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Discussion note by Nishantha Liyanage
Introduction
1. Contract Practice – Core‐ Level 3 / Contract Administration ‐ Optional – Level 2
2. Has to be thorough with one standard form – This is based on FIDIC 1999 red book
Subjected Area
1. Contract Practice
Can be defined as principles and practices of a construction contract, It gives what has to be followed at
each stages of the construction process in order to make a good practice. Eg;‐ how to select a correct form
of contract / roles and responsibilities of parties
2. Contract Administration
Can be defined as process of managing and controlling a contraction contract with in an outline of a
contract conditions, Eg; ‐ Specific time frames/ How dispute resolve/ How to pay payments
3. Principle of Contract Law
What is a Contract; ‐ mutual exchange of rights and obligations of two or more parties which is legally
binding.
Employer’s point of view :‐
Right – get the Building constructed
Obligation – make timely payments
Element or principles of Contract :‐ (6) Offer / Acceptance / capacity / legality / intention to enter to
contract / good faith and fair deal (Article 172 of Qatari law No 22 / 2004(Civil Code))
good faith and fair deal is dealing with honestly and being trustworthy and should not try to take undue
advantage from other party – unjust enrichment
Acceptance – should be unconditional, otherwise become counter‐offer
Consideration – is an element of contract under English law but offer and acceptance is enough to form a
contract in Qatar.
What is a Contract Law; ‐ is a part of civil or common law which governs the contract between parties.
Civil Law‐ written law which in Qatar
Common Law – case law
Construction Contract Documents:‐
a) Should address following important areas
1. Responsibilities of each party
2. Contract management procedures – Contract administration rules
3. Time frame, EOT Provisions
Condition of Contract
4. Payment mechanism
5. Dispute resolution mechanism
6. Dealing changes
7. Scope of Work
8. Quality by specifications
b) Content of a tender document
Vol ‐1 : Contract Agreement, Instructions to Tenders, Specimen Forms, scope of Work, COC part 1/2,
Appendix to tender
Vol‐2 : Specification part 1/2
Vol‐3 : Preamble and BOQ
Vol‐4 : Drawings
Vol‐5 : Any other documents like soil reports/standards
c) Key difference between Tender and Contract – Contract agreement filled and signed by both parties,
Priced BOQ, Tender addendums / post tender clarifications will be added
d) Priority of docs – FIDIC 99 Clause 1.5
1. Contract Agreement
2. Letter of Acceptance
3. Letter of Tender – this is introduced by 99 which is signed offer of the Contractor to the
Employer for the Works
4. Particular Conditions
5. General Conditions
6. Specifications
7. Drawings
8. Schedules ‐ BOQ also include here
4. Legislation
Court structure (Court of First Instance, Appeal, Cassation)
Important Provisions
Civil Code Law No 22 of 2004
Labour law Law No 14 of 2004 (H & S)
Arbitration Law No 13 of 1990
Intellectual Property Law No 07 of 2002
Environment Legislation Law No 11 of 2000
Commercial law Law No 28 of 2006
Important articles of law no 22 of 2004
Article 171 – Contract is law of contract
Article 106 – Either party can correct unfair Clause before issue an any concern
Article 701 – Decennial liability
5. Standard Forms of Contracts
a. Type of Standard forms of Contract
(FIDIC, NEC, ICE, JCT, PPC 2000, PWA(Ashghal CoC), QP)
b. Type of FIDIC forms of Contract (International Federation of Consulting Engineer)
Red Book – Building and Civil Engineering works design by Employer
Editions 1957/1969/1977/1987/1999.
Originally for re‐measurement contract / BOQ oriented
Can included same design part to Contractor
Yellow Book – plant, Design and Built
Silver Book – EPC and Turnkey
Green Book‐ Short form Contract (minor/repetitive work/ sort period, low value)
White Book – Client Consultant model service agreement
Blue Book – Dragging and reclamation Works (2006)
Good Book – PPP projects (BOT. BOOT) (2008)
c. Difference between FIDIC 1987 and 1999
FIDIC 99 FIDIC 87
Engineer consider as Employer’s agent Engineer consider as impartial
Dispute refers to DAB, Engineer only Dispute refers to Engineers Decision
gives determination under clause 3.5
New procedure for Employer’s claim No Such
New Provision for Value Engineering No such Provision
New Provision for Advance Payment No such Provision
Contractor has right to ask employer’s No such Provision
financial arrangement
Provision to pay off‐site material No such Provision
Employer can terminate the contract No such Provision
by his convenience
Retention not deduct for Material on No such Provision
site
Defect Notification period can be No such provision
extend up to 2 years
No overhead adjustment provision Provision adjust the overhead in case of
significant changes in Contract Price
d. Difference between My Contract and FIDC
My Contract FIDIC 99
Dispute refers to Engineers decision, Dispute refers to DAB, Engineer only
then Negotiations or Mediation, then gives the determination
Arbitration
Contract price consider as Lump sum Re‐measurement
Ground condition and physical No such Provision
condition risk pass to contractor
4.7&4.12
Quantity risk pass to Contractor No such Provision
e. What is included in form of Contract?
Define rights and obligations of the parties
Give power to the Engineer to administrate the contract
Give rules and regulations to administrate the contract
f. Why Standard form of Contract Required?
Prepared by independent organization / fairly distribute the risk between parties
Tested in the market for possible flows
Internationally recognized / Familiar by all parties
Less disputes
Legal costs minimized
Ready to use
6. Roles and Responsibilities of Parties
a. RIBA Plane of Work 2013
A – Appraisal B‐ Design Brief C – Concept Design D – Design Development E – Technical Design F –
Production Information G – Tender Documentation H – Tender Action J – Mobilization
K – Construction to Practical Completion L – Post Practical Completion
Cost planning
Cost planning is the process of controlling a cost to predetermine budget during the design stage.
