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12/11/2009

CLAIMS & DISPUTES RESOLUTION UNDER FIDIC 99 REDBOOK

Suranga Jayasena
Senior Lecturer Department of Building Economic University of Moratuwa

CLAUSE 20

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12/11/2009

CLAUSE 20

... is all about Claims and Disputes Resolution

pages 58 to 62

CLAIM FLOWCHART
Claim Event, Circumstance arisen Clause 20.1 Contractor gives notice to the Engineer describing the event or circumstance giving rise to the Claim, within 28 days Contractor becomes aware or should have become aware of the Claim

Yes

No

No Claim

suranga@becon.mrt.ac.lk

12/11/2009

Clause 20.1 Contractor gives notice to the Engineer describing the event or circumstance giving rise to the Claim, within 28 days Contractor becomes aware or should have become aware of the Claim
No

Yes

Clause 20.1 Contractor provides Engineer with detailed particulars and within 42 days and final claim within 28 days after end of effect if continuing event and complies with other contractual requirements
No

Clause 20.1 Claim Fails The Employer is discharged from all liability in connection with the Claim

Clause 20.1 Claim approved may be limited, if failure has prevented or prejudice the proper investigation of Claim

Dispute

No

Clause 20.1 Contractor provides Engineer with detailed particulars and within 42 days and final claim within 28 days after end of effect if continuing event and complies with other contractual requirements
No

Clause 20.4 Contractor is satisfied with Engineers decision

Yes

Clause 20.1 Claim approved is limited, if failure has prevented or prejudice the proper investigation of Claim

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12/11/2009

Clause 20.1 The Engineer (dis)approves, or gives opinion on the Claim within 42 days

Yes

Clause 20.1 Contractor provides Engineer with detailed particulars and within 42 days and final claim within 28 days after end of effect if continuing event and complies with other contractual requirements

Clause 20.1 The Engineer (dis)approves, or gives opinion on the Claim within 42 days
No

Yes

Clause 20.4 Contractor is satisfied with Engineers decision


No

Contractor does not tolerate Engineers delay in decision


No No

Yes

Dispute

No

Clause 20.1 The Engineer (dis)approves, or gives opinion on the Claim

Yes

Clause 20.4 Contractor is satisfied with Engineers decision

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12/11/2009

20.4
Determination Certification

Instructions

Dispute

Valuations Opinion

Recall...

CLAUSE 20

... is all about Claims and Disputes Resolution

However ... Typical sequence shown in beginning of the document is useful

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12/11/2009

TYPICAL SEQUENCE OF DISPUTE EVENTS


ENVISAGED IN CLAUSE 20

8.1 Commencement Date

20.2 Parties appoint the DAB

20.4 A Party refers a dispute to the DAB

20.4 A Party issues a notice of dissatisfaction

20.6 A Party initiate arbitration

Parties present submissions to the DAB

Amicable settlement

<28d

<84d

<28d

>56d

DAB gives its decision

Arbitrators appointed

20.2 PARTIES APPOINT THE DAB


Within 28 days of Date of Commencement? ... by the date stated in Appendix to Tender.
(28 days in example in sample forms)

Guidance for Particular Conditions It is preferable, but not essential, to agree before the Letter of Acceptance A list of potential members may be included in tender

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12/11/2009

20.2 PARTIES APPOINT THE DAB ... CONTINUED ...


Parties jointly appoint a DAB DAB comprises one or three member stated in Appendix
If not stated nor agreed, it shall be three

If three, each party nominate one member for approval of other party, two members appoint chairman Each part pay one-half of DAB remuniration

20.2 PARTIES APPOINT THE DAB ... CONTINUED ...


What if parties fail to agree DAB?
An appointing entity is named in Appendix to Tender
20.3

What if date of appointment not stated in Appendix?


Might go for ad-hoc DAB > i.e. only appointed if and when a particular dispute arises.

What if appointing entity not stated in Appendix?


?

