Professional Documents
Culture Documents
SLQS Journal
Editorial Committee
Ajantha Premarathna FRICS, FIQS(SL), ACIArb.
Dhammika T. Gamage
Editorial Policy
We, the editorial committee reserve the right to select, reject, edit, and excerpt articles at our sole discretion. We will
publish no article which, in the opinion of the editorial committee, can be reasonably interpreted as insulting or offensive
to any individual or group. We will not return unsolicited manuscripts. The opinions expressed in articles contained in the
SLQS Journal are the opinions of individual authors and not necessarily those of the SLQS Journal editorial committee.
Articles are provided for the general interest of the quantity surveying and contract administration community, but the
information contained therein does not constitute legal advice and should not be relied on as such. Neither the SLQS nor
the individual authors assume any responsibility for the accuracy of information reported.
The editorial committee assumes no responsibility for failure to report any matter inadvertently omitted or withheld from
it. The mode of citation utilised within the articles and for the bibliography would be the Chicago method.
Email your own creations to journal@slqs-uae.org with your passport size photograph and brief profile of yourself which
should not be more than 35 words.
September 2009
SLQS JOURNAL
CONTENTS
Page
Editorial
The Quantity Surveyor and the Law
Edward Jayathunga AAIQS
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16
22
27
35
40
50
57
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September 2009
Editorial
Dear Sri Lankan Quantity Surveyors
I am writing this editorial the day after the most successful Continuing Professional Development
event in the history of Sri Lankan Quantity Surveying, the programme, Variations and Valuation
of Variations under the ICTAD and FIDIC Forms of Contract, conducted by Prof. Indrawansa
Samaratunga, held at the BMICH- Colombo, on 31 August, 2009, with over 600 participants.
This most pleasurable event was the beginning of the commemoration of the Silver Jubilee of the
SLQS UAE get-together.
We wish to thank all those of you who were behind the overwhelming response of instructive, highquality articles to our request; all of those articles were a tremendous pleasure to read. Also, it was
with great satisfaction that we observed the outpouring of interest generated by the participants
of the recent training course conducted by SLQS-UAE, Sound Contract Administration, by
providing many articles which will be published in future issues.
In the last journal, from the readers perspective, one of the most noteworthy articles was Construction
Contract Arbitration by Renchen Perera, due to its rich content blended with simplified language.
Likewise and also of timely necessity, Ajantha Premarathnas article of Is FIDIC 99- ContractorFriendly ? would be considered of similar rank.
We trust that it is essential to remind you that this journal is designed to encourage interest in
all matters relating to contract administration, with an emphasis on matters of theory and onboard issues arising from the relationship of contract administration to other disciplines in the
construction industry. The subject matter of the articles will consist mainly of, but not be limited
to contractual matters.
Also, questions were raised on the appropriate length of the articles. We should say that as we have
many submissions of high quality than we may be unable to accommodate within one volume, the
ideal length is less than 5,000 words. There have been concerned about the size of the print (fonts).
Due to various constraints, we restrict the number of pages we can print and if we increase the font
size, we would be forced to reduce the number and length of the articles.
The topics written upon in this journal are those submitted by your peers and various highly
experienced and qualified industry professionals and academics of today. Articles included in this
journal, which have been arriving from the very large number of Sri Lankan quantity surveyors
living and working across the globe, are those felt to be relevant to our entire readership, either
personally or professionally.
We eagerly anticipate future articles from you, our readers, for our forthcoming journal, the Silver
Jubilee special edition.
On behalf of the editorial committee,
Dhammika T. Gamage
September 2009
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The Quantity Surveyor and the Law
Edward Jayathunga AAIQS
Edward attached Bond Communications as Chief Quantity Surveyor since 2008, prior to that he served
Gardiner and Theobold International as a Senior Quantity Surveyor over a period of ten years leading the
Electromechanical quantity surveying team
Introduction:
Contract/Employment agreement:
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many gentle agreements are breached by not delivering
as promised. When professional services are provided, the
intention is clear that the professional body or the person
must be paid for the service provided. In the example, H.
M. Key & Partners vs. M. S. Gourgey and others (1984)
in the UK, it was said: the ordinary presumption is that
a professional man does not expect to work unpaid for
his services. Given that all relevant terms are settled and
agreed, incorporated in a formal contract, the intention
of the parties may still be frustrated by a failure to express
the terms clearly.
Who are the parties a QS is involved with when performing
his/her routine duties? The first party is the employer or
the paymaster of the QS, with whom he is having an
agreement of employment and who assigns duties to
him. His duties and responsibilities must comply with
the terms and conditions of the employment agreement,
codes and conducts of the organization, moral and cultural
understandings of the organization and fellow co-workers
etc. Then the QS deals with the employers, contractors,
sub contractors, consultants, local authorities, insurance
agents, banks, material suppliers etc. at the work place
and with relevant professional institutions and their
ethics, professional codes and conducts. The following
(figure 1) illustrates patterns of contractual relationships
and links existing between various parties of design and
procurement teams.
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pay the damages. As discussed above, Quantity Surveyors
duties and responsibilities as well as the liabilities and
consequences in the event of the failure, must be stated
as a part of their service agreement. In the case of lack of
care in delivering or discharging his contractual duties
the QS can always be held responsible and is in breach
of contract as per the 1982 act. For this reason, it is very
important for the QS to perform with diligence and due
care. For further protection however, it is advisable to have
a Professional Indemnity Insurance Policy (PI) in place to
cover any negligence.
What is the indemnity policy and its coverage? Professionals
are advised to have some method to cover the liabilities
for loss or damage in the event of any negligence caused
by them. PI has become more popular in these days than
before, as it can share the liabilities for possible losses.
Such a policy will provide an indemnity in respect of
legal liability for errors and omissions done or committed
by professionals. PI is compulsory in many professional
organizations; the RICS has introduced a compulsory PI to
be effective for its members since January 1986. However,
freedom of choice is with the members, and where to place
such insurance remains open. Generally, all professionals
must seriously consider the importance of this in todays
complicated market conditions, and in particularly to
those who are willing to start their own businesses.
As discussed and shown in figure 1 above, the contractual
link is very important and effects for claims or suing against
negligence. Liability is considered independently. If there
is no contractual link between the parties, a third party can
sue only in the tort of negligence. However, plaintiff suing
in negligence has to show that:
In line with the above, in the case Junior Books Ltd vs.
The Veitchi Co. Ltd (1982), the House of Lords held that
a specialist flooring subcontractor was liable in negligence
for defective flooring to the employer with whom a
subcontractor had no contractual link or relationship. There
are not much cases of law concerned with the negligence
of Quantity Surveyors. However, it is advisable to have a
PI cover which may limit the risk involved. According to
the RICS code of conduct, a surveyor should never accept
SLQS JOURNAL
to the contractor for the prolonged period. It was held
that the contractor himself should absorb this additional
cost because the aforesaid letter of qualification was not
forming a part of the agreement.
