Module 2

6/3/2017
MANAGEMENT
OF CLAIMS AND
RESOLUTION OF
DISPUTES
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6/3/2017
Contact details: Bogdan Oprea

E-mail: bogdan66@gmail.com;
Web: http://sites.google.com/site/bogdabdrb
Phone: +4 0731 556 665;
Fax: +4 0318 151 517
FIDIC accredited trainer
Member of the Dispute Resolution Board Foundation
Listed on the DRBF President List of Dispute Boards Member
Listed on Romanian national list of adjudicators
Accredited mediator
1. FIDIC Advanced 2. Claims Management and
3. Contract Management
Application of FIDIC Contracts resolution of disputes
5. How to write and respond to

4. Dispute Boards Using them
a claim; preparation of referral
to have successfully Projects
in front of DB
Objective
To have a better understanding and practical
approach on the FIDIC type of Contracts
Getting more familiar with FIDIC Conditions
of Contract
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Name
Profession
Experience in FIDIC Contracts
Session 1 - Contract
General issues
Contracting strategy- Balanced Contracts
Law and the Contract
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EXERCISE 1
WHAT IS A CONTRACT?
WHAT ARE THE ELEMENTS OF A
CONTRACT?
EXERCISE 2:
WHAT IS PROJECT CONTRACTING
STRATEGY?
WHO DEVELOP THE PROJECT
STRATEGY?
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PROJECT CONTRACTING STRATEGY
At the start of the project the Employer is exposed to all of the

risks associated with the project.
The way, in which the services are to be provided, provides the

greatest opportunity for effective management of risk, innovative
service delivery, and packaging, with consequential savings in
capital and operating costs.
The way in which the engineering, procurement, construction and

management services are grouped and provided to a project or
part of a project may be called the Delivery Vehicle.
The decision on how these services are to be structured creates a

vehicle to which commercial and contractual terms and
conditions can be applied, Examples of Delivery Vehicles include
Engineering, Procurement and Construction (EPC), Engineering,
Procurement and Construction Management (EPCM), Project
Management Contractor (PMC) and combinations of EPC and
EPCM.
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In FIDIC Contracts the risk is equitably allocated

between the Employer and the Contractor.
There has been a tendency for the Employers to attempt to

transfer project risk to the contractor through the contract.
This has lead to inappropriate risk allocation on many

projects and adversarial behavior as a result.
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STANDARD TYPES OF CONTRACTS

DISCUSS REQUIREMENTS
ADVANTAGES
DISADVANTAGES
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Law and the Contract
http://sites.google.com/site/abresolutionsit
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e
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COMMON LAW CIVIL LAW
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WHAT IS COMMON LAW?
Common law, also known as case law or precedent, is law developed by

judges through decisions of courts and similar tribunals rather than through
legislative statutes or executive branch action.
A "common law system" is a legal system that gives great precedential

weight to common law, on the principle that it is unfair to treat similar
facts differently on different occasions.
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COMMON LAW
The body of precedent is called "common law" and it binds future decisions.
In cases where the parties disagree on what the law is, an idealized common
law court looks to past precedential decisions of relevant courts. If a similar
dispute has been resolved in the past, the court is bound to follow the
reasoning used in the prior decision.
If, however, the court finds that the current dispute is fundamentally
distinct from all previous cases (called a "matter of first impression"),
judges have the authority and duty to make law by creating precedent.
Thereafter, the new decision becomes precedent, and will bind future
courts.
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COMMON LAW
In practice, common law systems are considerably more complicated than
the idealized system described above. The decisions of a court are binding
only in a particular jurisdiction, and even within a given jurisdiction, some
courts have more power than others.
SUPREME
For example, in most jurisdictions, decisions by COURT
appellate courts are binding on lower courts in the
same jurisdiction and on future decisions of the same APELLATE
appellate court, but decisions of lower courts are only COURT
non-binding persuasive authority. Interactions between
common law, constitutional law, statutory law and
TRIAL COURT
regulatory law also give rise to considerable complexity.
However stare decisis, the principle that similar cases should be

decided according to consistent principled rules so that they will reach
similar results, lies at the heart of all common law systems.
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WHAT IS CIVIL LAW?

Civil law (or civilian law) is a legal system inspired by Roman law, the
primary feature of which is that laws are written into a collection,
codified, and not (as in common law) determined by judges.
Conceptually, it is the group of legal ideas and systems ultimately

derived from the Code of Justinian, but heavily overlaid by Germanic,
ecclesiastical, feudal, and local practices, as well as doctrinal strains
such as natural law, codification, and legislative positivism.
Materially, civil law proceeds from abstractions, formulates general

principles, and distinguishes substantive rules from procedural rules.
It holds legislation as the primary source of law, and the court system is
usually inquisitorial, unbound by precedent, and composed of specially
trained judicial officers with a limited ability to interpret law.
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CIVIL LAW
The principle of civil law is to provide all citizens with an accessible and
written collection of the laws which apply to them and which judges
must follow.
It is the most widespread type of legal system in the world, applied in

various forms in approximately 150 countries and oldest surviving legal
system in the world.
Colonial expansion spread the civil law system and European civil law
has been adopted in much of Latin America as well as in parts of Asia
and Africa
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CIVIL LAW
COMMON LAW
CIVIL AND COMMON LAW
SHARIA 22
Exercise 3
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IMPORTANCE OF THE LAW

In a country named Q8 exist a law in which it is mentioned that:
Employer, before signing a construction Contract has to
employ a specialized company in order to have the field clear from
munitions and bombs.
The Employer K entered into a contract design and build with
Contractor C and in the Contract it was mentioned:
starting the works the Contractor will employ a specialized
company in order to have the field clear from munitions and bombs
as requested by the law.
The Contractor did this request.
After the contract started during the excavation an excavator hit an
old bomb not discovered which exploded and 2 peoples died.
The local authorities entered in action, stating that the Contract
was not legal due to the fact that in accordance with the law is the
responsibility the clearance for munition and not the
.
Is the Contract legal? 24
The importance of the applicable law to the FIDIC contract

How important it is?
FIDIC Conditions refer to laws in two senses:
(1) The governing law of the contract [Sub-Clause 1.4], and
(2) Duty of the Contractor to comply with [Sub-Clause

1.13]
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The importance of the applicable law to the FIDIC contract
A FIDIC contract is not just governed by the national law

provided for in the contract. It is also governed by any
applicable trade usages.
Article 17.2 of the ICC Arbitration Rules (referred to in Sub-

Clause 20.6 of the FIDIC Contract) provides:
all cases the Arbitral Tribunal shall take account of the

provisions of the contract and the relevant trade usages.
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Exercise 4
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Above the law? exercise

You are contractor C from the country N, and you won a DBO contract in
2005 for the execution and operation of a refinery in a country named L.
In the Contract is mentioned that all disputes will be resolved through
the Commercial Court of Country L. The law of the Contract is the law of
Country L.
You finished the works in 2007 and you started the period for operation.
The contract was for 30 years.
In 2008 a civil war started in the country L and a military government
took power. The Government of country N together with other
democratic countries expressed their concern regarding democracy
values, peace etc. The new government issued a new law in which the
land occupied by the refinery built by you is nationalized as being of very
important national strategic value, and you, under the new law, as a
foreigner from country N; you are not allowed any more in country L; you
have to leave in 2 days country L; else you will be condemned to be
hanged by your neck until death, as a foreigner intruder.
What are you going to do? Can you claim your losses?
Session 2 - Management of claims

Claims Causes and Risk
Inherent project risks
Allocation of risks under various FIDIC 1999 Contracts
Analysis of Contractual risk
Claims procedure
Clauses require notice by the Contractor
Delegation by the Engineer
Notification of claims
Contemporary records
Preparation of claims
Global Claims
Disruption Claim
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Claims Causes and Risk
INHERENT PROJECT RISKS
Classification of risks based on the main 2 factors:
Natural Human
Social and politic

Climatic conditions
Economic and
Geotechnical Geological changes in law
conditions
Natural catastrophes The main actors

involved in the
Contract
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Human
Social and politic
War, civil war, hostilities, riots, vandalism and

terrorism
Economic and changes in law
Inflation, changes in legislation, absence of

manpower and materials from the market
The main actors involved in the Contract
The Employer, Engineer, Contractor, Sub-

contractors, third parties
32
Natural
Sub-clause 8.4 allow for an

Climatic conditions extension of time due to
exceptionally adverse climatic
conditions. (no costs)
Sub-clauses 4.12, 4.24 and

Geotechnical Geological Force Majeure. The Contractor
conditions is entitled to EOT + costs
Sub-clauses 17.3 & 17.4. The

Contractor is entitled to EOT + costs
Natural catastrophes
due to unforeseeable forces of
nature.
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Human
Social and politic
The provisions of the Sub-clause 17.3 and Clause 19 shows

that the majority of the risks from this cathegoy is
undertaken by the Employer. The Contractor is entitled to
EOT + costs.
However, some of the social risks like robbery and acts of

vandalism are risk 17.2.
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Human
Social and politic
The provisions of the Sub-clause 13.8 share the

economical risk between the parties. The fixed
element a shows the proportion which is not
subject of inflation
Sub-clauses 4.1+6.1 the Contractor undertakes

the risk of lack of manpower, materials and
equipments
Sub-clause 13.7 Changes in legislation the

Contractor is entitled to EOT + cost

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Human
Social and politic
The risk (Engineer included) is related to

the Possession of Site and Payment to the Contractor.
EOT + cost + profit
The risk described in 4.1, materials,

execution, site safety, rejection and remedial works
Third party interference - 4.22, 6.1, 8.5 - EOT

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BALANCED
CONTRACTS!!!
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use a balanced equitable type of Contracts
understand the Contract
understand the risks and the

responsibilities
take care at the criteria for the selection of

your Engineer
38
lack of continuity and knowledge.

