Chapter-Two

Construction laws and

Regulations

by: Emebet .A
 Introduction to Law
 Definition of Law
 law is defined as “ a set of general statements aimed at regulating
choices in possible human behavior that is defined or recognized,
publicized and sanctioned or rewarded by the State.
 Law is, therefore, a Social Rule enacted or promulgated by the
State to regulate the behavior of the Society ;
Nature of the Law
 Law is Obligatory
 Law is Established by Public Authority
 Law is Sanctioned by Public Force
 Function of the Law
  Law is a System of Social Control ;
;It controls the relationship between the State and
its Subjects (by means of Public Law) and the
relationship between the Subjects themselves (by
means of Private Law); 
 Law is a Method of Dispute Settlement
; This is done through the Court System.
CONSTRUCTION LAWS AND
REGULATIONS

 Codes, laws, regulations, and acts govern

construction works
 Standards, Specifications, Norms etc
facilitate and standardize construction
works
 Depending on needs, life styles, cultures,
civilization status, etc the terms of these
regulations and standards vary from country
to country, province to province, municipality
to municipality
Major regulations in
construction
 Inmost cases, the following are the major
issues covered in these systems:
 Regulations and proclamations on who is responsible for
specific sectors.
 Road sector: ERA
 Power sector: EPCCO
 Water sector: MoWR
 Building sector MoWUD, manucipalities,
etc
 Planning regulations,
 Environmental protection regulations,
 Waste and waste management and
 Health and safety regulations,
 Bidding laws and regulations dealing with
administration of disputes in construction,
 Property ownership right laws,
 Regulations on registered professionals and
construction enterprises and administration of
construction project quality,
Importance of the
regulations and standards
 Reduce the vulnerability of the
built environment to risk &
facilitate practices and protect
stakeholders’ interests
 Improve the living standards and
safety of the citizens
 Urban planning regulations
 Waste handling regulations
 Building safety regulations and codes
 Fire safety codes
Importance of the
regulations and standards
 Increase the efficiency and quality of the construction
built environment
 Professional licensing regulations,
 Occupational health and safety regulations,
 Material and machinery standardization
 Ensure fair trade within the sector and guarantee
protection for investment
 Bidding and tendering laws and regulations
 Rules in contract administration
 Property ownership rights
Importance of the
regulations and standards
 Ensure uniformity and continuity of operation
 Following a standard codes and procedure helps
 Promote imports and exports of construction
products and services
 Transfer of Technology
 Increase reliability to the industry to
investors
 Having a standard documentation and plan in
licensing helps
 Improves efficiency and avoids corruption and
nepotism
 Gives base for professional maintenance
scheme and security access
 Ensure safety and the environment protection
 Codes and Regulations
Ethiopian context

 Parliament
 Ministry of Infrastructure
 Ministry of Works and Urban Development
 ERA, IUHDPO, etc
 Ministry of Water Resources
 Ministry of Mining and Energy
 EEPCo
 Provincial infrastructure departments
 Municipalities
 major governing bodies of construction:
 The MoWUD, the party mandated to regulate and
promulgate laws, codes, standards, etc meant to
promote efficiency, transparency, accountability as
well as growth in the industry; Etc.
 Municipalities: Bodies who are given the mandate
to look after urban housing construction and its
associated legalities;
 The MoWR; is the party mandated to overlook
water sector development programs;
 The ERA: Besides being a major client of the road
sector by itself, the ERA is the party mandated to
look after the road sector construction works;
Major standards and
regulations
 Procurement & Contract related:
 Proclamation 430/2005
 The PPA SBDs
 The MWoUD’s standard condition of
contracts
 The ERA’s NCB’s and ICB’s documents
 International ones
 FIDIC procurement and contracting
documents
 the bank harmonized version of FIDIC
 the EDF conditions of contracts
Major standards and
regulations
 Standard codes and specification related
 The Ethiopian Building Code Standards
 Standard technical specifications for building
construction by MoWUD, BaTCoDA
 Technical Specifications for Road Works
(ERA)
 Internationals
 BS, ASTM, AASHTO, ACI, Euro code, TRL
specs, etc are also quite in common use.
Major standards and
regulations
 Norms
 The EBCA standard productivity, the
BaTCoDA productivity standard and the
MWoUD’s Ethiopian Construction
Productivity (buildings)
 The ERA’s CMS
 The ERA’s EMS
Major standards and
regulations
 Construction Services Practices and
Ownerships
Ethiopian Building Proclamations
Building Permit Regulation (Addis
Ababa)
The Property Ownership Law (the
CIVIL Code and the Condominium
proclamations)
Major standards and
regulations
 Others
 labor laws (employment laws)
 Health and safety regulations,
 Environmental protection acts, etc
International Law of
contract
 The common Parties & Stakeholders in the
Construction Contract are contractor and employer
 The contractor could be:_
 General contractor or joint venture, i.e. in terms of
organizational form;
 Domestic or local or foreign or international, i.e. in
terms of nationality;
 Private or public, i.e. in terms of ownership;
 Only constructor or both designer & contractor, i.e.
in terms of contractual obligation;
 The employer could be:-