Quantifying of project scope is a fundamental duty of QS
and therefore, a measurement of work is very important and
this is to be done in accordance with Standard Methods of
Measurements published by widely accepted international
professional institutions like Royal Institute of Chartered
Surveyors. When following an internationally accepted
(standard) method by all parties, it is acceptable and
clear to all users how and what work has been measured
as parties are talking in the same language. Therefore, a
professional QS must follow these standard methods of
measurements in practice. Following are widely accepted
methods currently in use:
SMM 7 -Standard Method of Measurements by RICS
POMI -Principles of Measurements (International) by
RICS
CESMM 3 Civil Engineering Standard Method of
Measurements by Institute of Civil Engineering UK
important for all types of projects and parties use them very
familiarly with the contents of the form of contract; by using
widely used standard contract conditions, the contractor
and the employer are aware of their common obligations
and responsibilities towards the contract from the initial
stage to the settlement of final accounts. The contract
administration is the core function of the QS, where he/she
has to apply internationally accepted contract conditions;
RIBA, JCT, NEC, GC/wks/1, FIDIC etc, are some of
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contractor who provided the bond became insolvent
and his employment was terminated automatically.
Prior to issuing the certificate of completion, the
employer had brought in another party to complete
the work and the certificate of completion was issued
after that. The plaintiffs made a claim on the bond, but
the defendants refused to pay on the basis that their
liability ceased on issue of the certificate. The intention
had been that the bond should remain in force to
protect the employer until the original contractor had
completed the work. This had not happened because of
its insolvency. The purpose of the bond was precisely to
guard against such an event. The court therefore held
that the bondsman is liable and the contractor could
not escape from paying the damage to the employer.
Programme - For the execution of the work, the
contractor must give a programme using standard
forms, and the method he proposes to adopt to
execute the work. The contractor has to comply
with the programme and he is liable for any failure in
completing the programme due to reasons within the
limits of his control. In such a situation the contractor
has to pay liquidated damages and other consequences
associated.
Possession The date or dates (if more than one) by
which the contractor is to be given possession of the
site enabling him to commence the work; liabilities
and consequences are given for either party in the
event of failure to give or take the possession.
Completion and delay In the Appendix to the tender,
a particular time for completion of the work is to be
stated for whole or parts of the work as appropriate and
this may be extended by the contract administrator/
employer under certain acceptable circumstances. In
the event that the contractor fails to complete the work
by this date (original or extended completion date),
the contractor has to pay compensation for liquidated
damage to the employer and if there is a delay from
the employers part requiring an extension of time, the
costs are to be awarded to the contractor by employer.
Liquidated damages (LD) - This must represent a
genuine pre-estimated value of the losses that will be
suffered by the employer due to the non-completion of
the work by the contractor on time. Courts usually do
not uphold this pre-estimated figure of LD.
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vs. Ka Duk Investment Co. Ltd 1989). However, it is
the contract administrators moral duty to recommend
correct representation of the work progress in a timely
manner for payment to the contractor; remember the
employer can take action against the QS for his/her
delay in recommending payment on time for the
contractor.
Retention The entire interim amount certified for
progress of the work including materials at site is
subject to deduct retention by the employer in order to
protect himself, if the work is incomplete or defective.
The contractor has to rectify his defective or incomplete
work in order to get the retention money. Normally,
the retention is 10% of the certified value. First half
(first moiety) of this will be released with the issuing
of completion certificate (or Taking Over Certificate)
and the rest will be released after the issuing of Defects
Liability Certificate.
Determination - Either party in the contract need to
determine their rights under the contract or provide
some method to reserve their rights. The contract
administrator shall consult the employer and the
contractor before determining the amount or time of
such a right.
Disputes- Most probably disputes occur when more
than one party is involved in a business; in the
construction industry also there are many disputes
during the progress of the work. Therefore, there must
be some methods to resolve these disputes. It may be
resolved by Conciliation, Mediation, Adjudication,
Amicable settlements, and Arbitration which are some
common alternative methods for resolution of disputes
over the litigation.
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accepted methods to resolve disputes; both are very costly
and consume lengthy time in an unacceptable manner.
Following are important factors to be reviewed prior
deciding to go for arbitration:
Amount disputed will remain unpaid till the dispute is
resolved
Cost of arbitration is very high and that is an additional
burden
Contract perhaps should be completed or abandoned
some years before the award
Interest for the money withheld and losing future
opportunities may occur
This could badly affect the reputation of the company
name
In the worst case, companies may face bankruptcy or
declare insolvency prior to the award
Looking at all the given reasons, it is better not to encourage
parties to go for above methods but for other alternative
methods of dispute resolution. Goodwill of the parties and
proper coordination and communication are important at
this point to bring the worrying parties for an amicable
settlement.
Conclusion:
Investment appraisal
Advice on cost limits and budgets
Whole life costing
Value management
Risks analysis
Insolvency services
Cost engineering services
Sub contract administration
Environmental services measurements and costing
Technical auditing
Supply chain management
Products and projects life cycle
Planning and supervision
Valuation for insurance purposes
Project management
Facilities management
Time management
Advice on contractual disputes (Arbitration)
Planning supervisor
Employers agent
Bibliography:
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12
Cost Effectiveness
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but will go on to ensure that services are monitored,
service levels maintained and budgets adhered to. The
balancing of facility cost and service quality is crucial to
an organisations effectiveness.
Performance measurement
Outsourcing
Business Management
Business Planning
Strategic Advice
Business process re-engineering
Disaster recovery planning
Real Estate
Property Reviews
Asset Management
Property Management
Maintenance and Repair
Rent Reviews
Lease Negotiations
Acquisition & Disposals
Service Charges
Security
Support Services
Catering Vending
Cleaning and Refuse Disposal
Building Services and Equipment
Project Management
Change Management
Construction Management
Financial
Workplace
Space Planning
IT & Telecommunications Infrastructure
Energy Management and Conservation
Post Occupancy Evaluations
Procurement
Operations
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The space, like time, costs money. The provision, servicing
and maintenance of accommodation are large costs for
many organisations. Without efficient space management
the resources tied up in property are not used to the
companys best advantage.
Asset tracking may not be instantly recognizable as an
activity, but it is a logical development and replacement
of traditional inventories. Companies dependent on
external funding of working capital through banks,
venture capitalists or shareholders are deeply interested
in the net asset valuation of their work; it is the basis of
much bank-based financial support and together with
profit/dividend potential earnings sets the level of share
value in a floating market. A strong net asset value gives
confidence in long-term stability which, together with a
strong share value, presents one of the least costly funding
routes for raising development or expansion capital.
Maintenance and life cycle costing are interrelated with
maintenance planning, which is often thought to be the
facilities managers principal task. Reality is not quite the
same, for in fact the facilities managers task, if properly
developed, covers a wide range of activities relating to the
provision and use of buildings and contents. Maintenance
should be reviewed with references to total quality
management (TQM). But experts have observed that
periodic maintenance allows the Building capability to
be recovered to a level comparable with the Buildings
initial condition. However a gap continues to emerge
throughout the Buildings life because user expectations
increase and indeed change in nature & Technology
and this was seen as a technological and functional driver
of Facilities Management. Also, Life Cycle Costing needs
to be examined and monitored throughout in order to
balance cost against life expectancy.
