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Claims & Disputes
1
SectionsSections::
 Section 1: What is and Why
 Section 2: Types
 Section 3: Relation to Contract Clauses
 Section 4: ...
Claims & Disputes
Section 1:
What is and Why
3
Section 1: What is and WhySection 1: What is and Why
 “Claim” is the general term used for the
affirmation of rights to m...
Section 1: What is and WhySection 1: What is and Why
 Claims are generally made by the parties due to
or all the followin...
Section 1: What is and WhySection 1: What is and Why
 Claims are usually defined as a Paper War. That
usually can result ...
Section 1: What is and WhySection 1: What is and Why
 Claims usually have the following life
cycle:
A. Problem identified...
Claims & Disputes
Section 2:
Claim Types
8
Section 2: Claim TypesSection 2: Claim Types
 Claims are usually classified by “Cause” and
“Entitlement”:
– Major Changes...
11--Changes by EmployerChanges by Employer
 These are usually referred to as Constructive and
Convenient changes, that ar...
11--Changes by EmployerChanges by Employer
 Extra Works:
– Engineer or Employer, Poor justification while Rejecting
mater...
22--DelaysDelays
Delay is defined to occur when an activity
takes longer than the planned duration to
complete.
To recov...
22--DelaysDelays
Due to “Failure to commence”:
– Employer fails to hand over the site.
– Employer fails to complete the d...
22--DelaysDelays
Due to “Approvals”:
– Employer or his Consultant failure to provide
Submittal Approvals on time.
– Emplo...
22--DelaysDelays
Due to “Adverse Weather”:
– Weather Conditions are adverse or hostile.
– Weather conditions are unusual ...
22--DelaysDelays
 Due to “Continued Changes”:
– These are usually initiated by a variation order or site
instructions.
– ...
33--Interruptions and DisruptionInterruptions and Disruption
• It usually occurs when the performance
conditions expected ...
33--Interruptions and DisruptionInterruptions and Disruption
 Another form of disruption is the actual
“Suspension of wor...
44--Acceleration of worksAcceleration of works
“Escalation” occurs when a task is
performed in a shorter time frame than
...
55--Deferring Site ConditionsDeferring Site Conditions
 Best Practice: is a term used always in contracts to:
 Reduce bi...
66--Defective specificationsDefective specifications::
Defective Design:
 Elements of the project has been performed by ...
66--Defective specificationsDefective specifications::
Errors and Omissions:
Usually due to:
 Answers to questions arisi...
77--EntitlementEntitlement::
Executable but none compensable:
Usually due to:
 Acts of government orders or decrees with...
77--EntitlementEntitlement::
Executable and Compensable:
Usually due to:
 Shortfalls by the employer.
These usually enti...
77--EntitlementEntitlement::
None Executable and None Compensable:
Usually due to:
 Poor Performance.
 Poor Coordinatio...
Claims & Disputes
Section 3:
Relation to Contract
Clauses
26
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 The Legal Basis for Claims:
 Contractual ...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Continue, The Legal Basis for Claims:
As t...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Contract Clauses that govern Claims :
– Cl...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Continue: Contract Clauses that govern Cla...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 1.9 Delayed Drawings and or Instruc...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 2.1 Right of access to site:
– The ...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 4.6 Co-operation:
– The Contractor ...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 4.7 Setting Out:
– The contractor s...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 4.12 Unforeseeable physical conditi...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 4.24 Fossils:
– Any and all fossils...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 5.1 Nominated Sub-Contractors:
– An...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 7.5 Rejection of works:
– Usually a...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 8.5 Delay caused by authorities:
– ...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 8.9 Consequences of Suspension:
– I...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 10.2 Taking over part of the works:...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 10.3 Interference with tests of
com...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 11.2 Cost of Remedying Defects:
– W...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
Clause 11.8 Contractor to Search:
– The con...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 12.3 Evaluation:
– Except as otherw...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 13.3 Variations Procedures:
– Prior...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 15.4 Payment After Termination:
– I...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 16.1 Contractor Entitlement to Susp...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
Clause 17.4 Consequences of Employer
Risks:...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 19.1 Definition of Force Majeure:
–...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 20.1 Contractor’s Claims:
– Under t...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
Clause 20.2 Appointment of the Dispute
Adju...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
Clause 20.5 Amicable settlement:
– Under th...
Section 3: Relation to ContractSection 3: Relation to Contract
ClausesClauses
 Clause 20.7 Failure to comply with the DAB...