 different standard conditions of contract are
developed by certain institutions or recommended
by international financing or development
institutions;
 FIDIC; is developed by an international
federation of national association of
independent consulting engineers.
 Itsfull name is Federation International Des
Ingenieurs-Conseils ;
FIDIC……
 Itwas founded in 1913 by five national
associations of independent consulting
engineers within Europe;
 The objectives were to promote in common the
professional interests of the member
associations and to disseminate information of
interest to members of its component national
associations;
 Ithas begun to prepare & disseminate standard
conditions of contract since 1957 for
international use.
 Typical tender (contract) documents in the
international Construction Contract & divided in to
legal, commercial & technical parts.
 The Legal Part
 The Contract Agreement;
 The (latest) Minutes of Meeting, if any;
 The Letter of Acceptance(Award);
 The Tender ( NB: Including the Appendix to
Tender, if any);
 The Special Conditions of Contract;
 The General Conditions of Contract;
 Others, if any
 The Commercial Part
 The Performance Security Form;
 The Payment Security Form;
 The Advance Payment Guarantee Form;
 The Bid Security Form;
 The Insurance Forms;
 The Retention Money Security Form;
 Others, if any
The Technical Part
 The Technical Specifications;
 The Drawing;
 The Bill of Quantities;
 Schedule of Requirements, if any;
 Others, if any;
 LOCAL CONTRUCTION Contract…
 Under this part of the Course, we shall try to cover, the issue of
 The Standard Conditions of Contracts in use in Ethiopia i.e. the
Conditions of Contract:Of the MoWUD( Ministry of Works &
Urban Development); and
 PPA (Public Procurement Agency) under the Ministry of Finance
& Economic Development).
The MoWUD Conditions of Contract are
important local conditions of contract. The current
one is valid since 1994. Such conditions of
contract is highly resembles that of FIDIC’s
conditions of contract. It applies for civil
engineering works.
The PPA Conditions of Contract are recent one.
They have been issued in January 2006. They are
applicable to all possible sorts of public
procurement.
The PPA Standard Conditions of
Contract
 The PPA, under its legal mandate provided
under The Public Procurement
Proclamation, it has prepared & issued
certain standard tender & contract
documents for the purpose of public
procurement.
 Theconditions of contract are applicable to
the procurements of the federal
government.
 The Standard Conditions of Contract cover the following
types of procurement.
 These are Standard Conditions of Contract for the
procurement of:-
Consultancy Services;
Non-consultancy Services;
Works;

Goods;

