COCIESLNewspaper(Final)

8/13/2019 COCIESLNewspaper(Final)

1/13

1

Overview of Conditions of Contract under ICTAD (SBDs: 01, 02, & 03)

and FIDIC (Red) Form of Contracts

By Eng T K M Galappththy, Chief Engineer (Badulla District), Road Development Authority

(This is written based on the Technical Presentation held at IESL-Uva Center on 29 February

2012, and modified to suit for the Newspaper)

My Effort

Welcome to this article and before going in to the subject in detail it is necessary to being understood and

very clear about the goals of my effort through this article. This article is not designed to teach you the

clauses of the Conditions of Contract (COC) but to provide the conditions in which you can learn by yourself

and to alert you to the subject. The sets of COCs mentioned in the title have many clauses which need to be

presented in-depth, but as this article is only an overview of selected clauses are taken up due to space

constraints. In the process it aims to highlight some striking features of these publications. You may need the

relevant publications for extensive reading of the article and to get a clear understanding of the context. You

may have to write down the relevant clauses, where applicable, of the COCs to the context of the article. ( Iam sure you are fully familiar with the National Procurement Agency Procurement Guidelines (NPA-PG)

which I have already presented at IESL-Uva center on 30th

August 2011 in my presentation under the

theme Overview of Procurement Management.

Overview of Conditions of Contract

Introduction

This article refers to the latest ICTAD l publications of Standard Bidding Documents (SBDs) 01, 02, & 03

released in January 2007 with the approval of the National Procurement Agency (NPA) and the FIDICs Red

Book 1999 edition.

The Conditions of Contract sets out the terms and conditions for the rights and obligations of the

contracting parties when a contract is awarded or entered into; as well as, to some extent,the contractual

procedures to be followed by the parties and persons to the contract. The Conditions of Contract should be

read in conjunction with Contract Data, Schedule, Appendix to Tender, as the case may be, of contract,

which shall take precedence over the Conditions of Contract.The contracts foreword makes clear that these

two parts together form the Conditions of Contract that govern the rights and obligationsof the parties.

Table of Clauses

The Table of clauses are listed differently in each publication. Almost similar format is used for ICTAD Red

book and the FIDIC Red book (but the title for clause numbers 19 & 20 reads differently). This is because the

ICTAD Red book Conditions of Contract was prepared based on the FIDIC Red book. However, the clauses

were listed under Contents of General Conditions in FIDIC Red book. Those who are familiar with the ICTAD

Red book contract need no special attention for FIDIC Red book contract except for a few clauses.

Acronyms

Interestingly, there is no Acronyms list provided with any of the publications. However, three acronyms

could be read in the publications; DAB Dispute Adjudication Board, ICTAD Institute for Construction

Training and Development, and FIDIC Fdration Internationale des Ingnieurs-Conseils. Thus it may beadvised to you not to use acronyms if you refer these COCs for contractual matters.


2/13

2

Definitions

The publications provide the lists of definitions for key words and expressions for their meanings to be clear.

Daymeans a calendar day. It may be a non-working or a working day. You need not write it as calendar

day (s) in you contractual writing. Writing it as day(s) is sufficient. However, if you want to differentiate

between Working Days and Calendar Days in the supporting narrative - never write the word "days" without

the prefix "Working" or "Calendar". This definition is very much helpful when you calculate the Delay

Damages and evaluating the Extension of Time (EOT) and all other time-based events. You may use capital Dfor the word as we do in ICTAD publications and Project Management software to mean the day(s) as

calendar day(s). The ICTAD Blue book defines this as Dayscalendar days.

Base Datemeans the date 28 days prior to the latest date for submissions of the Bid. This definition is not

given in the ICTAD Blue book and Green book. FIDIC red book used the word Tenderinstead of Bid. This is

because in ICTAD contracts the word bid is used in the process of procurement while in FIDIC contracts it s

used as tender.

In both Red books, Costmeans all expenditure reasonably incurred (or to be incurred) by the contractor,

whether on or off the site, including overhead and similar charges, but does not include profit. However, the

ICTAD Green book uses the word properly instead of reasonably. ICTAD Blue book definition given for theCosts deemed to include overhead costs whether on or off site but without profit. Your attention is

brought to the profit component. Unfortunately, the word cost is not used exclusively or consistently

throughout the Conditions. In some clauses cost is qualified by an adjective, and in other provisions

undefined words of similar but possibly not identical meaning are used, such as additional cost, extra

cost, expense, value, amount, cost plus profit.