It is aiming to established realistic budget which we call a cost limit and fairly allocate cost limit to
the element of the building and doing sub‐sequence cost checks when design develops.
NRM forms?
1. NRM 1: Order of Cost Estimating and Cost Planning for Capital Building Works
2. NRM 2: Detailed Measurement for Building Works
3. NRM 3: Order of Cost Estimating and Cost Planning for Building Maintenance Works
Purpose of NRM?
Provide guide line to effective and accurate cost advises to employer and design team
Provide uniform basis for all related cost breakdowns in pre, post and maintenance works
Purpose of Cost planning
• ensure that employers are provided with value for money;
• make employers and designers aware of the cost consequences of their design or
proposals
• provide advice to designers that enables them to arrive at practical and balanced designs
within budget;
• keep expenditure within the cost limit approved by the employer
• Provide robust (strong) cost information upon which the employer can make informed
decisions.
Terms
Base cost estimate – means an estimate figure without any allowances for risk and uncertainty,
or inflation. The base cost estimate is the sum of the works cost estimate, the project/design
team fees estimate and the other development/project costs estimate.
Format Cost Plan / Order of cost Estimate
• Facilitating work estimate (enabling work)
• Building Cost estimate
• Main contractor’s preliminaries
• Main contractor’s overhead and profit
• Work cost Estimate
• Design fee estimate
• Other development/project cost (Insurance, marketing costs)
• Base Cost Estimate
• Risk allowance
• Cost limit (excluding Inflation)
• Inflation
• Cost limit (including Inflation)
Cost limit (or authorised budget or approved estimate) – means the maximum expenditure that
the employer is prepared to spend on the project.
Cost checks (cost check or cost checking) – is comparing current estimated costs against cost
targets previously set for elements or sub‐elements of the building.
Cost target – means the total expenditure allocated for an element.
Profit ‐ return on capital investment
Elemental break down for elemental cost plan according to NRM
1. Substructure
2. Superstructure
3. Internal Finishes
4. Fittings, Furniture and Equipment
5. Services
6. Prefabricated buildings
7. Work to existing buildings
8. External Works
b. General Knowledge
QS is cost manager for construction and economic consultant to project team. Finally QS is multi‐
disciplinary profession and required technical, economical and legal knowledge other than the
general competencies.
7. Assignment/Novation
a. Assignment
An assignment is a transfer the benefit or interest of contractual obligation (rights) to third party.
However, first two parties contract remains unchanged. Assignment differs from novation in so
much that the parties to the contract do not change.
Generally does not require the consent of the other party (However, Construction contract
usually requires) Ex: once contraction complete of building contract, contractor can assign third
party to receive remaining retention under the contract.
b. Novation
Novation is a mechanism whereby one party can transfer all its obligations under a contract and
all its benefits arising from that contract to a third party with the agreement of all three parties.
The third party effectively replaces the original party as a party to the contract. When a contract is
novated the other contracting party must be left in the same position as he was in prior to the
novation being made. Ex: Novating de‐watering contactor from pilling contractor to main building
contractor
c. Sub‐contracting
Sub‐contracting or sub‐letting is performing or full filling obligations by the third party to contract
on behalf of the original contracting party. However, original contracting party remain liable
under the contract. Ex: carry out the MEP works by MEP subcontractor
8. Letter of Intent
Definition: An expression in writing of a party’s present intention to enter into a contract in a
future date
Purpose: To obtain approvals/ arrangement of resources and suppliers/
Situation: where there are anticipated delays in finalizing contract
Letter of Comfort: is a letter expressing a party’s intention to act in a particular way at some point
in the future, or at the time of issuing the letter. Such a letter will not oblige the party making the
statement to actually act in a way and the author will be liable only if the expressed intention was
not actually held at the time the letter was issued.
MOU: is a formal agreement between two or more parties. MOU’s used to establish official
partnership between the parties but which is not legally binding. However, it carry a degree of
seriousness and mutual respect. ( use in frame work contracts)
9. Performance security – Bond, Parent Company Guarantee
Bonds and guarantees are securities provided in monitory terms by third party to insure the
performance of a contractual obligation of a party to contract. Third party most of the time be a
bank or financial institute.
Bond: conditional
Guarantee: on‐demand
PS: is security provided by the approved bank or financial institute to proper performance of the
Contract.
Purpose:‐ to protect the Employer form any losses due to contractor stop the businesses.
Clause 4.2
Start: ‐ Within 28 days from the Letter of Acceptance (otherwise bid bond has to be extended)
Amount: As per Appendix to Tender
Valid: Until end of the DNP (Employer need to return the PS, within 21 days after receiving a copy
of the performance certificate to him)
Employer can claim against Performance Security if (Four Situation)
1. Failure to extend (has to be extend before 28 days of the expiry date)
2. Failure to pay Employers claim (clause 2.5)(with 42 days after determination)
3. Failure to remedy defect (42 days after notice of the Engineer)
4. Termination under clause 15.2 (Termination by Employer)
Parent Company Guarantee
Security provided by the parent company in order to insure the performance of the contractor.
Normally takes from new companies in the market.
Not provide monitory compensation (So no charge)
If no parent no PCG
This provide a cover against the insolvency
In case of the failure to perform by the Contractor, parent company oblige to full fill all the
obligations of the contractor.
10.Insurance
If relevant party fail to get insurance other party can pay that and claim against the default
party pursuant to clause 18.1
Employer take third party insurance in case of Harbor/airport construction as the third party
losses significantly height
Normally CAR insurance covers works/third part & pant and equipment. But in Qatar only
works and third party / plant and equipment’s will take as a umbrella cover by Contractors
Umbrella cover – Employer take insurance for Works + third party (large developments),
Include later packages as a schedule, why contractor also take insurance in some instances?