Claims & Disputes
Section 4:
Preparation and
Documentation
55
Section 4: Prep & DocumentationSection 4: Prep & Documentation
 Issue:
– Most of the claim submissions lack documents, pr...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
EVIDENCE:
– IT is a must that the Claiming party
substanti...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
FACTS:
– FACTS on site must be considered to
determine wit...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
 The following are a guideline for the minimum
contents an...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
c. Program of work:
Copies of the following documents relat...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
d. Resources:
Copies of the following documents related to ...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
e. Background (contractual):
Event Must be linked to a cont...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
f. Further provide the following:
• Chronological record of...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
f. Continues:
• Partial/substantial completion certificates...
Section 4: Prep & DocumentationSection 4: Prep & Documentation
g. Claim Package Format:
• Executive Summary
• Related Clau...
Claims & Disputes
Section 5:
Claims Avoidance
Techniques
66
Section 5: Claims avoidanceSection 5: Claims avoidance
 Overview:
– Claim Avoidance is a strategy that can preserve the
E...
Section 5: Claims avoidanceSection 5: Claims avoidance
Claims Avoidance Strategies:
– A good strategy focuses on the foll...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Claims Avoidance – Design stage:
– Focus on providing Full, Detai...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Claims Avoidance – Procurement Phase:
– Focus on calling for comp...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Claims Avoidance – Construction phase:
– Focus on identifying and...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Know when your action or inaction will constitute a change order
...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Always read your received mail and other
communications properly ...
Section 5: Claims avoidanceSection 5: Claims avoidance
 Manage Potential Claims issues proactively by:
– Talking to the c...
Claims & Disputes
Section 6 :
Claims Resolution
75
Section 6: Claims ResolutionSection 6: Claims Resolution
The three levels of Claims Resolution are:
Adjudication
Arbitra...
Section 6: Claims ResolutionSection 6: Claims Resolution
Partnering:
A system of operation that transforms the constructio...
Section 6: Claims ResolutionSection 6: Claims Resolution
Partnering:
It is established via:
Developing a common project c...
Section 6: Claims ResolutionSection 6: Claims Resolution
Partnering:
Projects are sometimes classified based on the partne...
Section 6: Claims ResolutionSection 6: Claims Resolution
Now back to the three levels of Claims Resolution:
Adjudication ...
Section 6: Claims ResolutionSection 6: Claims Resolution
 Arbitration:
It is defined to be “a referral of a dispute to on...
Section 6: Claims ResolutionSection 6: Claims Resolution
Finally and based on FIDIC 2005 the hereunder time
table summariz...
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Claims & disputes management

  1. 1. Claims & Disputes 1
  2. 2. SectionsSections::  Section 1: What is and Why  Section 2: Types  Section 3: Relation to Contract Clauses  Section 4: Preparation and Documentation  Section 5: Claim Avoidance Techniques  Section 6: Claims Resolution 2
  3. 3. Claims & Disputes Section 1: What is and Why 3
  4. 4. Section 1: What is and WhySection 1: What is and Why  “Claim” is the general term used for the affirmation of rights to money, property or a remedy.  In Construction, the term is used as an application, request for entitlements under the contract terms and conditions.  It is usually a payment outside the terms of the physically measured works or services provided and includes those related to extension of time but not limited to those related to prolongation, interruption or disruption, acceleration or crashing schedules, mitigation and the like. 4
  5. 5. Section 1: What is and WhySection 1: What is and Why  Claims are generally made by the parties due to or all the following situations: – Entitlement for non fulfillment of one party to an obligation under the terms of the agreement. – Entitlement to additional funds. – Entitlement to the recovery of incurred costs. – Entitlement for an extension of time. – Entitlement against additional payments due to legal preceding. 5
  6. 6. Section 1: What is and WhySection 1: What is and Why  Claims are usually defined as a Paper War. That usually can result in the following: – Irrational responses and behavior and thus destroyed personal relations. – Increased costs. – Loss of control on outcome. – Waste of time while preparing and participating in resolution and litigation. – Overall loss of focus on what is important during the life cycle of the project. 6
  7. 7. Section 1: What is and WhySection 1: What is and Why  Claims usually have the following life cycle: A. Problem identified B. Disagreement arises C. Result or action disputed D. Paper war starts E. Conflict F. Litigation 7
  8. 8. Claims & Disputes Section 2: Claim Types 8
  9. 9. Section 2: Claim TypesSection 2: Claim Types  Claims are usually classified by “Cause” and “Entitlement”: – Major Changes by Employer – Delays – Interruptions and disruptions – Accelerations – Differing Site Conditions – Defective Specs and Design Shortfalls – Entitlement 9
  10. 10. 11--Changes by EmployerChanges by Employer  These are usually referred to as Constructive and Convenient changes, that are mainly due to Extra Works, or Excessive Inspection of the works.  They are usually initiated by an action or inaction by the Employer or Engineer.  They are usually resulting in a benefit to the Employer that exceeds the deliverables of the agreement.  They tend always to increase the cost of the work done. 10