In the ICTAD Red book, Initial Contract Price(ICP) means the amount stated in the LOA for the execution and

completion of the Works and remedying any defects. In other ICTAD books, its defined as in short form

giving the same meaning. However, the FIDIC Red book does not use this expression but it uses Accepted

Contract Amount defined in the same way as in the ICTAD Red book using the word accepted instead of

stated.

Contract price means the amount stated in the LOA, subject to adjustments in accordance with the

provisions of the Contract. In FIDIC Red book, itsdefined as the price defined in sub-clause The Contract

Price, and includes adjustments in accordance with the Contract. Even ICTAD Red book has this sub-clause;

it defines the expression differently as in other ICTAD books.

The above two prices will usually differ because the initially agreed price (amount in LOA) will be adjusted

(either increased or decreased) to determine the contract pricewhich is the final price of the Works.

The adjustments take place according to the valuations of the works actually done. This feature makes the

FIDIC and ICTAD Books a so-called re-measurement contract.

In ICTAD Red book, Schedulesmeans the document(s) entitled schedules and given in Section 9. This word

is not defined in the other two ICTAD books. However, FIDIC Red book defines this as the document(s)

entitled schedules, completed by the Contractor and submitted with the letter of Tender, as included in the

Contract. Such documents may be the Bill of Quantities, data, lists, and schedules of rates and/or prices.

Partymeans either or both, the Employer or the Contractor, as the context requires. The FIDIC Red book

defines this without either or bothphrase. No definition is given in the ICTAD Blue book and the Green

book. If you study the following Figure-1you can clearly understand the parties and persons involved in a

particular contract. Team work of all parties and persons is of paramount importance to complete a contract

with better control of cost, quality, and time and ultimately to achieve the goal of procurement action.


3/13

3

Employers Personnel

The FIDIC Red book reads that the Employer shall have obtained (or shall obtain) the planning, zoning or

similar permission for the Permanent Works, and any other permissions described in the specification as

having been (or being) obtained by the employer so that the Contractor is to be harmless against and from

the consequences of any failure to do so.

Both the Red books read that the Employer shall, where he is in position to do so, provide reasonable

assistance to the Contractor (at the request of the Contractor) in obtaining permits, licenses and approvals.The Employer shall also be responsible for ensuring the Employers Personnel and Employers other

contractorss on the site co-operate with the Contractors efforts and take actions similar to those which the

Contractor is required to do under safety procedures and under protection of the environment.

Both ICTAD Blue and Green books have not addressed above requirements. However, the Employers

personnel should act as above. If you read the ICTAD Blue book clause Other Contractors you will get the

need of last requirement of the above paragraph.

The Employer should also keep in mind the sub-section Contract Administration of NPA-GL which is not a

part of the document for a Contract. It reads that:

1 The PE shall be responsible for ensuring that the execution of Works is adequately supervised andassessed for purpose of making interim and final payments.

2 The quality of the execution of Works should be checked independently before taking over.3 Particular attention should be paid to claims arising from disputes and differences during

implementation

Contractors Personnel

According to both Red books, the Contractor shall appoint the Contractors Representative (CR) giving all

authority necessary to act on the Contractors behalf. The Engineers consent should be taken prior to

Commencement Date, unless the CR is named in the Contract and the Contractor shall not revoke theappointment or appoint replacement without prior consent of the Engineer. Note that if the CR is to be

temporarily absent from the site during execution of Works, a suitable replacement shall be appointed with

the Contract

moneThe

Employer

The

Contractor

The

Engineer

TheEngineer

s

decisions

Parties in terms of COC

Communication Communication

Figure-1


4/13

4

the Engineers consent. This requirement is not in the ICTAD Red book. The CR, on behalf of the Contractor,

receives the Engineers instructions.

But in ICTAD Blue book, the Contractor shall employ the key personnel if named in the Contract Data. The

Engineer may approve any other proposed replacement with equal or better qualified. Interestingly, there is

no time bar for this appointment.

However, in the ICTAD Green book, the contractor shall submit to the Employer (not to the Engineer) forconsent the name and particulars of the CR to receive instructions. Here also no time bar is given.

