ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF CIVIL AND ENVIRONMENTAL
ENGINEERING

Course: Construction Contract & Law

TITLE: - CLAIMS: THEIR REGULATION & MANAGEMENT UNDER THE “MDB-
FIDIC (2010) & PPA (2011)” CONDITIONS OF CONSTRUCTION CONTRACTS &
THE APPLICABLE LAWS

GROUP MEMBER
NAME ID
ALEM ADICHO GSR/9430/15
GASHAW KIBRU GSR/6366/15

SUBMITTED TO: ZEWDU TEFERA WORKE

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Acknowledgement
First and foremost, praises and thanks to the God, the Almighty, for His showers of
blessings throughout this research work to complete the research successfully.

We would like to express our deep and sincere gratitude to our instructor Ato Zewdu
Tefera Worke for delivery of immense knowledge on this course and for delivery of this
semester project.

Finally, our thanks go to all the people who have supported us to complete the research
work directly or indirectly.

Contents
Acknowledgement........................................................................................................................................I

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List of Table...............................................................................................................................................III
Abstract......................................................................................................................................................IV
CHAPTER ONE..........................................................................................................................................1
1 Introduction.........................................................................................................................................1
1.1 Background.....................................................................................................................................1
1.2 Objective of the study......................................................................................................................2
1.2.1 General Objective of the study.....................................................................................................2
1.2.2 Specific Objective of the study....................................................................................................2
1.3 Methodology....................................................................................................................................3
CHAPTER TWO.........................................................................................................................................5
2 LITERATURE REVIEW....................................................................................................................5
2.1 Construction Claims........................................................................................................................5
2.1.1 Construction Claims: Types and Causes......................................................................................5
2.1.1.1 Types of Construction claims......................................................................................................6
2.1.1.2 Causes for claims.........................................................................................................................7
2.2 Construction Claims Management...................................................................................................8
2.3.1 General overview.......................................................................................................................12
2.3.2 Project Procurement System and Contract Administration........................................................13
2.3.3 Types of Claims in Ethiopian Construction Industry.................................................................14
CHAPTER THREE...................................................................................................................................16
3 Construction Claims: Conceptual Background..................................................................................16
3.1 Concept of Construction Claims....................................................................................................16
3.2 Types of Construction Claims.......................................................................................................16
3.2.1 Time Relate Claims...................................................................................................................16
3.2.2 Cost Relate Claims....................................................................................................................17
3.2.3 Payment Related Claim.............................................................................................................19
3.3 Cause of Construction Claims.......................................................................................................20
3.3.1 Basis for Construction Claims and their remedies.....................................................................21
CHAPTER FOUR.....................................................................................................................................24
4. Construction Claims Management Process........................................................................................24
4.1 Construction Claims Management Process Overview...................................................................24
4.2 Requirements for Construction Claims..........................................................................................25

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4.3 Construction Claims Management Process....................................................................................27
4.4 Construction Claims Management Sub-process.............................................................................29
4.5 How a construction claim transformed into a construction dispute (Need revision)......................30
CHAPTER FIVE.......................................................................................................................................31
5.1 Prevention of Construction Claim..................................................................................................31
Phases of a Construction Project........................................................................................................31
Typically a construction project has four basic phases......................................................................31
5.2 Best ways to prevent construction claims......................................................................................33
CHAPTER SIX.........................................................................................................................................35
6 Role of Engineer................................................................................................................................35
6.1 Role of Engineer in Construction...................................................................................................35
6.2 Role of Engineer in Construction Claims Management.................................................................36
6.3 Role of Engineer in Construction Claims Prevention....................................................................40
CHAPTER SEVEN...................................................................................................................................43
7 Case Studies, EOT.............................................................................................................................43
7.1 Background....................................................................................................................................43
7.1.1 Preamble....................................................................................................................................43
7.2 Scope of this Evaluation................................................................................................................45
7.2.1 Contractual Basis and Scope of the Determination....................................................................46
7.2.2 ENGINEER’S EVALUATION OF THE CONTRACTOR’S CLAIM......................................46
7.2.2.1 Claim Head 1 – Time Extension Claim for Earth Work............................................................46
7.2.2.2 Claim Head 2 – Time Extension Claim for Water Supply & Sewerage Drainage......................48
7.2.2.3 Claim Head 3 – Time Extension Claim for Power Supply.........................................................50

7.2.2.4 Claim Head 4 – Time Extension Claim for Telecommunication & Security Work...................51
7.2.2.5 Claim Head 5 – Time Extension Claim for Storm Drainage......................................................53
7.2.2.6 Claim Head 6 – Time Extension Claim for Road & Pavement Work........................................55
7.2.2.7 Claim Head 7 – Time Extension Claim for Architecture Work.................................................57
7.2.2.8 Claim Head 8 – Time Extension Claim for Landscape, Guardhouse, Fence Works and Solid
Waste Management...................................................................................................................................58
7.2.2.9 Claim Head 9 – Time Extension Claim for WWTP Work.........................................................60
7.2.3 Conclusion of the Case study.....................................................................................................61

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7.3 Case Study 2, Delay Damage.........................................................................................................63
7.3.1 Background................................................................................................................................63
7.3.2 Preamble....................................................................................................................................63
7.3.3 Basic Contract Data for the Works Contract..............................................................................64
7.3.4 Scope of this Evaluation............................................................................................................64

7.3.5 ENGINEER’S EVALUATION.................................................................................................66

CHAPTER EIGHT....................................................................................................................................68
8 Comparisons: MDB – FIDIC and PPA..............................................................................................68
8.1 Similarities and difference of claim management process under the two standard: MDB – FIDIC
and PPA.....................................................................................................................................................68
CHAPTER NINE......................................................................................................................................81
9 Conclusions and Recommendations..................................................................................................81
9.1 Conclusions...................................................................................................................................81
9.2 Recommendations.........................................................................................................................82
REFERENCES..........................................................................................................................................83

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List of Table
Table 1-1 Basic Contract Data
Table 1-2 Summary of the Contractor’s Claim
Table 1-3 The Contractor has based his claim on the following clauses.
Table 1.4 The Contractor has based his claim on the following clauses.
Table 1-5 The Contractor has based his claim on the following clauses………………

Table 1-6 Summary of Engineer’s Determination for the Contractor’s Claim………………….

Table 2-1 Basic Contract Data

Table 2-2 Contract Bill items with contract amount

Table 2-3 Contractual Basis of the Claim

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Abstract

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The Ethiopians government is investing millions of dollars every year in new facilities to
improve the infrastructure of the country. Construction projects are complex, uncertain, have
long construction periods, involve many parties, and require the integration of different work
components (Civil, Mechanical and Electrical) to work together as a single unit. The projects
require highly specialized designs, detailed plans and specifications, high-risk constriction
methods, effective management, skill full supervision, and close coordination. Thus, claims are
common in such projects. Today, construction projects are the subject of more claims than in any
other industry. Claims appear to hinder the completion of construction and cause delays in
delivering projects. These claims are undesirable because they require significant time and
resources to resolve, and because they cause adversarial relationships among the parties
involved. It is therefore in the common interest of all involved parties to prevent them, minimize
them, or resolve them as amicably as possible. Identifying common claim types and their causes
is essential in devising ways and means to minimize and hopefully avoid them in future projects.
This research presents the results of a pilot case study of the types, and causes of construction
claims in the bole lemi Industrial Park Phase II Construction Project in Addis Ababa, Ethiopia.
The recommendations to prevent/reduce claims in construction projects are then presented. It is
expected that the findings of this research will help construction firms avoid the main causes of
claims and, accordingly, minimize delays and cost overruns in construction projects.
Keywords: Claims, Disputes, Causes, Types, Construction

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 CHAPTER ONE

1 Introduction

1.1 Background
The construction sector plays a very important role in economy of any country. The weak
management of construction industry leads to delay the progress; as a result it increases the
project cost and time, increasing the risk factor, client disappointment and safety issues etc.
Claims are the primary source of problems in the construction industry. Construction claims are
considered by numerous project participants to be one of the most disruptive and unpleasant
events of a project (Ho and Liu, 2004). Most construction projects are uncertain and complex,
involve a wide variety of business parties, extend over a lengthy period of time and require
highly specialized designs, detailed plans and specifications, high-risk construction methods,
effective management, skillful supervision and close coordination.

Large industry parks construction projects are extremely complex and consist of several inter-
related activities/work packages of different disciplines involving numerous parties. Thus, claims
are common in such projects, further delaying completion times and causing cost overruns.

Moreover, construction contracts are extremely long, complex sets of documents, which are
often not well understood by the parties and lead to differing interpretations by different parties.
Consequently, disagreements or disputes arise regarding contractual obligations or expectations.
Minimizing and avoiding construction claims and disputes requires understanding the contractual
terms and clauses early on while identifying and understanding the causes of the claims. When
one party believes that the other party has not met the contractual obligations or expectations and
that they deserve monetary and/or time compensation, they may submit a claim. A survey
performed in western Canada discovered that a large majority of claims involved delays, and, in
several cases, these delays exceeded the original contract duration by over 100%. Additionally,
more than half of these claims resulted in additional costs of at least 30% of the original contract
values (Semple, Hartman and Jergeas, 1994).

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According to Detlev (2004), the increase in claims and disputes has multiplied over the past
decade. It is evident that certain factors influencing the serious and substantial increase in the
number of claims for additional compensation are due to the complexity of the projects now
being undertaken and the price structure of the industry, which does not permit the absorption of
unanticipated additional costs by the contractor.

The high competition has forced contractors to submit projects with minimum profits in order to
stay in business. In addition to their multiparty nature, projects are becoming more complex and
risky. This has placed an added burden on contractors to construct increasingly sophisticated and
risky projects with less resources and profits. Under these circumstances, it is not shocking that
the number of claims within the construction industry continues to increase.

As such, in recent years, the participants in the construction process have become increasingly
concerned regarding construction claims. The goal of this study is to identify various monetary
claim types and claim causes that have occurred during the construction of this industry parks
project work in Addis Ababa, Ethiopia and to analysis those in accordance with MDB and PPA
contract types and also evaluated the frequency of occurrence and severity of the claim amount.
Additionally, the modes of claim settlement and the duration of the claims are analyzed.

1.2 Objective of the study

1.2.1 General Objective of the study
The general objective of the study is to define & discuss the concept, scope and causes including
management process of construction claims including its prevention

1.2.2 Specific Objective of the study

 To define and discuss the concept of construction claims;
 To identify and discuss types of construction claims;
 To identify and discuss causes for construction claims;
 To identify and discuss the basis for construction claims & their remedies;
 To identify and discuss the requirements for a construction claim;

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  To identify and discuss the process of construction claims management;
 To discuss how a construction claim transformed into a construction dispute;
 To emphasize and discuss the role of the Engineer in claims management process;
 To discuss how a construction claim transformed into a construction dispute;
 To identify and discuss the legal status of the determination of the Engineer in case such
determination brought for review to any dispute resolution sub-system or forum (like
dispute board (adjudication) or arbitration or court);
 To identify and discuss the similarities of claims management process under the two
standard conditions of construction contracts;
 To identify and discuss the differences of claims management process under the two
standard conditions of construction contracts;
 To identify and discuss best ways to institute good governance as related to claims
management system;
 To identify and discuss best ways to prevent construction claims;

1.3 Methodology
The methodologies applied to achieve the objective of the research are: literature survey,
problem identification, design of data collection methods, data collection, data analysis and draw
conclusion from the result of data analysis and forward recommendations. The surveyed
reference materials include: recent journals related to construction claims, text books of project
management emphasizing claims, hand book of civil engineering claims, internet exploration etc.

The organizations chosen were large scale with long histories of construction business. The
organizations were assured that the purpose of the study is purely for academic purpose i.e. to
conduct comprehensive study on claims management in the industry, rather than to check
mistakes or misconducts.

Considering the various claim types and causes of claims identified by the literature review,
research was performed on a case study with a single embedded design (Yin, 1994) to determine
the important claim types and causes that occurred during the construction of a Bole lemi
Industry park phase II construction project in Addis Ababa, Ethiopai. Commissioning of the

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project was planned for one year completion period from 2017, but was delayed until today 2022
because of design and right off problems. The site was visited and data were gathered by
referring to several claim documents, contract documents, archival records, minutes of meetings
(MoMs), correspondences, project daily reports, technical specifications, claims working sheets,
progress reports, damage and delay/disruption reports, photographs and various other supporting
archival records.

The claims documents and archival records were studied to create a database for the case. The
various settlement methods used to resolve the issues were obtained. Furthermore, a few project
participants, who dealt with claims issues, were informally interviewed and their opinions were
incorporated in analyzing the claims. Information obtained for each case was claim type, claim
cause, amount claimed, amount resolved for payment, mode of resolution adopted and duration
of settlement.

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 CHAPTER TWO

2 LITERATURE REVIEW
2.1 Construction Claims
2.1.1 Construction Claims: Types and Causes
Bramble, D'Onofrio and Stetson (1990) grouped claims under four types: change claims, impact
claims, performance quality claims and bad faith claims. Change claims included formal/directed
changes, constructive changes, cardinal changes, changes due to differing site conditions and
design related changes. Impact claims were related to claims from delays, disruptions and
acceleration.
A study performed by Zaneldin (2006) in the UAE discovered that claim types in construction
projects could be classified into six main types: contract ambiguity claims, delay claims,
acceleration claims, change claims, extra work claims and differing site condition claims. A
survey conducted in Portugal by Moura and Teixeira (2007) found 10 different types of claims:
direct changes, errors and omissions, indirect changes, delays, acceleration, force majeure,
beginning and ending, measurement and payment, suspension of work and termination of
contract.
One of the best methods to devise measures to avoid or minimize these claims is to determine the
primary sources or causes of the claims. In mega industry park projects, there are several varied
sources of claims, thus making it critical that we identify their exact causes. Al-Khalil and Al-
Ghafly (1999) identified various important causes of delay claims in public utility projects in
Saudi Arabia based on the severity and frequency of occurrence. Zaneldin (2006) identified 26
different causes of claims in construction projects in the UAE: change or variation orders, delay
caused by owner, oral change orders by owner, delay in payments by owner, low price of
contract due to high competition, changes in material and labour costs, owner personality,
variations in quantities, subcontracting problems, delay caused by contractor, contractor not well
organized, contractor financial problems, bad quality of contractor's work, government
regulations, estimating errors, scheduling errors, design errors or omissions, execution errors,
bad communication between parties, subsurface problems, specifications and drawings

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inconsistencies, termination of work, poorly written contracts, suspension of work, accidents and
planning errors. The important causes of claims related to the contract are as follows: ambiguous
contract, conflicting information, omissions of provisions, adjustment of clauses, multiple
contracts, inadequate bid information, frequent changes in plans and specifications and
inadequate bid preparation time for bidders etc.

According to Hassanein and Nemr (2008), the most common types of claims have been
documented as change orders and delays caused by the owner. The contractor actions that lead to
claims are as follows: inadequate investigation before bidding, underbidding and poor planning
and management. At the International Conclave on Contract Management for Accelerated
Development of Indian Hydropower Projects held in Delhi on 2007, it was determined that the
primary causes of claims in hydropower projects included long gestation periods, hydro-
geological surprises, subsurface conditions, delays in getting approvals, contractual problems
and changes in work.

