Used when the scope and/or the resources of the project are
uncertain.
•More risky for the Employer
Cost Plus
3

Fidic stands for :
Fédération Internationale Des Ingénieurs-Conseils
Can be translated to:
The International Federation of Consulting Engineers
4

History of FIDIC:
The idea started on 1913 when several countries met in
Belgium to discuss the possibility of forming a global
federation of consulting engineers.
On 1950, FIDIC became a truly international organization
in the late of 1950.
The actual founders of FIDIC were Belgium, France and
Switzerland and later many countries joined.
About 90 Countries are scheduled as members in the FIDIC
by the end of 2009.
5

Objectives of FIDIC:
Represent the consulting engineering industry globally.
Promote the development of a global and viable
consulting engineering.
Promote conformance to a code of ethics and business
integrity.
Improve and develop FIDIC’s training and publishing
activities.
Promote and enhance the leading position of FIDIC’s
Forms of Contract.
6

Forms of FIDIC
Forms of FIDIC
Red Book:
The Conditions of Contract for
Construction for Building and
Engineering Works.
Contemplated for buildings and
engineering works designed by
Employer.
1st edition 1957, 2nd edition 1969, 3rd
edition 1977, forth edition 1987 and
superseded in 1999.
Contractor shall execute, complete,
remedy any defects and design the
works to the extent specified in the
Contract.
7

Forms of FIDIC
Forms of FIDIC
Yellow Book:
The Conditions of Contract for Plant
and Design-Build for Electrical and
Mechanical Plant (or any other works).
Contemplated for electrical and
mechanical plant for works designed
by the Contractor.
1st edition 1963, 2nd edition 1980, 3rd
edition 1987.
Contractor shall design, execute
and complete the works, remedy any
defects.
Engineer Shall supervise the Works.
8

Forms of FIDIC
Forms of FIDIC
Silver Book:
•The Conditions of Contract for EPC /
Turnkey Projects.
•Contemplated for process or power
plant, a factory or similar facility or
infrastructure project that needs high
degree certainty of final price and
time.
•1st edition 1999.
•No third party Engineer.
9

Forms of FIDIC
Forms of FIDIC
Green Book:
Simple and repetitive works with
short duration.
Design by either party; but
commonly the Employer takes over
the design responsibility;
Balanced risk sharing;
No Engineer, but Employer may
appoint a Representative;
Payment on lump sum or any other
basis according to value of Works
executed and Materials and Plant
delivered to site;
10

Presentation will be conducted
for the Conditions of Contract
for Construction for Building
and Engineering Works
(Red Book First edition 1999) .
11

Subjects to be covered
Subjects to be covered
A. Definitions
B. Priority of documents
C. The role of the Employer
D. The role of the Engineer
E. The role of the Contractor
F. Delayed drawings and instructions by the Engineer
G. Variations
H. Employer’s risk
I. Care of the Works
J. Force Majeure
K. Commencement and Completion dates.
L. Taking-Over Certificate
M. Claims
N. Invoicing
O. Suspension
P. Termination
Q. Dispute board and Arbitration
12

A. Definitions:
Contract Agreement:
Agreement which the Parties entered within 28 days after the Contractor receives
the Letter of Acceptance, unless they agree otherwise. The Contract Agreement shall
be based upon the form annexed to the Particular Conditions. The costs of stamp
duties and similar charges (if any) imposed by law in connection with entry into the
Contract Agreement shall be borne by the Employer.
Letter of Acceptance:
Means the letter of formal acceptance, signed by the Employer, including any
annexed memoranda comprising agreements between and signed by both Parties.
If there is no such letter of acceptance, the expression "Letter of Acceptance" means
the Contract Agreement and the date of issuing or receiving the Letter of
Acceptance means the date of signing the Contract Agreement.
13

A. Definitions:
Letter of Tender:
Means the document entitled letter of tender, which was completed by the
Contractor and includes the signed offer to the Employer for the Works.
Appendix to Tender:
Means the completed pages entitled appendix to tender which are appended to
and form part of the Letter of Tender
Defects Notification Period:
Means the period for notifying defects in the Works or a Section.
Performance Security:
A security issued to the Employer by the Contractor to guarantee that the
Contractor will perform his duties according to the Contract. Usually a bank letter of
guarantee (L/G) with 10% of the Contract Value
14

The Key Parties involved in the project are:
The Key Parties involved in the project are:
1.1.2.2 "Employer"
•The person named as employer in the Appendix to Tender and the legal
successors in title to this person.
1.1.2.3 "Contractor"
•The person(s) named as contractor in the Letter of Tender accepted by the
Employer and the legal successors in title to this person(s).
1.1.2.4 "Engineer"
•the person appointed by the Employer to act as the Engineer for the
purposes of the Contract and named in the Appendix to Tender, or other
person appointed from time to time by the Employer and notified to the
Contractor under Sub-Clause 3.4 [Replacement of the Engineer].
15

Employer Contractor
Engineer Subcontractor / Supplier
Contract
Contract
PM / CM
Contract
Contract
Sub-consultant
Contract
Sub-subcontractor / Sub-supplier
Contract
16

Case study:
Case study:
• A contractor has sent an offer for executing a
stadium.
• The contractor stated that its lump-sum price is
USD50,000,000.
• The employer sent a letter of acceptance that he
has accepted the offer but with a total lump-sum
price of USD 45,000,000.
• Do we have a binding contract?
• Why?
17

B. Priority of Documents: (Cl 1.5)
 The documents forming the Contract (with their priority) are:
a) The Contract Agreement (if any),
b) The Letter of Acceptance,
c) The Letter of Tender,
d) The Particular Conditions,
e) The General Conditions,
f) The Specification,
g) The Drawings, and
h) The Schedules and any other documents
forming part of the Contract
 The documents forming the Contract are to be taken as
mutually explanatory of one another.
18

