Building Department

BASICS OF CONSTRUCTION PROJECT MANAGEMENT

WITH AN
A EMPHASIS
AS S ON
O
EFFECTIVE CONTRACT ADMINISTRATION

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 What is a Project?
j

A Project
P j t isi a temporary
t endeavor
d
undertaken to create a unique product,
service or result.

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 Project Characteristics Slide 1 of 3

1. Temporary
p y
Temporary means every project has a definite
beginning and a definite end
Th end
The d is
i reached
h d when
h theth projects
j t objectives
bj ti have
h
been achieved

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 Project Characteristics Slide 2 of 3

2. Unique Products, Services or Results

Uniqueness is an important characteristic
For example, many thousands of buildings have been
built in Dubai, but each building is unique different
owner, different
diff t design,
d i different
diff t location,
l ti different
diff t
contractors, different use etc.
The ppresence of repetitive
p elements does not change g
the fundamental uniqueness of the project work.

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 Project Characteristics Slide 3 of 3

3 Progressive
3. P i Elaboration
El b ti (P.E)
(P E)
P.E means developing in steps and continuing in
increments
For example, the project scope will be broadly
described early in the project and made more explicit
and
d detailed
d t il d as th
the project
j t tteam develops
d l abbetter
tt andd
more complex understanding of the objectives and
deliverables.

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 Project Constraints

Ti
Time C t
Cost

PROJECT

Scope
p
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 Project Examples

Constructing a building or facility

Moving a companys office to a new location
Developing a new Product or Service
Power Plant construction
Telecom Tower Erection
Etc.

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 Wh t iis P
What Project
j t Management?
M t?

Project Management is the application of knowledge,

skills, tools and techniques to project activities to
meet Project requirements

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Wh is
When i a Project
P j t badly
b dl Managed?
M d?
Cost or schedule overruns
Unrealistic schedules
Changing of work or schedules
Poor communication and increased conflict
Running out of time at the end of the project
Unsatisfactory quality
Too many project meetings
Low Morale

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Effective Project Management requires that a project
management team understands and use knowledge
and skills from at least five areas of expertise:

The Project Management body of knowledge

Application area knowledge, standards, and regulations
Understanding of project environment
General management knowledge and skills
Interpersonal Skills

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The knowledge of the Project Management consists of:

Project Life Cycle definition

Five project management process groups
Nine knowledge areas

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Interpersonal Skills:

Effective Communication
Influencing the Organization
Leadership
Motivation
N
Negotiation
ti ti and
d Conflict
C fli t MManagementt
Problem Solving

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 Project Management Nine Knowledge Areas

1) Project
P j Integration
I i Management
M
2) Project Scope Management
3) Project Time Management
4) Project Cost Management
5) Project Quality Management
6) Project Human Resources Management
7) Project Communications Management
8) Project Risk Management
9) Project Procurement Management

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 Project Quality Management

Quality
Q li Pl Planning
i

Perform Quality Assurance

Perform Quality Control

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 Project Risk Management

Risk Management Planning

Risk Identification

Qualitative Risk Analysis

Quantitative Risk Analysis

Risk
Ri k R
Response Pl
Planning
i

Risk Monitoring
g and Control

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 Project Procurement Management

9 Plan Purchases and Acquisitions

9 Plan Contracting

9 Request Seller (Contractor) Responses

9 Select Sellers (or Contractors)

9 Contract
C t t Administration
Ad i i t ti

9 Contract Closure

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 Contract Administration Some Definitions
A
A project
j t may consist
i t off a number
b off contracts
t t for
f the
th supply
l off
goods and materials or the supply of a service.
There are usually y two p parties to each contract. The first may
y be
called the employer, the client or the buyer. The second party may be
called the contractor, the seller or the provider.
The Dubai Municipality (DM) Standard Conditions of Contract for
Civil Engineering Works use the terms Employer and Contractor
and therefore this lecture will generally use these terms.
Another
h brief
b i f explanation
l i isi required
i d regarding
di the
h Engineer.
i He
is appointed by the Employer to administer the Contract but he is not
a party to the contract.