Such requested right or remedy in construction contract fundamentally related to:

 Time remedy; in the form of extension of time;

 cost remedy; in the form of additional payment; or
 Both time remedy & cost remedy;
 including other measures or remedies;
 Time remedy is expressed in terms of extension of time for completion of the road project
under consideration by the contractor or extension of defects notification period for the
employer;
 Cost remedy may be expressed in terms of recovery of additional payment or cost from the
other party like the contractor from the employer or vice versa;

2.1.1.1 Types of Construction claims

There are several types of Construction claims out of which some of the listed down below after.
(IJERT, December 12, 2014)
 Delay Claims
 Price Acceleration Claims
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  Change of order claims
 Variation claim
 Damage claims
 Different site condition claims
 Loss of profit claims
 Wrongfully withholding of dispute claims.

2.1.1.2 Causes for claims

According to IJERT, December 12, 2014, there are many kind of conflicts occur in construction
industry between the parties which mostly. Converts into the claims. Some of the causes for
claims are listed below.
 Delay in Supply of Drawings,
 Delay in Handing over the Site,
 Delay in Supply of materials,
 Delay in Payments,
 Delay in Starting work,
 Delay in Completing the work,
 Work actually done but not measured and paid,
 Refund of maintenance deposit,
 Loss due to extra overheads on account of extension of time limit,
 Loss due to idle machinery and idle labor,
 Due to Design errors,
 Due to inadequate or incomplete specifications,
 Due to inadequate information related to design.
 Due to Inadequate bid information,
 Due to Inadequate time for bid preparation,
 Due to Change in work scope,
 Due to Changes in plans and specifications during construction,
 Due to Insufficient plans and specifications,
 Due to Extra items and Variations,
 Due to Non-granting of Completion by Engineer in charge.

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  Due to Partiality by the Engineer,
 Due to Unrealistic expectations,
 Due to Poor management and administration of the construction site.
 Due to Ambiguities in contract documents,
 Due to Different interpretations of the contract provisions,
 Due to Inadequate investigation of site,
 Due to Unbalanced bidding,
 Due to coating very low rates in the Tender,
 Due to Changes made or changes which occur not at the request of the owner,
 Due to Extension of time (EOT),
 Due to financial failure of the contractor,
 Due to technical inadequacy of the contractor,
 Due to Poor quality of construction work and use of wrong equipment,
 Due to Failure to follow authorized procedures,
 Due to Employers’ Lack of Construction Knowledge,
 Due to damages occur to adjacent buildings during the work,
 Due to Strikes by Workers,
 Due to Stoppage of Work by workers,
 Due to Failure of parties to cooperate with each other in the performance of the work.
 Due to Accidents,
 Due to Natural Calamity,
 Due to Increase in Material / Fuel Cost,
 Due to Court intervention,
 Due to Weather conditions,
 Due to Unforeseen ground conditions

2.2 Construction Claims Management

The word “Management” means the process of dealing with or controlling people or things.
When combined with the meaning of the word “Claim” defined by Arditi and Patel (1989), the
word “Construction claim management” can be construed as the process of dealing with or

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controlling the seeking of consideration or change by one of the parties involved in the
construction process.
Cox (1997) considered variation and claim management as the management of risks and should
begin even before the start of constructions by both employers and contractors.
There are many sub-processes related to construction claim management. Levin (1998) indicated
seven basic procedures for claims and change order administration. They are:
1) Recognition and identification of change,
2) Notification of change,
3) Systematic and accurate documentation of change,
4) Analysis of time and cost impacts of change,
5) Pricing of change,
6) Negotiation of claim, and
7) Dispute resolution and settlement.

1 Recognition and Identification of Change

Construction claim recognition and identification involves “timely” and “accurate” detection of a
construction claim. It is the first and critically important ingredient of the claim process.
Callahan,(1998) viewed the ability to recognize an emerging problem that could lead to a
dispute, and allowing for this problem to be dealt with early in its life as the most important part
of dispute avoidance. He also presented the techniques used to anticipate or identify disputes at
an early stage by all transit agencies in the United States and Canada, including the commuter
rail agencies, which have undertaken construction in the last 5 years. They are (1)
preconstruction meeting, (2) project meetings, (3) construction scheduling, (4) bid evaluation/
comparison, (5) project cost/ payment forecasting, (6) regular review of project documentation,
and (7) proactive problem management at meeting.
In order to form a foundation for proper claim management and to keep the contractors out of
troubles and free to concentrate on constructions of the jobs, Levin (1998) listed of the general
circumstances that typically cause claims and variation order.
2 Notification of Change
Construction claim notification involves alerting the other party of a potential problem in a
manner that is non-adversarial. Time limit requirements are very crucial and critical. An initial

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letter of a claim notice to the other should be concise, clear, simple, conciliatory, and
cooperative. It should indicate the problem and alert the other party of the potential increase in
time or cost. Time limit requirement are normally specified in the contracts. For example, the
Construction Contract (First Edition), prepared by Federation Internationale des Ingenieurs-
Conseils (FIDIC) requires the contractor to notify the employer within 28 days after he became
aware or should have become aware of the event or circumstance.

3 Systematic and Accurate Documentation of Change

Records and documentation play a very important role in the settlement of contract claims.
Bu-Bshait and Manzanera (1990) listed nine records usually needed to substantiate a claim. With
more focus on the delay claim, Elnagar and Yates (1997) investigated the types of
documentation used to determine the causes of project delays. The ten documents ranked as the
top indicators of project delays are presented.
Jergeas and Hartman (1994) suggested that construction contractors should always file some
necessary records. Fifteen records were listed in the paper. Furthermore, Adrian (1988)
explained how some techniques such as camera, and recording devices can be alternatives in
recording the important information.
However, there are many evidences showing that the importance of record management is not
realized as much as it should be. Scott and Assadi, (1999) concluded that records available on
sites seldom allow the as-built schedules to be constructed easily. Pogorilich, (1992) reported
that the daily reports are often given the least amount of attention although they may be the most
important document on the projects. Too often daily reports are prepared with minimal details
and are subsequently ignored by managements.

4 Analysis of Time and Cost Impacts of Change

There are several literatures concerning the calculation procedures of the time and cost impacts
caused by the events entitling rights to claim. These can be grouped into two major categories:
time impact analysis (or schedule analysis) and cost impact analysis.
There are several schedule analysis techniques such as: (1) Global Impact Analysis, (2) Net
Impact Analysis, (3) Impacted As-Planned Analysis, (4) What-If Technique, (5) But-For
Technique, (6) Contemporaneous Period Analysis Technique, (7) The Affected Baseline

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Schedule Technique, (8) Collapsed As-Built Analysis, and (9) Fragnet Analysis. The main
differences of these techniques are their input schedules. Some techniques require as-planned
schedule, while others require as-built schedule. Updated schedule is also the input for some
schedule analysis techniques.

5 Pricing of Change
The purpose of this sub-process is to give the other party in the contract a substantive description
and details of the extra costs incurred or to be incurred due to a contract change. This detailed
cost description is necessary for understanding, negotiating, and justifying extra contract costs.
Pricing of claims can be divided into two types:
1) Forward Pricing
Under this scheme, the price is negotiated before the work is done. This type of pricing method
is typically preferred since it encourages prompt revision of the progress schedule, thus
maintaining accurate record of the sequencing of the remaining work, the final contract price,
and the final completion date.
2) Post pricing:
In post pricing, the risks have been incurred and the added costs have been known. The difficulty
is identifying and isolating all the changes and their attendant costs. The claimants are supposed
to have good cost records, with adequate descriptions of works performed. Thus, after a
determination of the work which was affected by a change, the claimant will be able to identify
and price all the costs associated with the changed work.

Adrian (1988) described the relationships between four types of claims (e.g. delay claim, scope-
of-work claim, acceleration claim, and changing-site-condition claim) and each cost components
(i.e. addition direct labor hours, equipment rental cost, interest cost or finance cost).

6 Negotiation
Kululanga (1989) explained the reason for having negotiation and its advantages. A structured
and proper negotiation preparation includes (1) ascertaining that all information is current and
complete, (2) minimizing the scope of negotiation beforehand so that insignificant points should
not precipitate a violent argument and disrupt progress, (3) knowing one’s weakness and trying

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to utilize weak points by conceding them in return from the other party, (4) foreseeing problems,
and (5) anticipating the opposition’s next move.
If an agreement cannot be reached and any party believes his position is correct, he should
propose an alternative dispute resolution method. If this fails, the choice remaining is to
implement the contractor’s “disputes” mechanism or take the matter to court.

7 Dispute Resolution and Settlement

There are many options the employers and the contractors can select for settling any dispute
occurring in their project. Murdoch and Hughes (1996) listed the various disputes resolution
methods: litigation, arbitration, conciliation, quasi-conciliation, mediation, private inquiry,
adjudication, and mini-trial. He also explained that these terms are often used interchangeably
and also listed the details of each approach. Each dispute resolution method has particular
advantages and disadvantages. Sometimes more than one method of dispute resolutions are
implement, as specified in the FIDIC’s “The Construction Contract”.

2.3 CLAIMS IN ETHIOPIAN CONSTRUCTION INDUSTRY

2.3.1 General overview

The free market economic policy practiced in Federal Government of Ethiopian creates good
opportunity for participation of local and foreign investors in the sector of construction industry.
Using this opportunity, many new contractors were registered under MoWUD and the existing
contractors also strengthened their capacity since 1992. Accordingly, before1992 the total
number of local contractors were 399. This number is increased by 939 and presently the total
number of local contractors is 1338. In addition to this figure about 436 contractors of different
grades ranging from G-7 to G-10 were registered under Works and Urban development of
regional governments.

In Ethiopia, construction licensing of contractors has four categories, namely: General

Contractors (GC); Building Contractor (BC); Road Contractor (RC) and Special Contractor (SC).
Depending on human and material resource requirements each category is then sub-divided in to

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various classes, which lead to determine the maximum cost of project value they can bid for. For
instance, general contractors of class one (GC-1), can bid for projects worth greater than 20
million Birr. Considerable measure is also taken to improve the number and capacity of local
consulting firms. For instance, before 1992 supervision of large-scale construction projects were
done only by two governmental organizations i.e. BDE and TCDE. However, after 1992, using
the free market economic policy many private consulting firms are emerging. Based upon office
facilities, qualification and number of staffs, experience and the type and cost of the project they
can supervise, consulting firms of different grades are registered under MoWUD.
Thus 2 governmental and 57 private local consultants of different grades are giving service in the
industry. Due to limited capacity of local contractors, it becomes normal practice to offer multi-
million Birr worth projects to foreign contractors. This fact indicates that some means has to be
devised to raise the capacity of competent local contractors; so that they can engage themselves
in major construction undertakings. Considering this problem, the Federal Government of Ethiopia is
taking some measures. For instance, advance payment is allowed for projects financed by the Federal
Government. Other possible ways of up grading local contracting firm capacity could be: merging of
two or more contracting firms or joint venturing, permitting contractors to use their machineries and
other equipment’s to use as collateral for bank loans. The above paragraphs clearly show that the
Federal Government of Ethiopia is taking encouraging steps to improve the capacity of local
contracting firms.
However, no comprehensive work was done for improvement of construction project managements,
especially on claim administration. Among the steps that could have been taken some could be:
giving short and long term on job training for peoples working around this area, arranging different
seminars on claims for different contracting parties, encouraging academic institutions to focus on
project management particularly on claim administration etc. Hence, it is unquestionable to conduct
comprehensive study on claims management to supplement the rapid increase of our construction
industry.

2.3.2 Project Procurement System and Contract Administration

The traditional procurement system is usually used in developing countries. The same applies to
Ethiopia. In principle implementation of construction projects in traditional procurement system
require bidding procedures and condition of contract, which are fair to both owner and

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contractor. In Ethiopia the condition of contract used are fair to both parties if properly
administered. In fact some irregularities happen sometimes due to human factor, which is
common all over the world.
The major contract conditions used in Ethiopian construction industry are:
1. Standard condition of contract for construction of civil works projects. (BaTCoDA),
December 1987)
2. Ethiopian Road Authority (ERA), standard specification, 1968 (mainly for road projects)
3. Condition of contract for civil engineering construction. FIDIC, 1987
The choice of contract condition depends on owner and international agencies involved in the
work. FIDIC is widely used in construction works funded by international agencies. The problem
in most cases is not contracting document but the understanding and interpretation, which require
trained personnel in contract administration. Unfortunately little or no on the job training is given
to the people working on projects on this subject. The only way one can learn is working with a
boss having good experience, which is usually a rare case. This problem causes delay of
decisions and disputes, which may ultimately; result in claims and delay projects.

The average Ethiopian contractors are small-scale organization, which lack experience in
construction management. This indicates that there is high demand for training both public and
private sectors personnel involved in construction for the efficient implementation of projects.
Government support to establish training facilities for this purpose is very important. The
construction industry in developing countries cannot develop without government’s commitment and
long-term active support. This implies that proper contract administration require experienced and
highly trained personnel to effectively implement the contract. However, one of the main problem of
local contractors is that they couldn’t properly administer the contract. This is because of the
experience and training they have. That is to say, most of them are not properly trained to prepare:
cost and schedule reports, quality records, safety reports, change order records, claims records,
progress reports, payment requisition etc.

2.3.3 Types of Claims in Ethiopian Construction Industry.

The main cause of construction claims in Ethiopian construction industry has somehow similarity
with other context. For this purpose different organizations were contacted. The organizations

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covered in the study are large-scale firms of having long history of construction business. Some
of them have working experience up to half a century (50 years) and they have undertaken
different projects in the country in the last 15 years. 23% of them respondents say that claims
issue is not great problem in their industry. On the other hand 77% of the respondents say that
claim administration is one of the main problems in their performance.
This paper much emphasizes is given to claims raised under contractual provisions. Hence,
contractual claims in Ethiopian construction industry can be divided in to the following four
categories:
a) Claims due to employers or contractors breach of contract
b) Claims arising out of variation
c) Claims for disruption and delays and,
d) Third party caused claims

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 CHAPTER THREE
3 Construction Claims: Conceptual Background
3.1 Concept of Construction Claims

The ‘Claim’ can be defined as a demand assertion by one of the parties. In general claims in
construction industry are defined as demands for compensation in terms of money, time
extension or other or a combination of these that a party rightly or wrongly believes that he is
entitled. A construction claim arises when one party to the contract has suffered a loss for which
the other party should compensate that party. Therefore, a construction claim is an assertion of
and a demand for compensation by way of evidence produced and arguments advanced by a
party in support of its case.

3.2 Types of Construction Claims

Construction claims involves time related claims, cost related claims and both time and cost
related claims.
 Based on the basis of remedy claim is categorized in two;
1. Contractual claim and contractual remedy
2. Contractual claim but legal remedy.
 Based on who the claimant is
1. Contractor’s Claims
2. Employer’s Claims.

3.2.1 Time Relate Claims

Delay Claims
Construction contacts usually have a time within which or a date by which the contractor must
complete the work or bring it to the stage of practical completion. Before a Contractor makes a

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contract, the Contractor must consider the risks involved in contracting. One major risk is
liability to the Owned for delay.

When a time for completion is specified, and unless expressed otherwise, it is not deemed to be
of the essence of the contract. Specifying that “time is of the essence‟ means that the obligation
to perform by that date is essential to the contract. Any failure to meet the date gives the
employer the right to treat the contract as being at an end. Most construction contracts recognize
that completion may be delayed by unforeseen and unanticipated circumstances. The risks of
such delays are borne either by the employer or contractor. These risks are usually allocated by
the time extension clauses, which enable a new completion to be set, so the liquidated damages
clause can continue to operate from this new date. The contractor has a contractual obligation to
regularly and diligently proceed with the works, to use his best endeavors to prevent or mitigate
any delay in the progress of the works, and to prevent the completion of the works from being
delayed beyond the completion date.

