CAUSES OF CLAIMS AND AVOIDANCE N D Sharma

CAUSES OF CLAIMS AND AVOIDANCE N D Sharma 3/18/2018 1

CLAIM A Claim is a request for reimbursement of cost and / or time from one Party to another. This may be for a progress payment or a variation, or something else Under the Contract either party may have a claim’ (PPMO SBD does not envision Employer’s Claim) 3/18/2018 2

CLAIMS Contract provides for procedures making contractual claims by the contractor arising out of including: • A response to events which the contractor was not required to anticipate • For additional payment or additional time • The legal/contractual consequence of events 3/18/2018 3

CLAIMS Contractual Claims include: • Additional work claims – cost & profit • Damages claims – cost only • Neutral risk claims – time only Common Legal (outside the Contract) Claims: • Claims in tort • Ex- Gratia 3/18/2018 4

CLAIMS Claims may be arising out of several factor including: • Manner in which contract was secured (Low bidding ) • The Engineer and roles in designing • The level of definition of the scope of works • Political aspects • Legal / contractual 3/18/2018 5

CAUSES OF CLAIMS • Inability to recognize all the risks and failure to deal adequately with those including their sharing amongst the contracting parties • Risks being either ignored or dealt with arbitrarily • Employer’s tendency to own all the rights and shift risks and obligations to the contractor • Inadequate pre-bid investigations; developing projects hastily not knowing the potential risks 3/18/2018 6

RISKS OWNERSHIP FIDIC/PPM O Cls. 1. 9/20. 1 and 42© 1. 9 2. 1/21 4. 7 Risk Delayed drawings and instructions Employe Contr r actor √ Error in Employers requirements Right of access to the site √ Setting out √ 3/18/2018 √ √ √ 7 Unforeseeable physical

RISKS OWNERSHIP FIDI/PPMO Risk Cls. Fossils 4. 24 Employ Contrac er tor √ 7. 4/42 and 33 Testing delays by the √ Employer 7. 5 /35. 5 Def Rejection of Materials 7. 6/34 Remedial works 8. 4(a)/27. 1 3/18/2018 Extension for time for √ completion - Variation √ √ 8

RISKS OWNERSHIP FIDIC/PPMO Cls 8. 4(b)/na 8. 4(e)/na 8. 4(d)/na 3/18/2018 Risk Employer Contr actor Extension for time for √ completion – delay giving entitlement to EOT Exceptionally adverse √ climatic conditions Unforeseeable √ shortages and the availability of personnel or goods 9

RISKS OWNERSHIP FIDIC/PP MO Cls 9. 4/33 Risk Employer Contra ctor Failure to pass Tests on √ Completion 11. 4/35 Failure to remedy Defects 12. 1 and 14. 1/37 and 38 Increase of quantities 3/18/2018 √ √ 10

RISKS OWNERSHIP FIDIC/PPM Risk O Cls Employe Contra r ctor 12. 4/na Omission of work through a Variation Failure to pass tests after Completion Variation procedure √ Adjustment for changes in legislation Adjustment for changes in cost √ √ 12. 4 13. 3/37 and 38 13. 7/45 13. 8/45 3/18/2018 √ √ 11

RISKS OWNERSHIP FIDIC/PP MO Cls 14. 8/41 Risk 15. 4/61 Payment after Termination 17. 1 Indemnities 17. 2/na Care of the Works prior to the Taking Over Certificate 3/18/2018 Delayed payment Employer Contract or √ √ √ 12

RISKS OWNERSHIP FIDIC/PPMO Risk Cls Employer Contrac tor 17. 4/11 Consequences of Employer's risks √ 19. 4/42 Consequences of force majeure √ 20. 1/na Contractor's claims √ 3/18/2018 13

CAUSES Of CLAIMS • Awards of contracts going to very low rate bidding contractors, looking for opportunity to put in claims leading to disputes. • Inefficient contract administration on the part of the Employer/Purchaser • Force-Majeure conditions not recognized. • Failure on the part of the actors of the contract to timely discharge their duties and meet contractual obligations 3/18/2018 14