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 Contract Administration - Basics
Both the Employer (the Buyer) and the Contractor (the Seller)
administer the contract for similar purposes.
Each party ensures that they meet their contractual obligations and
that their legal and contractual rights are protected.
The contract administration process ensures that the Contractor
The Contractorss
performance meets contractual requirements and that the Employer
performs according to the terms of the contract.
On
O larger
l projects
j t with
ith multiple
lti l products,
d t services,
i andd inputs,
i t a key
k
aspect of contract administration is managing interfaces among the
various Contractors.
The legal nature of the contractual relationship makes it imperative
that the project management team is acutely aware of the legal
implications of actions taken when administering a contract.

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 Contract Administration Some Essentials

Provisions in the Contract for Extension of Time and Prolongation Costs

Dealing with Contractor (or Concurrent) Delays
Calculation of Prolongation Costs
Contract Dispute Settlement Procedures

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 Standard Forms of Contract
International Federation of Consulting Engineers - FIDIC International Standard
Australian
Australian Standard General Conditions of Contract - AS 4000 Australia
New Engineering Contract Conditions - NEC United Kingdom
Federal Acquisition Regulation (FAR) - United States
American Institute of Architects - AIA A201 - United States
Engineering Advancement Association of Japan ENAA - Japan
Construction Industry
y Development
p Board - Singapore
g p
Contract for Building and Civil Engineering Major Works - GC/Works/1 United Kingdom
The World Bank, Standard Bidding Documents, Procurement of Works International (FIDIC
based))
Joint Contracts Tribunal JCT United Kingdom
Institution of Civil Engineers ICE United Kingdom

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 FIDIC An Introduction
d

Founded
Founded in 1913
Expanded in 1945 to include 40 national associations
Published first Conditions of Contract in 1957
Presently has 70 member associations from 70 Countries
Headquarters in Switzerland
Web Site : www.fidic.org
www fidic org
Pre 1957 no internationally recognised contract conditions
First red book based on UK ICE conditions
FIDIC has international committees to improve contracts
Dubai Municipality (DM) Standard Conditions are based on FIDIC

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Provisions in the Contract for Extension of Time and
Prolongation Costs
Time is of Essence
Delays are inevitable on construction projects
The only
ypproject
j to have completed
p on time is a Mosque.
q Divine
intervention (or Gods help) was later understood to be the force behind
the timely completion of this Mosque.
Time and Money go hand-in-hand. This makes it imperative to take
control of project delays; timely and effectively.
This is to avoid Time
This Time-at-Large
at Large situations and Constructive Acceleration
Claims.

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Provisions in the Contract for Extension of Time

Extension of Time (EOT) claims can arise under several clauses of the DM
Standard Conditions of Contract (1999 Version), such as;

Sub-Clauses 6.3/6.4 related to Delay in Issuing Documents like drawings

/ /
Sub-Clauses 12.2/12.3/12.4 related to Adverse Physical
y Obstructions
Sub-Clause 27.1 related discovery of Fossils
Sub-Clause 36.5 related to Tests not Provided for
Sub Clause 40.2
Sub-Clause 40 2 related to Instructions to Suspend the Works by Engineer
Sub-Clause 42.2 related to Failure to give Possession of Site
Clause 44 related to several causes of delay
Sub-Clause 69.4 related to Default of Employer
Other Employers Breaches as defined in the Contract

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 Classification of Delays - Slide 1 of 3

(1) Excusable and Compensable

[Th
[These delays
d l are the
h responsibility
ibili off the
h Employer]
E l ]

Extension of Time should be granted

Contractor is relieved from the liability of Liquidated Damages

Contractor may claim for reimbursement of Prolongation Costs

Examples:
Late Possession of Site by the Employer
Late issue of construction drawings by the Engineer
Late approval of Shop Drawings by Engineer
Etc.

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 Classification of Delays - Slide 2 of 3

(2) Excusable but Non-Compensable

[Th
[These delays
d l are regarded
d d as Neutral]
N l]

Extension of Time should be granted

Contractor is relieved from the liability of Liquidated Damages

Contractor may NOT claim for reimbursement of Prolongation Costs

Examples:
Exceptional Rainfall
Unforeseen Public Holiday announced by Local
Government
Etc.