The duration of contract performance has a direct effect on the profitability of construction
project from the perspective of all stakeholders. For project owners, lost profits or benefits stem
from being unable to make use of the project at the agreed date whilst to the contractor; extra
cost will be incurred due to prolonged stay on site.

Most standard form of Contract thus has provisions that anticipate delay brought by the action
and/or inactions of the contractor, the owner or are outside the control of both parties. The
Contractor is often executed from the consequences and/or allowed compensation for any cost
due to delays resulting from events or circumstance that are beyond its control.

Contractual provision also allows the owner to recover liquidity damages from the contractor for
failure to deliver the project within the contract performance period. Liquidated damages clauses
entitle the owner to recovery of a specified sum of money for each day or week of culpable
delay. In both instances, a detailed schedule analysis is required to investigate the events that
have actually caused the project to overrun.

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3.2.2 Cost Relate Claims
I. Acceleration Claim
Acceleration is the process by which work is speeded up in an attempt to complete performance
earlier than was anticipated. This may be earlier than either the originally contracted for
completion date or the completion date as extended under the contract provisions [Davison et.al,
2009]. Davison et. al [2003] also identifies the cause of acceleration under two categories. First,
actual acceleration/direct acceleration occurs when an owner orders a contractor to finish the
project in advance of the specified contract completion date. Constructive acceleration, on the
other hand, occurs when a contractor has a justified claim for an extension of time and the owner
refuses to adjust the completion date for performance and instead, requires the contractor to
finish the project by the original contract completion date.
The net effect of the agreed acceleration order will be a variation to the contract. Where the
contractor is not advised on any time entitlement, he is under considerable pressure, not knowing
if he will be held liable for liquidated damages. Additional plant or labor may be brought in, or
overtime incurred. This is known as „constructive acceleration order‟, which effectively converts
a refusal to grant an extension of time into an implied instruction to accelerate. The employer
may be liable for the additional costs involved. Of course it would be important for the
contractor to have already submitted a written claim.
II. Prolongation Claim
A prolongation claim is defined as claims for additional time related costs associated with delays
caused by the employer. Prolongation costs should be recoverable by reference to the period
when the effect of the employer risk event was felt, and not by reference to the extended period
under the contract. In this case, it will be difficult to pre-agree a daily rate, where that rate will
differ at different stages of the construction and where it may increase beyond that envisaged as a
result of a combination or accumulation of employer risk events.
III. Disruption Claim
Disruption is any change in the method of performance or planned work sequence contemplated by the
contractor at the time the job was bid that prevents the contractor from actually performing in that
manner, resulting in lower working efficiency and productivity, hindering and interrupting
regular progress. When caused by the employer, it should be compensated either under the
contract or as damages for breach of contract.

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IV. Change in Scope Claim
Variation is used interchangeably with the word change, and it is defined as any deviation from
an agreed well-defined scope and schedule [O’Brien, 1998]. Tadesse [2009] reported that
variation is a major effect in local construction industry in bringing cost overrun. Almost every
construction project encounters change. Whether it’s a change to the scope of work, a revision to
the specifications, or an impact to the means and methods of performing the work, changes can
significantly impact a project’s cost and schedule. Due to change in work scope the claim may
take place between the contractor and client. Due to change in work scope or change in design
the quantity of work may increase or decrease and if it is the work from which contractor is
going to get the maximum profit then he can claim for increased rates for performing the work or
extra money for completing the work.

3.2.3 Payment Related Claim

In the construction industry most of claims arise for the not payment or delayed payment of
running bills, Final bills, unreasonably deduction of money from bills without any strong reason,
delay in payment of security deposit, maintenance deposit etc. To every contractor, the expected
cash flow under the payment terms of the contract is very critical. When payment is not made or
is made in an untimely fashion, not only are bottom-line profits affected, but also the contractor's
capital, its financing, its ability to perform other projects, its bonding capacity, and its obligations
to employees, subcontractors, and material suppliers are all negatively impacted.

FIDIC (1987) conditions of contract has introduced provisions to enable the contractor to
suspend work or slow down his progress subject to the contractor giving twenty-eight days'
notice of his intention to suspend or slow down the progress of the works, if the employer fails to
pay by the expiry of the notice period. Let alone suspension, the Contractor may terminate the
contract, as and when the payment is delayed unreasonably. Following such suspension or
slowing down, the contractor is entitled to an extension of time and additional costs

A. Termination Claim

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A party may terminate a contract but only if the breach is material and occurs prior to substantial
completion and due to that the Contractor may be compensated for the loss of profit and other
expenses stated under the specific contract
When contract termination has occurred before the contractor has begun the work, the contractor
may be entitled to recover the loss of the expected profit, or the difference between the contract
price and the anticipated cost of the work. If the owner has terminated the contract after the
contractor has begun the work, the contractor may be entitled to recover the loss in various ways.
If the contractor has completed the work in full compliance with the contract prior to
termination, she should expect to recover the full contract price. Recovery and liability under
terminated contracts varies widely.
B. Extra Work Claims
Extra work is any work that is ordered by the owner after construction has started that was not
included in the original contract. The extra work being performed by the contractor is a result of
a clarification of the contract documents. However, the contractor believes that he is performing
extra work, while the owner believes the work was part of original contract.

3.3 Cause of Construction Claims

The claim may arise due to the owner or the contractor. The claim may be on account of any of
the following causes:
 Additional work not specified in the contract documents
 Work different from that specified in the contract document
 Work in a particular manner or method, which varies from that originally expected
 Work resulting from contract drawings or specifications which have been changed,
amended revised, amplified or clarified.
 Unanticipated work, which results from insufficient details in the plans and specification.
 Work required to be performed in one particular method when specifications allow two
or more methods.
 Work out of sequence.
 Stop, disrupt, or interrupt work; wholly or partially; directly or indirectly.
 Owner furnishes equipment late, in poor condition, or not suitable for the intended use.

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  Accelerate performance in any way, to regain schedule, to add men or materials, or to
work overtime or extra shifts.
 Differing site condition
 Differences in contract interpretation
 Defective specifications
1. There may be defects and loopholes in the contract document. For example, the contract
document may not be clear, may have dual meanings at different places, or may not have
sufficient details. Also, an unresponsive contract administration may lead to contractor raising
the claim.
2. There may be delay in release of areas as per contract. Besides, site conditions differ to a large
extent from those described in the contract document.
3. The owner may desire to get the work done at a faster pace than is required by the contact
document.
4. There may be delay in supply of power, water and other materials from the owner.
5. There may be hold on works due to delay in release of drawings and other inputs.
6. There may be delay in release of payments to the contractor.
7. The scope of work may be substantially modified by the owner.
8. There may be levy of liquidated damages on the contractor. Other recoveries from bills may
also lead to contractor raising the claim.
9. There may be delay on the part of contractor in completion of works due to inadequate
mobilization of labor, material and plant.
10. There may be loss of profit and investment to the owner due to delays caused by the
contractor.
11. Construction claims can also arise on account of inclement weather.

3.3.1 Basis for Construction Claims and their remedies

The base for the claims of the employer or the contractor shall be the constructions contract itself
or the applicable law or both;
Remedy under the Construction Contract
These are of two types:

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1. Claims as a result of certain anticipated & specified events & for which a remedy is designated
in the contract; and
2. Claims as a result of an event where a certain term of the contract is breached & for which a
remedy is not designated in the contract.
 In both cases, the remedy is provided under the contract.
 However, the first related to non-breach of the contract, whereas, the second does.
 The remedies in both cases may relate to financial compensation, time extension, & other
benefits or remedies.
 Illustrative of remedies under the FIDIC Conditions of Contract.
 Financial compensation:
 With respect to Variation;
 Measurement Changes;
 Adverse Physical Conditions;
 The Employer‘s Risks;
 Compliance with statutes, regulations, price fluctuations, currency & other economic
causes;
 Defects & unfulfilled obligations (NB: It relates to breach of the contract
 Failure to commence, critical or non-critical delays, suspension of work, release from
performance, default & termination;
 Delay in certifying payments;
 Other specified events;
 Time Extension
 Delay in supply of documents or drawings; (FIDIC MDB Edition Article
 1.9(a));
 Adverse physical obstructions or physical conditions; (FIDIC MDB Edition
 Article 4.12);
 Fossils & articles of value or antiquity; (FIDIC MDB Edition Article 4.24);
 Suspension of the progress of the works; (FIDIC MDB Edition Article 8.8);
 Failure to give possession of site; (FIDIC MDB Edition Article 2.1(a))
 Other specified events;
 Other Remedies

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  Termination of contract under the contract and/or the applicable law.
 Suspension of the execution of works;
 Reduction of the progress of the execution of works;
 Remedy under the Law
 Remedy under the applicable law relates to a claim arising out of the contract based on
the grounds that a term of contract had been breached but where the remedy is not
designated in the contract;
 Under this circumstance, if the claim is valid, the remedy lies under the provisions of the
applicable law;
 This is specially related to: damages; performance; and cancellation: namely.,
 damages: the assessment of general damages (see Article 1771 (1) 1790-1805 cum 1790
(1) cum 2090-2123 of the Civil Code); or
 performance: specific (compulsory) performance of the contract (see Article 1771 (1)
cum 1776-1783 of the Civil Code) or
 cancellation: requesting (the court) cancellation of the contract or direct cancellation of
the contract by the interested party; (see Article 1771 (2) cum 1784-1789 of the Civil
Code);
 general damages: With respect to assessment of general damages only courts or the
arbitral tribunal or the adjudicator is empowered to assess & determine/decide based on
the principles of damages or compensation;
 specific performance: With respect to specific performance only courts or the arbitral
tribunal is empowered to decide or give an award based on the principles of the
applicable law;
 In such a situation, the Engineer is not empowered to assess & determine any (general)
damages or order specific performance of the construction contract under the applicable
law;

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 CHAPTER FOUR
4. Construction Claims Management Process

IV.1 Construction Claims Management Process Overview

A typical claim management process basically has 4 phases which are below:

1. Claim Presentation
2. Claim Mitigation
3. Claim Identification and Qualification
4. Claim Resolution
1. Claim Prevention

The claim prevention process is activated at Pre-tender and Contract Formulation phases of a
project. Contract documents, project plan and scope of work should include all requirements
related to the project because after the award of contract the opportunity to prevent claim comes
to an end.

2. Claim Mitigation

Construction activities are generally performed in highly sensitive and outdoor environments. It
is better to minimize the possibilities of occurring claim all through the progression of the
contract. A well-defined scope, responsibilities, and risks will help to decrease the possibility of
occurrence of claims. Also, risk management plans play important roles in the phase of claim
mitigation.

3. Claim Identification and Quantification

Claim identification can be done by analyzing both the scope of work and the provisions of the
contract. Inputs of the claim identification process are the scope of work, contract terms,

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definition of extra work and definition of extra time requested. Once an activity is identified as a
claim, it will be quantified in terms of an additional payment or a time extension to the contract
completion or to another milestone date. In this phase, schedule and critical path analysis should
be made in order to calculate the delay of the project. In addition to that, additional direct costs
and indirect costs originated from the claimed activity should be calculated.

4. Claim Resolution

Claim resolution is a step by step process to resolve the claim issues. Depending on the
resolution terms of the contract, negotiation, mediation, arbitration, and litigation processes will
be conducted
IV.2 Requirements for Construction Claims

For the claim to be successful, it has to fulfill certain valid requirements

These requirements are:

 procedural requirement;
 substantive requirement; and
 proof requirement;
1. Procedural Requirement: Notifying the Engineer
 It means that the contractor is to give its intention to claim, via notice of claim, to the
Engineer;
 Such notice is time bound; the failure to comply with such time scale may lead to the loss
(waiver) of the claim itself & cessation of the liability of the employer towards the
contractor;
 Under Sub-clause 20.1 of MDB-FIDIC;

# If the Contractor, considers himself to be entitled to any extension of the Time for Completion
and/or any additional payment, under any Clause of these Conditions or otherwise in connection
with the Contract, the Contractor shall give notice to the Engineer, describing the event or
circumstance giving rise to the claim. The notice shall be given as soon as practicable, as and not

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later as 28 days after the Contractor became aware, or should have become aware, of the event or
circumstance.

2. Substantive Requirement: Contract and/or Law

 This requirement also known as legitimacy requirement; mean supporting or giving
justification for the claim by specifically citing or invoking the provisions: Of the
Construction Contract; and/or of the applicable law.

 The Contractor is required to show or indicate the basis (legitimacy or authority) for its claim
based on specific applicable thus relevant clauses or sub-clauses of the construction contract
signed.
 The requirement said to be substantive because it is related to the establishment of a right or
an entitlement (to the claimant or obligation on the other) under the contract and/or the
applicable law;
 Under Sub-clause 20.1 of MDB-FIDIC

#The Contractor shall keep such contemporary records as may be necessary to substantiate any
claim, either on the Site or at another location acceptable to the Engineer. Without admitting the
Employer’s liability, the Engineer may, after receiving any notice under this Sub-Clause,
monitor the record-keeping and/or instruct the Contractor to keep further contemporary
records. The Contractor shall permit the Engineer to inspect all these records, and shall (if
instructed) submit copies to the Engineer.
3. Proof Requirement: Records
 By proof requirement it means that the contractor, when it submits its full claim, is required
to substantiate its claims by all available evidence/records:
Records are of two kinds:

 contemporary records; and

 historical records;

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 see Sub-clause 20.1 of the two FIDIC versions (MDB (2006 & 2010) & New Red Book
1999) in this regard;
 Proof requirement is also a legal requirement: he who alleges must prove its assertion; see
Article 2001-2026 of the Civil Code (Proof in Relation to Contracts);
 Two legal obligations: production obligation viz., the obligation to produce the evidence (like
records); persuasion obligation viz., the obligation to persuade/convince the decision maker
like the Engineer as related to construction claims;
 Means of proof could be documentary (like records); witness (expert opinion; factual
witness); presumptions; (like see Sub-clause 10.1: Takeover of the Works by the Employer)
project site visit; and so forth;
 Proof at the stage of claim (mainly focused on documentary type of evidence known as
contemporary records) & at the stage of dispute resolution may vary (documentary plus
expert opinion plus factual witness…); and so forth
IV.3 Construction Claims Management Process
Construction claims management process may undergo the following three interrelated steps (Dr.
Wubishet):

1. Claim submittal;
2. Claim processing; and
3. Claim enforcement;

Claim Submittal

 This is a process by which the claimant is obliged to claim within a reasonable period of
time (28-30 days in most contracts) followed by the claimant’s preparation for all
substantial documents & legal aspects supporting its entitlements for an official submittal.
 This constituted that a claim has been filed for its consideration if all the three sub-
processes called Claim Notification, Claim Preparation & Claim Submittal are fully
undertaken by the claimant.

