Adama University

Faculty of Technology
School of Engineering & Information Technology
Department of Civil Engineering & Architecture
Postgraduate Program in
Construction Management

CENG 6107? Contracts and Business Law

(“Construction Law & Contract”) Date: February 11, 2009
I Semester 2008/2009 (2001 E.C.)

Instructor: Zewdu Tefera Worke

Model Examination

Information & Instruction

1. This Model Examination has three parts.

I. General Course Knowledge Exam. Questions; in relation to business

services, project delivery systems & related issues, obligations of the
employer & the contractor, the concept of time at large, delay &
disruption claims, subcontracting & the role of the consultants;

II. Comparative Analysis Exam. Questions; in relation to certain

provisions from the FIDIC & the PPA Conditions of Contract;

III. Case Study Exam. Questions; in relation to water & road projects
hypothetical cases.

2. Under each part, you are instructed to choose & attempt certain exam.
questions.
3. The type of examination is open book. You are allowed, however, only to
consult your course material, the relevant standard conditions of contract,
the Civil Code & other directly relevant reference materials.
4. Please, also consider other instructions under each part of the examination.
5. Please, submit your answer type or computer written on Wednesday,
February 18, 2009 at 9: AM.
6. We will discuss on your answers during our class sessions on the same day
but in the afternoon.
7. Please, attempt the model exam. questions individually.

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I. General Course Knowledge Exam. Questions

Instruction: Please, choose & attempt only three questions.

1. Please, identify & discuss (in detail) the possible types or categories
of business services required both for the construction business &
construction project & their content & practical significance in
respect thereof.

2. Please, define, and discuss (in short) the basic features & distinctions
between Project Delivery Systems, Contract Types (Forms of
Contract) & Methods of Procurement by providing three pertinent
examples for each of them under the Ethiopian & the international
context.

3. Please, identify, and discuss (in short) the fundamental obligations of

the Employer & the Contractor within the context of an
international construction contract based on MDB Harmonized
FIDIC Conditions of Contract (2006).

4. What do you understand by delay & disruption claims? Is there any

difference between the two types of claims? If yes, why? If not, why
not? Please, discuss in detail.

5. There are two types of sub-contractors: preferred (selected) sub-

contractors & nominated sub-contractors. The nomination is carried
out by the employer himself. Does the Sub-contract Agreement
signed between the (preferred/selected) Sub-Contractor & the Main
Contractor create any legal relationship between the said Sub-
contractor & the Employer? Why? Discuss. Would your opinion or
position be different, if the Sub-contractor were a nominated sub-
contractor? Why? Please, discuss in detail.

6. Please, discuss the role of Consultants in the construction project

inclusive of building project.
What is the underlining features or nature of their professional
Services? Please, discuss in detail.

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II. Comparative Analysis Exam. Questions

Instruction: Please, choose & attempt only one question.

1. Please, compare & contrast all possible differences & similarities

between the MDB-FIDIC 2006 & the PPA (Public Procurement
Agency) ICB & the Ministry of Works & Urban Development
(MoWUD) Conditions of Contract with respect to the following
issues based on their respective clauses.
It is advisable to present it in Table.

 Dispute Settlement Mechanisms;

 Variations; and
 Quality regulations;

2. Please, compare & contrast all possible differences & similarities

between the FIDIC 4th & PPA (Public Procurement Agency)
Conditions of Contract with respect to Liquidated Damages based
on the following respective clauses.

A. FIDIC Conditions of Contract (Clause 47 Liquidated

Damages)

47.1 Liquidated Damages for Delay

If the Contractor fails to comply with the Time for

Completion in accordance with Clause 48, for the whole of
the Works or, if applicable, any Section within the relevant
time prescribed by Clause 43, then the Contractor shall pay
to the Employer the relevant sum stated in the Appendix to
Tender as liquidated damages for such default and not as a
penalty(which sum shall be the only monies due from the
Contractor for such default) for every day or part of a day
which shall elapse between the relevant Time for Completion
& the date stated in a Taking-Over Certificate of the whole of
the Works or the relevant Section, subject to the applicable
limit stated in the Appendix to Tender. The Employer may,
without prejudice to any other method of recovery, deduct
the amount of such damages from any monies due or to
become to the Contractor. The payment or deduction of such
damages shall not relieve the Contractor from his obligation
to complete the Works, or from any other of his obligations
& liabilities under the Contract.