(Deductible – Limit of insurance claim is not covered under the policy)
Cross liability (Clause 18.1) – refer to terms
Subrogation – right of the insurance company to sue whoever is responsible for causing loss
to the insured (insurance pay to insure and claim back from relevant party)
Administration of insurance claims
• Inform insurance company according to policy terms
• Take police reports + photos
• Prepare incident report with estimation for the damage
• Loss adjusters visit
• Submit claim with substantiations (quotations etc)
11.Advance Payment
Clause 14.2 ‐ Advance payment is an interest free loan to contractor to mobilization and to get rid
of initial negative cash flow (This will reduce the financial cost of the Contractor)
Requirement to pay Advance payment
1. Submit the performance security pursue to Clause 4.2
2. Submit a bank guarantee(equal to amount/it may progressively reduce/valid until AD
recovered, has to extend 28 days prior to expire, then if not fully recovered)
However, some contract request, Programmed to be submitted
Re‐payment
Start when certified amount exceed 10% of Accepted Contract Amount.
Then deduct 25% of the certified payment until fully recovered
(FIDIC considered as maximum AD as 22% of ACA for above calculation)
Immediate Re‐payment when?
1. Issue a taking over certificate for Works
2. Termination under Clause 15, 16 or 19
12.Interim Valuations and Payment Provisions
Application for Interim payment certificate – Clause 14.3
The Contractor has to submit 6 copies at the end of each month to Engineer detailed the amount
which he considered to be entitled
Content
1. Estimated contract Value of Work executed
2. Variations executed (Clause 13 Variations)
3. Adjustment due to price fluctuations (Clause 13.8) / changes in legislations (Clause 13.7)
4. Deduction of Retention (consider only above 1,2 and 3) (Clause 14.9)
5. Advance payment deduction (Clause 14.2) (consider 1,2,3,4,5 excluding AD and deductions
like retention)
6. Material on and off site (Clause 14.5)
7. Claims (Clause 20.1)
8. Deduction of previous payments
Certifying the Interim Payment – Clause 14.6
The Engineer has to certify the amount which he fairly determine to be due to contractor (with
supporting particulars) within 28 days after receiving statement and supporting documents
No payment will be certified until performance security has been approved by the
Employer
Engineer shall not bound to issue a payment certificate, if the amount not reach to
minimum amount until TOC issued (after retention and other deductions)
Engineer can withheld the amount for defective works and works not according the
contract
Engineer can modify any payment which previously certified
If Engineer not issue the payment certificate within 28 days
Contractor can suspend or reduce speed of progress by 21 days’ notice (minimum 49 days
28+21)
Can terminate the contract by 14 days’ notice, if engineer fail issue IPC after 56 days of
contractor’s submission (minimum 70 days (56+14))
Pursuant Clause 14 [Payment] Employer shall pay to contractor above certified amount within 56
days of contractor’s submission of statement and supporting document.
13.Material On/Off Site
Clause 14.5
Pay for plant and material purchases. Those material should be required for permanent
Works and not yet used, amount according appendix include with the interim payments
Reduce those once it become a permanent work
If no material list in appendix to tender no payment for MOS
Material on site payment requirement
1. Has to be listed material
2. Delivery sheet
3. Invoices
4. Material inspection sheet
5. Visual inspection to check stored safely
Material off site payment requirement
1. Has to be listed material
2. Bill of lading (for shipped material) / vesting certificate (for material stored in
manufacture’s yard)
3. Payment Invoices
4. Material bond
5. Insurance for the material
6. Material approval sheets
Then pay according to percentage given in appendix to tender while checking total material
requirement for the project & BOQ value for the particular material
14.Price Fluctuations
Generally this is not applicable in Qatar
Calculation has to be done according to the table adjustment data
Formula
• Pn = a + b Ln + c En + d Mn
Lo Eo Mo
• Pn = Amount of fluctuation
• a,b,c,d = Fixed coefficients
• n = Current market cost indices (49 days prior to last day of the period)
• o = Base date cost indices
15.Retention and Retention bond
Retention is amount of money keep hold with the employer from each payment a certain
percentage as per the contract (As per Appendix to tender/ maximum limit also there).
Purpose:
To encourage/motivate the contractor to repair defects (then employer have remedial
action to rectify those with retained amount in case of failure to repair by the Contractor)
Encourage contractor to timely complete (then he can take the retention released)
Pursuant to Clause 14.3 [application for IPC] retention will apply
Retention deduct for:‐
1. Estimated contract Value of Work executed
2. Variations executed (Clause 13 Variations)
3. Adjustment due to price fluctuations (Clause 13.8) / changes in legislations (Clause 13.7)
Retention not deduct for:‐
1. Material on and off site (Clause 14.5)
2. Claims (Clause 20.1)
How retention released? Pursuant to Clause 14.9 [payment of retention money]
First half‐ upon TOC for whole of the Work / 40 % of estimate contract value of section or the part
proportion to the estimated final contract price.
Sectional completion – define in the contract
Partial completion – not define in the contract, take over part of the completed work
Second half – upon expiration of DNP / expiration of the DNP of the section (this is also 40% as
above) or latest expiration of the part, less cost of any work remaining pursuant Clause 11
Retention bond – bond submitted by the Contractor in order to allow early release of retention if
the Contract allows (either monthly or upon issue of TOC)
16.Change Control Procedure
Changes within construction projects are unavoidable. Therefore, those should be kept to a
minimum and managed.
Change control procedure is the pre setout procedure to control and manage the changes in a
project. This process facilitate to employer to get the informed decision on project changes.
The following should be considered to develop CCP:
contract terms with the client and who is having the decision making power
type/ size and complexity of project;
procurement method of the project;
condition of contract
Availability of resources for the design and implementation of the process.