Claim Processing

 This phase is classified further in to the following three sub-processes:

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  Claim Handling;
 Dispute Resolution; and
 Claim Approval;

 Claim Handling, this sub-process initiates checking of the claim whether, it is legally or
contractually supported or not, documents provided are valid and reliable to substantiate the
claim for consideration or not, and overall procedural requirements have been followed or
not. After verifying the validity of the claim proper computations & evaluations will be
carried out to present the proposed compensation for the contractual parties the claim is
applicable to.
 Dispute Resolution, the contractual parties will pass through different dispute resolution
system depending on their acceptance over the proposed compensation varying from the
simplest mediation by the consulting engineer to the final court ruling in the form of
litigation. Three types of dispute resolution systems are well recognized. These are,

 Preventive Dispute Resolution System; (by use of partnering, dispute resolution

advisors, facilitators, …);
 Amicable Dispute Resolution System; ( through negotiation, mediation,
conciliation, mini-trial, …);
 Judgmental Dispute Resolution System; (through Dispute Adjudication Board,
Arbitration, Litigation…; where dispute was handled in any form of its resolution
System, it is termed as Dispute Resolution;

 Claim Approval, once the contractual parties agree on the final outcome of the claim
process, then they have reached in to a stage where the claim is approved. The claim
approval may come from the Engineer positive determination or dispute board’s decision
or recommendation or arbitration award or court judgment as the case may be;

Claim Enforcement

 This phase is sub-divided in to the following two sub-processes:

 Claim Enforcement; and
 Claim Closure;

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  The claim enforcement sub-process will entertain the inclusion of the approved claim in to
payment certificates where their enforcement is due;
 Once this compensation or entitlement is due in accordance with the approved claim and its
enforcement requirements, then it is concluded for its closure;
 In order to account for such an administration process, contracts provide claim clauses
within their provisions in their conditions of contract

IV.4 Construction Claims Management Sub-process

Procedure for the Claims of the Contractor:

under Clause 20.1

According to Bunni cited on (Zewdu ) , the following procedures (based on FIDIC 1999 New
Red Book) were described;

Step 1: An event or circumstance occurs with a potential of a claim by the Contractor against
the Employer under any of the Contract conditions or otherwise (i.e., the applicable law) in
connection with the Contract;

Step 2: The Contractor shall give notice of the claim to the Engineer describing the event or
circumstance give rise to the claims;

Step 3: The Contractor should keep substantiating contemporary records, which the Engineer
may monitor and/or instruct the Contractor to keep further contemporary records;

Step 4: Within 42 days of the event, the Contractor should submit a fully detailed claim which
includes full supporting particulars of the claim. The period may be varied if approved by the
Engineer.

Step 5: Within 42 days after receiving the claim or any further particulars supporting a previous
claim, the Engineer should respond with approval or disapproval and detailed comments. He (the
Engineer) may also request any necessary further particulars, but shall nevertheless give his
response on the principles of the claim within such time.
Step 6: Substantiated amounts for any claim should be included in each Payment Certificate.
Step 7: The Engineer should then proceed in accordance with sub-clause 3.5 to agree or
determine (i) the extension of time (if any) and/or (ii) the additional payment (if any) to which
the Contractor is entitled under the Contract;
Step 8: The Engineer should consult with each Party in an endeavor to reach agreement, failing
which he is required to make a fair determination in accordance with the Contract;

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Step 9: If agreement between the parties is achieved, the Engineer is required to give with notice
a particular. Otherwise, he is required to give a notice of his determination with particulars;
Step 10: Each Payment Certificate shall include such amounts for any claim as have been
reasonably substantiated as due under the relevant provisions of the Contract;
Step 11: If the Engineer’s determination is not acceptable to the Parties, the dispute arising
should be resolved in accordance with Sub-clause 20.2 to Sub-clause 20.8;

Procedure for the Claims of the Employer:

Under Clause 2.5
According to Bunni, the following procedures (based on FIDIC 1999 New Red Book) were
described;
Step 1: An event or circumstance occurs with a potential of a claim by the Employer against
the Contractor under any of the Contract conditions or otherwise (i.e., the applicable law) in
connection with the Contract;
Step 2: The Employer or the Engineer should give notice & particulars of the claim to the
Contractor;
Step 3: The Engineer should then proceed in accordance with Clause 3.5 to agree or determine
(i) the amount (if any) which the Employer is entitled to be paid by the Contractor; and/or (ii) the
extension (if any) of the DNP in accordance with sub-clause 11.3;
Step 4: The Engineer should consult with each party in an endeavor to reach agreement, failing
which he is required to make a fair determination in accordance with the Contract;
Step 5: If agreement between the parties is achieved, the Engineer is required to give with
notice a particular. Otherwise, he is required to give a notice his determination with particulars;
Step 6: The amount determined may be included as a deduction in the Contract Price &
Payment Certificate. The Employer shall only be entitled to set off against or make any
deduction from an amount certified in a Payment Certificate, or to otherwise claim against the
Contractor;
Step 7: If the Engineer’s determination is not acceptable to the Parties, the dispute arising should
be resolved in accordance with Sub-clause 20.2 to Sub-clause 20.8;

IV.5 How a construction claim transformed into a construction dispute (Need

revision)
As already stated not all claims will lead to dispute – most of them will be quite satisfactorily
dealt with under the terms of the Contract itself. However, most disputes will in the first instance
present itself as a claim under the Contract whether for payment, for time, for variation, for a

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perceived failure in the administration of the Contract or arising from a departure by one or other
party from its obligations under the Contract.

In an ideal world the Works will commence on time, be constructed exactly in accordance with
the drawings and specifications provided pre tender, will be paid for exactly in accordance with
the payment schedule agreed and will be advanced and completed in accordance with the
completion schedule agreed between the parties. Deviation in respect of time, scope, payment,
flow of information or programmed of Works will lead to claims. Failure to reach agreement in
respect of those claims, or failure to comply with contractual obligations, will lead to disputes.

CHAPTER FIVE

5.1Prevention of Construction Claim

Construction claims management is an indispensable process in today’s projects that involve

many resources and parties. One of the most effective claims management techniques to avoid
claims in the early phases of a project is eliminating the root causes of problems before they
occur. For example, a well-defined technical specification for a material prevents disagreements
related to the quality of the material during the execution phase.

It is always easier and cheaper to resolve the issues between the parties at the early stages. As the
construction project progresses, changes may become costly and difficult. For that reason, claim
management requires to implement effective practices during the entire project life cycle.

Phases of a Construction Project

Typically a construction project has four basic phases.

 Phase 1, Pre Tender: Preparation of concept design and contract documentation.

 Phase 2, Contract Formulation: Preparation and submission of tenders and contract
signing.
 Phase 3, Construction: Building & execution of the project

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  Phase 4, Post Completion: Completion of the project.

Most of the disputes arise during the construction phase. However, the root causes of the
disputes are originated from the poorly managed pretender and the contract formulation phases.
So that it is possible to prevent most of the claims by establishing a proper contact management
system.

Claim prevention can be accomplished most effectively during the design phase of a construction
project. When the design is sufficiently complete to enable qualified contractors to submit bids
for the construction work, the careful preparation of well-considered contract documents offers
the next greatest opportunity for claims prevention. Once contracts are executed and construction
begins, the prevention of claim become more difficult, although the impact of claim can still be
mitigated though timely management actions and effective contract administration.
Mostly claims relate to the encountered conditions or events, which occur during the
construction phase. But the seeds of claim and nutrients essential for development are contained
in the contract documentation and the information supplied or not supplied in pre-contract phase.
The greatest opportunity to Prevent Claims comes to an end once tender-documents are finalized
and the contract is awarded. The vast majority of claims are based on errors, omissions, conflicts,
and ambiguities in the contract documents and /or erroneous interpretation of those documents.

The design professional plays a major role in a claims prevention program prior to award of the
construction contract after all. The documents prepared by the design professional are more often
than not used basis for claim. Design profession is not perfect. There will be errors, omissions
and conflicts. The secrete of successful claims prevention and mitigation program is to minimize
those error and omission and then to respond positively and reasonably when an error and/or
omission is uncovered. Claim prevention reviews, on the other hand, focus on alternatives to
reduce costs yet accomplish the same overall objectives. These alternatives typically involve
means, methods, materials, form, equipment selection, etc. A claims prevention review focuses
on potential errors, conflicts, omissions, ambiguities and misrepresentations both in terms of the
contract document and the system to administer, interpret and manage those contracts.

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The prevention process is activated at Ph-1 & 2 of project that starts with formulation of contract
documents and development of integrated project plan with sufficient knowledge of the purpose.
Clearly the best way to prevent claims is to have no claims to prevent! Thus, the emphasis is on
how to avoid or prevent claims from arising. Alignment of purpose, and development of all
documents related with Contracts for a project are all prepared in same line. The ingredients are
management scheme, identified risk distribution to ones in best position to control and defined
responsibilities. Effort is required to align the contract documents to the defined purpose, logical
risk sharing and management scheme. The seeds of claim and nutrients essential for their
development are contained in the contract formulation/documentation and the information
supplied or not supplied at relevant point in time. After the award of contract the opportunity to
prevent nutrients for Claim comes to an end.

5.2 Best ways to prevent construction claims

The necessary Inputs required to Claim Prevention process are:

 Scope Assessment: An assessment of work that needs to encompass all requirements and
satisfy the purpose.
 Required Distribution of Information: Plan for distribution of necessary information to
project players who prepare responses to risk.
 Management Scheme of Project: The required management scheme that defines the
responsibilities of major players and stakeholders.
 Requirement of risk sharing scheme: The scheme of the risk sharing among the major players
and stakeholders.
 Time frame for project completion: An assessment of logical time frame for completion.
 Dependency. Project players understanding of alignment to the defined purpose and
dependency of responsibilities for risk sharing.
 Conflicts of Interests. Defined assessment of interest and respect for difference of
 Need.
 Strength & Weakness of Employer. An analysis of strength/weakness of employer
Necessary Tools and Techniques that help Claim Prevention

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 Methodology for Economic Exchange. Methodology with win/win outcomes that best serves
the scheme of management and risk sharing of project players.
 Identification & Assessments of Project Scope. Everything that is necessary to add value or
is required to serve the purpose of project, needs to be incorporated in Project Scope.
 Information Sharing. Distribute information in accordance with the responsibility and risk
carried by project player.
 Template. Tested methodology and lessons learned on similar project.
 Expert Judgment. Independent views of experts of the field to ascertain that the approach
adapted will lead to win/win end results.
 Alignment of Documents. All documents are aligned with the purpose for a Contract.
 Dispute Resolution. A reliable mechanism for fast resolution of dispute
 Partnering Approach. Respect for project player's independence and commercial interest.
 Monitoring & Control. The system and team developed for project monitoring and control
 Education & Training. Project lifelong continuous education and training is necessary to
develop an atmosphere of trust, respect for purpose and direction setting through the
complexities.
Desired outcomes from Claim Prevention process
 Project Scope. Scope of work (explicit and implicit) to satisfy the purpose
 Contract Form. Economic exchange adopted in contract leads to win/win situation. Well
defined risk sharing and responsibility policy, the Contract Form may be;
 Contract Documents. All documents carefully aligned with the purpose
 Dispute Resolution Methodology. An independent dispute resolution board is defined.
 Trust Building & Training Plan. Action plan is developed to train & educate the team of
project players on Claim/Contract Management during progression for trust building.

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 CHAPTER SIX

6 Role of Engineer

6.1Role of Engineer in Construction

The role of the Engineer/consultant in the construction project may, according to (Bunni 2005),
Validly be summarized, as follows;
These functions are;-
 Study & design function;
 Tender document preparation;
 Construction supervision; and
 Construction administration;
Design Services
 This role includes the completion of skillful design of the project sought by the promoter.
 Such design includes, but is not limited to:
 the preparation of drawings which should express & communicate the details of every
aspect of the project to be constructed;
 To draft a specification of the materials to be used,

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  to draft the standard of the workmanship, to be achieved; and
 to prepare the bill of quantities

Tender Document Preparation Services

 With respect to Tender document preparation to prepare all documents necessary for
obtaining a competitive price for carrying out the work by a competent contractor & to
advise the promoter on the tenders received and on the selection of the contractor.

Construction/Project Supervision Services

 With respect to Construction supervision, once work starts on the project, to supervise or to
inspect the work carried out by the contractor in order to ensure conformity with the design
requirements

Construction Administration Services

 With respect to Construction administration, to administer the contract to deal with situations
as they arise, to certify and to act as an adjudicator of disputes;

 During the implementation phase of a construction project, the Engineer, as a consultant,

may have two categories of roles:
 Agent role
 professional role

6.2 Role of Engineer in Construction Claims Management

Design professionals can play an important role in properly setting the course for the
construction project, especially in minimizing the likelihood of claims and disputes. For
example, not only can the architect serve as the master builder, but also as the master of dispute
prevention and resolution.
There are four phases in a project where the design professional can make a difference in
avoiding disputes or sowing the seeds of problems:

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1. Ensuring the adequate performance of pre-design services
2. Properly managing and coordinating the design phase services;
3. Providing adequate and correct details in the design documents to allow construction;
4. Assisting in the management of construction phase services on behalf of the owner.

Pre-Design
The pre-design state (i.e., before the designer commences performance of the traditional role of
preparing plans and specifications) is often the breeding ground for costly claims that arise
during construction. Frequently, problems originate with:
a. An erroneous expectation or assumption by the owner that the designer will perform crucial
services that must precede design, such as programming and site investigations
b. The designer’s failure to dispel the owner’s notion that the designer or indeed anyone is
performing these vital services.

If a facility is designed without careful consideration of the needs of the end users, redesign may
be required. This may complicate the pre-construction phases or prompt costly last minute
changes during construction. Programming is the term commonly used to describe the analysis of
the facility users’ needs that is performed to delineate objectives, space requirements and
relationships, site requirements, equipment, and budget.

An unsophisticated owner may attempt to minimize the programming effort, fail to recognize the
need for programming, or attempt to perform the programming function with inadequate or
untrained personnel. In either event, the designer is faced with a difficult choice – perform the
programming for free, walk away from the project, or begin the design development without an
adequate program. Design without adequate programming may only serve to drive up the
ultimate cost of both design and construction. When the owner realizes that some portion of the
design will not meet its needs, the owner may require the designer to redesign various aspects of
the work. If the matter is recognized during the schematic design phase, the revisions may be
relatively inexpensive.

However, the later the revisions are made, the more difficult, time-consuming and costly the
redesign will be. For example, if revisions are made during the construction documents phase,

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when the details of the design are complete, many of the details may have to be changed. If the
revisions are made during the punch list phase of construction, tear-out and rework may be
required. Equally serious problems may arise from not adequately performing certain
investigations that should properly be performed prior to commencement of design. Three key
investigations are: geotechnical and site studies; hazardous material abatement studies; and
evaluation of existing building conditions and dimensions. Unless these investigations are done
properly and thoroughly, and the results effectively communicated to and utilized by the
designer, the results frequently are a dispute over the designer’s entitlement to additional
compensation and claims by construction contractors for differing site conditions. Under the
provisions of commonly used forms of design contracts, these investigations are to be performed
by the owner and provided to the designer. These tasks are not part of the architect’s scope of
work, but may be additional services. However, like programming, unless these investigations
are done, and done properly, the designer is likely to be drawn into any dispute.
Quality Design Phase Services
Many construction claims have their origin in the quality control aspects of the design process.
Design professionals can implement Total Quality Management concepts to provide coordination
of design disciplines, as well as to provide adequate reviews to identify problem areas before
proceeding with the next phase of the design process. Almost every construction project requires
that the work product of several design disciplines be incorporated into one comprehensive,
coordinated design. These specialties include architectural, structural, mechanical, electrical,
geotechnical and other types of engineers. If these different aspects are not coordinated, the
result may be gaps, overlap and conflicts of the contract drawings and specifications that may not
be identified until construction is underway. It is also common for owners to engage specialty
consultants (such as interior designers) who may have direct input into design. Coordination with
the owner’s consultants may create problems such as the responsibility for integration and
checking to avoid interferences, changes, and conflicts.