C.
C. The role of the Employer:
The role of the Employer:
1. Give the Contractor access and possession to Site: (Cl 2.1)
 Possession to site shall not be exclusive to the Contractor.
 The Employer may withhold the Site possession until
receiving the Performance Security from the Contractor.
If time is specified in the
Appendix to Tender
If no time specified in the
Appendix to Tender
Employer shall abide
to such time
Within such times as
may be required to
enable Contractor to
proceed according to
the Programme
19

C.
1. Give the Contractor access and possession to Site:
If the Employer delayed the
Site Possession to the
Contractor
For reasons not
attributable to the
Contractor
For reasons
attributable to the
Contractor
Contractor
will be entitled
to EOT and
Cost including
profit under
clause 20
Contractor
will have no
entitlements
20

C.
3. The Employer’s claims: (cl 2.5)
If the Employer considers himself to be entitled to any payment
under any of the Contract Clauses and/or any extension to
the Defects Notification Period:
The Employer or the Engineer shall
give notice (as soon as he became
aware of the event) to the Contractor.
The Employer shall then send
Particulars to the Contractor including
the Clause he relied on to submit the
claim and his entitlements (cost &time)
The Engineer shall determine the
amount which the Employer is entitled
to be paid and any extension to the
DNP.
21

C.
2. Permits, Licenses or Approvals: (Cl 2.2)
2.1 The Employer shall provide assistance to Contractor (when
requested by the Contractor) in:
 Providing copies of the Law of the country which are relevant to
the Contract.
 In obtaining any permits, license or approval required by the law
of the country which is:
 Under the Contractor’s obligations.
 For the delivery of goods (custom clearance)
 For export of Contractor’s Equipment when removed from Site.
22

D.
D. The role of the Engineer:
The role of the Engineer:
The Employer shall appoint the Engineer
To carry out the duties
assigned to him in the
Contract (Cl 3.1)
The Engineer shall not
have the authority to
amend the Contract
(Cl 3.1)
The Engineer may
issue from time to time
instructions and
modified drawings
which may be
necessary for the
execution of the Works.
(Cl 3.3)
 The Employer may replace the Engineer by a 42 days prior notice to the
Contractor. The notice shall include the name, address and the relevant
experience of the intended replacement Engineer.
 The Employer shall not appoint the Engineer with a person against the
Contractor raises reasonable objection with supportive particulars.
23

D.
D. The role of the Engineer:
The role of the Engineer:
(Cl 3.3)
The Engineer’s instructions to the Contractor shall be given in
writing:
If the Engineer issued a verbal instruction to the Contractor:
The Engineer shall make determination to the matters referred to him by any
Party, in accordance to the Contract Conditions (Cl 3.5) .
24

E.
E. The role of the Contractor:
The role of the Contractor:
(Cl 4.1)
The Contractor shall:
Design (to the extent specified in the Contract) ,Execute
and Complete the works all in accordance to the Contract
and to the Engineer’s instructions.
Provide the plant and Contractor’s document;
Temporary and permanent tools;
Be responsible for the adequacy, stability and safety of
the Site operation and the methods of construction.
Provide details of the method of constructions if requested
by the Engineer.
Inform the Engineer with a prior notice before adopting
any alteration to the method of constructions.
25

Case study:
Case study:
• You discovered after making an order for the
painting material of the project, that there is a
conflict between the specifications and the
drawings.
• The specifications stated that the painting material
shall be acrylic while the drawings requires oil
paints.
• You have followed the specifications.
• If the Engineer stated they shall be oil painting, do
you have the right to request cost?
26

Case study:
Case study:
• You are a Senior Site Engineer in a massive power plant
project. During execution of the formwork and rebar activities,
the Engineer came and requested you verbally to complete
these works within 2 days, although the remaining time for
these works is scheduled for 5 days. You can finalize the works
in 2 days, however, now you will require additional resources
and to work overtime.
• What should you do?
• What if the Engineer sent you an email instructing you to do
so?
27

F.
F. Delayed drawings and instructions by the Engineer
Delayed drawings and instructions by the Engineer (Cl 3.3)
(Cl 3.3)
If the Engineer delayed any instructions or drawings:
• Details of the necessary
drawing or instruction
• Details of why and by
when it should be
issued
• Details of the nature
and amount of the
delay likely to be
suffered.
Notice
• Further notice as
per CL 20.1
• Extension of time
(Cl8.4)
• Payment of
incurred Cost +
reasonable profit.
Entitlement
• The Engineer shall
make a
determination
based on Cl 3.5
Determination
If the Engineer’s failure was due to fault from the Contractor, the
Contractor shall not be entitled to EOT , Cost or profit.
28

G.
G. Variations:
Variations:
•Any change to the Works, which is instructed or approved as a variation
under Clause 13 [Variations and Adjustments}.
•Variations are source of many disputes.
•Employers are generally unwilling to enter into contracts which prevent
them from requiring changes to be made, other than after the Taking
Over Certificate is issued.
Variations can be initiated by any of three ways:
•The Variation may be instructed without prior agreement as to feasibility or
price, which may be appropriate for urgent work, or in respect of
Construction Works which are designed by or on behalf of the Employer.
•The Contractor may (at his option) initiate his own proposals, which may
be approved as a Variation, or he may be given other instructions which
constitute a Variation.
•A proposal may be requested, in an Endeavour to reach prior agreement
on its effect and thereby minimize dispute.
Note: A “request” would typically not constitute a Variation.
29