Sources of change in a project
engineer's instructions;
specification changes;
request for instructions (site);
client introduce additional works
legislative changes; and
Risk involvement
Change Control Procedure
Anyone can initial a change/ say employer initiated
Then CCF has to filled and send to Engineer
Engineer review time and cost impact of the change
Time being Engineer can request the Contractor also to submit a proposal pursuant to
clause 13.3
Then Engineer submit the time and cost impact of the change to Employer
If Employer decided to go further inform to Engineer
Engineer issue a instruction to execute the change pursuant to Clause 3.3
If Employer not agree with the time and cost impact, Engineer to search the alternative
options or go for VE
Once Employer approves the change Engineer can issue VO to Contractor
Payment for the change based on the procedure set out in Contract in Clause 13.3
[Variation Procedure]
17.Variations and valuation of Variation
Variation is any change to the original scope of Work
Works can be change according Clause 13.1
1. Changes to quantity
2. Changes to quality
3. Changes to level and position
4. Changes to timing and sequence
5. Additional works
6. Omissions
3 situations were Variation can be arise
1. Engineer Instruction pursuant to Clause 3.3
2. Engineer request Contractor’s proposal (Clause 13.1)
3. Contractor submit proposal under VE (Clause 13.2)
However, according to Clause 3.3 Engineer cannot instructed the changes which may not be
necessary to complete the Works.
Valuation of Variation
Quantities has to be agreed pursuant Clause 12.1 [work to be measured]
Engineer has to prepare quantity sheets and contractor has to agree for it
Rates has to be agreed pursuant Clause 12.3 [Evaluation]
1. If appropriate rate specified in contract, that has to be used ‐‐‐‐ if not
2. Derived from the similar item in the contract with the reasonable adjustments ‐‐‐ if not
3. Derived a new reasonable rate with reasonable profit
a. With First Principles
b. From Quotations
4. If change is minor or incidental in nature can be valued under Day Works
a. Engineer instruction is mandatory to claim under this
i. Normally day works rates are high? Why?
Until rate or price agreed on‐ account reasonable price has to paid with Interim payments
18.Value Management and Value Engineering
Value Management is process under take to acquire the necessary and required function in
lowest cost without compromising the performance of it. In another term, achieve value for
money.
Starts ‐ Appraisal stage and continuous up to end of the life of the project.
Value Engineering is systematic approach eliminate the unnecessary cost of element or functional
unit or service by considering functional requirement and life cycle costing.
Start ‐ Design development stage
VE is part of the VM
VE Job plane
1. Information
2. Functional Analysis
3. Idea generation ( Brainstorming section)
Work Shop
4. Idea evaluation (team meeting discussion)
5. Proposal development
6. Implementation
19.Statement at Completion
Clause 14.10 [Statement at Completion]
Has to apply within 84 days after receiving a TOC for whole of the works
Includes:
a. Value of Work Done
b. Any further sum which contractor considered to be due (claims)
c. Estimated amount of work which contractor consider will become due during DNP
period (completion of outstanding works which undertake to carry out during DNP)
Payment will be done within 56 days of the contractor’s submission as per IPC
20.Final Payment
Clause 14.11 [Application for final payment certificate]
Has to apply within 56 days after receiving a performance certificate shall submit the draft
application
d. Value of Work Done
e. Any further sum which contractor considered to be due (claims and potential claims)
Further verification has to be provided as requested by the Engineer
If everything agreed contractor has to submit the Final Statement
Includes of Final Statement
Project details
Copy of the BOQ with agreed amounts as per draft submission (Clause 14.13 [issue of Final
Payment certificate]
o Value of Work Done
o Agreed Variations
o Agreed Claims
o Provisional sum adjustment
Copy of taking over certificate
Copy of performance certificate
Copy of written discharge
If Contractor can’t agree with the Engineer for “Final Statement”, Engineer need to issue a
a. Interim payment certificate for Agreed portion
b. Refer to DAB for non‐ agreed portion
Once dispute solve contractor to apply the Final Statement
Payment will be done within 56 days after Employer receives the final payment certificate.
After Contractor receives his all due in accordance with the written discharge and Final Statement
and if no any further obligation under 11.10 [unfulfilled Obligations] the Contract comes to end by
fulfilling parties obligations.
21.Extension of Time
Extension of time means extend the completion date of project according to terms and condition
of the Contract
Why EOT – Avoid time at large situation / contractor avoid paying LD in a excusable delay
Ground for EOT – Clause 8.4[Extension of Time for Completion]
1. Variations or other substantial changes to the Works
2. Cause of delays giving entitlement under other clause
a. 1.9 [Delay Drawings or Instruction] – cost + profit
b. 2.1 [Right of Access to the site] – cost + profit
c. 8.5 [Delay causes by Authority] – No cost
d. 8.8 [Suspension by the Engineer] – Cost only
3. Exceptional adverse climatic conditions – No cost
4. Unforeseeable shortage of personals or good due governmental or epidemic action –
No cost
5. Any delay impediment or prevention by the Employer
Engineer shall fairly determine entitlement (Contractor is duty bound to mitigate)
Delays – Contractor (Culpable), Employer (Excusable), Neutral (Excusable)
Excusable delay – Delay happen due to force which beyond the control of the contractor, Ex:
Force majeure / unexpected weather/ Employer design delay
Culpable delay – Delay event could have force and prevented, but fail to do so. Ex:
Concurrent delay – Out of above three types, two or more delays happen at the same time or
effect felt at the same time – not addressed in FIDIC.
True concurrency – delay happens at the same time
Sequential concurrency – delay happens sequentially but the effect felt at the same time
Critical path – longest path in a programme (sequences construction activities which contractor
intended to carry out the works)
Mitigation vs acceleration – mitigation contractual duty, not paid for whereas acceleration is done
upon instruction from Emp/Eng except in the case of constructive acceleration
Floats are spare time of a programme
Free Float – amount of time one activity can be delayed without delaying the subsequence
activity, who owns the float? Project, first come first serve (External pipeline – Contractor delay
procurement, Emp delay drawings)
Total Float‐ mount of time one activity can be delayed without affecting to CA of the project.