  11. 11. 11--Changes by EmployerChanges by Employer  Extra Works: – Engineer or Employer, Poor justification while Rejecting material and equipment submittals. – Engineer, Poor or uncoordinated response to RFI’s. – Employer or Engineer Poor understanding of Drawings and Specs. – Employer Poor understanding of his privileges and deliverables expected from second party under the agreement. – Employer exceeds his rights to inspect the works, and inspector’s performance. – No tolerances or strictly low ones applied against those noted in the contract. 11
  12. 12. 22--DelaysDelays Delay is defined to occur when an activity takes longer than the planned duration to complete. To recover or mitigate the delay it is a must to: – Affect the critical path by either increasing durations along the planned critical path or by – Delaying the completion of non-critical activities enough to create a new critical path. 12
  13. 13. 22--DelaysDelays Due to “Failure to commence”: – Employer fails to hand over the site. – Employer fails to complete the designs. – Employer fails to coordinate with service providers. – Employer fails to obtain a bldg. permit. – Employer fails to give right of way for prescheduled activities. 13
  14. 14. 22--DelaysDelays Due to “Approvals”: – Employer or his Consultant failure to provide Submittal Approvals on time. – Employer or his Consultant providing Unreasonable or Poorly justified rejection of submittals. 14
  15. 15. 22--DelaysDelays Due to “Adverse Weather”: – Weather Conditions are adverse or hostile. – Weather conditions are unusual for the time of year. 15
  16. 16. 22--DelaysDelays  Due to “Continued Changes”: – These are usually initiated by a variation order or site instructions. – They are usually requests to proceed immediately and in others after proper financial approval. – Usually within physical limits due to subsequent works. – With all above Issuance of formal VO might also be with delay. – The impact of the works requested on the original program of works. 16
  17. 17. 33--Interruptions and DisruptionInterruptions and Disruption • It usually occurs when the performance conditions expected at the time of tendering materially/substantially defer from those encountered during the actual execution to a point that “cost of performance” for the contractor is increased due to, • Contractors plan of work alteration. • Contractor work, equipment and crew hours is increased. 17
  18. 18. 33--Interruptions and DisruptionInterruptions and Disruption  Another form of disruption is the actual “Suspension of works”: – Via issuing a Stop work order be it based on site limited issues or contractual issues. – Via delaying inspections. – Via providing Employer furnished equipment or accessories. – Via delay or failure to respond to RFI’s. – Via suspended manufacturing – Via authorities not due to contractor negligence. 18
  19. 19. 44--Acceleration of worksAcceleration of works “Escalation” occurs when a task is performed in a shorter time frame than originally planned based on a request by the client. Escalation usually entails added overheads due to increased resources. It can also be due to:  Increased extra work orders or VO’s without time extension. 19
  20. 20. 55--Deferring Site ConditionsDeferring Site Conditions  Best Practice: is a term used always in contracts to:  Reduce bid conditions.  Allocate risk of site conditions to the Employer.  Encourages bidders to rely on the information provided.  Almost always actual site conditions differ from those indicated in the contract, i.e. and for example:  Presence of Rock or boulders while not shown on documents.  Underground utilities presence in areas not predefined.  Actual Elevation of natural ground compared to Datum.  Actual plot limits defer than those on demarcation certificate. 20
  21. 21. 66--Defective specificationsDefective specifications:: Defective Design:  Elements of the project has been performed by the contractor per the contract documents and specifications but those elements “do not function together” as required. i.e. • In cases where drift is not accounted for especially for high rise buildings. • Thermal steel is not considered especially if Post Tensioning method is adopted for slab construction. 21
  22. 22. 66--Defective specificationsDefective specifications:: Errors and Omissions: Usually due to:  Answers to questions arising from the documents are not found within the contract documents.  Provisions of the contract are not accurate.  Contractor requests for information are responded to with incorrect or contradicting replies. 22
  23. 23. 77--EntitlementEntitlement:: Executable but none compensable: Usually due to:  Acts of government orders or decrees without compensation clearly stated.  Fires, Floods, Epidemics, or quarantine restrictions.  Embargoes.  Wars 23
  24. 24. 77--EntitlementEntitlement:: Executable and Compensable: Usually due to:  Shortfalls by the employer. These usually entitle the contractor to both an extension of time and an increase in the contract price. 24
  25. 25. 77--EntitlementEntitlement:: None Executable and None Compensable: Usually due to:  Poor Performance.  Poor Coordination and Planning.  Late performance by subcontractors.  Delay in procurement and/or out of specification procurement even if the change is accepted by Employer.  Defective works. 25
  26. 26. Claims & Disputes Section 3: Relation to Contract Clauses 26