Including Simple Request for Quotations & Local

Purchase Order;
Procurement of Works
 The Standard Conditions of Contract for the purpose of the
procurement of Works have been prepared for
International Competitive Bidding (ICB) & National
Competitive Bidding (NCB), separately.
 User’s Guide has been also prepared, separately, both for
the ICB & the NCB.
 The Conditions of Contract have been also prepared both
in Amharic & English language.
 The conditions of contract are based on Design-
Bid-Build project delivery system.
 The type of contract could be based on BOQ, in
which case it becomes measurement based.
 Or based on Activities Schedule, in which case it
becomes lump sum.
 The role of the engineer is envisaged.
 The PPA documenta is divided in to the following three
parts, namely,
 Bidding Procedure and documentation;
 Schedule of Requirements; and
 Contract;
Bidding Procedure &
Documentation
 Under this part, the following are included, namely,
 Section 1 Instruction To Tenderers(ITB);
General part;
Bidding Documents;
Preparation of Bids;
Submission of Bids;
Bid Opening & Evaluation;
Award of Contract;
 Section 2 Bid Data Sheet(BDS)
 Section 3 Evaluation & Qualification Criteria
(EQC)
 Average Annual Volume of Construction Work;
 Experience as Prime Contractor;
 Acquisition of essential Equipment( by way of
ownership, hire or lease);
 Personnel;
 Liquid Assets and/or Credit Facilities;
 The issue of Joint Venture;
 Section 4 Bidding Forms
 Bid Submission Form;
 Priced Schedules (BOQ or Schedule of
Activities);
 Bid Security;
 Qualification Information;
 Section 5 Eligible Countries
 Schedule of Requirements & Documentation
Section 6 Schedule of Requirements
Scope of Works;
Technical Specification;
Drawings;
Billof Quantities or Activity
Schedule;
Contract & Contract
Documentation
 Under this part, the following are included.
 Section 7 General Conditions of Contract (GCC)
 The GCC is composed of 62 Clauses.
 It contains the following parts.
General; (Clause 1-26)
Time Control; (Clause 27-32)
Quality Control; (Clause 33-36)
Cost Control; (Clause 37-54)
Finishing the Contract; (Clause 55-62)
General
(Clause 1-Clause 26)
Letter of Acceptance
A Letter of Acceptance means the formal
acceptance, signed by the Employer, of a contractor’s
Letter of Tender.
This offer and acceptance constitute a legally binding
agreement of the Parties to enter into a Contract
Agreement
Tender Security
A Tender Security (alternatively called a Tender
Bond) is provided by each of the tenderers. It
entitles the Employer to monetary compensation
from the successful tenderer in the event that he:
 withdraws his tender after the latest time specified for
its submission and before its period of expiry;
 refuses to accept the correction of errors in his tender in
accordance with the tender conditions;
 fails to sign the Contract within the time specified in
the Tender Documents;
Works Contract Documents
Sufficiency & discrepancy
 The Conditions of a Works Contract should state the priority
of the various component documents of the Works Contract
in order to establish, in the event of discrepancy between
them, what takes precedence. The order of precedence may
be stated, for example, as:
1. Contract Agreement
2. Letter of Acceptance
3. Completed Form of Tender and Appendix to Tender
4. Conditions of Particular Application
5. General Conditions of Contract
6. Specifications
7. Drawings
8. Priced Bill of Quantities (including Method of
Measurement)
9. other Schedules (proposals/undertakings) of the
Contractor’s Tender
Engineer

 The “Engineer” is usually defined generically in Conditions of

Contract as meaning “the person appointed by the Employer to
act as the Engineer for the purposes of the Contract.
 The Engineer must:
• formally delegate duties and authorities to
the Engineer’ Representative.
• notify the Contractor of that delegation in
writing, copied to the Employer.
Contractor’s Representative
 Most forms of contract require that the Contractor shall
appoint a Contractor’s Representative, and give him
authority to act on the Contractor’s behalf under the
Contract.
 Further, the Contractor’s Representative shall be full-time
on Site, give his whole time to directing the Contractor’s
performance of the Contract, and shall, on behalf of the
Contractor, receive instructions and notices from the
Engineer.
Commencement Date
 The Commencement Date marks the start of the Time for
Completion, and therefore determines the date by which
the Contractor must substantially complete the Works.
 The signing date of the Works Contract is not necessarily
the date for commencement of the Time for Completion of
the Works. Most forms of Works Contract (certainly
FIDIC) require that the Engineer shall give to the
Contractor a Notice of Commencement Date.
Performance Security
 The Contract will require that the Contractor obtain and provide to the
Employer, copied to the Engineer, a Performance Security (also called a
Performance Bond).
 The Performance Security, from a bank or financial institution acceptable to
the Employer, entitles the Employer to monetary compensation (to the limit of
the amount of the security)
 Advance Payment Security
 If the Contract provides for an Advance Payment
by the Employer to the Contractor, it will state the
amount and currencies in the Appendix to Tender,
and should include within the Contract Documents
a form of the Advance Payment Security (also
called a Bank Guarantee for Advance Payment) to
be delivered by the Contractor before he can
receive the Advance Payment.
Employer
 Has responsibilities to:
Pay the due payments for the contractor;
Provide the site and right of access to it in
due time;
Look into the statutory aspects of the
construction such as permission to construct,
custom clearance etc;
Employer’s personnel and other contractors
to cooperate with contractor;
Power of Engineer
 His authorities can be limited [by specifying
matters he needs to get approval from the
Employer.
Care must be taken not to stifle the engineer’s
performance by overly limiting his authorities
Most issues limited are:
Consenting with contractor to the sub-letting of
part of the works
Certifying additional cost determined
Awarding an extension of time
 Certifying payment if the contract price
will be exceeded;
 Issuing any taking-over certificate;
 Authorising the use of provisional sums in
excess of the monetary limit for variations;
 Certifying additional payment
 Issuing Defect Liability Certificate
Engineer’s approval
 In most cases the Engineer’s approval doesn’t relieve the contractor of his
duties.
 Even the engineer’s approval of as built drawings may not relieve the
contractor of his duties if work wasn’t executed accordingly
Sub contract
 Subletting
Usually not allowed to sublet the
whole work
Is to be held responsible for the
performance of his subcontractors;
Require Engineers approval and
without the approval of the
Employer in writing.
Risks
 Employer's (Excepted) force majeure risks
War, hostilities, rebellion, revolution etc
entitle the contractor for Excusable delays or
Excusable compensable delays
Contractor is not normally required to insure
for such risks
However, some of these risks are insurable
(eg defaults from designer),
 Employer can insure for such risks but can also
provide the premium to contractor to insure
together with contractor’s risks
 Insurance of work
 Under PPA, Contractor need to insure
 Loss of or damage to the Works, Plant, and Materials;
 Loss of or damage to Equipment;
 Loss of or damage to property (except the Works, Plant,
Materials, and Equipment) in connection with the
Contract; and
 Personal injury or death.
Cost of Insurance

