FIDIC Yellow Book Training [PDF]

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FIDIC Yellow Book Training Training to VSMC 2014

CONTENTS 1.

Presentation slides

3

2.

FIDIC Notes – part one

180

3.

FIDIC Notes – part two

214

© Driver Trett 2013

www.drivertrett.com/europe

Managing FIDIC Contracts Training to VSMC – 2 day workshop 2014 Mark Castell – Regional Managing Director [email protected] www.drivertrett.com

Managing FIDIC contracts Introduction Contract management - some general principles The FIDIC standard forms – overview & differences Management of a FIDIC Yellow Book Contract throughout a project
The Tender Phase
Award of Contracts
Setting up the project
Procurement and sub-contracting
The execution phase
Completion & handover
Resolution of financial matters (and disputes if any)
Conclusions





2

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DRIVER GLOBAL PRESENCE

Contract management some general principles

6

Some questions …

Q: What is common to every project? A: A Contract.

Q: What is a Contract? A: Simply speaking, it is an agreement. Q: What is the objective of a contract? A: To define the relationship and how the parties act – the ‘rules of the game’. 8

Q: What is contract management and what does it cover? A: Management of: Risks & opportunities Change Entitlement Claims The Client It should include the avoidance of Disputes

Or is it simply, good management

9

Q: When should the management of contracts begin? A: At the conception of a contract.

Q: When should the management of contracts end? A: At the finalisation of all matters. 10

Contracts involve a process – ‘conception to grave’
Receipt of an enquiry
Tender or bid phase
Negotiation and award
Design or engineering phase
Procurement phase
Construction phase
Defects liability phase
Finalisation of all matters 11

Q: Who is involved in managing a contract? Revised Q: Who should be involved in managing a contract? A: Everyone within the business...

Does this happen?

12

Introduction to FIDIC

13

FIDIC (Fédération Internationale des Ingénieurs-Conseils)
Federation of national associations of consulting engineers
Based in Geneva
Founded in 1913 with original founding members from France, Belgium and Switzerland
UK joined 1949, USA joined 1958
Seen as international from 1970s and members from about 70 counties

FIDIC aims
High ethical standards
High professional standards
Development of engineering profession in developing countries

FIDIC documents
Standard Forms of Contracts
Guides to Standard Forms of Contracts
Tendering procedures
Model Agreements

Standard Forms of Contract

17

History of FIDIC Standard Forms of Contract
In 1957 the original Red book for works of civil engineering construction was published. Further editions and supplements were published up to 1996.
Modelled on ACE form of contract which was based on ICE conditions of contract.
The original Yellow book for electrical and mechanical work reached third edition in 1987.
The original Orange book was first published in 1995 for design and build – turnkey works.

General principles of FIDIC Standard Forms of Contract
Historically based on Anglo Saxon type contracts.
Drafted for general use on an international basis.
Modifications may be required in some jurisdictions.
FIDIC standard forms are generally accepted to be well-written and capable of being understood by users.
They recognise there will be problems and potential for conflict and dispute on projects but set out processes to resolve them including:
Placing a significant administrative burden on the parties and;
requiring the parties to deal with issues at the time.

The Current FIDIC Standard Forms of Contract

20

Current FIDIC Main Standard Forms of Contract

Blue (2006)

Yellow (1999)

Green (1999)

Red (1999)

Silver (1999)

Pink (2010)

Gold (2008)

Current FIDIC Main Standard Forms of Contract Blue book. Dredgers Contract

Green book. Short Form

Red book. Construction Contract

Pink book. MDB Construction Contract

Current FIDIC Main Standard Forms of Contract

Yellow book. Plant and Design-Build Contract Gold book. DBO Contract

Silver book. EPC/Turnkey Contract

When do you use which standard form? For dredging & reclamation works, the Blue book

Otherwise, which contract should be used? STRAIGHTFORWARD PROJECT ?

no

< $500K or < 6 months

EMPLOYER DESIGN ?

yes

no yes

CONTRACTOR DESIGN

no

plant and/or high unforeseen risks yes

little employer involvement no major unforeseen risks

Maintenance yes

yes

no

Silver book - EPC Turnkey concept Contractor provides a complete facility that is ready to operate when the Employer turns the key Employer ‘steps back’ Only appropriate in certain situations

Consequences
Greater risk transfer to Contractor
Increased tender prices
Opportunity for extensions of time and financial claims reduced
More certain final price for Employer

Overview of Current FIDIC Standard Forms of Contract

27

Generally – Red, Yellow & Silver Books
FIDIC produces the General Conditions (20 clauses) and anticipates separate Particular Conditions to be used for project-specific changes and / or revisions due to applicable law.
Appendix to Tender also used to contain project-specific information.
Definitions set out in clause 1.
Importance of Letter of Acceptance – binds Parties to Contract.
Contract Agreement only confirms binding Contract is in place (if Letter of Acceptance is used).
Communications shall be in writing, transmitted using specific methods and issued to stated addresses (clause 1.3).
Applicable law and ruling language needs to be stated (clause 1.4).
Priority of documents provisions (clause 1.5).