G.
G. Variations:
Variations:
Variations can be initiated by the Employer
at any time prior to issuing the Taking-Over
Certificate for the Works, either by an
instruction or by a request for the Contractor
to submit a proposal.
The Contractor shall execute and be bound
by each Variation, unless the Contractor
promptly gives notice to the Engineer stating
(with supporting particulars) that
the Contractor cannot readily obtain the
Goods required for the Variation.
Cl 13.1
Right
to
Vary
30

G.
G. Variations:
Variations:
Cl 13.1 Any Variation may includes:
Changes to the
quantities of any item of
work included in the
Contract.
Changes to the levels,
positions and/or
dimensions of any part
of the Works.
Changes to the quality
and other characteristics
of any item of work.
Omission of any work
unless it is to be carried
out by others
Any additional work, Plant,
Materials or services
necessary for the
Permanent Works including
Tests and boreholes
Changes to the sequence or
timing of the execution of the
Works
Right
to
Vary
31

G.
G. Variations:
Variations:
Cl 13.1
Right
to
Vary
32

G.
G. Variations:
Variations:
•Note: The Contractor is not obliged to submit Value
Engineering proposals.
Value
Engineering
Cl 13.2 The Contractor may, at any time, submit to the
Engineer a written proposal which will, if adopted
Accelerate Completion.
reduce the Cost to the Employer
of executing, maintaining or
operating the Works.
Improve the efficiency or
value to the Employer of the
completed Works, or
Otherwise be of benefit to
the Employer.
33

G.
G. Variations:
Variations:
Value
Engineering
Cl 13.2 Evaluation of Value Engineering Cost
If this change results in a reduction in the contract value of
this part, a fee shall be included to the Contract Price. Such
fee shall be 50% of the difference between:
i)Such reduction in contract value, resulting from the change.
ii)the reduction (if any) in the value to the Employer of the
varied works, taking account of any reductions in quality,
anticipated life or operational efficiencies.
if amount (i) is less than amount (ii), there shall not be a fee
34

G.
G. Variations:
Variations:
Variation
Procedure
Cl 13.3 If the Engineer requests a proposal, prior to instructing a
Variation, the Contractor shall respond as soon as
practicable either by giving reasons why he cannot comply
or by submitting:
Description and Programme
of the proposed work.
Any necessary modification to the
Programme as a result of the Variation
and to the Time for Completion
Proposal for the evaluation
of the Variation
35

G.
G. Variations:
Variations:
•
This Sub-Clause applies whenever an adjustment is agreed,
approved or determined under Clause 13 taking into
consideration the Contract’s Currency Proportions which
may be appropriate for the Variation.
•
Payment
in
Applicable
Currencies:
Cl 13.4
36

G.
G. Variations:
Variations:
Provisional Sums : means a sum (if any) which is specified in the
Contract as a provisional sum, for the execution of any part of
the Works or for the supply of plant, Materials or services under
Sub clause 13.5.
• Provisional Sums are to be used upon the Engineer’s
instructions.
• for the Contract Price to be adjusted.
• Provisional Sums may be executed by a Nominated
Subcontractor or by the Contractor.
• The Price to be included shall be:
The actual amount paid by the Contractor.
A sum of overhead charges and profit.
•
Provisional
Sum
Cl 13.5
37

G.
G. Variations:
Variations:
• Appropriate for minor works.
• Should be instructed by the Engineer.
• The works evaluated according to the daywork schedule
included in the Contract.
•
Daywork
Cl 13.6
38

G.
G. Variations:
Variations:
•This Sub-Clause protects the Parties from the consequences of
changes in legislation in the Country (Where the project will be
executed) such as:
•The Laws of the Country (including introduction of new
Laws and the repeal or modification of existing Laws) or,
•The judicial or official governmental interpretation of such
Laws.
Adjustment
for
Changes
in
Legislation
Cl 13.7
If the Contractor will suffer delay or incur cost:
39

G.
G. Variations:
Variations:
•This Sub-Clause is to adjust the Contract Values to reflect
escalation of costs due to inflation using a formulae.
•The amount payable to the Contractor shall be adjusted for
rises or falls in the cost of labors, goods and any other inputs to
the Works.
•If this cost was recovered under any other clause, it cannot be
recovered any more subject to this clause.
•Ex: 0.2 + 0.08 (Li/Lo) + 0.58 (Si/So) + 0.09 (Ni/No) + 0.01 (Fi/Fo) +
0.04
•
Adjustment
for
Changes
in
Cost:
Cl 13.8
Li Current labor index figure Fo Base automotive fuel price index figure
Lo Base labor index figure Ni Current paint material price index
figure
Ei Current equipment index
figure
No Base paint material price index figure
Eo Base equipment index figure Si Current structural steel material price
index figure
Fi Current automotive fuel price
index figure
So Base structural steel material price
index figure 40

G.
G. Variations:
Variations:
•
Evaluation
of
Variation
Cl 12.3
The Contract rate of the item of
work has a certain rate in the
Contract
If nor certain rate, the rate specified
for similar work.
If there is no specified rate or price is
appropriate because the item of work
is not of similar character or not
executed under similar conditions.
41

Case study:
Case study:
• During the execution of series of villas, the Engineer
requested the Contractor to execute more 10 villas.
• What shall the Contractor do?
• What if the Engineer requested the Contractor to
make a golf course?
• Shall it be considered as a variation?
42

Case study:
Case study:
• The Contract stated that the unit rate of pouring concrete
with Fcu = 250kg/cm2
= 400EGP/m3
, and for concrete with
Fcu=400 Kg/cm2
= 550EGP/m3
.
• The Engineer made a comment on the shop drawings that the
Fcu shall be 350Kg/cm2.
• What shall the Contractor do?
• How can we evaluate the price of the new concrete.
43