 Premium is an amount to be paid for a contract

of insurance
 Contractor’s should include cost of insurance
in their tender
 they should be provided details of
information , excess levels etc
Site inspection and tender
sufficiency
 The contractor inspect the site before tender satisfy,
that is
 Hydrological and climatic conditions
 Availability of resource and skill
 The nature of work and availability of material
Time Control
(Clause 27-Clause 32)
Program

 Often submitted before signing Agreement Form and needs to

be approved by Engineer
 Mobilization (if applicable) and detailed work programme.
 The details and time for submission to be stated in the special
condition of contract.
Extension of Time
 Disruption Claims
 Prolongation Claims
 Acceleration
 Concurrent Delays
 Successive Delays
 Critical and Non Critical Activities
 Time at Large
 Usually incorporate possibilities of extension of
the intended completion time
 Otherwise, given the possibility of change clauses, time may be put at large
 Under time at large condition, Contractor expected to complete work in a
reasonable time
Quality Control
(Clause 33-Clause 36)
Execution of the work
 Contractor is obliged to perform the work, with due
diligence, with strict conformity of the contract
(provided that it is legally and physically possible)
and to the satisfaction of the Engineer
Work to be in accordance to the drawings and
specifications
If specs and drawing are generic, work and
material to be of the highest quality-that
approved by the Engineer
 Contractor should care for the work executed and
keep it safe
 The contractor controls the resources and runs the
execution of the work;
Key Resource Deployment

 Contractor is expected to comply with:

 Key personnel requirements
 Key equipment requirements
 Make workmanship to the quality specified
 Use the appropriately specified materials
 keep the operations safe, etc
Workmanship and Material

 Contractor is expected to execute the work

 Using quality material and workmanship
specified for
 If, upon inspection, work is not to quality
specified contractor will be asked to rectify
Cost of inspection could be covered by
contractor if work was faulty
Cost Control
(Clause 37-Clause 54)
Contract Type

 An Admeasurements Contract with a Bill of Quantities

 A Lump Sum Contract with an Activity Schedule
Change in BOQ
 Rate will be adjusted if the increment or decrement of quantity exceeds:
 in the Bill of Quantities for the particular ítem by more than 25%
 the change excedes 5% of the Initial Contract Price.
 Both condition have to be satisfied
Variation
 Increase or decrease the quantity of any work (other than by re-measurement).
 Omit any such work.
 Change the character or quality of any such work.
 Change lines, levels, dimensions.
 Execute (necessary) additional work.
 Change the sequence or timing of construction.
 Variation should be within the scope of the work
 Provide provision for procedures and conditions to fix rates of altered items
 In most cases, Engineer given the authority to give change orders and fix rates
 Note: A contractor is not required to sign, approve or even agree to a variation
order. It is an order to do certain works.
Payment

 Contractor shall submit to the Engineer monthly statements .