General concepts – Red Book

Adopts the role of an Engineer who can vary Works Responsibility of design with the Engineer acting on behalf of the Employer Tenderers issued with Specification, Drawings and Schedules (includes BoQ) Payment on a re-measurable basis (but option for lump sum) Responsibility for unforeseen conditions with Employer DAB appointed at outset of project to resolve disputes

General concepts – Yellow Book

Adopts the role of an Engineer who can vary Works Responsibility of design (fitness for purpose) with the Contractor Tenderers issued with Employers Requirements Payment on a lump sum basis (but option for re-measurable ) Responsibility for unforeseen conditions with Employer DAB appointed at outset of project to resolve disputes, or ad-hoc

General concepts – Silver Book

Employer’s Representative instead of Engineer. Prime duties restricted to monitoring progress, quality and testing Responsibility of design (fitness for purpose) with the Contractor Tenderers issued with Employers Requirements Payment on a lump sum basis Responsibility for nearly all risk with the Contractor DAB appointed at outset of project to resolve disputes, or ad-hoc

Format of the FIDIC books

32

Standard Format for the Red, Yellow and Silver books 1. General Conditions – 20 Clauses

2. Guidance for the preparation of Particular Conditions

3. Forms of letter of Tender, Contract Agreement (including Appendix to Tender), Dispute Adjudication Agreement and Forms of Securities

33

Red Book General Conditions


Clause 1 - Definitions, General Provisions
Clauses 2 to 4 - Duties of the Employer, the Engineer and the Contractor
Clauses 5 to 7 - Resources (staff, labour, materials)
Clauses 8 to 10 - Time
Clause 11 - Defects Liability
Clauses 12 to 14 - Payments
Clauses 15 to 16 - Termination
Clauses 17 to 19 - Risk and Insurance
Clause 20 - Claims and Disputes

34

Yellow Book General Conditions

Differs as:
Clause 5 - Design
Clauses 12 – Tests after Completion

35

Silver Book General Conditions

Differs as:
Clause 3 - Duties of the Employers Representative

36

Exercise Low

High

Employer design

Re-measurable

Contractor design

Lump Sum

1. Match each book with a description of design responsibility. 2. Match each book with a description of valuation. 3. Arrange in the order of risk to Contractor (low to high).

Answer Low

High

Employer design

Contractor design

Re-measurable

Lump Sum

The management of a FIDIC Yellow Book contract

39

A FIDIC YB contract entails management of:


A tendering process or period


Preparation of enquiry documents




Contractor’s sets its commercial strategy and issues its offer




Discussion / negotiation


Award of the contract


Agreement reflects a common understanding




How is the offer accepted?


Setting up the project


Internal – knowledge transfer and project specific systems




External – submittals and kick-off meeting


Procurement and sub-contracting


Step down / flow down principles versus practice




The use of the phrase ‘Back to back’ 40

A FIDIC contract entails management of:


The execution phase


Progress control / updates




Financial matters & payment




Change / claims




Suspension




Force Majeure


Completion and Handover


Takeover




Tests




Defect liability


Resolution of financial matters (and disputes, if any)


Dispute resolution

41

The tender stage

Photograph credits to FreeDigitalPhoto.net & Grant Cochrane

Typical Sequence of Events

Issue of Tender Documents

Submission of the Tender Yellow book Cl. 1.1.3.1 Base Date

28 days

Preparation of Tender Documents

Tender Period

43

An Employer has to:
Draft the Particular Conditions (see guidance notes)

44

Risk allocation:


Risk should be allocated to the party best able to manage it.


Standard Forms of Contract (such as one of the FIDIC forms) generally allocate risk reasonably and fairly.


Major revisions to Standard Forms of Contract should be considered carefully.

45

An example VSMC contract Installation of export & array cables - London Array project


One document called ‘Conditions of Contract’




States “these … are based on FIDIC Conditions of Contract for Plant and Design-Build First Edition 1999”




No separate General and Particular Conditions of Contract




22 Clauses

Do you consider this: 1. Is an advantage to the contractor? 2. Adds or reduces work at tender stage? 3. Adds or reduces risk to the contractor?

Some Contracting Risks 1.

Clear scope of work

2.

Provision of bonds, guarantees

3.

Security for payment

4.

Physical conditions and access

5.