Design professionals may go the extra mile and take the opportunity to “inspect out” problems
before the design is finalized. Even where quality control measures are built into the design
process, design reviews may identify potential problems. While the emphasis of quality
assurance should not be on inspection, performing periodic, thorough reviews of design

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documents during the various pre-construction phases may help minimize errors, omissions,
ambiguities and conflicts in the contract documents.

Details in Contract Documents

Providing ample details in construction contract drawings and specifications often serves to
minimize contractor claims during construction for increased costs and delays. Some designers
defer detailed engineering until shop drawing time, anticipating that the contractor ultimately
will correctly supply the specifics. Given this latitude, some contractors will submit the cheapest
rather than the best detail or product. The designer may have to expend even more time adding
details and arguing with contractors during shop drawing review, or worse during installation of
the system.
Designers may use performance specifications to pass along some of the detailed engineering
responsibility to the contractor. Although there is an appropriate place for performance
specifications, some contractors resist the additional engineering responsibility required.
Performance specifications are legitimately used to specify manufactured or standardized
systems that more than one manufacturer can supply, but whose designs differ. By using a
performance specification that describes functions, standards and performance results, more
competitive bidding may result than from a detailed proprietary system. Indeed, any
manufactured or fabricated product requires a certain amount of engineering to be performed.
Contractors and their vendors often know the details better than the project designer, and are
sometimes better equipped to provide engineering support.

Construction Phase Services

The designer is often called upon to be the pace setter, key actor, and critical player throughout
both design and construction. The avalanche of delay-related litigation may fall back upon
architects and engineers, as contractors often blame the designers’ performance for the causes of
construction delays. Owners caught in the bind of paying contractors for delay claims, may in
turn look to designers for contribution or indemnification. Delay is most often recognized during
the construction phase. However, delays in the design phase may serve to reduce the time
allotted for construction, making the construction phase more susceptible to delay. For example,
an owner may require a project occupancy date to be in thirty months from the time the designer

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is retained. If the design phase is established to be fifteen months, the remaining fifteen months
are allotted for bidding and construction. If the design phase is extended to eighteen months and
the owner insists on the original occupancy date, then the bidding and construction phase will be
reduced. When an aggressive construction period is mandated, the likelihood of delay-related
disputes is increased.

More importantly, tardy designer performance during the construction phase may lead to project
delays and claims. The designer’s contract administration responsibilities often are tied to the
timely performance of the field work. This may include responses to requests for information,
shop drawing reviews, payment review, and change order processing. Belated performance of
these responsibilities may lead to allegations against the designer.

Given the realities and complications of the design and construction process, disruptions and
delays to the designer’s performance are often caused by or intertwined with delays due to owner
interference, changes, and involvement by the public or regulatory bodies, contractors,
subcontractors, suppliers, acts of God, and third parties. The designer may have justifiable
reasons for the perceived lack of timely performance.

6.3Role of Engineer in Construction Claims Prevention

This article identifies solutions and suggests programs that one can use to prevent, mitigate, and
manage claims. Topics include the following: quality contract documents, management of
outside design professionals, site investigation, review and approval of detailed as-planned
schedules,

1. QUALITY CONTRACT DOCUMENTS

The successful project manager is an effective manager of contracts. From the owner’s point of
view, this involves three basic steps:

• Development of contract documents which provide a clear and no conflicting basis for a
contractor to assemble a bid. The contract documents must reflect the intent of the project in
language that is unambiguous and provides a basis for a contractor to plan its means, methods
and sequences.

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• Contract administration has taken on new meaning. It is not merely the enforcement of
the terms and conditions but includes the use of the terms and conditions to adapt to the changing
environment, ongoing contract interpretation and management of decisions necessary to keep the
project moving forward. Both the contractor and the engineer have duties under the terms of the
contract.

• Perhaps the most important step and the one most frequently overlooked is the
importance of record keeping or documentation. Does the engineer have the hard facts to support
decisions made during contract interpretations and to defend against unreasonable allegations on
the part of the contractor expressed in the wording of a total cost claim. Without documentation,
the engineer representing its owner is at the mercy of the courts.

The design professional plays a major role in a claims prevention program prior to award of the
construction contract. After all, the documents prepared by the design professional are more
often than not used as the basis for a claim. Design professionals are not perfect. There will be
errors, omissions and conflicts. The secret of a successful claims prevention and mitigation
program is to minimize those errors and omissions and then to respond positively and reasonably
when an error and/or omission is uncovered.

2. MANAGEMENT OF OUTSIDE DESIGN PROFESSIONALS

Studies have shown that over 60 percent of claims have their basis in defective and deficient
contract documents. Owners often use the engineering services of engineering and construction
companies and private design firms for preparation of these contract documents. Such
professionals are not deemed to be perfect and do not warrant that their plans and specifications
are 100 percent free of errors and omissions. Liability of design professionals for errors and
omissions is beyond the scope of this particular course.

Common causes of problems that owners experience with professional contracts include the
following:

 Incomplete scope of work

 Misunderstanding of work plan and the responsibilities of the parties
 Unclear performance criteria

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  Interference and change by the owner
 No internal quality assurance system by professional designer
 Lack of independent reviews of professional work products
 Lack of coordination between sub consultants
 Inadequate selection procedure
 Lack of an agreed-upon schedule for professional performance
 Conflict between the professional as an agent and the professional as an independent
contractor producing work products.
Of all of these causes, the most common problem is the failure in expectations between the
parties. Professionals are contractors and must be managed by contract. This involves
development of a scope of work, performance criteria, budgets and schedules – all of which form
the basis for a meeting of the minds.

3. REVIEW AND APPROVAL OF DETAILED AS-PLANNED SCHEDULES

Creating a detailed as-planned schedule that identifies the scope of the work, the activity
relationships, milestones and completion requirements is vital to the proper planning of a project.
A contractor should perform the following tasks to review and check it’s as planned schedules,
ensure their completeness, accuracy, and reasonableness, and allow for their timely approval by
the owner:

 Verify that all work that must be performed is included in the schedule.
 Check the level of detail proposed. Is it consistent and balanced throughout the network
or is it vague in certain areas? Is the level of detail adequate to plan, schedule, coordinate,
monitor, control, and report on the progress of work?
 Check for compliance with all contract specifications related to the schedule.
 Check to ensure that all owner-related functions outlined in the contract documents are
properly incorporated. These include:
 Access and availability dates for physical areas of the project
 Intermediate completion dates established for follow-on contractors
 Delivery of owner-furnished materials and equipment
 Approval of shop drawings, submittals, and samples
 Inspections as required
 Joint occupancy dates
 Beneficial occupancy dates

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 CHAPTER SEVEN

7 Case Studies, EOT

7.1Background
The Industrial Parks Development Corporation (IPDC) representing the Federal Democratic
Republic of Ethiopia (FDRE) has received a credit from the World Bank (International
Development Association) for the construction of Bole Lemi Phase II Industrial Park. The IPDC,
through the process of International Competitive Bidding, has entered in to contract agreement
with CGCOC Group Co., LTD on 20 Jan 2017 for the Construction works of this project. In
parallel the Consulting Services for the Construction Supervision of the Works is awarded to
DOHWA Engineering Co. Ltd., IPE Global Private Ltd and Metaferia Consulting Engineers Plc
Joint Venture. Bole Lemi Phase II Industrial Park Project is located in the Southeastern part of
Addis Ababa city. It covers an area of 171.4 hectares. The scope of the project involves
preparation of serviced land (including site grading, roads, structures, sanitary site works,
electrical works, telecom works, landscaping, fencing, main gate, etc.) as well as construction of
support buildings (health center , fire brigade , police station and administration building). The
project includes construction of three sheds namely 2 for factory and one for logistics.

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7.1.1 Preamble
The parties are:
 The Employer: Industrial Park Development Corporation (IPDC)
 The Contractor: CGCOC Group Co., LTD (CGCOC)
 The Engineer: DOHWA Engineering Co. Ltd., Seoul - KOREA; IPE Global
Private Limited -INDIA and Metaferia Consulting Engineers –ETHIOPIA
(DOHWA/IPE/MCE JV)
 On the 20th day of Jan 2017, the Employer and the Contractor have entered into a contract
for the Construction Works of Bole Lemi Phase II Industrial Park Project. The contract sum
was noted as ETB 3,522,404.883.60 including Specified Provisional Sums, 10%
Contingency and 15% VAT.
 The Contract incorporated FIDIC General Conditions of Contract (GCC), the Bank
Harmonized Edition, 2010. It should be noted that the Parties also agreed to a number of
Particular Conditions (PC) that change, override or augment the provisions of the General
Conditions of Contract.
 The DOHWA/IPE/MCE JV has also assumed the role of the Engineer as of 14th Feb 2017
for implementation of the project.

 The Engineer acknowledges receipt of the Contractor’s Claim Submission for extension of
time made pursuant to Clauses 20 of the GCC. Under such circumstances, the Engineer will
review the Contractor’s Claims and make determinations in accordance with Sub clause 3.5
and other relevant provisions of the Contract and complying with the requirement of Sub
clause 3.1 of the GCC. Accordingly, the Contractor’s Claims for extension of time has been
reviewed by the Engineer to make the determination and recommendation contained herein.

Table 1-1 Basic Contract Data

1 Date of the Letter of Acceptance 02 Jan 2017

2 Date of Contract Signature 20 Jan 2017
3 Site Handover Date 15 Feb 2017
4 Contract Type Ad-measurement

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 5 Original Contract Price ETB 3,522,404.883.60
6 Commencement Date 27 Feb 2017
7 Original Contract Period 365 calendar days
8 Original Completion Date 26 Feb 2018

7.2 Scope of this Evaluation

General Overview
The Contractor through his official letter (with all additional supporting documents) requested
the Engineer to evaluate and determine the claims made with respect to the following ten
headings and he solicited for the revised completion date of the project to be 08th Nov 20181
that brings an extension of time 240 calendar days due to the critical activity stated under each
Claim Head.

Table 1-2 Summary of the Contractor’s Claim

S/N Claim head Original completion Claimed revised
date completion dated
1 Time Extension Claim for Earth Work Before 26 Feb 2018 30th Apr 2018
2 Time Extension Claim for Water & Before 26 Feb 2018 6th Jul 2018
Sewerage
3 Time Extension Claim for Power Supply Before 26 Feb 2018 2nd Aug 2018
4 Time Extension Claim for Storm Drainage Before 26 Feb 2018 30th Apr 2018
5 Time Extension Claim for Telecom & Before 26 Feb 2018 28th Jul 2018
Security System
6 Time Extension Claim for Architecture Before 26 Feb 2018 30th Apr 2018
Design

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 7 Time Extension Claim for Road & Before 26 Feb 2018 30th Jun 2018
Pavement
8 Time Extension Claim for Landscape, Before 26 Feb 2018 30th May 2018
Fence, Guard House & SWM
9 Time Extension Claim for WWTP Before 26 Feb 2018 24th Oct 2018
Construction

7.2.1 Contractual Basis and Scope of the Determination

The Conditions of Contract provide the procedures for dealing with Claims. The Contractor’s
Submission of the aforementioned Claim places a duty upon the Engineer’s part to give his
determination pursuant to the relevant provisions of the Contract. The Scope of this evaluation is,
therefore,
 to review the Contractor’s claim for extension of time and make determination pursuant
to the relevant provisions of the Contract not limited to Sub clauses 1.9, 2.1, 3.5, 8.4,
13.1, and 20.1 of the GCC, complying with the requirement of Sub- Clause 3.1 of the
GCC and PC.

7.2.2 ENGINEER’S EVALUATION OF THE CONTRACTOR’S CLAIM

The Contractor’s first submission via his official letter is found to be incomplete and generally
not substantiated as each claim head didn’t state which clause of the contract it was made. It
lacks details required from such claim submissions indicating the important elements such as
articulating the event, contractual basis, contractual entitlement and cause and effect analysis,
well referenced and indexed appendices. The Engineer immediately communicated to the
Contractor for submission of properly substantiated claims with necessary compliances.

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Incorporating the Engineer’s comments, the Contractor resubmitted Extension of Time. It is also
to be noted that until detail assessment is made an interim time extension of three months period
was granted to the Contractor which brought the revised project completion date from 26th Feb
2018 to 31st May 2018. In particular to the cost, The Contractor’s submission mentioned that he
will not claim for costs associated with the granted time extension. To this effect, the Engineer is
limited only to the analysis of extension of time.

7.2.2.1 Claim Head 1 – Time Extension Claim for Earth Work

 The Event
The Contractor contended that following the start of the physical work, earth work stands at the
beginning of CPM, even though most of earth work had already been completed, but the
influence of its delayed completion due to the right of way affected the other sequence work
items like road & pavement, retaining wall, factory shed, landscape.
The Contractor’s schedule is only by estimation assuming the ROW problem would be solved
before end of March 2018, and then considering 30 days construction period, the earth work will
be completed by 30th April 2018. Based on the aforementioned events, the Contractor is
claiming for 30 calendar days to execute the remaining earthwork construction of the project.
The Contractor subsequently suggested that, assuming all the outstanding right of way problems
would be solved by the end of March 2018, the revised completion date for this claim head is to
be extended up to 30th April 2018.
 Contractual Basis of the Claim

Table 1-3 The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1

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In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer
within 28 days after the event has first arisen. The Contractor has issued a notice via official
letters.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though earthwork was planned to be completed before 28th July 2017, it is
delayed up to date due to a right of access problem, in accordance with the provisions of Sub
clause 2.1 of the GCC.

 Cause and Effect Analysis

S/N Event Description Cause Effect
1 Delay in removal of the remaining obstruction Prevention of the Delay to the
for the period up to this claim submission date Contractor from works
on the following locations (Right to access performing its obligation
problem event according to Sub clause 2.1 of the due to the presence of
GCC) remaining obstruction

In view of this, the Contractor is entitled to an extension of time for the delay from 28th Jul 2017
to 30th Apr 2018, which is 276 calendar days. And computing against the original completion
date of the project which is 26th Feb 2018, the delay becomes 63 calendar days.. It is to be
noted that it is a non-compensable time extension.

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 7.2.2.2 Claim Head 2 – Time Extension Claim for Water Supply &
Sewerage Drainage
 The Event
The Contractor is claiming that the ROW issue on Bore holes, reservoirs and collection tank
and design variation on water line and sewere line delayed the work and hence the
completion time for the same is to be extended from 9th Feb 2018 to 6th July 2018.
 Contractual Basis of the Claim

Table 1.4 The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1
In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer
within 28 days after the event has first arisen. The Contractor has issued a notice via letters.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though the water supply and sewerage works was planned to be completed before

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 9th Feb 2018, it is delayed up to date mainly due to right of access problem, in accordance
with the provisions of Sub clause 2.1 of the GCC.
 Cause and Effect Analysis
S/N Event Description Cause Effect
1 Delay in deciding of BH locations, right of way Prevention of the Delay to the
problems, Engineer’s instruction for double Contractor from works
water supply and double sewer pipe lines (Right performing its obligation
to access problem Right to vary events according due to the unresolved
to Sub clause 2.1 & 13.1 of the GCC right of way problems &
Respectively). delayed instruction.

In view of the above three concurrent delays, the effective delay is taken for water line & sewer
line works resulting in 147 Calendar days entitling the Contractor from 9th Feb 2017 to 6th July
2018. And computing against the original completion date of the project which is 26thFeb 2018,
the delay becomes 130 calendar days. It is to be noted that it is a non-compensable time
extension.