 The Employer shall pay the Contractor within 30 days.
 Interest(at prevailing bank interest rate) for delayed payment
by the client
 Minimum interim amount shuld be specified
Payment Form

 Work Done
plus Variations
plus Dayworks
plus Contract Price Adjustment (CPA)
less Retention
plus Materials on Site (MoS)
less Advance Payment repayment
plus Any other amount
Compensation Events
 Failure to give possession of site
 Delay in issuing drawing
 Adverse physical, political or economical conditions
 Delay in Advance payment .
 The effects on the Contractor of any of the Employer’s Risks.
 Contractor to uncover or to carry out additional tests upon work, which is then
found to have no Defects.
Contract Price Adjustment

Sub-Clause 47.1.
Increases or decreases to be determined in accordance with
Part II (Particular Conditions).

 recommended for projects lasting over one year

 The Contract may contain, as all standard forms of FIDIC contract do,
provision for adjustment of the Contract Price for any increase or
decrease in Cost arising from a change in the Laws of the Country
made after the “Base Date” defined as the date 28 days prior to the
latest date for submission of tenders
Methods of Calculating CPA

 The most common methods are

 Proven Cost Method
 Formula Method
Proven Cost Method
Description Unit Qty Basic Price Current Price Difference
CPA
Cement qt 200 300.00 400.00 100.00
=20,000.00
Diesel l 1000 10 15 5.00
=5,000.00
200*100=20000
+
1000*5000=5000

Total CPA for this Month (Birr)

25,000.00
Formula Method

Pn= a + b Ln/Lo + c Mn/Mo + d En/Eo + etc.

Where: Ln, Mn, En, etc., are the current cost

indices
Lo, Mo, Eo, etc., are the base cost indices

 PPA uses formula method of CPA

Retention

 5% limit.
 50% released at Taking Over.
 50% released at Defects Liability Certificate.
 The contractor can replace it with Retention Money
Guarantee.
Advance Payment

 Interest free Up to 30% to the Contractor for mobilization and

front end expenses for that specific project
Liquidated Damages

 FIDIC Clause 47 liquidated damage

 PPA Clause 49 liquidated damage
 Sub-Clause 49.1
 Pre agreed amount stated in the Appendix
to Bid
 Types of damages by the client
 The additional cost of supervision consultants.
 Benefit obtained from completion of the project
Finishing the Contract
(Clause 55-Clause 62)
Completion

 Contractor shall request the Engineer to issue a certificate of

Completion of the Works.
 The Employer shall take over the Site and the Works within
seven days of the Engineer’s issuing a Certificate of
Completion
Hand over

 Upon substantial completion, contractor

can ask for taking over certificate
 Work need to pass inspection and contractor promises to rectify
defects and complete outstanding works during defect liability
period

 Taking over can be partial

 Final certificate is issued after defect
liability period
Final Payment

 Final
payment
Payments after certification of
acceptance-after defect liability
period
Net balance including retention
money
Due within reasonable days of
submission of final statement
General and special
conditions of contract
General condition of contract
 A document called the General Conditions is an essential part of the
contract.
 It defines the responsibilities of the parties involved in the contract-
the owner and the general contractor.
 It describes the guide lines that will be used in the administration of
the contract
 Various standard forms of General Conditions have been development
by different organizations. These forms are familiar to all parties
concerned, and the wording is not only clearly understood, but has
also been tested in the courts.
Supplementary Conditions
 The Supplementary Conditions are sometimes known as Special
Provisions or Special Conditions.
 The purpose of the Supplementary Conditions is to provide an
extension of the General Provisions of the contract to fit the specific
project at hand.
 
 They serve as amendments or augmentation to
the General Conditions.
 Items included in the Supplementary Conditions
are entirely subject to the discretion of the
owner, and may include topics such as:
 The number of copies of contract documents to
be received by the contractor
 Survey information to be provided by the owner
 Materials provided by the owner
 Changes in insurance requirements
 Phasing requirements
 Site visit
 Start date of the construction
 Requirements for security and temporary facilities
 Procedures for submittal and processing of shop drawings.
 Cost and schedule reporting requirements
 Traffic control and street cleaning requirements
 Responsibilities fir testing of materials
 Actions to be taken in the event of discovery of artifacts
 END OF CHAPTER
 TWO;
THANK YOU
FOR YOUR
ATTENTION;
Time alloted10 min.
1. Compare and contrast FIDIC and PPA?? (2)
2. When Compensation Events occurred??(1)
3. What does it mean variation order and what are ways that
variation order occur???(1)
4. Describe Liquidated Damage??? (1)