Practicality of schedule dates

6.

Use of specialist suppliers/sub contractors/ third parties

7.

Extension of time provisions

8.

Safety provisions

These risks have to be provided for in the contract

More Contracting Risks 1.

Clarity of the contract wording and provisions (no discrepancies)

2.

Wording and provisions that can be easily understand by all concerned

3.

Document submittals at, or just after commencement

4.

Conditions precedent clauses

5.

Notice requirements

6.

Requirement for record keeping

7.

Change process

8.

Claims process

These risks also have to be provided for in the contract

An Employer has to:
Draft the Particular Conditions (see guidance notes)
Draft the Employers Requirements

49

Employer’s Requirements According to Clause 1.1.1.5, ERs must specify (cannot imply) for each part of the works
The purpose
The scope
The design
Other technical criteria

Satisfying the Employer’s Requirements shown by successful Tests on Completion

Responsibility for errors in the Employer’s documents Yellow book
Clause 5.1 provides for a period for the Contractor to identify errors
If any found within period, corrected and treated as Variation if it is deemed that “an experienced contractor exercising due care” would not have found it pre-tender.
Under Clause 1.9, if any found outside of period, becomes a claim if it is deemed that an experienced contractor would not have found it pre-tender.

Fitness for purpose

Yellow book Clause 4.1 provides an obligation that the Works be “fit for the purposes for which the Works are intended as defined in the Contract”

The obligation for fitness for purpose is more onerous that designing with “due skill and care” i.e. Suitability of end product versus design process

London Array project has amended wording. ‘Works shall conform to the Employer’s Requirements as defined in or reasonably inferred from the Contract.’

Fitness for purpose continued Responsibility for fitness for purpose cannot be passed to anyone else or insured Yellow book Clause 4.1 also provides an obligation to provide all Works “necessary for stability or for completion, or safe and proper operation of the Works”

Satisfying Fitness for Purpose shown by successful Tests on Completion

An Employer has to:
Draft the Particular Conditions (see guidance notes)
Draft the Employers Requirements
Complete the Appendix to Tender

54

An Employer has to:
Draft the Particular Conditions (see guidance notes)
Draft the Employers Requirements
Complete the Appendix to Tender
Provide a Letter of Tender

55

An Employer has to:
Draft the Particular Conditions (see guidance notes)
Draft the Employers Requirements
Complete the Appendix to Tender
Provide a Letter of Tender
Provide Site Data (Clause 4.10)

56

An Employer has to:
Draft the Particular Conditions (see guidance notes)
Draft the Employers Requirements
Complete the Appendix to Tender
Provide a Letter of Tender
Provide Site Data (Clause 4.10)
Draft the Instructions to Tenderers (if required)

See also the Notes on the Preparation of Tender Documents

57

Clarity is important as a Contractor must understand what will be expected of him in order to:
Recognise the responsibilities and risks
Quantify the responsibilities and risks
Evaluate the responsibilities and risks

Plus… identify the opportunities.

This sets the basis for a Contractor’s commercial strategy for the project 58

Are these opportunities that exist at tender stage?




To understand the employer needs




To see whether the proposed contract describes the same thing




To influence the client’s way of thinking




To influence the provisions of the contract (terms and conditions)




To influence the allocation of risk




To agree the duration for undertaking the works




To agree the price for undertaking the works




To agree security of payment




etc 59

Exercise 8 days prior to tender submission the Employer provides further sub-surface data which contradicts data issued previously. The Contractor however, ignores the new data in his tender. The tender is successful and the Contractor is awarded the project. It then subsequently claims on the basis of unforeseeable physical conditions. a) Consider the relevant clauses and issues. b) Consider the various ways in which the Employer could have acted prior to Tender when issuing the revised data. c) Consider the various ways in which the Contractor could have acted when the revised data was received. d) Consider what the Contractor’s position might be. 60

Yellow Book – relevant clauses




Clauses 1.3, 3.1 & 4.3 – why?




Clause 4.10 – Employer to make available all relevant site data. Contractor responsible for interpretation and inspecting site.




Clause 4.11 – Sufficiency of tender.




Clause 4.12 – unforeseeable and adverse physical obstructions by an experienced Contractor.




Clause 1.1.6.8 – definition of unforeseeable




See also Clause 20 Claims

61

A Contractor will then submit its tender or offer

Yellow book
Under cover of a Letter of Tender

62

Period leading up to Contract Award

63

Typical Sequence of Events

Issue of Tender Documents

Submission of the Tender

Contract award

Yellow book Cl. 1.1.3.1 Base Date

28 days

Preparation of Tender Documents

Tender Period

Discussion & negotiation

64

Prior to contract award


Employer has to undertake comparisons of tenders




Both parties have to negotiate their best position




Agreement should reflect a common or mutual understanding




The agreement should be explained in the Contract

65

Contract award

66

A Contract is an agreement, which should be based upon the mutual understanding that was built up in the tender stage.