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 47.2 Reduction of Liquidated Damages

If, before the Time for Completion of the whole of the Works
or, if applicable, any Section, a Taking-Over Certificate has
been issued for any part of the Works or of a Section, the
liquidated damages for delay in completion of the remainder
of the Works or of that Section shall, for any period of delay
after the date stated in such Taking-Over Certificate, and in
the absence of alternative provisions in the Contract, be
reduced in the proportion which the value of the part so
certified bears to the value of the whole of the Works or
Section, as applicable. The provisions of this Sub-Clause shall
only apply to the rate of liquidated damages & shall not
affect the limit thereof.

B. PPA Conditions of Contract (Clause 49 Liquidated Damages)

49.1 The Contractor shall pay liquidated damages to the

Employer at the rate per day stated in the Special
Conditions of Contract for each day that the Completion
Date is later than the Intended Completion. The total
amount of liquidated damages shall not exceed the
amount defined in the Special Conditions Contract. The
Employer may deduct liquidated damages from
payments due to the Contractor. Payment of liquidated
damages shall not affect the Contractor’s liabilities.

49.2 If the Intended Completion Date is extended after

liquidated damages have been paid, the Engineer shall
correct any overpayment of liquidated damages by the
Contractor by adjusting the next payment certificate.
The Contractor shall be paid interest on the
overpayment, calculated from the date of payment, at the
rates specified in Sub-Clause 43. 1.

NB: Please, also refer & discuss the effects of Sub-clause 43.1 of the PPA
in your comparative exercise.

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III. Case Study Exam. Questions

Instructions:

 Please, choose & attempt only one from the following two cases.
 Please, do not assume any extra facts but rely on given facts of the
case.

1. The Water Supply Dam Construction Project Case

 A Construction Contract for the construction of Water Supply

Dam, the purpose of which is to impound 600, 000, 000 cubic
meter of raw water, has been signed between the Employer &
the Contractor.
 The conditions of contract applicable to the Contract were that
of MDB FIDIC.
 The Contract Price was ETB 600, 000, 000. 00.
 The completion time was 1460 calendar days.
 The Contractor, during the execution of the project, had some
claims against the Employer. The heads of claims include:-

 variation claims (alleged to be due to difference in rates

ETB 50, 000, 000, 000. 00);
 delay claims (said to be caused by the Employer ETB
8, 000, 000. 00);
 disruption claims (said to be caused by design change &
late issuance of drawings ETB 10, 000, 000. 00); and
 increase of the cost of material & labour(due to
legislative measure taken by the government ETB 20,
000, 000. 00);

 The total claims of the Contractor are amounting to ETB 88, 000,
000. 00.
 The Contractor has first submitted its claims to the Engineer by
fulfilling all requirements for the valid claim. The Engineer by
considering the merits of the case has declined to accept the whole
claims by stating its reasons.
 The project has been completed.
 The Contractor has submitted a Statement at Completion by
including the final value of the executed works.
 The Contractor has, however, neither submitted its claims for the
Engineer’s determination and nor included in its claims, as per
their contract in the said Statement at Completion.
 The very reason of the Contractor is to submit its claims directly
to adjudication & then to arbitration.

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  The Employer has, after the Engineer certified the Final
Statement, effected all the payments due, under the Final
Statement, to the Contractor.
 As planned, the Contractor has submitted its claims (ETB 88
Million) to the agreed adjudication by requesting the Employer,
as follows:-

 the payment of the said claims; (i.e. ETB 88, 000, 000, 000 .
00)
 the payment of interest with respect to the claims; (i.e.
ETB 4, 000, 000, 000. 00) and
 The costs of arbitration; (i.e. ETB 1, 000, 000, 000. 00)
(i.e. the payment that has been made to the Claims
Engineer, Legal Advisor, Adjudicator’s fee, for two
Expert Witnesses…).

 You have been appointed, both by the Contractor & the Employer, as
a sole Adjudicator since you are a highly qualified Adjudicator in the
field.
 The Claims of the Contractor has been sent to the Employer.
 The Employer has submitted its Response to the Claims of the
Contractor.
 The Employer requests the Adjudicator to reject the whole of the
Claims of the Contractor due to the following reasons.

