Contract Administration for Construction & Engineering Contracts - 1
November 12, 2016 | Author: Ahmad Firdaus | Category: N/A
Short Description
CONTRACT ADMINISTRATION FOR CONSTRUCTION & ENGINEERING CONTRACTS...
Description
IEM TRAINING CENTRE SDN. BHD.
TWO DAY INTENSIVE COURSE ON
CONTRACT ADMINISTRATION FOR CONSTRUCTION & ENGINEERING CONTRACTS
Presented by:
IR. HARBANS SINGH K.S. B.E. (Mech) S’PORE, LLB (Hons) London CLP, DipICArb, C. Eng, PE.
ABOUT THE COURSE PRESENTER Ir. Harbans Singh K.S. B.E. (Mech) S’pore, LLB (Hons) London, CLP, DipICArb, P.E., C. Eng., MIEM, MIMechE, MIHEEM, MASHRAE, MCIArb, MMIArb.
Ir. Harbans Singh K.S. is a Professional and Chartered Engineer, Arbitrator, Adjudicator, Mediator, Advocate & Solicitor (non-practising). He commenced his career in Malaysia before working in Germany and then locally in various professional capacities. He is presently domiciled in Malaysia where he is active in construction law and dispute resolution. Ir. Harbans is the recipient of IEM’s Tan Sri Hj. Yusoff Prize (2001), the Cedric Barclay and the Chartered Institute of Arbitrator’s Awards for the Diploma in International Commercial Arbitration Examination (Oxford 2003). He is also the author of a series of four books entitled ‘Engineering & Construction Contracts Management’, coauthor of the book ‘The PAM 2006 Standard Form of Building Contract’, contributor to the ‘Malaysian Standard Forms & Precedents: Construction & Engineering Contracts’, ‘The Ingenieur’ and the ‘Malayan Law Journal’.
© HSKS
CONTRACT ADMINISTRATION FOR CONSTRUCTION/ ENGINEERING CONTRACTS DAY 1 - PROGRAMME 8.30 a.m.
-
9.00 a.m.
:
Registration
9.00 a.m.
-
10.30 a.m.
:
Session 1
10.30a.m.
-
10.45a.m.
:
Tea/Coffee Break
10.45 a.m.
-
12.30 noon
:
Session 2
12.30 noon
-
1.00 p.m.
:
Q & A Session
1.00 p.m.
-
2.00 p.m.
:
Lunch Break
2.00 p.m.
-
3.15 p.m.
:
Session 3
3.15 p.m.
-
3.30 p.m.
:
Tea/Coffee Break
3.30 p.m.
-
4.45 p.m.
:
Session 4
4.45 p.m.
-
5.00 p.m.
:
Q & A Session
:
End of Day 1
5.00 p.m.
© HSKS
CONTRACT ADMINISTRATION FOR CONSTRUCTION/ ENGINEERING CONTRACTS DAY 2 - PROGRAMME 9.00 a.m.
-
10.30 a.m.
:
Session 1
10.30a.m.
-
10.45a.m.
:
Tea/Coffee Break
10.45 a.m.
-
12.30 noon
:
Session 2
12.30 noon
-
1.00 p.m.
:
Q & A Session
1.00 p.m.
-
2.00 p.m.
:
Lunch Break
2.00 p.m.
-
3.15 p.m.
:
Session 3
3.15 p.m.
-
3.30 p.m.
:
Tea/Coffee Break
3.30 p.m.
-
4.45 p.m.
:
Session 4
4.45 p.m.
-
5.00 p.m.
:
Q & A Session
:
End of Course
5.00 p.m.
© HSKS
CONTENTS 1.0
CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION
2.0
COMMENCEMENT OF CONTRACT AT SITE
3.0
MONITORING OF WORK PROGRESS
4.0
SUPERVISION OF WORKS/CONTRACT ADMINISTRATION
5.0
PAYMENTS/COMMERCIAL MATTERS
6.0
VARIATIONS/CHANGES
7.0
DELAY AND EXTENSION OF TIME
8.0
NON-COMPLETION AND DAMAGES
9.0
COMPLETION AND HANDING OVER
10.0
DEFECTS
11.0
POST COMPLETION AND FINAL ACCOUNT
© HSKS
CONSTRUCTION/ ENGINEERING CONTRACTS: INTRODUCTION
© HSKS
1.0
•
CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION TYPES OF CONTRACTS 1.
GENERAL CONTRACTS
2.
ENGINEERING/CONSTRUCTION CONTRACTS
•
TYPES OF BUILDING CONTRACTS
•
COMMON CONTRACT PROCUREMENT METHODS 1.
TRADITIONAL GENERAL CONTRACTS
2.
MANAGEMENT TYPES
3.
‘PACKAGE DEAL’ TYPES
4.
MISCELLANEOUS METHODS
© HSKS
•
•
BASIC CONTRACT PRINCIPLES 1.
CONTRACT DEFINITIONS
2.
ELEMENTS OF CONTRACT
3.
STANDARD FORMS OF CONTRACT
4.
BREACH OF CONTRACT: REMEDIES
MISCELLANEOUS ISSUES
© HSKS
SIMPLE CONTRACTS SPECIALITY CONTRACTS (DEED)
COLLATERAL CONTRACTS MATERIAL & LABOUR CONTRACTS
ORAL CONTRACTS
LABOUR CONTRACT
EXPRESS CONTRACTS
GENERAL CONTRACTS: TYPES
MATERIAL SUPPLY CONTRACT
MAIN CONTRACTS
INDEPENDENT CONTRACTS
SUB-CONTRACTS EMPLOYMENT CONTRACTS
SUB-SUB CONTRACTS
FIG. 1-1: GENERAL CONTRACTS - TYPES © HSKS
ENGINEERING/ CONSTRUCTION CONTRACTS: TYPES’
FIG. 1-2 : ENGINEERING/CONSTRUCTION CONTRACTS - TYPES © HSKS
TYPE OF CONTRACT
MESUREMENT CONTRACTS
LUMP SUM CONTRACTS
LUMP SUM WITH PLAN AND SPECIFICATION
LUMP SUM WITH BILLS OF QUANTITIES
BASED ON APPROXIMATE QUANTITIES
COST PLUS FIXED FEE
COST REIMBURSEMENT CONTRACTS
COST PLUS PERCENTAGE
BASED ON A SCHEDULE
COST PLUS FLUCTUATING FEE
TARGET COST
VALUE COST
FIG. 1-3 : TYPES OF CONTRACTS BASED ON PRICING MECHANISM © HSKS
COMMON CONTRACT PROCUREMENT METHODS
TRADITIONAL GENERAL CONTRACTTING
PACKAGE DEAL TYPE
MANAGEMENT TYPE
MANAGEMENT CONTRACTING
DESIGN & BUILD/ DESIGN & CONSTRUCT
CONSTRUCTION MANAGEMENT
BUILD, OPERATE & TRANSFER
ENGINEERING, PROCUREMENT, CONSTRUCTION & COMMISSIONING
MISCELLANEOUS METHODS
FAST TRACKING
PARTNERING
‘TURNKEY’ TURNKEY’
FIG. 1-4 : COMMON CONTRACT PROCUREMENT METHODS IN USE © HSKS
FIG. 1-5 : COMPARISON OF COMMON CONTRACT PROCUREMENT METHODS
1985
1990
1995
2000
1.0 TRADITIONAL GENERAL CONTRACTING
95%
76%
31%
20%
2.0 MANAGEMENT CONTRACTING
2%
3%
2%
1%
3.0 CONSTRUCTION MANAGEMENT
1%
3%
9%
10%
4.0 PACKAGE DEAL TYPE’
2%
15%
52%
60%
5.0 BUILD, OPERATE AND TRANSFER
-
2%
5%
8%
6.0 OTHER MISCELLANEOUS
-
1%
1%
1%
© HSKS
FIG. 1-6: TRADITIONAL GENERAL CONTRACTING (TGC) – CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL TEAM - DESIGN AND CONTRACT ADMINISTRATION
1. 2. 3. 4.
Architect Engineers - C&S, M&E Quantity Surveyor Other Specialist
MAIN CONTRACTOR (MC)
DOMESTIC SUPPLIER (DS)
SUBSUB-SUB CONTRACTORS Key _______ _____
: :
SUB--SUB SUPPLIERS SUB
NOMINATED SUPLLIER (NS)
SUBSUB-SUB CONTRACTORS
SUBSUB-SUB SUPPLIERS
Contractual Link Responsibility
© HSKS
FIG. 1-7: ‘TURNKEY’ CONTRACTS/DESIGN & CONSTRUCT (D&C) - CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL ADVISORS
1. 2. 3. 4.
Architect Engineers - C&S, M&E Quantity Surveyor Other Specialist
1. Setting up Employers Requirements 2. Auditing role during construction
D & C CONTRACTOR
1. 2. 3. 4.
Architect Engineers - C&S, M&E Quantity Surveyor Other Specialist
PROFESSIONAL TEAM
: :
SUBSUBSUPPLIER
1. Detailed Design 2. Construction supervision
SUBSUB-SUB CONTRACTORS
Key _______ _____
SUBSUBCONTRACTOR
SUBSUB-SUB SUPPLIERS
SUBSUB-SUB CONTRACTORS
SUB--SUB SUPPLIERS SUB
Contractual Link Responsibility
© HSKS
FIG. 1-8: MANAGEMENT CONTRACTING (MC) - CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL TEAM 1. 2. 3. 4.
MANAGEMENT CONTRACTOR (MC)
Architect Engineers - C&S, M&E Quantity Surveyor Other Specialist
TRADE CONTRACTOR
TRADE CONTRACTOR
TRADE CONTRACTOR
Key
_______ : Contractual Link _____
:
Responsibility
© HSKS
FIG. 1-9: CONSTRUCTION MANAGEMENT (CM) - CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL TEAM 1. 2. 3. 4.
CONSTRUCTION MANAGER (CM)
Architect Engineers - C&S, M&E Quantity Surveyor Other Specialist
Key
_______
: Contractual Link
_____
: Responsibility
TRADE CONTRACTORS
TRADE CONTRACTORS
© HSKS
* 1.0
DEFINATIONS
PER ANSON * * * *
2.0
CONTRACT -
Legally binding agreement Between two or more parties By which rights are acquired by one or more To acts or forbearances on the part of the other or others
PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974) * An agreement * Enforceable by Law **
CLEAR + OFFER
CONTRACT - BASIC ELEMENTS
UNQUALIFIED ACCEPTANCE
+ CONSIDERATION =
CONTRACT CONTRACT (LEGAL AGREEMENT)
FIG. 1-10: CONTRACT DEFINITIONS © HSKS
FIRM OFFER/ PROPOSAL
+ UNQUALIFIED ACCEPTANCE
+ CONSIDERATION
INTENTION TO CREATE LEGAL RELATIONS
FREE CONSENT
CERTAINTY OF TERMS
LAWFUL OBJECT AND CONSIDERATION
LEGAL CAPACITY TO CONTRACT
PHYSICAL/LEGAL POSSIBILITY
FIG. 1-11: ELEMENTS OF A VALID/ENFORCEABLE AGREEMENT © HSKS
DEFINITION/ MEANING
CHARACTERISTICS
MAIN TYPES
DISADVANTAGES
ADVANTAGES
FIG. 1-12 :
STANDARD FORMS OF CONTRACT
TYPES
PURPOSE
STANDARD FORMS OF CONTRACT (PART I) © HSKS
STANDARD FORMS OF CONTRACT
GOVERNMENT/ PUBLIC SECTOR
INTERNATIONAL CONTRACTS
PRIVATE SECTOR
1. FIDIC Conditions 2. ICE Conditions
JKR / PWD
MISCELLANEOUS
•
203 (Rev. 1/2010) - without quantities
•
203A (Rev. 1/2010) - with quantities
•
203N (Rev. 1/2010) - For NSC
•
203P (Rev. 1/2010) - For Nominated Suppliers
•
PWD Form DB (2007 Edn.) For Design & Build Contracts
3. IEEE Conditions
•
CIDB Form for:
4. IMechE Conditions
-
Building Contracts 2000 Edn. Form CIDB.B (NSC/2002)
5. JCT Conditions
•
Modified JKR/PWD Forms e.g. LPK, MHA, etc.
CIVIL ENGINEERING WORKS
BUILDING WORKS •
PAM Contract 2006 (with quantities)
•
PAM Contract 2006 (without quantities)
•
•
M & E WORKS
IEM Conditions
•
IEM Conditions
- IEM.CE 2011 - IEM.CES 1/90
-
IEM.ME 1/94
•
TNB Conditions, etc.
PAM Sub-Contract 2006
FIG. 1-13: STANDARD FORMS OF CONTRACT (PART II) © HSKS
COMMENCEMENT OF CONTRACT AT SITE
© HSKS
2.0
•
APPROACHES IN: 1. 2.
•
COMMENCEMENT OF CONTRACT AT SITE
TRADITIONAL GENERAL CONTRACTS DESIGN & BUILD / TURNKEY CONTRACTS
FORMALITIES: 1. 2.
CONDITIONS PRECEDENT INSURANCES, PERFORMANCE BONDS, ETC.
•
SITE POSSESSION : MEANING AND EFFECT
•
SUBMITTALS : 1. 2. 3. 4. 5. 6.
CONSTRUCTION DRAWINGS SHOP DRAWINGS SAMPLES QA AND QC DOCUMENTS HEALTH AND SAFETY DOCUMENTS METHOD STATEMENTS
•
TEMPORARY WORKS
•
ISSUES FOR ATTENDANCE OF NOMINATED SUBSUB-CONTRACTORS
•
MISCELLANEOUS ISSUES © HSKS
•
RELEVANT CASES 1. THE RADIO & GENERAL TRADING CO. SDN. BHD. V WYASS & FREYTAG (M) SDN. BHD. [1998] 1 MLJ 346 2. LEC CONTRACTORS (M) SDN. BHD. V CASTLE INN SDN. BHD. & ANOR [2000] 3 MLJ 339 3. KLEINWORT BENSON LTD. V MALAYSIA MINING CORP. BHD [1989] 1 WLR 379 4. NANYANG INSURANCE CO. LTD. V SALBIAH & ANOR [1967] 1 MLJ 94 5. SURREY HEALTH [1988] 42 BLR 25
BOROUGH
COUNCIL
V
LOVELL
CONSTRUCTION
6. FREEMAN V HENSLER [1981] 20 BLR 78 7. TAN HOCK CHAN V KHO TECK SENG [1980] 1 MLJ 308 8. PUTRA PERDANA CONSTRUCTION SDN. BHD. V AMI INSURANCE & ORS [2005] 2 MLJ 123 HC
BHD
9. YIP SHOU SHAN V SIN HEAP LEE – MARUBENI SDN. BHD. [2002] 5 43, HC`
MLJ
© HSKS
TAKING OVER OF THE SITE
SITE POSSESSION
COMMENCEMENT OF CONTRACT
COMMENCEMENT: COMMON LABELS
COMMENCEMENT OF OPERATIONS ON SITE
COMMENCEMENT OF CONTRACT PERIOD
COMMENCEMENT OF WORKS
FIG. 2-1 : COMMENCEMENT - COMMON LABELS © HSKS
PARENT COMPANY GUARANTEE
INSURANCE
PERFORMANCE BOND
PROTECTION AGAINST CONTRACTOR’S FAILURES: COMMON MECHANISMS
LETTER OF COMFORT
STANDBY LETTER OF CREDIT LETTER OF AWARENESS
FIG. 2-2: PROTECTION AGAINST CONTRACTOR’S FAILURES – COMMON MECHANISMS © HSKS
PROTECTION AGAINST CONTRACTOR’S FAILURES: AN OVERVIEW (PART I)
COMMON MECHANISMS/ INSTRUMENTS: TYPES
PURPOSE •
Risk transferring contracts
•
Parent Company Guarantees
•
Enable recovery of compensation upon contractor’s default/failure under the contract
•
Performance Bonds
•
Miscellaneous Types: 1. 2. 3.
