Referring a dispute

•The Contractor usually refers the dispute under cl. 67.1 of the
Contract.
•First the Contractor writes to the Engineer for payment of disputed
rate/issue as the Contractor interprets it.
• The Engineer makes his determination /decision.
•If Engineer decision does not satisfy the Contractor ,he raises his
claim with the Employer.
•If he does not get a satisfactory reply with in 14 days of making
reference , he writes to the Chairman DRB for resolution of the said
dispute.
•The board is permitted only 56 days from the date Chairman
receives the notice of dispute.
•The Chairman writes to Project Director to give his defence reply
with in 7-10 days of receiving the reply.
•The Contractor is asked to submit the counter reply , if any within
• The Board fixes special DRB meeting usually at site of work or where
PD’s / Engineer HQ is located.
• The meeting is attended by Contractor’s authorised representatives
and Engineer (TL) and Project Director.
• The aggrieved party makes its submission . The meeting usually
lasts 2-3 days.
• The other party replies.
• Both parties are requested to submit gist of written arguments by
another one week or so if they desire so.
• The Board members meet privately at convenient place and have
their internal meeting to deliberate the issue.
• The crux of submission by each party , comments of Engineer if any ,
are documented.
• The Board makes its reasoned recommendations . The
recommendations are usually unanimous but these could be
2:1/majoirty as well.
• If these can’t be done in time, further time extension is given by the
parties to the dispute.
• The recommendations are legal if the non aggrieved party does not
raise any objection to DRB’s recommendation with 14/28/56 days of
making the same, and the recommendations become legally
enforceable.
Otherwise, the party which feels aggrieved by the recommendations and
goes in for Arbitration.
Advantages :
• Normally i.e. in 99% cases the dispute is referred during execution
period of the project.
• The concerned staff officials of the Engineer, The Contractor and the
Employer are available for consultation.
• The assessment of ground realities is quite sound and
• There is no danger of misrepresentation/hiding of facts by any party.
• It is time bound and fast track dispute resolution method.
• Disadvantage: the board recommendations are recommendatory in
nature have no teeth . These are not taken that seriously.
• Usually one of the parties goes in for arbitration.
• The success rate in India is quite poor.
• Reasons for non acceptance of Board’s
recommendations
 Lack of pragmatism.
 The dissatisfied party wants to exhaust the
Arbitration channel also.
• Experience
 All World Bank/ADB funded , projects whether of
GOI or State governments incorporate the provision
of DRB in their contract document under Cl. 67.1 of
G.C.C ( 1996 amendment ) of FIDIC IV.
 Observations
• The period of 56 needs to be enhanced to 90
days and to 120 days in complex cases .
• There should be provision for time extension in
the contract document.
• Now time is being extended by both parties with
mutual consent w/o any provision in the contract.
• If Board fails to make recommendations with in
prescribed time/extended time due to either of the
parties refusing for initial time extension or 2 nd
time extension , the whole exercise goes waste.
• In that case it is loss of human resources.
CASE STUDIES
 Case 1
The Employer specified that a drainage layer will be provided
over the sub grade to drain away the sub-surface water.
The gradation of the DL was such that:
• The DL was uncompactable.
•Contactor raised the matter with the Engineer.
•Engineer verified and observed that the D.L. could not be actually
compacted.
•The Employer changed the specification of DL.
•Employer specified table 400.1 of M/o RTH specification with change in last
two sieves.
•The changed grading was compactable.
•The Employer also mentioned permeability as criteria.

•The Contractor tried GSB with naturally occurring materials.

 GSB
• The permeability requirement was not satisfied.
• The Contractor was asked to use crushed GSB
• Permeability requirement was satisfied.
• Contractor determined the rates of crushed GSB which was quite high.
• Employer insisted to pay at BOQ rates of GSB which incidentally were
for natural GSB.
• The dispute arose.
• Employer did not pay at Contractor’s rates.
• Engineer got some rates approved from the Employer as per contract
provisions.
• The Contactor did not agree.
• Matter referred to DRB.
• DRB deliberated on the claim.
• Both sides made their oral presentations.
• DRB held private meetings.
• Recommendations were finalised.
• A.T. decided in favour of the Contractor.
 CASE 2