Facilities Management is not just about controlling cost;
there are several significant services that can be managed
through FM systems to ensure the smooth operation of a
company or organization. These services are:
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generalisations remain, a common thread binds facilities
managers together and reinforces their contribution to
overall business performance. For as coordinators of such
a wide range of technical skills, facilities managers are in a
unique position to set and maintain quality standards in
the working environment, and to help improve briefing
and decision-making by providing data on how their
buildings are performing. They also have an increasing
important role to play in terms of accountability for
safety standards and for ensuring that staff and occupants
are protected from potential health hazards, and that the
building is not a Sick Building.
The profession of facilities management is gaining
respectability through the interest of various professional
bodies and educational establishments. The Royal
Institution of Chartered Surveyors has a skills panel and
a separate faculty on the subject and there are bodies like
the British Institute of Facilities Management formed
out of the amalgamation of the Association of Facilities
Managers with the Institute of Facilities Managers where
membership leads to an interchange of current views.
The most encouraging sign that this is evolving into a
recognised professional discipline must be the creation of
structured study and examinations leading to degrees and
corporate membership of several recognised professional
bodies.
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September 2009
Summary
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demand for dollar-denominated oil as it becomes cheaper for buyers using stronger currencies. Oil prices also rose as
investors saw it as a safe investment amid fears of rising inflation and a US recession.
However, demand for oil started slowing down drastically in the wake of the recession in developing countries. The
downslide of oil prices began3. (See Chart No.1)
Chart No. 1 The rise and fall of crude oil prices in 2008
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comparison between benefits and costs of a proposed
action. Benefits are placed in the numerator and costs are
placed in the denominator. If the ratio of benefits to costs
is greater than one, the project is viable. Comparisons can
be made between many projects to select those projects
with the highest B/C ratio. Costs are generally one-off,
or may be ongoing. Benefits are most often received over
time. We build this effect of time into our analysis by
calculating a payback period. This is the time it takes for
the benefits of the change to repay its costs.
In the case of deciding whether or not to cancel a project
all the costs associated with the cancellation need taken
into account. These may include the following:
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C) Contractors (and subcontractors)
In the Tsunami of global economic meltdown, the
Contractors could be the hardest hit in terms of lost
revenue, reduced profit margins and loss of skilled
manpower.
The first line of fire the Contractor receives is from his
beloved Client in the form of cancellation of the project
awarded a few months ago with no prior notice whatsoever.
The reason we hear most often is common; due to global
financial crisis. All the effort that the Contractor puts
into the project over the past few months in the form
of planning, procurement, recruitment, setting-up of
offices etc. will be shot down with that powerful letter
from the Client. The Client might promise that the works
already carried out will be jointly recorded, evaluated and
properly reimbursed, but, still the Contractor will end up
on the losing side due to other indirect costs such as;
Chart No. 2 The rise and fall of world steel prices in 2008
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c) Opportunity cost i.e. The cost of the jobs foregone.
d) Suppliers
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Clients could make use this opportunity to promote
sustainable alternatives which are environmental
friendly and having a smaller carbon footprint.
According to an expert at the Reuters Global
Environment Summit, The current financial
downturn could spur demand for sustainably
designed buildings and communities. The heart of
sustainability is conserving and not wasting, and this
idea of getting clients to think about projects that are
actually less expensive rather than more expensive and
still sustainable these days gets a lot of good traction.
Its the environmental opportunity of a lifetime and
if we dont use it now as an opportunity to make the
sustainable movement not just make progress, but
gallop ahead, weve lost our chance8.
Project Managers, Architects, other Consultants and
Contractors main aim during this period should be
to control and reduce costs. They need to look at the
scope for reducing costs, addressing which overheads
are fixed (bills that will continue to fall due even if
there is no work coming in) and which are variable
(most significantly staff costs). Savings are likely to
mean a reduction in staff, but they need to remember
that redundancy is expensive (payout of gratuity
etc.) and so is re-recruitment. Sharing resources with
another practice could give a bit more flexibility
during the difficult times.
Since Clients are also struggling with the same economic
pressures, Consultants could give a thought to how
to create value for them in the way that the service is
delivered. i.e. How do we get buildings up at minimum
cost and maximum value?
Another good idea may be, If possible, keep investing
in training, research and development, and plan for the
medium and long terms. Markets could bounce back any
time and with different demands. It is necessary therefore
to be ready to respond to those differences in the face of
ever-growing competition on both quality and price.
In the case of Suppliers, this could be the best time
to re-evaluate their strategies. If the companies who
purchase materials from the supplier is in a financial
mess (may be due to not receiving due payments from
Clients) there is a chance that the supplier may not
get his payments for the materials already supplied.
In such cases a little open dialogue and honesty can
go a long way. It may be worth offering discounts or
Conclusions
Bibliography
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Invitation to Tender
The Client
Type of Project
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Transportation
Marine
Educational
Water supply & drainage
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The Consultant
Tender queries
Tender Documents
Instruction to Tenderers
Method of measurement
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CESSM3 it is measured net. So that in pricing an item
for excavation under CESSM3, the allowance for working
space should be included in the rate.
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Appendix to tender
Form of tender
Milestone dates
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Tenderer should be fully aware of the Conditions of
Contract for the particular project and especially those
related to following commonly used Clauses:
Extension of time
Payments
Liquidated damages
Fluctuation
Variations
Dispute Resolution
Defects Liability period
Materials at Site
Nominated sub contractors
Retention
Provisional sums & prime cost sums
Insurance
Specifications
General Specification
Particular Specification
Bills of Quantities
Drawings
Location Plan
Site Plan
Detail Plans
Sections
Elevations
Any special features
Current Work
Department
Load
in
the
Estimating
Current Workload
Department
in
the
Construction
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Conclusion and Recommendation
Bibliography
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The objective of this article is to discuss the issues related to Valuation of Variations under FIDIC 4th Edition in
the regional industry (United Arab Emirates), and also to examine the powers and impartiality of the Engineer
under the standard form of FIDIC 4th.
Several major contractual issues such as deactivation of price fluctuation clauses, non availability of relationship
between clause 14 programme and clause 52, non availability of material procurement information related to
clause 52 have been considered.
As per the professionals in the region and also the outcome of the research revealed that the problems encountered
in dealing with clause 52.1 were mainly due to:
Lack of awareness of the FIDIC conditions
Incorrect interpretation of clauses
The behaviour of some regional professionals related to clauses in FIDIC have caused considerable difficulties in
the administration of project works.
It is necessary to look at clause 52.1 by the industrial professionals and should alleviate necessary concerns for
sound contracts administration in the region. Most contracts disputes can be eliminated with small improvements
to the clause 52.1 which all the parties involved in the industry will be pleased to accept.
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Figure -1
45.71%
10.48%
9.52%
34.29%
28
Figure 2
45.71%
34.29%
10.48%
9.52%
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September 2009
The effect for the Employer due to lack of price fluctuation clause
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8.74%
39.81%
17.48%
33.98%
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Most of the construction projects get delayed due to
various reasons. Non availability of such clarifications
about the Contract Period generates a lot of disputes in
the final stage of the projects. Especially when the parties
deal with price fluctuations and ad hock variations issued
in the later part of the project, the situation destroys the
relationships and most of the times they could end up
following the dispute resolutions procedure.