67

Employer Letter of Acceptance signifies the contract coming into full force Refer definition at Clause 1.1.1.3 – includes annexed memoranda

Contract Agreement either follows, or used instead of a Letter of Acceptance

68

The inital period after award

69

Exercise

Under a Yellow Book project, consider...


What is / should be the internal process for transferring the knowledge already gained by the business?
How / when do you assess the specific contract management requirements of your projects?
How should kick-off meetings with the client be used?

70

Exercise

Under a Yellow Book project, consider...


The documents that the Contractor should expect to submit after receiving the Letter of Acceptance
The documents and other ‘things’ that the Contractor should expect to receive from the Employer and/or his representative after receiving the Letter of Acceptance

71

Some other issues to consider

72

Some particular concepts

1. Evidence of ability to pay 2. Value Engineering 3. Impartiality of the Engineer 4. Contractor design submittals

Evidence of Ability to Pay Clause 2.4 states

“the Employer shall submit, within 28 days after receiving any request from the Contractor, reasonable evidence that financial arrangements have been made and are being maintained which will enable the Employer to pay the Contract Price (as estimated at that time) in accordance with Clause 14. ...”

74

Evidence of Ability to Pay - issues

Requires a request by the Contractor

What constitutes “reasonable evidence” ?
A letter of confirmation from the Employer…
A letter from the source of funding…

The relevant amount includes changes made under the contract i.e. it is not just the tender sum

Evidence of Ability to Pay Clause 2.4 continues “If the Employer intends to make any material change to his financial arrangements, the Employer shall give notice to the Contractor with detailed particulars.”

76

Evidence of Ability to Pay – further issues

The obligation to give notice of change does not seem to require a request from the Contractor

Options available for non compliance
Contractor may slow or suspend work or even terminate the contract (Clause 16 refers)

London Array Project has amended provisions. Employer to provide a Parent Company Guarantee.

Value Engineering Clause 13.2




Clause 13.2 seeks to encourage the Contractor to propose changes to nature or construction of the works that will be beneficial to the Employer




Red book – savings to be shared and any subsequent design is to be by Contractor and fit for purpose at Contractor’s risk




Yellow & Silver Books- financial benefits to be proposed by Contractor 78

Impartiality of the Engineer Clause 3.1 states (red and yellow books)

“…Except as otherwise stated in these conditions: Whenever carrying out duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer. …”

79

Impartiality of the Engineer Clause 3.1 states (red and yellow books)

“…Except as otherwise stated in these conditions: (a) Whenever carrying out duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer. (b) …”

80

Impartiality of the Engineer Clause 3.5 gives the exception …

“Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.”

81

Impartiality of the Engineer Clause 3.5 gives the exception …

“Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.”

82

Impartiality of the Engineer - Issues 1.

Impartiality versus fairness

2.

Fair determination “in accordance with the Contract” i.e. interpretation of the Contract…but the Contract may not be fair

3.

Partiality is only “whenever carrying out duties or exercising authority, specified in or implied by the Contract” i.e. does not include negotiation on behalf of Employer

4.

Silver book there is no Engineer and the Employer makes the (fair) determination

83

Contractor design submittals

Yellow book Clauses 5.2 deals with submission of documents Yellow book provides for submission for “review and/or for approval”

Exercise

Yellow book The Contractor submits design documents for approval. Two weeks later the Engineer responds pointing out that the designer had not been submitted for his approval, and that the Contractor has provided insufficient details of a particular component. The Contractor (i) immediately starts the production of working drawings, (ii) 3 days later commences manufacture.

What action should the Engineer take?

85

Procurement and sub contracting

Sub-contracting issues




Obtaining consent to sub-contract works
When?
From whom?

87

Clause 4.4 states the Contractor: “… shall not subcontract the whole of the Works. … shall be responsible for the acts and defaults of any Subcontractors… as if they were the acts and defaults of Contractor. … shall not be required to obtain consent for suppliers of Materials, or a subcontract … named in the Contract. The prior consent of the Engineer shall be obtained to other proposed Subcontractors. … shall give the Engineer not less than 28 days notice of the intended date of commencement of each Subcontractor’s work…”

Sub-contracting issues Which terms and conditions are to be used?
Are the FIDIC Standard Forms of Contract to be used?
If so, how will the main contract and sub-contracts be aligned?
Back to back – what is it?