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12/11/2009

20.2 PARTIES APPOINT THE DAB ... CONTINUED ...


Parties may appoint members to be available to replace members resign or be terminated Otherwise, replacement be similar to new appointment Termination shall only be by mutual agreement of Parties usually DAB expires when discharge become effective

20.2 PARTIES APPOINT THE DAB ... CONTINUED ...


DAB members must be selected carefully, because
Parties empowers the DAB to reach decisions with which they undertake to comply, and A DAB member cannot normally be removed except with the agreement of both parties (20.2 last para)

suranga@becon.mrt.ac.lk

12/11/2009

A FULL-TERM DAB
Appointed before Contractor commence Works Visit the Site on a regular basis Also available to assist in avoiding disputes during these visits
20.2 Para 7 if at any time the Parties so agree, they may jointly refer a matter to DAB for it to give its opinion. Neither party shall consult DAB on any matter without the agreement of the other party

DAB: FULL-TERM OR AD-HOC


Red Book General Conditions are for full-term see 20.2 Parties may decide on appropriate model by considering (among other things):
Extent of Contractors Activities off-site paying DAB may not
economical

Extent of uncertainties in scope of works underground


tunnelling a full-term DAB most appropriate

Extent of Variations expected full-term Magnitude of the Contract No. of DAB members 1 or 3

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12/11/2009

20.4 OBTAINING ADBS DECISION


20.4 Reads if a dispute (of any kind whatsoever) arises between the Parties .... in connection with or arising out of the Contract or the execution of the Works including any dispute as to any certificate, determination, instruction, opinion or valuation of the Engineer ... may refer the dispute in writing to the DAB for decision

20.4 OBTAINING ADBS DECISION ... CONTINUED ...


No matter can be referred to DAB unless it is in dispute but, no formal notice of dispute required If matter is still in discussion or only interim determination given other party may assert that no dispute DAB to find if dispute has arisen see if agreement achieved under sc 3.5

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12/11/2009

THE MATTER HAS DEVELOPED INTO A


DISPUTE When ... Final determination rejected Discussions discontinued without agreement Party decline to participate in discussion Party decline to reach agreement as per sc3.5 So little progress being achieved that it is clear that agreement is unlikely

20.4 WRITTEN REFERENCE TO DAB


The Written Submission by Claimant For the decision of DAB Describes the situation Sets out the principles of the matter in dispute What Claimant wishes the DABs decision to be

A copy must be passed to the other party (Respondent) and Engineer

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12/11/2009

20.4 DABS DECISION


within 84 days after receiving the original reference, or within such other period as may be proposed by the DAB and approved by both parties
approvals must not be unreasonably withheld or delayed for complex matters DAB may propose to give decisions in stages

shall be reasoned and stated that it given under sub-clause 20.4

20.4 DABS DECISION ... CONTINUED ...


Note that DAB decision shall be admissible in evidence in arbitration. sc 20.6
Therefore well reasoned decision preferred

The Contractor shall execute the Works while DAB proceeding.

The decision shall be binding on both parties

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12/11/2009

20.4 DISSATISFACTION ON DABS DECISION


The Party must give a formal notice of dissatisfaction within 28 days. It establishes the claimant the right to commence arbitration. Unless the notice given within 28 days, decision become final and binding.

20.5 AMICABLE SETTLEMENT


During first 56 days after notice Parties should attempt amicable settlement DAB should not get involve in amicable settlement procedure. If no amicable settlement (or attempt thereto), ..... the dispute shall be finally settled by international arbitration sc 20.6

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12/11/2009

20.7 WHAT IF...


Formal notice of dissatisfaction NOT given, DAB decision became final and binding a Party FAILS to comply with decision

Other Party may refer THIS FAILURE directly to arbitration, without having to refer again to DAB or try amicable settlement

20.8 WHAT IF...


a dispute occurs, but no DAB is in place, either by
expiry or otherwise
the word otherwise shall be used to cover failure of appointing DAB due to defect in document. E.g. the appointing entity is non-existent

the dispute may be referred directly to arbitration under sc 20.6

However, there is still room for amicable settlement

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12/11/2009

20.6 ARBITRATION
Unless otherwise agreed by both parties
Rules of International Chamber of Commerce Three arbitrators Language be language defined in 1.4

Shall commence before or after completion Shall not prevent executing obligation of contract during the proceedings

::: BREAK :::

Well try something practical now

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12/11/2009

CASE
PROPOSED SCHOOL BUILDING FOR SEEVALI COLLEGE
Variation Instructions were issued changing the Ground Floor walls to block work from brick work which was in original contract. No block work was found in ground floor level in the original contract but upper floor partition walls in the original contract was similar type.

Contractor asked for the same rate from the upper floor block work but the Engineer rejected it and approved rate of his own schedule of prices (used for Engineers Estimate) which is less than claimed rate.