Figure 5
23.53%
11.76%
42.16%
4.90%
17.65%
39.81%
8.74%
17.48%
33.98%
the period.
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Figure 7
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the Definitions and Interpretation section by which
the rates can be fixed for the duration of the Contract.
Maintaining price indices or any other cost indices can
be used for adjusting the price fluctuations in the region.
Under present situation the regional Employers are facing
the risk of the price fluctuations included in the tender
even though the material prices may remain unchanged
during the Contract duration.
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Definitions
KM in Construction Industry
Introduction
A client investing in a construction project expects the
project to be completed on time, with specified quality
and at agreed cost (or agreed budget). However, the
general perception of the industry is that most projects
fail to achieve these project objectives due to various
reasons. Egan (1998: 7) admits the unpredictability of
projects in terms of delivery on time, to be within budget
and to the standards of the quality expected.
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1) Lack of time
Construction projects always work on tight deadlines.
KM requires additional efforts that may be considered
by the project staff as less important within a tight
construction programme.
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are of the opinion that KM in a project will be wasted
as the next project may be quite different.
7) Lack of learning
The unwillingness of people to learn from past mistakes
having the view that projects are unique and therefore
attempting to learn from past mistakes is futile.
8) Lengthy time period
KM is long term and takes time to reap its benefits
and to reflect the effectiveness in the organizational
performance.
9) Loss of faith
Even though KM is a long term process employees
may expect immediate benefits from a KM system
and may lose faith when it is not happening.
10) Information Technology support
Many KM systems rely on Information Technology.
Connecting construction project offices which may
be of temporary portacabins located in isolated
environments with inadequate infrastructure can be
a barrier in implementing KM.
As identified above the traditional culture of the
construction industry having an
adversarial nature,
sequential nature and traditional procurement systems as
integral parts of the culture provides very less incentive /
opportunity for the industry to continuously learn from
the process, build relationships, the integration of skills
and innovation and therefore does not promote KM.
Anumba et al. (2006: 216) identify some mechanisms /
solutions that can address these problems as follows:
1) Establish the KM problem prior to investing in KM
processes and practices
2) Establish the characteristics of knowledge that needs
to be managed as these have implications on the
approach to be adopted
3) Assess organizational culture and take steps to move
towards a sharing culture if the current culture is an
authoritative one
4) Identify the location knowledge is required to be
managed and the constraints involved when devising
KM processes and practices
5) Establish how the knowledge is to be acquired (formal
courses or by informal interaction between knowledge
owners)
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and Sinclair (2006: 65-79) and Kamara et al. (2006: 112113), identify the KM process and practices that are in
use in the construction industry as follows:
Post project reviews
Active involvement of top level to KM initiatives
Availability of a Knowledge Manager, Chief
Knowledge Officer or a similar position to deliver the
knowledge management strategy.
Non-traditional procurement methods
Training and development of staff, coaching and
mentoring
Apprenticeship programmes
Promotion of Life Long Learning
Use of Information Technology to capture, amplify
and disseminate knowledge within the organization
and to know who knows.
Proper archiving practices including effective means
of retrieving
Standard construction products
Promotion of e-business approaches
Promotion of a culture of organizational learning and
sharing and actively seeking to apply new learning
Organisation structures promoting KM
Team stability via use of same people working together
project after project
Research and development
Use of partnerships, alliances, joint ventures,
framework agreements
Effective networks with the members of supply chain
Identification of experts, empowering them and
encouraging them to share
Facilitate Communities of Practice within the
organization
Motivational practices related to KM such as linking
KM to appraisal system, team based rewards.
Face to face meetings
Brainstorming sessions
Job rotation
Quality circles
Reports and project summaries
Bulletin boards
Best practice documents.
Policies to retain staff to avoid knowledge drain
Egbu and Robinson (2006:43-44) state that construction
industry is increasingly aware of the knowledge sharing
through networks and identify knowledge sharing
networks such as Construction Best Practice Programme
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Conclusions
September 2009
References
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Time for Completion in Construction
Contracts
Senerath Wetthasinghe LL.M, AAIQS, FCIArb, MQSi, ACIOB
Senior Contract Administrator - Dar Al Handasah Consultants in Dubai
1. Overview
Time is Money1 is an immemorial adage used to indicate
that time is a very valuable commodity. Therefore, to be
successful and competitive in any business venture, time
needs to be managed efficiently. Construction, being a
business very complex in nature and which employs
multifarious trades and disciplines, requires more stringent
time management techniques than other businesses to
ensure that construction projects are completed within
their prescribed times for completion.
In construction contracts, it is the contractors obligation
to complete the works specified in the contract by the
date for completion stated therein. Failure to comply
with this obligation amounts to a breach of a condition
or a warranty depending upon the construction of such
terms2. If the obligation is a condition the innocent party
can repudiate the contract3. Otherwise, that party has a
remedy in damages liquidated if so specified in the
contract, or un-liquidated4. Therefore, it is important to
investigate the precise meaning of completion.
2. Meaning of Completion
Construction contracts, by their construction, can be
divided into two categories:
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Ellis v Hamlen13
Jackson v Eastbourne Local Board 14
Lucas v Drummoyne Borough15
Edward and Webster v Coley16
Ibmac Ltd v Marshall (Homes) Ltd 17
Update Construction Pty Ltd v Rozelle Child Care
Centre Ltd 18
Semour Segnit v Christopher Cotton19
Morse Group Ltd v Cogniesis Ltd 20
Safe Safe Homes Ltd v Massingham21
It is evident from the judgements of many of the above
cases that the entire performance rule conferred the owner
an undeserved benefit at the expense of the contractor.
The inequity of this system led to the emergence of the
doctrine of substantial performance23. The inception
of this doctrine is usually credited to the judgement
promulgated in Dakin & Co. v Lee24, albeit the courts
have evolved this doctrine much earlier than Dakin24.
Under this doctrine a contractor who achieves substantial
completion of its obligations under a contract in
contrast to absolute completion is eligible for
payment. Some of the many cases in which this doctrine
had been upheld in their judgements are as follows:
Cutler v Close25
H Dakin & Co Ltd v Lee26
Jacob and Banners v Kent27
Hoenig v Isaacs28
Kiely & Sons Ltd v Medcraft29
The Law Commission paragraph 2-11 of 19th Annual
Report (1983-1984) of England and Wales has
recommended the removal of the entire performance
rule from contracts, subject to certain limitations,
preferring that the party in breach of the contract should
be entitled to the value of the works it has completed, up
to the occurrence of the breach, if such completed works
have bestowed a benefit to the other party30.
Most of the present day construction contracts have
adopted the substantial performance doctrine instead
of entire performance rule by allowing owners to accept
or take-over the works once they have achieved practical
completion or substantial completion terms used in
JCT forms of contracts and ICE and FIDIC forms of
contracts respectively.