89

Example – use of the phrase ‘back to back’ “Please accept this telefax as your letter of intent for the [X] Scope of Work for the [Y] project. Total price €……..excluding pipe supports, which will, be calculated at a rate of €…/kg (delivery and installation). The contractual terms shall be on a back-to-back basis in accordance with the terms of the Main Contract. Currently, parts of the Main Contract are under discussion with the Client. The results eventually be incorporated in the Main Contract, which will be issued to you when available. This Letter of Intent is based on the mutual understanding that: 4. Shift working/overtime/weekend work shall be carried out as and when required and is included in the above mentioned price. 5. The order is based on the Back to Back principle. You are requested to return a signed copy of this telefax, thereby unconditionally agreeing to the above outlined conditions.”

90

Back to Back Do not rely on the phrase but actively align relevant parts of main and sub-contracts. Alignment is particularly required on: 1. Technical requirements  Performance criteria  Materials and Workmanship standards 2. Contractual requirements  HSQE / Business ethics  Termination / suspension  Warranty  Insurance 3. Procedural requirements  Completion, testing and commissioning protocols  Compliance regimes

Sub-contracting issues Which terms and conditions are to be used?
Are the FIDIC Standard Forms of Contract to be used?
If so, how will the main contract and sub-contracts be aligned?
Back to back – what is it?
Changing names – does it work?
Are VSMC standard forms of sub-contract to be used?
If so, how will it align to the main contract?
Is the FIDIC Standard Form of Sub-contract be used?
If so, how will it align to the main contract?

92

Execution phase

Typical execution phase issues


Time - monitoring or reporting progress




Valuation and payment




Change / variations




Claims for time and money




Suspension of the works




Claims




Suspension




Force Majeure

94

Time Issues

95

Clause 8 – programmes
Clause 8.1 – notice of Commencement Date
Clause 8.2 – Time for Completion
Clause 8.3 – Programme to be provided within 28 days of Notice to Commence – detailed
Clause 8.3 – Engineer has 21 days to reject
Clause 8.3 – Contractor to proceed in accordance with it
Clause 8.3 – revised programmes to be submitted in various situations London Array project has amended provisions Clause 8.2 concerns rate of progress and notice of delay

96

Exercise – Yellow book The Contractor has submitted its programme under Sub clause 8.3 and receives a response from the Engineer within 21 days. The reply says that the programme is not approved since the Engineer does not agree with the duration allowed for some of the activities.

What should the Contractor do?

97

Critical path


The Critical Path - Why it is important?
Determines the earliest completion date for the project.
Determines the earliest and latest completion dates for individual activities.
Calculates float.
Identifies which activities are important to the completion of the project.
Identifies areas of risk.
Identifies areas where action should be taken to reduce the project duration or recover from delays.

The Critical Path - Shortest route between work and the pub

Critical path analysis

New Wall No Activity

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 7 8

Link

Activity

Critical path analysis

New Wall No Activity

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 7 8

Critical Critical Activity Link

Critical path analysis

New Wall No Activity

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 Design 7 Order concrete 8 Order bricks

Critical Critical Activity Link

Critical path analysis

New Wall No Activity 1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 Design 7 Order concrete 8 Order bricks

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

Critical path analysis

New Wall No Activity 1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 Design 7 Order concrete 8 Order bricks

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

Critical path analysis

New Wall No Activity 1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 Design 7 Order concrete 8 Order bricks

Time (days) 1

2

3

4

5

6

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

Critical path analysis

New Wall No Activity

Time (days) 1

2

3

4

5

6

1 Excavate the trench 2 Pour the foundation 3 Raise the brickwork 4 Place the coping 5 Complete 6 Design 7 Order concrete 8 Order bricks

Total Float

7

8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23

Clause 4.21 – progress reports


Clause 8.1 – notice of Commencement Date




To be submitted monthly until completion of all work




Comprehensive - shall include: a) Charts & descriptions of progress for each stage b) Photographs c) Manufacture report d) Contractor’s personnel & equipment e) QA documents, test results etc f)

Notices of claims

g) Safety statistics h) Comparisons planned versus actual progress, risks and mitigation measures 106

Clause 8.6 – rate of progress “If, at any time: a) Actual progress is too slow to complete within the Time for Completion, and / or b) Progress has fallen (or will fall) behind the current programme under Sub-Clause 8.3…

other than as a result of a cause listed in Sub-Clause 8.4 [Extension of Time]…

107

Clause 8.6 – rate of progress continued

…then the Engineer may instruct the Contractor to submit…a revised programme…

Unless the Engineer notifies otherwise, the Contractor shall adopt these revised methods, which may require increases in the working hours and / or in the numbers of Contractor’s Personnel or Goods, at the risk and cost of the Contractor…

108

Clause 8.6 – rate of progress continued

…If these revised methods cause the Employer to incur additional costs, the Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay these costs to the Employer, in addition to delay damages (if any) under Sub-Clause 8.7 below.”