 The Contractor’s Claims have not been submitted to the

determination of the Engineer, as per the Contract;
 The Contractor did not request any amicable settlement, which
is a clear requirement under the Contract;
 The Contractor has not included its alleged Claims in the
Statement at Completion, as per the Contract;
 The Contractor has breached the Contract & therewith its
promise by not following the clear requirements of the
Contract agreed between the Employer & the Contractor, as
per the applicable law;

(Article 1731(1) of the Ethiopian Civil Code (Effects of

Contract): provides as follows:

The provisions of a contract lawfully formed shall be

binding on the parties as though they were law.)

 The Employer has further requested the Adjudicator to entitle

him the Costs of the arbitration amounting ETB 1 Million &
attached the required documentation in respect of the said costs.

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 The Contractor has attempted, in its Counter Defense, to refute
the Statement of Defense of the Employer. Specially, the
Contractor further argued, as follows.

 The non fulfillment of procedural requirements shall

not waive the substantive rights of the Contractor;
 The Contractor’s right to claim is unaffected on the basis
of the applicable law since the ten years period of
limitation has not yet elapsed as per the applicable law;
(i.e. as per Article 1845 of the Civil Code);
 The submission of the Contractor’s Claims to the
Engineer’s determination & the inclusion of the Claims
in the Statement at Completion shall serve no purpose
since the decision maker in both instances was the same
Engineer, who has initially rejected the whole of the
Contractor’s claims;
 Regarding the amicable settlement both the Contractor
& the Employer may undertake same, at any time even
during the process of this adjudication;
 The Contractor has committed no breach of Contract;

 Exam. Questions

a) Assuming that you are the sole Adjudicator for

the case between the Contractor & the Employer,
what would be your decision after you have
analyzed the claims & arguments of the
Contractor & the defense arguments of the
Employer? Who has presented a valid &
acceptable argument? You are required to give
detail reasons for your decision on the basis of the
applicable contract clauses & the provisions of the
applicable law.

b) Depending on your decision on the claims of the

Contractor (under (a)), who shall cover the costs
of the adjudication incurred both by the
Employer & the Contractor? Why? Discuss.

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2. The Road Project Case

 A Construction Contract has been signed between the

Contractor & the Employer for the construction of a 200km
road project.
 The Contract Price was ETB 400, 000, 000. 00.
 The completion time for the project were 1000 calendar days
excluding mobilization.
 The extent of liquidated damages agreed was ETB 100, 000. 00
for each day of delay up to the limit of 10 % of the final
Contract Price.
 An international Consulting Engineer has been selected &
appointed by the Employer for the design & Supervision of the
project.
 The final method of dispute resolution agreed in the Contract is
arbitration.
 A dispute has been arisen between the Contractor & the
Employer with respect to:
 Delay claims (200 days of time extension & ETB 30, 000,
000, 000. 00 prolongation cost); and
 Disruption claims i.e. the cost of loss of productivity &
uneconomical use of resources, said to be caused by
major & repetitive design change & late issuance of the
drawings by the Engineer to the Contractor ETB 10, 000,
000. 00;
 The Contractor, after fulfilling the contractual requirements,
directly submitted its claims to the court.
 The Employer has received the Claims of the Contractor.
 The Employer in its Statement of Defense has presented the
following arguments to the court.
 The Contractor is in breach of the Contract in bringing
the claims directly to the Court since we have an
agreement to arbitrate our disputes. The Court shall
dismiss the case for lack of jurisdiction.
 The Employer denies liability of the claims of the
Contractor.
 The Employer claimed, instead, the payment of
liquidated damages for the 400 days of delay i.e. ETB 40
000, 000, 000. 00.
 The Employer’s argument is that the delay caused to
the Contractor is due to design change & late issuance
of drawings to the Contractor by the Engineer.
 The Employer is not responsible for the act or omission
of the Engineer towards the Contractor under the
Contract.

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  You have been approached by the Contractor, before the next
court day, to advise him with respect to issues raised by the
Employer.
 You are instructed to analyze the exam. Questions under the
MDB Harmonized FIDIC Conditions of Contract.

Exam. Questions

 What would be your advice to the Contractor with respect to the

issues raised by the Employer? Please, discuss.
a) With respect to the agreement to arbitrate?
b) With respect to the Contractor’s possible
liability to the Employer for liquidated damages
& related issues?
c) Any other comments with respect to the claims
of the Employer?