Letters of Comfort Standby Letters of Credit Insurances
NATURE •
•
Contractual performance of ‘Company within a corporate group is underwritten by other members of group E.g. Subsidiary and Holding Company
PARENT COMPANY GUARANTEES
PROCEDURAL REQUIREMENTS
USE •
For commercial and administrative convenience
•
Owing to requirements of applicable law e.g. company law, etc.
•
Preliminary review
•
Check for legal compliance
•
Check for compliance with formalities
Cont’d….
FIG. 2-3 : PROTECTION AGAINST CONTRACTOR’S FAILURES – AN OVERVIEW (PART I) © HSKS
Cont’n.
PROTECTION AGAINST CONTRACTOR’S FAILURES: AN OVERVIEW (PART II)
MISCELLANEOUS MECHANISMS/ INSTRUMENTS
PERFORMANCE BONDS
• • •
Reasons for Typical contents Legal effect of letter
• • • •
DEFINITION DEFINITION •
See Robinson and Laver’s definition
•
Means of guaranteeing to the employer: 1. The contractor’s financial viability and 2. Contractor’s ability to perform obligations under the contract
•
Two main types: 1. ‘Conditional/ Default’ Bond 2. ‘Unconditional/ On-Demand’ Bond • •
Features of local practice Rules of construction and enforcement
Reasons for Comparison with letters of comfort Typical contents Legal effect of letter
DURATION DURATION OF OF LIABILITY LIABILITY
TYPES TYPES •
STANDBY LETTER OF CREDIT
LETTER OF AWARENESS
LETTER OF COMFORT
Normally stipulated in bond. Types include: 1. Entire duration of contract 2 Up to CPC ‘Construction’ Bond 3 CPC to Final Certificate – ‘Maintenance’ Bond
Reasons for Comparison with ‘Unconditional/On-Demand’ Bond Obligations under Legal effect of letter
• • • •
PROCEDURAL PROCEDURAL REQUIREMENTS
FINANCIAL LIMITS OF LIABILITY •
Normally stipulated in Bond itself.
•
Normally 5-10%
•
Sometimes higher
•
See use of ‘Indexed Performance Bonds’
INSURANCE • • •
Reasons for: Legal effect of Insurance Comparison with the other mechanisms/instruments
NONPROVISION OF OF NON--PROVISION BOND/GUARANTEE
RELEASE OF BOND /GUARANTEE
•
Preliminary review
•
Timing for submission
•
Seven main circumstances
•
Checks for authenticity
•
Consequences of failure to submit:
•
•
Check for compliance with formalities
Effect of breaches of terms and conditions
1. Contract provisions 2. Common law rules
4 Up to date of release stipulated by guarantor
FIG. 2-4 : PROTECTION AGAINST CONTRACTOR’S FAILURES – AN OVERVIEW (PART II) © HSKS
FIG. 2-5 : CONTRACTOR’S INSURANCE POLICIES – COMMON TYPES © HSKS
INSURANCES: AN OVERVIEW (PART I)
•
Risk allocation mechanisms
•
Per Robinson and Lavers
•
Means of seeking compensation following default/failure
•
Voluntary assumption of specified risk in return for an agreed payment
CATEGORY I
CATEGORISATION •
Two Main Categorization: 1. 2.
•
TYPES
DEFINITION
PURPOSES
Liability based Loss based
Difference: basis of compensation
CATEGORY II
PRINICPAL TYPES
•
Liability based
•
Loss based
•
Contractor: Common Types
•
Indemnification of insured against damages payable to 3rd party
•
Compensate insured for loss/damage directly incurred by insured
•
Employer: Common Types
•
Occupier: Common Types
Examples:
•
Examples:
•
Management Corporation: Common Types
•
1. 2. 3.
3rd Party Liability Insurance Workmen’s Compensation Professional Indemnity Insurance
1. 2.
Contractor’s All Risk Policy Erection All Risk Policy
FIG. 2-6 : INSURANCES – AN OVERVIEW (PART I) © HSKS
Cont’d…….
INSURANCES: AN OVERVIEW (PART II)
FEATURES AND CONDITIONS
PROCEDURAL REQUIREMENTS
FAILURE TO INSURE
• Necessity for checking authenticity of: 1. Cover notes 2. Policy • Necessity to check for compliance with: 1. Contract requirements 2. Formalities
FAILURE TO INSURE
TIMING FOR SUBMISSION •
Normally stipulated in contract
•
2 Common alternatives:
• Effects dictated by: 1. Governing contractual provisions 2. Common law rules
1. Before commencement of work/contract; or
• Possible options: Employer insures and charges premiums to contractor
2. Within stipulated period of award of contract
IMPORTANT IMPORTANT STANDARD STANDARD CONDITIONS CONDITIONS
BASIS BASIS OF OF CONTRACTING CONTRACTING • Submission of proposal •
Issue of policy
•
Effect of : 1. Contracts of ‘uberrimae fidei’ 2. Cover notes, etc.
•
PARTIES PARTIES EFFECTING POLICY POLICY
Six main ones i.e.
•
•
4. Following a loss event 5. As to subrogation 6. On contribution
• Various possibilities:
Typical parties: 1. 2. 3. 4.
3. As to risk
•
Employer Contractor Sub-contractors Selected 3rd parties
Effect of ‘cross liability’ provisions
DURATION DURATION OF OF POLICY POLICY
COMMENCEMENT COMMENCEMENT OF OF POLICY POLICY
1. Named party 2. With insurable interest
1. Condition precedent to liability 2. During work/construction
General rule:
Different formulae:
•
1. Date of commencement of contract; or
1. Up to issue of CPC
2. Date of commencement of work on site; or
3. Up to issue of Final Certificate
3. Date of delivery of material, etc.
• Function of the nature of contract works
• Apparently not a serious ground to effect determination
2. Up to issue of CMGD
FINANCIAL FINANCIAL LIMITS LIMITS OF OF LIABILITY LIABILITY •
•
Guidelines for estimating limits.
•
General rule on deductibles/excess clauses
4. Up to Final Certificate plus fixed period •
Normally stipulated by employer in tender/contract
Requirements pertaining to extension of period
TERMINATION TERMINATION OF OF POLICY POLICY • Three main methods: 1. Satisfaction of conditions precedent in contract e.g. issue of CPC, etc. 2. Termination of policy by breach/mutual agreement 3. Lapse of insurance period and/or extension
FIG. 2-7 : INSURANCES – AN OVERVIEW (PART II) © HSKS
SITE POSSESSION: AN OVERVIEW
PROVISIONS FOR
MEANING
EXPRESS • •
Licence revocable by Employer at any time
•
Licence to be free from any encumbrances
• If not expressed, by
Or in Contract
•
Contractor entitled to Sole/exclusive possession
GENERAL LEGAL POSITION
IMPLIED •
No
•
Freeman & Son v Hensler
EXCEPTIONS TO GENERAL PRINCIPLE •
Express Stipulations
•
Case Law
POSSESSION ON PIECEMEAL BASIS?
LATEST LEGAL POSITION •
Sufficient degree of possession/ access
•
To execute work unimpeded
•
To be able to perform work
FAILURE TO GIVE POSSESSION
EXCEPTIONS
Law
GENERAL PRINCIPLE •
•
In Letter of Acceptance
POSTPONEMENT
DEGREE
Express contract stipulations permitting postponement
GENERAL LEGAL POSITION
EFFECT
•
General Position: No
•
Breach of Contract
•
•
Exceptions:
•
Entitles Contractor to rescind Contract.
Contractor entitled to loss occasioned
•
Contractor entitled to EOT if expressly permitted contractually
•
Otherwise, LAD cannot be imposed
a) Express stipulations to contrary b) Where Common Law applies
FIG. 2-8 : SITE POSSESSION – AN OVERVIEW © HSKS
SITE POSSESSION MEETINGS
TIMING
·
On Date of Commencement of Contract /
·
Date of Site Possession
MATTERS DEALT
PURPOS E
·
1. All Project Team Member
To officially handover Possession of Site to the Contractor
WHO PREPARES ? ·
EXPLANATION OF CONTRACT REQUIREMENTS
LETTER OF DELEGATION OF POWERS
PARTICIPANTS
MINUTES
INTRODUCTION OF PROJECT MEMBERS
COPY OF CONTRACT DOCUMENTS
PRICED COPY OF B.Q.
Contract Administrator
DISTRIBUTION/ CIRCULATION ·
To all parties
HANDOVER OF VARIOUS DOCUMENTS
SET OF CONSTRUCTION DRAWINGS
SET OUT PROCEDURES COVERING ·
Document Submittals and Approvals
·
Sample Submittals and Approvals
· ·
Inspection of Work Interim Valuations
·
Claim Procedures
FIG. 2-9 : SITE POSSESSION MEETINGS © HSKS
WORK PROGRAMME MISCELLANOUES REPORTS AND DOCUMENTS
DESIGN AND CALCULATIONS FOR WORKS UNDER P.C. SUM, ‘PACKAGE DEAL’ TYPE CONTRACTS, ETC.
METHOD STATEMENTS
WORKS UNDER CONTRACT: TYPICAL SUBMITTALS BY CONTRACTOR
DESIGN AND CALCULATIONS FOR TEMPORARY WORKS
DRAWINGS I.E. SHOP, FABRICATION, SETTING OUT, ETC.
QA/QC DOCUMENTS
HEALTH AND SAFETY DOCUMENTS
FIG. 2-10: WORKS UNDER CONTRACT – TYPICAL SUBMITTALS BY CONTRACTOR © HSKS
MONITORING OF WORK PROGRESS
© HSKS
3.0
MONITORING OF WORK PROGRESS
•
PROGRAMMING OF WORKS
•
PARTIES RESPONSIBLE: 1. 2. 3.
EMPLOYER MAIN CONTRACTOR CONTRACT ADMINISTRATOR
•
PROGRESS REPORTS
•
SITE RECORDS
•
MEETINGS: 1. 2. 3. 4.
•
SITE POSSESSION PROGRESS/SITE NSC COORDINATION AD-HOC
MISCELLANEOUS ISSUES
© HSKS
•
RELEVANT CASES 1.
GLENLION CONSTRUCTION LTD. V THE GUINESS TRUST [1987] 39 BLR 89
2.
YORKSHIRE WATER AUTHORITY V (NORTHERN) LTD. [1986] 32 BLR 114
3.
GREATER LONDON COUNCIL V CLEVELAND BRIDGE & ENGINEERING CO. LTD. [1986] 8 Con LR 30
4.
KITSONS SHEET METAL LTD. V MATTHEW HALL MECHANICAL & ELECTRICAL ENGINEERS LTD. [1989] 47 BLR 82
5.
WEST FAULKNER ASSOCIATES V LONDON BOROUGH OF NEWHAM [1994]
SIR ALFRED MCALPINE & SON
71 BLR 1
6.
EQUITABLE DEBENTURES ASSETS CORP. LTD. ROBERTS & ORS [1984] 2-CLD-10-01
V
MORGAN BRANCH
© HSKS
FIG. 3-1 : WORK PROGRAMME - TYPICAL FORMS © HSKS
PRINCIPAL ACTIVITIES IMPORTANT MILESTONES FOR EMPLOYER TO MEET
SEQUENCE OF ACTIVITIES
WORK PROGRAMME: PRINCIPAL CONTENTS
IMPORTANT MILESTONES FOR CONTRACTOR TO MEET
TIMING OF ACTIVITIES IDENTIFICATION OF CRITICAL ACTIVITIES AND CRITICAL PATH
FIG. 3-2 : WORK PROGRAMME – PRINCIPAL CONTENTS © HSKS
WORK PROGRAMME: AN OVERVIEW
RESPONSIBILITY
•
Express Provisions
•
By Implication
METHOD OF WORKING
BAR CHARTS
FORM
MEANING
CONTENTS
Sequence and Timing of Activities
•
Critical Milestones
FOR CONTRACT ADMINISTRATOR
SEQUENCE OF WORKING
CRITICAL PATH ANALYSIS
•
PERT
PRIMIVERA/ MICROSOFT ‘PROJECT’ PROJECT’
PURPOSE
OPTIONS ON SUBMISSION
PART OF CONTRACT?
• Approval • Rejection • Withholding of Approval
ALTERATION/ REVISION •
General Policies
•
Mode of Alternatives / Revision
•
Effect of Alternatives/ Revision
FOR CONTRACTOR
MISCELLANEOUS
PART OF TENDER SUBMISSION?
SUBMITTED AFTER TENDER AWARD
FIG. 3-3 : WORK PROGRAMME – AN OVERVIEW © HSKS
TO LEVY CONTROL OVER PROGRESS OF THE WORKS TO ENSURE CONTRACT IS COMPLETED ACCORDING TO SCHEDULE
MISCELLANEOUS PURPOSES
PROGRESS MONITORING: EMPLOYER’S PURPOSES
TO PLAN AND STREAMLINE FINANCIAL ARRANGEMENTS TO OBVIATE DEFAULT
TO TAKE NECESSARY REMEDIAL MEASURES IF DELAY OCCURS OR IF EMPLOYER IS AT FAULT
TO WARN CONTRACTOR TO TAKE REMEDIAL MEASURES IN CASE DELAY OCCURS
FIG. 3-4 : PROGRESS MONITORING – EMPLOYER’S PURPOSES © HSKS
PROGRESS MONITORING: AN OVERVIEW
PURPOSE
DURATION
•
From Site Possession
•
To Issue of Final Certificate
•
Normally up to Practical Completion only
SITE POSSESSION MEETINGS
•
Primary Purposes
•
Secondary Purposes
METHODS
•
Use of Contractor’s Work Programme
• •
SITE PROGRESS MEETINGS
SUBSUBCONTRACTORS MEETING
Employer/ contract administrator Contractor
COORDINATION/ PROJECT MANAGEMENT MEETINGS
•
On regular basis
•
Normally ‘monthly’
•
Maybe i. Weekly ii. Fortnightly iii. Quarterly, etc.
SITE RECORDS
PROGRESS MEETINGS
FREQUENCY/ NATURE OF CHECKS
PARTIES RESPONSIBLE
BASIS
‘ADAD-HOC’ HOC’ MEETINGS
DURATION
PURPOSE
OFFICIAL WORK RECORDS
METHODS
OFFICIAL PROGRESS REPORTS
EVIDENTIAL VALUE
SITE DIARY
FIG. 3-5 : PROGRESS MONITORING – AN OVERVIEW © HSKS
SITE POSSESSION MEETINGS
MISCELLANEOUS MEETINGS
POST CONTRACT AWARD STAGE: PRINCIPAL TYPES OF MEETINGS
AD-HOC MEETINGS
SUB-CONTRACTOR’S MEETINGS
SITE PROGRESS MEETINGS
COORDINATION/ PROJECT MANAGEMENT MEETINGS
FIG. 3-6 : POST CONTRACT AWARD STAGE – PRINCIPAL TYPES OF MEETINGS © HSKS
SITE PROGRESS MEETINGS: AN OVERVIEW
ENABLE CONTRACTOR TO
PERMIT WORK PROGRESS TO
Officially present progress report
•
Be reviewed on regular basis
•
Present problems encountered
•
Identify areas and causes of delay
•
Enable Employer/ C.A. to redress delay caused by him/them
•
Keep track of financial progress/allocation
FINANCIAL ISSUES
3RD PARTY ISSUES AFFECTING CONTRACT
CONTRACT ADMINISTRATOR •
Chairs Meeting
•
Main participant
• S.O./ Contract Administrator
Main participant
DISTRIBUTION/ CIRCULATION • To all parties/ attendees
MISCELLANEOUS ISSUES
MAIN CONTRACTOR •
PARTICIPANTS
MINUTES
WHO PREPARES?
