Contract Administration

Dharmendar Pardasani MSc MRICS

Vice President IQSA
Contracts Manager - Parsons
Indian Quantity Surveyors Association
IQSA-APC-Matrix
Optional Competency - Level 2
Date : 29.01.2010
www.iqsa.info
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BEGINNING OF CONTRACTS
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Inception and Feasibility
Advise on implications on proposed project.
Establish priorities for quality, time and cost.
Advise on Pre-Qualification of Contractors / Consultants.
Prepare documents for inviting consultancy proposals.
Prepare Consultancy Agreements.
Review of Professional Indemnity / Insurances.
Preparation of initial budget requirements.
Contract Administrator Duties
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Contract Administrator Duties
Design Stage
Advise on cost proposals being developed by design team.
Advise on requirement of collateral warranties.
Advise on various procurement options.
Advise on use and/or amendment of standard form of Contracts in
association with legal advisors.
Participate in value Engineering Workshops.
Participate in Risk Analysis of Project.
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Contract Administrator Duties
Tender Documentation
Short listing of tenderers.
Assist in allocation of cost plan into work packages.
Review of tender documentation.
Review of compatibility of various Contract documentation and ensure removal of
ambiguities, errors, contradictions, etc.
To advise on provisions of liquidated damages / penalty.
To advise the management on specific provisions in respect of Time Extension,
variation, acceleration, claims provision, dispute resolution provisions.
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Contract Administrator Duties
Post Tender Stage
To review tender proposals.
Review Pricing strategy adopted by Contracts.
To review compliance with Contract requirement.
Advise on Tender Qualifications.
To advise on merits / demerits of each tender / award.
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Contract Administrator Duties
Post Contract Stage
Review periodic cost report.
Verify interim / final payments to Consultant / Contractor.
To attend regular commercial meetings on site to ensure that all
commercial and contractual matters are being identified and addressed in
good time.
To review the submitted claims / major variations.
To participate in dispute resolution process conciliation, mediation, expert
opinion, adjudication, arbitration, etc.
Overall
To ensure completion of the project in line with intended cost, quality, time
and maintaining good relations between the parties as far as possible by
being objective at all times.
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Contract Administration
Contract
A Contract is a agreement formed between two or more parties that is intended to
be legally enforceable, should have following essential elements.
Offer
Acceptance
Intent
Capacity of Parties
Possibility of Performance
Certainty of Terms
Consideration (In case of English Law)
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Contract Administration
Choice of Form of Contract
FIDIC 87
Risk Allocation
Involvement of Engineer
Value
Complexity
Design Responsibility
Need for Variation
Work Type
Contract Administration Responsibility
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Contract Administration
Choice of Form of Contract
FIDIC 99 - Type
Construction Works - Red Book 1999
Short Form of Contract - Green Book 1999
Plant & Design Build - Yellow Book 1999
EPC Turn Key - Silver Book 1999
Employer Consultant - White Book 1999
FIDIC 87 / 95
Civil Engineering Work -Red Book 1987
Electrical & Mechanical Works -Yellow Book 1987
Design & Build Turn Key -Orange Book 1995
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Contract Administration
Other Form of Contracts
JCT
NEC
PPC 2000
ICE
Insurances
Contractors All Risk value of Contract + %age for professional fee /
demolition, etc.
Third Party example Dhs. 5.00 Million / occurrence
Contractors Equipment value of equipments brought on site
Workmen Compensation total wages of workforce
PI Cover for design errors example 5% of Contract value subject to
maximum of Dhs. 10.00 Million
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Contract Administration
Third Party Rights / Collateral Warranties
To give certain rights to Third Party Stakeholders
Employer Sub-Contractor
Investor / Landlord Contractor
Collateral Warranty is a concurrent Contract which is related to or dependent upon
another Contract. Warranty is to capture a promise from one party to another.
To resolve the issues of doctrine of privity of Contract.
Nominated Sub-Contractors
Nominated / Named
Domestic
Listed 2 or 3
Risks vary slightly in each case
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Contract Administration
Provisional Sum & PC Sum
FIDIC has the term Provisional Sum.
If work instructed against this sum to be done by Main Contractor, then evaluation
under Clause 52.1.
If work against it to be done by nominated Sub-Contractor, then evaluation Clause
59.4.
PC item term used in CESMM, etc. and some as Provisional Sum for work to be
done by nominated Sub-Contractor.
Material On / Off Site
Material Off Site Requirements
Vesting Certificate
Insurance
Bank Guarantee
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Contract Administration
Claims
Extension of Time
Extension of Time
Time with Cost - Employers delays
Time Without Cost Neutral Delays or Concurrent Delays by Employer and
Contractor
Impact Analysis Techniques
Planned Impact
As-Built Collapsed
Window Analysis
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Contract Administration
Cost Claimable
Site Overheads
HO Overheads
Finance charges
Cost Escalation
Claim Preparation
Other Claims
Acceleration Claim
Hudson Formulae
Eichleys Formulae
Emden Formulae
Samaratunga Formulae
Instructed Acceleration
Constructive Acceleration
Hanklans Formulae
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Contract Administration
Disruption Claim
This is basically a delay claim but delay may or may not affect the project
completion.