Good Luck!

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 Question No 2
1. Project Delivery Systems

Definition

 Contract or Project Delivery System is the way Project Owners together with
Project Regulators and Financiers determine the assignment of
responsibilities to Project Stakeholders along the Construction Process.

 It is often determined during the Basic Planning phase of the Construction

Project.

Types of Project Delivery Systems

 Project delivery systems are basically classified in to two broad areas:

a) Force Account; and
b) Outsourced.
 Force Account

 When the project owners engage themselves to undertake the project, it is

called a force account delivery system.
 Such a system is often promoted if the Project Owners believe that there is a
comparative advantage in cost, time & quality.

 Outsourcing

 Most of the project delivery methods/systems are found under the category
of outsourcing.
 The following are some of them.

 Design-Bid-Build (D-B-B);
 Design-Build (D-B);
 Construction Management (CM At Free & At Risk);
 Design –Build- Operate (D-B-O);
 Design-Build-Operate-Maintain (D-B-O-M);
 Design-Build-Finance-Operate (D-B-F-O);
 Full Delivery or Program Management;
 Build-Own-Operate (B-O-T);
 Build Own Operate Transfer(B-O-O-T);

 Categories

 Those project delivery methods under the category of outsourcing

may be categorized under the following category.

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  The criteria for such category are based on: segmentation,
integration & financing.
 These are:
 Integrated Process Delivery Methods
o Design-Build-Operate;
o Design-Build-Operate-Maintain;
o Design-Build-Finance-Operate;
 Segmented Delivery Methods
o Design-Bid-Build;
o Design-Build;
o Construction Management;
o Pure Operations & Maintenance (O&M)
 External Financing Methods
o Design-Build-Finance-Operate;
o Build-Own-Operate;
o Build-Own-Operate-Transfer;

 Design-Bid-Build

 After Project Owners did prepare the Basic Planning that identifies
construction project programs, they call upon the participation of
Design and/or Supervision Consultants.

 This Consultant will carry out the design together with the necessary
tender documents which will be the basis for tendering to select
Contractors.

 This process is called Design-Bid-Build and hence the name for such
delivery system.

 Advantages may include:

 Long history of acceptance;

 Open competition;
 Distinct roles are clear;
 Owner flexibility;
 Easy to tender;

 Disadvantages may include:

 Innovation not optimized;
 Usually cost overruns;
 Disputes between parties;
 Client retains risks;
 Usually low bid-incentive for change orders;
 Owner responsible for errors & omissions;

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 Design-Build

 Design Build or Turnkey, in principle, reduces numbers of procurement

processes engaged in the fragmented process and employ only one
procurement process and a single contractor to provide the entire
Construction Implementation Process(Design & Construction
Implementations)

 In this arrangement both the design & construction liability rests with the
Contractor.

 The following are some of the basic features of Design-Build.

 These are;-

 Employer’s Requirements & Contractor’s Proposals;

o The employer approaches a contractor with a set of

requirements defining what the employer wants.
o The contractor responds with proposals, which will include
production as well as design work.
o The scale of design work included depends on the extent to
which the employer has already commissioned such (design)
work from others.
o The contractor’s design input varies from one contract to
another, ranging from the mere detailing of a fairly
comprehensive design to a full design process including
proposals, sketch schemes & production information.
o The Design-Build contractor, in any way be responsible for
both the design & construction.

 The Pricing Mechanism;

o The other feature is that Design-Build delivery method deals

is a guaranteed maximum price (GMP).
o This helps clients to feel reassured that they are not signing a
blank cheque.
o As an incentive to the contractor, any savings made by
completing the project for a price below the GMP may
sometimes be shared between the client & the contractor.

 Roles & Responsibilities of the contracting parties in the design-build

process;

o There is lack of an independent certification role in the

contract.

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 o There is no architect or contract administrator to settle
differences.
o There is no independent quantity surveyor responsible for
preparing the basis up on which contractors tender.