London Array project has amended provisions Clause 8.6 in entitled expediting but covers similar matters AND Employer instructed acceleration

109

Exercise – Yellow Book The Contractor falls behind programme with certain non-critical activities. The Engineer instructs the Contractor to revise his methods of working to recover the delays and both the Employer and Contractor incur additional costs as a result.

Who pays?

110

Valuation & Payments

Valuation 1999 editions

Payment on a re-measurable basis (but option for lump sum)

Payment on a lump sum basis (but option for remeasurable)

Payment on a lump sum basis

Yellow Book Contract Price and Payments




Clauses 14.1 and 14.2 refer




Contract Price is lump sum (option for remeasurement)




Any quantities are estimated but may not be measurable (see particular conditions)




Any advance payment is subject to a guarantee and is progressively reduced as works proceeds




First interim payment also subject to issue of Performance Security

113

Yellow Book Payment Procedure


Clause 14.3 Contractor submits Statement at end of stated period – 6 copies in approved form and including supporting details (including progress report)




Clause 14.4 - Schedule of payments may apply. Payments may be adjusted for actual progress.




Clause 14.5 - Payment for plant and materials may apply – certain conditions attached




Clause 14.6 – Engineer issues Interim Payment Certificate within 28 days of receipt of Statement




Certificate does not indicate acceptance or approval London Array project has amended provisions. Clause 14.3 is not used, 14.4 is. Clause 14.5 is also not used. Clause 14.7 states invoice to be issued and that Employer reviews.

114

Yellow Book Payment Procedure


Clause 14.7 – Employer pays within 56 days of receipt of Statement (different for advance payment)




Clause 14.8 - Contractor entitled to interest for late payments without giving notice




Clause 14.9 – half retention release at issue of Taking Over certificate and passing Tests on Completion (plus success in the Tests after Completion if appropriate)




Clause 14.9 – remainder of retention release at expiry of Defects Notification Period unless still works to be done

London Array project has amended provisions. Clause 14.7 states 45 days payment period after issue. Clause 14.9 is not used.

115

Yellow Book Payment Procedure




Clause 14.10 – Contractor issues Statement at Completion within 84 days of Taking Over certificate. Engineer certifies as Interim Payment Certificate




Clause 14.11 – Contractor submits draft final statement within 56 days of receipt of Performance Certificate (issued under Clause 11.9 and confirms Contractor has met all obligations and works accepted)




When agreed, Contractor issues Final Statement

London Array project has amended provisions Clause 14.10 revised and 14.11 is not used.

116

Yellow Book Payment Procedure




Clause 14.12 – At same time Contractor also issues discharge that amount is in full and final settlement




Clause 14.13 – Engineer issues Final Payment Certificate within 28 days of receipt of above




Clause 14.7 – Employer pays within further 56 days

London Array project has amended provisions. Clauses 14.12 & 14.13 are not used

117

Exercise – Yellow book The Contractor issues its fifth statement for interim payment in the required format. Progress is behind what is expected and there is disagreement to the value of some varied works. The Engineer enters into discussion with the Contractor to agree adjustments to the applied amount and agreement is finally reached some 4 weeks later. The Engineer duly certifies an amount to be paid, 34 days after the receipt of the statement. The Employer pays the Contractor 2 days later.

What should the Contractor do?

118

Variations

Variations Clause 13 1. Can no longer be instructed after issue of the Taking Over Certificate 2. New procedure whereby Contractor may be requested to indicate effect on programme and value of works of a proposed change 3. Contractor has limited rights to object to a variation, but can be over ruled 4. Timely notice to claim additional payment is condition precedent to payment

120

Variations




Clause 13.1 does not set out the types of changes that can be made i.e. authority for variations




A variation is defined (Clause 1) as “a change to the Employer’s Requirements”

121

Procedure




Clause 3.3 states that the Contractor must comply with all instructions from the Engineer




Clause 13.1 says Contractor shall execute and be bound by Variation unless certain specific situations exist. If so, Contractor to give ‘prompt’ notice.




Clause 13.3 also provides for a Contractor’s proposal to be requested prior to an variation being instructed

122

Contractor’s proposal covers a. The extent of the work (including design) to be performed and the timetable for completion.