Cost that are generally claimed are:
Reduced Productivity
Idle resources
Demobilization / Re-mobilization
Unproductive Overtime
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Contract Administration
Suspension / Determination / Termination
Suspension (Under FIDIC)
Clause 40
Suspension 84 Days
After that 28 days for omission / termination
Termination (Under FIDIC)
Clause 63 - Termination by Employer
Clause 69 - Termination by Contractor
Clause 65 & 66 - Force Majeure
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Contract Administration
Ending the Contract
By Performance
By Agreement As per UAE Law
By Operation of Law
By repudiatory breach by one or both parties
Doctrine of Frustration
Performance of Contract becomes
Illegal
Impossible to perform
Radically different to what was initially envisaged
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Contract Administrator Duties
Liquidated Damages vs. Penalty
Liquidated Damages - Ascertained and agreed prior to entering into Contract
Reflects actual losses to be suffered by Client due to delays.
Penalty - A sum inserted in the tender and not necessarily reflective of actual
losses.
Sectional Completion / Practical Completion
Clause 48.1 Whole of the Works
Clause 48.2 Part of the Works
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Contract Administration
Definition of Practical Completion
It varies, but most acceptable definition is that when the works are substantially
completed so as to be fit for use for the intended purpose
Discharge
Final statement pursuant to Clause 60.6 upon issuance of Defects Liability
Certificate
Discharge by the Contractor that he has no further claims on the project
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Contract Administration
Defects Liability Period
Period stated in the Contract starts after Taking-Over of Works. (Generally 1 year)
For Partial Completion Separate Defects Liability Period
However, Defects Liability Certificate is issued when last of Defects Liability Period
expires.
Letter of Intent
Does not create a contractual relationship
Unilateral assurance to enter into a Contract
Reimbursement of Work Legal doctrine of restitution which prevents unjust
enrichment
Quantum merit reimbursement
Limit of Liability
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Contract Administration
Contra ProferentumRule
An ambiguity in the document is construed in the way that it is least favourable to
the party who has drafted the document.
Concurrent Delay
Dominant Cause Theory
Devlin Approach Parties to bear their own loss
Apportionment Implication of each concurrent delay is allocated according to
relative efficacy of the delay.
Causes of Delays
Excusable / Compensable Employers Delay
Excusable / Non-Compensable Neutral or (Employer + Contractor Delays)
Non-excusable / Non-compensable Culpable Delay of Contractor
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Contract Administration
Alternate Dispute Resolution
Mediation
Conciliation same as mediation, but a third party plays active role in putting
forward terms of settlement
Early Neutral Evaluation A preliminary assessment of facts / legal merits
Expert Determination A third party provides a binding decision
Executive Tribunal / Mini Trial Panel of senior persons from each party and a
neutral person. Parties make submission of legal cases.
Private Trials / Judiciary Appraisals A judge is appointed to assess the legal
merits.
Dispute Review Boards Similar to Adjudication Board
Med Arbitration Initially appointed as a mediator, but later acts as Arbitration if
dispute persists.
Facilitative
Evaluative
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Condition of the Parties if the Contract was not Condition of the Parties if the Contract was not
Managed Efficiently or the Risk were not Managed Managed Efficiently or the Risk were not Managed
Effectively!! Effectively!!
Project Over Project Over- -budget, poor quality, delays, safety budget, poor quality, delays, safety
issues, unsatisfied client, disputes, litigation, loss of issues, unsatisfied client, disputes, litigation, loss of
reputation, sore relations reputation, sore relations
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Contract Administration - General Questions
1.Why Contract Administration required in Construction of Projects?
2.How CA will be done in Pre and Post Contract Stages ?
3.What is a Contract ? Parties in Contracts ? Obligations and Rights ?
4.Types of Contracts ? In UAE FIDIC why ? FIDIC 4
th
Edition Vs FIDIC 99
5Contract Administrator -with Contractors
6 Contract Administrator -with Consultants
7. Contract Administrator -with Client
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Main Reading List - Contract Administration
Standard forms of Contract- FIDIC ,JCT,ICE, NEC/ECC, ACA (PPC2000) etc
Roles and responsibilities of parties -Client,Contractor,Engineer,Architect and Q.S
Monitoring progress & Monitoring quality
Insurances ,Bonds / Parent Company Guarantees
Third party rights and Collateral Warranties
Payment provisions & Change procedures
Nominated Subcontractors
Provisional Sums and PC rate items
Extensions of time / loss and expense
Materials on / off site
Suspension/Determination/Terminations Mechanisms & Process
Liquidated and ascertained damages
Sectional Completion / Partial Possession/Practical Completion
Close out Procedures
Discharge
Defects Liability Period
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APC Questions will be based on following:
Level 1 :
The roles and responsibilities of the administrator
The various standard forms of contract and sub-contract used in the industry
Basic contractual mechanisms and procedures applied at various stages of the contract
Level 2 :
Issuing instructions
Dealing with payment provisions
Issuing Payment certificates
Managing change procedures
ClaimsManagement
Dealing with completion and possession issues
Entitlement for extension of time
Entitlement for loss and expense
All parties of their contractual rights and obligations
Involvement with dispute avoidance and Resolving disputes
Contract Administration
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Questions
Questions
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If your condition is not like as shown below!!)
If your condition is not like as shown below!!)