Political changes lead to changes of the
No decisions from the Employer

Fear to take the risk
Fear to take action
When a problem arrives on site there is no
action from the Employer. 39
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Use all mechanisms to avoid having disputes

Use the mechanism under the Contract
In the FIDIC conditions the following steps are
available:
Determination of the Engineer-> decision->
amicable settlement arbitration
When a problem arrives on site, understand it and
try to have a solution.
The Engineer is part of the personnel
When a DAB/DRB visit is held on site, go with your
management team and project team.
40
RESPECT YOURSELF BY
RESPECTING THE CONTRACT
AND ALL THE PARTIES
INVOLVED
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42
ALLOCATION OF RISKS UNDER FIDIC CONTRACTS
FIDIC 1999 edition comprises the following major type of Contracts
Conditions of Contract for Construction

New Red Book (CONS)
Conditions of Contract for Plant and Design

Build New Yellow Book (P&DB)
Conditions of Contract for EPC Turn Key

Projects New Silver Book (EPCT)
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The new FIDIC Conditions of Contract
All documents have the same format
Major forms 20 clauses
Similar clauses in all documents
44
Responsibilities of:
The Employer
The Engineer
The Contractor
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46
Exercise 5
RISK ALLOCATION IN FIDIC 1999 CONTRACTS
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Sub-
Description
clause
1.9
Delayed instruction and drawings
[Red]
1.9
Errors
[Yell.]
2.1 Access to the Site
4.7 Setting out of original points
4.12 Unforeseen physical conditions
E= Employer C=Contractor 48
Sub-
Description
clause
4.24 Vestige
7.4 Tests delayed by the Employer
7.5 Rejection of materials
7.6 Remedial works
8.4 Extension of time for completion
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Sub-
Description
clause
8.4 Adverse climate conditions
8.5 Delays caused by Authorities
8.6 Rate of progress
8.9 Consequence of suspension
9.4 Failure to pass tests on completion
Sub-
Description
clause
11.4 Failure to remedy defects
12.1 R Increase quantities during the

14.1 Y execution
12.4 Y Failure to pass tests after completion
13.3 Variation procedure
13.7 Changes in legislation
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Sub-
Description
clause
13.8 Changes in costs
14 Payment
15.4 Termination payment
17.1 Indemnities
17.4
Sub-
Description
clause
19.4 Consequences of Force Majeure
20.1
2.5
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ANALYSIS OF CONTRACTUAL RISK

The New FIDIC Conditions of Contract
The main criteria for the main question:
Which FIDIC Contract should be used?
Who is going to do the

design?
Who bears risk for change in
quantities?
Price of works
Type of works
54
ANALYSIS OF CONTRACTUAL RISK

Contract Price
the design phase
involvement in
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56
Exercise 6
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We are the Employer in the process of building

the new house. FIDIC 99 Red Contract.
We found a significant mistake ( one of our floor
the ceiling is 20 cm thick instead of 35). The
Contractor accepted that they made a mistake
and claimed that it's too late to be fixed and offer
a compensation. However, we can't tolerate this
and consider termination of the Contract.
Please advise us how to do it and if we can
recover our payments done
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Claims Procedure
Claims procedure
Clauses require notice by the
Contractor
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CLAIMS PROCEDURE - CLAUSES REQUIRE NOTICE BY THE CONTRACTOR
The Contractor has to notify his claims. FIDIC groups the reasons for the
claims as follows:
fault:
Delayed drawings or instruction, errors in the requirements,

possession of Site, delayed payment
Site conditions:
Setting Out, unforeseen ground conditions, vestige, interference with tests,

Extension of Time, Taking over of part of the Works, suspension of the
Works
Changes in legislation
Force Majeure
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Exercise 7
under FIDIC 1999 Red and Yellow Book
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Sub-clause Entitlement
1.9 Delayed Drawings or Instruction (Red)
1.9 Errors in Requirements (Yellow)
2.1 Right of Access to the Site
4.7 Setting Out
7.4 Testing
10.3 Interference with Tests on Completion
11.8 Contractor to search
EOT = Extension of Time Cost Profit 62
Sub-clause Entitlement
12.2 Delayed Tests (yellow)
12.4 Failure to pass Tests after Completion (Yellow)
16.1 Entitlement to Suspend Work
17.4 Consequences of Risks (in some cases)
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Entitlement
Sub-clause
4.12 Unforeseeable physical conditions
4.24 Fossils
8.9 Consequences of Suspension
12.4 Omissions (Red )
13.7 Changes in Legislation
17.4 Consequences of the risk (in some

cases)
Entitlement
Sub-clause
19.6 Optional Termination and Release
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MANAGEMENT OF CLAIMS AND RESOLUTION OF DISPUTES
Entitlement
Sub-clause
8.4 Extension of Time for Completion
8.5 Delays caused by Authorities
Entitlement
Sub-clause
12.3 Evaluation (Red )
14.8 Delayed Payment
16.4 Payment on Termination
18.1 General Requirements for Insurance
20.1 Claim Procedure
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68
Exercise 8
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On a FIDIC red book Contract the Contractor has to install a water

pipe in an important city.
In the Contract Documents it is written that he is not permitted to
block the traffic and where and if it is needed the Contractor shall
make a road deviation during the installation of the water pipe.
On boulevard 34 the Contractor decided to make a deviation of the
traffic and during the execution of the provisional road the
Contractor found a very old treasure.
The Contractor claimed for an EOT+costs of 2 months and 200,000
USD in accordance with Sub-clause 20.1 and 4.24.
The Engineer acted in accordance with 3.5 and due to the fact that
the Parties could not agree he issued a determination and accepted
financial compensation of 150,000 USD.

The Employer did not agree stating that the archaeological risk is
You are the DAB give a decision

risk event? Discuss the contractual merit. 70
The Employer is entitled to claim mainly for the following reasons:
Quality of the works bad workmanship, below specifications
Delays in completing the works in the time frame established at

the beginning of Contract
Slow rate of progress
Material not complying with the Specifications
71
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72
Exercise 9
Conditions of Contract
73
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Entitlement
Sub-clause
2.5 Claim Procedure
4.19 Electricity Water and Gas
4.20 equipment and free issue of materials
7.5 Rejection
7.6 Remedial Work
8.6 Rate of Progress
74
Entitlement
Sub-clause
8.7 Delay Damage
9.4 Failure to pass Tests on Completion
11.3 Extension of Defects Notification Period
11.4 Failure to remedy Defects
12.3 Retesting (Yellow)
12.4 Failure to pass Tests after Completion
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Entitlement
Sub-clause
13.7 Adjustment for Changes in Legislation
15.3 Valuation at Date of Termination
15.4 Payment after Termination
17.1 Indemnities
18.1 General requirement for Insurance
76
Sub-clause 2.5 Claim
The Sub-clause 2.5 establishes the procedure to be followed by the

Employer in making a claim
Failure to follow the procedure (except 4.19 Electricity, Water and