Further, provision made in present day construction
contracts for interim payments to be paid to contractors
as works progress, has alleviated cash flow problems
akin to entire contracts. In the United Kingdom, legal
assent to such interim payments is conferred by sections
109 and 110 of the Housing Grants, Construction and
Regeneration Act31, provided that the agreement is in
writing.
Under UAE law, Article 247 of the Civil Code32 provides
for the performance of contracting parties obligations.
The Article stipulates:
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of contract used in Dubai provide for substantial
completion of the works, it is highly unlikely that the
term completion would be interpreted by the courts
in the UAE in any other way than to mean substantial
completion.
The above proposition can be supported by the decision
given by the Federal Supreme Court (Court of Cassation)
of Abu Dhabi in a case35 related to partial completion of
a contract. There, the court held that if the contractor did
not complete all the agreed work and only completed part
of it, it should be entitled to payment in proportion to
the work it had completed and the value of essential work
required for the contract work. This means that, even if
the contractor has not achieved substantial completion
of the works, it is entitled for payment provided the
employer is benefited from the completed portion of the
works.
In a typical construction contract, the term completion
may be used in at least four separate senses36.
The first is practical or substantial completion. The
second, which may be called works completion, occurs
when all the actual physical work has been finished; this
may or may not coincide with practical or substantial
completion. The third is defects completion, which is
achieved when all defects appearing during the Defects
Liability Period have been made good. The fourth is
legal completion, which occurs when the contractor has
provided all information necessary for the preparation
of the final account and the employer has made his final
payment, so that in legal sense the contract has been
performed on both sides37.
Even though, the meaning of completion akin to latter
three scenarios can be comprehended, the meaning of
practical or substantial completion is not apparent.
Although there is no judicial interpretation of the term
completion promulgated by the UAE courts, such term
has been judicially interpreted in several occasions by the
courts in the United Kingdom. From the interpretations
given by the courts for practical completion, in the
context of JCT standard form contracts, it is clear that
once all the necessary construction works specified in the
contract are performed the works can be considered to be
practically completed for the purposes of such provisions
in the JCT form38. In Westminster City Council v J Jarvis
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Clauses 48.1 and 48.2 provide that when the whole of
the Works, or sections or parts of the Works (if sectional
or partial completions are allowed) are substantially
completed the contractor has to notify the engineer of
such completion with a written undertaking to finish
any outstanding works during the defects liability period
and request the engineer to issue a taking-over certificate
thereof. Within 2145 days of receiving such notification
from the contractor, the engineer must, either issue a
taking-over certificate for such works stating the date
on which such works, in its opinion, are substantially
completed to its satisfaction including passing of all the
prescribed tests, or instruct the contractor specifying all
the work, which in the engineers opinion, is required to
be completed before the issue of a taking-over certificate.
From the above provisions, it is evident that the state of
substantial completion of the works is solely a matter of
interpretation of that state by the engineer by observing
the state of the works and applying its professional
judgment thereof46. It is important to note that as per
the above provisions, it is mandatory for the engineer to
arrive at its decision as to the state of the works and issue
a certificate or notification to the contractor within the
prescribed period. Failure to comply with that provision
would amount to a breach of a warranty by the employer
which may lead to claiming damages therefore by the
contractor.
Out of the bespoke forms, DCA Standard Conditions of
Contract47 provides a definition for substantial completion.
In this form the term substantial completion is defined as:
From the above it can be seen that sufficient compliance
with the above provisions of the contract by the contractor
and architects / contract administrators unhindered
opinion on the state of the works are the sole requirements
necessary to issue a practical completion certificate.
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to consult the employer before issuing a taking-over
certificate or a notification. Hence, it is clear that the
employers perception as to the state of the works will
directly influence the interpretation of the engineer of
such state. Further, apart from the DCA form of contract,
all the other forms, by provisions of clause 2.1, have made
it mandatory for the engineer to obtain specific approval
of the employer to issue a taking-over certificate.
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It is clear from the above stipulations of the bespoke
contracts that the contractor has two important
responsibilities to carry out apart from completing the
works within the time for completion. Accordingly the
contractor is required to:
1. execute the Works diligently as per the contract
This means that the contractor has to carry out
the works in a meticulous manner, thoroughly in
accordance with the contract using specified material
and adhering to specified execution procedures.
Failure to comply with such requirements may render
the completed works not substantially completed
and the contractor may not be able to recover its
entitlement. An analogy can be drawn from Bolton v
Mahadeva54, where, despite completing installation
of the central heating system the plaintiff could not
recover its entitlement as the appeal court held that
the contract was not substantially performed due to
major defects in the completed system.
2. proceed with the Works with due expedition and
without any delay Under this provision, the
contractor is required to proceed with the works
expeditiously mitigating any delay. Therefore, the
contractor does not have any grounds to slow down the
works anticipating catching up with the delayed work
later. As reasoned earlier the contractor has to adhere
to the consented programme of works to achieve
such requirements. Clause 46.1 Rate of Progress,
provides for the engineer to notify the contractor
if the rate of progress is too slow, in the engineers
opinion, to comply with the Time for Completion.
Provisions are made in the bespoke forms55
empowering the employer to terminate the contract
when it is inevitable that the time for completion
would be delayed due to the contractors failure to
proceed with the works expeditiously and diligently
despite receiving notice for slow rate of progress from
the employer. Such provisions override the common
law inference that the contractor is entitled to proceed
with the works at its own pace, provided the time
fixed for completion in the contractor is met. This
proposition was discussed in West Faulkner56, where
the court had to decide whether the contractor was
required to proceed regularly and diligently as per
the terms of the contract. The court affirmed that the
contractor was required to proceed so. In contrast,
if such provision is not an expressed term of the
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Accordingly, an issue of a Defects Liability Certificate
indicates the full completion of works under the contract
and it is issued once the contractor completes whole of
the works including remedying any defects found in the
Defects Liability Period, which is normally one year.
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all subsequent performance under the contract; or an
innominate or intermediate term a breach of which,
depending on its extensiveness, allow the innocent party
to claim damages if the consequences of the breach are
less serious, or otherwise the innocent party has the
same remedy as in the case of a breach of condition; or a
warranty a breach of which entitles the innocent party
to claim damages83.
In Anglia Commercial Properties Ltd v North East Essex
Building Co Ltd84, it was held that the failure of the
defendant to develop the site of the plaintiffs company
within the four year period as stipulated in the contract
was a mere breach of warranty and the plaintiff was
entitled only to recover damages for the contemplated
cost of the delay.
In the standard form contracts85 as well as in the bespoke
forms, a delay in the time for completion is primarily
remedied by a claim for liquidated damages or penalty86.
Such provisions are underpinned by the elaborate
provisions made in these forms for granting extensions to
the time for completion87.