 Advantages may include:

 Single source responsibility both for design & construction;

 Integrating design & construction;
 Reduction in administration;
 Innovation;
 Cost savings;
 Constructability optimized;
 Most risks transferred to the design-builder;
 Usually GMP;
 Design reflects;

 Disadvantages may include:

 Limiting competition;
 High tendering costs;
 New method & unfamiliarity;
 Client needs quicker decision making;
 Clients bringing design requirements(30%)(reduces design innovation);

 Construction Management

 Under Construction Management the Owner contracts separately,

but somewhat simultaneously, with a design consultant and with a
firm whose primary expertise is construction (the Construction
Manager).
 The owner procures the management services of the Construction
Manager (in most cases a general contracting construction firm)
early in the design phase.
 Construction Management should not be confused with Project
Management. Project Management implies a much broader set of
responsibilities than Construction Management. Project
Management is the overall management by, or on behalf of, the
Owner of all aspects of a project from its inception through design,
construction & use.
 CM is of two types: CM At Free/as Agent & CM At Risk/as
Constructor. This distinction determines the contractual approach to
CM.

 Construction Manager (CM) as Agent

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  This is a form of CM under which the Construction Manager
acts as an agent of and advisor to, the Owner.
 The Owner enters in to multiple trade contracts with the trade
contractors & suppliers.
 The Construction Manager is retained on a fee for services
basis & acts on the Owner’s behalf in managing &
coordinating the trade contracts in the best interests of the
Owner.
 The Owner retains all of the contracting risks inherent in
each of the trade contracts.
 It essentially involves the Owner acting as its own general
contractor, with the assistance of a Construction Manager.
 This form of CM is sometimes also referred to as the “CM as
Advisor” or “owner contacted form of CM”.

 Construction Manger (CM) At Risk (as Constructor)

 This is a form of CM under which the Construction Manager

enters in to multiple trade contracts with the trade
contractors & suppliers.
 The Construction Manager assumes responsibility for the
performance of the trade contracts (subcontracts) much as a
general contractor under the traditional method, and is paid
for the trade contract work on a cost reimbursable basis.
 The Construction Manager may, or may not, also provide a
guaranteed maximum price & schedule to the Owner under a
cost plus type of arrangement, or enter into a stipulated price
contract, when the design is sufficiently complete.

 Advantages may include:

 CM At Free
o Provides a managing & administering for all phases
of a project;
o Treats planning, design, construction as an
integrated tasks;
o Some costs & schedule control;
 CM At Risk
o Good for clients with insufficient staff;
o Owner flexibility;
o Responsible for time & cost overrun;
o Holds & manages the trade contractors;
o Constructability design review;

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 o Same legal position as a General Contractor;
o Provides a GMP;
o Works closely as a teaming effort & encouraging
partnering & trust;
 Disadvantages may include;

 CM At Free
o No contractual relationship with trade contractors;
o No contractual responsibility for outcomes of a project;
o Client retains the risks;
 CM At Risk
o Duplication of administration & additional paperwork;
o More paper work for the client;
o Some duplication of administration;
o Fast tracking difficult to control with designer & CM;
o Sometimes difficult to manage all phased packages with
costs, changes & schedules;
 Design-Build-Operate

 According to FIDIC, the D-B-O approach to contracting combines

design, construction, and long term (ex. 20 years) operation (and
maintenance) of a facility in to one single contract awarded to a
single contractor (who will usually be a joint venture or consortium
representing all the skills for in a D-B-O arrangement).
 Advantages of D-B-O
 The advantages are categorized in terms of: time, finance & quality.
 Time
 With possibilities to overlap some design & build activities it
will be possible to minimize delays & optimize the smooth flow
of construction activities.
 Finance
 With cost restraints & commitments & other risks being
carried by the contractor, there is less risk of price over-run.
 Quality
 With the contractor responsible for 20 years operation, he has
an interest to design & build quality plant with low operation
& maintenance costs.
 Not only will then plant be “fit for purpose” but it will be built
to last.
 The FIDIC has now prepared conditions of contract which facilitate
the D-B-O process.