Gas and 4.20 equipment and free issue material)
preclude the rights to any costs and extension of Defect
Notification Period.
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2. The Employer
If the Employer considers himself to be entitled to any payment under any Clause of
these Conditions or otherwise in connection with the Contract, and/or to any extension
of the Defects Notification Period, the Employer or the Engineer shall give notice and
particulars to the Contractor.
The notice shall be given as soon as practicable after the Employer became 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.
3.5
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, in accordance with this Sub-Clause.
78
The Employer or the Engineer

shall give notice with The notice is issues as soon
particulars to the Contractor. as practicable
The Contractor receive the The Contractor is not

notification obliged to reply
The Contractor may
The Engineer 3.5 determination
determination apply
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DELEGATION BY THE ENGINEER
In assessing claims, the Engineer has an important role.
FIDIC 1999 editions are more dynamic in resolving the claims. The actions are
now required in a specific period of time. (20.1)
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DELEGATION BY THE ENGINEER
3.The Engineer
3.2 Delegation by the Engineer
The Engineer may from time to time assign duties and delegate authority to assistants
The Engineer may also revoke such assignment or delegation.
Without the approval of the Parties he cannot delegate the authority to make a
determination.
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RESPONSIBILITIES OF THE MAIN PARTIES
3.The Engineer
3.5 - Determinations
The Engineer is required to act fairly in making a determination.
There are 2 steps:

A consultancy step in order to reach an agreement
If the Parties cannot have an agreement the Engineer shall act fair and give a
determination.
The determination shall be given to the Parties with supporting documents and justification
82
Notification of claims
Contemporary records
Preparation of claims
Global Claims
Disruption Claim
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NOTIFICATION OF CLAIMS
20.1 Claim
This sub-clause sets the procedure to be followed by the Contractor is submitting his
claims.
The procedure is developed in three steps:
1. Notification of Claim
2. Substantiation of Claim
20.1 Claim 1- Notification of Claim
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 to the
Engineer, describing the giving rise to the claim.
The notice must be given in

The notice must describe the
accordance with Sub-clause
event or circumstances 1.3[Communications]
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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.
The word circumstances allow for flexibility in calculation the 28 days.
The event or circumstances occurred
The Contractor notify his intention to claim
Is the notification done in 28 days?
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PREPARATION OF CLAIMS
20.1 Claim 2- Substantiation of the Claim
Is the event an on-going

one? Yes
In 42 days the Contractor shall submit a detailed Claim

considered as interim
No
The Contractor shall submit monthly further interim
claims
In 42 days the Contractor
shall submit a fully detailed
Claim Final Details in 28 days after the end of the effect
resulting from the event or circumstances
20.1 Claim 3 Assessment
In 42 days after receiving the particulars of a Claim, the Engineer shall

respond with approval or disapproval of the claim, but shall
give the response on the principle of the claim
The Engineer shall proceed in accordance with Sub-clause 3.5 to agree

or determine the claim.
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20.1 Claim 3 Assessment
Each Payment Certificate shall include such amounts for any claim as have been
reasonably substantiated as due under the relevant provision of the Contract.
Unless and until the particulars supplied are sufficient to substantiate the whole
of the claim, the Contractor shall only be entitled to payment for such part of the
claim as he has been able to substantiate.
The Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree
or determine (i) the extension (if any) of the Time for Completion (before or after its
expiry) in accordance with Sub-Clause 8.4 [Extension of Time for Completion], and/or (ii)
the additional payment (if any) to which the Contractor is entitled under the Contract.
CONTEMPORARY RECORDS
The Contractor shall also submit any other notices which are required by the
Contract, and 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.
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Burden of proof (Latin, onus probandi) is the obligation to prove allegations which are
presented in a legal action. Under the Latin maxim necessitas probandi incumbit ei qui
agit, the ordinary rule is that "the necessity of proof lies with the claimant. The same
principle applies to FIDIC Conditions of Contract.
In claims essential are Contemporary Records.
The Contractor is obliged to keep this kind of records and should have a
policy for his Claim department as part of his quality assurance system.
In the other hand, the Employer and the Engineer should have a strategy and an action
plan when the Contractor is making a claim
Contract:
Claim no. and title : . Date:
Description of facts:
Resources involved Time Cost Amount

Manpower
Equipment and Plant
Material
Subcontractor
Note : not all financial aspects may be available at that time
Approved by the Contractor
Record approved by the Engineer for record only
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20.1 Claim 2- Substantiation of the Claim
Is the event an on-going

one? Yes
In 42 days the Contractor shall submit a detailed Claim

considered as interim
No
The Contractor shall submit monthly further interim
claims
In 42 days the Contractor
shall submit a fully detailed
Claim Final Details in 28 days after the end of the effect
resulting from the event or circumstances
Usually, there are two type of claims:
Time related claims
Various clause, but important sub-clauses are 8.4 and 20.1
Financial claims
various sub-clauses, but the procedure is set in Sub-clauses 20.1 and 2.5
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Time related claims
The Contractor shall be entitled, subject to Sub-Clause 20.1, [Contractor's

Claims] to an extension of the Time for Completion by any of the following
causes:
a Variation or other substantial change in the quantity
a cause of delay giving an entitlement to extension of time
exceptionally adverse climatic conditions,
epidemic or governmental actions, or
any delay, attributable to the Employer
If the Contractor considers himself to be entitled to an extension of the Time for

Completion, the Contractor shall give notice to the Engineer in accordance with Sub-
Clause 20.1 [Contractor's Claims}.
Exercise 10
Extreme climatic conditions
97
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`
I am a contract manager for a contractor on an African project for
which we are using un-
recently been plagued by weather which I and my colleagues think
is completely out of the ordinary and which has delayed our work
on site to a degree. In the last couple of project meetings I
mentioned that the rain is causing us some problems and that was
recorded in the minutes. I notified a claim in accordance with sub-
clause 8.4 and 20.1 in 28 days from the last rainy day in order not to
lose my entitlement. I also made sure that in our last progress
exceptional we strongly disagreed on the point.
event for extension of time, as we have liquidated damages on the

project for late completion.
Have you got any tips about what we should be keeping in mind to
give us the best chance of success?
98
Exercise 11
99
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We are working under FIDIC 99 Red Book. To calculate Price Adjustment using Pn
formula Contractor has to use statistical data provided by State Agency for
Statistics.
Recently Client have forwarded a letter from State Agency for statistics, where it
says that all previously data has to be changed since they were not correctly
calculated.
Now Client wants to recalculate all previously certified IPCs.
indices based on the Data provided by companies which are involved in Project
and companies manipulated situation to their advantage. Having understood this
lately the Agency now decided to recalculate indices using data provided by
Now Contractor put a Claim against Client for changing indices, specially Base
Indices in Contract.
1) Can Contractor put a Claim against Client in such a situation?
2) Is Sub clause 19.1 of FIDIC ( Force Majeure ) applicable in such situation?
3) Client insisting that overpaid Price Adjustment must be recovered from the
Contractor. Employer is saying that Engineer has to calculate PA himself and then
include to IPC & recover. Is this ok ?
100
Time related claims
Delays and changes occur in the execution of a project. There are three broad
category of delays:
1. Delays attributable to the Employer or his agents .
Late Site possession, changes and variations requested by the

Employer, late instructions or design delays
2. Delays caused by neutral agents (no fault)
Weather conditions, local authorities, force majeure
3. Delays caused by the Contractor or his sub-contractors
Slow progress, late delivery in material, late mobilization
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Time related claims
If the Contractor considers that he is entitled to an EOT then:
The Contractor In 42 days a full detailed claim is submitted to the

Engineer with the:
An Example
CUM SA SCRII UN CLAIM CA BENEFICIAR SAU ANTREPRENOR
NORTHRIDGE
103
51
CUM SA SCRII UN CLAIM CA BENEFICIAR SAU ANTREPRENOR
104
217.000 cars+trucks/day.
105
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In 1994, the Northridge earthquake in Southern California

damaged four bridges on the Santa Monica Freeway in Los
Angeles. C.C. Myers, Inc. won the contract to replace them. The
contract specified that the work had to be completed in 140 days,
and the State of California, understanding the loss to the LA
economy that was caused by the freeway being down, offered a
$200,000 per day bonus for each day prior to the 140 days that
the bridge opened. With the cooperation and extra effort
from Caltrans, the City of Los Angeles, the workers, and even the
citizens of LA, the company completed the job in 66 days, a full
74 days ahead of schedule. The $14.8M bonus is the largest early
completion bonus paid by Caltrans. The closure of the freeway
was estimated to cost the economy of the area as much as $1M
per day.[5]
106
Time related claims
Delay analysis is not an exact science
The impacted as-planned analysis
importing delay event into the as planned program,

which is then rescheduled. The Completion date
will move and this movement represents the delay.
Time-impact analysis
the planned program is updated with the progress up to the start of the
delay event and rescheduled. Then the delay event is imported into the
program and rescheduled again. The difference represents the delay. Good
technique for calculation of interim EOT
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Time related claims
Delay analysis is not an exact science
Collapsed as build vs. as planned
the as-built program is developed. Then the delay

events are extracted, the as built program is
rescheduled, and it results the negative movement
=delay
The as-planned vs. as build technique
does not rely upon the dynamic rescheduling program. Is

simply and in the right hands this can be an effective
approach.
Programme and records
Contracting parties should reach a clear agreement on the

type of records that should be kept .
Further, to reduce the number of disputes relating to
delay and disruption, the Contractor should prepare and
the Contract Administrator (CA) should accept a properly
prepared programme showing the manner and sequence
in which the Contractor plans to carry out the works.
The programme should be updated to record actual
progress and any extensions of time (EOTs) granted. If
this is done, then the programme can be used as a tool
for managing change and determining EOTs and periods
of time for which compensation may be due.
109
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Purpose of extension of time