MISCELLANEOUS
•
ONLY SITE ISSUES
ISSUES/ MATTERS DEALT
PURPOSE
TIMING
NSCs
CONSULTANTS •
Observers Only
•
Participants if contract administrator's assistants/ representatives
•
By invitation only
EMPLOYER •
Observer only
FIG. 3-7 : SITE PROGRESS MEETINGS – AN OVERVIEW © HSKS
SUB-CONTRACTORS MEETINGS: AN OVERVIEW
ISSUES/ MATTERS DEALT
PURPOSE
TIMING
•
Usually monthly prior to site meetings
•
If necessary more frequently TO ENABLE SUBSUBCONTRACTOR TO
TO PERMIT CONTRACTOR TO
• Officially present progress report to Contractor
• Review NSC’s progress, areas of delay, etc.
• Present problems encountered
PARTICIPANTS
MINUTES
WHO PREPARES? • Main Contractor
DISTRIBUTION/ CIRCULATION • To all parties/ attendees
• Identify and sort coordination problems CONTRACTOR (MAIN)
NOMINATED SUBSUBCONTRACTORS
DOMESTIC SUBSUBCONTRACTORS
• Chairs Meeting
OTHERS (BY INVITATION) • Employer • Third Parties
COORDINATION MATTERS
SITE PROBLEMS
FINANCIAL ISSUES
3RD PARTY ISSUES
• Design
• Possession
• Payments
• Authorities
• Site Work
• Access
• V.O.s
• Utilities Providers
• Security
• Claims
• Others
MISCELLANEOUS ISSUES
• Contract Administrator
FIG. 3-8 : SUB-CONTRACTORS MEETINGS – AN OVERVIEW © HSKS
‘AD-HOC’ MEETINGS: AN OVERVIEW
CONVENORS (AS APPLICABLE)
TIMING
AS AND WHEN NECESSARY FROM TIME TO TIME
•
The Employer
•
The Contract Administrator
•
The Contractor
•
The Sub-Contractors
PURPOSE
USUALLY DICTATED BY CIRCUMSTANCES
EMERGENCY ISSUES
TO DISCUSS SPECIFIC ISSUES / MATTERS
ADMINISTRATIVE MATTERS
TECHNICAL ISSUES
FINANCIAL ISSUES
•
Site Issues
•
Payments
•
Design
•
Training
•
Design/ Work Issues
•
V.O.s
•
Construction/Installation
•
Maintenance
•
3rd
•
Claims
•
Testing and Commissioning
•
‘As-Built’ Records
•
Defects
Party Issues
MISCELLANEOUS ISSUES
FIG. 3-9 : ‘AD-HOC’ MEETINGS – AN OVERVIEW © HSKS
SITE RECORDS: AN OVERVIEW
PURPOSE
DURATION •
From Date of Commencement / Site Possession to
•
Completion of works
•
Normally up to Practical Completion only PROVIDE NECESSARY INFORMATION/ EVIDENCE TO
EVALUATE CONTRACTOR’’S CONTRACTOR CLAIMS TO
REVIEW WORK PROGRESS •
Contractor’s Scope
•
Extension of Time
•
NSC’s/DSC’s Scope
•
Additional Work
•
Direct loss and/or expense
•
Miscellaneous matters
EVIDENTIAL VALUE
METHODS
OFFICIAL PROGRESS REPORT
OFFICIAL WORK RECORDS
PERMIT DECISION MAKING
SITE DIARY
DULY SIGNED/ ENDORSED RECORDS •
Best evidential value
ACKNOWLEDGEMENT OF RECEIPT RECORDS •
Some evidential value
FIG. 3-10 : SITE RECORDS – AN OVERVIEW © HSKS
OFFICIAL WORK RECORDS: AN OVERVIEW
TIMING OF SUBMISSION
DAILY
WEEKLY
PURPOSE
PROCEDURAL MATTERS
CONTENTS
USE OF DESIGNATED STAFF FOR
FORTNIGHTLY
• Preparing • Maintaining • Submitting RECORD OF SITE INFORMATION
SITE WORK/ ACTIVITIES
FOR CONTRACT ADMINISTRATION
RECORD OF WORKERS
• Planned
• Skilled
• Undertaken
• Unskilled
SIGNING OR ENDORSEMENT • By authorized Person(s)
TIME OF ENTRY
• S.O/ Contract Administrator
• Daily
FOR BASIS OF OFFICIAL PROGRESS REPORT
RECORD OF PLANT/MACHINER Y • On site
WEATHER CONDITIONS
SAFE KEEPING • By S.O./Contract administrator • Up to lapse of period of limitation
PROBLEMS ENCOUNTERED
INSTRUCTIONS
• Affecting work
• Design
• Received
• Delaying site operations
• Site
• Carried Out
• Coordination
• Outstanding
MISCELLANEOUS
• Site/ Factory Visits • Inspections
• Due to 3rd Parties
FIG. 3-11 : OFFICIAL WORK RECORDS – AN OVERVIEW © HSKS
SITE DIARY: AN OVERVIEW
NATURE
DURATION
•
Preferably kept by each and every site personnel
•
From commencement of work on site until completion
•
Personal record of site activities
•
If necessary until the end of the contract
•
Otherwise by designated site supervision team member
• Undertaken
ENTRIES ON DAILY BASIS •
SITE WORK/ ACTIVITIES
PROCEDURAL MATTERS
CONTENTS
By designated person
PROBLEMS ENCOUNTERED
INSTRUCTIONS
•
As to Site Work
• Issued to Contractors
•
Coordination
• Carried out by Contractor
PRESENTATION ON REQUEST/ DEMAND
CHECKING / ENDORSEMENT •
By Employer’s Representative/ Designated person
•
Accuracy of entries
RECORD OF • Contractor’s defaults /omissions
•
By Employer/ S.O./ any interested party
MISCELLANEOUS • Site/ factory visits • Weather conditions • Disruption to site activities
SAFE KEEPING/ CUSTODY •
By S.O./ contract administrator
•
Up to lapse of period of limitation
ATTACHMENTS • ‘As-Built’ sketches, drawings, diagrams, etc. • ‘As-erected’/ ‘AsInstalled’ Work/ plant, etc.
FIG. 3-12 : SITE DIARY – AN OVERVIEW © HSKS
SUPERVISION OF WORKS/ CONTRACT ADMINISTRATION
© HSKS
4.0 1.0
SUPERVISION OF WORKS/CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION PURPOSE DESIGNATION ROLES SOURCES OF DUTIES AND POWERS REPRESENTATIVE/ASSISTANTS PRINCIPAL DUTIES LIABILITY
2.0
SUPERVISION FORMS DURATION LEVEL LIABILITIES
3.0
DISCUSSION OF CASE LAW © HSKS
ENSURE WORKS SATISFACTORILY COMPLETED WITHIN ORIGINAL CONTRACT PERIOD AND PRICE
ENSURE THAT CONTRACTOR FULFILLS HIS OBLIGATIONS UNDER THE CONTRACT ENSURE THAT EMPLOYER FULFILLS HIS OBLIGATIONS UNDER THE CONTRACT
CONTRACT ADMINISTRATION: PRIMARY PURPOSES
ENSURE THAT NEEDS/ OBLIGATIONS OF CONTRACT ADMINISTRATOR UNDER CONTRACT/STATUTE ADEQUATELY FULFILLED
ENSURE THAT EMPLOYER’S POSITION ADEQUATELY PROTECTED AGAINST VARIOUS CLAIMS
ENSURE THAT EMPLOYER FULFILS HIS STATUTORY/LOCAL AUTHORITY REQUIREMENTS
FIG. 4-1 : CONTRACT ADMINISTRATION – PRIMARY PURPOSES © HSKS
SUPERINTENDING OFFICER/ S.O.
CONSTRUCTION MANAGER
PROJECT DIRECTOR
EMPLOYER’S REPRESENTATIVE
CONTRACT ADMINISTRATORS: COMMON DESIGNATIONS
ARCHITECT
ENGINEER
FIG. 4-2 : CONTRACT ADMINISTRATORS – COMMON DESIGNATIONS © HSKS
AS TO RIGHTS/ DUTIES UNDER THE CONTRACT WITH IMPLIED/ OSTENSIBLE AUTHORITY
WITH EXPRESS AUTHORITY
AS TO MATTERS OF COST
AS AN AGENT OF THE EMPLOYER
AS TO OTHER MATTERS
AS AN ADVISOR TO THE EMPLOYER
CONTRACT ADMINISTRATOR: RANGE OF ROLES PERFORMED
AS AN INDEPENDENT/ IMPARTIAL ADJUDICATOR
AS AN INDEPENDENT CONTRACTOR
WHERE SUCH WORK IS REQUIRED POSTCONTRACT
FOR MAINLY DESIGN/ DETAILING WORK
AS TO DISPUTE RESOLUTION
AS TO CERTIFICATION
FIG. 4-3 : CONTRACT ADMINISTRATOR – RANGE OF ROLES PERFORMED © HSKS
TERMS OF REFERENCE OF APPOINTMENT
CONDITIONS OF CONTRACT BEING ADMINISTERED
‘IN-HOUSE’ EMPLOYEE
CONDITIONS OF ENGAGEMENT/ SERVICES AGREEMENT
CONDITIONS OF CONTRACT BEING ADMINISTERED
EXTERNAL BODY/PERSON
CONTRACT ADMINISTRATOR: SOURCES OF DUTIES AND POWERS
FIG. 4-4 : CONTRACT ADMINISTRATOR – SOURCES OF DUTIES AND POWERS © HSKS
ARCHITECT SPECIALIST CONSULTANT
PROJECT MANAGER
CIVIL ENGINEER
CONTRACT ADMINISTRATOR’S REPRESENTATIVES/ ASSISTANTS: TYPICAL EXAMPLES
QUANTITY SURVEYOR
STRUCTURAL ENGINEER
MECHANICAL ENGINEER
ELECTRICAL ENGINEER
FIG. 4-5 : CONTRACT ADMINISTRATOR’S REPRESENTATIVES/ASSISTANTS - TYPICAL EXAMPLES © HSKS
OVERALL SUPERVISION
PROGRESS MONITORING
ADMINISTRATION OF PAYMENTS ISSUING INFORMATION, DRAWINGS, DETAILS, ETC.
ORDERING VARIATIONS ISSUING RELEVANT INSTRUCTIONS
GRANTING APPROVALS, CONSENTS, ETC.
INSPECTIONS OF WORKS
NOMINATING SUB-CONTRACTORS, ETC.
ADVISING EMPLOYER
CONTRACT ADMINISTRATOR’S PRINCIPAL DUTIES FOR TRADITIONAL GENERAL CONTRACTS
ISSUING NECESSARY REPORTS OVERSEEING TRAINING OF EMPLOYER’S O & M PERSONNEL OVERSEEING COMPLETION & HANDING OVER OF WORKS MONITORING RECTIFICATION OF DEFECTS PARTICIPATING IN PREPARATION OF MIGRATION/ FACILITIES MANAGEMENT PLANS
PARTICIPATING IN TESTING AND COMMISSIONING
MONITORING SERVICING AND MAINTENANCE CHECKING AND APPROVING O & M MANUALS & ‘AS-BUILT’ DRAWINGS PREPARING ‘FINAL ACCOUNT’
‘CLOSING-OFF’ CONTRACT
FIG. 4-6: CONTRACT ADMINISTRATOR’S PRINCIPAL DUTIES FOR TRADITIONAL GENERAL CONTRACTS © HSKS
FULL-TIME SUPERVISION
NOMINAL SUPERVISION
STANDING SUPERVISION
FORMS OF SUPERVISION: COMMON LABELS
PERIODIC SUPERVISION
CONSTANT SUPERVISION
PART-TIME SUPERVISION
FIG. 4-7 : FORMS OF SUPERVISION – COMMON LABELS © HSKS
SUPERVISION/INSPECTIONS: OVERVIEW (PART I)
TYPICAL CLAUSES IN AGREEMENTS •
TYPICAL PROVISIONS IN BYBY-LAWS
Engineer’s Agreement:
•
1. Clause 8.1 and 8.7 BEM Form (1999) •
Building (Federal Territory of Kuala Lumpur) By-Laws 1985: 1. By-Law 6: Supervision of Works
NATURE AND MEANING
•
Terms used synonymously
•
See Newey J’s definition
•
Distinction: Inspection imposes a lesser duty: William Tompkinson v St. Michael in the Hamlet.
Architect’s Agreement 1. Clause 5(4)(iv) Part II: Architects (Scale of Minimum Fees) (Amendment) Rules 1992 2. Clause 9 Conditions of Engagement of Architect
2. By-Law 23(1): Certificate For Occupation • •
By-Law 5(1) City of Kuala Lumpur (Earthworks) By-Laws 1975 •
PURPOSES
•
See Keating’s definition in ‘Building Contracts’
•
Three fold purpose:
In absence of express provisions to contrary courts imply a duty of supervision: Alexander Corfield v David Grant. Malaysia: Statutory provisions necessitate ‘supervision’
1. To ensure contractor carries out work in accordance with contract. 2. To enable contract administrator to discharge his obligations to employer. 3. To enable contract administrator to meet his statutory obligations
FIG. 4-8 : SUPERVISION/INSPECTIONS – OVERVIEW (PART I) © HSKS
SUPERVISION/INSPECTIONS: OVERVIEW (PART II)
LEVEL OF SUPERVISION REQUIRED
DURATION
•
Determining factors:
•
1. Nature of works under contract Normal periods:
2. Applicable statutory provisions e.g. By-Laws •
1. Up to issue of Practical Completion; or
2. Category II: PartTime/Periodic Supervision
3. Up to issue of Certificate of Making Good Defects Common practice is up to issue of Certificate of Making Good Defects
Necessity for Resident Site Staff (RSS)
•
Typical examples: 1. Resident architect/engineer 2. Clerk-of-works. 3. Other relevant staff
Prevailing Forms: 1. Category I: Fulltime/Standing/ Constant supervision
2. Up to application of certificate for occupation; or
•
•
1. Conditions of engagement
2. Conditions of engagement •
Determined by:
RESIDENT SITE STAFF
•
2. Must be sufficient to check the important elements
Primary responsibility for supervision: contractor’s. See East Ham Corp. v Bernard Sunley.
•
Heads of liabilities of contract administrator for defaults/ breaches:
Engagement:
•
Powers and duties determined by engineering/construction contract being administered and/or letter of delegation of power.
•
Responsibilities of:
Legal Position: 1. Must be reasonable for works involved
•
1. Contractual 2. In tort 3. Statutory
1. By employer; or 2. By contract administrator
3. Category III: ‘Nominal’ Supervision •
LIABILITIES
•
Position of contract administrators who are professional engineers, architects, etc.
1. RSS 2. Contract Administrator
3. Adequate to meet statutory requirements 4. Sufficient to meet obligations of engagement
FIG. 4-9 : SUPERVISION/INSPECTIONS – OVERVIEW (PART II) © HSKS
CONTRACT ADMINISTRATOR’S LIABILITIES: AN OVERVIEW (PART I)
•
•
CONTRACTUAL LIABILITY
LEGAL KNOWLEDGE AND PERSONAL DUTY
HEADS OF LIABILITIES Three main categories:
•
1. Contractual 2. Tortious 3. Statutory
General position: Required to have knowledge of all legal matters relating to work being undertaken
•
Nature of matters.