 Full Delivery or Program Management

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  Under full delivery method the selected contractor shall under take
the whole range of activities from thought to finish & operation
inclusive of maintenance.
 The possible activities include:
 Planning & acquisition;
 Finance;
 Design;
 Construction;
 Operation;
 Maintenance;
 Upkeep & Improvements;
 Advantages may include;
 Shorter time to project competition;
 Fully integrated process from project inception;
 Maximization of planning & reduction of problems during
execution;
 Knowledgeable alternative funding sources;
 Good for large & complex projects;
 Single source expertise;

 Disadvantage may include:

 Difficult to tender & not knowing the costs;

 Compatibility issues wit client;
 Quality based selection process(Negotiated);
 Client needs to make decisions quicker;

 Build-Operate-Transfer

 BOT is a form of procurement and contract delivery system that

promotes Public Private Partnership ( PPP) in which a private
company is contracted to finance, design, construct, operate for a
certain period ( usually 10 years) and transfer the facility to the
Project Owner.
 The typical BOT project contract is the process whereby a
government grants a concession to a project development company
to develop & operate what would normally be a public sector
project, for a given period of time known as the concession period.
 BOT project involves a potentially complex contractual structure.

2. Forms of Contract

Definition

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  Form of contract means the type of conditions of contract used for the
procurement of ex. construction works.
 Form of contract shall suit to the selected project delivery system.

Basis for the Classification

 Form of contract may be based on the following two bases.

 These are:-
 method of pricing & payment; and
 function/responsibility taken by the contracting parties;

 Method of Pricing & Payment

 Based on the method of pricing & payment, the following types of contracts
are identified.
 Re-measurement Contract;
 Cost-reimbursable Contract; and
 Lump Sum Contract;
 Re-measurement

 Re-measurement Contract based on unit rates and prices; ( the New

FIDIC Red Book, 1999, the FIDIC MDB Harmonized Edition,
2006 );
 Remeasurement:The Ministry of Works & Urban Development
Conditions of Contract(1994);
 The PPA Conditions of Contract for Works (January, 2006);
 Re-measurement contract is also called ad measurement type of
contract.
 Cost-reimbursable


Cost plus percentage fee contracts;

Cost plus fixed fee contracts;

Cost plus fluctuating fee contracts;

Target price contracts;
 The contractor is reimbursed for the actual cost of carrying
out of the work plus an additional amount of money in respect
of profit.
 In all these contracts, very detailed and extensive day-to-day
professional administrative services are required to check the
quality and quantity of work done.
 Lump Sum

 The FIDIC Orange Book;

 The PPA Conditions of Contract(January, 2006);
 Its basic characteristic is firmness in contract price.

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 Function Responsibility

 This form of contract is based on the very obligation(s) assumed by the

contractor and/or the employer under the relevant contract.
 The possible function or obligation could be construction, design &
construction, financing, design & construction or financing, design,
construction & operation, or management,…
 The following forms of contract are identified.

 Design-Bid-Build: FIDIC 4th Edition (Red Book) Conditions of

Contract for Works of Civil Engineering Construction(1987) under
which the contractor is responsible for construction;
 Design-Bid-Build: The Ministry of Works & Urban Development
Conditions of Contract for Construction Works(1994), under which
the contractor is responsible for construction;
 Design-Bid-Build: The PPA Conditions of Contract for Works
(January, 2006), under which the contractor is responsible for
construction;
 Design-Bid-Build: FIDIC Conditions of Contract for Construction
for Building and Engineering Works (1999 the New Red Book)
under which the contractor is responsible for construction;
 Design-Bid–Build: FIDIC MDB Harmonized Edition 2006
Conditions of Contract for Construction(the Red Book) under
which the contractor is responsible for construction;
 Design-Build: FIDIC Conditions of Contract for Electrical &
Mechanical Works including Erection on Site(1987 3 rd Edition, the
Yellow Book) under which the contractor is responsible both for
design & construction;
 Design-Build: FIDIC Conditions of Contract for plant and Design –
Build for Electrical & Mechanical Plant, and for Building &
Engineering Works(the New Yellow Book 1999) under which the
contractor is responsible both for design & construction;
 Engineer-Procure-Construct (EPC) FIDIC Conditions of Contract
for EPC/Turnkey Projects (the Silver Book, 1999), under which the
contractor is responsible for design, construction and/or financing,
operation,. this may also be adaptable to BOT & other related
arrangements;
 Design-Build-Operate: the FIDIC New Conditions of Contract for
Design Build & Operate, under preparation, under the intended
contractual arrangement, the contractor is to be responsible for
design, build & operate a given facility;
 Construction Management Conditions of Contract for at Risk & at
Free, in England;

3. Method of Procurement

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Definition

 Method of procurement is the procedure by which the Government solicits

offers, establishes terms & conditions, and selects a contractor …

 Type of procurement is different from method of procurement. It could be

classified in very many ways.