Reinforced Earth Retaining Wall

• The Employer in the contract document authorised the Contractor to give his
own design.
• The facial area of RE wall panels was quantified in the agreement in square
meters.
• The Geo grid area was not specified nor was its type (make) , i.e. size of
aperture , thickness of ropes, tensile strength , and at what intervals to be laid
was mentioned.
• The Contractor chose a costly design , manufactured by a particular firm in
USA.
• The design supplied by Contractor was approved/optimised by the consultant.
• The Employer paid the item at quite reduced rates.
• The Contractor raised the claim with DRB.
• After due procedure the DRB unanimously held that Ccontractor be paid at his
rates.
• The Employer did not agree.
• The Contractor went in for Arbitration.
• In the meantime, the Employer got the design supplied by the Contractor
checked from independent body of experts.
• The Arbitration went in favour of Contractor by majority decision.
• The Employer has taken the matter to the Court.
 CASE 3
• Variation request for Granular Sub Base (GSB).
• GSB had been provided as sub base below DLC in a
project Road of rigid pavement. The Contractor wanted to
use crushed slag aggregates. The JMF was prepared
using:-
• crushed slag ( main constituent)
• Crushed stone
• And crushed stone dust.
• Slag is very much an “aggregate “
• The GSB with above JMF was not approved by the
Engineer as this was against the current practice of client
which is that no slag ( although met all technical
parameters ) shall be used for construction of the GSB
layer.
• The contractor moved to DRB with claim as using only crushed stone
aggregate was costly to him and more over quarry for stone was
available quit late. The Engineer clarified that in the methodology
submitted by the Contractor slag had not been mentioned by him. It was
laterite but now the Contractor said he wanted to do GSB layer with slag
as GSB can be done with it. Engineer disapproved it saying definition of
aggregate is no where , but only its description is given and in absence
of definition of slag as aggregate , he cannot approve the same.
• The Board deliberated the issue and found out that crushed slag can be
used only with the specific approval of the Engineer . The Contract
specifications ( modified) said “ use of moorum either alone or in
combination shall not be allowed “ the Contractor insisted as long as they
meet the technical specification, he was free to use slag in GSB.
• The Board up held decision of Engineer not to permit use of slag.
• Contractor has gone for Arbitration.
 CASE 4
• Separation membrane below DLC.
• It was deleted on technical considerations.
• The Engineer deducted rates per Cum of
DLC which was not accepted by the
Contractor , being too high.
• The matter referred to DRB.
• After due presentation by the both parties
and deliberations by DRB members , the
rate was moderated by reducing it by 31%
after fresh analyses by DRB members.
• The Employer went in for Arbitration.
 CASE 5
• Sand filling in Embankment.
• The reaches where Earth Work was to be done on a National
Highway Project was all water logged in km after km.
• After proper official orders of the Engineer, the Contractor did
embankment work with sand which was brought from a longer lead
from a river.
• The Contractor applied for issue of V.O. at enhanced rates.
Engineer demanded analysis of rates which Contractor did supply.
The Engineer did not approve the rate beyond BOQ rates of E.W.
• The DRB deliberated on the matter and recommended that
Engineer work out a varied rate taking extra lead into consideration
and pay the Contractor accordingly.
• The Employer was not satisfied and went in for Arbitration
 CASE 6

Variation Order

WBM /Stone Dust

• The Project Director and TL ordered repair
of road under ‘emergency ‘ .
• Emergency due to VIP’s visit
• Contractor was assured that VO will be
prepared with in a month .
• The contractor repaired the road by WBM
specifications.
• Stone Dust was also used .
• Shoulders were also repaired .
• The rates were not finalised by the Engineer.
• The rates were analysed from market survey
jointly by TL and Contractor.
• The Rates still not finalised .
• Ultimately the rates were analysed as per MoRTH
SDB (2003) .
• Even then the rates were not sent to Employer for
approval.
• The whole process lingered on for more than
5 years.
• Although , in every monthly meeting TL
promised that rates will be forwarded to
Employer with in a week or so .
• Matter came before DRB .
• DRB made unanimous recommendation of
rates.
• Contractor was not paid.
• Employer went in for Arbitration.
• How do we define this Emergency
?
• Such delays erode faith in the institution
of Engineer.
 CASE 7

Abnormal increase in steel prices.

• Contractor quoted RCC rates considering
the then 28 days prior to bid rates of steel.
• The prices over the period of execution of
project increased disproportionately .
• It was Rs. 16000/-MT at the time of bid.
• It rose upto Rs. 28000/- MT .
• Contractor suffered alleged loss.
• Matter referred to DRB as a claim for
enhancement of rates.
• Two members recommended 20% Ad hoc
increase on Rs. 16000/- .
• Third member recommended , no
enhancement as per Contract condition.
• However, he recommended enhancement
as an act of benevolence under
administrative order .
• Matter before Arbitration .
 CASE 8

LEVY OF ENTRY TAX ON

CEMENT
• The NHAI works being executed in state of
U.P.
• From 16-05-2003 U.P. government levied
2% entry tax on cement brought from other
states.
• Contractor claimed the amount under cl.
70.8 – subsequent legislation .
• Engineer did not pay.
• Matter came before DRB.
• DRB got verified that OPC cement not being
produced in any factory in U.P.
• CMA confirmed it.
• DRB unanimously recommended payment
of entry tax to Contractor.
• Employer did not accept the
recommendations .
• Matter in Arbitation.
 CASE 9

INCREASE IN ROYALTY ON
AGGERATES.
• In U.P. government revised rates of Royalty
on crushed aggregates.
• This was done by Gazette notification .
• Contractor claimed enhanced rates under
Cl. 70.8 – subsequent legislation .
• Engineer did not pay.
• Employer sought clarification from Ministry
Of Commerce .
• Ministry of Commerce clarified aggregates
are not considered for determining WPI .
• Matter came before DRB .
• DRB held the view although aggregates are
not mentioned in the WPI but minerals are
included .
• Dolomite and ‘other minerals ‘are included
in WPI.
• Stone aggregates are very minor percentage
of WPI .
• There is not Construction Materials Index
(CMI) in the country.
• The DRB by majority view held that nothing
extra is payable to be Contractor as
enhanced Royalty is covered under price
escalation .
• Contractor went to Arbitration.
 CASE 10

GROUND IMPROVEMENT
• Weak ground was got improved by dumping
of stone boulders and filling of smaller size
aggregates as per MoRTH specification.
• Contractor claimed rates as per his analysis .
• Employer said contractor will be paid as per
‘day rates ‘in BOQ for small quantity of 50
cum .
• Contractor had dumped more than about
17000 cum.
• Matter came before DRB.
• DRB analysed the rates and made
unanimous recommendation for reasonable
rate with interest and escalation .
• Employer agreed & accepted the DRB
recommendation.
• Contractor got his due payment.