Characteristics:
•
Consequences of failure
1. Not distinct/mutually exclusive
•
Duty is personal and non-delegable
DEFENCES
2. Concurrent/complementary
•
Prove no valid express/implied contract of engagement
•
If there is such valid contract prove:
3. Choice of option on aggrieved part
STANDARD OF CARE
GENERAL POSITION •
Action by employer under terms of contract of engagement
•
If no express terms, implied by law
•
Contract of engagement: 1. Standard forms, or 2. ‘Bespoke’ Forms
•
Duty of care owed to employer
•
Usually to use ‘reasonable skill and care’
•
Duty and standard of care either: 1. Expressed in contract of engagement, or 2. Implied by law
EFFECT OF BREACH •
Two options available to employer:
1. Rescind contract and sue for damages; or
1. Contract didn’t impose particular duty breach of which claimed, or 2. Service actually rendered was of the standard reasonably expected under the circumstances
2. Affirm contract and sue for damages •
Right of election of option belongs to employer
FIG. 4-10 : CONTRACT ADMINISTRATOR’S LIABILITIES – AN OVERVIEW (PART I) © HSKS
CONTRACT ADMINISTRATOR’S LIABILITIES: AN OVERVIEW (PART II) TORTIOUS LIABILITY
NEGLIGENCE
GENERAL POSITION •
Duty of care in tort of negligence concurrent with contractual duty: Brown v Boorman
•
Common Forms: 1. Acts/omissions 2. Mis-statements
BASIC ELEMENTS
DEFINITION •
• •
Laid down in Donoghue v Stevenson ‘Neighbourhood’ principle
•
D owed P duty of care
•
Application of the ‘Bolam Test’
•
D breached this duty
•
•
Consequence: P suffered loss/damage
Use of ‘Reasonable Man’ test
•
Use by Malaysian Courts
Loss/damage suffered not remote
•
Important elements: 1. Causation 2. Forseeability
STANDARD OF CARE
•
•
Criterion: Objective
•
Less onerous
•
•
Proscribe use of hindsight
•
See Eckersly v Binnie & Partners
Per Hunter v Henley
•
2. Fitness for purpose •
Need to satisfy all 3 element on balance of probabilities
Only 3 types:
•
1. Deny existence of duty of care
No liability to contractor
•
Possible exceptions: See Para 5.9B5.
2. Prove claim made not of type currently recognized
2. D did not adopt the practice 3. Practice adopted by D would not be adopted by another reasonable D
LIABILITY TO 3RD PARTIES
DEFENCES
1. There is a usual and normal practice
Use of standards prevailing at time of default
•
2 Categories: 1. Reasonable skill & care
ESTABLISHING LIABILITY
REASONABLE SKILL & CARE
3. Show service rendered meets ‘Bolam Test’ •
No immunity to suit: Sutcliffe v Thackrah
•
Situation per ‘Pure Economic Loss’
FIG. 4-11 : CONTRACT ADMINISTRATOR’S LIABILITIES – AN OVERVIEW (PART II) © HSKS
CONTRACT ADMINISTRATOR’S LIABILITIES: AN OVERVIEW (PART III)
STATUTORY LIABILITY
LIABILITIES UNDER DELEGATED LEGISLATION
DIRECT STATUTORY LIABILITY
GENERAL POSITION
PROFESSIONAL LIABILITY
•
In addition to Contractual and Tortious Liability
•
Various Acts of Parliament applicable
•
Liability under various ByLaws e.g. UBBL, etc.
•
For professional contract administrator
•
Various sub-heads:
•
•
Penalties/sanctions stipulated in the By-Laws
•
1. Direct statutory liability 2. Under delegated legislation 3. Professional liability
Principal example: S71 Street, Drainage & Building Act 1974
Under specific Acts of Parliament
•
Penalty for mis-supervision, etc.
•
Possible sanctions: 1. Fine 2. Suspension 3. Cancellation of registration
FIG. 4-12 : CONTRACT ADMINISTRATOR’S LIABILITIES – AN OVERVIEW (PART III) © HSKS
PAYMENTS/ COMMERCIAL MATTERS
© HSKS
5.0
PAYMENTS/COMMERCIAL MATTERS
•
LEGAL OBLIGATION OF EMPLOYER
•
PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR
•
PAYMENT TO SUBSUB-CONTRACTORS
•
‘BACK TO BACK’ BACK’ PAYMENTS
•
BREACHES IN PAYMENT OBLIGATIONS
•
RELEVANT CASES •
SUTCLIFFE V THACKRAH [1974] 1 ALL ER 319
*
CROUDACE LTD. V THE LONDON BOROUGH OF LAMBETH [1986] 33 BLR 20
*
GUNUNG BAYU SDN. BHD. V SYARIKAT PEMBINAAN PERLIS SDN. BHD. [1987] 2 MLJ 332
*
HAJI ABU KASSIM V TEGAP CONSTRUCTION SDN. BHD. [1981] 2 MLJ 149
*
KAH SENG CONSTRUCTION SDN. BHD. V SELSIN DEVELOPMENT SDN. BHD. [1997] 1 CLJ SUPP 448
*
YONG MOK HIN V UNITED MALAY STATES SUGAR INDUSTRIES LTD. [1966] 2 MLJ 286
*
JALLCON (M) SDN. BHD. V NIKKON METAL (M) SDN. BHD. (No. 2) [2001] 5 MLJ 716, HC.
© HSKS
PROCEDURES AND CONDITIONS PRECEDENT
QUANTUM/AMOUNT
SET-OFF/DEDUCTIONS
ENFORCEMENT/HONOURI NG
TIMING
PAYMENT: ASPECTS OF CONTRACTOR’S ENTITLEMENTS/EMPLOYER’S OBLIGATIONS
FIG. 5-1: PAYMENTS – ASPECTS OF CONTRACTOR’S ENTITLEMENT/EMPLOYER’S OLIGATIONS © HSKS
TIMING OF PAYMENT TO CONTRACTOR: PRINCIPAL SCHEMES/SCHEDULES
PERIODIC SCHEDULE DURING CURRENCY OF THE CONTRACT
OF WHOLE CONTRACT SUM
STAGES/MILESTONE PAYMENT
PHYSICAL WORKS
PERIODIC SCHEDULE AFTER COMPLETION/ END OF CONTRACT
ADVANCE PAYMENT
FINANCIAL
OF PART OF CONTRACT SUM
AFTER ISSUE OF CPC
AFTER COMPLETION/ END OF CONTRACT
AFTER ISSUE OF CPC
AFTER ISSUE OF FINAL CERTIFICATE
MISCELLANEOUS/ METHODS
AFTER ISSUE OF FINAL CERTIFICATE
FIG. 5-2 : TIMING OF PAYMENT TO CONTRACTOR – PRINCIPAL SCHEMES/SCHEDULES © HSKS
START
Contract administrator to resolve all preliminary issues
Yes
Are the preliminary matters expressly stipulated in the contract? No
Yes
Are they included in the Project Procedures Manual? No Have these been sorted- out following award of contract?
No
Yes Have these been formalized by all the parties?
No
Contract administrator to take necessary action forthwith
Yes Contract administrator to issue formal record of issues agreed upon by all relevant parties
All relevant parties to take necessary steps to implement issues
A
FIG. 5-3: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART I) © HSKS
A
Establish if the contractor has fulfilled his first pre -condition to payment
Has the contractor commenced with the work under the contract?
No
Yes Has he executed any physical work?
No
Yes Has he delivered materials to site?
No
Contractor not entitled to any payment
Yes Prima facie, contractor may be entitled to payment
Contract administrator not obliged to initiate the progress payment
Establish if it is necessary for the contractor to apply for the required payment
No
Does the contract contain an express term thereto? Yes
B
C
D
FIG. 5-4: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART II) © HSKS
C
B
Contractor not obliged to apply
No
D
Is it mandatory? Yes
Contract administrator obliged to initiate process on his own volition
Has contractor complied with requirements?
No
Contractor may not be entitled to payment until he satisfies pre -conditions
Yes Contract administrator to proceed with the next stage i.e. valuation
Has the date of valuation been reached?
No
Yes Have the relevant pre-conditions been fulfilled?
No
Prima facie, valuation may not be initiated until achievement of necessary requirements
Yes No
Have the parties involved been identified? Yes
Deficiencies/omissions to be addressed forthwith to enable process to continue
No
Has the method for valuation been confirmed? Yes
E
F
G
FIG. 5-5: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART III) © HSKS
F
E
G
Valuation of works to be carried out jointly by the relevant parties
Valuers to prepare a valuation report
Yes
Does the contractor agree with the valuation? No
Yes
Does he sign off the valuation report?
No Valuation deemed to have been accepted by the contractor
No
Does he officially register his protest with valuers? Yes Do the valuers consider the objections protest? Yes Do they agree with the objections?
No
No
Contractor may protest to the certifier if necessary
Yes Valuers may revise/amend the valuation as necessary
Does the Contractor protest to the certifier?
Valuers to endorse/sign off the valuation report prepared
H
No
Yes
I
J
K
FIG. 5-6: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IV) © HSKS
H
I
J
K
Valuation report together with all other necessary documents to be submitted to the certifier Certifier to clarify/ discuss deficiencies/ omissions with the valuers
Certifier to carry out preliminary reviews
Is the valuation report complete, sufficient and accurate?
No
Deficiencies/ omissions may compromise the certification
Yes Certifier to take objections into consideration before undertaking certification
Yes
Has the contractor any valid grounds for objecting? No Certifier not to consider objections any further
L
Certifier may exercise No his discretion in undertaking certification
Is the date for certification imminent? Yes
No
Should in his discretion a certificate be issued? Yes
M
Has the stipulated minimum value of work been exceeded?
No
Certifier has no discretion to carry out certification
Yes Certifier to proceed with the necessary certification procedures
N
O
FIG. 5-7: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART V) © HSKS
M
L
N
O
Is the 1st Interim Certificate due?
No
Yes Have all the stipulated pre-conditions been met?
No
Yes Is the subsequent Interim Certificate due?
No
Yes Have all the relevant pre-conditions been met?
No
Prima facie, certificate cannot be issued
Yes Certifier to proceed with preparation of Interim Certificate
Is there a standard form of certificate prescribed?
Yes
Use the standard form as prescribed
No Utilize the form unless found not suitable
Yes
Has a ‘bespoke’ form been generated? No Certifier to develop an ‘ad hoc’ form meeting the necessary criteria/contents requirements
P
Q
R
S
T
FIG. 5-8: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VI) © HSKS
P
R
Q
T
S
Certifier to fill in all details completely, sufficiently and correctly in certificate Are there any NSCs/Nominated Suppliers?
Yes
No Are there any official assignees?
Yes
Amount certified for such parties to be indicated separately in certificate
No No
Are all procedural requirements met? Yes
No
Are all formal requirements met? Yes
Certificate may be challenged as invalid and unenforceable, if and when issued
No
Is the signatory an authorized person under the contract? Yes Have all the relevant checks for errors, etc. been undertaken?
No
Deficiencies/ errors may compromise validity of certificate
Yes U
V
W
X
FIG. 5-9: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VII) © HSKS
U
V
W
CA to rectify deficiencies/errors as soon as possible
Contract administrator to issue relevant certificate
Is there a certification period stipulated in the contract?
X
No
Certificate to be issued within a reasonable time of application/ valuation
No
Default in service may constitute a breach of contract on employer’s part. To be corrected/ rectified forthwith
Yes Prima facie, employer may be in breach of contract. Contractor may take appropriate action for employer’s breach
No
Is certificate issued within the said period? Yes
Contractor to be furnished with original copy
No
Is the recipient of the original copy stipulated? Yes Is the certificate issued to the stipulated person? Yes Are copies issued to the relevant parties?
No
Relevant parties have a right to demand the necessary copies from contract administrator
Yes No
Is the service of certificate formally evidenced? Yes
Y
Z
AA
AB
FIG. 5-10: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VIII) © HSKS
Y
AA
Z
AB
Establish the specific post-certification requirements
Do the recipients formally acknowledge receipt of document?
No
Omission to acknowledge may lead to future evidential problems
Yes No
Contractor may present certificate within a reasonable period of receipt
Contract administrator to procure said acknowledgements as soon as possible
Is presentation of certificate stipulated in the contract? Yes
No
Is there a period stipulated for the presentation? Yes Is presentation formally effected within this period?
No
Delay may postpone employer’s obligation to honour certificate
Yes Does employer formally acknowledges receipt of the certificate from contractor?
No
Omission to acknowledge may lead to future evidential problems and may affect the honouring of certificate
Yes Employer to review certificate for validity
AC
AD
AE
Contractor to procure said acknowledgement as soon as possible
AF
FIG. 5-11: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IX) © HSKS
AC
AD
AE
Are there grounds for challenging validity of certificate?
AF
Yes
Employer may challenge certificate and refuse to honour it citing the relevant grounds
No Employer to proceed with honouring certificate issued/ presented (as applicable)
No
Are there any set-offs/deductions to be made? Yes
Employer must pay amount as certified to the contractor
No
Are these expressly permitted by the contract? Yes Has the amount certified less the setoffs/ deduction been established? Yes Has the final sum due been paid to the contractor?
No
Employer to determine amount due before the stipulated honouring period lapses
No
Yes Has this been done in the stipulated honouring period?
No
Employer culpable of breach of contract. Contractor to take appropriate action.
Yes
STOP
FIG. 5-12: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART X) © HSKS
RECOVERY OF THE UNPAID AMOUNT MISCELLANEOUS REMEDIES
INTEREST ON THE UNPAID AMOUNT
DEFAULT IN PAYMENT: TYPICAL CONTRACTUAL REMEDIES
RIGHT TO DETERMINE EMPLOYMENT UNDER CONTRACT
RIGHT TO REDUCE RATE OF EXECUTING WORK RIGHT TO SUSPEND WORK
FIG. 5-13 : DEFAULT IN PAYMENT - TYPICAL CONTRACTUAL REMEDIES © HSKS
CERTIFICATE WRONG ON ITS’ FACE
CERTIFICATE FUNDAMENTALLY INACCURATE
CERTIFICATE NOT IN CORRECT FORM
CERTIFICATE ISSUED BY UNAUTHORISED PERSON CERTIFICATE ISSUED IN UNAUTHORISED MANNER
INTERIM CERTIFICATES: TYPICAL CHALLENGES
CERTIFICATE ISSUED OUT OF TIME CERTIFIER ACTING ‘ULTRA VIRES’ CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED CERTIFICATE SUBJECT TO FRAUD/COLLUSION FRAUD, DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR MISCELLANEOUS CHALLENGES
FIG. 5-14: INTERIM CERTIFICATES – TYPICAL CHALLENGES © HSKS
DIRECT PAYMENT BY THE EMPLOYER
PAYMENT UPON CERTIFICATION
CONTINGENT PAYMENT
PAYMENT TO SUB-CONTRACTORS: PRINCIPAL METHODS
FIG. 5-15 : PAYMENT TO SUB-CONTRACTORS – PRINICPAL METHODS © HSKS
START Sub-Contractor (SC) forwards details of amount claimed to Main Contractor (MC) officially
SC to make fresh submission in the next application No
Is it within the prescribed time limits? Yes
No
Does the MC accept the submission? Yes
MC to include SC’s details in his claim
MC to submit consolidated claim to the Contract Administrator (CA)
CA to carry out the necessary valuation
CA to issue interim payment certificate to MC
Employer to pay certified amount to MC within the Honouring Period
Establish if there is a Contingent Payment Type II clause in the sub-contract
A
FIG. 5-16: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II ‘CONTINGENT PAYMENT’ (PART I) © HSKS
A Is there such a clause in the contract?
No
Yes Is the period for payment stated?
No
MC may pay SC within a reasonable time of receipt of monies from the Employer
Yes Yes
Does the MC pay the SC within the said period? No SC to pursue the remedies available under the contract
Are there any contractual remedies available?