Case study:
Case study:
• If the Contractor proposed to change the aluminum doors
which will cost EGP200,000 to wooden doors which will cost
100,000EGP.
• If the Employer accepted, what does the Contractor is entitle
for?
• If the wooden doors will shorten the operational life time
which is equivalent to reduction of 50,000EGP in the price?
44

H.
H. Employer’s Risks
Employer’s Risks
• Fidic specified some event which shall be at the employer’s risk.
• Fidic determined in addition, the consequences of the
occurrence of any of these risks.
The Employer’s Risks are:
A.war, hostilities (whether war be declared or not), invasion, act of
foreign enemies,
B.rebellion, terrorism, revolution, insurrection, military or usurped
power, or civil war, within the Country,
C.riot, commotion or disorder within the Country by persons other
than the Contractor's Personnel and other employees of the
Contractor and Subcontractors,
D.munitions of war, explosive materials, ionising radiation or
contamination by radio-activity, within the Country, except as may
be attributable to the Contractor's use of such munitions,
explosives, radiation or radio-activity,
Cl 17.3
45

H.
Employer’s Risks
• Fidic specified some event which shall be at the employer’s risk.
• Fidic determined in addition, the consequences of the
occurrence of any of these risks.
The Employer’s Risks are:
E.pressure waves caused by aircraft or other aerial devices
travelling at sonic or supersonic speeds,
F.use or occupation by the Employer of any part of the Permanent
Works except as may be specified in the Contract,
G.design of any part of the Works by the Employer's Personnel or by
others for whom the Employer is responsible, and
H.any operation of the forces of nature which is Unforeseeable or
against which an experienced contractor could not reasonably
have been expected to have taken adequate preventative
precautions.
Cl 17.3
46

H.
Employer’s Risks
If any of the risks specified in Cl 17.3 has occurred, and the
Contractor will suffer delay or incurs cost, the Contractor shall
be entitled to:
• Extension of Time
• Payment of such incurred
Cost
Cl 17.4
47

I.
I. Contractor’s Care of the Works
Contractor’s Care of the Works
Cl 17.2
48

J.
J. Force Majeure
Force Majeure
A : It is an exceptional event or circumstance which is :
1. Which is beyond a Party’s Control
2. Which such Party could not reasonably have provided against before entering
into the Contract
3. Which, having arisen, such Party could not reasonably have avoided or
overcome, &
4. Which is not substantially attributable to the other Party.
Force Majeure may include, but is not limited to, exceptional events or
circumstances of the kind listed below, so long as the above conditions are
satisfied:
 War, hostilities, (whether was be declared or not), Invasion, act of foreign enemies,
 Rebellion, terrorism, revolution, insurrection, military or usurped power, or civil war,
 Riot, commotion, disorder, strike or lockout by persons other than the Contractor’s
Personnel and other employees of the contractor and Sub-Contractors,
 Munitions of war, explosive materials, ionizing radiation or contamination by radio
activity, except as may be attributable to the Contractor’s use of such munitions,
explosives, radiation or radio-activity, and
 Natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity.
Cl 19.1
49

J.
J. Force Majeure
Force Majeure
If a Party is or will be prevented from performing any of its obligations
under the Contract by Force majeure:
• He shall give a notice
within 14 days after he
became aware, or
should become aware
of the event.
• Each Party shall
minimize any delay in
the performance of the
Contract sue to Force
Majeure.
Notice
• Payment of
incurred Cost
Entitlement • The Engineer shall
make a
determination
based on Cl 3.5
Determination
Cl 19.2
Cl 19.3
Cl 19.4
50

Case study:
Case study:
• During a site visit, the Employer has caused damage to one of
the windows.
• Who shall bear the cost of repair?
• What if the Contractor has completed part of the works, but it
requires re-painting due to the spread of duct related to
another contractor?
51

• You are the Project Manager in a Buildings Project and the
Owner did not pay the last 2 invoices submitted. So, you were
unable to pay the salaries for the past two months. All labor on-
site went on strike for 1 continuous week and the project will be
delayed as a result of this stoppage.
• Is this a case of Force Majeure event? What should you do?
• What if the Owner did not pay his security staff, and they decided
to stop anyone from entering the Site. Is this a Force Majeure
event?
• Is this a case of Force Majeure? What should you do?
• What if there was a conflict between 2 armed tribal groups
at/in the Site and no one could enter the site safely?
• Is this a case of Force Majeure? What should you do?
© Orascom Construction 2015. Reproduction of this material is prohibited without the written consent of the owner.
Case study:
Case study:
52

K.
K. Commencement and Completion Date
Commencement and Completion Date
Commencement Date : means the date notified under Sub-Clause
8.1 [Commencement of Works].
The Engineer shall give not less than 7 days notice to
Commencement Date to the Contractor .
Unless otherwise agreed, the commencement date shall be within
42 days from the date of receiving the Letter of Acceptance ].
Cl 8.1
Time for Completion: the Completion of the Project or any Section
shall include:.
Achieving the Test on Completion
Complete the Works as required under Sub-Clause 10.1 [Taking Over of the
Works and Sections
53

L.
L. Taking Over Certificate
Taking Over Certificate
The Contractor may apply by notice to the Engineer for a Taking-
Over Certificate not earlier than 14 days before the Works will in the
Contractor's opinion be complete and ready for Taking Over.
Cl 10.1
Note : If the Works are divided into Sections, the Contractor may similarly
apply for a Taking-Over Certificate for each Section.
If the Contractor would like to apply for the Taking Over
Certificate he shall then :
The Engineer shall within 28days from receiving the notice:
Approve
Issue the Taking Over
Certificate to the Contractor
stating the date on which the
Works or Section were
completed in accordance
with the Contract
Reject
Give reasons and specifying
the work required to be done
by the Contractor to enable
the Taking-Over Certificate to
be issued.
54