Consider:


A comprehensive description




Direct effect on other parts of the works (time and cost)




Effect on ability to achieve Time for Completion

123

Contractor’s proposal covers b. Proposed modifications to programme and Time for Completion

Consider:


Requirements of Clause 8.3 to notify possible delays to the execution of the works i.e. delay Take Over by the Employer




Can only be shown using CPA (critical path analysis)




Prolongation costs

124

Contractor’s proposal covers c. Proposed adjustment to Contract Price

Consider:


Shall include reasonable profit

125

Valuation of variations




Adjustments to the Contract Price are to be agreed or determined by the Engineer




Reasonable profit is to be included

126

Exercise – Yellow book The Engineer requests a proposal under 13.1 prior to instructing a Variation. The Contractor responds claiming that the Variation will require the mobilisation of additional equipment in order to complete within the existing Contract time schedule, but alternatively, could be undertaken using the existing equipment but with the varied work being completed after the Contract completion date. Prices for both options were provided.

The Engineer instructs the Contractor to undertake the work.

What should the Contractor do?

127

Claims

Clause 2.5 – Employer’s claims


Employer or Engineer to give notice and particulars to the Contractor
To be given as soon as possible after being aware of the event or circumstance that gives rise to claim
Engineer to agree / fairly determine (clause 3.5)
Can deduct monies due

129

Employer’s claims


Clause 2.5 provides for and sets out procedure




Claims include:
Electricity, water & gas consumption – clause 4.19
Equipment & free issue materials – clause 4.20
Rejection / retesting – clause 7.5
Failure to do remedial work – clause 7.6
Revised methods cause additional costs – clause 8.6
Delay damages – clause 8.7
Failure to pass tests on completion – clause 9.4
Extension to Defects Notification Period – clause 11.3
Failure to insure – clauses 18.1 / 18.2 130

Clause 20.1 – Contractor’s claims




Notice is mandatory and to be submitted within 28 days of any event or circumstance that gives rise to entitlement




Notice is condition precedent to additional payment / extension of time

131

Clause 20.1 – Contractor’s claims


Records shall be kept, Engineer permitted to view




Fully detailed claim to be submitted within 42 days of any event or circumstance that gives rise to entitlement including full supporting particulars




Further claims to be submitted on a monthly basis if on-going




Final submission within 28 days of end of effects

London Array project has amended provisions. Clause 20.1 says fully detailed claim to be submitted within 30 days 132

Clause 20.1 – Contractor’s claims


Engineer to respond with 42 days of submission




May request further particulars but must respond on principles of claim




Interim payments allowed for amounts substantiated




Engineer to agree / fairly determine (clause 3.5)

London Array project has amended provisions. Clause 20.1 says Engineer to respond within 30 days

133

Contractor’s claims


Clause 20.1 provides for and sets out procedure




Claims include:
Delayed drawings or instruction – clause 1.9
Late access or possession – clause 2.1
Setting out reference point errors – clause 4.7
Adverse unforeseeable conditions – clause 4.12
Extension of Time – clause 8.4
Interference with tests – clause 10.3
Variations – clause 13.3
Change in law – clause 13.7
Force Majeure – clause 19.4 134

Ground condition claims

135

Yellow Book




Clause 4.10 – Employer to make available all relevant site data.




Clause 4.10 – Contractor responsible for interpretation.




Clause 4.10 – Contractor deemed “to the extent that it was possible” to have identified all risks etc.




Clause 4.11 – sufficiency of tender

London Array project has amended provisions. Clause 4.10 says Contractor accepts responsibility for information provided by the Employer 136

Yellow Book


Clause 4.12 – Unforeseeable (refer clause 1.1.6.8) physical conditions and obstructions.




Notice to be given if adverse conditions met that are considered to be Unforeseeable




Continue with Works and comply with instructions




Submit claim in accordance with clause 20.1




Engineer to agree / fairly determine (clause 3.5)




Money adjustment is Cost and Engineer to take account of more favourable conditions elsewhere

London Array project has amended provisions. Physical conditions are defined within clause 4.12. Revision to 4.10 taken account of.

137

Exercise – Yellow Book On 1st June, the Contractor discovers what it considers to be an unforeseen physical obstruction when it is laying a submarine cable. The Contractor’s site manager sends an email to his counterpart giving notice. On 1st July, the Contractor submits an Application for Interim Payment and includes within it an amount of €200,000 and description of the additional works it has undertaken as a result. On 4th July, the Contractor submits its Progress Report for the preceding month and includes within the list of notices submitted, a reference to the unforeseen physical obstruction and the aforementioned email.

Is the Contractor entitled to be paid anything in the next Interim Payment?