Yes
SC to initiate the contractual remedies as applicable
Yes
SC to initiate the Arbitration process if necessary
No Is there an arbitration agreement? No SC to pursue his common law remedies if necessary
STOP
FIG. 5-17: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II ‘CONTINGENT PAYMENTS’ (PART II) © HSKS
PAYMENT IN ‘PACKAGE DEAL’ TYPES OF CONTRACTS: AN OVERVIEW
CONTRACT SUM ANALYSIS
PURPOSE
DRAFTING
• For Tender Analysis • For Interim Payment • Valuation of Changes/ Provisional Sums
• Normally by Contractor • Samples may be given by Employer in Employer’s Requirements
• For any Price Adjustment
GENERAL POSITION
MEASUREMENT
QUANTITIES
STRUCTURE • Given in some Forms e.g. JCT 98, PWD Form DB/T, etc. • Required for: 1. Overall Works 2. Sections or Phases
EXPRESS PROVISIONS
• Whenever used, effect not similar to TGC
• Included in most Standard Forms
• Are deemed to be only estimates
• E.g. Clause 55(1) ICE, Clause 13.1(d) FIDIC, etc.
GENERAL POSITION • As based on Lump Sum and due to nature of contract
SITUATIONS WHERE USED • Changes/V.O.s • Unforeseen Conditions
• No requirement for measurement
ERRORS/ OMISSIONS
ACCURACY • Effect of measurement expressly stipulated in some forms • Mostly deals with patent errors
PREPARATION
• Risk on Contractor
• Contractor responsible
• E.g. Clause 55(2) ICE Form
• If Employer prepares, risk for errors/omissions normally passed on to Contractor
FIG. 5-18 : PAYMENT IN ‘PACKAGE DEAL’ TYPES OF CONTRACTS: AN OVERVIEW © HSKS
FINAL AMOUNT TO WHICH CONTRACTOR ENTITLED TO UNDER THE CONTRACT
FINAL ADJUSTMENTS TO THE CONTRACT SUM
FINAL AMOUNT (SET OFFS/ DEDUCTIONS) TO WHICH EMPLOYER ENTITLED TO UNDER THE CONTRACT
FINAL ACCOUNT: PRINCIPAL CONTENTS
FIG. 5-19 : FINAL ACCOUNT – PRINCIPAL CONTENTS © HSKS
APPROVED VARIATIONS TO THE CONTRACT MISCELLANEOUS ADJUSTMENTS
ADJUSTMENT FOR PRICE FLUCTUATION, ETC.
APPROVED CONTRACTOR’S CLAIMS
ADJUSTMENT TO THE CONTRACT SUM: TYPICAL HEADS/ITEMS
ADJUSTMENT FOR P.C. SUMS/ PROVISIONAL SUMS
PERMITTED COSTS FOR TESTING, OPENING UP OF WORK, ETC.
FEES AND CHARGES FOR PERMANENT CONNECTIONS REMEASUREMENT OF ‘PROVISIONAL’ ITEMS/WORK
FIG. 5-20 : ADJUSTMENT TO THE CONTRACT SUM – TYPICAL HEADS/ITEMS © HSKS
VARIATIONS/CHANGES
© HSKS
6.0
VARIATIONS/CHANGES
•
WHAT CONSTITUTES ‘VARIATIONS/CHANGES’ VARIATIONS/CHANGES’
•
ISSUES AS TO VALIDITY
•
PROBLEMS WITH VARIATIONS
•
INVALID VARIATION ORDERS AND EFFECTS
•
LIMITATIONS OF VARIATIONS
•
RELEVANT CASES *
SHARPE V SAN PAULO RAILWAY [1873] L.R. 8 CH. APP. 597
*
RE CHITTICK & TAYLOR [1954] 12 WWR 653
*
MITSUI CONSTRUCTION CO. LTD. V A.G. OF HONG KONG [1986] 33 BLR 1
*
CARR V JA BERRIMAN PTY LTD. [1953] 27 A.L.J.R. 273
*
COMMISSIONER FOR MAIN ROADS V REED & STUART PTY LTD. & ANOR [1974] A.L.J.R. 461
*
SIR LINDSAY PARKINSON & CO. LTD. V COMMISSIONERS OF AND PUBLIC BUILDINGS [1950] 1 ALL ER 2008
HIS MAJESTY’S WORKS
*
ANTARA ELEKTRIK SDN. BHD. V BELL & ORDER BHD [2002] 3 MLJ 321, HC. © HSKS
VARIATIONS
FACTORS DETERMINING A VALID V.O.
TYPES
ADDITION
OMISSION
HYBRID
LEGAL NATURE OF PROPOSED CHANGE
FORMALITIES
ISSUE BY DESIGNATED OFFICER
PROCEDURAL REQUIREMENTS
EXPRESS CONTRACT CONDITIONS APPLICABLE
APPLICABLE COMMON LAW RULES
FIG. 6-1: VARIATIONS: OVERVIEW © HSKS
CHANGE TO BE IN RELATION TO SCOPE OF THE WORK
A CHANGE BEING EFFECTED
SCOPE OF WORK BEING CHANGED MUST BE AS EXPRESSLY OR IMPLIEDLY CONTAINED IN CONTRACT DOCUMENTS
CHANGES/VARIATIONS: BASIC ELEMENTS
FIG. 6-2 : CHANGES/VARIATIONS – BASIC ELEMENTS © HSKS
INCREASE/ DECREASE QUANTITY OF WORK
OMIT WORK
EXECUTE ADDITIONAL WORK OF ANY KIND
CHANGE CHARACTER OF WORK
VARIATIONS: TYPICAL EXAMPLES
CHANGE SEQUENCE OF WORK
CHANGE QUALITY OF WORK
CHANGE TIMING OF WORK ACTIVITIES
CHANGE KIND OF WORK
CHANGE DIMENSIONS OF WORK
CHANGE LEVELS OF WORK CHANGE POSITION OF WORK
FIG. 6-3: VARIATIONS - TYPICAL EXAMPLES © HSKS
OMISSIONS
ADDITIONS
HYBRID
ACCORDING TO NATURE OF THE CHANGE
NSC
CONTRACTOR
TIME IMPLICATIONS CONTRACT ADMINISTRATOR
EMPLOYER
ACCORDING TO IDENTIT Y OF INITIATOR OF CHANGE
COMBINATION OF BOTH
FINANCIAL CONSIDERATIONS
ACCORDING TO CONSEQUENCES/EFFECT OF THE CHANGE
TYPES OF VARIATIONS: MAIN METHODS OF CLASSIFICATION
FIG. 6-4: TYPES OF VARIATIONS – MAIN METHODS OF CLASSIFICATION © HSKS
CHANGES IN EMPLOYER’S REQUIREMENTS
INTEFERENCE BY EMPLOYER
MALADMINISTRATION OF CONTRACT
DEFECTIVE DRAWINGS
DEFECTIVE SPECIFICATIONS
DEFECTIVE CONTRACT DOCUMENTS
ITEMS CONSTITUTING VARIATIONS
WRONG/ NEGLIGENT ADVICE FROM CONTRACT ADMINISTRATOR
DIFFERENCES BETWEEN BILLED AND ACTUAL QUANTITIES CHANGES DUE TO STATUTORY/ LEGISLATIVE CHANGES
FIG. 6-5: ITEMS CONSTITUTING VARIATIONS © HSKS
WHAT CONSTITUTES VARIATION WORKS
LEGAL POSITION
1. Test: What is the intention of the parties at time of contracting 2. Extras: Work not contemplated by parties when contracting and not provided in Contract. 3. Works which are indispensably necessary to give effect to parties intentions: Not extra
CONTRACTS BASED ON BILL OF QUANTITIES 1. Rule: All items intended to be executed by Contractor must be provided for in the Contract. 2. All items not provided for in Contract are extras. 3. Literal interpretation/ strict construction.
CONTRACTS BASED ON DRAWINGS AND SPECIFICATIONS 1. Rule: Contract requires: a) Not only work set out in drawings and/or specifications b) But also all work incidental or necessarily required whether set out in the drawings and/or described in specifications or not
VARIATION TEST PER RE:
CHITTICK & TAYLOR 1. Item specifically provided for in Contract: ‘Not Extra’ 2. If Contractor varies, contract without an instruction: Cannot Claim for ‘Extra’ 3. If Contractor instructed by C.A. to change contract: has basis for claim for ‘Extra’
2. Effect: Difficult to claim extra work [Re: Sharpe v Sao Paulo Railway]
FIG. 6-6 : WHAT CONSTITUTES VARIATION WORKS © HSKS
WORKS CHANGED MUST BE DEFINED IN CONTRACT DOCUMENTS
THERE MUST BE AN ‘INSTRUCTION’
VALID VARIATION ORDER: PRINCIPAL ELEMENTS
INSTRUCTION MUST EFFECT A CHANGE TO THE WORKS
‘INSTRUCTION’ TO BE ISSUED BY CONTRACT ADMINISTRATOR OR BY AUTHORISED PERSON
FIG. 6-7 : VALID VARIATION ORDER – PRINCIPAL ELEMENTS © HSKS
COMPLIANCE WITH THE RELEVANT EXPRESS CONTRACT PROCEDURES
EXISTENCE OF EXPRESS CONTRACTUAL PROVISION PERMITING VARIATION OF WORK UNDER THE CONTRACT
VALIDITY OF VARIATION ORDERS: PRINCIPAL FACTORS DETERMINING
ISSUE OF VARIATION ORDER BY DESIGNATED PERSON
COMPLIANCE WITH THE APPLICABLE COMMON LAW RULES IN RELATION TO VARIATIONS WORKS
FIG. 6-8 : VALIDITY OF VARIATION ORDERS – PRINCIPAL FACTORS DETERMINING © HSKS
LIMITATIONS TO VARIATIONS
LEGAL POSITION
EXERCISE OF POWER BY CONTRACT ADMINISTRATOR 1.
Power to vary work confined to genuine omissions
2.
If effect of omission is to give omitted work to 3rd Parties: Invalid Omission
CARDINAL CHANGES
SCOPE OF WORK 1.
2.
2.
TESTS
Power to vary confined to scope of works contemplated by parties at time of contracting.
1. Was it in the reasonable contemplation of the parties when contracting?
If effect of variation is to substantially change scope of work (‘Cardinal Change’): Invalid Variation
2. Although not included, can it be considered an indispensable part of the Contract?
DEFINITION 1.
NATURE
Changes which render the works substantially different from that contracted for by the parties
3. Functionally is it similar to the intended work or some other work required by the Contract?
EFFECTS 1. General Rule: Invalid 2. Contractor cannot be compelled to carry it out 3. If compelled, breach of contract 4. If Contractor carries out work, Contract rates not applicable
FORM
TYPES 1.
Physical work changes
1.
A Single change
2.
Financial Changes
2.
A large number of otherwise small permissible changes.
Constitutes a fundamental change in the scope of the Contract
FIG. 6-9 : LIMITATIONS TO VARIATIONS © HSKS
PAYMENT FOR VARIED WORK: GENERAL PRINCIPLES/METHODS
VARIED WORK OUTSIDE CONTRACT
VARIED WORK WITHIN CONTRACT
FORMULA VALID AND APPLICABLE
A ‘CARDINAL’ CARDINAL’ CHANGE i.e. FUNDAMENTALLY ALTERS CONTRACT
ABSENCE OF EXPRESS FORMULA IN CONTRACT
EXISTENCE OF EXPRESS FORMULA IN CONTRACT •
Mutually agree upon a formula/rate; or
•
Any contractual formula rendered invalid /inapplicable
•
Be paid a reasonable sum i.e. on a ‘quantum meruit’ basis, etc.
•
Whole works to be paid on ‘measure and value’ basis and on ‘altered’ or ‘adjusted’ rates
NOT A ‘CARDINAL’ CARDINAL’ CHANGE i.e. DOES NOT FUNDAMENTALLY ALTER CONTRACT •
Portion of works within scope of contract to be paid according to the contract formula (if applicable)
•
Remaining works falling outside scope of contract to be paid at a reasonable rate
FORMULA INVALID AND/OR INAPPLICABLE
•
Use the formula for valuation and payment
•
Mutually agree upon a formula/rate; or
•
No right of election
•
Be paid a reasonable sum i.e. on ‘quantum meruit’ basis, etc.
FIG. 6-10 : PAYMENT FOR VARIED WORK – GENERAL PRINCIPLES/METHODS © HSKS
COST OF DELAY AND DISRUPTION COST OF VARIED WORK e.g. •
Additions
•
Omissions
• Direct loss and/or expense • Extended Preliminaries
FINANCIAL EFFECTS
DELAY AND DISRUPTION TO CONTRACT •
Extension of time to Contract Period, etc.
TIME EFFECTS
PRINCIPAL CONTRACTUAL CONSEQUENCES OF VARIATION OF WORK UNDER CONTRACT
FIG. 6-11 : PRINCIPAL CONTRACTUAL CONSEQUENCES OF VARIATION OF WORK UNDER THE CONTRACT © HSKS
VALUATION OF VARIATIONS: COMMON COMPUTATIONAL METHODS
WHERE THERE ARE RATES/ PRICES IN THE CONTRACT
WHERE WORK CANNOT BE MEASURED
•
Use of B.Q. rates
•
Use of Daywork Rates in Contract
•
Use of Schedule of Unit Rates
•
On a cost-reimbursible basis
•
Use of Adjusted Contract Rates
•
Use of Contract Prices in: a) Contract Bills; or b) Summary of Prices; or c) Contract Sum Analysis
MISCELLANEOUS METHODS
WHERE NO RATES/ PRICES IN CONTRACT •
Use of ‘Fair Valuation’ principles
•
Use of ‘Quotation’ Method
•
Use of ‘Negotiated’/’Agreed’ Rates
•
Use of ‘Negotiated’/’Agreed’ Rates
•
Use of ‘Quotation’ Method
•
Payment on ‘quantum meruit’ basis or a reasonable sum
•
Payment of a reasonable sum
FIG. 6-12 : VALUATION OF VARIATIONS – COMMON COMPUTATIONAL METHODS © HSKS
START Establish if the conditions precedent have been satisfied
Has measurement stage been satisfactorily completed?
No
Yes Has the valuation stage been satisfactorily completed?
Prima facie, premature to prepare and issue certificate concerned
No
Yes Contract administrator to prepare certificate of variation of works
No
Is there a contract provision prescribing the same? Yes
A
Yes
Are its requirements clear and complete? No Have the requirements been agreed to by the parties?
No
Yes
B
C
D
FIG. 6-13: FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF VALUATION (PART I) © HSKS
A
B
C
Have the requirements been complied with?
D
No
Yes Have the particulars been completely and properly filled in?
No
Yes Is the V.O./instruction attached?
No
Yes Are the measurement and valuation details endorsed?
No
Omissions/deficiencies may render certificate invalid
No
Contract administrator to address omissions /deficiencies forthwith
Yes Has the certificate been checked for sufficiency and accuracy? Yes No
Has it been signed by the authorized person? Yes
E
FIG. 6-14:
F
G
FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF VALUATION (PART II) © HSKS
E
F
No
G
Has it been prepared within a reasonable/ prescribed period of completion of measurement and valuation? Yes Contract administrator to issue certificate to the contractor
Contractor to check and undertake necessary action
No
Is the certificate sufficient and accurate? Yes
No
Has it been signed by the authorized person? Yes
Prima facie, certificate is invalid
No
Does it comply with any prescribed requirements? Yes
H
I
J
FIG. 6-15: FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF VALUATION (PART III) © HSKS
H
I
J
Does the contractor agree with the content?
Yes
Contractor to formally signify acceptance
No Does he notify the contract administrator officially of his dissent?
No
Yes Are the full particulars/details given?
No
Yes Contractor obliged to give notice within reasonable period only
No
Is there a period stipulated for the giving of the notice? Yes Has the contractor met the time requirements?
No
Contractor deemed to have accepted the measurement and valuation
Yes Contract administrator to review contractor’s notice and make decision
K
FIG. 6-16:
L
M
FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF VALUATION (PART IV) © HSKS
M
L
K
Yes
Is the notice sufficient and accurate? No
No
Has the contractor been asked to furnish further details? Yes Has he complied with the request?
No
Yes Is the contractor’s stand reasonable?
Yes
No Is there any reason not to reject the contractor’s application?