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 Classification of Delays - Slide 3 of 3

(3) Inexcusable (Contractor or Culpable or Concurrent)

[Th
[These delays
d l are regarded
d d the
h responsibility
ibili off the
h Contractor]
C ]

Extension of Time should NOT be granted

Contractor is NOT relieved from the liability of Liquidated Damages

Contractor may NOT claim for reimbursement of Prolongation Costs

Examples:
Late Mobilization of Construction Equipment
Slow Progress due to insufficient Resources
Etc.

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 Corrective Action following Delays
Slide 1 of 3

Acceleration:

Delay Types (1) and (2) will require an Instruction to Accelerate Pursuant to
Sub-Clause 46.2.
46 2

Contractor will be entitled to additional costs of acceleration.

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 Corrective Action following Delays
Slide 2 of 3

Expedite Progress:

Delay Type (3) will require the Engineer to issue a Sub-Clause 46.1 Notice
requiring
i i the
h Contractor
C to take
k appropriate
i measures to recover hi
his delays.
d l

These measures to be implemented by the Contractor at his own expense.

No reimbursement of additional costs to the Contractor.

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 Corrective Action following Delays
Slide 3 of 3

Contractors Duty to Mitigate:

Irrespective of the Type of Delay, the Contractor has the duty, as expressly
defined by Sub-Clause 53.3(c),
53 3(c) to mitigate or reduce the effect of delays
delays, such
as;

Increase (or divert) resources on an activity on the critical path

Change sequence of activities to reduce the longest path of the project
Increase motivation of workforce
Change method of construction
Etc.
Etc

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 Procedure for EOT Claims Slide 1 of 5

Procedure Specified by Clauses 44 and 53:

The Contractor must follow the procedure and mechanism defined in Clauses 44
and 53. Failure to follow the specified procedure and mechanism could result in
the invalidation of the related claim. Some of the procedural requirements are;

Contractor to timely issue a Notice of Delay: The intention and spirit of the Contract is
that the Engineer and the Employer are timely aware that there may be a claim in
respect of a delay event and that corrective or remedial action may be initiated to reduce
or mitigate the effects of the delay. This also gives the Engineer and Employer an
opportunity to reverse the cause of the delay event.

Contractors obligation to keep Contemporary Records: Upon the happening of the

delay event, the Contractor shall keep such contemporary records as may reasonably be
necessary to support any claim he may subsequently wish to make.

Engineers obligation to inspect Contemporary Records: Without necessarily admitting

the Employers liability, the Engineer shall, on receipt of a Delay Notice, inspect such
contemporary records and may instruct the Contractor to keep any further
contemporary records as are reasonable and may be material to the claim of which
Notice has been given. The Contractor shall permit the Engineer to inspect all records
and shall supply him with copies thereof as and when the Engineer so instructs.

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 Procedure for EOT Claims Slide 2 of 5
Procedure Specified by Clauses 44 and 53 (Contd):

Contractor to timely submit Claim Particulars: Within 28 days of giving a Delay

Notice, or at such other reasonable time as may be agreed by the Engineer, the
Contractor shall send to the Engineer an account giving detailed particulars of the time
extension claimed and the grounds upon which the claim is based.

Where the event giving rise to the claim has a continuing effect, such account shall be
considered to be an interim account and the Contractor shall send further interim
accounts giving the accumulated claim and any further grounds upon which it is based
at the end of each week following the submission of the first account, or at such other
intervals as the Engineer may reasonably require. In cases where interim accounts are
sent to the Engineer, the Contractor shall send a final account within 28 days of the end
of the effects resulting from the event.

