fidic

12/11/2009

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CLAIMS &

DISPUTES RESOLUTION

UNDER FIDIC 99REDBOOK

Suranga Jayasena

Senior Lecturer

Department of Building Economic

University of Moratuwa

CLAUSE 20

12/11/2009

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CLAUSE 20

... is all about Claims and Disputes Resolution

pages 58 to 62

CLAIM FLOWCHART

Claim Event,

Circumstance

arisen

Clause 20.1

Contractor gives notice

to the Engineer

describing the event or

circumstance giving

rise to the Claim,

within 28 days

Contractor becomes

aware or should have

become aware of the

Claim

Yes

No Claim

No

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Clause 20.1

Contractor gives notice

to the Engineer

describing the event or

circumstance giving

rise to the Claim,

within 28 days

Contractor becomes

aware or should have

become aware of the

Claim

Clause 20.1

Claim Fails

The Employer is

discharged from all

liability in connection

with the Claim

No

Clause 20.1

Contractor provides

Engineer with detailed

particulars and within

42 days and final claim

within 28 days after

end of effect if

continuing event and

complies with other

contractual

requirements

Yes

Clause 20.1

Claim approved may be

limited, if failure has

prevented or prejudice

the proper

investigation of Claim

No

Clause 20.1

Contractor provides





end of effect if


complies with other

contractual

requirements

Clause 20.1

Claim approved is

limited, if failure has

prevented or prejudice

the proper

investigation of Claim

No

Dispute

No

Clause 20.4

Contractor is satisfied

with Engineer’s

decision

Yes

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Clause 20.1

Contractor provides





end of effect if


complies with other

contractual

requirements

Clause 20.1

The Engineer

(dis)approves, or gives

opinion on the Claim

within 42 days

Yes

Clause 20.1

The Engineer



within 42 days

Clause 20.4


with Engineer’s

decision

Yes

Dispute

No

YesContractor does not

tolerate Engineer’s

delay in decision

No

Clause 20.4


with Engineer’s

decision

Yes

Clause 20.1

The Engineer



No NoNo

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Certification

Valuations

Instructions Dispute

Determination

Opinion

20.4

CLAUSE 20

... is all about Claims and Disputes Resolution

However ... Typical sequence shown in

beginning of the document is useful

Recall...

12/11/2009

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TYPICAL SEQUENCE OF DISPUTE EVENTSENVISAGED IN CLAUSE 20

8.1Commencement Date

20.4A Party refers a dispute to the DAB

20.6A Party initiate arbitration

20.4A Party issues a “notice of dissatisfaction”

Parties present submissions to the

DAB

20.2Parties appoint the DAB

Amicable settlement

<28d <28d<84d >56d

Arbitrators appointed

DAB gives its decision

20.2

PARTIES APPOINT THE DAB

� Within 28 days of Date of Commencement?

� ... by the date stated in Appendix to Tender.

(28 days in example in sample forms)

� Guidance for Particular Conditions – “It is preferable,

but not essential, to agree before the Letter of

Acceptance”

� A list of potential members may be included in tender

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20.2

PARTIES APPOINT THE DAB ... CONTINUED ...

� Parties jointly appoint a DAB

� DAB comprises one or three member stated in Appendix

� If not stated nor agreed, it shall be three

� If three, each party nominate one member for

approval of other party, two members appoint

chairman

� Each part pay one-half of DAB remuniration

20.2


� What if parties fail to agree DAB?

� An appointing entity is named in Appendix to Tender 20.3

� What if date of appointment not stated in Appendix?

� Might go for “ad-hoc” DAB > i.e. only appointed if and

when a particular dispute arises.

� What if appointing entity not stated in Appendix?

� ?

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20.2


� Parties may appoint members to be available to

replace members resign or be terminated

� Otherwise, replacement be similar to new

appointment

� Termination shall only be by mutual agreement of

Parties

� usually DAB expires when discharge become effective

20.2


� DAB members must be selected carefully, because

� Parties empowers the DAB to reach decisions with which

they undertake to comply, and

� A DAB member cannot normally be removed except with

the agreement of both parties (20.2 last para)

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A “FULL-TERM” DAB

� Appointed before Contractor commence Works

� Visit the Site on a regular basis

� Also available to assist in avoiding disputes during

these visits

� 20.2 Para 7 – “if at any time the Parties so agree, they may

jointly refer a matter to DAB for it to give its opinion. Neither

party shall consult DAB on any matter without the

agreement of the other party

DAB: “FULL-TERM” OR “AD-HOC”