Both Red books do not allow the Contractor to subcontract the whole of the Works. The Contractor shall be

responsible for the acts or defaults of any Subcontractor, his agents or employees, as if they were the acts or

defaults of the Contractor. The Contractor shall not be required to obtain consent to Suppliers of Materials,

or to a subcontract for which the Subcontractor is named in the Contract or may be instructed to employ by

the Engineer under variation. However, the prior consent from the Engineer is needed for Suppliers if stated

in the Contract or other Subcontractors. Not less than 28 Days notice of the intended date of the start of

each Subcontractors work, and start of such work on the site should be given to the Engineer.

In ICTAD Blue book, the Contractor may subcontract with the approval of the Engineer, but shall not assignthe Contract without approval of the Employer in writing. The Subcontractors (Nominated Subcontractors)

may be stated in the Contract or may be instructed to employ by the Engineer under variation.

Subcontracting shall not alter the Contractors obligations.

According to the ICTAD Green book, the Contractor shall not subcontract the whole of the Works or any part

of the Works without the consent of the Engineer.

The Contractors Personnel shall be appropriately qualified, skilled and experienced in their respective

occupation. The Engineer may remove any person employed on the Site or Works including the CR who

persists in any misconduct or lack of care; carries out duties incompetently or negligently; fails to conform to

any provisions of the Contract; or persist in any conduct which is harmful to safety, health, or the protectionof the environment. The Contractor shall then appoint a suitable replacement. In ICTAD Blue book reads that

if the Engineer asks the Contractor to remove a person who is a member of the Contractors staff or work

force, stating the reasons, the Contractor shall insure that the person leaves the Site within 7 Days and has

no further connection with the work in the Contract. In real world this removing should not be done at first

instance but after giving warnings. There is no clause in the ICTAD Green book for the removing of

Contractors Personnel.

In both Red books, the Contractor shall submit details showing the number of each class of Contractors

Personnel and Equipment on the Site to the Engineer, in each calendar month, until the Contractor has

completed all works, in a form approved by the Engineer. Other ICTAD books have not given this

requirement. However, maintaining details will be helpful for both parties.

Engineers Personnel

According to the Red books clauses, the Employer appoints the Engineer to carry out the duties assigned to

him in the Contract and the Engineers staff shall include suitably qualified engineers and other

professionals. The Engineer has no authority to amend the Contract. The Employer undertakes not to impose

further constraints on the Engineers authority, except as agreed with the Contractor. Whenever the

Engineer exercises a specific authority for which the Employers approval is required, then the Employer is

deemed to have given the approval. Also note that the Engineer will decide the contractual matters between

the parties. In both other ICTAD books, there are no specific clauses for this, but in practice the above will

be applied. Anyway the Engineer will decide contractual matters between the parties.


5/13

5

Engineer

All ICTAD books, define the Engineer in similar manner so that who is responsible for administrating and

supervising the execution of the Work is very clear. Note that according to the clauses such person may be

an engineer, architect or any other technical person. Also note that in the absence of such appointment the

Employer itself can be the Engineer. But the FIDIC book, defines him differently, without mentioning the

profession of the Engineer or provision for the Employer to act as the Engineer. Only the ICTAD Red book

gives clause for the Engineers impartiality. Anyway, the question arises whether the Engineer can beimpartial?

In general, the Engineer is not a party to the Contract and he may usually have a separate contract, formal or

informal, with the Employer, to advise upon and to control all technical aspects of the project from inception

to completion. He is the machinery to supervise the Contractors performance of the Contract and to decide

what payments shall be made. Hence, the Engineer must have a clear view on the proper interpretation of

the Contract provisions, in certifying payments. Note that the Engineer must bring an independent

professional judgment to bear when deciding certain questions and must act fairly and impartially between

the Employer and the Contractor. That means, the Engineer should take pre-arbitral decisions acting as the

Dispute Adjudication Board at the cost of the Employer.

Engineers Representative

The Engineer may from time to time assign duties and delegate authority to assistants, and also revoke such

assignment or delegation. These assistants may include Engineers Representative (ER), Senior Resident

Engineer (SER), Resident Engineer (RE), and/or Independent Inspector. The assignment, delegation or

revocation shall be in writing and shall not take effect until copies have been received by both parties.