L.
Cl 10.1
If the Engineer failed to respond within 28 days:
• The Contractor’s
application for the
TOC deemed
Accepted.
And the TOC shall be deemed to have been issued on the last day of
that period
55

L.
Cl 10.2
If the Employer uses the Works before the TOC
The Employer shall not use any part of the Works (other than as a
temporary measure which is either specified in the Contract or agreed by
both Parties) unless and until the Engineer has issued a Taking-Over
Certificate for this part. However, if the Employer does use any part of the
Works before the Taking-Over Certificate is issued, then:
the part which is used shall be deemed
to have been taken over as from the
date on which it is used
the Contractor shall cease to be liable
for the care of such part as from this
date when responsibility shall pass to the
Employer. and
If requested by the Contractor, the
Engineer shall issue a Taking-Over
Certificate for this part.
A
B
C
56

L.
The Employer is required to Take Over the Works (or a Section, if any)
when they are completed in accordance with the Contract including
the matters described in Sub-Clause 8.2 a & b:
(a) "achieving the passing of the Tests on Completion; and
Sub Clause 10.1(a)
"any minor outstanding work and defects which will not substantially affect the use
of the Works or Section for their intended purpose”
(b) "completing all work which is stated in the Contract as being required for
the Works or Section to be considered to be completed for the purposes of
taking-over under Sub-Clause 10.1” including the "work which is stated in the
Contract“ [RED 4.1(d) or YELLOW/SILVER 5.5, 5.6 and 5.7),
BUT EXCLUDING:
So, minor works shall not delay the TOC issuance.
57

L.
What if Employer / His representative delays or interferes with Taking
Over?
• If the Contractor was
delayed for more
than 14 days from
carrying out the Test
on Completion
Notice
• Payment of
incurred Cost +
profit
Entitlement
• The Engineer shall
make a
determination
based on Cl 3.5
Determinatio
n
And the TOC deemed to be issued
58

L.
What happens after the TOC ?
59

M.
M. Payments
Payments
1.Advance Payment:
The total advance payment, the number and timing of installments
(if more than one), and the applicable currencies and proportions,
shall be as stated in the Appendix to Tender.
The Engineer shall issue an interim payment certificate for the
Advance Payment when the Employer receives :
a)the Performance Security in accordance with Sub-Clause 4.2
[Performance Security] and;
b)a guarantee in amounts and currencies equal to the advance payment.
Cl 14.2
The Contractor shall ensure that the guarantee is valid and
enforceable until the advance payment has been repaid, but its
amount may be progressively reduced by the amount repaid by the
Contractor as indicated in the Payment Certificates
60

M.
M. Payments
Payments
2.Interim Payment Certificate
The Contractor shall submit a Statement in six copies to the Engineer after the
end of each month, in a form approved by the Engineer, showing in detail
the amounts to which the Contractor considers himself to be entitled,
together with supporting documents which shall include the report on the
progress during this month in accordance with Sub-Clause 4.21 [Progress].
Cl 14.3
the estimated contract
value of the Works
executed
any amounts to be added
and deducted for the
advance payment
any amounts to be added and
deducted for changes in
legislation and changes in cost
Omission of any work
unless it is to be carried out
by others
any other additions or deductions
which may have become due
under the Contract or otherwise,
including those under Clause 20
[Claims, Disputes and Arbitration]
the deduction of amounts certified
in all previous Payment Certificates
61

M.
M. Payments
Payments
2.Interim Payment Certificate
No amount will be certified or paid until the Employer has received and
approved Performance Security.
The Engineer shall within 28 days from receiving the Statement, issue to the
Employer an interim payment certificate stating the amount he fairly
determines to be due with supportive documents.
The Engineer may withhold the interim payment certificate if:
Cl 14.6
Work done by the Contractor is not in accordance with the Contract, the
cost of rectification or replacement may be withheld until rectification or
replacement has been completed
If the Contractor was or is failing to perform any work or obligation in
accordance with the Contract, and had been so notified by the
Engineer, the value of this work or obligation may be withheld until the
work or obligation has been performed
A Payment Certificate shall not be deemed to indicate the
Engineer's acceptance, approval, consent or satisfaction
62

M.
M. Payments
Payments
3.Timing of payments
a.Advance Payment:
within 42 days after issuing the Letter of Acceptance or within 21 days after
receiving the documents in accordance with Sub-Clause 4.2 [Performance
Security] and Sub-Clause 14.2 [Advance Payment], whichever is later;
b. Interim Payment:
The amount certified in each Interim Payment Certificate within 56 days after
the Engineer receives the Statement and supporting documents
Cl 14.7
4. Delayed Payment:
•the Contractor shall be entitled to receive financing charges compounded
monthly on the amount unpaid during the period of delay.
•This period shall be deemed to commence on the date for making interim
payment not the date of the issuance of payment application.
•these financing charges shall be calculated at the annual rate of three
percentage points above the discount rate of the central bank in the
country of the currency of payment, and shall be paid in such currency
(unless otherwise agreed).
63

M.
M. Payments
Payments
5. Statement at Completion
Within 84 days after receiving the Taking-Over Certificate for the Works, the
Contractor shall submit to the Engineer six copies of a Statement at
completion with supporting documents(Statement at Completion) including:
Cl 14.10
any further sums which the Contractor considers to be due
an estimate of any other amounts which the Contractor
considers will become due to him under the Contract
any further sums which the Contractor considers to be
due
64

