CONTRACT MANAGEMENT

Defect Liability Period

Prof. Ashish Goel

Defect Liability Period (DLP)

DLP:
Meaning
Obligations under this period
Significance

Contracts Management : Prof Ashish Goel,

NICMAR

Defect Liability Period (DLP)

Also called defect notification period.
Starts immediately after taking over of the
work.
It is the period after taking over during which
the contractor is responsible for correcting
any defect in the said works.
Contracts Management : Prof Ashish Goel,
NICMAR

Defect Liability Period (DLP)

What should be suitable period for defect
liability ??
One year is generally sufficient for civil engg.
projects.
In case of EPC jobs, a longer period may be required
eg. HVAC plant.
Employer may change the figure of 365 days
mentioned in FIDIC forms.
Contracts Management : Prof Ashish Goel,
NICMAR

Defect Liability Period (DLP)

More involvement of client rather than the
engineer... Why ???
First hand use of completed works.
More aware of any defects
in the works.
Employer need to make arrangement
to identify any defects.
Engineer may be used for this purpose if required.

Contracts Management : Prof Ashish Goel,

NICMAR

Contractors Obligation under DLP

During the DLP the contractor is supposed to:
Quickly address any defects or damages as notified by
the client.

Complete any pending works / rectifications as

mentioned in the TOC before expiry of DLP.
Defects due to clients mishandling & no/improper
maintenance.

Contracts Management : Prof Ashish Goel,

NICMAR

Cost of Remedying Defects

All the cost to this effect shall be borne by the
contractor only if:
Construction is based on contractor's design
Problem in workmanship

Problem in supplied material, P&M

Contracts Management : Prof Ashish Goel,

NICMAR

Cost of Remedying Defects

Following are not covered under DLP :
Normal Wear & tear.
Defects due to clients design.
Defects due to clients mishandling & no/improper
maintenance.

Contracts Management : Prof Ashish Goel,

NICMAR

Extension of DLP
The employer may ask extension of DLP if:
The plant or a part of same cannot be used for its
intended purpose due to the defects.

Notice for extension for DLP is to be given by

employer at the earliest but before expiry of original
DLP.
Generally contractors obligation shall not be
applicable two years after the DLP of plant & material
would otherwise have expired.
Contracts Management : Prof Ashish Goel,
NICMAR

Failure to Remedy the Defects

In case the contractor doesn't act even after receiving
notices from client, the employer may:
Get the work done himself at the cost of contractor.
In such case the contractor will be under obligation to the
reasonable cost of remedying & not for the work as such.

Accept the work with defect but reduce the contract price
in consultation with the engineer for reduction.

Take extreme step of terminating full/part contract &

recover total amount paid from contractor for such works
(parts) + financing cost + dismantling cost + clearing the
site + returning plant & material to contractor.
Contracts Management : Prof Ashish Goel,
NICMAR

10

Removal of Defective work

In case the defect is not readily rectified at
site, the contractor may remove such item
from site :
The pre-requisite for such action ???.
Employers consent.
Time for return
Performance guarantee for the new/rectified part.
This situation could result in increase of DLP.
Contracts Management : Prof Ashish Goel,
NICMAR

11

Right of Access
During DLP (until performance certificate is
issued), the contractor has the right of access to
the site but:
Access will be reasonable as may be required to fulfil
the obligation under contract.
Have to be consistent with employers safety
measures established at work place.

In cases (specially design build/EPC contracts), the

contractor may need additional access during DLP to
ensure that plant is being operated as per their
guideline.
Contracts Management : Prof Ashish Goel,
NICMAR

12

Contractor to Search
If required by the engineer, contractor shall
search for cause of any defect, 2 possibilities:
If the defect is such that it is to be remedied at
the cost of contractor ?.

If not, then contractor may investigate the

problem & determine a suitable cost + profit for
the remedy in consultation with the engineer.
Most common in case of employer design.
In correct operation/maintenance by employers.
The contractor should treat this as an extra claim &
such provisions of the contract should govern.
Contracts Management : Prof Ashish Goel,
NICMAR

13

Performance Certificate
Issued at the end of DLP with contractor
fulfilling his obligations under the contract.
Why is performance certificate so important?.
It is the only document which deems to constitute
the acceptance of work.
Generally Issued within 28 days from end of DLP.
Within this period of 28 days, a joint inspection is
carried out & contractor can fulfil (if) any balance
obligations.
Contracts Management : Prof Ashish Goel,
NICMAR

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Un-fulfilled obligations
Contractors obligation after issuance of
performance certificate ??.
Site clearance.
Apply for final payment.
Latent defects
certificate.

detected

after

issuance

of

Applicable only if the contract has specific provision to

deal with such cases.

Contracts Management : Prof Ashish Goel,

NICMAR

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Clearance of Site
After issuance of performance certificate the
contractor is supposed to remove following from
the site:
Any remaining equipment, material, rubbish &
temporary works if any.
If such items are not removed within 28 days after PC
then the employer may
Sell/ Dispose off such items
Employer shall get any cost incurred in such process from
contractor.
If any balance amount left out after employers expenses,
same to be handed over to employer.
In case expenses exceed employer cost, contractor is
Contracts
: Prof
Ashish Goel,
supposed to pay
theManagement
balance
outstanding
amount.
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NICMAR