However, unless otherwise agreed by both parties, the Engineer shall not delegate the authority to

determine any matter in sub-clause Determinations. ER has authority to issue instruction, etc. that have

only been authorized by the Engineer. Any failure to disapprove within the given authority it is not the right

of the Engineer to reject the matter. If the Contractor is dissatisfied by reason of any act, instruction or any

determination of the ER or any other person responsible to the Engineer the Contractor should refer thematter to the Engineer for his decision. ICTAD Green Book has not given this ER clause.

In many situations the named Engineer delegates s most of his power to an ER. In this way, the named

Engineer may in practice have little or no involvement in the administration and control of day-to-day

activities of the project, and takes an active part only where serious problems or disputes arise. It is

debatable whether or not such arrangement is in the best interest of both parties to the Contract. Note that

the functions of ER, unless specifically extended, are limited to watching and supervising the construction of

the Works. Bear in mind it does not mean watching like TV Tele drama. Note also that following delegation,

the Contractor must realize that a variation on instruction issued by the ER is ultra vires.

Laws and Language Applicable

The Contract shall be governed by the laws of Democratic Socialist Republic of Sri Lanka and in the language

of English. As the FIDIC is not only for the Sri Lankan Contract it says if there are versions of any part of the

Contract which are written in more than one language, the version in the ruling language in the Appendix to

Tender shall prevail. In the ICTAD Green book, the language should be the written language of the Contract.

Priority of Documents

An order of priority is usually necessary, in case a conflict is subsequently found among the Contract

Documents. All books provide the priority list of the documents as in Table-1below:


6/13

6

The FIDIC The ICTAD

1 The Contract Agreement (if any)2 Letter of Acceptance3 Letter of Tender4 Particular Conditions5 The Conditions of Contract6 Specification7 Drawings8 Schedules9 Any other documents forming part of the

Contract

1 The Contract Agreement (if any)2 Letter of Acceptance3 Memorandum of Understanding (if any)4 The Form of Bid5 Contract Data6 The Conditions of Contract7 Specification8 Drawings9 Bill of Quantities10 Any other documents forming part of the

Contract

Table-1

If an ambiguity or discrepancy is found among the contract documents, the Engineer shall issue any

necessary clarification or instruction.Post Tender Correspondences is superior to the Form of Bid /Letter ofTender and the Particular Specification is superior to Specification (General Specification).

Principal Events

The principal events can be listed as in the following Table-2. If you put those events in a timeline you may

understand clearly the sequence of the events. Events of Contract Management start after issuing LOA.

FIDIC Red ICTAD Red ICTAD Blue ICTAD Green

Issue LOA Issue LOA Issue LOA Issue LOA

Deliver Performance

Security

Deliver Performance

Security

Deliver Performance

Security

Deliver Performance

SecurityEnter into Agreement Enter into Agreement Enter into Agreement Enter into Agreement

Possession of Site Possession of Site Possession of Site Provision of Site

Commencement Date Commencement Date Start Date Start Date

Issue of Taking-over

Certificate


Certificate

Issue Certificate of

Completion


Notice

Issue of Performance

Certificate

Issue of Performance

Certificate

Issue Final Certificate No clause

Return Performance

Security

Return Performance

Security

No clause No clause

Table-2

You may note that both Red books give same expressions for the events while other two books have

different expressions for few events. Also note that there are no clauses given for some events under the

Blue and the Green book. It is my opinion that these clauses should be included in those books. Time for

completion of the Contact is the time between the event five and event six as the number of Days. It is to be

stated in the Contract as a number of Days, to which is added any extensions of time and delay time

attributable to the Contractor. Defects Notification Period starts after event six and ends by the Days stated

in the Contract. Both Red books only allow for extending the Defect Notification Period. Please note the

validity period of the Performance Security in each publication.


7/13

7

Payment Events

The payment events can be listed as in the followingTable-3. If you put those events in a timeline you may

understand clearly the sequence of the events. Payment Events of Contract Management start after issuing

LOA.