As reasoned earlier, in the presence of the above
provisions in standard and bespoke forms, the time in
these forms will not be of essence. However, the notice
issued to the contractor under the provisions of clause
46.1 Rate of Progress, which empowers the engineer
to notify the contractor that the progress of the works is
too slow to comply with the time for completion, makes
time is of essence. This allows the employer to terminate
the contract under clause 63.1(b)ii, which stipulates
that the employer may, after giving 14 days notice to
the contractor, terminate the contract, if the contractor
without reasonable excuse has failed to proceed with
the Works, or any section thereof, within 28 days after
receiving notice pursuant Sub-Clause 46.1.
Reference
1
2
3
4
48
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
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43 Dubai Municipality (DM) Conditions of Contract
for Works of Civil Engineering Construction
1991, Department of Civil Aviation (DCA)
Standard Conditions of Contract Revision
2, October 2002, Road Transport Authority
(RTA) Conditions of Contract for Works of Civil
Engineering Construction January 2006, Dubai
Properties (DP) Conditions of Contract for Building
& Civil Engineering Construction, Re-measure and
Lump Sum January 2006, and Nakheel General
Conditions of Contract (Re-measure and Lump
Sum) January 2003.
44 Corbett, E.C. (1991). FIDIC 4th A Practical Legal
Guide. Sweet & Maxwell, p275.
45 Period stated in FIDIC Red Book. All of the bespoke
forms provide for 28 days.
46 Nestor, J. (2004). Completion is The Key to
Liquidated Damages: But What is Completion?
Paper D48. Society of Construction Law, UK.
47 See note 43.
48 JCT Standard Building Contract With Quantities
2005, published by the Joint Contract Tribunal.
49 Garner, B.A. (1999). Blacks Law Dictionary, 8th
Edition. Thomson West, p348.
50 (1902) 32 SCR 216.
51 See note 32.
52 Either Primavera Project Planner or Microsoft
Projects.
53 (1994) 71 BLR 1.
54 [1975] QB 326.
55 Clause 63.1(b)ii of the bespoke contracts.
56 See note 53.
57 (1984) 34 BLR 50.
58 See note 32.
59 Refer to Article 872 of Civil Code for the
definition.
60 In the case of Nakheel forms Employers
Representative.
61 Ibid.
62 Case No. 529-22 dated 09/10/2001
63 Capper, P. op. cit. p175A.
64 (1843) 6 Man & G 593.
65 [1893] A.C. 22
66 Wallace, I.N. Duncan. op. cit. p606.
67 [1990] 51 BLR 16.
68 Furst, S & Ramsey V. op.cit. Paragraph 9-002,
p305.
69 Ibid.
70 [1977] 2 W.L.R. 806, HL.
71 [1987] Q.B. 527, at 535, CA.
72 (1837) 3 Bing NC 737.
73 Ibid at 744.
74 Furst, S & Ramsey V. op.cit. Paragraph 9-002, p305
& 306.
75 Boris Homes Ltd v Oakcliff Investment Corpn.
[1994]BLM (June) 5.
76 British and Commonwealth Holding Plc v Quadrex
Holding Inc [1989] 3 All ER 492. See also Charles
Rickards Ltd. V Oppenheim [1950] 1 K.B. 616.
77 (1992) 35 Con LR 86.
78 (1889) 41 ChD 248, CA.
79 Bespoke forms of contract clause 44.1.
80 Ibid clause 47.1.
81 Capper, P. op. cit. p175B.
82 (1849) 3 Ex. 283.
83 Capper, P. op. cit. p175C.
84 (1982) 266 EG 1096.
85 JCT, ICE, NEC, FIDIC etc.
86 Clause 47.1 of the bespoke contracts.
87 Clause 44.1 of the bespoke contracts.
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Abstract
50
Introduction
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procedure may vary from case to case, jurisdiction
to jurisdiction and region to region, there is no
common definition that can be given. This has been
pointed out by the authors of the book Arbitration
of Commercial Disputes as:
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1.1.4.2 The judicial nature of Arbitration
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agreed. There are powers and restrictions granted by
the law for the tribunal, which is outside of the scope
of this article.
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arbitration. However, the most popular establishment
is the Dubai Chamber of Commerce and Industry
Conciliation and Arbitration Centre (known as
Dubai International Arbitration Centre or DIAC)
established in 19948.
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More care has been taken to suit the law into the existing
economic and trade rules while creating provisions
for domestic and international arbitration. The new
draft law is based on the Model Law of the United
Nations Commission on International Trade Laws
(UNCITRAL). The new law will enforce the arbitral
awards domestically and internationally in consistent
with various conventions/treaties including the New
Your Convention. It is also an objective of the new
law to establish an arbitration office to monitor the
international developments in arbitration and make
recommendations for improving the law further.
3 Conclusion
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Certainly, the future of arbitration in the country will
be very successful if the draft arbitration law is well
established.
Specific references
1
Text Books
Articles
Internet Sources
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Is FIDIC-99 Contractor Friendly?
Ajantha Premarathna FRICS, FIQSSL, ACIArb
Contracts Advisor-Dubai Martime City
2.0 INTRODUCTION
Several contracts are signed or entered into at a daily basis.
These contracts may have an agreement or may not have
an agreement. All the contracts should have an agreement
but all the agreement may not fall under the contract.
Out of all these contracts, the construction contracts
are peculiar and they have their own characteristics, in
terms of the form of the contracts upon which parties
sign an agreement, and duration of contracts, etc. The
duration of construction contracts generally takes a longer
period compared with the other commercial contracts.
In addition to the main two parties to the contract it
would have domestic sub contractors, nominated subcontractors, domestic suppliers, nominated suppliers,
design and supervision consultants, project manager,
local authorities, project financer etc. To deal with this
complex nature of construction contracts, in particular
in the international construction contracts, it needs
sophisticated and well drafted conditions of contract
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to execute the contract until the final account has been
signed or until all the disputes have finally been resolved.
To deal with this, several international conditions
of contract have been issued by various professional
institutions, world bodies, and financial institutions etc.
Few of them are:
The International Federation of Consulting Engineers
(Federation Internationale des Ingenieurs Conseils,
(FIDIC),
Institute of Civil Engineers, (ICE) in Great Britan ,
World Bank,
United Nations, etc.
The meaning of international construction contracts may
have different forms; (i). the law of the country where
the contract is made differs to one party, or (ii). the
project is constructed in a different country from another
party, (iii) two different nationals signed a contract for
a construction. Following the formation of FIDIC with
Table 1
Forms of Contract in FIDIC 1987 and 1999
FIDIC 1987
FIDIC 1999
Conditions of Contract for Works of Civil Engineering Conditions of Contract for Construction for Building
Construction 4th edition (Commonly referred as the and Engineering Works Designed by the Employer.
Red Book).
(Commonly referred as the Red Book).
Conditions of Contract for Electrical and Mechanical
Conditions of Contract for Electrical and Mechanical
Plant, and for Building and Engineering Works Designed
Works 3th edition (Commonly referred as the Yellow
by the Contractor (Commonly referred as the Yellow
Book).
Book).
Conditions of Contract for Design-Build and Turnkey Conditions of Contract for Engineering, Procurement,
1st edition in 1995 (Commonly referred as the Orange and Construction and Turnkey (Commonly referred as
Book).
the Silver Book).