The benefit to the Contractor of an EOT is to
relieve the Contractor of liability for damages
for delay (usually liquidated damages or LDs)
for any period prior to the extended contract
completion date.
The benefit of an EOT for the Employer is that
it establishes a new contract completion
date, and prevents time for completion of the
works becoming 'at large'
110
Entitlement to extension of time

The parties and the CA should comply with the
contractual procedural requirements relating to
notices, particulars, substantiation and assessment
in relation to delay events.
The Contractor will potentially be entitled to an EOT
only for those events or causes of delay in respect of
which the Employer has assumed risk and
responsibility.
The parties should attempt so far as possible to deal
with the time impact of Employer Risk Events as the
work proceeds (both in terms of EOT and
compensation)
111
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Concurrent delay - its effect on

entitlement to extension of time
Where Contractor Delay to Completion

occurs or has effect concurrently with
Employer Delay to Completion, the
Contractor's concurrent delay should not
reduce any EOT due.
112
Concurrent delay - its effect on

entitlement to compensation for
prolongation
Where Employer Delay to Completion and
Contractor Delay to Completion are
concurrent and, as a result of that delay the
Contractor incurs additional costs, then the
Contractor should only recover compensation
to the extent it is able to separately identify
the additional costs caused by the Employer
Delay from those caused by the Contractor
113
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The Association for the Advancement of Cost Engineering (AACE

International) 2007 revised in 2009 Recommended Practice No.
29R-03 Forensic Schedule Analysis Practice Guide
The Society of Construction Law Delay and Disruption

Protocol (ISBN 0-9543831-1-7, Printed by Printmost (Southern)
Ltd) revised in 2016.
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American Society of Civil Engineers published in 2016 Schedule

Delay Analysis under revision.
How to evaluate wp- SUA
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118
Exercise 12
119
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Concurrent delays
A Contractor Risk Event will result in five weeks
Delay to Completion, delaying the contract
completion date from 21 January to 25 February.
Independently and a few weeks later, a variation
is instructed on behalf of the Employer which, in
the absence of the preceding Contractor Risk
Event, would result in Delay to Completion from
6 February to 20 February.
What EOT is due to the Contractor?
120
Exercise 13
121
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The Employer and the Contractor signed a FIDIC 99 Red Book

Contract for the execution of a railway. The completion date is 1
April 2016.
The Contractor did not finish on time due to the fact that he did not
mobilize on time, there were no requests for an Extension of Time
for Completion.
The Employer claimed delay damages and the Engineer issued a
determination on this aspect giving a determination in the favor of
the Employer.
We are on 1 June 2016 and the Contractor find an archeological
vestige on Site. On 1 June 2016 the works are not completed (only
70% of the works are done) and there is no Taking Over Certificate.
The Contractor is claiming Extension of Time for Completion and
Costs.
The Employer stated that he is outside of the Completion date and
the Contractor has no entitlement for an Extension of Time for
Completion
Is the Contractor entitled to an Extension of Time for Completion? 122
Time related claims
Assessment
In 42 days after receiving the particulars of a Claim, the Engineer shall

respond with approval or disapproval of the claim, but shall
give the response on the principle of the claim
The Engineer shall proceed in accordance with Sub-clause 3.5 to agree

or determine the claim.
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Time related claims
The claim for an extension of Defects Notification Period
Sub-clause 11.3 gives the possibility to the Employer to extend the

Defects Notification Period
The main reasons are:
Failure of major plant or item
Defects in the works or part of the works which makes them

unusable
The Defect Notification Period shall not be extended with more

than 2 years.
Time related claims
The claim for an extension of Defects Notification Period
The Employer is entitled to an Extension of Defects Notification Period if the Works, or

major item of the Plant cannot be used because of a defect or damage. Sub-clause 2.5
The procedure is set in sub-clause 2.5
The Employer must give notice

and particulars
The Engineer shall act in

accordance with 3.5
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Financial claims
The claim for Delay Damages
Sub-clause 8.7 gives the possibility to apply delay damages if the Contractor does not finish
the works in the time for completion and the delays are attributable to the Contractor.
The procedure is set in sub-clause 2.5
Actual Completion
Commencement
Completion
Date 8.1
Date 8.2
Date
Time for Completion
Financial claims
In Appendix to Tender is mentioned a daily damage either by sum or a percentage of the

Final Contract Price.
In Appendix to Tender is mentioned a limit of delay damages (10-

15% of the Contract Price)
Actual Completion
Commencement
Completion
Date 8.1
Date 8.2
Date
Time for Completion
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Financial claims
The Employer may lose his rights for the delay damages if he is not following the procedure
as per Sub-clauses 2.5 and 8.7.
The Employer is not entitled to delay damages if the

Contractor has a claim for EOT, whch is under
discussion in accordance with 20.1
Actual Completion
Commencement
Completion
Date 8.1
Date 8.2
Date
Time for Completion
Exercise 14
129
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Delay damages Concurrent delays
Is the Employer entitled to claim delay

damages in case of concurrent delays of the
project?
130
Financial claims
If the Contractor considers that he is entitled to a Financial Compensations:
The Contractor In 42 days a full detailed claim is submitted to the

Engineer with the:
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Financial claims by the Contractor
The procedure is set in the Sub-clause 20.1.
1. Notification of Claim in 28 days from the event or circumstances
2. Substantiation of Claim in 42 days from the event or circumstances
The Contractor has to demonstrate his costs and, if

relevant, his profit
Under the Red Book the substantiation is easier

since it is based on the existing BOQ in which rates
are available.
Under the Yellow Book, where BOQ is not available, the process of
agreeing/determining the costs is substantially more difficult for the
Contractor and the Engineer.
The Cost of each item is based on the allocation of necessary resources to

complete the works.
The Contractor, in substantiation of his claim, can use the ccontemporary records
to substantiate each cost item.
Material Labour Equipment Transport TOTAL

A. Direct Costs
Sub-Total
B. Overheads
C. Risk
D. Profit
Grand Total
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When submitting his Tender, in some jurisdictions the Contractor is not obliged
to disclose his methodology in calculation of his unit rates.
However, in substantiation of his claim, the Contractor may have to disclose

the details of his price analysis.
For the Yellow Book, unless required by the Employer in the Tender
Documents, the Contractor will offer a Lump Sum for the execution of the
works, and as payment method - a schedule of payments.
Therefore, in substantiation of a claim, the process is more difficult. The

quantities can be measured, but is difficult to establish the financial aspects.
Variations
Some of the claims, if are considered valid, can be treated as

Variations, and Sub-clause 13.1 can be used.
A variation is issued by the Engineer to cover the event or circumstances

claimed by the Contractor.
Under the Red Book, in establishing a variation,

Sub-clause 12.3 is used.
Under the Yellow Book, the evaluation is done

under 3.5 .
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Global claims
For a contractor to recover losses caused by events for which the employer is responsible, the
contractor needs to:
(1) demonstrate that there are events for which the employer is responsible;
(2) prove that the contractor has suffered loss; and
(3) prove there is a causal link between the events and the losses sought to be recovered.
However, sometimes it is impractical or impossible for the contractor to attribute specific losses or
delays to specific breaches or events.
In a global claim (or total cost claim), the contractor does not offer evidence to prove a causal link
between its losses and the events for which the employer is responsible.
Rather than prove the causal link, the contractor submits a collection of events and a total amount
of loss incurred and argues that the events in their totality caused the loss.
136
General guidance on the approach to be taken in relation to "global" claims:
Contractors must prove their claims as a matter of fact. They must show the
occurrence of a Relevant Event and that it caused delay leading to loss and
expense.
Whilst there is nothing in principle "wrong" with a global claim, it may raise
evidential difficulties since the Contractor will have to show that the loss he has
incurred would not have been incurred in any event.
He will need to demonstrate that his tender was sufficiently well priced that he
would have made some net return and that no other matters are likely to have
caused the loss.
A global claim does not transfer the burden of proof to the party defending it; the
defending party may adduce evidence that the accepted tender was so low that
the loss would always have occurred, irrespective of the events relied on by the
Contractor.
IN CASE OF CONCURENT DELAYS IT WILL BE DIFFICULT TO SUCCEED WITH A
GLOBAL CLAIM
MAIN DEFENCE SPLIT THE EVENTS AND COSTS ASSOCIATED
UNLESS THE CONTRACT DICTATES THAT A GLOBAL COST CLAIM IS NOT

