Questionnaire on the Contractual Matters

Question 1: FIDIC has issued new editions of Forms of Contract in 1999.

What are these and on what type of Contracts can these be used.

Four standard Form of Contract have been issued by FIDIC in 1999

1. Conditions of Contract for construction of building or engineering

works –Red Book
This form of contract can be used where Employer or his
representative designs the works

2. Conditions of Contract for plant and design-build – Yellow Book

This form of contract is used for provision of electrical or mechanical

plant and for design and execution of building or engineering works,
where design is also the contractor’s responsibility.

3. Conditions of Contract for EPC / turnkey projects – Silver Book

This form of contract is used where one party takes total

responsibility for design and execution of the project.

4. Short Form of Contract for building or engineering works – Green

Book

This form of Contract is for works of relatively small value.

Question 2: If a work is omitted from the contract by way of variation, and if

the contractor claims for loss of profit on the omitted work, what should be
the basis for rejecting such claim?

Pursuant to Clause 52.3, no adjustment is required if the variations are + or

- 15% of the Effective Contract Price. Even if the omission is beyond 15%,
the adjustment that is required to be done as per this clause is for
contractor’s site and general overheads only. This clause does not mention
of any adjustment for profit.

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Question 3: Is the contractor required to keep an allowance in the
Preliminary Items in his tender bid for the Provisional Sums inserted in the
tender by the Employer?

The Contractor is required to keep an allowance for the Preliminary Items

for the Provisional Sums, which relate to the work, which is reasonably
defined in the tender. But if the Provisional sum relates to some
contingency amount for any unforeseen site requirements, then he is not
required to make any allowance for the preliminary items in his tender.

Question 4: What FIDIC says about the Contractor’s entitlement against his
Claims, if he failed to notify the claims in a timely manner.

The FIDIC has different provision for Time Claims and the Cost Claims.

For Time Claims, FIDIC says that the Engineer is not bound to make a
determination for an Extension of Time in case the Contractor failed to
fulfill his obligation of timely notification. RTA conditions say that the
Engineer shall not make a determination in case the contractor failed to
fulfill his obligation of timely notification.

For Cost Claims, the Clause 53.4 states that if the Contractor fails to
comply with the notice requirement, the Engineer shall still assess his
entitlement or the Arbitrator based on the contemporary awards.

Question 5: What are three main techniques available to analyze an

Extension of Time claim?

The three main techniques are,

1. As-Planned Impacted Method – Here the delays are incorporated in
the original Clause 14 Program and it gives the extended completion
date due to delays.

2. As-Built Collapsed Method - In this method, the As-Built Program is

taken as the basis and the Employer’s delays are removed from it
one by one. The difference of the actual completion date and the
completion date shown by the Program after removing the
Employer’s delays indicate the Contractor’s entitlement for an
Extension of Time

3. Window Analysis – In this method the Actual Progress Update (i.e.

the weekly updated program) at the time of actual happening of the
delay is taken as the base program and the delays are incorporated
to see the effect of delay.

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Out of all the above, the courts and the Arbitrators internationally have
shown their preference to use Window Analysis method for delay claims.

Question 6: Does the Engineer have to authority to instruct a variation after

the issuance of Taking Over Certificate and under which clause?

The clause 49.2 (b) requires the Contractor to execute all such work of
amendment, reconstruction as the Engineer may instruct.

Question 7: Can you name some of the different internationally known

methods of Dispute Resolution other than Arbitration and Litigation?

 Mediation – One Neutral party helps the parties to find common

ground for settling disputes (Not binding)

 Reconciliation – One Neutral Party puts forward the possible terms

of settlement or the opinion on the dispute (Not Binding)

 Adjudication – Adjudicator is appointed at the time of the dispute

and is similar to Arbitration, but lesser time frame and lesser
documentation required than arbitration (Binding)

 Dispute Review Boards – A standing adjudication panel appointed at

start of the project and adjudicate the dispute as and when arises
(Binding)

 Early Neutral Evaluation – A preliminary assessment of facts,

evidences and legal merits of the parties’ cases, to form a basis of
further negotiations. (Not binding)

 Expert Determination – A independent expert appointed by the

consent of the parties to decide the dispute (Binding)

 Judicial Appraisal – The parties appoint a private judge to make an

appraisal of the likely result if the case goes to court. (The parties
can decide if they would like it to be binding or not)

 Neutral Fact Finding – Similar to Expert Determination, but not

binding.

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Question no. 7: What is a collateral warranty.

The collateral warranty is an agreement, which exists along side the main
contract between the parties which otherwise have no contractual links.
For example, if the Employer wants to have a separate contract with the
nominate subcontractor, he can have it by way of having a collateral
warranty.

Question No.: Can an Arbitrator’s award be challenged in the court?

The Arbitrator’s award can be challenged in the court on very limited

grounds, such as, lack of substantive jurisdiction to deal with the dispute,
or for serious irregularity such as failure of the Arbitrator to act fairly or
impartially, not giving the parties reasonable opportunity to present their
cases, the award being ambiguous, the award being against the Public
Policy etc.

Question 10: Is Head Office Overheads payable in case of a Time Extension

Claim. What is the view of industry experts on this issue?

The view of the industry experts is that the Contractor needs to

demonstrate one of the following,

 That he lost head office overheads, by showing that he refused any

new tenders on the grounds that his head office resources were
engaged in the prolonged project,

 But for the prolonged project, he could have reduced some of his
head office resources,

 That his head office overheads increased to deal with the prolonged
project.