Yes
Contract administrator to undertake necessary amendments/ revisions
No
N
Reject the contractor’s application/notice
N
Communicate decision to the contractor
Does the contractor wish to proceed with dispute resolution?
Yes
Contractor to give necessary notice. Contract administrator to use valuation set out in the interim period
No
STOP
FIG. 6-17: FLOWCHART ON THE GENERAL PROCEDURE FOR CERTIFICATION OF VALUATION (PART V) © HSKS
VARIATIONS: PRINCIPAL REQUIREMENTS FOR ‘PACKAGE DEAL’ TYPE OF CONTRACTS
EXPRESS STIPULATIONS
EMPLOYER’ EMPLOYER’S RIGHT TO VARY
CONTRACTOR’ CONTRACTOR’S RIGHT TO VARY
• In most Standard Forms
•
• Stipulate – Extent, Procedure, etc.
•
EXPRESS EXPRESS PROVISIONS PROVISIONS • Enshrined in all Standard Forms
NEED NEED FOR FOR CONSULTATION
CONTRACTOR’ CONTRACTOR’’S S RESPONSIBILITY
• Prior to ordering V.O. • Get Contractor’s view on effect of V.O. on programme
• Be pro-active
•
Most Standard Forms have express clauses Issued by E.R./ P.D.
Permitted expressly in most Standard Forms Due to: 1. Value engineering 2. Buidability 3. Safety 4. Legal/Physical impossibility
VARIATIONS IN WRITING
EFFECT OF PROCEDURE • Formal V.O. Instruction from E.R./P.D. condition precedent to recovery of payment
• Permissible if only expressly allowed by contract • Some Standard Forms do allow e.g. ICE, FIDIC, etc. • Others are silent e.g. JKR, etc.
• Failure of Contractor to observe procedure/ formalities – may compromise recovery
• Not to unreasonably withhold consent, etc.
NECESSITY NECESSITY FOR FOR ‘‘WRITTEN’ WRITTEN’’ INSTRUCTIONS INSTRUCTIONS
CONTRACT CONTRACT PROVISIONS PROVISIONS •
VARIATIONS IN DLP/DCP
• •
Requirement for ‘Writing’ Includes: 1. Letters 2. Minutes of Meetings 3. Drawings
RECOVERY RECOVERY WITHOUT WITHOUT INSTRUCTIONS INSTRUCTIONS
ORAL INSTRUCTIONS • • •
Only if contract expressly allows Need for written confirmation Duty of confirmation either on: 1. Contractor or 2. Employer
• •
Generally no Situations where permitted: 1. If contract expressly allows 2. Under Waiver/Estoppel 3. Under concept of ‘Constructive Change’
FIG. 6-18: VARIATIONS – PRINCIPAL REQUIREMENTS FOR ‘PACKAGE DEAL’ TYPE OF CONTRACT © HSKS
DELAY AND EXTENSION OF TIME
© HSKS
7.0
DELAY AND EXTENSION OF TIME
•
OPTIONS AVAILABLE TO EMPLOYER
•
EXTENSION OF TIME ISSUES
•
ACCELERATION OF WORKS
•
DRAFTING OF DELAY AND DISRUPTION CLAIMS
•
MISCELLANEOUS ISSUES
•
RELEVANT CASES *
PEAK CONSTRUCTION (LIVERPOOL) LTD. V MCKINNEY FOUNDATION LTD. [1970] 1 BLR 114
*
MILLER V L.C.C. [1934] 50 T.L.R. 479, 482
*
MERTON LONDON BOROUGH V STANLEY HUGH LEACH [1985] 32 BLR 55
*
WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64
•
SYARIKAT TAN KIM BENG DAN RAKAN-RAKAN V PULAI JAYA SDN. BHD. [1992] 1 MLJ 42
© HSKS
CONSEQUENCES OF DELAY: AN OVERVIEW
BY EMPLOYER (ACTS OF PREVENTION)
BY CONTRACTOR
INSTRUCT CONTRACTOR TO ACCELERATE WORKS
GRANT OF EXTENSION OF TIME • Only if contract expressly permits
•
Only if contract expressly permits
• Contractor may be entitled to:
•
To meet original contract deadline
•
Contractor to be compensated for reasonable expenses incurred
1.
Extended Preliminaries
2.
Direct Loss and/or Expense
DUE TO NEUTRAL EVENTS
•
•
Contractor entitled to E.O.T. but not to extended preliminaries or other claims If asked to accelerate works, entitled to reasonable expenses incurred therefrom
DUE TO CONTRACTOR’ CONTRACTOR’S OWN ACTS AND/OR OR OMISSIONS • Contractor culpable
DUE TO CONTRACTOR’ CONTRACTOR’S SUBSUB-CONTRACTORS/ SUPPLIERS •
Contractor vicariously liable to Employer
•
May seek indemnity from the culpable party e.g. Subcontractor, Supplier, etc.
• May be liable for: 1. Liquidated Damages, or 2. Unliquidated Damages caused to Employer
FIG. 7-1 : CONSEQUENCES OF DELAY – AN OVERVIEW © HSKS
‘FORCE MAJEURE’ EXCEPTIONALLY INCLEMENT WEATHER CIVIL COMMOTION, STRIKES, LOCK-OUT, ETC. LOSS OR DAMAGE TO THE WORKS OCCASIONED BY SPECIFIED PERILS CONTRACTOR’S INABILITY TO SECURE LABOUR, GOODS, MATERIALS, ETC. CARRYING OUT OF WORK BY STATUTORY UNDERTAKERS EXERCISE BY GOVERNMENT OF ANY POWER WHICH DIRECTLY AFFECTS THE WORKS
EXTENSION OF TIME: COMMON ‘RELEVANT EVENTS’ FAILURE OF EMPLOYER TO GIVE POSSESSION/ACCESS IN TIME DELAY IN THE SUPPLY OF INFORMATION/INSTRUCTIONS VARIATIONS AND EXTRA WORKS COMPLIANCE WITH CONTRACT ADMINISTRATOR’S INSTRUCTIONS DELAY ON PART OF NOMINATED SUB-CONTRACTORS/SUPPLIERS EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT LATE SUPPLY OF MATERIALS BY THE EMPLOYER OTHER SPECIAL CIRCUMSTANCES
FIG. 7-2 : EXTENSION OF TIME – COMMON ‘RELEVANT EVENTS’ © HSKS
DEFERMENT/POSTPONEMENT IN GIVING SITE POSSESSION OTHER ACTS OF PREVENTION EXPRESSLY PERMITTED BY THE CONDITIONS OF CONTRACT
LATE SUPPLY OF INFORMATION, DRAWINGS, INSTRUCTIONS, ETC.
‘ACTS OF PREVENTION’: TYPICAL EXAMPLES
LATE SUPPLY OF MATERIALS BY THE EMPLOYER
EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT
COMPLIANCE WITH CONTRACT ADMINISTRATOR’S INSTRUCTIONS, DIRECTIONS, ETC.
FIG. 7-3 : ‘ACTS OF PREVENTION’ – TYPICAL EXAMPLES © HSKS
‘FORCE MAJEURE’ DELAYS BY NOMINATED SUBCONTRACTORS/SUPPLIERS FOR THE SAID ‘NEUTRAL EVENTS’
EXCEPTIONALLY INCLEMENT/ ADVERSE WEATHER
‘NEUTRAL EVENTS’: TYPICAL EXAMPLES
CIVIL COMMOTION, STRIKES, LOCK OUTS INDUSTRIAL ACTION, EMBARGOES, ETC.
CONTRACTOR’S IN ABILITY TO SECURE LABOUR, GOOD, MATERIALS AND/OR OTHER RESOURCES LOSS/DAMAGE TO THE WORKS OCCASIONED BY SPECIFIED PERILS OR CONTINGENCIES
FIG. 7-4 : ‘NEUTRAL EVENTS’ – TYPICAL EXAMPLES © HSKS
CAUSE OF THE DELAY
ALL OTHER SUPPORTING RECORDS, DETAILS, ETC.
APPROPRIATE CONTRACT REFERENCES TO SUCH EVENT OF DELAY
SCHEDULING DOCUMENTATION
DETAILS OF EFFECT OF DELAY ON WORK PROGRAMME
APPLICATION FOR EXTENSION OF TIME: TYPICAL CONTENTS
ESTIMATE OF THE EXTENSION OF TIME REQUIRED
ESTIMATED LENGTH OF THE DELAY STEPS TAKEN/PROPOSED TO MINIMIZE/AVOID DELAY
FIG. 7-5 : APPLICATION FOR EXTENSION OF TIME – TYPICAL CONTENTS © HSKS
OFFICIAL WORK RECORDS OFFICIAL PROGRESS REPORTS SITE DIARIES LETTERS, INSTRUCTIONS, ETC. MEMORANDA FACSIMILE TRANSMISSIONS, ETC. DRAWINGS, ETC.
EXTENSION OF TIME APPLICATION: TYPICAL SOURCES OF INFORMATION
OFFICIAL MINUTES OF MEETING WORK PROGRAMMES, ETC. RECORDS/REPORTS FROM AUTHORITIES/INDEPENDENT BODIES, ETC. SHIPPING/AIRFREIGHT RECORDS, ETC. PROCUREMENT RECORDS, INVOICES, ETC. DELIVERY ORDERS OTHER MISCELLANEOUS RECORDS, DOCUMENTS, ETC.
FIG. 7-6 : EXTENSION OF TIME APPLICATION – TYPICAL SOURCES OF INFORMATION © HSKS
START
Is progress delayed or is likely to be delayed?
No
Yes Does the delaying event constitute one of the ‘relevant events’ /grounds under the provisions of the contract?
No
Yes Initiate notification of the delay procedure
Is the notice given in writing?
No
Yes Is the notice given within the period expressly stipulated?
No
A
Yes
No
Yes Proceed with the application of the extension of time process
Is the notice a condition precedent?
Yes
Has an extension been granted by the contract administrator?
No
B
FIG. 7-7: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART I) © HSKS
B
A
Is the application given in writing?
No
Yes Is the application made within the period expressly stipulated?
No
Yes Contract Administrator to check application made
Is the application complete/sufficient and accurate?
Is the application a condition precedent?
Yes
No Yes
No
Yes
Has an extension been granted by the contract administrator?
No
Is the requirement as to sufficiency, etc. a condition precedent?
Yes
No
Establish whether contractor has done all that is reasonably required of him
No
Has the contractor used his ‘best endeavours’ to minimize the delay?
No
Has the contract administrator requested for information, details, etc.?
Yes
Prima facie no extension of time can be granted
Yes Contract Administrator to proceed with further assessment for the possible grant of extension of time
Return to contractor for resubmission or reject application as appropriate
STOP
FIG. 7-8: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART II) © HSKS
PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART I)
NATURE OF APPLICATION
EXPRESS CONTRACT PROVISIONS •
Included in most standard forms of contract
REQUIREMENT REQUIREMENT •
•
TIMING OF NOTIFICATION
Expressly stipulated in conditions of contract of contract; or
•
Implied by law
Various formulae used e.g.:
2 broad steps:
VARIATIONS VARIATIONS •
•
Usually stipulated in the conditions of contract.
2. Stipulation of express time periods
•
Important to comply with the express requirements
Legal effect of provisions on time:
•
As a minimum must inform the contract administrator of the occurrence of the delay which is likely to affect the progress or has delayed progress
•
Otherwise must include:
1. Whether notification/application is a condition precedent to entitlement
Either a:
1. Notification of the delay; and
1. Single exercise, or
2. Making the application
2. Two separate processes •
Depends upon express/ implied requirements
CONTENTS OF THE NOTICE •
1. Use of specific phrases
CATEGORIZATION CATEGORIZATION •
FORM OF THE NOTICE
2. If affirmative, the effect of the breach of the condition precedent
1. Occurrence of the delay
3. Application to acts of prevention/neutral events •
2. Cause of the delay
Review of applicable case-law
3. Relevant events causing the delay; and 4. Contractor’s intention to make a claim
EXPRESS EXPRESS REQUIREMENTS REQUIREMENTS
TYPES TYPES OF OF WRITTEN WRITTEN NOTICES NOTICES /NOTICES /NOTICES IN IN WRITING WRITING
• Included in most standard forms
•
Correspondence
• Usually stipulated as:
•
Facsimile transmissions
•
Entries in official records
1. ‘Written notice’ or 2. ‘Notice in writing’
•
Entries in site diaries
•
Official Progress reports
EVIDENTIAL VALUE EVIDENTIAL
GENERAL RULE •
Where the form is expressly stipulated, it must be complied with
•
A written notice/notice in writing is of immense evidential value
•
Where not expressly stipulated, may be implied
•
Therefore, even if not expressly required, must try to give written notice
FIG. 7-9 : PROCEDURES FOR CLAIMING EXTENSION OF TIME – AN OVERVIEW (PART I) © HSKS
PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART II)
FORM OF THE APPLICATION
TIMING OF THE APPLICATION
EXPRESS REQUIREMENT •
Included in most standard forms
• Formulae include: 1. Specific time periods 2. Within a reasonable period
•
Similar to ‘Form of the Notice’
•
Preferably to be in writing
•
Compliance to any express requirements
GENERAL RULE
• Where specific time periods have been specified these should be adhered to • If not practicable, requirement for express consent for deferment • Otherwise within a reasonable period of notification/delay
CONTENTS OF THE APPLICATION • Dictated by express stipulations in contract • Otherwise by necessary implication. • Typical list includes: 1.
Cause of delay
2.
Appropriate contract reference
3.
Details of effect of delay on programme/progress
4.
Estimated length of delay
5.
Steps taken to mitigate/prevent delay
6.
Scheduling documentation
7.
Miscellaneous details, records, documents, etc.