Project/terminal Float – if CP ends before contractual completion
Milestone – a section in a project that has to be completed on a particular date
Causal link – but for the event giving rise to the claim, the contractor wouldn’t have suffered the
loss (loss should be naturally and directly arising from the beach)
Type of programmes;
• Programme submitted pursuant to Clause 8.3
• Revised programme submitted pursuant to Clause 8.3 (recovery programmes – 8.6)
• As‐built programme
Delay analysis methods – As planed impacted, As planed Vs As built, Collapse as built, Window
analysis
22.Suspension
Suspension is temporarily stop the progress of work in all or a part of the project
Suspend by the Engineer
Grounds for suspension
due to contractor’s default – like using unapproved sub‐contractor
due to climatic condition
on safety reasons
Clause 8.8 [Suspension of work]
Engineer can suspend the works part or all of the Work any time and may give the reason.
Then Contractor shall protect the works and if contractor is responsible for the suspension other
clauses will not apply (not get any cost or time incurred due to suspension)
Clause 8.9 [Consequence of Suspension]
Contractor can claim the suspension cost (without profit) and time by giving the notice according
to Clause 20.1
Contractor is not entitle for loss due to his faulty works and not properly protecting the works
Clause 8.10 [Payment for plant and materials in event of suspension]
Contractor entitled to get paid for plant and material or delivery of those for the suspended works
Clause 8.11 [Prolonged suspension]
If suspension prolong more than 84 days
For part of the work
after (total (84+28)112days) not less than 28 days’ notice can be omit the particular scope
as Variation under clause 13.1
For whole of the work
after (84 days) with immediate effect of the notice, Contractor can terminate the contract
under clause 16.2 [Termination by Contractor]
Clause 8.12 [Resumption of Work]
After Engineers instruction, can start the work after joint inspection
If any damage to works, contractor has to rectify.
Suspend by the Contractor
Grounds for suspension
After giving the not less than 21 days’ notice to the Employer
Contractor can claim Time + Cost & Profit
fail to comply with 2.4 [Employers Financial Arrangement]
o Submit the financial arrangement to Contractor within 28 days from the request
fail to comply with 14.7 [Payment]
o pay the interim payment by 56 days from the contractor’s submission of statement
and the supporting documents
o pay the advance payment in accordance with the contract
23.Termination
Terminate the contract means bringing the contract to an end pre‐mutually. Then parties
discharged from the remaining unformed contractual obligations and may bring it to action of the
damages. But contract itself is not cancel.
Once terminate the contract, parties are discharged from any further obligations.
Rescission (rescind) of a contract means cancellation of agreed rights and obligations of the
parties under contract. The parties are restoring to the position where no contract had ever been
formed.
Determination of Contract ‐ contract comes to an end prematurely before it has been discharged
by performance. Similar to Temination
The older JCT forms refer to “determination” rather than “termination”, but there is no
significance in the different terminology.
How a contract can comes to an end by cancellation?
• by mutual agreement (revocation)
• by Court Order
• due to force mature event – parties discharged from liabilities that is call
Frustration as well
Force Majeure" means an exceptional event or circumstance,
which is beyond a Party's control,
which such Party could not reasonably have provided against before entering into the
Contract,
which, having arisen, such Party could not reasonably have avoided or overcome, and
which is not substantially attributable to the other Party
Ex: war, hostilities, rebellion, terrorism, riot, commotion, natural catastrophes such as
earthquake, hurricane,
In the event of Force Majeure,
1. The notice shall be given within 14 days after the Party became aware, or should have
become aware
2. Each Party shall at all times use all reasonable endeavours to minimise any delay
3. Such an event occur contractor entitle for
a. an extension of time
b. payment of any Cost
4. if the Force Majeure event prevented the progress
a. continuously 84 days from the notice, or
b. multiple period of 140 days
either party can terminate the contract with 7 days’ notice
5. Then Value of the works has to be done similar to termination for Employer’s convenience
as follows
a. the amounts payable for any work carried out
b. the Cost of Plant and Materials ordered
c. any other Cost or liability which reasonably incurred like temporary works
d. the Cost of removal of Temporary Works and Contractor's Equipment
e. the Cost of the Contractor's staff and labour employed returning to home country
Frustration – Situation where parties of the Contract unable to full fill their obligation due to
reason which beyond the control of both parties.
Ex: Govt acquire land, New regulation, Tunnel instead of bridge
Termination by Employer (Clause 15.2)
Grounds for termination
1. Failure to comply with the 15.1 Notice to correct which is issue to comply with the any
obligation under the contract
2. Failure to provide and maintain the performance security according to the contract
3. Abandons the works
4. Failure to comply with Clause 8 , commencement, delay and suspension or to comply with
notice of remedying defects under clause 7.5 [rejection] or 7.6 [remedial works]
5. Subcontract whole of the work
6. Contractor became bankrupt or insolvent
7. Gives or try to give bribery to any person to get favor in relation to a contract
Bankrupt or bribery circumstances, contract may terminate immediately after the notice,
otherwise, upon giving 14 days’ notice
Payment after termination
Once notice of termination has taken effect
Engineer to agree or determine the value of the Work, goods and material and any other
sums like claim
Encash the performance security
Employer to follow the 2.5 clause Employer’s claim procedure
Withhold any further payment to Contractor until completely finish the project (end of
DNP of new contract)
After completing the project, after recover all losses, if anything balance from the
Engineers estimated value at the termination, will be given to Contractor
Termination by Contractor (Clause 16.2)
Grounds for termination
1. Contractor does not receive the reasonable evidence within 42 days request for financial
arrangement under Clause 2.4 [Employers Financial arrangement]
2. Engineer fails to issue a payment certificate within 56 days from the contractor’s
submission
3. Engineer issue the certificate but payment not received to contractor within 42 days’ of the
expiration of 56 days from the submission (Total 98 days)
4. Employer’s failure to sign the contract agreement
5. Prolong suspension more than 84 days whole of the works (after 28 days’ notice)
6. Employer become bankrupt or insolvent
Bankrupt or prolong suspensions circumstances, contract may terminate immediately after the
notice, otherwise, upon giving 14 days’ notice
Under Qatari law
Article 701: A contract is the law of contracting parties (therefore, can terminate according to the
agreed terms and conditions)
Article 703: Contract terminate once it expired the period
Article 704: both parties can’t perform a obligation due to reason which beyond the control of
both parties
Article 183: in contracts that are bilaterally binding, if one of the contracting parties fails to fulfill
its obligation, the other party may, after giving him notice seek rescission of the Contract
Article 184: in case of failure to fulfill the obligations by the parties, contract is automatically
revoked without the need for any adjudication or court order.