CLAIM TIMELINE • If the Contractor considers himself to be entitled to an EOT or addition payment or both, he must give notice to the Engineer 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” giving rise to the claim. If he fails to make claim on time he is not entitled to it. 3/18/2018 15

CAUSES OF CLAIMS AND AVOIDANCE OF CLAIMS 3/18/2018 16

AVOIDANCE OF CLAIMS • Parties must know their contracts well; • ‘Every contract is unique’; though this saying is somewhat diluted by the introduction of SBDs, elaborate regulations (PPR) and the PPA • Parties must understand that they are at par as sovereign partners of the contract, to be regulated by their contract and the governing law. 3/18/2018 17

AVOIDING CLAIMS Avoidance of Claims through Contract Administration • • • Drawings, information and ‘Holds’ Approvals Ground conditions Relationships Consultants’ performance Access to works Public authority / government bodies Payment The manner in which early problems are dealt with Performance of nominated sub-contractors 3/18/2018 18

AVOIDING CLAIMS Avoidance of Claim Situations by Contractor’s Actions: • carefully review the bidding documents including drawings and specifications; • price the job adequately to make fair profit; • manage and perform contract with due diligence; • respect specifications and instructions; 3/18/2018 19

AVOIDING CLAIMS Avoidance of Claim Situations by Contractor’s Actions: • use materials, plant as specified and ensure quality; • take care of works in progress by appropriate measures; • comply with all applicable laws, regulations including safety related; 3/18/2018 20

AVOIDING CLAIMS Avoidance of Claim Situations by Contractor’s Actions: • inform the Employer in advance whenever an event occurs which is likely to increase the cost of the works and or the time of completion; • remedy defects well before expiry of the defect liability/ defect notification or warranty period; and • present claims, if any, in a timely manner. 3/18/2018 21

AVOIDING CLAIMS Avoidance of Claim Situations Good documentation: CONTRACTOR’S PROGRAM • Reflect Contract requirements • Include Contract milestones • Show sequence of works • Incorporate resource and other constraints • Supported by Method Statement 3/18/2018 22

AVOIDING CLAIMS Employer’s Actions at. thé Procurent Stage: • inform and instruct bidders on the procedure for preparation and submission of bids; • describe the standards required; • inform bidders of the criteria for evaluating bids; and • also inform that the only bidder having the experience and capacity to execute the 3/18/2018 23

AVOIDING CLAIMS Employer’s Actions at. thé Procurent Stage: • in the case of works, provide detailed site investigation report and other information related to the site of which the Employer is in possession • define the conditions of contract and method of payments; • describe procedures for acceptance of final products ; • and for issuance of contract amendments 3/18/2018 24

AVOIDING CLAIMS Employer’s Actions at. thé Procurent Stage: • define adequately quality control procedures • inform about the rights and duties of the parties and the remedy against defaulter • provide for amicable settlement, adjudication and arbitration mechanisms for settlement of disputes FIDIC- Based conditions stipulate that: – an independent Engineer, empowered with authority to administer the contract with some pre-disclosed restrictions, will supervise the contract. 3/18/2018 25

AVOIDING CLAIMS Employer’s Actions at. thé Procurent Stage: • the Employer has produced a design for the work through a competent Engineer • the possession of site and access thereto will be made available as specified in the documents or within reasonable time so that the activities as scheduled would not be adversely affected 3/18/2018 26

EMPLOYER’S CLAIM Employer’s Claim: • Entitlement: under any Clause of the contact or otherwise in connection with the Contract. • No time bar for the notice (should be given as early practicable- can be given by the Employer or by the Engineer • Engineer to refer to engineer for determination! 3/18/2018 27

Engineer's Supremacy • Employer is denied to set off against or make any deduction from a certified amount or otherwise claim against the Contractor unless done in accordance with the contract provisions under Clause 3/18/2018 28

HANDLING OF CLAIMS Employer and Contracor’s Joint Actions: • • • Keep good record systems and agree on facts Respond to challenges / issues promptly Monitor progress Establish claims systems and procedure Review resourcing Do not assume everything will come good at the end of the day • Settle amicably or go for adjudication 3/18/2018 29