� Red Book General Conditions are for “full-term” – see 20.2

� Parties may decide on appropriate model by

considering (among other things):

� Extent of Contractor’s Activities off-site – paying DAB may not

economical

� Extent of uncertainties in scope of works – underground

tunnelling – a full-term DAB most appropriate

� Extent of Variations expected – full-term

� Magnitude of the Contract – No. of DAB members 1 or 3

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20.4

OBTAINING ADB’S DECISION

� 20.4 Reads “if a dispute (of any kind whatsoever)

arises between the Parties ....

� in connection with or arising out of the Contract

or the execution of the Works

� including any dispute as to any certificate,

determination, instruction, opinion or valuation

of the Engineer ...

� may refer the dispute in writing

� to the DAB for decision”

20.4

OBTAINING ADB’S DECISION ... CONTINUED ...

� No matter can be referred to DAB unless it is in

dispute

� but, no formal notice of dispute required

� If matter is still in discussion or only interim

determination given

other party may assert that “no dispute”

� DAB to find if dispute has arisen – see if

agreement achieved under sc 3.5

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THE MATTER HAS DEVELOPED INTO A

DISPUTE

When ...

� Final determination rejected

� Discussions discontinued without agreement

� Party decline to participate in discussion

� Party decline to reach agreement as per sc3.5

� So little progress being achieved that it is clear

that agreement is unlikely

20.4

WRITTEN REFERENCE TO DAB

The Written Submission by Claimant

� For the decision of DAB

� Describes the situation

� Sets out the principles of the matter in dispute

� What Claimant wishes the DAB’s decision to be

� A copy must be passed to the other party

(Respondent) and Engineer

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20.4

DAB’S DECISION

� within 84 days after receiving the original

reference, or

� within such other period as may be proposed by

the DAB and approved by both parties

� approvals must not be unreasonably withheld or

delayed

� for complex matters DAB may propose to give

decisions in stages

� shall be reasoned and stated that it given under

sub-clause 20.4

20.4

DAB’S DECISION ... CONTINUED ...

� Note that DAB decision shall be admissible in

evidence in arbitration. sc 20.6

� Therefore well reasoned decision preferred

� The Contractor shall execute the Works while

DAB proceeding.

� The decision shall be binding on both parties

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20.4

DISSATISFACTION ON DAB’S DECISION

� The Party must give a formal “notice of

dissatisfaction” within 28 days.

� It establishes the claimant the right to commence

arbitration.

� Unless the notice given within 28 days, decision

become final and binding.

20.5

AMICABLE SETTLEMENT

� During first 56 days after notice

� Parties should attempt amicable settlement

� DAB should not get involve in amicable

settlement procedure.

� If no amicable settlement (or attempt thereto),

.....

the dispute shall be finally settled by

international arbitration sc 20.6

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20.7

WHAT IF...

� Formal notice of dissatisfaction NOT given,

� DAB decision became final and binding

� a Party FAILS to comply with decision

� Other Party may refer THIS FAILURE directly

to arbitration,

without having to refer again to DAB or try

amicable settlement

20.8

WHAT IF...

� a dispute occurs, but

no DAB is in place, either by

� expiry or otherwise

� the dispute may be referred directly to

arbitration under sc 20.6

� However, there is still room for amicable

settlement

the word ‘otherwise’ shall be used to

cover failure of appointing DAB due to

defect in document. E.g. “the

appointing entity is non-existent”

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20.6

ARBITRATION

� Unless otherwise agreed by both parties

� Rules of International Chamber of Commerce

� Three arbitrators

� Language be language defined in 1.4

� Shall commence before or after completion

� Shall not prevent executing obligation of contract

during the proceedings

::: BREAK :::

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We’ll try something practical now

12/11/2009


CASEPROPOSED SCHOOL BUILDING FOR SEEVALI COLLEGE

Variation Instructions were issued changing the Ground Floor

walls to block work from brick work which was in original

contract. No block work was found in ground floor level in the

original contract but upper floor partition walls in the original

contract was similar type.

Contractor asked for the same rate from the upper floor block

work but the Engineer rejected it and approved rate of his own

schedule of prices (used for Engineer’s Estimate) which is less

than claimed rate.