  27. 27. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  The Legal Basis for Claims:  Contractual Claims. This is under the contract clauses themselves.  Land Law and Common Law Claims. Based on other predominant laws that are in governance.  Negligence or TORT Claims. This is usually when a party acts in breach of a legal duty imposed by law, and so infringes on the rights of the other party causing it foreseeable damages. (negligence, fraud, slander, battery and assault)  Quantum Meruit Claims: usually for works not controlled by contract and named alternatively as “reasonable value of services”. (enrichment or benefitting from works not contracted)  Ex-Gratia Claims: Those are claims made without legal grounds or merits. (hardship claims that only the employer can consider) 27
  28. 28. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Continue, The Legal Basis for Claims: As the law usually considers the contractor to be experienced enough to foresee what is likely required from him to perform under the contract, thus and in order to establish a contractual claim the contractor must be able to show that the work he was doing or the conditions under which he was performing differed from those what normally would have been expected or should have been expected at the making of the contract. 28
  29. 29. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Contract Clauses that govern Claims : – Clause 1.9 Delayed drawings or instructions – Clause 2.1 Rights of access to site – Clause 4.6 Cooperation – Clause 4.7 Setting out – Clause 4.12 Unforeseeable physical conditions – Clause 4.24 Fossils – Clause 5.1 Nominated subcontractors – Clause 7.5 Rejection (testing) – Clause 8.5 Delays caused by authorities – Clause 8.9 Consequences of suspension – Clause 10.2 Taking over parts of the works – Clause 10.3 Interference with tests on completion 29
  30. 30. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Continue: Contract Clauses that govern Claims: – Clause 11.2 Cost of remedying defects – Clause 11.8 Contractor to search – Clause 12.3 Evaluation – Clause 13.3 Variation Procedures – Clause 15.4 Payment after termination – Clause 16.1 Contractor’s entitlement to suspended works – Clause 17.4 Consequences of employer risks – Clause 19.1 Definition of force majeure – Clause 20.1 Contractor’s claims – Clause 20.2 Appointment of dispute adjudication board – Clause 20.5 Amicable settlements – Clause 20.7 Failure to comply with dispute adjudication board decision 30
  31. 31. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 1.9 Delayed Drawings and or Instructions: – The contractor must give a notice to the Engineer advising the delayed documents and its impact. – The contractor shall include all details of why and when it should have been issued and the detail of the nature and amount of delay or disruption it will cause if the delay continues. If a claim is presented to you not in line with the above you do not have to respond unless instructed by the Employer. Your response must state that the delay notice was not formulated in line with the contract requirements, and as such it is rejected. 31
  32. 32. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 2.1 Right of access to site: – The employer must give the contractor right of access to and possession of the site. All parts of the site must be in the possession of the contractor within the time stated in the appendix to tender. – The right of possession might not fully be with or exclusive to the contractor, however the employer may with hold any such right or parts of it until the performance security bond is received. Usually claims result from prolonged denial of access or right of possession even after submission of the bond and usually due to negligence from the responsible Employer staff or the Consultant side. 32
  33. 33. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 4.6 Co-operation: – The Contractor must and as specified by the contract or as instructed by the Engineer allow appropriate access and opportunity for carrying out works by:  The Employer staff  Any other contractor employed by the Employer and the personnel of any legally constituted authorities. Those who may be employed during the execution of the works or towards the completion of the works on site or near the site for any works that are not included in the contract or included but require authorities inspections and approvals. 33
  34. 34. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 4.7 Setting Out: – The contractor shall setout the works in relation to the original points, links and levels, specified in the contract or advised by the Engineer. – The Employer shall be responsible for any of the errors in the contract or information provided by the Engineer. With the above stated the Contractor must exercise reasonable effort to verify such information and advise the inaccuracy before hand and within reasonable time to adjust, Otherwise he will not be able to claim against. 34
  35. 35. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 4.12 Unforeseeable physical conditions: – It includes all site conditions be it surface or sub- surface and including those of hydrological nature. – It excludes the Climatic Conditions. With the above stated the Contractor must exercise all reasonable effort to verify and raise before signing the contract, and advise any variances before hand and adjust his contract accordingly. In cases were conditions are beyond those which can be considered foreseeable the contract might be able to claim against. 35
  36. 36. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 4.24 Fossils: – Any and all fossils, coins articles of value, structures, remains, or items of geological or archeological nature found on site shall be placed under the care and custody of the Employer. – Any delay caused to the works and the costs incurred of such delay and from complying with this article are the responsibility of the Employer. With the above stated the Contractor must exercise all reasonable effort to verify and raise to the attention of the Employer before signing the contract. If that has been satisfied and the case arises then the contractor must give notice to the Engineer. 36