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For this paper, the Conditions of Contracts for
Construction of Engineering Work Designed by the
Employer (red book) issued in 1999 is selected. It has
attempted to explore to what extent this conditions of
contract are friendly to the parties to the contract. The
exploration has been specifically carried out with reference
to the FIDIC 1987 and generally with New Engineering
Contracts, Third Edition, (NEC-3) which is commonly
used in the international construction contracts. The
arguments have been compiled in general aspects and on
the specific core areas of the industry as follows:
General aspects
Variations
Payments
Extension of time
Suspension and termination
Claims and disputes
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Table 2- Priority of Documents
FIDIC 1987 Clause 5.2 Priority of Contract
Documents
(1) The Contract Agreement (if completed);
(2) The Letter of Acceptance;
(3) The Tender;
(4) Part II of these Conditions;
(5) Part I of these Conditions; and
(6) Any other document forming part of the Contract.
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terms of contract. The engineer is deemed to act for the
employer unless expressly stated in particular applications
of conditions.
This is somewhat a wide variance from the original concept
of engineers impartial role in the contract administration.
This might expose the contractor to an unknown risk
while pricing the tender during the post contract stage.
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This is a positive step to address the industry ambiguity in
respect of force majeure. The parties now are aware of the
circumstances to which their risks are exposed under the
pretext of force majeure. A part of employers risks stated
in FIDIC-87 sub-clause 20.4, Employers Risks, also are
categorized as force majeure. It has however qualified that
events leading to force majeure beyond the clause 19.1
stated in the sub-contractors agreement does not fall
under the clause 19.1.
There is no defined force majeure clause in NEC-3.
However, similar events which leads to the force majeure
defined in FIDIC-99 have been identified in core clause
80.1, Employers Risks, which is somewhat similar to
the provision set-out in FIDIC-87.
Clearly defined force majeure under sub-clause 1.1.6.4
and identifying events leading to force majeure, describing
its limitation for application and procedure to be applied
in sub-clause 19.1 of FIDIC-99 give an easy opportunity
to the contractors to assess their risks whilst the tender is
being priced.
4.0 VARIATIONS
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September 2009
Table 3
Valuation of Variation in FIDIC- 87 and 99
FIDIC 1987 Clause 52 Valuation of Variation
At the rates and prices set out in the contract. At the rates and prices set out in the contract. (contracted
(contracted rates and prices)
rates and prices)
Failing to above 1 and 2, the engineer with due If above 1 and 2 is failed, a new rate or price shall be
consultation with the employer and the contractor, appropriate for an item of work if;
suitable rates or prices shall be agreed upon between (a) (i) the measured quantity of the item is changed by
the engineer and the contractor.
more than 10% from the quantity of this item in
the bill of quantities or other schedules,
(ii) this change in quantity multiplied by such specified
rate for this item exceeds 0.01% of the accepted
contract amount,
(iii) this change in quantity directly changes the cost per
unit quantity of this item by more than 1%, and
(iv) this item not specified in the contract for as a fixed
rate item
Or
(b) (i) the work is instructed under clause 13, Variations
and Adjustments,
(ii) no rate or price is specified in the contract for this
item, and
(iii) no specified rate or prices is appropriate because
the item of work is not of similar character , or is
not executed under similar conditions, as any item
in the contract.
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5.0 PAYMENTS
5.1 Advance Payment
Table 4
Interim Payment Certificates in FIDIC 87 and 99
FIDIC 1987 Clause 60.1 Monthly Statements
(a). the value of the Permanent Work executed
(b). any other items in the Bill of Quantity including (b). any amount to be added and deducted for changes in
those for Contractors Equipment, Temporary Works,
legislation and changes in cost.
dayworks and the like,
(c) the percentage of the invoice value of listed materials (c). any amount to be deducted for retention.
and Plant delivered to the Site for incorporation in
the Permanent Work but not incorporated in such
Works,
(d ) adjustment under Clause 70, Changes in Cost and (d). any amount to be added and deducted for advance
Legislation
payment and repayment
(e). any amount to be added and deducted for Plant and
(e) any other sum to which the Contractor may be
Materials intended for the Works
entitled under the Contract or otherwise,
(f ). any other addition or deduction which may have
become due under the Contract or otherwise
including Claims.
(g). the deduction of amounts certified in all previous
Payment Certificates.
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Unlike FIDIC-87, the contractor shall submit the
payment statements with supporting documents and this
shall include the report on the progress of the work of that
particular month. Further, the employer shall pay to the
contractor the amount certified in the interim certificates
within 56 days after the engineer receives the statement
and supporting documents (not from the date receipt
by the employer). Whereas in FIDIC-87, the payment
shall be made within 28 days after such interim payment
certificates delivered to the employer by the engineer.
The onerous of application for interim payment in terms
of degree of information to be provided (in FIDIC-87, it
was five items and in FIDIC-99, it has seven items, refer
table 4 above), supporting documents to be submitted
and payment period compared to FIDIC-87 is now on the
Contractors side. In a way, this will facilitate the engineer
to certify the interim payment based upon the submitted
information and supporting documents. Further it is a
practically difficult task for an employer who has internal
bureaucracy to settle an interim payment certificate
within 28 calendar days which is nearly 20 working
days. Therefore, the increase to 56 days is a reasonable
step towards the practicability provided that engineer has
certified it within less than 28 days.
Most of the Contractors are concerned about receiving
payment within due date. In the case of delayed payments,
there should be a remedy for the same. Both FIDIC87 and 99 have provided the remedy for the delayed
payments. FIDIC-87 has not specifically stated the rate
of interest in the general condition but has stated to
insert in the appendix to tender. However, FIDIC-99 has
spelled-out the ways and means to calculate the applicable
rate for finance charges. In case no such rate has been
specified, an annual rate of three percentage points above
the discount rate of the central bank in the country of
the currency of payment would be taken to claim finance
charges for delayed payments. Further, the sub-clause
has strengthened the contractors rights stating that the
contractor shall be entitled to this payment without formal
notice or certification, and without prejudice to any other
right or remedy. This is a remarkable improvement in
the payment related clauses where most of the time the
contractors are suffering from delayed payments from the
employers.
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Table 5
Extension of time clauses
FIDIC 1987
FIDIC 1999
Table 6
Extension of time and its financial implication FIDIC-99
Subclause
1.9
Sub-clause
4.7
4.12
4.24
7.4
8.4
Delayed
Drawings
or
Instructions
Right to Access to the Site
Setting out
Unforeseeable
Physical Conditions
Fossils
Testing
Extension Time for Completion
8.5
2.1
Costs
Profits
Costs
Profits
Costs
Profits
Costs
Costs
Costs
Costs
-----
Profits
----Profits
----
Remarks
Table 6 contd.
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Table 6 contd.
