(The
Red Book)
Introduction
Every 8 in 10 Candidates invited for Civil Professional
interviews in Kenya are asked a question related to claims and extension of
time according to FIDIC Conditions of Contract during interview succession. The
Majority experience a challenge to discuss the topic profoundly, and some end
up being referred to go practice/train on FIDIC Contract conditions.
Extension
of Time (EoT)
If delays have been incurred that are likely to cause
delayed completion of the project, it will become a priority issue for the
Contractor to seek an extension of time for completion. This is necessary to
reduce or eliminate the liability to pay liquidated damages, which can be very
expensive. Under FIDIC contract conditions, an extension of time is justified
if, for example, delays have been incurred to the Contractor’s operation due to
late availability of the site, late issue of drawings and instructions,
suspension of work, unusually inclement weather and force majeure.
Two fundamental conditions must be met for a time
extension to be awarded. First, the delay must not be due to any fault of the
Contractor. Second, the delay must be such that it will directly influence the
overall completion of the project; that is, it must fall on the critical path. A
request for extension of time must be made by the Contractor as soon as
possible after the delay has been incurred. The supervision organization is
also under an obligation to act fast since the Contractor will not be able to
plan his operation correctly until it is known whether or not an extension of
time will be granted. When evaluating a request for time extension, the Resident
Engineer is, as usual, under an obligation to be fair and reasonable. Allowing
additional time may result in increased project costs, as well as possible
consequential cost claims from the Contractor. On the other hand, rejection of
justified requests may end up costing more if taken to adjudication. Extension
of time should always be dealt with by the Engineer, as knowledge of contract
law is essential in handling these matters correctly.
Almost every road construction contract is faced with
claims for an extra payment. Sometimes the aggregate value of the claims equals
or even exceeds the original contract sum. Some contractors deliberately tender
low prices to secure the contract, and then start to prepare cost claims
immediately work starts, with the help of claims specialists, frequently
lawyers. It is imperative, therefore, that the Resident Engineer and his staff
are conscious of claims from the outset of the project and make every effort to
prevent or at least minimize extra costs.
Some employers regard any request for extra payment as an
‘insult’ and expect the supervision organization to reject all claims out of
hand. This is improper since many claims are genuine and deal with matters that
are risks borne appropriately by the Employer under the FIDIC conditions. The
vast majority of cost claims fall into one of the following three categories;
The Contractor has encountered conditions or obstructions that could not have
reasonably been foreseen at the time of tender, Extra or changed works have
been paid at too low unit rates fixed by the supervision organization. There
have been delays and disruptions to work operations for reasons beyond the
control of the Contractor.
Unforeseeable conditions and obstructions often refer to
matters that are hidden in the ground, such as problematic subsoil, poor
quality borrow-sources, water pipes, and the like. The basic rule is that the
Contractor is only entitled to recompense for any difficulties encountered if
it can be established that even an experienced Contractor could not reasonably
have foreseen what happened. It should be noted that the FIDIC conditions
require tenderers to make all such investigations as are necessary to prepare a
realistic tender, including a survey of subsoil conditions. If the Contractor
has failed to do this adequately, then there will be no recompense.
Additional or changed work is paid at the unit rates in
the bill of quantities if these are considered applicable by the supervision
organization. If existing unit rates are not applicable, or when no unit rates
exist in the bill, the FIDIC conditions require that adjusted or new unit rates
be agreed with the Contractor. If it is not possible to reach an agreement on
what is fair and reasonable, the supervision organization has the right to fix
the rates unilaterally. In doing so, however, great caution should be
exercised, as disagreements about fixed rates is one of the most common causes
of dispute in international construction contracts. There are numerous examples
where adjudications have resulted in very big awards to the Contractor, and
this has sometimes come as a surprise to the Employer and the Engineer.
Therefore, variations should not be ordered without serious consideration of
the possible implications.
Claims for delays and disruptions to the Contractor’s
operation are, in principle, admissible in the following cases; the site has
not been made available on time, Drawings have been issued too late, The
progress of the works has been formally suspended by the supervision
organization, There have been errors and discrepancies in the contract
documents, The survey information provided to the Contractor has been in error,
and The Contractor has been ordered to make excavations from uncovering and
testing work which, subsequently, proved to be in order.
To qualify for payment, the Contractor has to prove that
it was not possible to utilize idle equipment and laborers, for example, by
moving the team in question to alternative work sites. This is important, as it
is the obligation of the Contractor to make all possible efforts to minimize
the effects of any obstruction to work. Furthermore, it is the Contractor’s
duty to document all claimed expenses.
The following points address commonly held misconceptions
about cost claims; The fact that a time extension has been granted does not
automatically justify the additional payment to the Contractor, and Exceptional
weather may entitle the Contractor to a time extension, but not to extra costs,
finally Whether or not the Contractor has lost money is irrelevant and cannot
form the basis of a cost claim, Any misdeed of a subcontractor is the
responsibility of the Contractor, and As long as the Resident Engineer and his
staff act within the framework of the contract, there is no such thing as ‘too
strict’ supervision.
When raising a cost claim, the Contractor has to comply
with strictly formal procedures. First, it is crucial that written notice is
given about the intention to claim extra payment. Although the claim itself may
be submitted later, it will not be disqualified if the requirement for a
specific notice period has been complied with. Second, for a claim to be valid,
it must be raised with reference to a specific clause (or clauses) in the
contract. Finally, the burden of proof is on the Contractor, who needs to
provide all documentation to substantiate the additional costs claimed.
It is normal for the Engineer to retain the authority to
deal with cost claims. It is the intention of the FIDIC conditions that the Engineer
acts as an independent mediator and makes fair and unbiased decisions, even if
decisions might be unfavorable to the Employer.
If the Contractor does not accept the Engineer’s
decision, the Engineer should be informed accordingly in writing. If a dispute
cannot be resolved through negotiations, it will be referred to adjudication,
where it will be settled by one or more adjudicator, appointed jointly by the
two parties. In case the two parties cannot agree on the appointment of an
adjudicator, each party may apply to any appointing authority named in the
contract or, if none, to the President of FIDIC, to appoint an adjudicator.
Such appointment is final and conclusive. In adjudication, the supervision
organization must be able to present written records of instructions given to
the Contractor, observations, tests, progress of work, the weather, equipment
on-site, personnel, material supply, errors by the Contractor, etc. The Engineer
will be in default of obligations under the contract if such evidence cannot be
produced. The adjudicator’s decision is final and binding
.
Conclusion
Every
Civil Professional Interview candidate should acquaint himself with the FIDIC
Conditions of Contract before availing himself for the interview.
What
is your experience with FIDIC Conditions of Contract (Red Book)? Do you have
any clause you would like to discussed??
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