  37. 37. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 5.1 Nominated Sub-Contractors: – Any Contractor or Supplier nominated by the Employer or that based on instructions from the Engineer under clause 13 to be employed by the Main Contractor. The Contractor though is required to coordinate and exercise all efforts for better performance of works, and ensure that the agreements he undertakes with those are of back to back nature in relation to his contract with the Employer, but he could be liable for a claim against any delays caused by those sub contractors or against the quality of work done especially that directly effecting his works where he employs extra resources to overcome. 37
  38. 38. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 7.5 Rejection of works: – Usually as a result of examination, inspection, measurement or testing of plant equipment, materials . The Engineer must promptly advise the contractor with the rejection and request remedy within reasonable time. The Contractor must receive such request and remedy within the stipulated period or otherwise advise promptly if he can not comply or meet the target date. Failure in any of part of the process might result in a claim from either party. 38
  39. 39. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 8.5 Delay caused by authorities: – If the following conditions apply:  The contractor diligently followed the procedures laid down by the authorities,  Theses authorities delayed or disrupted the works,  The delay or disruption was unforeseen by the contractor. Then and if prompt prior notice was advised to the Engineer, the contractor would be entitled for a claim of time extension and possibly financial compensation. 39
  40. 40. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 8.9 Consequences of Suspension: – If the following conditions apply:  The contractor suffered delays  Or the contract incurred costs from complying to the Engineer suspension of works under clause 8.8,  Or the costs are related to none scheduled resumption of works Then and if prompt prior notice was advised to the Engineer, the contractor would be entitled for a claim of time extension and possibly financial compensation. 40
  41. 41. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 10.2 Taking over part of the works: – If the following conditions apply:  The Engineer and based on instructions from the Employer requests partial handover of certain areas of the works,  The Engineer issued a partial handing over certificate for that part of the works,  The contractor incurred costs as a result of this partial taking over or usage of the area other than that use specified originally in the contract conditions, Then and if prompt prior notice was advised to the Engineer, the contractor would be entitled for a claim for compensation. 41
  42. 42. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 10.3 Interference with tests of completion: – If the following conditions apply:  Contractor is ready to conduct test on Completion  The contractor has given amble proper advise  The contractor has been prevented from performance for more than 14 days by the employer  The employer then is deemed to have received the works without testing. If for any reason the contractor suffers delay and or incurs costs as a result of this delay, the contractor shall give notice to the engineer and will be entitled for compensation both in terms financial and time related. 42
  43. 43. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 11.2 Cost of Remedying Defects: – While it is the responsibility of the contractor to complete the works and remedy the defects and shall do that at his risk and cost, it is a fact that a Variation notice should be issued to the contractor by the owner or on his behalf by the Engineer in the following situations:  Any change or variance from a design that the contractor is responsible for  Any plant, material or workmanship not in accordance with the contract  Any failure by the contractor to comply with any of his obligations. Failure to issue such a Variation notice under the terms of Article 13.3 (variation Procedure) in time, will allow the contractor to claim against remedy of works. 43
  44. 44. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses Clause 11.8 Contractor to Search: – The contractor shall if required by the Engineer; search for the causes of defects. Unless the cause of any defect is to be remedied by the Contractor and at his cost under the terms of clause 11.2, then the cost of search exercise plus a reasonable OH & Profit shall be agreed or determined by the Engineer, or otherwise claimed against by the contractor. 44
  45. 45. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 12.3 Evaluation: – Except as otherwise stated in the contract, the Engineer will proceed in accordance to sub-clause 12.3 (Evaluation) and 3.5 (Determination) for evaluating the value for works that do not have a specific rate defined in the contract nor there are similar works that could be used to determine a fare value of the works for and in the following situations:  Any change or variance of an item by more than 10 %.  Any item that does not have a specific rate in the BOQ. Failure to issue such determinations under sub-clause 12.3 and 3.5 (Determination) will lead to a claim by contractor. 45
  46. 46. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 13.3 Variations Procedures: – Prior to instructing a VO the Engineer will ask for a proposal, the contractor will respond to in writing; either declining the request with proper reasoning, or by providing a quote complete with a full description of the works and it’s financial evaluation complete with his time frame to complete these works and its impact on his original work schedule if any. – The Engineer is expected to swiftly evaluate the quote and respond with an approval or disapproval and advise the contractor to either proceed with the works pending finalization of the financial and time impact or not to proceed unless those are finalized. – In both cases the contractor shall not delay any works. – If the Engineer fails to respond, then the contractor is entitled to Claim. 46