Extension of time and its financial implication FIDIC-99
Subclause
8.9
10.3
13.7
16.1
17.4
19.4
7.0
Sub-clause
Consequences of Suspension
Interface
with
Tests
on
Completion
Adjustments for Changes in
Legislation
Contractors Entitlement to
Suspend Works
Consequences of Employers
Risks
Costs
Profits
Costs
Costs
--Profits
Costs
---
Costs
Profits
Costs
Remarks
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headings. The FIDIC-87, under sub-clause 69.1, Default
of Employer, and FIDIC-99 under sub-clause 16.2,
Termination by Contractor have described the ways and
means which entitles the contractor to terminate the
contract. FIDIC-99 has identified seven such reasons
whilst FIDIC-87 has identified four reasons leading to
termination of the contract by the contractor as illustrate
in the table 7 below with added emphasize.
After giving 14 days notice to the employer, contract can
be terminated by the contractor. However, no notice is
required for sub-clause 16.2.(f ), and (g) of FIDIC-99, for
which the contractor may by noticed the termination of
the contract immediately. There are no such provisions
like sub-clause 16.1.(a), (b), (d), and (e) in FIDIC-87.
However, in FIDIC-87 there is a provision that contractor
is entitle to terminate the contract under sub-clause 69.1
(b), Employer interfering with or obstructing or refusing
any required approval to the issue of any certificate,
and sub-clause 69.1.(d), Employer giving notice to the
contractor that for unforeseen economic reasons it is
impossible for him to continue to meet his contractual
Table7
Termination of Contract due to default of the Employer
FIDIC 1987
FIDIC 1999
(a) Employer failing to pay the certified amount by the (a) The contractor does not receive the reasonable
Engineer within the specified time to the Contractor,
evidence within 42 days after giving notice under
sub-clause 16.1(Contractors Entitlement to Suspend
(b) Employer interfering with or obstructing or refusing
the Work) in respect of a failure to comply with subany required approval to the issue of any certificate,
clause 2.4 (Employers Financial Arrangements),
(c) Employer becoming bankrupt or, being a company, (b) The Engineer fails, within 56 days after receiving a
going into liquidation, other than for the purpose of
statement and supporting documents, to issue the
a scheme of reconstruction or amalgamation, or
relevant payment certificate.
(d) Employer giving notice to the contractor that for (c) The contractor does not receive the amount due
unforeseen economic reasons it is impossible for him
under an interim payment certificate within 42 days
to continue to meet his contractual obligation
after the expiry of the time stated in sub-clause 14.7
(Payment),
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Table 7 contd.
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Table 7 contd.
Termination of Contract due to default of the Employer
FIDIC 1987
FIDIC 1999
(d) The employer substantially fails to perform his
obligations under the contract,
(e) The employer fails to comply with sub-clause 1.6
(Contract Agreement) or sub-clause 1.7 (Assignment),
(f ) Prolonged suspension affects the whole of the work as
described in sub-clause 8.11(Prolonged Suspension),
or
(g) The employer becomes bankrupt or insolvent, goes
into liquidation
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9.0 CONCLUSION
The analysis above shows that most of the new clauses
introduced in FIDIC-99 has taken maximum care to
maintain the balance between the parties. However,
some of the new clauses directly benefit the contractor
or employer. Summarized below are some of those key
clauses identified in terms of how they affect the parties.
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(vii) Payments
A new detailed clause for advance payment has
been included to the conditions with a specimen
for advance payment guarantee. The contractor has
to prepare and submit his/her payment statement
in a fully comprehensive manner identifying the
deductions. Further, in the case of delayed payment
by the employer, the applicable rate of finance has
been given in the sub-clause 14.8, Delayed Payment.
.
(viii) Extension of Time
Following establishing the conditions precedence
for the notices for extension of time, it has diluted
engineers discretionary on the determination of
extension of time in case no notices submitted by the
contractor. Under sub-clause 8.4.(d), contractor is
now entitled to claim extension of time in the case of
unforeseeable shortage in the availability of personnel
or goods caused by epidemic or governmental
action. Further, in accordance with the sub-clause
8.5, Delays Caused by Authorities, the ambiguity is
cleared in terms of the responsibility of the contractor
when a delay is caused by the authorities. It is further
expressly stated that no reduction of time from the
time for completion.
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Claims, if the employer considers he/she is entitled
for payments or extension of the defects notification
period, the employer or the engineer shall give notice
and particulars to the contractor.
10 Conclusion
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Sri Lankas Ombudsman Schemes
Dr. Wickrema Weerasooria
Dr Weerasooria has written over 15 textbooks on Banking and Credit. His Australian book on Banking
Law is titled Weerasoorias Banking Law of Australia. He also continues his academic lectures and writing work and teaches Business Law and Banking, Finance and Administration Law at the Postgraduate
Institute of Management (PIM) in Sri Lanka. Presently serve Insurance Ombudsman of Sri Lanka
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The Parliamentary Ombudsmans functions and powers
are contained in the two Acts of Parliament referred to
above. His main duty is:
Matters
excluded
from
Ombudsmans purview
Parliamentary
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1. Financial Ombudsman
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the Financial Ombudsman can inquire into complaints
by customers of the banks and other financial institutions
who are members of the scheme and those institutions
will be bound by his decisions and awards. Like in other
Ombudsman schemes in foreign countries, the Financial
Ombudsman is not bound or restricted by rules relating
to the laws of evidence or legal procedures which govern
a normal court of low. Nor can lawyers appear before the
Ombudsman. The object of freeing the Ombudsman
from having to observe legal rules and preventing lawyers
appearing before him is to enable him to decide disputes
without delay. All that is required is that he must be
reasonable, fair and just in arriving at this decisions and
awards. This is how Ombudsman schemes in foreign
countries also operate and the Financial Ombudsman of
Sri Lanka will be guided by the foreign schemes.
Ombudsmans Powers
2. Insurance Ombudsman
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a) Non-settlement or delay in the settlement of a claim
b) Inequitable interpretation or application of the terms
and conditions of
the insurance policy
with regard to the following:
Claims including maturities of long-term insurance
policies
Premium payable and premium refunds
(i) Other benefits payable in terms of the insurance
policy
(ii) Any complaint by a policy-holder against an insurance
agent relating to an insurance policy.
(iii) Any complaint by an insurance agent or broker against
an insurance company in relation to an insurance
policy.
(iv) Any matter referred to the Ombudsman by the
Insurance Board of Sri Lanka (IBSL)
(v) Any matter referred to the Ombudsman by the
Consumer Affairs Authority of Sri Lanka (CAA)
Any decision or award of the Insurance Ombudsman upto
Rs. 500,00/- is binding on the insurance company but
not on the complainant who can proceed to arbitration
or litigation etc. Above Rs. 500,000/- the award is not
binding on the insurer but the Ombudsman decision can
be made available to an arbitrator or to the court if the
insurer contests it in that manner.
This writer was appointed as Sri Lankas first Insurance
Ombudsman in February 2005. In the eyes of the
insurance companies which are now all in private sector
hands and the insurance policy holders the possible
complainants the insurance ombudsman scheme is
working successfully.
3. Tax Ombudsman
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Where the Ombudsman decides not to conduct an inquiry
he will communicate such decision to the complainant
together with reasons therefore, such communication
shall be treated as the conclusion of such complaint.
Every complaint with or without any inquiry being
conducted will be dealt with to a finish within a period of
ninety (90) days from the date on which the complaint
is received.
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