Such conditions or agreement shall not result in restricting the judge’s authority in respect of
rescission unless the contract statement indicates explicitly that it was the intention of the
contracting parties.
24.Claims, Loss and Expenses
Claim is the official request of one party’s compensation due to none performance of the
obligations of the other party.
Type of Claims
1. Contractual claims – arising out of expressed provisions of the Contract
2. Extra‐Contractual claims– arising out of breach of implied terms of the Contract or
governing law
3. Ex gratia claims – expecting base on sympathy or out of kindness or to maintain the
relationships
Claim procedure pursuant Clause 20.1[Contractor’s Claim]
Mandatory to give notice as soon as practicable not later than 28 days after the contractor
become aware or should have become aware of the event (if not Employer discharge from
all liabilities)
Contractor to maintain contemporary records
Engineer to monitor the contemporary records and instruct keep further records if
required
Ex: idle time of resources, abortive works / protective measures, demobilization and
remobilizations records, photos, minutes of meetings, site diaries, resource utilization
patterns, correspondence, news & articles
Contractor to submit the full detail claim with full supporting particulars within 42 days
after become aware of the event (or any other period purpose by the Contractor and
approve by the Engineer)
If the event has continuing effect‐ full detail claim considered as Interim claims has to be
submitted in monthly intervals ‐ Then final particular to submit within 28 days after end of
the effect of the event
Engineer’s evaluation
Evaluate and respond to the claim within 42 days of the Contractor’s submission ((or any
other period purpose by the Engineer the Contractor and approve by)
Need to determine (Clause 3.5) the amount/EOT according to the substantiation
Evaluated amount has to be included to the interim payment
Employer’s Claim procedure pursuant Clause 2.5[Employer’s Claims]
Employer or the Engineer need to give notice to the Contractor as soon as practicable after
Employer become aware of the event ( Notice is not mandatory and no specific time
frame)
Employer should substantiate the basic and amount of the claim, then Engineer to
determine the entitlement pursuant to clause 3.5
Structure of a claim
Executive summery or brief description of the project
Statement of Claim / cause and effect of the claim (Contemporary records, witness
statement, other evidence (news))
Entitlement (Contractual and legal provisions / under what provision contractor entitle to
receive cost or time)
Mitigation action (what step taken mitigate the loss to employer)
Quantification (Amount of EOT and/or additional payment)
Headings of a loss and expense claim
(formula – Hudson, Emden, Eichleay etc)
25.Dispute Avoidance and Resolution
Dispute is disagreement between parties
Conflict is if dispute last for long period it become a conflict
Dispute avoidance
Choose competent staff for design process
Minimize the communication gap between design team to achieve comprehensive design
Choose correct procurement path
Provide enough time to prepare contract documents with competent staff
Use standard forms as much as possible
Allow sufficient time to price the tender
Provide timely and proper answers to tender queries and distribute to all
In post contract stage execute proper contract administration process by
o Provide timely answers to contractors quires
o Take required decision on time and properly communicate to concern party
o Parties act openly and transparently
Dispute resolution under the contract ‐ as per FIDIC 1999;
Appoint a DAB as per clause 20.2 (within 28 days from the commencement) –parties
appoint member from each party, they will select a another member who will act as
chairman of the DAB
If any party not agrees for Engineers determination, certification, instruction, opinion or
valuation, particular mater has to refer to a DAB asking decision of the DAB with a copy to
other party.
Within 84 day DAB has to give decision with the reasons (84 days or other period proposed
by DAB and agrees by parties)
If any party dissatisfied to the decision, has to give a notices other party within 28 days
from the decision (if not dissatisfaction, decision shall become final and blinding)
After the dissatisfaction notice, parties shall attempt the settle the dispute amicably until
start the Arbitration. Parties will receive a 56 days period form the dissatisfaction for
amicable settlement.
If not amicably settle, parties need to refer the dispute to Arbitration
o Arbitration procedure
o
ADR methods: various techniques for resolving dispute using a neutral third party alternative to
the litigation system.
Advantages of arbitration vs litigation;
• Arbitrators are experts on this field
• Confidentiality (private hearing)
• Speed – Normally 6 months, but 3 months under Qatar law
• Parties have flexibility to select Arbitrators/Rules/ Law/ Language
• International enforceability under New York convention – 1959 (UAE joined in 2006)
Disadvantages of arbitration vs litigation;
• Cost
• Power of arbitrators (Calling witnesses / disclosure of documents)
Challenge Arbitration Award – Procedural errors / Equal opportunity / Bias (Conflict of Int)
26. Provisional sums and Prime cost sums
A provisional sum is estimated sum indicated in a BOQ / included in a contract to carry out
specific works which does not have enough details to price at time of tendering.
Purpose of having Provisional sums:‐
Contractor to allow time for that specific work in his programme and include preliminaries
relate provisional sum in his tender
Client to indicate provisional budget within the tender prices.
Provisional sums can be 'defined' or 'undefined':
Defined provisional sums are items of work which has known
nature of the works
location where going to fix in the building
Quantity
Any specific limitations
and but no further details available to price (according to SMM and NRM)
Undefined provisional sums are does have above details and accounted for in the contractor's
preliminaries and his programme under the contract. This means that the client is taking the risk
for the works and the contractor may be entitled to an extension of time and additional
payments.