FIG. 7-10 : PROCEDURES FOR CLAIMING EXTENSION OF TIME – AN OVERVIEW (PART II) © HSKS
PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART III)
NATURE OF INFORMATION REQUIRED
ADEQUACY OF INFORMATION SUPPLIED
DETERMINING DETERMINING FACTORS FACTORS
•
•
Contractor must furnish enough information to enable contract administrator to undertake assessment satisfactorily Information to be: 1. Sufficient/ complete 2. Accurate 3. Relevant
•
Breach of condition may be fatal to claim depending on its nature and seriousness
Type of relevant event Nature of relevant event
•
Particular requirements of applicable express provisions
•
Evidential value of information
CONSEQUENCES CONSEQUENCES WHERE WHERE PROVISION PROVISION IS IS NOT NOT A A CONDITION CONDITION PRECEDENT PRECEDENT
CONSEQUENCES CONSEQUENCES WHERE WHERE PROVISION IS IS A A CONDITION CONDITION PRECEDENT PRECEDENT
BASIS BASIS OF OF REQUIREMENT REQUIREMENT
• •
•
Contract administrator can: 1. Request for further information 2. Set a new deadline for contractor to respond
FAILURE FAILURE TO TO RESPOND RESPOND AFTER AFTER EXTENSION EXTENSION •
Should contractor fail to respond by: 1. Deadline set, or 2. Within reasonable period of request
PRINCIPAL PRINCIPAL SOURCES SOURCES • • • • • • • • • • • • •
Official work records Official progress reports Site diaries Correspondence Instructions Drawings, etc. Official minutes of meetings, discussions, etc. Work programmes 3rd party reports/records Procurement records, etc. Delivery orders Shipping/airfreight records Miscellaneous records/documents
Contract administrator may not proceed further with assessment
FIG. 7-11 : PROCEDURES FOR CLAIMING EXTENSION OF TIME – AN OVERVIEW (PART III) © HSKS
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART I)
EXPRESS CONTRACT PROVISIONS
GENERAL •
Included in most standard forms of conditions of contract
TO WHOM OWED • • •
THE CONTRACT ADMINISTRATOR’S DUTY ADMINISTRATOR’ OF CARE •
DERELICTION DERELICTION OF OF DUTY: DUTY: CONSEQUENCES CONSEQUENCES
DUTY DUTY TO TO EMPLOYER
To Employer To Contractor To Nominated Subcontractors/Suppliers
• •
•
PRELIMINARY PROCEDURES
Positive duty vis-à-vis ‘acts of prevention’ Satisfaction of: 1. ‘Reasonableness’ Test and 2. ‘Fairness’ Test Help employer: 1. Preserve right to LAD 2. Stave off claims from contractor
•
May compromise employer’s position
•
Contract administrator liable to actions in:
• • •
Upon occurrence of delaying event, independently undertake own assessment especially for acts of prevention Must take an active role Issue an interim extension to contractor if one due on facts Contractor can later apply for reassessment based on additional information
1. Breach of contract 2. Tort of negligence
PRELIMINARY PRELIMINARY CHECKS CHECKS TO ESTABLISH MATTERS SUCH MATTERS SUCH AS AS • •
WHO UNDERTAKES WHO • •
Delegated by the employer to authorized person Usually it is the contract administrator
ADDITIONAL ADDITIONAL DUTY DUTY
NATURE NATURE OF OF ROLE ROLE • • •
As an independent adjudicator Decision making function Must act fairly, reasonably and impartially
• •
Per John Baker Construction v London Protman Hotel Ltd. Must adhere to governing express contractual procedures in addition
POST APPLICATION PROCEDURES
• • •
Verification of occurrence of delay Sufficiency, accuracy, relevancy, etc. Compliance with preconditions, procedural requirements, etc. Assessment of evidential value Assessment whether delay in principle entitles contractor to extension
INSUFFICIENT INSUFFICIENT INFORMATION: OPTIONS AVAILABLE AVAILABLE TO TO CONTRACT CONTRACT ADMINISTRATOR ADMINISTRATOR • •
Request contractor to submit more details, etc. or If delaying event of a continuing nature: 1. Proceed with interim assessment 2. Grant an interim extension
FIG. 7-12: ASSESSMENT OF THE APPLICATION – AN OVERVIEW (PART I) © HSKS
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART II)
THE ASSESSMENT PROCESS
BASIS OF ASSESSMENT •
Basic principles
•
Overriding requirements: Satisfaction of: 1. ‘Reasonableness’ Test 2. ‘Fairness’ Test 3. Procedural requirements
•
MISCELLANEOUS ISSUES
Factors to be taken into consideration:
•
Multiple extensions
•
Review of prior decisions/ certificates
1. Previous extensions granted 2. Effect of omissions 3. Effect of concurrent delays
•
Concurrent delay: effects
•
Extensions during culpable delay
•
Extension of time and omissions
•
Acceleration in lieu of extension
•
Extension of time and claims
•
Sources and types of information used
•
Concluding decision:
Important exceptions 1. Contractor not to be culpable 2. Contractor to mitigate/prevent delay
•
•
TIMING FOR GRANTING EXTENSION
1. Rejection of claim; or 2. Grant of extension of time
Definition of ‘best endeavours’
PRINCIPAL ISSUES PRINCIPAL
•
Factors dictating the timing of the grant
•
Express stipulations as to time period for granting
•
Prospective/Retrospective granting of extension
TIME TIME PERIOD PERIOD
FACTORS FACTORS DICTATING DICTATING
•
•
The need to preserve the LAD provisions for the benefit of the employer To allow contractor opportunity to reprogramme his works
•
PROSPECTIVE/ PROSPECTIVE/ RETROSPECTIVE GRANTING GRANTING OF OF EXTENSION EXTENSION
Various formulae:
•
Where expressly permitted
1. Use of specific time period stipulations
•
Where implied
•
Courts approach:
2. Within reasonable time •
Effect of failure to comply
•
Situation of continuing delay
1. Previous strict interpretation 2. Current liberal approach •
Circumstances where retrospective granting permitted
FIG. 7-13: ASSESSMENT OF THE APPLICATION – AN OVERVIEW (PART II) © HSKS
CERTIFICATE NOT GIVEN ON TIME
OTHER MATERIAL BREACHES
CERTIFICATE NOT IN CORRECT FORM
CONTRACTUAL PROCEDURES NOT FOLLOWED
CERTIFICATE GIVEN BY UNAUTHORIZED PERSON
CHALLENGING CERTIFICATE OF EXTENSION OF TIME: COMMON GROUNDS
CERTIFICATE NOT GIVEN FAIRLY
NO NAMED CERTIFIER
DECISIONS IMPROPERLY DELEGATED
FIG. 7-14: CHALLENGING CERTIFICATE OF EXTENSION OF TIME – COMMON GROUNDS (PER EGGLESTON) © HSKS
DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS: AN OVERVIEW
EXPRESS CONTRACTUAL PROVISIONS
GENERAL REQUIREMENTS •
The principles and general requirements similar to that of Main Contract
•
Principal difference only in some procedural requirements
•
Applicable only to:
•
1. Nominated Sub-Contractors and 2. Nominated Suppliers •
Does not encompass:
•
1. Domestic Sub-Contractors and 2. Domestic Suppliers
PAM PAM 1998 1998 SUB SUB---CONTRACT CONTRACT FORM FORM
JKR 203N FORM JKR (REV. 10/83) •
Clause 26: Delay and Extension of Time
(a): Notice of delay (b): Extension of time (c): Dispute on failure of S.O. to grant extension of time
•
Clause 8.0: Extension of Time
8.1:Notifying of events causing delay 8.2:Relevant events causing delay for which extension of time may be given 8.3:A Fair and Reasonable extension of time
GENERAL PROCEDURAL REQUIREMENTS
GENERAL CONTRACTUAL POSITION Extension of time under contract can only be validly granted if:
Main steps involved are: 1. Occurrence of delaying event
1. Delaying event is one of the ‘relevant events’/grounds under the conditions of sub-contract
2. Notification of the delay
2. The express formalities or procedures are strictly complied with
4. Contractor forwards application to contract administrator
3. Review by the contractor
5. Contract administrator assesses application
The general contractual position similar to Main Contract
PUTRAJAYA PUTRAJAYA CONDITIONS OF OF NOMINATED SUB-NOMINATED SUBCONTRACT CONTRACT
IEM.CES.1/90 FORM IEM.CES.1/90 •
•
Clause 26: Delay and Extension of Time
•
Clause 24: Delay and Extension of Time
6. Contract administrator communicates decision to contractor 7. Contractor informs subcontractor 8. Receipt and acknowledgement •
The rules in the preparation and issuance of the certificate of extension of time similar to that of Main Contract
(a): Notice of delays (b): Extension of time (c): Dispute on failure of Engineer to grant extension of time
8.4:Failure of architect to give written consent for extension of time
FIG. 7-15: DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS – AN OVERVIEW © HSKS
NON-COMPLETION AND DAMAGES
© HSKS
8.0
NON COMPLETION AND DAMAGES
•
COMMON LAW POSITION
•
CONTRACTUAL FORMULAE
•
RIGHTS TO IMPOSE
•
CHALLENGES
•
MALAYSIAN POSITION
•
RELEVANT CASES *
DUNLOP PNEUMATIC TYRE CO. LTD. V NEW GARAGE & MOTOR COMPANY LTD. [1915] AC 79
*
TEMLOC LTD. V ERRIL PROPERTIES LTD.
*
GILBERT-ASH (NORTHERN) LTD. V MODERN ENGINEERING (BRISTOL) LTD. [1974] AC 689
*
SIM CHIO HUAT V WENG TED FUI [1983] 1 MLJ 151
*
LION ENGINEERING SDN. BHD. V PAUCHUAN DEVELOPMENT SDN. BHD. [1997] 4 AMR 3315
© HSKS
*
MANIAM V STATE OF PERAK [1957] MLJ 75
*
WEARNE BROTHERS (M) LTD. V JACKSON [1966] 2 MLJ 155
*
SELVA KUMAR A/L MURUGIAH V THIAGARAJAH A/L RETNASAMY [1995] 1 MLJ 817
*
REALVEST PROPERTIES SDN. BHD. V THE COOPERATIVE CENTRAL BANK LTD. (Under Receivership) [1996] 2 AMR 2292, FC.
*
SAKINAS SDN. BHD. V SIEW YIK HAU & ANOR [2002] 5 MLJ 497, HC.
*
ARAB MALAYSIAN CORP. BUILDERS SDN. BHD. & ANOR V ASM DEVELOPMENT SDN. BHD. [1998] 6 MLJ 136, HC.
© HSKS
RECOVERY/PAYMENT TRIGGERED BY OCCURRENCE OF SPECIFIED DEFAULT/BREACH
SUM OF MONEY AGRRED BY THE PARTIES
LIQUIDATED DAMAGES: PRINCIPAL CHARACTERISTICS
SUM STIPULATED IN THE CONTRACT
GENUINE PRE-ESTIMATE OF THE LOSS
FIG. 8-1 : LIQUIDATED DAMAGES – PRINCIPAL CHARACTERISTICS © HSKS
LIQUIDATED DAMAGES: AN OVERVIEW
BASIC CHARACTERISTICS
DEFINITION
•
Prof. Vincent PowellSmith’s definition
•
Per Eggleston
•
Per Robinson and Lavers
•
1.
2.
3. 4.
GENERAL
•
Common view
•
Common view
Sum of money agreed/fixed in advance by parties
•
Reiteration in Philips Hong Kong Ltd. v AG of Hong Kong.
•
Disadvantages to:
Sum is a genuine pre-estimate of likely loss
•
•
•
Distinct difference
•
•
Position in Malaysia post Selvakumar v Thiagarajah
1. Employer 2. Contractor
Advantages to:
3. Sub-contractor
1. Employer 2. Contractor
Sum is stipulated in the contract
3. Sub-contractor
Recovery of sum is triggered by contractor’s breach e.g. non-completion
DISTINGUISHING BETWEEN THE TWO TERMS
PENALTY: DEFINITION
Use of terms interchangeably
•
DISADVANTAGES
ADVANTAGES
Four basic characteristics:
LIQUIDATED DAMAGES AND PENALTIES DISTINGUISHED
Per Prof. Vincent PowellSmith Per Lord Dunedin in Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd.
•
Mere labeling is inclusive
•
Depends on construction afforded to term by the courts
•
EXAMPLES OF PENALTY CLAUSES •
Elicited from the relevant case-law
Lord Dunedin’s proposed tests.
LEGAL EFFECTS OF PENALTIES •
Penalty: Invalid and unenforceable
•
Legal effect per Watts, Watts & Co. Ltd. v Mitsui & Co. Ltd.
•
See Keating’s view
FIG. 8-2 : LIQUIDATED DAMAGES – AN OVERVIEW © HSKS
INCLUSION OF EXPRESS PROVISION IN CONTRACT PERMITTING DEDUCTION OF THE LIQUIDATED DAMAGES EMPLOYER HAS NOT WAIVED HIS RIGHT TO DEDUCT LIQUIDATED DAMAGES
THE EXPRESS LIQUIDATED DAMAGES CLAUSE IS VALID AND ENFORCEABLE
IMPOSITION OF LIQUIDATED DAMAGES: TYPICAL PRE-CONDITIONS
SPECIFIED CONTRACTUAL PROCEDURES HAVE BEEN STRICTLY COMPLIED WITH
DETAILS ON LIQUIDATED DAMAGES CLEARLY AND PROPERLY FILLED IN DEFINITE DATE FIXED CONTRACTUALLY FROM WHICH DAMAGES CAN RUN
FIG. 8-3 : IMPOSITION OF LIQUIDATED DAMAGES – TYPICAL PRE-CONDITIONS © HSKS
CONTRACTOR SHALL FAIL TO COMPLETE ON TIME
MISCELLANEOUS PRE-CONDITIONS
THE CONTRACT ADMINISTRATOR SHALL DETERMINE AND ISSUE ANY EXTENSIONS OF TIME DUE TO CONTRACT
DEDUCTION OF LIQUIDATED DAMAGES: COMMON CONDITIONS PRECEDENTS USED
THE EMPLOYER SHALL GIVE WRITTEN NOTICE TO THE CONTRACTOR OF HIS INTENTION TO DEDUCT LAD
FIG. 8-4 :
THE CONTRACT ADMINISTRATOR SHALL ISSUE A CERTIFICATE OF NON-COMPLETION
THE CONTRACT ADMINISTRATOR SHALL CERTIFY THAT NO FURTHER EXTENSIONS OF TIME ARE DUE TO CONTRACTOR
DEDUCTION OF LIQUIDATED DAMAGES – COMMON CONDITIONS PRECEDENTS USED © HSKS
PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES: AN OVERVIEW
GENERAL RULE FOR IMPOSITION OF LIQUIDATED DAMAGES
DEFINITION •
Recovery of LAD must be in accordance with the contract
•
Procedural requirements/conditions precedent must be strictly followed
•
Effect of the application of the ‘contra proferantum’ rule
•
Need to satisfy general rule
•
Six principal pre-conditions:
GENERAL PROCEDURE
1. Existence of express contractual provision on LAD 2. LAD Clause must be valid 3. LAD details must be clearly filled in 4. Contractual provisions must be strictly complied with 5. Definite date from which LAD can run 6. Non-waiver by employer of his rights to the LAD
BASIC STEPS
•
Five basic steps
•
See Figures 6-11 to 6-13 on the flowcharts
FIG. 8-5 :
•
Triggering event: failure of contractor to complete on time
•
Crucial to enforceability of provision and recovery of LAD
DETERMINE IF RELEVANT CERTIFICATES/ NOTICES HAVE BEEN ISSUED
DETERMINE IF EMPLOYER HAS WAIVED HIS RIGHTS TO LAD
ESTABLISH EXISTENCE AND VALIDITY OF LAD CLAUSE
ESTABLISH DEFAULT OF CONTRACTOR
•
2 forms of waiver: 1. Express 2. Implied
•
Was there consideration in return?
• •
Certificate of NonCompletion (CNC) Notice of Intention to deduct LAD
EMPLOYER RECOVERS THE LIQUIDATED DAMAGES •
Conditions precedent
•
Decision as to recovery
•
Timing
POST LAD DEDUCTION PROCEDURES
•
Effect of further E.O.T.
•
See Fig. 6-14 & 615 for flowchart
PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES – AN OVERVIEW © HSKS
NON-COMPLETION AND DAMAGES IN NOMINATED SUB-CONTRACTS: AN OVERVIEW
EXPRESS CONTRACTUAL PROVISIONS
GENERAL POSITION
NSC’S LIABILITY FOR DAMAGES
•
Legal principles similar to Main Contractor
•
Clause 7.0: PAM ‘98 Sub-Contract Form
•
Liability for 2 types of damages:
•
Clause 27: JKR 203N (Rev. 10/83)
1. 2.
•
Clause 27: IEM.CES 1/90 Form
•
Clause 25: ‘Putrajaya’ Conditions of Nominated Sub-Contract
Liquidated damages, or Unliquidated/general damages
EFFECT OF NSC’S DEFAULT •
Effect of default in completing works in time: breach of contract
•
Consequences of the said breach - Employer entitled to damages i.e., either: 1. 2.
LAD as stipulated in the subcontract, or General damages enforceable through arbitration/court action
DAMAGES FOR BREACH OF CONTRACT •
•
EXPRESS CONTRACTUAL FORMULA
Governing Provision: S 74 Contracts Act 1950 (Rev. 1974) ‘Compensation for loss or damage caused by breach of contract’
•
Called the ‘Financial Contractual Remedy’
•
Usually an LAD clause
Three main heads of damage per Eggleston:
•
Express stipulations as to: 1. 2. 3. 4.
1. Main Contractor’s liability to pay LAD to employer of NSC’s default 2. Main Contractor’s own loss consequent to NSC’s default
•
Rate Scope of coverage Maximum limit Pre-conditions, etc.
Issues pertaining to the ‘stepping down’ of the Main Contractor’s LAD clauses
GENERAL OBSERVATIONS •
Necessity for parties to agree upon and arrive at a genuine preestimate
•
Need to clearly stipulate conditions precedent to recovery
.