TASK 01

Write the cover letter for referring the matter to DAB

You may make necessary assumptions

12/11/2009


<< Date >>

<< Adjudicator1 >> - chairman (member)

<< Adjudicator2 >> - member

<< Adjudicator3 >> - member

Dispute Adjudication Board

Proposed School Building for Seevali College

<< Address >>

Dear Sirs,

REFERENCE TO ADJUDICATION

...............

.....

We are not in agreement with the rates determined by the Engineer for

Block work (varied item) at Ground Floor Level we carried out under the

above contract. Therefore a dispute has arisen between the parties to the

above Contract and pursuant to Sub-clause 20.4 we refer the dispute to

DAB for its decision. The detail claim is attached herewith.

Thank you.

Yours faithfully,

<< Contractor >>

cc: << Employer >>

<< Engineer >>

12/11/2009


TASK 02

Write the Adjudication Submission

You may make necessary assumptions

TASK 02 - TIPS

How much to write - Keep it short but clear

Format – Not strict, but you may use something similar to

arbitration submissions

Order –

Introduce parties and contract

DAB appointed

Contractual provision 1,

Contractual provision 2,

Occurance, your statement

........

Dispute

Your claim for decision by DAB

12/11/2009


In the matter of Adjudication

Dispute Between

ABC Construction,

No 9, Road Lane

Colombo 20

Contractor/Claimant

and

Seevali College,

111/1, Lane Road

Colombo 19.

Employer/Respondent

STATEMENT OF CLAIM

........

1. The Contractor is a civil engineering contractor registered under

ICTAD as a Grade C-5. The Employer is a public school in Colombo.

2. By a contract dated 09th October 2009 (‘the Contract’), The Contractor

undertook to construct and complete certain building works, namely

“the Construction of Proposed School Building for Seevali College”

(‘the Works’) in consideration for payment by the Employer on

measure and pay basis without price fluctuation adjustment for the

priced bills of quantities bid by the contractor, at the time and in the

manner prescribed by the contract.

12/11/2009


3. The Contract Incorporates the FIDIC Conditions of Contract for

Construction, First Edition 1999 (‘the FIDIC Conditions’).

4. The Dispute Adjudication Board (‘the DAB’) was appointed by a

tripartite agreement signed on 15th October 2009.

5. Sub-clause 13.1 of the FIDIC Conditions provides that Variations may

be initiated by the Engineer and the Contractor shall execute and be

bound by each Variation.

6. On 28th October during a site visit, the Engineer instructed a

Variation changing all ground floor walls to block work from brick

work specified in the Contract.

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7. Sub-clause 3.3 of the FIDIC Conditions provides that in the event

Engineer gives oral instructions the Contractor shall confirm the said

instruction by writing.

8. Sub-clause 13.3 of the FIDIC Conditions provides that each Variation

shall be evaluated in accordance with Clause 12 [Measurement and

Evaluation].

9. Sub-clause 12.3 of the FIDIC Conditions provides that the appropriate

rate for an item shall be the rate specified for similar work.

10.The Contractor confirmed the Variation instructions and notified the

applicable rate to be the rate of similar work in the Contract – BOQ

Item 2.34: Block Work Walls at Second Floor level, by his letter to the

Engineer dated 01st November 2009.

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11.The Contractor included the block work quantity with applicable rate

to its Interim Statement dated 31st December 2009.

12.Sub-clause 14.6 of the FIDIC Conditions provides that the Engineer

shall issue an Interim Payment Certificate which shall state the

amount which the Engineer fairly determines to be due.

13.The Engineer, in the Interim Payment Certificate, had not certified

the rate applied for Variation and had determined a lower rate.

14.The Engineer failed to certify payment to the Contractor of sums to

which it is entitled pursuant to the said Sub-clause 12.3; which sums

amount to Rs. 115,000.00.

PARTICULARS

<<< Include a brief calculation here, annex if there are detailed calculations>>

15.Accordingly, the Contractor claims Rs. 115,000.00 under Sub-clause

12.3 of the Contract, plus interest thereon at the rate of three

percentage points above the discount rate of the Central Bank of Sri

Lanka, compounded monthly, pursuant to Sub-clause 14.8 of the

Contract.

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16.I certify on behalf of the Contractor that the facts stated in this

Statement of Claim are true to the best of my knowledge and belief.

..........................................................

Muralitharan, M.

Project Coordinator

ABC Construction

No 9, Road Lane

Colombo 20

WELLWELL--DONEDONE

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