FIDIC define Provisional sums as
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].
According it includes
Define provisional sums
Any works to be carried out by the nominated sub‐contractors
Any material to be supplied by the nominated supplier
Employer has right to execute full or part or not at all the provisional sums. Contractor need
Engineers Instruction to carry out works related to provisional sums.
If execute, according to FIDC 99 work will price
Any works carried out by the Contractor ‐ the procedure set out in Clause 13.3 Variation
procedure
Any works to be carried out by the nominated sub‐contractors or nominated supplier –
Actual amount paid (invoice value) + overhead and profit (applying % quoted under PS or
Appendix to tender)
Provisional sums place either the contractor or the client at risk of unexpected costs or delays.
Agreeing the cost of such work or extensions of time that might be claimed can result in tension
between the contractor and client.
According to the JCT from of contract, NRM and CSMM 3, it’s define A prime cost sum as
estimated sum indicated in a BOQ / included in a contract to carry any works through a nominate
subcontractor or any material to be supplied by the nominated supplier.
In prime cost sums, contractor is permitted quote overhead & profit plus attendance
related prime cost. Then payment will base on the Actual amount paid (invoice value) +
overhead & profit and attendance (applying relevant % quoted under the contract)
Historically nominated subcontractors or suppliers were selected prior to the appointment of a
main contractor for one of three reasons:
For long delivery items where design and manufacturing times could not wait for the appointment
of a main contractor. For example, lifts, switchgear or refrigeration plant.
Where specialist design input was required in the early stages of design development. For
example, for a cladding system.
Where the client directly orders a preferred piece of equipment on which design is to be based.
For example, an MRI scanner, laboratory fume cupboards or bottling plant.
However NRM define a another term call “prime cost” as any amount included in a contract and
indicated in BOQ as prime cost rates to cover material cost that have not been fully detailed.
Ex: supply installation of tile.
Risk to Employer having more provisional sums?
Employer would not get the price certainty of the project
If Employer will not use all provisional sums, it may pay additional preliminary cost
Employer has additional risk and liability to timely appoint sub‐contractors (prime cost)
Risk to Contractor having more provisional sums?
If Employer don’t use all provisional sums, contractor may loss his profit
The Contractor has risk of working with unknown sub‐contractors (prime cost)
27. Named / Nominated subcontractors
Domestic – Appointed by MC as per his own requirements subject to approval of Engineer
Named – Appointed by MC from the list provided by the Employer
Nominated – Appointed by the Employer but contract with MC
Employer obligations towards Nominated SC;
Selection and appointment of a suitable SC on time
If MC arise reasonable objection on Nominated SC appoint a another sub‐contractor
o Main contractor object where sub‐contractor does not have sufficient competence,
resources or financial strength– pursuant to Clause 5.2 [Objection to nomination]
Making direct payments to NSC in case of MC’s failure – Clause 5.4 [Evidence of payments]
28. Sectional completion / Partial possession (Clause 10)
Sectional completion – completion of any Section for which separate Time for Completion is
provided in the Contract
Partial possession – occupation or use of any substantially completed part of the Permanent
Works by the Employer
In both cases, the Contractor may request and Engineer to issue TOC as per Clause 10.1 & 10.2.
Requirements for issuing TOC;
Permanent Works should be substantially (minor works can be remain) completed
Satisfactorily passed any Tests on Completion according Clause 9.1 [Contractor’s
Obligation]
If any outstanding works,
Written undertaking from the Contractor to finish any outstanding work during DNP
Substantial completion means – The Employer can use of the project for its intended purpose –
Contractor still liable to complete the project in its entirety but entitled to receive TOC
Employer can take over any part of completed permanent works his sole discretion according to
Clause 10.2 [Taking over of Parts of the Works], if any outstanding works on that part, Contractor
need to complete before expiry of DNP.
29. Consequences of TOC for whole of the work
1. DNP commences
2. Contractor’s obligation for Works insurance ceases except for outstanding works
3. First half of the retention release
4. Remaining advance payment has to be fully recovered (if any)
5. Contractor is no longer liable for LD
6. Statement at Completion – within 84 days of issuing TOC – Clause 14.10
30. Determination [Clause 3.5]
The Engineer shall consult with each Party to reach agreement. If agreement is not achieved, the
Engineer shall make a fair determination in accordance with the Contract.
Each party shall bound to it until revised under dispute resolution procedure Clause 20.
Examples of Engineer determinations
Clause 2.5 [Employer’s Claim] – Employer’s entitlement
Clause 20.1 [Contractor’s Claim] – Contractor’s entitlement
31. Delay Damages
Liquidated (represented by a monetary value), Ascertained (amount stated prior to
commencement of contract)
Delay damage is reasonable pre‐estimate of the Employer’s potential loss due to late completion
of the project.
Penalty vs LAD?
Penalty – any amount included to contract impose on the delay completion of the project with
the intension of penalize the contractor.
Normally it is mansion in the Appendix to tender as a per day cost and maximum limit as well
If it is ‘Nil” = No damages and client will not have right to ask again
If it is Blank = liquidated damages / then Employer can recover the loss after prove the loss in
court
32.Defect Notification Period (Clause 11)
Defects can be patent (evident now) or latent (appear after sometime)
DNP is pre‐defined period in the contract after taking over the project, the Contractor is liable for
rectify any latent defect during that period.
Why is it normally 12 months – to cover all climatic seasons to test and reconfirm (Ex: leaks not
found until rain)
There is special provision in FIDIC 1999, Clause 11.3 [Extension of Defect Notification Period]
accordingly work section or major plant cannot be used for the purposes for which they are
intended by reason of a defect or damage. However, a Defects Notification Period shall not be
extended by more than two years.