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 Procedure for EOT Claims Slide 3 of 5
Procedure Specified by Clauses 44 and 53 (Contd):

Contractor to submit Sufficient Claim Particulars: The Claim Particulars submitted by

the Contractor should, as a minimum, contain;

the description of the event including the timing and nature of the event
the impact of the event on the Contractors Work Program, resources,
deployment of Materials, Equipment and Personnel, the Works, the Contractors
site operations, costs, etc.
an analysis of the measures undertaken to deal with or alleviate the problem
references to the applicable Clauses of the Contract and to the critical path of the
Contractors approved d Work Program pursuant to the provisions off Clauses
l 14.1
and 14.2
a detailed justification of the time delay suffered by the Contractor, including
the details of all the calculations.

any other
h requirement
i off the
h Engineer
i related
l d to the
h format,
f level
l l off details,
d il
arguments, documentation, etc.
supporting documents

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 Procedure for EOT Claims Slide 4 of 5
Procedure Specified by Clauses 44 and 53 (Contd):

Contractors Failure to Comply with Specified Procedure: There is an express

provision in the DM Contract Conditions, Sub-Clause 53.4, which specifies that if the
Contractor fails to comply
p y with any
y of the p
provisions of Clauses 44 and 53,, the related
claim shall be invalidated.

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 Procedure for EOT Claims Slide 5 of 5
Procedure Specified by Clauses 44 and 53 (Contd):

g
Engineers Obligation
g to timely
y Determine the Contractors Claim: Upon
p receiptp of the
Contractors account, after due consultation with the Employer, the Engineer shall take
one of the following actions:

j
reject the Contractors claim on the ground
g that either the Contractor did not
comply with the provisions of Clause 53.4 or that the Contractors arguments were
not supported by the provisions of the referenced Clauses of the Contract.

return the Contractors claim to the Contractor and set a new deadline for
resubmission, if the Contractor did not develop his claim, did not follow the
Engineers instructions, or the Contractors arguments were insufficiently
developed, calculations incorrect, or the documentation incomplete.

accept the Contractors claim for analysis and verification. In this case, the
Engineer may ask the Contractor to provide further clarifications, if required, and
the Contractor shall comply. The Engineer shall prepare a detailed analysis of the
Contractors claim with specific
p recommendations to the Employer.
p y Within 28
days from the receipt of the Contractors detailed, complete and valid claim, the
Engineer shall submit both the Contractors original claim and the Engineers
analysis to the Employer.

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 Requirement to Consult with the Parties

It is important that the Engineer should carry out Consultations with

the Parties (especially the Contractor) prior to issuing a Determination
of the Contractors
Contractor s Claims
Claims.

After Due Consultation by the Engineer with the Employer and the
Contractor means that the Engineer shall consult with the Employer
Contractor
and the Contractor to such extent as is appropriate in the
circumstances.. The term due consultation shall not be construed in
anyy instance as to mean no consultation with the Employer
p y and the
Contractor

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 Timebar Provisions related to Claims

DM Contract, its meaning and interpretation, and the relation between

the parties shall be governed by the Laws of UAE and Dubai [Clauses
5.1 and 1.1(f)].

It is
i th
therefore
f important
i t t tto k
keep the
th ti
timebar
b provisions
i i off th
the
governing law into perspective in the event of crystallization of a
dispute with respect of a claim.

Timebar provisions of UAE law are very relaxed (to be verified by

legal professionals)

It is therefore suggested and recommended to assess a claim with the

aim of reducing future disputes

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EOT Claims : Assessment Parameters

Factual Data Verification Primary and most Important

Critical Path
Who owns the Float?
Contractor Delays and how these effect Entitlement
EOT and its relation with Compensation for Delay
Method of Schedule Analysis
As-Planned
A Pl d Vs.
V As-Built
A B ilt Comparison
C i
Impacted As-Planned
Collapsed As-Built / But-For
Time Slice / Sub-Networks / Time-Impact
Etc.

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Contractor Delays and how these effect Entitlement

Contractor Delays are Type 3 delays (Inexcusable) and are as a result of Contractors own
breaches and mistakes

An example
A l off a C
Contractor
t t Delay
D l is
i iinsufficient
ffi i t resources ((manpower, equipment
i t etc.)
t )
resulting in slow progress

Contractor Delays
y should have NO bearing
g on EOT entitlement. EOT should NOT reduce
due to Contractor Delays.

Contractor Delays DO have a bearing on Prolongation Costs Claims.

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EOT and its relation with Compensation
p for Delay
y

Time is NOT equal

q to Money.
y

Entitlement to an EOT does NOT automatically lead to entitlement to compensation.