FIDIC Red ICTAD Red ICTAD Blue ICTAD Green

Issue LOA Issue LOA Issue LOA Issue LOA

Advance Payment Advance Payment Advance Payment Advance Payment

Interim Payments Interim Payments Interim Payments Interim Payments

Retention Release (1

Half)


Half)


Half)


Half)

Statement at

Completion

Statement at

Completion

Statement at

Completion

Payment at Completion


Half)


Half)


Half)


Half)

Submit Draft FinalPayment Submit Draft FinalPayment No clause No clause

Final Payment Final Payment Final Account Final Account

Table-3

You may note that both Red books give same expressions for the events while other two books have

different expressions for few events. Also note that there are no clauses given for some events under the

Blue and the Green book. Keep in mind that once the Engineer issues the Interim Payment Certificate (IPC),

it becomes a due debt, payable within the terms of the Contract. Non-payment of an IPC amounts is a

breach of contract.

Programme

Both Red books stipulate that the Contractor shall submit detailed time programme (Baseline Programme)

to the Engineer within 28 Days (ICTAD -14 Days) after receiving the Commencement Notice. Revised

Programme shall be submitted whenever the previous programme is inconsistent with actual progress or

with the Contractors obligations. Unless the Engineer, within 21 Days (ICTAD -14 Days) after receiving the

programme, gives notice to the Contractor stating the extent to which it does not comply with the Contract,

the Contractor proceeds in accordance with the programme. If, at any time, the Engineer gives notice to the

Contractor that the programme fails to comply with the Contract or to be consistent with actual progress,

the Contractor shall submit a Revised Programme. Note that the Employers personnel shall be entitled to

rely upon the Programme when planning their activities.

The ICTAD Blue book under this clause stipulates that within the time stated in the Contract Data, the

Contractor shall submit to the Engineer for approval a Programme (Baseline Programme). The Contractor

shall also submit to the Engineer for approval an Updated Programme at intervals no longer than the period

stated in the Contract Data. If the Contractor does not submit the Programmes as above within the period

specified, the Engineer may withhold the amount stated in the Contract Data from the next Payment

Certificate and continue to withhold this amount until next payment after the date on which the overdue

programme has been submitted. The Engineers approval of the Programms shall not alter the Contractors

obligations. The Contractor may revise the programme and submit to the Engineer again at any time. The

ICATD Green book stipulates simply that the Contractor shall submit a Programme for the Works to the

Engineer within 14 Days from the Start date, in a form acceptable to the Engineer.


8/13

8

Programme in a Nutshell

The programme should be used by all parties to the Contract as the means for monitoring and measuring

progress and performance. The programme is an essential document in determining the extent of any

extension of time and/or compensation for delay and it is the benchmark or measuring tool in these

situations. The usefulness of a programme can be enhanced by addition of resource and cost information

and the importance of a comprehensive baseline programme cannot be over-emphasized.

Float in programmes activities is an essential and inevitable part of every programme and is used by

Contractors in the efficient management of manpower and equipment resources. The ownership of float

causes particular arguments in disputes over entitlement to EOT. It is my view that the project owns the float

so that both parties can take merit for it. In evaluating the EOT due care should be given to the activities

which reduce the total float below zero which may be a critical activity or non-critical activity of the baseline

programme or approved revised programme.

Progress Report

Both Red books stipulate monthly progress reports provisions which shall be prepared by the Contractor and

submitted to the Engineer. The first report shall cover the period up to the end of the first calendar monthfollowing the Commencement Date. Thereafter, each report should be submitted within 7 Days after the last

day of the period to which it relates. Reports shall continue until the Contractor has completed all work

which is known to be outstanding at the completion date stated in the Taking-Over certificate for the Works.

Note that these reports should also be attached with each IPC. The details provided with each report could

be summarized as below:

1 Charts and detailed descriptions of progress2 Photograph showing the progress3 Records of Contractors Personnel and Equipment4 Copies of test results5 Notice given under Employers Claims and Contractors Claims6 Safety statistics including activities relating to environmental aspects7 Comparisons of actual and planned progress and measures being (or to be) adopted to overcome

delays, if any

Both other ICTAD books do not stipulate this provision. However, ICTAD Blue book stipulates the Updated

Programme under Programme clause.

Rate of Progress

If, at any time, actual progress is too slow to complete within the Time for Completion and/or progress has

fallen (or will fall) behind the current programme due to reasons other than as a result of a cause forextension of time then the Engineer may instruct the Contractor to submit a revised programme and

supporting report describing the revised methods which the Contractor proposes to adopt in order to

expedite progress and complete within the Time for Completion. If these revised methods cause the

Employer to incur additional costs, the Contractor shall be subject to pay these costs to the Employer,

(Employers Claim), in addition to the Liquidated Damages (if any).