7.2.2.3 Claim Head 3 – Time Extension Claim for Power Supply

 The Event
The Contractor complained that power supply work has also raised many big variations by the
Ethiopia Electric Utility (EEU) which is quite different with the Contract requirement.
According to the Contractor’s analysis, completion time of the power supply work should be
extended by 280 days from 15th Dec 2017 to 2nd Oct 2018.
 Contractual Basis of the Claim

Table 1-5 The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1

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In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time as the event
of variation order was not finalized until on 28th Dec 2017 the time when factory certificate was
signed/approved by the Engineer and Client and considered the same as delayed drawings or
instructions in accordance with the provisions of Sub clause 1.9 of the GCC.
 Cause and Effect Analysis

S/N Event Description Cause Effect

1 Delayed instructions from 22nd May 2017 to 28th Dec Prevention of the Delay to the
2017 (Delayed drawings or instructions event Contractor from performing
works
according to Sub clause 1.9 of the GCC) to Sub its obligation due to the
clause 2.1 & 13.1 of the GCC Respectively). varied instruction of RMU
Looping System. right of
way problems & delayed
instruction.

However, the Engineer disagrees with the Contractor’s contend of starting works beyond 28th
Dec 2017 as the time line for starting related works.

In view of this, the Contractor is entitled to an extension of time for the delay from 22nd May
2017 to 29th Nov 2017, which is 191 calendar days. This extension of time will shift a revised

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completion date of power supply from the scheduled date of 15th Dec 2017 to 24th Jun 2018,
including system checking. The original master schedule considers 30 cal days for system
testing. And computing against the original completion date of the project which is 26th Feb
2018, the delay becomes 118 calendar days. It is to be noted that it is a non-compensable time
extension.

7.2.2.4 Claim Head 4 – Time Extension Claim for Telecommunication &

Security Work

 The Event
The Contractor is narrating the event that this work is held by the government organization
Ethiopia Telecom Company (ETC) and Contractor started the design work from the beginning of
Aug 2017, and submitted the design document since 5th Oct 2017. However, after several
discussions, the Client & the Engineer instructed the Contractor to proceed with the design work
as per the standard of ETC as well as this work needs to be compatible with Bole-Lemi Phase I
industrial Park.
Based on the aforementioned reasons, the Contractor is claiming for total delay of 150 days for
telecom work and the corresponding completion date will be 28th July 2018, subject to
finalization of drawings by ETC.
 Contractual Basis of the Claim
The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1
In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.
S/N Description Basis of Claim Basis of claim

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 1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter ref. no.
CGCOC/ETH/BLIPP-II/1412 dated 11th Jan 2018.

 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time as the event
of variation order was not finalized to date and hence considered the same as delayed drawings
or instructions in accordance with the provisions of Sub clause 1.9 of the GCC.

 Cause and Effect Analysis

S/ Event Description Cause Effect
N
1 Delayed instructions up to estimated date of Prevention of the Delay to the
28th Feb 2018 (Delayed drawings or Contractor from works
performing its obligation
instructions event according to Sub clause 1.9
due to the varied
of the GCC) instruction of telecom
works

The Engineer generally agrees with the Contractor’s contend of delay of drawing approval to
start site construction activities. In view of this, the Contractor is entitled to an extension of time
starting from 17th Feb 2018. It is to be noted that apart from the preparation of design drawings,
schedule for site construction works of Telecommunication & Security are not included in the
original master schedule. But the revised work schedule submitted in Sep 2017 considers 150 cal

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days for construction of the same. This extension of time fixes a revised completion date of
Telecommunication & Security Work to 17th Jul 2018. And computing against the original
completion date of the project which is 26th Feb 2018, the delay becomes 141 calendar days. It
is to be noted that it is a non-compensable time extension.

7.2.2.5 Claim Head 5 – Time Extension Claim for Storm Drainage

 The Event
The Contractor narrates that as per the master schedule, the storm drainage work is planned to be
completed by 18th January 2018 and requested time extension for the delayed completion of the
same work due to the following reasons:-
 Influence by the related sequence work
 ROW
 Design Variation

Based on the aforementioned, three major reasons the Contractor come to a conclusion that by
estimation if the right of way problem can be solved by the end of March 2018, the completion
date will be 30th April 2018. The Contractor subsequently suggested that the revised completion
date for Storm Drainage work is to be accordingly extended from 18th January 2018 to 30th
April 2018, by a total of 102 days.

 Contractual Basis of the Claim

The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1

In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC

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 2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though earthwork was planned to be completed before 28th July 2017, it is delayed
up to date due to a right of access problem, in accordance with the provisions of Sub clause 2.1
of the GCC.
 Cause and Effect Analysis

S/N Event Description Cause Effect

1 Delay in clearance of issues related with Prevention of the Delay to the
AACRA road, 32m inside Northern part of IP & Contractor from works
local houses at southern part near south telecom finalizing its obligation
tower area (Right to access problem event due to the presence of
according to Sub clause 2.1 of the GCC) AACRA road at north
and local houses at south
part of IP.
2 Prevention of the Delay to the
Design variation: delay in deciding the location Contractor from works
of part of the storm drainage inside Bole Lemi I finalizing its obligation
IP (Delay of drawing approval and instruction due to delayed
according to Sub clause 1.9 of GCC) instruction on the
location of storm
drainage falling inside
the premises of Bole
Lemi I IP.

In view of this, the Contractor is entitled to an extension of time for the delay from 18th Jan 2018
to 30th Apr 2018, which is 102 calendar days. And computing against the original completion
date of the project which is 26th Feb 2018, the delay becomes 63 calendar days. It is to be noted
that it is a non-compensable time extension.

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 7.2.2.6 Claim Head 6 – Time Extension Claim for Road & Pavement
Work
 The Event

The Contractor narrates that since road and pavement acts as type of last stage of finishing work,
it can be influenced by many of related sequence work, like: earth work, utility pipe line work,
retaining wall, cable installation, storm drainage etc. As per the master work schedule, this work
is planned to be completed on 4th Feb 2018 before the commissioning start. In the same manner,
since most of the preceding works had been delayed by different reasons, in general, most of area
will be cleaned around June 2018. Thus the Contractor proposed for the reasonable extension of
road & pavement

The Contractor subsequently requested that the revised completion date of road and pavement
construction should be extended by 146 days from 4th Feb 2018 to 30th Jun 2018.

 Contractual Basis of the Claim

The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1
In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.
S/N Description Basis of Claim Basis of claim
1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter

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  Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though road and pavement work was planned to be completed before 4th Feb 2018, it
is delayed up to date due to a right of access problem & design change, in accordance with the
provisions of Sub clause 2.1 of the GCC & Sub clause 1.9 of GCC, respectively.

 Cause and Effect Analysis

S/N Event Description Cause Effect
1 Delay in removal of the remaining obstruction Prevention of the Delay to the
for the period up to this claim submission date Contractor from works
(Right to access problem event according to Sub finalizing its obligation
clause 2.1 of the GCC)  due to the presence of
Design variation (Delay of drawing approval and remaining obstruction &
instruction event according to Sub clause 1.9 of pending design issues
GCC
In view of this, the Contractor is entitled to an extension of time for the delay from 4th Feb 2018
to 30th May 2018, which is 115 calendar days. And computing against the original completion
date of the project which is 26th Feb 2018, the delay becomes 93 calendar days.. It is to be noted
that it is a non-compensable time extension.

7.2.2.7 Claim Head 7 – Time Extension Claim for Architecture Work

 The Event

The Contractor is complaining that this activity is delayed due to the reasons listed below:-

 Influence by the related sequence work:-

 Design revision by the Contractor:-
 Instruction for deeper foundation and backfill with select material:-

Based on the aforementioned reasons, the Contractor finally concluded that around 135 days are
needed to be added to complete all the finishing works. So the Completion date will be 30th
April 2018, as calculated from the final approval date. The Contractor subsequently suggested

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that the revised completion date of Architecture work is to be extended by 77 days from 12th Feb
2018 to 30th April 2018.

 Contractual Basis of the Claim

The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1
In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.
S/N Description Basis of Claim Basis of claim
1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though road and pavement work was planned to be completed before 12th Feb 2018,
it is delayed up to date due to pending design issues, in accordance with the provisions of Sub
clause 1.9 of GCC.
 Cause and Effect Analysis

S/N Event Description Cause Effect

1 Design variation (Delay of drawing approval Prevention of the Contractor Delay to the
and instruction event according to Sub clause from finalizing its obligation works
1.9 of GCC due to pending design issues

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In view of this, the Contractor is entitled to an extension of time for the delay from 12th Feb
2018 to 30th Apr 2018, which is 77 calendar days. And computing against the original
completion date of the project which is 26th Feb 2018, the delay becomes 63 calendar days. It
is to be noted that it is a non-compensable time extension.

7.2.2.8 Claim Head 8 – Time Extension Claim for Landscape,

Guardhouse, Fence Works and Solid Waste Management
 The Event
The Contractor narrates that as part of the finishing work, normally, landscaping will be at the
last stage of the work sequence. Its completion depends on the timely hand over of other related
works such as earth work, site grading, administration building, and utility line completion. The
Contractor subsequently suggested that the revised completion date for Landscape, Guardhouse,
Fence Works and Solid Waste Management shall be extended by 121 calendar days from 29th
Jan 2018 to 30th May 2018.
 Contractual Basis of the Claim
The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1
In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance

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The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. The Contractor has issued a notice via letter.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though Landscape, Guardhouse, Fence Works and Solid Waste Management works
were planned to be completed before 29th Jan 2018, it is delayed up to date due to a right of
access problem & design change, in accordance with the provisions of Sub clause 2.1 of the
GCC & Sub clause 1.9 of GCC, respectively

 Cause and Effect Analysis

S/N Event Description Cause Effect

1 Delay in removal of the remaining obstruction Prevention of the Delay to
for the period up to this claim submission date Contractor from the works
(Right to access problem event according to Sub finalizing its obligation
clause 2.1 of the GCC) Design variation due to the presence of
(Delay of drawing approval and instruction event remaining obstruction &
according to Sub clause 1.9 of GCC pending design issues
In view of this, the Contractor is entitled to an extension of time for the delay from 29th Jan 2018
to 30th May 2018, which is 121 calendar days. And computing against the original completion
date of the project which is 26th Feb 2018, the delay becomes 93 calendar days. It is to be noted
that it is a non-compensable time extension.

7.2.2.9 Claim Head 9 – Time Extension Claim for WWTP Work

 The Event
The Contractor contended that as it is well known, the work of Waste Water Treatment Plant
(WWTP) is most critical work of the project, not only its large amount (20% of the total Contract
amount) but also the complete process. Normally, for such capacity of 21000m3/day WWTP,
nearly 14 months are required only for construction work. Thus even to use the 12 months full

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period of the Contract for this work is still very challenging. However, the Contractor had
prepared itself in very positive way in order to comply with the very tighten schedule.
Unfortunately due to the Client several times change of ideas with regard with the process, the
parameter requirement, the nominated sub-contractor, etc. the whole work was seriously delayed.
The Contractor’s considerations subsequently computed that the revised completion date for
WWTP Work shall be extended by 254 calendar days from 12th Feb 2018 to 24th Oct 2018.

 Contractual Basis of the Claim

The Contractor has based his claim on the following clauses.
S/N Description Basis of Claim Basis of claim
1 Delay of drawing approval and instruction Sub clause 1.9 of GCC
2 Right of access to the site Sub clause 2.1 of GCC
3 Right to Vary Sub clause 13.1 of GCC
4 Definition of Force Majeure Sub clause 19.1

In view of the above tabulated clauses, the Engineer couldn’t find the relevance of Force
Majeure under Sub clause 19.1 referenced in the above table. Instead the following additional
clauses of the contract are used in determination of the claim.

S/N Description Basis of Claim Basis of claim

1 Claim by Contractor Sub clause 20.1 of GCC
2 The extension of completion time Sub clause 8.4 of GCC

 Contractual Compliance
The Contractor has submitted his claim in compliance with the procedures for claims of Sub
clause 20.1 of the GCC, where the Contractor is required to give notice to the Engineer within 28
days after the event has first arisen. Even though the Contractor has issued a notice via letter.
 Contractual Entitlement
The Contractor in his submission indicated that he is entitled to an extension of time, for the
reason that though WWTP was planned to be completed before 12th Feb 2018, it is delayed up to
date due to repeated design change, in accordance with the provisions of Sub clause 1.9 of the
GCC. The Engineer doesn’t accept the reason of right of way problem due to the interference of

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the local people as the WWTP area is protected by additional temporary fence. As such the issue
of right of access problem is not justifiable.

 Cause and Effect Analysis

S/N Event Description Cause Effect

1 Design variation: delay in deciding the Prevention of the Delay to
parameters of WWTP (Delay of drawing Contractor from the works
approval and instruction according to Sub clause finalizing its obligation
1.9 of GCC) due to delayed
instruction.

In view of this, the Contractor is entitled to an extension of time for the delay from 12th Feb
2018 to 14th Sep 2018, which is 214 calendar days. And computing against the original
completion date of the project which is 26th Feb 2018, the delay becomes 200 calendar days.
This extension of time will establish a revised completion date of WWTP construction on 14th
Sep 2018. It is to be noted that it is a non-compensable time extension.

7.2.3 Conclusion of the Case study

The project has delayed due to the prevailing
1. right of way obstructions,
2. design change and
3. Contractor’s poor performance.
From the above facts the Engineer is in a position that whatever time of completion is
extended should be non-compensable. Hence as per the requirement of Sub clause 3.5 of the
GCC, the Engineer consulted both the Client and the Contractor to reach agreement so that
the time extension will be granted without compensation for costs associated with the
extended time. Accordingly the Contactor confirmed not to claim for costs associated with
time extension

The finding of this assessment shows that activities under the WWTP design build work are
currently falling in the critical path of the Bole Lemi Phase II industrial park construction.
During our assessment, effective delays are considered from the concurrent delays of the

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 various claim events. Superimposing the delays, the activities under claim head of WWTP
became the effective delay.

Table 1-6 Summary of Engineer’s Determination for the Contractor’s Claim

S/ Claim head Revised Completion Date
N Contractor’s Engineer Determination
Claim
1 Time Extension Claim for Earth Work 30-Apr-18 30-Apr-18 63 Cal days
2 Time Extension Claim for Water & 06-Jul-18 07-Jul-18 130 Cal days
Sewerage
3 Time Extension Claim for Power 24-Jun-18 118 Cal days
Supply 02-Aug-18
4 Time Extension Claim for Storm 30-Apr-18 30-Apr-18 63 Cal days
Drainage
5 Time Extension Claim for Telecom & 28-Jul-18 17-Jul-18 141 Cal days
Security System
6 Time Extension Claim for Architecture 30-Apr-18 30-Apr-18 63 Cal days
Design
7 Time Extension Claim for Road & 30-Jul-18 31-May-18 93 Cal days
Pavement
8 Time Extension Claim for Landscape, 31-May-18 31-May-18 93 Cal days
Fence, Guard House & SWM
9 Time Extension Claim for WWTP 24-0ct-18 14-Sep-18 200 Cal days
Construction
Accordingly, the Engineer assessment and determination was sent to Employer for Employer
Approval. The Employer approved the engineer determination and The EOT was grated to
Contractor that establish a revised completion date of 14th Sep 2018

7.3Case Study 2, Delay Damage

7.3.1 Background
The Industrial Parks Development Corporation (IPDC) representing the Federal Democratic
Republic of Ethiopia (FDRE) has received a credit from the World Bank (International
Development Association) for the construction of Bole Lemi Phase II Industrial Park. The IPDC,
through the process of International Competitive Bidding, has entered in to contract agreement

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with CGCOC Group Co., LTD on 20 Jan 2017 for the Construction works of this project. In
parallel the Consulting Services for the Construction Supervision of the Works is awarded to
DOHWA Engineering Co. Ltd., IPE Global Private Ltd and Metaferia Consulting Engineers Plc
Joint Venture. Bole Lemi Phase II Industrial Park Project is located in the Southeastern part of
Addis Ababa city. It covers an area of 171.4 hectares. The scope of the project involves
preparation of serviced land (including site grading, roads, structures, sanitary site works,
electrical works, telecom works, landscaping, fencing, main gate, etc.) as well as construction of
support buildings (health center , fire brigade , police station and administration building). The
project includes construction of three sheds namely 2 for factory and one for logistics.