138

Extension of Time claims

Extension of Time


An Extension of Time does not mean an entitlement to additional money




An Extension of Time relieves Contractor liability to pay delay damages




An Extension of Time establishes a new completion date




An Extension of Time allows the Employer to impose delay damages after the new completion date

140

Extensions of Time - considerations


Contract provisions define the basis of entitlement




Delay to be on the critical path




‘Ownership’ of Float




Effect of Concurrency

141

Clause 8.4 – Extension of Time


Clause 8.4 - Lists grounds for entitlement






Yellow Book (a) to (e) Clause 8.4 - Refers to clause 20.1 i.e. notice, submissions of details Clause 8.4 – entitlement if completion for Taking Over is delayed No provision for Engineer to unilaterally award Extension of Time

142

Delay analysis techniques


Time extensions after completion of project (retrospective):
Collapsed As-built
As-planned –v- As-built
(plus Windows Analysis)

Retrospective or Actual Based Analysis

Activity

1

2

3

4

5

6

7

8

9

10 11

ACTIVITY A ACTIVITY B

Original Completion

ACTIVITY C

Why Delay?

144

Delay analysis techniques


Time extensions after completion of project (retrospective):
Collapsed As-built
As-planned –v- As-built
(plus Windows Analysis)
Time extensions during currency of project (prospective)
Impacted As-Planned
Time Impact Analysis

Prospective or Model Based Analysis

Activity

ACTIVITY A ACTIVITY B

1

2

3

4

5

6

7

8

9

10 11

Event Original Completion

ACTIVITY C Estimate of Delay

146

Suspension

147

Suspension Clause 8.8


Engineer may instruct at any time




Contractor to protect, store, secure the work




If cause of suspension the responsibility of Contractor, no entitlement to time and / or money

148

Suspension Clause 8.9


Provides entitlement for Contractor to claim additional time and / or money




Notice must be given




Failure to protect, store or secure means no entitlement to time and / or money

149

Suspension Clause 8.10


Payment for Plant and Materials delivered to site

If:


Suspension > 28 days

And;


Plant and Materials marked as Employers property

150

Suspension Clause 8.11 If suspension > 84 days, Contractor may request Engineer permission to proceed.

If no response within 28 days: i.

Treat as an omission (cl. 13) if part of work, or

ii. Give notice of termination (cl. 16.2) if whole of work

151

Suspension Clause 8.12


Joint examination before work restarts




Contractor to make good any deterioration, defects or losses

152

Force Majeure

153

Force Majeure Clause 19


Clause 19.1 – definition




Clause 19.2 – notice to be given by either party within 14 days of event




Clause 19.2 – shall not apply to making payments




Clause 19.3 – reasonable endeavours to minimise resulting delay




Clause 19.4 – entitlement for Contractor to claim time and / or money




Clause 19.5 – treatment when differing terms in sub-contracts

154

Force Majeure Clause 19 Clause 19.6 – if period > 84 days for substantially all works, OR multiple periods > 140 days Either party can give notice of termination. Then proceed in accordance with cl. 16.3 Payment provisions described

Clause 19.7 – release from performance under Law

155

Completion & Handover

156

Typical Sequence of Events

Taking over Certificate

Commencement Date

Contractor Delay

Time for Completion

Completion


Clause 8.1 – Notice of Commencement Date




Clause 8.2 – Time for Completion




Clause 9.1 – Contractor’s Obligations for Tests on Completion including provision of As builts and O & M manuals




Clause 10.1 - Taking Over Certificate for the Works and Sections




Clause 10.2 - Taking Over Certificate for Parts of the Works




Clause 12.1 – Contractor’s Obligations for Tests After Completion

158

Exercise

What does the issue of the Taking Over certificate signify?

What are the consequences of the issue of the Taking Over Certificate?

159

Clause 8.7 – delay damages


Amount as agreed between the parties




Not subject to reduction for partial completion




Whether Employer has suffered damage is not relevant




Refers to sub-clause 2.5 (procedure)




Comprises Contractor’s entire liability for delay

160

Exercise

The Contractor gives the Engineer 14 days notice for issue of a Taking Over Certificate, undertaking to complete subsequently certain minor Works. The Engineer responds 21 days later by requiring that certain minor outstanding works (which effects maintenance of the Plant) be complete first. The Contractor claims EOT and costs.

161

Defects Notification Period

162

Defects Liability




Clause 11.1 – Completion of outstanding work and remedying defects




Period stated in Appendix




Clause 11.9 – Performance Certificate

163

Exercise – Yellow Book

What does the issue of the Performance certificate signify?

What are the consequences of the issue of the Performance Certificate?

164

Dispute resolution

Resolution of Disputes under Yellow Book If not agreed, Engineer to fairly determination (cl. 3.5). Any dispute can be referred to the procedure in cl. 20:




Adjudication by a Dispute Adjudication Board (DAB) in accordance with the rules in the standard form




If any Party dissatisfied or decision not made when it should, Notice of Dissatisfaction issued within 28 days




Arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC)

166

Yellow Book typical sequence of dispute events envisaged in clause 20

Parties present submissions to DAB