Classification of Methods of Procurement

 Based on the level of competition involved in the process, methods of (public)

procurement may be classified, as follows.
 These are, according to Sue Arrowsmith, & et el., in Regulating Public
Procurement:-
 Formal tendering procedure;
 Less structured methods of competitive procurement; and
 Single source procurement;

 Formal tendering

 Single stage tendering

 In which tenders are sought in response to procurement

documentation setting forth the contract terms and
conditions and detailed technical specification.
 Tendering may be open to all interested parties or may be
restricted to a limited number of firms from whom the goods,
works, or services are available.

 Two stage tendering

 In which tenderers submit only technical information in the

first stage of the procedure.
 Price discussions are typically held with all or some of the
tenderers who submit technically acceptable tenders

 Less structured

 Request for proposal

 In which detailed technical & cost proposals are sought.
 Technical & cost evaluations are conducted, and
negotiations with prospective providers may be held.
 This method of procurement permits a procuring entity to
include broad performance parameters in a request for
proposals & to seek technological or innovative solutions
from interested firms.

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  Competitive negotiation
 The word negotiation may be used to refer to a competitive
request for proposals type procurement.
 Competitive negotiation may refer to a very informal and
unstructured competitive process.
 The meaning is therefore different in different countries.
 Requests for quotations/shopping
 Typically used for commercial or “off-the-shelf” items of
low financial value.
 Single source

 In which a procuring entity considers only one candidate.

Question No 4

DELAY and DISRUPTION

Core principle
If disruption is caused by the employer, it may give rise to a right to compensation
either under the contract or as a breach of contract.
Guidance
The Protocol states that disruption has a different meaning to delay. In the context of
a construction contract, disruption is the loss of productivity, disturbance, hindrance
or interruption to the progress of a contractor. Unlike delay, the disruption may not
lead to late completion of the work. Generally, the contractor is only able to recover
disruption compensation to the extent that the employer causes the disruption.
Although many standard contracts do not deal expressly with disruption, a contractor
should maintain good site records to assist the CA to make proper assessments of
disruption.
Commentary
The Protocol does not provide that a contractor should be compensated for disruption,
it states only that a contractor may be compensated. From a contractor's perspective,
this principle does not provide a firm basis upon which to claim compensation.
Further, the Protocol's position that float is not for the exclusive use of the employer
or the contractor and that the contractor is only entitled to an EOT if the Employer
Delay is critical to achieving completion by the completion date., has been criticised

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 for having the effect that a contractor will not be entitled to an EOT for an Employer
Risk Event that delays its progress or prevents it from completing the work earlier
than the completion date.

Question No 5
Types of sub contract and Legal Relations

 The legal effects of Sub-contract could be seen in light of the doctrine of the
privity of contract or relative effects of contract.

 The subcontract concluded between the Main Contractor & the Sub-contractor
only binds the Main Contractor & the Sub-contractor (see also Article 1731(1) of
the Civil Code).

 The Sub-contract may not create a contractual relationship between the Sub-
contractor & the Employer (see Sub-clause 4.3 of the FIDIC Conditions of Sub-
contract). See also Article 1952(1) of the Civil Code.

 This legal position may be seen in specific circumstances, in case where a specific
sub-contractor may resort, by way of right, against the Employer, to enforce some
remedial rights ex, payment.

The Employer may have a direct relationship to the Sub-contractor under the doctrine of
assignment of contractual rights, in case where the Main Contractor assigns its rights
under the Sub-contract to the Employer (see, for ex. Sub-clause 4.2 & 63.4 of the FIDIC
Main Contract.)
Nominated Sub-contractor is a subcontractor nominated by the employer which the
contractor is obliged to appoint as a subcontractor.

Question No 6

The role of the engineer

The role of the ‘Engineer’ in the international field has come under attack from
Both employer and contractor on the question of bias. On the one hand, the ‘Engineer’
Has been accused by the contractor of being biased in favor of the employer
Because:
— His fee is paid by the owner or developer, referred to as employer under the Red
Book;
— He has acted as adviser to the employer prior to construction and may wish to

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Continue this role upon completion of the construction stage;
— He is required to consult with the employer prior to making certain decisions.

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