If the Contractor incurs additional costs (such as Prolongation Costs) that are caused both
by Excusable Delays and Contractor Delays, then the Contractor should only recover
compensation if it is able to separate the additional costs caused by the Employer Delays
from those caused by the Contractor Delays.

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 Prolongation Costs - General

Prolongation or Delay Costs are additional costs associated with the extended Time for
Completion (or period of EOT).

Cost means all the expenditure properly incurred or to be incurred, whether on or off the
Site, including overhead and other charges and expenses properly allocable thereto, but does
not include any allowance for profit.

Prolongation Costs are, generally speaking, the Time-Related Costs associated with the
extended period determined following an assessment of an Extension of Time (EOT).

Time related costs is a general term that is used to differentiate between those costs that are
di tl related
directly l t d to
t the
th execution
ti off the
th work k on the
th jobsite
j b it and
d are incurred
i d only
l when
h theth
work is in progress, e.g. the cost of steel fixers or machine operators working on the site. Time-
Related Costs are costs that arise independently of the progress of the work on the jobsite.

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 Prolongation Costs General (contd)

When the Contractor sets up his Site establishment and his head office support team, he is
committed to a regular programme of time-related expenditures that will accrue almost
independently of the amount of work carried out on the jobsite. Some of these time-related
costs are:

Supervision and Management

Technical and Clerical support
Head Office costs
Site facilities, Water, Electricity etc.

The Contactor also has, on Site, plant and equipment which may not be working and requiring
operators and fuel but still represents a cost. These costs are of two types:

It is depreciating in value, and

The cost of purchase has not been recovered through payments for work done and
therefore
h f financing
fi i off the
h outstanding
di cost off purchase
h is
i an ongoing
i cost.

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 Prolongation Costs General (contd)

Time related costs begin to be incurred as soon as the Contractor sets up his Site organization
organization.
These costs are as a result of his presence on the Site. These costs cannot be reduced even
though the work on the jobsite slows down or stops due to delays.

Therefore project time-related costs are accrued irrespective of whether site work is ongoing or
is on standby. These costs are also independent from the rates of production. Slower rates of
production do not reduce time-related costs.

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 Elements of Prolongation Costs

Extended hire or ownership costs (depreciation etc.) of plant and equipment

Extended employment of general labour
Extended manufacturing, fabrication and temporary works facilities
Extended employment of site staff
Extended hire or depreciation and maintenance of site offices and equipment.
Extended utility services
Extended transportation services and storage facilities
Extended safety and quality assurance facilities
Extended bonds, insurances and warranties
Extended head office overheads
Extended hire of external consultants
Increased cost of labour, plant and materials employed, hired or purchased during the extended period due to
inflation
Increased cost of site and head office overhead resources employed or hired during the extended period due to
inflation
Idle resources and other effects of inclement weather encountered during the extended period
Extended Inventory Financing Costs
Financing all the above

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 Extended Head Office Overheads

Calculation of Head Office Overheads is permitted using one of the following Formulae:

Hudson
H d
Corrected Hudson
Emden
Eichleay

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Standard for Evaluation of Construction Delay Issues

One of the most difficult areas in dealing with delay and associated cost
claims (unless the works being carried out are very simple) is establishing
the impact
p of individual delays
y on the completion
p date and whether these
impacts should be compensated. The Society of Construction Laws Delay
and Disruption Protocol provides a fair and equitable basis for agreed
methods and mechanism of dealing with such issues. It is important to
emphasise that if the Protocol is to be effective its recommendations must be
implemented from the start of the contract and the most important of these
recommendations is the preparation and regular updating of programmes.

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It is, therefore, recommended that the;

should be adopted as a Standard and

should be,
be where possible,
possible incorporated
in the Construction Contracts
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The SCL Protocol can be downloaded,
free of cost, from:

www.eotprotocol.com
l

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 Contract Disputes

When either party (Employer or the Contractor) is dissatisfied with any opinion,
instruction, determination, certificate, or valuation of the Engineer, the matter in
di
dispute
t may b be referred
f d ffor settlement
ttl tbby th
the d
defined
fi d procedure
d andd mechanism
h i
defined in the Contract.