TASK 01

Write the cover letter for referring the matter to DAB

You may make necessary assumptions

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12/11/2009

<< Date >>

<< Adjudicator1 >> - chairman (member) << Adjudicator2 >> - member << Adjudicator3 >> - member

Dispute Adjudication Board Proposed School Building for Seevali College << Address >>

Dear Sirs,

REFERENCE TO ADJUDICATION

...............

..... We are not in agreement with the rates determined by the Engineer for Block work (varied item) at Ground Floor Level we carried out under the above contract. Therefore a dispute has arisen between the parties to the above Contract and pursuant to Sub-clause 20.4 we refer the dispute to DAB for its decision. The detail claim is attached herewith. Thank you.

Yours faithfully,

<< Contractor >>

cc: << Employer >> << Engineer >>

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12/11/2009

TASK 02

Write the Adjudication Submission

You may make necessary assumptions

TASK 02 - TIPS
How much to write - Keep it short but clear Format Not strict, but you may use something similar to arbitration submissions Order Introduce parties and contract DAB appointed Contractual provision 1, Contractual provision 2, Occurance, your statement ........ Dispute Your claim for decision by DAB

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12/11/2009

In the matter of Adjudication Dispute Between


ABC Construction, No 9, Road Lane Colombo 20 Contractor/Claimant and Seevali College, 111/1, Lane Road Colombo 19. Employer/Respondent STATEMENT OF CLAIM ........

1. The Contractor is a civil engineering contractor registered under ICTAD as a Grade C-5. The Employer is a public school in Colombo.

2. By a contract dated 09th October 2009 (the Contract), The Contractor undertook to construct and complete certain building works, namely the Construction of Proposed School Building for Seevali College (the Works) in consideration for payment by the Employer on measure and pay basis without price fluctuation adjustment for the priced bills of quantities bid by the contractor, at the time and in the manner prescribed by the contract.

suranga@becon.mrt.ac.lk

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12/11/2009

3. The Contract Incorporates the FIDIC Conditions of Contract for Construction, First Edition 1999 (the FIDIC Conditions).

4. The Dispute Adjudication Board (the DAB) was appointed by a tripartite agreement signed on 15th October 2009.

5. Sub-clause 13.1 of the FIDIC Conditions provides that Variations may be initiated by the Engineer and the Contractor shall execute and be bound by each Variation.

6. On 28th October during a site visit, the Engineer instructed a Variation changing all ground floor walls to block work from brick work specified in the Contract.

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12/11/2009

7. Sub-clause 3.3 of the FIDIC Conditions provides that in the event Engineer gives oral instructions the Contractor shall confirm the said instruction by writing.

8. Sub-clause 13.3 of the FIDIC Conditions provides that each Variation shall be evaluated in accordance with Clause 12 [Measurement and Evaluation].

9. Sub-clause 12.3 of the FIDIC Conditions provides that the appropriate rate for an item shall be the rate specified for similar work.

10. The Contractor confirmed the Variation instructions and notified the applicable rate to be the rate of similar work in the Contract BOQ Item 2.34: Block Work Walls at Second Floor level, by his letter to the Engineer dated 01st November 2009.

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12/11/2009

11. The Contractor included the block work quantity with applicable rate to its Interim Statement dated 31st December 2009.

12. Sub-clause 14.6 of the FIDIC Conditions provides that the Engineer shall issue an Interim Payment Certificate which shall state the amount which the Engineer fairly determines to be due.

13. The Engineer, in the Interim Payment Certificate, had not certified the rate applied for Variation and had determined a lower rate.

14. The Engineer failed to certify payment to the Contractor of sums to which it is entitled pursuant to the said Sub-clause 12.3; which sums amount to Rs. 115,000.00. PARTICULARS
<<< Include a brief calculation here, annex if there are detailed calculations>>

15. Accordingly, the Contractor claims Rs. 115,000.00 under Sub-clause 12.3 of the Contract, plus interest thereon at the rate of three percentage points above the discount rate of the Central Bank of Sri Lanka, compounded monthly, pursuant to Sub-clause 14.8 of the Contract.

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12/11/2009

16. I certify on behalf of the Contractor that the facts stated in this Statement of Claim are true to the best of my knowledge and belief.

.......................................................... Muralitharan, M. Project Coordinator ABC Construction No 9, Road Lane Colombo 20

WELLWELL -DONE

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