M.
M. Payments
Payments
6. Final Payment
Within 56 days from the date of issuing the Performance Certificate (after
the Defect Notification Period) the Contractor shall submit to the Engineer six
copies of a Statement includes:
Cl 14.11
the value of all work done in accordance with the
Contract
any further sums which the Contractor considers to be due
to him under the Contract or otherwise
any further sums which the Contractor considers to be
due
65

M.
M. Payments
Payments
6. Final Payment
Within 28 days after receiving the Final Statement the Engineer shall issue, to
the Employer, the Final Payment Certificate which shall include:
Cl 14.13
the amount which is finally due.
the balance (if any) due from the Employer to the
Contractor or from the Contractor to the Employer,
as the case may be.
If the Contractor has not applied for a Final Payment Certificate, the Engineer shall
request the Contractor to do so. If the Contractor fails to submit an application within a
period of 28 days, the Engineer shall issue the Final Payment Certificate for such
amount as he fairly determines to be due.
66

N. Claims
N. Claims
There are four categories of claims ( Bunni 296):
a.Under the contract
b.Arising out of or in connection with the contract
c.Arising out of the principal of quantum merit
d.Ex gratia payment
Cl 14.2
a. Under the contract:
Based on the grounds that should a certain event occur, then claimant
would be entitled to a remedy that is specified under a particular
provision of the contract, subject to the effect of the applicable law.
Example:
Failure by the contractor to complete the works on a specified date
would entitle the employer to deduct liquidated damages at a
specified rate per day or week
67

N. Claims
N. Claims
d.Ex gratia payment
Cl 14.2
b. Arising out of or in connection with the contract
The remedy is not designated in the contract and the claimant needs to
invoke a Provision of the applicable law to obtain a remedy.
Therefore, if the claim is valid, The remedy lies under the provisions of the
applicable law of the contract.
Example:
where one of the parties has misrepresented certain important facts
in negotiations leading to the formation of the contract.
In such case, the other party may use this as a basis for cancelling
the contract or for claiming damages.
68

N. Claims
N. Claims
d.Ex gratia payment
Cl 14.2
c. Arising out of the principal of quantum merit
Where no contract exists between the parties or if one existed, it is deemed
to be void.
instead the contract expressly provides that the amount to be paid
will be based on a reasonable sum or the price will be agreed from
time to time.
69

N. Claims
N. Claims
d.Ex gratia payment
Cl 14.2
d. Ex gratia payment
•Are not claims which arise by virtue of a contractual entitlement,
•Are sometimes entertained by employers and engineers as a matter of
expedience to avoid arbitration or litigation and, indeed, to maintain the
goodwill necessary to complete the project successfully.
•There is no applicable legal basis for such payments, but rather some
commercial sense or benefit in reaching a settlement between the
parties without acceptance of liability.
70

N. Claims
N. Claims
According to Fidic :
Cl 20
42 days or
as agreed
28 days
(Clause 20.1)
Event
giving rise
to the
claim
Notice
Detailed
Particulars
of the
Claim
71

28 days
42 days
28 days or
as agreed
at
monthly
intervals
N. Claims
N. Claims
72

• Duration for Determination: within 42 days after receiving a claim or any
further particulars. the Engineer shall respond with approval, or with
disapproval and detailed comments.
• He may also request any necessary further particulars, but shall
nevertheless give his response on the principles of the claim within such
time.
• The Engineer shall proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine (i) the extension (if any) of the
Time for Completion (before or after its expiry) in accordance with Sub-
Clause 8.4" [Extension of Time for Completion], and/or (ii) the additional
payment (if any) to which the Contractor is entitled under the Contract.
N. Claims
N. Claims
73

28 days
Commencement of DAB
O. Dispute Board and Arbitration
74

20.2 Appointment of Dispute Adjudication Board
20.2 Appointment of Dispute Adjudication Board
• The DAB shall comprise, as stated in the Appendix to Tender, either one or
three suitably qualified persons ("the members"). If the number is not so stated
and the Parties do not agree otherwise, the DAB shall comprise three persons.
• If the DAB is to comprise three persons,
o each Party shall nominate one member for the approval of the other Party.
o The Parties shall consult both these members and shall agree upon the
third member, who shall be appointed to act as chairman.
• Each Party shall be responsible for paying one-half of this remuneration.
• Neither Party shall consult the DAB on any matter without the agreement of the
other Party.
• Unless otherwise agreed by both Parties, the appointment of the DAB
(including each member) shall expire when the discharge referred to in Sub-
Clause 14.12 [Discharge] shall have become effective.
75

• Sample Form of Discharge
We ... hereby confirm, in the terms of Sub-Clause 14.12 of the Conditions of
Contract, that the total of the attached Final Statement, namely ...,
represents the full and final settlement of all moneys due to us under or in
connection with the Contract. This discharge shall only become effective
when we have received the Performance Security and the outstanding
balance of this total of the attached Final Statement.
Should be submitted when submitting the Final Statement.
14.12 [Discharge]
14.12 [Discharge]
76

84 days
Party refers a
dispute to the DAB
(Clause 20.4)
DAB gives decision
BINDING
DECISION
Party may issue “a
notice of
dissatisfaction”
(Clause 20.4)
Party May initiate
Arbitration
(Clause 20.6)
28 days 28 days
Either Party may refer the dispute in writing to the DAB
for its decision, with copies to the other Party and the
Engineer
77

84 days
Failure of DAB to give
Decision
(FIDIC 99)
28 days 28 days
If the DAB fails to give its decision within the period of 84 days (or as
otherwise approved) after receiving such reference, then either Party may,
within 28 days after this period has expired, give notice to the other Party of
its dissatisfaction.
112 days
78