Consequences of DLP;
1. Engineer to issue Performance Certificate (Constitute the acceptance of the Work), within
28 days upon expiry of DNP – Clause 11.9
2. Second half of retention become due – Clause 14.9
3. Contractor to submit FS within 56 days of issuing Performance Certificate – Clause 14.11
4. End of third party insurance
5. Performance security release within 21 days of issuing Performance Certificate – Clause 4.2
Liabilities of Contractor after DLC
1. Extended warranties, if any
2. Unfulfilled obligations pursuant to Clause 11.10, if any
3. Decennial liability pursuant to Qatar law
33.How to Make FIDIC 99 as Lump Sum Contract
Delete Clause 12[Measurement and Evaluation].
Delete the last sentence of Sub‐Clause 13.3 [Variation Proedure] and substitute:
Upon instructing or approving a Variation, the Engineer shall proceed in accordance with Sub‐
Clause 3.5 to agree or determine adjustments to the Contract Price and to the schedule of
payments under Sub‐Clause 14.4 [Schedule of Payment]. These adjustments shall include
reasonable profit, and shall take account of the Contractor's submissions under Sub‐Clause 13.2
[Value Enginering] if applicable.
Delete sub‐paragraph (a) of Sub‐Clause 14.1 [The Contract Prices]and substitute:
(a) the Contract Price shall be the lump sum Accepted Contract Amount and be subject to
adjustments in accordance with the Contract;
34.Other Terms
Time is of the essence – time limits must be strictly adhered to – Ex: football stadium need
to complete before the world cup schedule date.
Without prejudice – cannot be used as evidence in future dealings or in the courts / no
admission
Time bar ‐ setting a strict deadline in a contract to full fill for the entitlement. Ex: if notice
no provided for claim within 28 day.
Quasi‐contract – Contractor commenced works at site before agreeing the essential terms
of the Contract – obligation to pay if negotiation fails
Quantum merit – reasonable value of services, Ex: LOI issue no price agreed, extra works
done no mechanism to value in the contract, contract is void (as much as one deserve /
payment of reasonable sum for the work done base on market rate)
Unjust enrichment – getting a benefit unfairly or no person should be allowed to get profit
at another’s expense without having reasonable right for it.
Contra proferentum rule – in case of an ambiguity in a document, it is construed against
the person who drafted the document
Discrepancy – Lack of compatibility or similarity between two more document is a
Contract.
Ambiguity ‐ has no clear meaning
Prevention principle – party cannot enforce the contract right against the other party
where preventing the other party act under the contract. (Ex: no provision for EOT, Emp
delay, Contractor liable for LD – this is against good faith)
Repudiatory breach – innocent party is entitled to terminate the contract in addition to
recovering damages (normally you can claim damages for breach of contract and not
entitled to terminate) Ex: persistent failure by the Emp to pay the Contractor
Time at large – happens when there is no completion date in the contract or no provision
to extend time for completion when Emp delays the project and time runs beyond
Privity of contracts – no rights conferred or obligations imposed on third parties
Collateral Warranty – (Guarantees and warrantees are given to the Contractor by supplier)
is an agreement which make a contractual link between subcontractor/supplier/ service
provide with the end user of project who is third party to contract.
Collateral warranty required in order to overcome rule of privity of contracts
Set‐off – is compensate any amount paid to any amount due ‐ three types
Contractual (contract expressly allowed – Insurance taken by Employer, OT payment
to Engineer, Payments to NSC)
Equitable (closely connected – Under same contract but not expressly allowed –
Emp procure materials on Contractor’s behalf)
Legal (not required to be closely connected – may be different projects but the
amounts should be liquidated / know / can be readily ascertained Ex: payment
against a PC vs LD against a separate contract) need court order
Negligence – failure to exercise reasonable skill, care and diligence
In UK – 6 years by Limitation Act (RICS requirement for run off cover)
Lean Construction – is develop a construction process by eliminating unnecessary steps
while improving necessary steps in order to increases the productivity. Lean construction
process consider to minimize waste, time and effort from the construction process to
achieve value for money.
Joint & several liable (Cross liability) – Defendants are liable for full damages regardless of
their individual share of the liability as claimant may pursue its claims against anyone party
Cross liability ‐ when insurance under both contractor and employer, damages to both
parties are covered as if they are separately insured (both parties can seek compensation
for their individual losses)
Decennial liability – Designer and the contractor are jointly liable for collapse, near collapse
or threat to life due to defect of the building for 10 years from the date of delivery (Article
701 – Decennial liability of Civil Code)
LC – guarantee of an automatic payment by the purchaser in advance of receipt of goods
(Applicant, Beneficiary, BOL – Bill of Lading, FOB – Free on Board, CIF – Cost Insurance
Freight)
Escrow Account – is type of account which provide by the bank and specialty is deposited
money in the account disburse by the bank according to the terms and conditions agreed
with the bank by the account holders.
Insolvency – Inability to pay debts when they become due
Bankruptcy – a status declared of insolvency by the Court
What you should do if the Contractor becomes insolvent;
• Inform Emp to temporarily stop any further payments
• Advise Emp to ensure bonds and insurances are in place and in safe custody
• Advise Emp to put site security to ensure nothing is taken away from site
• Take steps to maintain essential services and ensure protection of works completed
• Issue Default Certificate enabling Emp to Terminate the employment of the Contractor
• Take photographic evidence, as built drawings
• Take joint measurement of works done, if possible and asses the value of work done
• Liaise with liquidator as and when necessary
BIM – is the process developed using computer generated 3D modal to simulate the
planning, designing, construction and operation of a project.
35.Consequences of LOA;
1. PB, if required, within 28 days Clause 4.2
2. Provide the advance payment Clause 14.2
3. Submit the Programme pursuant to Clause 8.3 within 28 day from the
commencement notice
4. Breakdown of lump sum items pursuant to Clause 14.1 within 28 days from
commencement
5. Appoint the DAB pursuant to Clause 20.2 within 28 days from commencement
6. Submission of insurance according to Appendix to tender