Actualités

From a contractor’s perspective

I was recently asked by a client to offer my views as to whether they should propose adopting FIDIC 2017 Contract Conditions in respect of a large civil engineering project in the Middle East.

The client in question is a contractor and very well versed in the 1999 Conditions. A prospective employer had invited them to propose “standard” terms of conditions and, due to the familiarity they had with the 1999 conditions, they initially felt compelled to propose these.

In answering, I asked the question as to what, in their experience, was “the worst part” of using the 1999 Conditions so we could consider if the 2017 version would provide something better. It was revealed that their biggest frustration was within the claims process. They felt that they (as the Contractor) were “kicked into the long grass” too often, and claims were not considered by the Engineer, either impartially or expediently. A commonplace complaint in my experience.

Below, I have considered the two forms, and their differences, in respect of dealing with Contractor’s claims.

Author: Phil Duggan, Head of Expert Services, Driver Trett, Middle East

The 1999 Conditions

Within the 1999 Conditions, the procedure for claims and disputes is set out within Sub-Clause 20 (“Claim, Disputes and Arbitration”). In simple terms, this provides that:

1. Wherever the Contractor considers himself entitled to any extension of the Time for Completion and/or any additional payment, they are obliged to give notice to the Engineer describing the event and circumstances.
2. The requirement to give notice is further specified to be delivered within 28 days of the date upon which the Contractor became aware, or should have become aware, of the event and that this is a condition precedent to the Contractor securing their entitlement(s).
3. The Contractor is obliged to submit a fully detailed claim with supporting particulars within 42 days of the date upon which the Contractor became aware, or should have become aware, of the event (which will be interim if the effects of the event are ongoing).
4. The Engineer is obliged to provide a response within 42 days of receiving a claim from the Contractor with approval, or with disapproval and detailed comments. He may also request any necessary further particulars.
5. If the first claim is interim (i.e. the effects of the event are ongoing beyond 42 days), the contractor is obliged to send further interim claims at monthly intervals giving the accumulated delay and/or amount claimed.
6. The Contractor is entitled to have any such amounts for any claim that has been reasonably substantiated included within any Payment Certificate.
7. The Engineer is obliged to proceed in accordance with Sub-clause 3.5 [Determinations] to agree or determine the extension of the Time for Completion and/or any additional payment which the Contractor is entitled to.

Under the 1999 Conditions, determinations are described within Sub-clause 3.5. Therein, there is an obligation that whenever the Conditions require the Engineer to provide a determination (as in the case with a Contractor’s claim in accordance with Sub-clause 20.1) the Engineer shall consult with each party in an endeavour to reach agreement.
If agreement is not reached, the Engineer is required to make a fair determination.

Any agreement or determination must be complied with unless and/or until it is revised by reference to the dispute resolution procedures under the Contract (i.e.
by reference to a decision of the Dispute Adjudication Board and/or further by either amicable settlement of arbitration).

The 2017 Conditions

Within the 2017 Conditions, “Claim” is a Defined Term and means “a request or assertion by one Party to the other Party for an entitlement or relief under any Clause of these Conditions or otherwise in connection with, or arising out of, the Contract or the execution of the Works.”

Further, the 2017 Conditions separates the provisions for Claims and Disputes, with Claims (both Employer’s and Contractor’s) dealt with under Clause 20. For the purposes of this article, I will only address the provisions in so far as they apply to a Contractor’s Claim.

Sub-clause 20.1 identifies that a claim may arise:
(a) …
(b) If the Contractor considers that he/she is entitled to any additional payment from the Employer and/or to EOT; or
(c) If either Party considers that he/she is entitled to another entitlement or relief against the other Party…

Sub-clause 20.2 sets out the key procedural requirements and in particular that:

1. The claiming Party shall give a Notice to the Engineer, describing the event or circumstance giving rise to the Claim as soon as practicable and no later than 28 days after they became aware or should have become aware of the event or circumstance.
2. The requirement to give Notice is further specified to be a condition precedent to a Party securing their entitlement(s).
3. If the Engineer considers that the claiming Party failed to give the requisite and timely Notice, the Engineer is obliged to notify the claiming Party accordingly within 14 days of the receipt of the Notice, setting out reasons. If the Engineer does not give such notification within 14 days, the Notice of Claim shall be deemed valid (although, the other Party can give notification of disagreement of such deemed valid Notice and the claiming Party can challenge a rejection of the Notice by the Engineer).
4. A fully detailed Claim, as stipulated by Sub-clause 20.2.4, must be submitted within 84 days after the Party became aware, or should have become aware, of the event or circumstance. Although, there is provision for this to be revised if proposed by the claiming Party and agreed by the Engineer. This document would also include the claiming Party’s justification that its Notice was correct and should stand in the event that it had been rejected by the Engineer.
5. If the claiming Party does not submit, as a minimum, a statement of the contractual and/or legal basis of the Claim within the 84 day period (or as agreed to be amended by the Engineer) the Notice of Claim shall be deemed to have lapsed and no longer be valid and the Engineer shall, within 14 days of the time limit expiring, give notice to the claiming Party accordingly. Failure by the Engineer to issue such a Notice will mean that the Notice of Claim remains valid.
6. In the event that the first claim is interim (i.e. the effects of the event are ongoing beyond 84 days), the claiming Party is obliged to send further interim Claims monthly intervals. The Engineer is required to give his/her response on the contractual and/or legal basis of the Claim within 42 days of receipt of an interim Claim and in the event that the Engineer fails to do so, the Engineer is deemed to have rejected the Claim.
7. A final Claim is required to be submitted within 28 days of the end of the effects resulting from the event.
8. Upon receipt of the final Claim, the Engineer is obliged to consult with both Parties and encourage discussion between the Parties in an endeavour to reach an agreement. There is a stipulated period of 42 days for agreement to be achieved, though this can be amended if proposed by the Engineer and agreed by the Parties.
9. If agreement is not reached within 42 days, the Engineer is obliged to issue a fair determination of the matter within 42 days after expiration of the period for reaching agreement.
10. Failure of the Engineer to adhere to these time limits means that the Engineer is deemed to have given a determination rejecting the Claim.
11. The Engineer is expressly stated to carry out his duties of consultation and determination neutrally between the Parties and shall not be deemed to act for the Employer.

The Contrast

As is evident from the analysis of the provisions for dealing with claims, as set out within the 1999 Conditions as compared to the 2017 Conditions, there appears to be more stringent and time-specific procedures within the latter.

In particular, it is noteworthy that:

1. The 2017 Conditions allows significantly more time for a Contractor to provide a fully particularised Claim. This additional time ought to allow the Contractor to produce better quality Claims which hopefully will assist the Parties to understand and resolve matters.
2. There is an emphasis upon the Contractor providing proper explanation of the contractual and/or legal basis of its Claim.
3. The Engineer is obliged to consider the merits of the Claim at an earlier stage in the process (i.e. upon receipt of the Notice and not the first Claim submission).
4. The deemed acceptance provisions ought to ensure that the Engineer issues a response timeously.
5. The procedures for consultation and determination have fixed timescales and therefore cannot be open-ended. The deemed rejected provisions for failure to adhere to the time limits at least bring a closure to this part of the process to allow the Contractor to instigate the Dispute procedures.
6. Unlike the 1999 Conditions, the 2017 edition expresses that the Engineer should act neutrally when determining Claims. This could make a big difference in allowing more objective analysis of Contractor’s Claims.

In-keeping with the intention to make the 2017 Conditions more focused upon dispute avoidance, it is my opinion that the key differences outlined above will go some way towards achieving this aim, particularly in respect of Contractor’s claims. The greater emphasis that is placed upon dealing with claims in a timeous manner should (hopefully) avoid the past feelings that often Contractor’s Claims are not dealt with expediently.

As with all matters of contract management and administration, the contract conditions can only provide the parties with the framework to deliver upon such objectives. The responsibility to make it work remains with those involved in the process.

This article originally featured in issue 20 of the Driver Trett Digest. To view the publication, please visit: www.driver-group.com/digest-issue-20 

To find out how Driver Trett can support your claims management, please view our services, and get in touch.