PERMISSIBLE IF CERTAIN HURDLES ARE NOT OVERCOME, SUCH A
CLAIM MAY BE PERMISSIBLE ON THE FACTS AND SUBJECT TO PROOF
137
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Disruption claim
Such claims have been defined as claims where
multiple changes on a project act in sequence or
concurrently to increase project costs, disrupt
work sequences and extend the schedule.
Disruption and impact occurs when project
conditions deteriorate, to the point where work
on certain activities is adversely affected by
changes, additions or work on one or more other
activities.
138
Disruption claims are routinely made during the course of

a construction project yet they remain notoriously difficult
to prove.
One of the main reasons for this is that productivity losses
are often extremely difficult to distinguish, as opposed to
other money claims which are more directly concerned
with the occurrence of a distinct and compensable event,
such as an instruction for a variation during the progress
of work or a properly notified compensation event.
Most claims for disruption are dealt with retrospectively
and the claimant is forced to rely on contemporary
records to try and establish a causal link for identified
losses (cause & effect), which are inadequate for
evidencing a loss of productivity claim.
139
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Because contractors are usually paid a set amount for

work installed, any excess resources they expend to
accomplish this work will come out of the
recover these amounts from the owner or others.
In preparing a lost productivity change order request
or claim, the burden of proof is on the contractor to
establish causation by demonstrating a causal link
.
Further, the contractor must establish that these
conditions or impacts were outside of its control and
that they were not foreseeable as original project
requirements.
140
In quantifying its productivity claim, the contractor

must establish it had a reasonable and achievable
baseline productivity level for the work, and it must
productivity.
The adverse parties often vigorously contest all of
claim, generally because of the difficulty of isolating

impacts outside of the contractors control and
inefficiencies attributable to the contractor.
141
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142
Exercise 15
143
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A construction Contract started in 2010 and suspended in July 2012 because of the
change of the government and lack of funds.
An addendum to the Contract has been signed in which the Contractor agreed to
continue the works without payment during 2012, and for the works executed in
2012 the payment shall be done in February 2013.
After resuming the works in September 2012, the contractor took a credit from the
bank for 180 day periods, however IPC submitted in December 2012 was not paid in
accordance with the addendum exceeding the bank 180 day period of
reimbursement.
The government decided not to allocate funds for this project in 2013 and asked the
Contractor to sign the same amendment, meaning to continue the works and for
2013 the payment shall be done in 2014. The Contractor was willing to agree to the
addendum and went with it to his Bank.
The bank is now concerned about continued financing because of lack of guarantee
and ask for a Bank Guarantee from the Employer in order to continue financing the
Contractor. The Employer cannot give guarantee as state enterprise because it
depends on government funding.
The Contractor requested additional credit from the Bank but it was refused.
Because the Contractor did not reimburse the credit on time the Bank asked the
What best action the contract affords to the contractor? 144
Session 3 - The Resolution of disputes

Understanding the dispute adjudication boards
Dispute avoidance vs dispute resolution
Disputes
Appointment of Standing Board and Ad- hoc DAB
Post DAB Decision
Alternative Dispute Resolution Methods
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In a FIDIC Yellow Book Contract the Taking Over Certificate has been issued by
the Engineer and there were no outstanding works.
During the execution of the Contract the Contractor issued various claims, but
the Engineer reject the request.
The Contractor submitted his Statement at Completion of the Works and he
requested just the payment of the works since there were no outstanding
works (snag list) .
At the end of the Defect Notification Period the Contractor issued the Final
Payment Application stating that the claims raised during the execution were
not settled and asking the amounts claimed.
The Engineer rejected the application and issued the Final
Payment Certificate without taking into account the claims raised.
The Contractor stated that it is evident that there is a dispute and in
accordance with the provisions of the Sub-clause 14.11 for the amounts
claimed he will address the dispute to the DAB.
You are the DAB

Understanding the dispute adjudication boards
History of DBs
Engineer's decisions
DRBs
FIDIC DABs
Overview of Contract Provisions
Principles governing the DAB
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History of Dispute Boards
149
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150
151
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152
ICC Dispute Boards are independent bodies designed to help

resolve disputes when they arise during the performance of a
contract.
They are normally set up at the beginning of the contract and
remain in existence for its duration, from beginning to end. DBs
resolve disagreements that may arise in the course of the
contract and make recommendations or decisions for disputes
referred to it by any of the parties.
DBs have become a standard dispute resolution mechanism
against contractual disputes that may arise in mid- or long-term
contracts. By being involved in the contract from the outset, DBs
are able to intervene early and propose solutions before the
positions have grown entrenched and sometimes even
before the Parties themselves are aware that they are heading
towards a dispute. In this regard, DBs are not only a tool for
resolving disputes, but also for avoiding them.
153
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Understanding the dispute

adudication bords
Engineer's decisions
DRBs from USA
FIDIC DABs
Orange Book 1995 - standing DAB
RB 1999 - standing DAB
YB/SB 1999 - ad hoc DABs
Gold Book 2008 - standing DAB

RB99:-
Clause 20.2-Appointment
20.3 - Failure to agree on DB members
20.4 - Obtaining a Decision
20.7 - Failure to comply
20.8 - Expiry of appointment
Appendix to Tender
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RB99:-
Dispute Adjudication Agreement - tor 1 or 3
General Conditions of DAA
Annex - Procedural Rules

YB and SB differences:-
Ad hoc DAB appointed within 28 days of
notice
Notice of intention to refer a dispute
Delay to dispute resolution while ad hoc DAB
put in place; paid
No retainer for DAB members
No scope for "informal opinions"
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The future
Second editions will have standing DABs
Possible re-branding?
Dispute Avoidance and Adjudication Board?
Dispute Prevention and Resolution Board?
Exercise 16 Orange book
159
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A FIDIC 99 Yellow Book has been signed between a Contractor

and an Employer.
The employer sent a claim regarding a reduction in quantities of
excavation works due to different soil conditions.
The employer claim was calculated in this way:
45 000 m3-750 000 $-that's the schedules provided by the
15 000 m3-250 000 $- valuation of claim.
The determination was done but now the contractor came up
with proofs of his loss (increased cost per unit; unabsorbed
overheads) and the engineer thinks that the contractor really
suffered this loss.
Can the engineer overcome the situation using the contract
procedure to reimburse the contractor for the costs incurred?
160

Dispute avoidance vs dispute resolution
General
FIDIC's approach to dispute avoidance
Disputes and their resolution
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Dispute avoidance vs dispute

resolution
Dispute Resolution by definition implies the
very existence of a dispute!
Negative effect on Project Execution
Negative effect on Project Cost
Negative effect on Project Timing
Negative effect on Project Relationships
As well as
Additional risks
Consequential effects (e.g. follow-on projects)

resolution
The negative effects of this implication have

been recognized over the centuries:
"Prevention is better than cure" - Desiderius
Erasmus (1466 - 1536)
Thus it seems to be better to avoid Disputes
than to resolve them
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resolution
In order to avoid Disputes it is essential that

we understand how they arise in the first
place...
What have we learned so far?
A good Contract is worth a fortune, it

saves nerves and
makes a pleasant project
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Exercise 17 28 days notice
167
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Exercise
On a FIDIC Red Book Contract the Contractor has to build a motorway. During the
excavation process the Contractor becomes aware that the soil is much harder
than foreseen. For the execution of the works the Contractor need drilling and
blasting equipment. In the BOQ there were no items for this kind of works.
During the Monthly Progress Meting the contractor raised this issue but there was
not recorded in the minute.
The Contractor stopped the work, and mobilized the additional equipment
required.
He gave notice of a claim under 20.1 but the Engineer rejected because the notice
was too late (more than 28 days) from the event.
Prepare your case as Contractor /Employer
Exercise 18 - Virus
169
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Exercise
On an isolated site a virus hit the and the camp. The effect
of the virus was for 15 days. The Contractor made a claim under Sub-clause 20.1
and 8.4(d) and requested 15 days Extension of Time. The representative
on site, who was also affected, gave an Extension of Time of 15 days in accordance
with the sub-clause 3.5 and 8.4.
The Employer rejected the extension of time given.
The Contractor declared a dispute and address it to the DAB.