  47. 47. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 15.4 Payment After Termination: – If a “Termination by Employer” under sub clause 15.2 is issued, and is in effect, the employer may:  Proceed in accordance with sub clause 2.5 “ Employer Claims” and  Withhold any further payments to the contractor until all costs of execution, completion and remedying of the works, damages for delay in completion, and all other costs incurred by the Employer has been established and recovered from the Contractor. 47
  48. 48. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 16.1 Contractor Entitlement to Suspend the works: – If the Engineer fails to certify in accordance to sub clause 14.6 “Issue of interim payment certificates” or the employer fails to comply with sub clause 2.4 “Employer Financial Arrangements” or under sub clause 14.7 “Payment” then the contractor may and after giving proper advance notice of 21 days “suspend the works” or “reduce the rate of progress” until the contractor has received the certified amounts or reasonable evidence of its release. – The contractor is in this case entitled to claim against all delays that occurred and ask for both financial compensation and time extension. 48
  49. 49. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses Clause 17.4 Consequences of Employer Risks: – If to the extent that any of the risks listed in sub clause 17.3 results in loss or damage to the works, goods or contractor’s documents, the contractor and after promptly notifying the Engineer shall rectify this loss and/or damage to the extent required by the Engineer. – If the contractor suffers delay and/or incurs costs as a result from rectifying the loss/damage and after serving notice to the Engineer, the contractor will be entitled for a claim to compensate those. 49
  50. 50. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 19.1 Definition of Force Majeure: – Under this clause Force Majeure means an exceptional event or circumstance which :  Is beyond any parties control.  No party could reasonably have provided against it before entering into contract.  Having risen, no party could have reasonably avoided or overcome.  Not substantially attributed to the second party. – If for any reason there is any doubt about any of the conditions above, either party could claim. 50
  51. 51. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 20.1 Contractor’s Claims: – Under this and if the contractor considers himself to be entitled to any extension of time and/or any financial compensation, he shall give notice to the Engineer:  Describing the event and circumstances and particulars,  Within 28 days from becoming aware of the event and  Send further interim claims at monthly intervals advising the, – Accumulated delay and or amount claimed and – Further particulars that the Engineer may reasonably require. If the contractor fails to do so, he loses his entitlement for the claim. 51
  52. 52. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses Clause 20.2 Appointment of the Dispute Adjudication board: – Under this clause disputes must be adjudicated by the DAB entity described in the contract and in accordance to clause 20.4 – The parties shall jointly appoint a DAB by the date stated in the Appendix to Tender. 52
  53. 53. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses Clause 20.5 Amicable settlement: – Under this clause any party and when dissatisfied by the DAB results must issue a Dissatisfaction notice and under clause 20.4, and within the period stated. If that is the case then,  The parties shall attempt to settle the dispute amicably and before reverting to Arbitration . 53
  54. 54. Section 3: Relation to ContractSection 3: Relation to Contract ClausesClauses  Clause 20.7 Failure to comply with the DAB Decision: – In the event of:  Neither party has given notice of dissatisfaction per 20.5 above.  DAB decision has become final and binding after the time frame has elapsed.  One or both parties has failed to comply to the decision, then: – The other party and without prejudice to any of its rights, may refer the failure to Arbitration under sub clause 20.6 “ARBITRATION”. 54
  55. 55. Claims & Disputes Section 4: Preparation and Documentation 55
  56. 56. Section 4: Prep & DocumentationSection 4: Prep & Documentation  Issue: – Most of the claim submissions lack documents, programs, and professional analysis. – They use substandard formats and structure and are difficult to follow.  Solution: – Logically organize your claim submissions with sufficient documents, programs, and professional analysis explaining the legal and factual basis of the claim and professionally calculate the damages so as to permit proper review and assessment. – The standard to which the documentation is issued depends largely on the nature of the project and the professional standards adopted by the consultant and or the project manager. 56
  57. 57. Section 4: Prep & DocumentationSection 4: Prep & Documentation EVIDENCE: – IT is a must that the Claiming party substantiates it’s claim. This is done via providing proper evidence to demonstrate and prove that entitlement for the amounts claimed. – The legal term “He who asserts must prove” is the prevailing maxim and the standard of proof is that on the balance of probabilities. 57
  58. 58. Section 4: Prep & DocumentationSection 4: Prep & Documentation FACTS: – FACTS on site must be considered to determine wither the occurrence claimed against has affected the operations critical to the claiming party to complete his works. – It is not enough that the claiming party show that it is, they must prove relevance to activities and dependencies. 58