This provision is not given in ICATD Blue and Green books.

Price Escalations

The amounts computed from the formula given under this sub-clause in respect of the rise or fall in the cost

of Labour, Materials, Plant and other inputs to the Works shall be added or deducted from the payment to


9/13

9

the Contractor in monthly basis if the Contract price is subjected to adjustments due to fluctuation of prices

and stated in Contract Data, Appendix to Tender, or Schedule as the form of contract. Price escalation is the

general expression used for this adjustment and the following Table-4 shows the expressions used in the

clauses.

Form of Contract Clause

FDIC Red Adjustments for Changes in Cost

ICTAD Red Adjustments for Changes in Cost

ICTAD Blue Price Adjustment

ICTAD Green Price Adjustment

Table-4

According to the NPA-PG, in any contract for Works, exceeding a period of three months, the price variation

formulae for the SLR component shall be included in the bidding document and the contract agreement.

Price variation formulae developed by ICTAD shall be used. For Foreign Funded Projects, if it is a

requirement of the Foreign Funding Agency, the price adjustments shall be made for foreign currency

component, such recommended formulae may be used for the foreign currency component. However, in

such case the ICTAD formulae shall be used for SLR component.

ICTAD has developed two formulae, namely; Standard Formula and Simplified Version of the Standard

Formula. In Standard Formula indices are based on the Material, Labour, and Plant/ Equipment issued

monthly by ICTAD. However, in the other formula indices are based on the type of Contracts and issued

quarterly by ICTAD. The monthly indices for this formula should be calculated by interpolating and the

formula should only be used for Contracts for which the ICP is less than Rs 5M.

According to all ICTAD books , for the first Interim Bill, the Current Indices should be from the first month

after the Commencement and for any other Interim Claim or for the Final Claim the Current Indices shall be

taken as the indices prevailing for the calendar month, one month after the previous valuation was done. In

my opinion this paragraph in ICTAD publications should be modified based on the terms used in payment

events.

If the Contractor fails to complete the Works within the approved time for completion the price adjustment

for the work done after the due date of completion shall be made using the Current Indices prevailed at due

date for completion.

According to the above procedure, all parties and persons involved in the Contract should not allow to freeze

the indices of actual work done.

Variations

The variations to contracts during the implementation stage cause very high burden on the PE and to the

Government. If the contribution from the variation to the final contract sum is high it will dilute the

procurement process that was carried out when awarding the contract. Therefore, PE must ensure that all

professional efforts are taken to minimize this situation. It should be kept in mind that the variations can

significantly affect contracts to delay.

Anyway, NPA-PG reads that the COC will normally empower the Employer to vary the form, quality and

quantity, of the Works to be executed at any time during the progress of the work and provide the basis for

such variations and valuation of such variations within approved limits. A contract variation order is used to


10/13

10

obtain approval to order variations and, more particularly to obtain authorization to incur the financial

effects of them. The variations within Contingency provision, if provided and any savings accumulated on the

reduction of quantities and/or deletion of items in the original Bill of Quantities (BOQ) may be used to issue

variation orders by the PE. No variation order on change of scope which involves the increase of Initial

Contract Price shall be issued without the prior approval obtained following the procedure indicated in the

NPA-Procurement Manual (NPA-PM). There are three categories which need to follow the procedure: (1) Net

variation within 10% of the Contract Awarded Price (CAP); (2) Net variation exceeds 10% of the CAP but

within 15% of the CAP; (3) Net variation is more than 15% of the CAP.

According to the all COC a variation may be initiated by the Engineer at any time prior to issuing Taking-Over

Certificate/Certificate of Completion/ Taking-Over Notice as the form of contract and the Contractor is

bound to do the variations if no valid reasons is given for not doing so..

Variation may include:

1 Changes to the quantities in BOQ item (such changes do not necessarily constitute a variation)2 Changes to quality and other characteristics of any item3

Changes to levels, positions and dimensions of any part of the Works4 Omission of any work unless it is to be carried out by others5 Any additional work, plant, material or services necessary for the Permanent Works6 Changes to the sequence or timing of the execution of the Works

The ICTAD Blue book does not list out item 6 and the ICTAD Green book does not list out any item.