You are DAB
FIDIC's Approach to Dispute

Avoidance
Multi-Staged approach focused on: Fixed Contractual
procedures!
FIDIC does not encourage deviations to the General
Conditions
The Engineer has a function to mediate before a conflict
escalates into a potential dispute (SC 3.5)
FIDIC Promotes cooperation between stakeholders, SC 4.6.
As a result, the Parties know how to interpret and what to
expect from the
Contract e.g.
The Contractor's Claim procedure as spelled out in Sub-Clause
20.1
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Avoidance
Transparency
Sub-Clause 1.12 [Confidential Details} requires
both the Contractor to disclose any such
confidential and other information that may
realistically be required to verify contractual
compliance.
Sub-Clause 2.4 [Employer's Financial
Arrangements] obliges the Employer upon request
to submit reasonable evidence of his financial
resources to fund the project.

Avoidance
Multi-Staged approach focused on: Early
Communication
Under Sub-Clause 1.9 [Delayed Drawings or
Instructions] the Contractor shall give early
warning.
Under Sub-Clause 8.3 [Programme] the Contractor
shall always notify the Engineer if his programme
is inconsistent with factual progress.
Other extensive notification requirements tor
both Parties under numerous Sub-Clauses.
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Avoidance
What can the Parties do?
For any opinion, suggestion, argument, claim or
other point of view to be persuasive it must be
sustainable and most of all justifiable.
Justification is most effectively done through
Records. Records & Records!!

Avoidance
Throughout the FIDIC Contracts, the Parties are encouraged to
engage in professional Contract Administration and Process
Control
Fixed Time-Line Processes
e.g. Contractor's Claims under Sub-Clause 20.1
Specifically required records, e.g.
Under Sub-Clause 12.1 [Works to be Measured] the Contractor shall
keep detailed records allowing quantification and detailing of any
payment application.
Sub-Clause 4.9 [Quality Assurance] requires detailed records to be
kept and submitted the Quality Assurance system.
Sub-Clause 4.21 [Progress Report] requires detailed and regular
records of factually achieved progress
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Avoidance
It will not be difficult to see that
Good Records avoid misinterpretation,
doubt and subsequent challenges

Avoidance
The Role of the Engineer:
What he/she should NOT do:
Delay instructions
Delay determinations (e.g. Sub-Clause 20.1 par. 9 direct route to
DB)
Delay evaluations
What he/she should do:
Be pro-active
Be impartial to the facts
Clearly spell out what is expected from the Parties in specific
situations.
Be specific and unambiguous in instructions, determinations,
valuations, etc.
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Avoidance
The Role of the Dispute Adjudication Board or
DAB:
The Board is appointed for the duration of the Project.
Board is always "up-to-date" with factual progress and issues
at hand (Procedural rules 2)
Thus Board is perceived to be competent and effective.
Thus Board's decisions are perceived to be fair and correct.
The DAB has to give a decision within 84 days after the date
on which it received a referral from either party.
Quick decision allows minimal disruption to the project.
Quick decision allows party to plan effectively.

Avoidance
DAB:
The Costs associated with a DAB are minimal
when compared to traditional dispute resolution
methods, e.g. arbitration.
The Board is allowed to take an inquisitorial
approach (PR 7)
Board's function is to ascertain the facts
themselves, rather than to decide who is most
likely telling the most of the truth (PR 8d)
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Avoidance
DAB:
The Board may make use of its own specialist
knowledge if any (PR 8e)
This highlights the importance of selecting suitably
qualified persons as DAB-Members
The DBs role in dispute avoidance under the MDB Form
of Contract has been clearly spelled out:
In contrast to the RED Book, Procedural Rule 2 has
been amended such that the DB shall, as far as
reasonably possible, endeavor to use Site Visits as an
opportunity to prevent problems or claims from
becoming disputes.
Category of Claims
181
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Contractor Practices
Inadequate investigation before bidding

Unbalanced bidding
Bidding below cost and over optimism
Poor planning and use of wrong equipment
Failure to follow authorized procedures
182
Contracting Agency Practices

Changes in plans or specifications
Inadequate bid information
Inadequate time for bid preparation
Excessively narrow interpretation of plans &
specs
Restrictive specifications
Contract requirements for socioeconomic
objectives unrelated to the construction
process
183
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Personal Factors
Incompatible personalities
Adverse attitudes
184
Institutional Factors
Complex construction
Lengthy performance period
High quality requirements
185
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Contract Documents
Exculpatory clauses
Mandatory notice requirements
Finality of engineer's decisions
Changed conditions clauses
Out of date specifications
186
Project uncertainty
Pre-existing conditions
Outside forces (weather. strikes)
Complexity
187
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Imperfect contracts
Incomplete scope definition

Overly rigid contractual arrangements
Poor performance
188
People Issues
Poor interpersonal skills
Poor communications
Lack of responsiveness
Opportunistic behavior.
189
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Contract Administration
Coordination Interpretation of policy
Inspection standards
Administrative styles
Documentation funding schedules
Political considerations
190
Claims Settlement Practices
Encouragement or not of project-level

settlements
Delegation or not of settlement authority to
field supervisors
Effectiveness of field - headquarters
consultation
191
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Changes
Estimated quantity variations

Extra work/scope of work
Agency changes
Disputed changes/changc orders
Constructive changes
Cumulative changes
Contract interpretation
Higher performance standards
Over inspection
192
Design/Engineering Defects
Design errors
Design omissions
Plan revisions
Layout errors
Dimension problems
193
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Different Site Conditions

Differing geotechnical site conditions
Soil settlement
Misallocated utilities
Higher water table
Hazardous material encountered
Incorrect as-built dimensions
Environmental conditions
194
Site Access or Site Management

Failures
Right-of-way delays
Restricted or denied site access
Traffic control problems
195
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Third Party Actions/Inactions

Governmental actions
Strikes
Utility relocation delay
Work of previous or adjacent contractors
Transportation delays
Weather
Third party permits
196
Delay/Impact
Project delay
Suspension
Acceleration
Lost labor productivity inefficiency
197
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Contractor Management and

Performance Problem
Inadequate staffing
Equipment failures
Poor planning
Work quality/defective work
Subcontractor defaults
Labor productivity/inefficiency
198
Exercise 19 Change in legislation
199
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In a FIDIC Red Book Contract the Contractor had to build a motorway.

After 2 years the Contractor substantially completed the works and
requested the Taking-Over Certificate.
The Engineer prepared the Taking-Over Certificate and mentioned the

outstanding works to be done during the Defect Notification Period.
During the Defect Notification Period a change in the law/technical norms
occurred regarding installation of additional guardrail.
The Employer requested the installation of additional guardrail on the
motorway Sub-clause 13.7.
The Engineer issued an instruction to the Contractor but the Contractor
refused to do the works.
The Engineer made a notification in accordance with the provisions of the
Sub-clause 15.1, and the Employer terminate the Contract in accordance
with Sub-clause 15.2 and claimed the Performance Security.
The Contractor went to DAB. You are Dispute Adjudication Board what
are the entitlements?

Disputes
Definition of dispute
Enforcement of DAB's decision
FIDIC - the GAP
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ADJUDICATION PRINCIPLES
WHAT IS A DISPUTE?
a disagreement or argument about
something important
coming into conflict with
a verbal controversy; a debate.
an angry altercation; a quarrel.
202
WHAT IS A DISPUTE?
A dispute might be said to exist where a

claim has been made by one organization
against another and there has been
sufficient time to consider, admit, modify
or reject that claim on the basis of
reasoned argument.
203
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WHAT IS A DISPUTE?
Claims are distinct from disputes. Claims are

simply a statement of entitlement.
A is an assertion of a right.
Disputes can be about a claim, but there is

rather more to a dispute than simply a claim
which is not accepted.
Many standard forms of contract have claim

procedures and some have general
procedures applicable to all claims, together
with additional requirements for particular
events. 204
WHAT IS A DISPUTE?
A final determination has been rejected

Discussions have been terminated
without agreement
When a party declines to participate in
discussions to reach agreement
When so little progress is being achieved

during protracted discussions, that it has
become clear that agreement is unlikely
to be achieved
205
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WHAT IS A DISPUTE?
Clauses in the contract which

generate disputes are:
Claim 2.5
206
ADJUDICATION PRINCIPLES WHAT IS A DISPUTE?
Dispute mechanism 2.5
Employer or the Engineer shall give notice and

particulars to the Contractor
The Engineer acts in accordance with 3.5 and

issues a determination
determination?
NO YES
207
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Dispute mechanism 20.1

The Contractor notify describing the event or circumstances
The Contractor substantiates in the contractual time frame
The Engineer answers in the contractual time frame?
The Contractor agrees

NO YES
NO YES The Engineer 3.5
The Parties agrees with 3.5?