7.3.2 Preamble
The parties are:
 The Employer: Industrial Park Development Corporation (IPDC)
 The Contractor: CGCOC Group Co., LTD (CGCOC)
 The Engineer: DOHWA Engineering Co. Ltd., Seoul - KOREA; IPE Global
Private Limited -INDIA and Metaferia Consulting Engineers –ETHIOPIA
(DOHWA/IPE/MCE JV)
 On the 20th day of Jan 2017, the Employer and the Contractor have entered into a contract
for the Construction Works of Bole Lemi Phase II Industrial Park Project. The contract sum
was noted as ETB 3,522,404.883.60 including Specified Provisional Sums, 10%
Contingency and 15% VAT.
 The Contract incorporated FIDIC General Conditions of Contract (GCC), the Bank
Harmonized Edition, 2010. It should be noted that the Parties also agreed to a number of
Particular Conditions (PC) that change, override or augment the provisions of the General
Conditions of Contract.
 The DOHWA/IPE/MCE JV has also assumed the role of the Engineer as of 14th Feb 2017
for implementation of the project.

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7.3.3 Basic Contract Data for the Works Contract

Table 2-1 Basic Contract Data

1 Date of the Letter of Acceptance 02 Jan 2017

2 Date of Contract Signature 20 Jan 2017
3 Site Handover Date 15 Feb 2017
4 Contract Type Ad-measurement
5 Original Contract Price ETB 3,522,404.883.60
6 Commencement Date 27 Feb 2017
7 Original Contract Period 365 calendar days
8 Original Completion Date 26 Feb 2018
9 Revised Completion Date 14 Feb 2020

7.3.4 Scope of this Evaluation

Provisional handover is issued by Engineer in accordance with the particular condition of the
contract 4.25 “There shall be no sectional completion. However if the client have any intention
of taking over parts of the works, please amend the phrase by deleting “ works exceeding 30km
in length” and replace it by the type of section the Client anticipate.” And GCC 10.2 (MDB-
FIDIC) “The Engineer may, at the sole discretion of the Employer, issue a taking over certificate
for any part of the permanent work” for all bill items except system related works.

For system related works (Water supply system, Power supply system, telecommunication and
Waste water treatment plant WWTP) the provisional hand over is not issued because the testing
and commissioning is not done by the Contractor. The testing and commissioning of systems
was planned to be done during the Defect notification period (From 15 Feb 2020 up 15 Feb
2021), one year. However during the DNP and extended DNP the Contractor is failed to conduct
testing and commissioning of systems. Accordingly, the Engineer issue notice letter to
Contractor on delay damages of work at April 26, 2022.

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For system related works, that the parts of the work, testing and commissioning is not done by
the contractor as per the contract

Table 2-2 Contract Bill items with contract amount

S/N Bill items Contract Amount (Birr) Provisional Hand over

1 General item 68,844,907.78 Issued on Feb, 2022
2 Earth work 255,249,749.29 Issued on Feb, 2022
3 Road and Pavement 232,502,229.23 Issued on Feb, 2022
4 Water supply 299,532,226.35 Not Issued
5 Storm water drainage 114,757,490.40 Issued on Feb, 2022
6 Serewe line 49,867,761.00 Issued on Feb, 2022
7 Structure 86,740,940.91 Issued on Feb, 2022
8 Power supply 499,619,854.13 Not Issued
9 Telecom 14,789,806.15 Not Issued
10 Fence, Guard house and 81,264,523.90 Issued on Feb, 2022
Landscape
11 WWTP 639,560,367.60 Not Issued
12 SWT 8,498,376.92 Issued on Feb, 2022
13 Architectural 458,874,676.62 Issued on Feb, 2022
14 Security system 10,921,390.30 Issued on Feb, 2022

 The Contractor was several times instructed to complete the testing and commissioning of
systems and to hand over the work to Employer.
 However, the Contractor’s performance was very poor and they are failed to fulfill their
Contractual responsibility.
 The Employer also stress that the Contractual measurement should be applied by Engineer
for Contractor poor performance and failure to the Contractual obligation.
 Under such circumstances, the Engineer make determinations in accordance with Sub clause
3.5 and other relevant provisions of the Contract and complying with the requirement of Sub
clause 3.1 of the GCC of MDB-FIDIC.
 Accordingly, the Engineer determine the delay damage amount and gave a notice on to the
Contractor’ s

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7.3.5 ENGINEER’S EVALUATION

 The Event
Due to the Contractor’s poor performance the testing and commissioning of 4 bill items are not
conducted and the works and not handed over to the Employer within the extended construction
period.

Table 2-3 Contractual Basis of the Claim

S/N Description Basis of Claim Basis of claim
1 Delay Damage for the works Particular condition of
Contract
2 Maximum amount of delay damages Particular condition of
contract
3 Testing on completion Sub clause 1.1.3.4
4 Delay Damages Sub clause 8.7
Time for completion Sub clause 1.1.3.3
5 Delayed tests Sub clause 9.2
6 Failure to pass test on completion Sub clause 9.4
7 Payments of the damages specified in the Sub clause 14.15
contract data shall be made in the currencies and
proportions specified in the schedule of payment
currencies

 Contractual Compliance

The Engineer issued delay damage for works which are not completed and handed over to
Employer within the extended construction period.
 0.05 % of the Contract price except the completed bill item
Estimated delay damage

(B)ETB*0.05%/day*(c) days =(A) ETB

A: Estimated delay damage

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B: Final Contract price of respective Bill no. items (Bill no. 4 water supply, Bill no. 8 Power
supply, Bill no. 9 Telecom and Bill no. 11 WWTP)
C: Number of delay days

Note that the delay days are calculated from start of DNP, February 15, 2020 until April 26,
2022.

CHAPTER EIGHT

8 Comparisons: MDB – FIDIC and PPA

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 8.1 Similarities and difference of claim management process under the two
standard: MDB – FIDIC and PPA

Description MDB-FIDIC PPA

1. Employer Sub-clause 2.5 Sub-Clause 73.4
Claim If the Employer considers himself to be entitled If the Contractor has failed to
to any payment under any Clause of these give early notification of a
Conditions or otherwise in connection with the delay or has failed to
Contract, and/or to any extension of the Defects cooperate in dealing with a
Notification Period, the Employer or the Engineer delay, the delay by this failure
shall give notice and particulars to the Contractor. shall not be considered in
However, notice is not required for payments due assessing the new intended
under Sub Clause 4.19 [Electricity, Water and completion date.
Gas], under Sub-Clause 4.20 [Employer’s
Equipment and Free-Issue Materials], or for other
services requested by the Contractor. The notice
shall be given as soon as practicable and no
longer than 28 days after the Employer became
aware, or should have
Become aware, of the event or circumstances
giving rise to the claim. A notice relating to any
extension of the Defects Notification Period shall
be given before the expiry of such period.

2. Contractor Sub-clause 20.1 No specific

Claim If the Contractor considers himself to be entitled clause
to any extension of the Time for Completion
and/or any additional payment, under any Clause
of these Conditions or otherwise in connection
with the Contract, the Contractor shall give notice
to the Engineer, describing the event or
circumstance giving rise to the claim. The notice
shall be given as soon as
Practicable, and not later than 28 days after the
Contractor became aware, or should have become
aware, of the event or circumstance. If the
Contractor fails to give notice of a claim within
such period of 28 days, the Time for Completion
shall not be
Extended, the Contractor shall not be entitled to
additional payment, and the Employer shall be
discharged from all liability in connection with
the claim. Otherwise, the following provisions of
this Sub-Clause shall apply.
The Contractor shall also submit any other
notices which are required by the Contract, and

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 supporting particulars for the claim, all as
relevant to such event or circumstance.
The Contractor shall keep such contemporary
records as may be necessary to substantiate any
claim, either on the Site or at another location
acceptable to the Engineer. Without admitting the
Employer’s liability, the Engineer may, after
receiving any notice under this Sub-Clause,
monitor the record-keeping and/or instruct the
Contractor to keep further contemporary records.
The Contractor shall permit the
Engineer to inspect all these records, and shall (if
instructed) submit copies to the Engineer.

Sub-clause 1.9
3. Delayed The Contractor shall give notice to the Engineer No Room
drawings/instr whenever the Works are likely to be delayed or
uctions disrupted if any necessary drawing or instruction
is not issued to the Contractor within a particular
time, which shall be reasonable. The notice shall
include details of the necessary drawing or
instruction, details of why and by when it should
be issued, and the nature and amount of the delay
or disruption likely to be suffered if it is late.
If the Contractor suffers delay and/or incurs Cost
as a result of a failure of the Engineer to issue the
notified drawing or instruction within a time
which is reasonable and is specified in the notice
with supporting details, the Contractor shall give
a further notice to the Engineer and shall be
entitled subject to Sub-Clause 20.1 [Contractor’s
Claims]
to:
(a) an extension of time for any such delay, if
completion is or will be delayed, under Sub-
Clause 8.4 [Extension of Time
for Completion], and
(b) Payment of any such Cost plus profit, which
shall be included in the Contract Price.
After receiving this further notice, the Engineer
shall proceed in accordance with Sub- Clause 3.5
[Determinations] to agree or determine these
matters.
Instructions
However, if and to the extent that the Engineer’s
failure was caused by any error or delay by the

70 | P a g e
 Contractor, including an error in, or delay in the
submission of, any of the Contractor’s
Documents, the Contractor shall not be entitled to
such extension of time, Cost or profit.

4. Delayed Sub-clause 14.8 Sub-clause 67

Payment If the Contractor does not receive payment in Once the time-limit referred to
accordance with Sub-Clause 14.7 [Payment], the in GCC Clause 59.3 has
Contractor shall be entitled to receive financing expired, the Contractor – unless
charges compounded monthly on the amount the Contractor is a public body
unpaid during the period of delay. This period which is partly or wholly
Shall be deemed to commence on the date for financed by the Federal
payment specified in Sub-Clause 14.7 [Payment], Government Budget – shall
irrespective (in the case of its sub-paragraph (b)) upon demand, submitted within
of the date on which any Interim Payment two months of receiving late
Certificate is issued. payment, be entitled to late-
payment interest at the
rediscount rate
Applied by the National bank of
Ethiopia on the first day of the
month in which the time-limit
expired, plus three and a half
percentage points. The interest
shall be payable for the time
elapsed between the expiry of
the payment deadline and the
date on which the Public Body’s
account is debited. .

5. Extension of Sub-clause 8.4 Sub-clause 73

Time The Contractor shall be entitled subject to Sub- The Contractor may request an
Clause 20.1 [Contractor’s Claims] to an extension extension of the Intended
of the Time for Completion if and to the extent Completion Date if he is or will
that completion for the purposes of Sub-Clause be delayed in completing the
10.1 [Taking-Over of the Works and contract by any of the following
Sections] is or will be, delayed by any of the causes:
following causes: a)Exceptional weather
(a) a Variation (unless an adjustment to the Time conditions in the Federal
for Completion has been agreed under Sub- Democratic Republic of
Clause 13.3 [Variation Procedure]) or other Ethiopia;
substantial change in the quantity of an item of b) Artificial obstructions or
work included in the Contract, physical conditions which
(b) a cause of delay giving an entitlement to could not reasonably have been
extension of time under a Sub-Clause of these foreseen by an
Conditions, experienced Contractor;
71 | P a g e
 (c) exceptionally adverse climatic conditions, c)Compensation Event occurs or
(d) Unforeseeable shortages in the availability of a change order for modification
personnel or Goods caused by epidemic or is issued which makes it
governmental actions, or impossible for
(e) Any delay, impediment or prevention caused completion to be achieved by the
by or attributable to the Employer, the Intended Completion
Employer’s Personnel, or the Employer’s other Date;
contractors. Completion d) Administrative orders
If the Contractor considers himself to be entitled affecting the date of completion
to an extension of the Time for Completion, the other than those arising from the
Contractor shall give notice to the Engineer in Contractor's default;
accordance with Sub-Clause 20.1 [Contractor’s e) Failure of the Public Body to
Claims]. When determining each extension of fulfill his obligations
time under Sub-Clause 20.1, the Engineer shall under the Contract;
review previous determinations and may increase, f) Any suspension of the works
but shall not decrease, the total extension of time. which is not due to the
Contractor's default;
g) Force majeure;
h) Any other causes referred to
in these GCC which are
not due to the Contractor's
default.

6. Delay No room,
caused by Sub-clause 8.5
Authorities If the following conditions apply, namely:
(a) the Contractor has diligently followed the
procedures laid down by the relevant legally
constituted public authorities in the Country,
(b) these authorities delay or disrupt the
Contractor’s work, and
(c) the delay or disruption was Unforeseeable,
then this delay or disruption will be considered as
a cause of delay under subparagraph (b) of Sub-
Clause 8.4 [Extension of Time for Completion].

7. Delay Sub- Clause 8.7 Sub-clause 27

damages If the Contractor fails to comply with Sub-Clause Except as provided under GCC
8.2 [Time for Completion], the Contractor shall Clause 18, if the Contractor fails
subject to notice under Sub-Clause 2.5 to carry out any or all of the
[Employer’s Claims] pay delay damages to the Works within the period
Employer for this default. These delay damages specified in the Contract, the
shall be the sum stated in the Contract Data, Public Body may without
which shall be paid for every day which shall prejudice to all its other
elapse between the relevant Time for Completion remedies under the Contract,
and the date stated in the Taking-Over Certificate. deduct from the Contract Price,

72 | P a g e
 However, the total amount due under this Sub- as liquidated damages the
Clause shall not exceed the maximum amount of following:
delay damages (if any) stated in the Contract 1) A penalty of 0.1% or 1/1000
Data. These delay damages shall be the only of the value of undelivered
damages due from the Contractor for such Service for each day of delay
default, other than in the event of termination until actual delivery or
under Sub-Clause 15.2 [Termination by performance,
Employer] prior to completion of the Works. 2) The cumulative penalty to be
These damages shall not relieve the Contractor paid by the Contractor shall not
from his obligation to complete the Works, or exceed 10% of the contract
from any other duties, obligations or price. If the delay in performing
responsibilities which he may have under the the contract affects its activities,
Contract. the Public Body may terminate
the contract by giving advance
notice to the Contractor pursuant
to GCC Clause 21 without any
obligation to wait until the
penalty reaches 10% of the value
of the Contract.