Careful following of the sub-clauses of the Variation Procedures and Valuation/Evaluation of Variations is

necessary for t the disputes and delays to be minimized. Should Keep in mind the necessity of Employers

approval according to the NPA-PG or the PEs specific guidelines.

The sub-clause given for the Valuation/Evaluation of quantity changes in each publication needs to bereviewed so that it can be fixed up new rates to the reduction or increase in quantities in different

percentage groups and one validating rule not with Initial Contract Price but with Effective Contract Price.

Progress Meetings

This is the general expression used for the meetings which review the programme/progress of the Works.

The following Table-5shows the expressions used in the clauses.

Form of Contract Clause

FDIC Red No clauseICTAD Red Management Meetings

ICTAD Blue Management Meetings

ICTAD Green No clause

Table-5

The Engineer or Contractor may require each other to attend a management meeting in order to review the

arrangements for future works. The minutes of these meetings recorded by the Engineer are a good way of

keeping track of the progress of the Contract. The recording of advice by the Contractor of an intended

claim in the minutes of a meeting will not set the clock running for such claim. This may mean that minutesof the meeting will not have a contractual validity.


11/13

11

Contractual Claims and Disputes

This article will not talk much on this matter as the publications may not address it well and also as the

claiming situation is more controversial in the present construction field. Anyway I present these in general.

It is a common perception that claims are a significant feature in all construction contracts. Please note that

claims and disputes events come from both parties; the Employers Claims and the Contractors Claims.

The philosophy behind the compensation is to find the replacement value, like a typical insurance scheme, in

order to bring back the Contractor into the original position where he stood financially had there been no

delay. The tender allowances have limited relevance for the evaluation of prolongation and disruption

caused by breach of contract or any other cause that requires the evaluation of additional costs. It is my view

that an agreed contractual amount per Day for prolongation costs can reduce arguments over the proof of

such loss. A form of reverse liquidated damages, or more guidance should be given for calculation of the

cost introducing appropriate formula.

Liquidated Damages (LD) has been used differently in the publication. In FIDIC, it is used as Delay Damages

and in ICTAD Green book it is used as Late Completion. Some books charged it as % of Initial Contract Pricefor both per Day rate and the maximum ceiling amount. In FIDIC these are based on Final Contract Price (It is

a variable). In ICTAD Blue book, per rate is an amount. It is my opinion that these amounts should be based

on the % of Initial Contract Price/ Accepted Contract Amount. Note that in ICTAD blue book if you deduct the

LD and you approve the EOT there after, the Contractor may submit an Interest Claim. The Employer should

also follow the claiming procedures.

With reference to the sub-clause given for Exceptionally Adverse Climatic Conditions inboth Red books,

the Contractor is entitled to EOT (not for additional cost). But this sub-clause does not clarify the norm of

proving whether the Contractor really faced Exceptionally Adverse Climatic Conditions; neither the number

of years to be analyzed of the exact rain fall data nor the statistical analytical method of the rain fall data.Under these circumstances, the Engineer possesses the sole authority to decide the above parameters,

which defers from Engineer to Engineer, so that the Contractor is unable to prove the conditions.

Unfortunately, these conditions were not addressed anywhere in both ICTAD Blue and Green books.

Interestingly, the publications provide guidance for Interest Claims as well as for price fluctuations.

It is generally accepted that failure to give notice of delay for EOT purposes is not usually fatal to an EOT

claim. However, failure to give notice in accordance with the Contract in respect of additional payment, e.g.

prolongation, or loss and expense claims may bar or severely prejudice a claim.

The contractor is usually required in construction contracts to do all it can to avoid, overcome or reduce

delay. This duty does not extend to carrying out any change in scope any more efficiently than the original

scope, spend more money in order to negate the effect of an Employer Risk Event, for example adding extra

resources by working outside its planned working hours or otherwise. The employer should pay the

contractor the costs of taking such measures to mitigate the loss if it requires the contractor to do so. The

method, speed and timing of the activities under the contract are generally at the contractor's discretion

subject to any agreed programme or method.


12/13


13/13

13

Acknowledgement

I thank the Office Bearers of IESL-Uva Center-2012 who motivated me to present the Technical Session on

this topic. Any IESL Center needs to hear my both presentations, Call me on 071 8179763 or email at

[email protected] for invitation.
mailto:[email protected]:[email protected]