NO YES
208
CLAIM FIDIC DO NOT ENCOURAGE TO HAVE DISPUTES

NEGOTIATIONS
IN CASE OF FAILURE OF NEGOTIATIONS
ONE OR BOTH PARTIES DO NOT AGREE WITH THE
DECISION NOTICE OF DISSATISFACTION
AMICABLE SETTLEMENT
ARBITRATION 209
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DISPUTE AVOIDANCE
There is a solution to every problem

the only problem is finding it
Pro-active dispute avoidance
By looking forward
By anticipating problems
210
DISPUTE AND DISAGREEMENTS
There is always more than one way of looking at the

problems 2 sides of the story
Conflicts can be positive and healthy and result in a new

way of thinking
211
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Disputes arise out of uncertainty

Construction projects are not
Each project is a prototype
Every site is different (geotechnical information)
Weather and climate
Political issues
Errors in the design

212
Poor project management
Disputes arise out of uncertainty
Poor communications
Cultural differences
Personality problems
213
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FIDIC GAP

Appointment of Standing Board and Ad- hoc DAB
The Course of the Referral
Notice of intention to refer
Timetable
Submissions of the Parties
Powers of the DAB
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Appointment of the Board

Who?
How?
Dispute Adjudication Agreement, fees etc
Workshop
You are the chairman of an Ad-hoc DAB
Prepare the timetable for a dispute referral
217
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WORKING WITH THE DAB REFERRAL TO THE DAB
Program for the dispute referral period
In this 84 days period there are a lot of tasks in order to allow each of
the parties reasonably opportunity of putting his case and responding to
the case:
Referral
A response from the other party
A period for questions from DAB

Hearing
Site visit
Written closing statements
A period for deliberations
218
WORKING WITH THE DAB REFERRAL TO THE DAB
Program Day 0 - Chairman receive the documents

for the
dispute Day 1 Chairman inform the parties about the receipt of
referral the documents and confirm the 84 days for decision
period
Day 3 Chairman issues directions
Day 14 Responding party gives its response
Day 21 Referring party replies to the responding response
Day 28 Responding Party replies
Further submissions
Day 40 Hearing 1-2 days
Day 50 - Site visit
Day 56 Written closing submission submitted by the Parties

DB member meets to agree the decision
Day 84 Chairman issues DB Decision to the Parties

219
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Workshop
You are the Claimant
What should be the content of your referral?
220
WORKING WITH THE DAB PREPARING A REFERRAL TO THE DAB
The referral document gives the referring party the opportunity to present the
case to the DB.
The Referral format is not a standard one. But the claimant should take
into account the following aspects:
This is the first time when the DB read about dispute. It is

important to say that a dispute is referred to the DB and
not a claim.
The presentation mode to the DB is important
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WORKING WITH THE DAB PRESENTATION OF EVIDENCE TO THE DAB

There is not a standard form in the presentation of evidence to the DAB,
however there is a typical sequence of documents to be presented:
1.A cover page

Give the title of dispute, the name of the parties, DAB, name of
the Contract
2. Contents
List of Documents, files containing references to the dispute.
The list of documents must be clearly indexed.
3. The Parties of the Contract and the DAB

Name, address, contact details
4. The Contract between parties
The name of the Contract, dates of the

Contract, brief description of the works
5. The issue in dispute The description of the issue in dispute, the redress
thought. These are important, as DB will answer
of the disputed items.
WORKING WITH THE DAB PRESENTATION OF EVIDENCE TO THE DAB

There is not a standard form in the presentation of evidence to the DAB,
however there is a typical sequence of documents to be presented:
6. A summary of the matters in dispute

DB must familiarize with the matters in dispute, how the claim
developed into a dispute, followed by a short financial summary
7. Details
Full details must be provided for each issue in dispute including:
Chronological events leading to the dispute

If the claim was rejected, Details of notices and responses
the details of the
response and further Contractual and legal justification of the claim
correspondence
Details of EOT with reference to the program
Details of financial implication
8. Supporting documents
Every allegation must be supported by evidence
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WORKING WITH THE DAB THE DECISION
FORMAT OF THE DECISION
The layout of the decision is not standard one.
The decision must follow a logical sequence

Cover page
Table of content
Introduction and background
DAB appointment
The dispute
Procedure adopted
DAB jurisdiction
The issues to be determined the description of the issue, the party
positions and DB decision on the issue.
DAB decision
Directions of DAB
.

Post DAB Decision
Amicable settlement
Arbitration
Alternative Dispute Resolution Methods
Mediation
Negotiation
Expert determination
Arbitration
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IMPLEMENTING AND ENFORCEMENT
THE DECISION IS BINDING AND MUST BE IMPLEMENTED
YES
NOTICE OF DISSATISFACTION ISSUED IN 28 DAYS? THE FAILURE TO
COMPLY CAN NOT BE
NO SENT TO ARBITRATION
DECISION IS FINAL
CHECK REDRESS
YES UNDER THE CONTRACT
DECISION HAS BEEN ENTITLEMENS
IMPLEMENTED? RECEIVED
NO
CHECK REDRESS AT
THE NONCOMPLIANT PARTY IS IN BREACH OF CONTRACT THE COURTS
YOU MAY REFER THE FAILURE ORIGINAL DISPUTE MAY BE

TO ARBITRATION 20.7 REFERRED TO
ARBITRATION
POST
AMICABLE SETTLEMENT
In case of dissatisfaction to the decision, under Sub-clause 20.5 the

parties shall attempt to settle the dispute through amicable settlement.
Sub-clause 20.5 gives 56 days to settle in this way the dispute.
In some cases mediators, facilitators, negotiators are used in order to

reach an agreement.
.
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ARBITRATION
There are two cases in which a DAB solution can be followed by

arbitration:
1. Failure to implement a decision
The arbitral tribunal will not consider the merits of the issues in
dispute but just the matter if a decision is properly reached and
implemented. If the decision was properly reached and not
implemented, the tribunal will decide thet the decision shall be
implemented.
2. The dispute on which DAB gave a decision may be referred to

arbitration.
Basically in the case in which a notice of dissatisfaction was
given and the parties fail to reach an amicable settlement - the
dispute may be referred to arbitration.
.
DISPUTE RESOLUTION UNDER FIDIC CONTRACTS

COST
PARTIES ARE NOT IN

CONTROL OF OUTCOME
THIS IS DETERMINED BY
OTHERS OUTSIDE OF
THE CONTRACT
PARTIES ARE IN
INSIDE OF THE CONTROL OF OUTCOME
CONTRACT
REFERRAL DAB NEGOTIATION TIME
DECISION
84 DAYS 229
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ARBITRATION
Sub-clause 20.6 gives the procedure relating to the arbitration.

Unless otherwise agreed by the parties:
1. The dispute shall be settled under the Rules of Arbitration of the
International Chamber of Commerce (ICC)
2. The dispute shall be settled by three arbitrators
3. The arbitration shall be conducted in the Contract language.
The place of arbitration must be stated in Particular Conditions. If not it

will be decided by ICC.
The nomination of arbitrators each party nominates a person and the

chairman shall be either agreed by the parties or selected by ICC. In case
of disagreement, ICC will formally appoint the arbitrators.
.
.
CLAIMS, DISPUTES AND ARBITRATION
Other forms of Dispute Resolution
Mediation
The role of the mediator is to facilitate an agreement between the parties by

negotiation. There is no place for negotiation in adjudication.
Conciliation
The process is similar as the mediation one. The main difference is that at the
end the conciliator is making a recommendation at the end of the process.
Expert determination
Reaches conclusion as to the parties rights and obligation under the Contract on
the basis of information
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Arbitration
Arbitration and adjudication involve the production of evidence before tribunal.