  59. 59. Section 4: Prep & DocumentationSection 4: Prep & Documentation  The following are a guideline for the minimum contents and format of a claim submission: 1. Content a. Tender Details: Copies of the following documents related to each claim heading:  Cost Breakdown for tender rates  Clarifications and addenda  Details of any discounts made b. Contract Documents: Copies of the following documents related to each claim heading:  Drawings (showing number and revision and approval date)  Specifications (Showing reference number and page number related and signatures/seal therein) 59
  60. 60. Section 4: Prep & DocumentationSection 4: Prep & Documentation c. Program of work: Copies of the following documents related to each claim heading:  Contractual Program ( tender stage )  Detailed Base Program (post contract program of Clause 14 or 8.2 one)  Revisions if any  Conditions of the program if earlier provided  Consultant report on the detailed base program  Any minutes of meeting in relation to the detailed base program  Progress of Work S-Curve (planned vs actual)  As built CPM program 60
  61. 61. Section 4: Prep & DocumentationSection 4: Prep & Documentation d. Resources: Copies of the following documents related to each claim heading:  Site overheads planned vs. actual identifying the specific resources related to the event  Project direct resources planned vs actual again directly related to the event and includes equipment, labor and materials  Contract cash flow planned vs. actual  Record of any delay in receipt of materials, equipment or deployment of labor  Production rate records and comparison between planned vs. actual 61
  62. 62. Section 4: Prep & DocumentationSection 4: Prep & Documentation e. Background (contractual): Event Must be linked to a contractual background that relates to each claim heading:  A list of contract conditions that relates to each event.  Extracts of all relevant conditions.  Extracts of the clauses that the contractor used in his claim and those used by the consultant.  Details of any non standard contract clauses.  Cause and effects analysis.  Clear differentiation between Disruption, Delay or Acceleration.  Analysis of the Compliance with the claims notice.  Analysis of the compliance with government regulations. 62
  63. 63. Section 4: Prep & DocumentationSection 4: Prep & Documentation f. Further provide the following: • Chronological record of correspondences and related copies • Drawings register • Technical submittals • Written instructions • Resource records • Site diaries • Time sheets • Cost records • Photographs • Monthly progress reports • Minutes of meeting (all related) • Project Management structure and key personnel listings 63
  64. 64. Section 4: Prep & DocumentationSection 4: Prep & Documentation f. Continues: • Partial/substantial completion certificates • Variation orders record • Payment records • Procurement and delivery records • Lab test results • Site safety records • NOC and approval records 64
  65. 65. Section 4: Prep & DocumentationSection 4: Prep & Documentation g. Claim Package Format: • Executive Summary • Related Clauses and alignment of entitlement • Statement of Claim • Nature of Claim • History of Events • Narrative on Program and delay analysis with impacted activities as applicable • Summary of required action be it time or compensation claimed • Possible mitigation measures and future mitigation measures if applicable. • Appendices. 65
  66. 66. Claims & Disputes Section 5: Claims Avoidance Techniques 66
  67. 67. Section 5: Claims avoidanceSection 5: Claims avoidance  Overview: – Claim Avoidance is a strategy that can preserve the Employer/ Contractor relationship & save Time and Money – Claim avoidance strategies must be set before, during and after construction in agreement between the Employer, Contractor and Engineer. – As a minimum A Claims avoidance strategy must include promptly handling of the issues once they arise, and reinforce the aim of resolving issues with no disputes, in the earliest time and the lowest management level possible. 67
  68. 68. Section 5: Claims avoidanceSection 5: Claims avoidance Claims Avoidance Strategies: – A good strategy focuses on the following common milestones:  Design Phase  Procurement Phase  Construction Phase 68
  69. 69. Section 5: Claims avoidanceSection 5: Claims avoidance  Claims Avoidance – Design stage: – Focus on providing Full, Detailed, Concise and well Coordinated contract documents. Which can be achieved by:  Careful screening of consultants.  Clear Specific Project Information based on Clear Project Charter and business requirements.  Knowing the contract and assuring constructability of all works therein.  Having a clear concise cost estimate  Periodic auditing of design phases  Conducting Risk analysis to identify potential risks and addressing those  Always make sure that you are drafting for Clarity not confusion and use a list of definitions to assure consistency  Allow enough time for construction 69
  70. 70. Section 5: Claims avoidanceSection 5: Claims avoidance  Claims Avoidance – Procurement Phase: – Focus on calling for competent contractors who will undersatnd the scope of works and:  Careful screening of bidder organization charts.  Audit previous experience lists  Audit equipment lists for relevancy  Determine capacity to accept new work given the current engagements  Review their claims history. Be blunt ask for it  Examine Financial and Credit standing  Encourage pre bid site visits  Conduct pre bid conference and explain site access limitations, utility locations, noise and environmental limitations etc.  Answer tender questions promptly  If appropriate extend the bidding period 70