Sub-clause 2.1 Sub-clause 31.1

8. Right of The Public Body shall, in due
access to the The Employer shall give the Contractor right of time and in conformity with the
site access to and possession of, all parts of the Site progress of the works, place the
within the time (or times) stated in the Contract site and access thereto at the
Data. The right and possession may not be disposal of the Contractor in
exclusive to the Contractor. If, under the accordance with the program of
implementation of tasks referred
Contract, the Employer is required to give (to the to in these GCC. If possession of
Contractor) possession of any foundation, a part is not given by the date
structure, plant or means of access, the Employer stated in the approved work
shall do so in the time and manner stated in the program, the
Specification. However, the Employer may Public Body will be deemed to
Withhold any such right or possession until the have delayed the start of the
Performance Security has been received. relevant activities, and this will
be a Compensation Event.
If no such time is stated in the Contract Data, the
Employer shall give the Contractor right of access
to, and possession of, the Site within such times
as required to enable the Contractor to proceed
without disruption in accordance with the
programme submitted under Sub-Clause 8.3
[Programme].

Sub-clause 8.2 Sub-clause 72 (stated as period

73 | P a g e
 9. Time for The Contractor shall complete the whole of the of execution of works in PPA)
completion Works, and each Section (if any), within the Time The period of execution of
for Completion for the Works or Section (as the Works shall commence on the
case may be), including: Start Date fixed in accordance
(a) achieving the passing of the Tests on with GCC Clause 71.1 and shall
Completion, and be as laid down in the SCC,
(b) Completing all work which is stated in the without prejudice to extensions
Contract as being required for the Works or of the period which may be
Section to be considered to be completed for the granted under GCC Clause 73.
purposes of taking over under Sub-Clause 10.1
[Taking Over of the Works and Sections].

10. Rate of Sub-clause 8.6 Sub-clause 75 (Stated as

Progress If, at any time: acceleration)
(a) actual progress is too slow to complete within 1) When the Public Body wants
the Time for Completion, and/or the Contractor to finish
(b) progress has fallen (or will fall) behind the Before the Intended Completion
current programme under Sub-Clause 8.3 Date, the Engineer will obtain
[Programme], other than as a result of a cause priced proposals for achieving
listed in Sub-Clause 8.4 [Extension of Time for the necessary acceleration from
Completion], then the Engineer may instruct the the Contractor. If the Public
Contractor to submit, under Sub- Clause 8.3 Body accepts these proposals,
[Programme], a revised programme and the Intended Completion Date
supporting report describing the revised methods will be adjusted accordingly and
which the Contractor proposes to adopt in order confirmed by both the
to expedite progress and complete within the Public Body and the Contractor.
Time for Completion. 2) If the Contractor’s priced
proposals for acceleration are
accepted by the Public Body,
they are incorporated in The
Contract Price and treated as a
modification.

Sub-clause 8.8 Sub-clause 20

11. Suspension The Engineer may at any time instruct the The Contractor shall, on the
of work Contractor to suspend progress of part or all of order of the Engineer, suspend
the Works. During such suspension, the the progress of the works or any
Contractor shall protect, store and secure Such part thereof for such time or
part or the Works against any deterioration, loss times and in such manner as the
or damage. The Engineer may also notify the Engineer may consider
cause for the suspension. If and to the extent that necessary.
the cause is notified and is the responsibility of
the Contractor, the following Sub- Clauses 8.9,
8.10 and 8.11 shall not apply.

Sub-Clause 8.9 No separate room but included

74 | P a g e
 12. Consequenc If the Contractor suffers delay and/or incurs Cost under clause 20
es of from complying with the Engineer’s instructions
Suspension under Sub-Clause 8.8 [Suspension of Work]
and/or from resuming the work, the Contractor
shall give notice to the Engineer and shall be
entitled subject to Sub-Clause 20.1 [Contractor’s
Claims]

Sub-clause8.11 No separate room but included

13. Prolonged If the suspension under Sub-Clause 8.8 under clause 20
suspension [Suspension of Work] has continued for more
than 84 days, the Contractor may request the
Engineer’s permission to proceed. If the Engineer
does not give permission within 28 days after
being requested to do so, the Contractor may, by
giving notice to the Engineer, treat the suspension
as an omission under Clause 13 [Variations and
Adjustments] of the affected part of the Works. If
the suspension affects the whole of the Works,
the Contractor may give notice of termination
under Sub-Clause 16.2 [Termination by
Contractor].

14. Engineer Sub-clause 3.1 Sub-Clause 12

duties and The Employer shall appoint the Engineer who Except where otherwise
Authority shall carry out the duties assigned to him in the specifically stated and subject to
Contract. The Engineer’s staff shall include any restriction in the SCC, any
suitably qualified engineers and other action required or permitted to
professionals who are competent to carry out be taken, and any document
these duties. The Engineer shall have no authority required or permitted to be
to amend the Contract. The Engineer may executed, under this Contract by
exercise the authority attributable to the Engineer the Public Body or the
as specified in or necessarily to be implied from Contractor may be taken or
the executed by the Engineers
Contract. If the Engineer is required to obtain the named in the SCC. Except as
approval of the Employer before exercising a expressly stated in the SCC, the
specified authority, the requirements shall be as Engineer shall not have
stated in the Particular Conditions. authority to relieve the
The Employer shall promptly inform the Contractor of any of his
Contractor of any change to the authority obligations under the Contract.
attributed to the Engineer. However, whenever 2) Any notice, information or
the Engineer exercises a specified authority for communication given to or made
which the Employer’s approval is required, then by an Engineer shall be deemed
(for the purposes of the Contract) the Employer to have been given or made by
shall be deemed to have given approval. the Public Body.
Except as otherwise stated in these Conditions: 3) The Engineer may delegate

75 | P a g e
 (a) whenever carrying out duties or exercising any of his duties and
authority, specified in or implied by the Contract, responsibilities to Engineer's
the Engineer shall be deemed to act for the representative after notifying the
Employer; Contractor, and may cancel any
(b) the Engineer has no authority to relieve either delegation
Party of any duties, obligations or responsibilities 4) After notifying the
under the Contract; Contractor. Instructions and/or
(c) any approval, check, certificate, consent, orders issued by the Engineer
examination, inspection, instruction, notice, shall be byway of administrative
proposal, request, test, or similar act by the orders. Such orders shall be
Engineer (including absence of disapproval) shall dated, numbered and entered by
not relieve the Contractor from any responsibility the Engineer in a register, and
he has under the Contract, including copies thereof delivered by
responsibility for errors, omissions, discrepancies hand, where appropriate, to the
and non-compliances; and Contractor’s representative
(d) any act by the Engineer in response to a
Contractor’s request except as otherwise
expressly specified shall be notified in writing to
the Contractor within 28 days of receipt

15. Value Sub-clause 13.2 No Room

engineering The Contractor may, at any time, submit to the
Engineer a written proposal which (in the
Contractor’s opinion) will, if adopted, (i)
accelerate completion, (ii) reduce the cost to the
Employer of executing, maintaining or operating
the Works, (iii) improve the efficiency or value to
the Employer of the completed Works, or (iv)
otherwise be of benefit to the
Employer. The proposal shall be prepared at the
cost of the
Contractor and shall include the items listed in
Sub-Clause 13.3 [Variation Procedure].
If a proposal, which is approved by the Engineer,
includes a change in the design of part of the
Permanent Works, then unless otherwise agreed
by both Parties:
(a) the Contractor shall design this part,
(b) sub-paragraphs (a) to (d) of Sub-Clause 4.1
[Contractor’s General Obligations] shall apply,
and
(c) if this change results in a reduction in the
contract value of this part, the Engineer shall
proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine a fee,

76 | P a g e
 which shall be included in the Contract Price.
This fee shall be half (50%) of the difference
between the following amounts:
(i) such reduction in contract value, resulting
from the change, excluding adjustments under
Sub-Clause 13.7 [Adjustments for Changes in
Legislation] and Sub-Clause 13.8 [Adjustments
for Changes in Cost], and
(ii) The reduction (if any) in the value to the
Employer of the varied works, taking account of
any reductions in quality, anticipated life or
operational efficiencies. However, if amount (i) is
less than amount (ii), there shall
not be a fee

16. Delayed test Sub-clause 9.2 No Room

If the Tests on Completion are being unduly
delayed by the Employer, Sub-Clause 7.4
[Testing] (fifth paragraph) and/or Sub-Clause
10.3 [Interference with Tests on Completion]
shall be applicable. If the Tests on Completion
are being unduly delayed by the Contractor, the
Engineer may by notice require the Contractor to
carry out the Tests within 21 days after receiving
the notice. The Contractor shall carry out the
Tests on such day or days within that period as
the Contractor may fix and of which he shall give
notice to the Engineer.
If the Contractor fails to carry out the Tests on
Completion within the period of 21 days, the
Employer’s Personnel may proceed with the
Tests at the risk and cost of the Contractor.
The Tests on Completion shall then be deemed to
have been carried out in the presence of the
Contractor and the results of the Tests shall be
accepted as accurate

17. Variation Sub-clause 13.3 No Room

Procedure If the Engineer requests a proposal, prior to
instructing a Variation, the Contractor shall
respond in writing as soon as practicable, either
by giving reasons why he cannot comply

77 | P a g e
 (if this is the case) or by submitting:
(a) a description of the proposed work to be
performed and a programme for its execution,
(b) the Contractor’s proposal for any necessary
modifications to the programme according to
Sub-Clause 8.3 [Programme]
and to the Time for Completion, and
(c) The Contractor’s proposal for evaluation of
the Variation. The Engineer shall, as soon as
practicable after receiving such proposal (under
Sub- Clause 13.2 [Value Engineering]
Or otherwise), respond with approval,
disapproval or comments. The Contractor shall
not delay any work whilst awaiting a response.
Each instruction to execute a Variation, with any
requirements for the recording of Costs, shall be
issued by the Engineer to the Contractor, who
shall acknowledge receipt

18. Force Sub-clause 19.1 Sub-clause 18

Majeure In this Clause, “Force Majeure” means an For the purposes of the Contract,
exceptional event or circumstance: “Force Majeure” shall mean an
(a)which is beyond a Party’s control event or events which are
(b) which such Party could not reasonably have beyond the reasonable control of
provided against before entering into the a Contractor, and which makes a
Contract, Contractor’s performance of its
(c) which, having arisen, such Party could not obligations hereunder
reasonably have avoided or overcome, and impossible or so impractical as
(d) Which is not substantially attributable to the reasonably to be considered
other Party. impossible in the circumstances
Force Majeure may include, but is not limited to,
exceptional events or circumstances of the kind
listed below, so long as conditions (a) to (d)
above are satisfied:
(i) war, hostilities (whether war be declared or
not), invasion, act of foreign enemies,
(ii) rebellion, terrorism, sabotage by persons other
than the Contractor’s Personnel, revolution,
insurrection, military or usurped power, or civil
war,
(iii) riot, commotion, disorder, strike or lockout
by persons other than the Contractor’s Personnel,
(iv) munitions of war, explosive materials,
ionizing radiation or contamination by radio-
activity, except as may be attributable to the
Contractor’s use of such munitions, explosives,

78 | P a g e
 radiation or radio-activity, and
(v) natural catastrophes such as earthquake,
hurricane, typhoon or volcanic activity

19. Adjustment Sub-clause 13.8

for changes In this Sub-Clause, “table of adjustment data”
in cost means the completed table of adjustment data for
local and foreign currencies included in the
Schedules. If there is no such table of adjustment
data, this Sub-Clause shall not apply.
If this Sub-Clause applies, the amounts payable to
the Contractor shall be adjusted for rises or falls
in the cost of labor, Goods and other inputs to the
Works, by the addition or deduction of the
amounts determined by the formulae prescribed
in this Sub-Clause. To the extent that full
compensation for any rise or fall in Costs is not
covered by the provisions of this or other Clauses,
the Accepted Contract Amount shall be deemed
to have included amounts to cover the
contingency of other rises and falls in costs.
The adjustment to be applied to the amount
otherwise payable to the Contractor, as
valued in accordance with the appropriate
Schedule and certified in Payment Certificates,
shall be determined from formulae for each of the
currencies in which the Contract Price is payable.
No adjustment is to be applied to work valued on
the basis
of Cost or current prices.

20. Right to Sub-clause 13.1 No room .

Vary Variations may be initiated by the Engineer at
any time prior to issuing the Taking-Over
Certificate for the Works, either by an instruction
or by a request for the Contractor to submit a
proposal.
The Contractor shall execute and be bound by
each Variation, unless the Contractor promptly
gives notice to the Engineer stating (with
supporting particulars) that (i) the Contractor
cannot readily obtain the Goods required for the
Variation, or (ii) such
Variation triggers a substantial change in the

79 | P a g e
 sequence or progress of the Works. Upon
receiving this notice, the Engineer shall cancel,
confirm or vary the instruction. Each Variation
may include:
(a) changes to the quantities of any item of work
included in the Contract (however, such changes
do not necessarily constitute a Variation),
(b) changes to the quality and other
characteristics of any item of work,
(c) changes to the levels, positions and/or
dimensions of any part of the Works,
(d) omission of any work unless it is to be carried
out by others,
(e)any additional work, Plant, Materials or
services necessary for the Permanent Works,
including any associated Tests on Completion,
boreholes and other testing and exploratory work,
or
(f) Changes to the sequence or timing of the
execution of the Works.
The Contractor shall not make any alteration
and/or modification of the Permanent Works,
unless and until the Engineer instructs or
approves a Variation.

80 | P a g e
 CHAPTER NINE

9 Conclusions and Recommendations

9.1 Conclusions

This term paper has tried to address construction claims and its management, starting from the
definition, different types, causes, bases, requirements, processes of construction claim
management. Through preparation of this document we have seen that most of the construction
projects in Ethiopia are characterized by problems, such as time overrun, over budgeted, poor
functionality, claims, and other project problems. But at the outset of any construction project,
when goodwill and trust are usually at their high points, the parties will often neglect to record in
writing many of the key agreements and understandings reached between them. Later on in the
project, when problems start to arise, trust and goodwill often give way to the financial realities
of potential construction claims. And if the claims are not well managed it may rise to a dispute.
Hence, an effective claim management process is essential to ensure that any contractual claims
arising are dealt with in a way that is fair to each involved party. Better training in the area of
contract management to the professionals can be said to be of a great help for better

81 | P a g e
understanding of the contract. The requirement of contractor involvement during the design
process can improve constructability and reduce the probability of design changes which will
lead to claims. It is also very important that the engineers have a role in the construction claims
management.

9.2 Recommendations

Client and contractor are recommended to use the developed predictive method to measure a
claim in the project. Project managers can use this method to assess the claim level of a
construction project. Assessments of likely project outcomes can be ascertained during
construction and any necessary correction actions can be initiated.
Good planning for the project along the life cycle of the project starting from planning stage,
design phase, procurement contract phase, execution phase, and finally operation phased. A good
planning has to build on concrete vision and studied strategy for the institution though strong
division for engineering works studying and reviewing all related contract documents; including
bill of quantity to be accurate quantity and specified precisely according to site condition,
specification for the project material and work, special condition, and detail drawings to be
completed and clear from errors and omissions. The client and contractor must keep record and
all documents for all changes and events in the site in daily reports and weekly and monthly
report in files and signed to keep all information of the project and avoiding disputes, to be used
in case of delay or suspension to work or termination the projects, to keep right for all parties
involved in the projects. Project time schedule must be taken in a consideration from starting to

82 | P a g e
finish. All events must be recorded in site documents and a companied with updating time
schedule. All change must be approved and documented.

Site visit for proposed project to investigate the site condition by client and contractor. Seminars
and training courses for clients and contractors’ teams to aware claims management. The
Engineer team and contractor team must be qualified and skilled, and have enough experience in
contract management. Cooperation and full coordination between parties in the project is very
important to overcome any ambiguity or conflict and deal promptly in a proper time. Clients
recommended to reviewing and approving shop drawing early. The client and contractor must
keep record /good to do together and ask any confusion to make.

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