Both arbitration and adjudication reach a decision on the respective rights
and obligations under the contract.
The difference is the procedure used. There is an absolute obligation in

arbitration to give each party a reasonable opportunity of putting his case and
dealing with that of his opponent.
In adjudication the time factor is paramount. All the requirements of arbitration
which can be defined as being the rule of and which is still
important in adjudication are secondary to the requirement that the adjudicator
shall reach his decision in a limited time period.
The decision is binding but not final unless the parties agree so. It is
however not appealable.
Litigation
In principle there is no comparison between litigation and construction industry

adjudication. There are so utterly different.
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On a FIDIC red book the Employer E from country Ne and Contractor C from country Ja entered
into a contract agreement for the execution of a factory near the river R. The Accepted Contract
amount is 100Mil$, and execution of the works has been 2 years, meaning completion of the
works to be done on 30 December 2013.
The Contractor has to insure the works as stated in the Contract. He made the insurance with
company J from the country Ja, however the insurance policy was valid until 23 march 2013.
The Contractor stated that he will extend the policy until 1 January 2014. On 1 march 2013 the
Engineer issued the IPC no 10, of a value of 10 Mil$, and the total payments (10 certificates)
certified by the Engineer is 70 Mil$. On 20 March the Employer received from the national
meteorological institute that there will be flooding on the river R and the works will be
affected. The estimated period of flooding is between 26 March and 1 April. The Employer
contacted the Contractor and ask him to remove his equipment and to protect the works in
order to avoid more damages.
The Contractor contacted the insurance company J but due to national day of the country Ja the
insurance company was closed for 2 weeks starting with 19 March.
After the flooding the Employer asked the Engineer to evaluate the value of the works done,
and the Engineer evaluated these works at 40Mil$.
The Employer stated that he will not pay IPC no10 and he will make a claim against the
Contractor for 20 Mil$, due to the fact that the total amount paid (70-10=60Mil$)is more than
the value of the works. The Employer made a claim in accordance with the sub-clause 2.5 but
the Engineer failed in issuing a determination.
The Employer issued an invoice to the Contractor of 20 Mil$. The Employer stated that if he will
not be paid he will claim the performance bond. The Contractor did not agree with
the position, declared a dispute and address it to the DAB. You are DAB
234
Workshop
235
117
Workshop 1
• You are the Contractor in a FIDIC MDB Version of Contract for the execution of a resort in the
Caribbean Islands.
• The Contract was signed on 1 January 2016 and has a period for completion of the works for 2
years and a Defects Notification Period for 12 months. He has to build 5 6 stars hotels and all
infrastructure required.
• The Employer is Ministry of Tourism represented by his General Manager Mr. Smith
• The Consultancy Company is LL Group and they nominated to act as Engineer Mr. Sparrow
from Caribbean Islands
• The Contractor name is Build and Run represented by Mr. Barbosa. The Contractor and Mr.
Barbosa are from Namibia. The Performance Guarantees were issued by CI Bank from
Namibia.
• The DAB has to be appointed in 28 days after commencement (Commencement date is 1
February 2016) - 3 members DAB. The appointment in case of disagreement (as stated in Sub-
clause 20.3) is done by the Chamber of Lawyers from Caribbean Islands
• The Arbitration is under the International Chamber of Commerce (ICC) from Paris, Rules of ICC
3 members.
• During the execution of the works it was noted that there are a lot of discrepancies between the
drawings and the real situation on Site.
• We are now in June 2017 and the works are delayed due to the Employer and the Contractor.
All 5 hotels have columns as a foundation. The Contractor issued a notice of claim due to the
fact that during the execution (drilling) of the columns the geotechnical conditions on site are
different from the geotechnical study prepared by the Employer in the Tender documents. He
served his notice of Claim under Sub-clause 17.3 and he is claiming an EOT Cost and Profit
based on the above issues. Details of the claim have not been provided.
• The Engineer was not happy with the Contractor’s requests and rejected all of his claims. He
issued a notice in which he stated that the Contractor has no entitlements for an Extension of
Time for Completion and no financial implications. The Engineer stated the geological layers
did not influence the drilling process for the execution of the columns. The Engineer underline
that in particular condition of the Contract is mentioned that he cannot increase the Contract
price and/or extend the construction period without the prior approval of the Employer; therefore
he cannot issue a determination on the Contractor’s claims.
• The Contractor took some samples and he stored them in a temporary building in the site
compound where the Engineer’s office was also. Two contradictory geotechnical reports were
done: one by experts from the Employer and one from the Contractor’s expert.
• In one evening Mr. Barbosa in a bar found from a lady that Mr. Sparrow’s wife is the sister of
Mr. Smith. He checked the next day this information and found out that is true.
What is your opinion on this aspect?
What can be done?
• The DAB is not in place. The Contractor decided to raise his claim to DAB. He proposed Mr.
John as member and submitted to the Employer his request.
• The Employer stated that it is too late now since the DAB should have been nominated in 28
days from commencement and rejected the Contractor’s proposal to have the DAB. The
Employer stated that the DAB has no more jurisdictions since it has not been nominated from
the beginning.
• The Contractor went to ICC and asks for a decision on this issue.
You are the chairman of the 3 arbitrators – issue your decision.
Workshop 2
• The Employer proposed Mr. Fun to act as a DAB member. Mr. Fun is a very well know lawyer
from Caribbean Islands. The Contractor accepted the Employer’s proposal.
• The Contractor proposed Mr. Jim to act as a DAB member. Mr. Jim is also a lawyer from
Namibia. The Contractor’s proposal was not accepted by the Employer.
• The Contractor raised this issue to Chambers of Lawyers and they nominated Mr. Pit as a DAB
member. Mr. Pit is also a lawyer.
• The Employer refuses to sign the Dispute Adjudication Agreement with Mr. Pit.
• Since there is no DAB in place the Contractor together with the Employer went to Chamber of
Lawyers and asked if the Employer is bound to this nomination.
Please answer to this question.
• Later the Employer accepted Ms. Rose to act as a DAB member. She is a lawyer from
Caribbean Islands.
• The Chairman was selected Mr. Gin also lawyer from Caribbean islands.
Please give your opinion about the members, and the selection method.
• At the first site visit Ms Rose stated that there is another technical solution to avoid having
columns at building no 3 and she gave the details of her friend to the Contractor who is a
geotechnical engineer in order to be contacted and solve this issue.
• In one evening Mr. Gin and Ms. Rose has been seen by Mr. Fun together with Ms. Barbosa
(Mr. Barbosa’s wife) taking lunch at Novotel restaurant.
• Mr. Sparrow in one evening took his friend Mr. Tonic which is a Contractor and moved some of
his furniture from the Engineer’s office from site. During this operation some of the Contractor’s
samples were destroyed.
Please give your opinion on the above issues. What the DAB should do?
• Mr. Fun reported the fact that Ms. Rose and Mr. Gin were seen at Novotel restaurant to Mr.
Smith,
• Mr. Smith issued a notice of termination of the Dispute Adjudication Agreements with Ms. Rose
and Mr. Gin
Please give your opinion on the above issue.
• Finally a decision has been issued by the DAB in majority (2 to 1) in the favour of the Contractor.
• The Employer decided to go to arbitration to ICC
• The Contractor vanished from site and issued a notice of termination.
• The Contractor which has shares at CI Bank from Namibia instructed the bank not to pay to the
Employer a potential claim for the Performance Guarantee, or Advance Guarantee since he
terminated the Contract.
• The Arbitrators issued a decision in the favour of the Employer.
Please give your opinion on the above issues.
Thank you!
236
6/3/2017

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6/3/2017

Contact details: Bogdan Oprea

FIDIC accredited trainer

Member of the Dispute Resolution Board Foundation

Listed on the DRBF President List of Dispute Boards Member

Listed on Romanian national list of adjudicators

5. How to write and respond to

Contracting strategy- Balanced Contracts

Law and the Contract

PROJECT CONTRACTING STRATEGY

At the start of the project the Employer is exposed to all of the

The way, in which the services are to be provided, provides the

PROJECT CONTRACTING STRATEGY

The way in which the engineering, procurement, construction and

The decision on how these services are to be structured creates a

PROJECT CONTRACTING STRATEGY

In FIDIC Contracts the risk is equitably allocated

There has been a tendency for the Employers to attempt to

This has lead to inappropriate risk allocation on many

STANDARD TYPES OF CONTRACTS

Law and the Contract

COMMON LAW CIVIL LAW

WHAT IS COMMON LAW?

Common law, also known as case law or precedent, is law developed by

A "common law system" is a legal system that gives great precedential

However stare decisis, the principle that similar cases should be

WHAT IS CIVIL LAW?

Conceptually, it is the group of legal ideas and systems ultimately

Materially, civil law proceeds from abstractions, formulates general

It is the most widespread type of legal system in the world, applied in

IMPORTANCE OF THE LAW

The importance of the applicable law to the FIDIC contract

FIDIC Conditions refer to laws in two senses:

(1) The governing law of the contract [Sub-Clause 1.4], and

(2) Duty of the Contractor to comply with [Sub-Clause

The importance of the applicable law to the FIDIC contract

A FIDIC contract is not just governed by the national law

Article 17.2 of the ICC Arbitration Rules (referred to in Sub-

all cases the Arbitral Tribunal shall take account of the

Above the law? exercise

Session 2 - Management of claims

Delegation by the Engineer

Claims Causes and Risk

INHERENT PROJECT RISKS

Classification of risks based on the main 2 factors:

Social and politic

Natural catastrophes The main actors

INHERENT PROJECT RISKS

Classification of risks based on the main 2 factors:

Social and politic

War, civil war, hostilities, riots, vandalism and

Economic and changes in law

Inflation, changes in legislation, absence of

The main actors involved in the Contract

The Employer, Engineer, Contractor, Sub-

INHERENT PROJECT RISKS

Classification of risks based on the main 2 factors:

Sub-clause 8.4 allow for an

Sub-clauses 4.12, 4.24 and