• If any of the following apply:
a) The Parties fail to agree upon the appointment of the sole member of the DAB by
the date stated Sub-Clause 20.2.
b) either Party fails to nominate a member (for approval by the other Party) of a DAB
of three persons by such date,
c) the Parties fail to agree upon the appointment of the third member (to act as
chairman) of the DAB by such date, or
d) the Parties fail to agree upon the appointment of a replacement person within 42
days after the date on which the sole member or one of the three members
declines to act or is unable to act as a result of death, disability, resignation or
termination of appointment,
Then:
the appointing entity or official named in the Appendix to Tender shall, upon the
request of either or both of the Parties and after due consultation with both Parties,
appoint this member of the DAB.
This appointment shall be final and conclusive. Each Party shall be responsible for
paying one-half of the remuneration of the appointing entity or official.
79

• Unless otherwise agreed by both Parties:
o the dispute shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce,
o the dispute shall be settled by three arbitrators appointed in
accordance with these Rules, and the arbitration shall be conducted
in the language for communications defined in Sub-Clause 1.4 [Law
and Language].
o The arbitrator(s) shall have full power to open up, review and revise
any certificate, determination, instruction, opinion or valuation of the
Engineer, and any decision of the DAB, relevant to the dispute.
Nothing shall disqualify the Engineer from being called as a witness
and giving evidence before the arbitrator(s) on any matter
whatsoever relevant to the dispute.
o Any decision of the DAB shall be admissible in evidence in the
arbitration.
Cl 20.7
Arbitration shall commence 56 days after the date of the “notice for
dissatisfaction”
Unless settled amicably, any dispute in respect of which the DAB's
decision (if any) has not become final and binding shall be finally
settled by international arbitration.
80

• If a dispute arises between the Parties in connection with, or arising
out of the Contract or the execution of the Works and there is no DAB
in place, whether by reason of the expiry of the DAB's appointment
or otherwise:
• Sub-Clause 20.4 [Obtaining Dispute Adjudication Board's Decision]
and Sub-Clause 20.5 [Amicable Settlement] shall not apply, and the
dispute may be referred directly to arbitration under Sub-Clause 20.6
[Arbitration].
If :
neither Party has given notice of dissatisfaction within the period stated in Sub-
Clause 20.4 [Obtaining Dispute Adjudication Board's Decision],
the DAB's related decision (if any) has become final and binding, and
 a Party fails to comply with this decision.
Then:
 The other Party may, without prejudice to any other rights it may have, refer the
failure itself to arbitration.
Amicable settlement shall not apply to this reference.
81

Engineer has the authority to suspend the progress of the Works (or any part) and
indicates the circumstances the Contractor will be considered responsible for the
suspension.
(Risk of Contractor) - Contractor will be responsible for the Suspension if:
a.Due to the Contractor’s shortcomings (faulty design, workmanship or materials …
etc.)
b.Necessary by reasons of site climatic conditions,
c.Necessary for ensuring quality and safety of Works.
(Risk of Employer) – Employer will be responsible for the suspension if:
a.Engineer fails to certify payment certificates (S-Cl. 14.6) or to comply with Financial
Arrangements (S-Cl. 2.4) or Payment Conditions (S-Cl. 14.7).
b.Employer fails to perform his obligations under the Contract.
P. Suspension
P. Suspension Cl 8.8 & 16
82

Clause 8 (Commencement, Delays & Suspension)
Suspension by Engineer
Engineer’s
Instruction
to Suspend
Contractor to Suspend,
Protect & Secure such
suspended part. (S-Cl.
8.8)
Contractor’s
Risk
Engineer to determine
subsequent EOT (Cl. 8.4)
and/or incurred cost of
Contractor
Employer’s
Risk
Contractor may give
notice requiring
permission to resume in
28 days
Permission not
granted
Contractor may
omit such
suspended part
Cl. 13 (Variations)
If it affects all
Works,
Contractor may
Terminate
S-Cl. 16.2
(Termination by
Contractor)
OR
Engineer gave no permission
to resume Work within 84
days
Contractor to Suspend,
Protect & Secure such
suspended part. (S-Cl.
8.8)
Engineer’s
Determination of
reasons for suspension
S-Cl. 8.11
S-Cl. 8.9
S-Cl. 8.8
P. Suspension
P. Suspension
83

Within 21
Days
Engineer fails to
certify interim
certificate as
S-Cl. 14.6
Clause 16 (Suspension & Termination by Contractor)
Contractor’s Entitlement to Suspend Works
Employer to pay financial
charges upon unpaid sums as
stated Special Conditions
(S-Cl. 14.8 Delayed Payment)
After giving notice, Terminate
the Contract after 14 days as per
(S-Cl. 16.2. Termination by Contractor)
OR
After giving 28 days notice,
Contractor may suspend, or
reduce the rate of the Works
Contractor suffers delay or
incurred cost from such
suspension
As per S-CL. 3.5. Determination,
Engineer to determine
subsequent EOT (Cl. 8.4)
and/or incurred cost+ profit of
Contractor
Employer fails
to pay or comply
with Financial
Arrangements
(S-Cl. 2.4 & 14.7)
S-Cl.16.1
S-Cl.16.1
OR
S-Cl.16.1
S-Cl.16.1
Contractor to give
notice as per (S-Cl.
20.1 Contractor’s
Claims)
S-Cl.16.1
P. Suspension
P. Suspension
84

The Employer may terminate and expel the Contractor from the site days notice
if the Contractor (15.2):
• Fails to comply with Sub-Clause4.2 “Performance Security” or with a notice
under Sub-Clause 15.1 “Notice to Correct”.
• Abandons or intend not to continue his obligations under the Contract.
• Subcontracts the whole of the Works or assigns the Contract without the
required consent.
After 14
days
Q. Termination
Q. Termination
Termination by Employer Due to Contractor’s Default
85