For the specific case of DM Contract Conditions,

Conditions this procedure and mechanism is
defined by the section titled Settlement of Disputes (Sub-Clauses 67.1 to 67.6).

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 Dispute Avoidance

The primary focus of the Contractor, the Employer and the Engineer should
be to be able to avoid disputes
Disputes are expensive and sometimes unnecessary
In this respect both the parties and the Engineer have certain obligations,
which must be fulfilled
The Contractor should focus on real
real issues and avoid unnecessary claims
The Engineer should act fairly and impartially
The Engineer to avoid delays in issuing opinions, determinations,
instructions etc.
The Employer to act fairly and impartially
The Employer to avoid delay in issuing approvals

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 Dispute Settlement Procedure

The Settlement
Settlement of Disputes
Disputes procedure specified by the DM
Standard Conditions of Contract is a multi-tier (or several steps)
process

The higher tiers get more and more expensive

Thus it suits both parties to resolve disputes as early as possible

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 Settlement of Disputes Procedure
Ti 1 Engineers
Tier E i Decision
D i i

Tier 1 of the Settlement of Disputes procedure is specified by Sub-Clause 67.1

Engineerss Decision
Engineer

Either party may refer a matter in dispute to the Engineer for his Decision

Referring party must comply with the specified procedure. Failing which, the request
for Decision may be rejected

Once the Engineer issues a Decision, the Contractor and the Employer shall give
effect forthwith to every such decision of the Engineer unless and until the same
shall be revised in either of the higher tiers of the Settlement of Disputes Procedure

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 Settlement of Disputes Procedure
Ti 2 Amicable
Tier A i bl Settlement
S ttl t

Tier 2 of the Settlement of Disputes procedure is specified by Sub-Clause

67 2 Amicable Settlement
67.2

Where a party is dissatisfied by an Engineers Decision and where a notice

off intention
i i to commence conciliation
ili i or arbitration
bi i (3rdd and d 4th Tiers)
Ti ) as to
a dispute has been given, the parties shall attempt to settle such dispute
amicably before commencement of conciliation or arbitration

The parties are permitted a maximum of 56 days to amicably settle a dispute

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 Settlement of Disputes Procedure
Ti 3 Conciliation
Tier C ili ti

Tier 3 of the Settlement of Disputes procedure is specified by Sub-Clause 67.3

Conciliation

Failure to reach amicably settle a dispute is a pre-condition for the commencement of

Conciliation

The Conciliator is to be appointed pursuant to the current Dubai Municipalitys

Rules of Arbitration and Conciliation

The Conciliator has 28 days from the date of submission of the dispute to the
Conciliator, or such extended time as may be mutually agreed by the Parties, to
resolve the dispute

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 Settlement of Disputes Procedure
Ti 4 Arbitration
Tier A bit ti

Tier 4 of the Settlement of Disputes procedure is specified by Sub-Clause 67.4

Arbitration
Either party who is dissatisfied with the results of Conciliation may commence
Arbitration.
bi i
Failure to amicably settle a dispute is a pre-condition for the commencement of
Arbitration
The Arbitral Tribunal is to be appointed
pp pursuant
p to the current Dubai
Municipalitys Rules of Arbitration and Conciliation
Arbitration may commence prior to or after the completion of the Works, provided
that the obligations of the Employer, the Engineer and the Contractor shall not be
altered by reason of the arbitration being conducted during the progress of the
W k
Works.
All costs of arbitration shall initially be shared equally between the Parties, but the
Arbitral Tribunal shall have the right, when making its award, to allocate such costs
between the Parties as it shall think fit.

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Dubai Municipality and Construction Solutions
thank you for attendance and contribution.

We wish you all Good Luck.

Construction Solutions (www.cspk.org) will remain available for
further discussions on the foregoing and any other relevant issue.

This Lecture was delivered by the Managing Partner of

Construction Solutions, Mr. Khalil Tayab Hasan. For any queries
and
d clarifications,
l ifi i please
l ffeell ffree to contact M
Mr. H
Hasan at;
khalilhasan@cspk.org
kh lilh
khalilhasan@hotmail.com
@h t il
+971 50 8861709

+92 345 8500195