  71. 71. Section 5: Claims avoidanceSection 5: Claims avoidance  Claims Avoidance – Construction phase: – Focus on identifying and resolving potential claim events promptly and in the shortest time frame possible, accordingly:  Know your contract.  Coordinate utilities relocation if required  Obtain all relevant permits well in time  Obtain right of way  Furnish materials or equipment that is supplied by employer on time  Know contractor responsibilities and enforce them and request the schedule, submittals, daily reports.  Understand the scope of works and know the elements required by Law or adopted codes.  Know the elements that are required by function, purpose or design.  Identify elements that can be deleted, added or altered. 71
  72. 72. Section 5: Claims avoidanceSection 5: Claims avoidance  Know when your action or inaction will constitute a change order or will constitute acceleration or disruption of the works and accordingly make sure that the Engineer is: – Receiving RFI’s – Understanding clearly the RFI’s – Responding promptly to RFI’s – Responding Clearly and Accurately to RFI’s – Listening to the contractor and considering his suggested solutions – Giving a clear direction to the contractor if the solutions suggested are not acceptable – Understanding what the contract believes to be the limits of the contract – Advising the contractor with the true limits of his obligations – Fare in giving the contractor a change order when it is due – Check the time extensions given and if it is fare and appropriate. (Too little against much changes might cause acceleration claims). 72
  73. 73. Section 5: Claims avoidanceSection 5: Claims avoidance  Always read your received mail and other communications properly and check for the “BUZZ” words: • In Acceleration: - Overtime request - Extra shifts at .. - Slowed down in .. - Speed up of .. - Early completion of .. • In Changes: - Unwritten request such as.. - Additional work such as .. - Over inspection of …. - Defective specifications … • In Differing site conditions: - Subsurface or buried - Concealed or hidden - Different soils - Excessive ground water - Higher / lower levels • In Delays: - Late approval of… - Late deliveries while … - No access / Partial access - Disruption of works - Abortive works - Bad weather occurrences - Interference from …. 73
  74. 74. Section 5: Claims avoidanceSection 5: Claims avoidance  Manage Potential Claims issues proactively by: – Talking to the contractor and detecting potential claims – If you know that it has merit then initiate the change and suggest a settlement – If you disagree, make sure that you resolve promptly by correcting defects on your side first.  Keep accurate records  Maintain Proper records  Keep your management will informed and communicate 74
  75. 75. Claims & Disputes Section 6 : Claims Resolution 75
  76. 76. Section 6: Claims ResolutionSection 6: Claims Resolution The three levels of Claims Resolution are: Adjudication Arbitration Litigation But before addressing those, it is vital to promote again the avoidance techniques, and in this case Partnering 76
  77. 77. Section 6: Claims ResolutionSection 6: Claims Resolution Partnering: A system of operation that transforms the construction environment from one with deception to one with open communication and frankness. It is a commitment between the parties to achieving a business requirement while respecting and recognizing own and other party rights, privileges, common goals and expectations. It opens way for trust and dedication, and helps align objectives, doing away with unrealistic expectations and improves communications thus reducing misunderstandings and inducing team work. It is not a step in dispute resolution but it set the way for an open on going joint problem solving process that results in harmonious resolution and settlement all during the project cycle. 77
  78. 78. Section 6: Claims ResolutionSection 6: Claims Resolution Partnering: It is established via: Developing a common project charter Conducting joint inspections and meetings Developing assessment sessions for both parties key staff and subcontractors Perusing shared savings via value engineering Agree to a resolution process (conflict management plan) that is based on the understanding of the common goals and interests of parties involved 78
  79. 79. Section 6: Claims ResolutionSection 6: Claims Resolution Partnering: Projects are sometimes classified based on the partnering level and as such those are: Competitive, with no common goals, little trust, low communication levels, defensive attitudes, short term focus, no shared risks, and usually result in disputes. Cooperative, Collaborative, Synergistic, with total alignment of common goals, high trust levels, excellent communication, responsibility sharing attitude that looks for solutions, fully focused, shared risks, and usually results in no to minimal disputes 79
  80. 80. Section 6: Claims ResolutionSection 6: Claims Resolution Now back to the three levels of Claims Resolution: Adjudication (mediation): The purpose of Mediation is to,  Reducing hostility between parties  Opening path for discussion  Communicating opinions in understandable terms and helping each party understand the other  Propping for unrevealed facts  Narrowing the issues and differences  Measuring receptiveness to conciliation  Structuring a resolution 80
  81. 81. Section 6: Claims ResolutionSection 6: Claims Resolution  Arbitration: It is defined to be “a referral of a dispute to one or more impartial persons for final and binding resolution or determination. It is usually quick, practical and in a way economical” it could be in deferent forms, i.e. baseball type or shadowed type (similar to baseball type but the mediator is present).  Litigation: It is defined by meaning to be “a referral to a court of law” when all other efforts fail. 81
  82. 82. Section 6: Claims ResolutionSection 6: Claims Resolution Finally and based on FIDIC 2005 the hereunder time table summarizes the process: 82
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