The Employer may terminate and expel the Contractor from the site days
notice if the Contractor (15.2):
• Without reasonable excuse, fails to proceed after receiving a Notice as per
Clause8 “Commencement, Delays and Suspension” or to comply with Clause
7.5 “Rejection” or Sub-Clause 7.6 “Remedial Works” .
After 28
days
After 14
days
Q. Termination
Q. Termination
86

The Employer may by notice terminate the Contract immediately if the
Contractor:
• e. Becomes bankrupt, goes into liquidation ... etc.
• f. Offers or giving gif or, briber, commission ... etc.
Q. Termination
Q. Termination
Valuation at Date of Termination (15.3):
• the Engineer in accordance with Sub-Clause 3.5 “Determinations” shall
determine the value of the Works, Goods and Contractor's Documents, and
any other sums due to the Contractor.
87

Payment after Termination (15.4):
After a notice of termination has taken effect, the Employer may:
(a) proceed in accordance with Sub-Clause 2.5 “Employer's Claims”,
(b) withhold further payments to the Contractor until the costs of execution
completion and remedying of any defects, damages for delay in completion
(if any) and all other costs incurred by the Employer have been established
and/or
(c) recover from the Contractor any losses and damages incurred by the
Employer and any extra costs of completing the Works, after allowing for any
sum due to the Contractor under Sub-Clause 15.3 “Valuation at Date of
Termination”. After recovering any such extra costs, the Employer shall pay
any balance to the Contractor.
Q. Termination
Q. Termination
88

After a notice of termination has taken effect, the Contractor shall (15.2):
• leave the Site and deliver any required Goods, all Contractor's Documents,
and other design documents made by or for him to the Engineer.
• The Contractor shall use his best efforts to comply with any reasonable
instructions included in the notice
(i) for the assignment of any subcontract, and
(ii) for the protection of life or property or for the safety of the Works.
Q. Termination
Q. Termination
Termination by Employer
89

After termination, the Employer may (15.2):
• Complete the Works and/or arrange for any other entities to do so, the
Employer and these entities may then use any Goods, Contractor's
Documents and other design documents made by or on behalf of the
Contractor.
• The Employer shall then give notice that the Contractor's Equipment and
Temporary Works will be released to the Contractor at or near the Site.
Note:
If by this time the Contractor has failed to make a payment due to the
Employer, these items may be sold by the Employer in order to recover this
payment. Any balance of the proceeds shall then be paid to the Contractor.
Q. Termination
Q. Termination
Termination by Employer
90

*for multiple periods
total more than 140 days
*84
days
After 7
days
Either Party may give to the other Party a notice of termination of the
Contract.
Optional Termination
Q. Termination
Q. Termination
91

Upon notice by either Party to the other Party of such event or
circumstance:
• (a) the Parties shall be discharged from further performance , and
• (b) the sum payable by the Employer to the Contractor shall be the same as
would have been payable under Sub-Clause 19.6 “Optional Termination
Payment and Release”
If any event (including, but not limited to, Force Majeure) arises which
makes it impossible or unlawful for either or both Parties to fulfill its or their
contractual obligations, under the law governing the Contract.
Q. Termination
Q. Termination
92

Upon such termination, the Engineer shall determine the value of the
work done and issue a Payment Certificate which shall include: (19.6)
• (a) the amounts payable for any work carried out.
• (b) the Cost of Plant and Materials ordered for the Works which have been
delivered or of which the Contractor is liable to accept delivery, this Plant and
Materials shall become the property of the Employer.
• (c) any other Cost or liability incurred by the Contractor in the expectation of
completing the Works.
• (d) the Cost of removal of Temporary Works of Contractor's Equipment from
the Site
• (e) the Cost of repatriation of the Contractor's staff and labour.
Q. Termination
Q. Termination
93

The Contractor shall be entitled to terminate the Contract (16.2)
After 14
days
42,56,42
days
Termination by Contractor due to Employer’s default
Q. Termination
Q. Termination
94

The Contractor shall be entitled to terminate the Contract to the
Employer fails to(16.2):
After
14 days
Q. Termination
Q. Termination
95

The Contractor shall be entitled to terminate the Contract
immediately if (15.2):
• a prolonged suspension affects the whole of the Works as described
in Sub-Clause 8.11 [Prolonged Suspension], or
• the Employer becomes bankrupt or goes into liquidation…
Q. Termination
Q. Termination
96

After a notice of termination has taken effect under
Under Sub-Clause 15,5 “Employer's Entitlement to Termination”, Sub-
Clause 16.2 “Termination by Contractor” or Sub-Clause 19.6
“Optional Termination, Payment and Release”:
(a) cease all further work, except for such work as may have been
instructed by the Engineer for the protection of life or property or for
the safety of the Works,
(b) hand over Contractor's Documents, Plant, Materials and other work
for which the Contractor has received payment, and
(c) remove all other Goods from the Site, except as necessary for safety,
and leave the Site.
Q. Termination
Q. Termination
97

Payment on Termination (16.4)
The Employer shall promptly:
A- return the Performance Security to the Contractor,
B- pay the Contractor in accordance with Sub-Clause 19.6 [Optional
Termination, Payment and Release], and
C- Pay to the Contractor the amount of any loss of profit (LoL 17.6)or
other loss or damage sustained by the Contractor as a result of this
termination.
Q. Termination
Q. Termination
98

Awareness PPT - Fidic_slide_s_show 2015.ppt

More Related Content

Similar to Awareness PPT - Fidic_slide_s_show 2015.ppt

More from Ismail Sultan

Recently uploaded

Awareness PPT - Fidic_slide_s_show 2015.ppt

Editor's Notes