•
Prudent to cap maximum limit
•
If LAD clause ‘stepped down’ into sub-contract, sub-contractor bound irrespective of value of the sub-contract
3. Third party claims due to NSC’s default
FIG. 8-6: NON-COMPLETION AND DAMAGES IN NOMINATED SUB-CONTRACTS – AN OVERVIEW © HSKS
CONTRACTUAL PROVISION IS A PENALTY CLAUSE CONTRACTUAL PROVISION IS UNCERTAIN/INCONSISTENT NO CONTRACTUAL PROVISION TO EXTEND TIME FOR ACT OF PROVISION IN QUESTION NO DATE STIPULATED FOR THE COMMENCEMENT OF THE CONTRACT CONTRACT IS AT LARGE CONDITIONS PRECEDENT NOT OBSERVED
LIQUIDATED DAMAGES: TYPICAL GROUNDS FOR CHALLENGING
EMPLOYER HAS WAIVED LIQUIDATED DAMAGES CERTIFICATES OF EXTENSION OF TIME AND/OR PRACTICAL COMPLETION NOT VALID EXTENSIONS OF TIME GRANTED INSUFFICIENT PRACTICAL COMPLETION ACHIEVED EARLIER THAN CERTIFIED MISCELLANEOUS CHALLENGES/DEFENCES
FIG. 8-7: LIQUIDATED DAMAGES – TYPICAL GROUNDS FOR CHALLENGING © HSKS
LAD: MALAYSIAN LEGAL POSITION – AN OVERVIEW
EFFECT OF S75 CONTRACTS ACT 1950 (REV. 1974) 1. No difference between penalty and liquidated damages clauses. 2. All liquidated damages clauses to be treated as penalty clauses under English law.
EFFECT OF SELVAKUMAR V THIAGARAJAH [1995]
CIRCUMVENTING SELVAKUMAR V THIAGARAJAH
1. Employer cannot recover simpliciter sum fixed in contract, whether as a penalty or liquidated damages. 2. Must prove actual damages/reasonable compensation per Hadley v Baxendale. 3. Figure stipulated in Contract is the ceiling amount recoverable.
UNDER DOCTRINE OF FREEDOM TO CONTRACT 1. Parties of equal bargaining strength. 2. Free to agree on any terms between themselves. 3. Philips HK Ltd. v AG of Hong Kong.
MUTUAL AGREEMENT
CLAUSE 22.2: PAM CONTRACT 2006
1. By parties on circumventing decision in Selvakumar v Thiagarajah.
1. Contractor confirms that by entering into the Contract
2. Can draft appropriate clause
2. He agrees to pay such sums 3. Which become due 4. Without Employer having to prove his actual loss/damage
FIG. 8-8 : LAD – MALAYSIAN LEGAL POSITION – AN OVERVIEW © HSKS
START
Is the contractor liable to pay LAD?
No
Yes Have all the conditions precedents been fulfilled?
No
Prima facie, employer cannot recover liquidated damages (LAD)
Yes Employer can proceed to recover simpliciter the sum fixed in the contract as LAD
Does the contractor challenge the employer’s deduction of the LAD?
No
Yes Is there an express clause circumventing rule in Selvakumar Thiagarajah?
Yes
Prima facie, employer can deduct the stipulated LAD amount
No Matter to be resolved through arbitration/litigation
A
B
FIG. 8-9: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN POSITION POST SELVAKUMAR V THIAGARAJAH (PART I) © HSKS
A
B
Employer must prove the actual damages or reasonable compensation per rule in Hadley v Baxendale / S74 Contracts Act
Is employer able to prove damages as required?
No
Employer may not be able to recover any damages at all
Yes
Are the damages more than the sum stipulated in the contract as LAD?
Yes
Prima facie, employer can deduct the stipulated LAD amount
No
Employer can recover only his actual damages or reasonable compensation as decided by the arbitral forum or the court
STOP
FIG. 8-10: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN POSITION POST SELVAKUMAR V THIAGARAJAH (PART II) © HSKS
COMPLETION AND HANDING-OVER
© HSKS
9.0
COMPLETION AND HANDING-OVER
•
PROBLEMS WITH DEFINITIONS AND TERMINOLOGY
•
CONDITIONS PRECEDENT
•
NONNON-ISSUE BY CONTRACT ADMINISTRATOR
•
CHALLENGES TO CPC
•
PROBLEMS ARISING FROM CPC ISSUES
•
SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC
•
RELEVANT CASES
*
WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64
*
H.W. NEVILL (SUNBLEST) LTD. V WILLIAM PRESS & SONS LTD. [1981] 20 BLR 78
*
P & M KAYE LTD. V HOSIER DICKINSON LTD. [1972] 1 WLR 64
*
EMSON EASTERN (IN RECEIVERSHIP) V EME DEVELOPMENTS LTD. [1991] 55 BLR 114
*
BRUNO ZORNOW (BUILDERS LTD.) V BEECHCROFT DEVELOPMENTS LTD. [1990] 51 BLR 16
© HSKS
CONTRACT ADMINISTRATOR HAS DISCRETION TO ISSUE C.P.C. WHERE MINOR WORKS ARE LEFT TO BE DONE ON A ‘DE MINIMIS’ BASIS
C.P.C. CAN BE ISSUED NOTWITHSTANDING PRESENCE OF LATENT DEFECTS
GUIDELINES TO DETERMINE PRACTICAL COMPLETION PER KEATING
PRACTICAL COMPLETION MEANS COMPLETION OF ALL WORK THAT HAS TO BE DONE
C.P.C. CANNOT BE ISSUED IF THERE ARE PRESENT PATENT DEFECTS
FIG. 9-1 : GUIDELINES TO DETERMINE PRACTICAL COMPLETION PER KEATING © HSKS
FUNCTIONAL TEST
MISCELLANEOUS TESTS
COMPLETENESS TEST
ESTABLISHING PRACTICAL COMPLETION: PRINICPAL TESTS
AUTHORITIES TEST
SAFETY TEST
INCONVENIENCE TEST
FIG. 9-2 : ESTABLISHING PRACTICAL COMPLETION – PRINICPAL TESTS © HSKS
MARKS END OF CONSTRUCTION PERIOD CONTRACTOR’S RIGHT TO POSSESSION OF SITE CEASES CONTRACTOR’S LIABILITY FOR CARE, SECURITY, ETC., ENDS CERTIFICATION OF INTERIM PAYMENT ENDS EMPLOYER TO RELEASE ONE MOIETY OF RETENTION SUM DEFECT LIABILITY PERIOD COMMENCES
ISSUE OF THE CERTIFICATE OF PRACTICAL COMPLETION: PRINCIPAL EFFECTS FREE SERVICE AND MAINTENANCE PERIOD STARTS TRIGGERS COMMENCEMENT OF PERIOD OF FINAL MEASUREMENT AND VALUATION OF THE WORKS CONTRACTOR’S LIABILITY TO INSURE WORKS ENDS CONTRACTOR’S LIABILITY FOR FURTHER LAD ENDS CONTRACT ADMINISTRATOR’S POWER TO ORDER VARIATIONS CEASES ENDS RESTRICTION ON OPENING OF ARBITRATION
FIG. 9-3 : ISSUE OF THE CERTIFICATE OF PRACTICAL COMPLETION – PRINCIPAL EFFECTS © HSKS
OBLIGATION TO INSURE FOR EACH SECTION ENDS WITH CPC (DEPENDING ON CONTRACT PROVISION)
CERTIFICATE OF PRACTICAL COMPLETION FOR EACH SECTION SEPARATE EXTENSION OF TIME CERTIFICATION FOR EACH SECTION
SECTIONAL COMPLETION: PRINICPAL ISSUES/EFFECTS
RELEASE OF ONE MOIETY OF RETENTION SUM FOR EACH SECTION
SEPARATE LIQUIDATED AND ASCERTAINED DAMAGES FOR EACH SECTION SEPARATE DEFECT LIABILITY PERIOD FOR EACH SECTION
FIG. 9-4 : SECTIONAL COMPLETION – PRINCIPAL ISSUES/EFFECTS © HSKS
RELEASE OF PERFORMANCE BOND AND FINAL PAYMENT UNAFFECTED
ISSUE OF CERTIFICATE OF PARTIAL OCCUPATION OF RELEVANT PART WITHIN STIPULATED PERIOD
COMMENCEMENT OF DEFECT LIABILITY PERIOD FOR RELEVANT PART ON DATE OF POSSESSION/ OCCUPATION
PARTIAL POSSESION/ OCCUPATION: PRINICPAL ISSUES/EFFECTS
CESSATION/REDUCTION OF INSURANCES CORRESPONDINGLY (IF EXPRESSLY PERMITTED)
PROPORTIONING DOWN OF LIQUIDATED AND ASCERTAINED DAMAGES RELEASE OF A PROPORTION OF FIRST HALF OF RETENTION SUM IN RESPECT OF RELEVANT PART WITHIN STIPULATED PERIOD
FIG. 9-5 : PARTIAL POSSESSION/OCCUPATION – PRINCIPAL ISSUES/EFFECTS © HSKS
COMPLETION OF WORKS UNDER THE CONTRACT
LITERAL MEANING/ INTERPRETATION
SECTIONAL COMPLETION
PRACTICAL COMPLETION
•
Strict View
•
Also termed ‘Substantial Completion’ in some cases
• Envisages completion in sections/ stages/phases
•
Absence of any patent defects; and
•
Adopts an expedient view
•
Connotates a state of readiness for use or occupation by Employer
• Intention must be agreed/expressed at time of contracting.
•
Absence of any outstanding works however trifling
•
Rarely used in practice
•
Has been abandoned in favour of a more expedient approach
•
• Contract Documents must identify/ define:
Formalized by issue of Certificate of Practical Completion (CPC) or Taking Over Certificate (TOC)
•
More common in practice
•
Provided for expressly in many Standard Forms
a) Each Section b) The Completion dates c) The Corresponding LAD •
Each section has separate: a) Certificate of Practical Completion (CPC)/TOC or Defect Notification Period (DNP)
PARTIAL POSSESSION • Situation where Employer takes over/resumes possession of: a)Whole works, or b) Part of works before Contract Completion Date • Pre-Conditions: a)With consent of Contractor b) Consent not to be unreasonably withheld • Procedural aspects: a)Issue of Certificate of Partial Occupation (CPO) within 7 days of possession. b)
Certificate to identify: i) Relevant part possessed ii) Its estimated value
b) Defects Liability Period (DLP)
c)DLP/DNP starts on date of possession
c) Liquidated and Ascertained Damages (LAD)
d) LAD rate reduced prorata for unoccupied part/portion
FIG. 9-6 : COMPLETION OF WORKS UNDER THE CONTRACT – AN OVERVIEW © HSKS
TEST ON COMPLETION: AN OVERVIEW
TYPES
PURPOSE
PRELIMINARY •
Normally undertaken by Contractor on his own.
•
Prior to Final Tests on Completion.
•
Is a necessary prelude to the Final Tests
FINAL •
Normally undertaken by either:
•
To show compliance with the Performance Specification/ Contract Requirements
•
To meet applicable statutory requirements.
•
As a pre-condition to issue of CPC
•
As a pre-condition to certification by Independent 3rd Party Specialist.
FAILURES
RESPONSIBILITY
a) Contractor in the presence of Contract Administrator (or) b) Independent 3rd Party Specialists •
Is usually a precondition to issue of CPC.
CONTRACT ADMINISTRATOR
CONTRACTOR •
Contractually, responsible for: a) Preliminary and Final Testing and Commissioning. b) Satisfactory Completion
INDEPENDANT TESTER
•
Active participant and certifier of Final Testing and Commissioning.
•
Scope as expressly stipulated in Contract.
•
Default/negligence in certification does not relieve Contractor’s obligations.\
•
Eg. SIRIM, DNV, Lloyds, TÜV, Statutory authorities, etc.
•
May also be required under statute.
FIG. 9-7 : TEST ON COMPLETION – AN OVERVIEW © HSKS
OPERATION AND MAINTENANCE MANUALS: AN OVERVIEW
GENERAL GENERAL POSITION •
Must follow express Contract stipulations as to: a) b) c) d)
•
TIMING TIMING FOR FOR SUBMISSION
Type/Nature Contents Quantity Timing for Submission
•
Must comply with express Contract stipulations.
•
Normal practice is:
•
b)Errors/ inaccuracies
• • Professionals to update • on safety issues and errors detected.
OPERATION & MAINTENANCE MANUALS/ MANUALS/ MAINTENANCE HANDBOOKS
•
Permanent record of works
•
•
Suitably detailed for future reference.
To enable Works to be operated and maintained efficiently and safely.
•
Contents, etc. to express contract stipulations/industry practice.
Contents, etc. to express contract stipulations/industry practice.
a) O & M manuals due to product improvement.
Usual requirements include draft copies for approval prior to finalization.
ASAS--BUILT/ BUILT/ ASAS--CONSTRUCTED/ CONSTRUCTED/ ASAS-INSTALLED DRAWINGS
ACCURACY ACCURACY
• Contractor’s responsibility at least during Limitation Period for:
a) Before TOC b) After TOC c) Before Performance Certificate
Most Contracts have incorporated such stipulations
•
UPDATING
TYPES/ TYPES/ NATURE NATURE
In Contract and Tort
•
In Tort, on joint and several basis
Primary responsibility for errors, omissions, etc.
•
Especially so for signing-off/ endorsing ‘Qualified Person’.
MISCELLANEOUS RECORDS/ DOCUMENTS RECORDS/
RECORDS RECORDS OF OF FINAL FINAL MEASUREMENT MEASUREMENT •
Undertaken by Contract Administrator jointly with Contractor.
•
To facilitate preparation of Final Account.
PROFESSIONAL’ PROFESSIONAL’’S S RESPONSBILITY RESPONSBILITY
CONTRACTOR CONTRACTOR ‘‘S S RESPONSBILITY RESPONSBILITY
•
Final testing and commissioning records
• Servicing and Maintenance records
•
O & M Training records, etc.
FIG. 9-8 : OPERATION AND MAINTENANCE MANUALS – AN OVERVIEW © HSKS
IDENTIFICATION OF PATENT DEFECTS & OUTSTANDING WORKS
ISSUE OF RELEVANT COMPLETION CERTIFICATE
HANDOVER OF APPROVALS/ CLEARANCES FROM STATUTORY AUTHORITIES
HANDOVER OF ALL NECESSARY SPARES
COMPLETION OF TESTING & COMMISSIONING
TAKING OVER: TYPICAL PRECONDITIONS
TRAINING OF EMPLOYER’S OPERATION & MAINTENANCE PERSONNEL
HANDOVER OF ALL ‘AS-BUILT’ DOCUMENTS/ RECORDS
HANDOVER OF ALL NECESSARY TOOLS
HANDOVER OF ALL KEYS
FIG. 9-9: ‘TAKING OVER’ OF COMPLETED WORKS BY EMPLOYER – TYPICAL PRE-CONDITIONS © HSKS
IDENTIFICATION OF THE TYPES AND DETAILS OF NECESSARY INSPECTIONS IDENTIFICATION OF THE MODE OF FORMALIZING THE TAKING OVER
IDENTIFICATION OF THE SEQUENCE OF TAKING-OVER
TAKING OVER OF COMPLETED WORKS: PROCEDURAL ISSUES
SETTING UP OF THE PROCEDURES FOR RECORDING
ESTABLISHMENT OF TAKING-OVER PROGRAMME ESTABLISHMENT OF THE RELEVANT DELIVERABLES
FIG. 9-10 : TAKING OVER OF COMPLETED WORKS – PROCEDURAL ISSUES © HSKS
DEFECTS
© HSKS
10.0
DEFECTS
•
PROBLEMS WITH DEFINITIONS AND TERMINOLOGY
•
DEFECTS FOR WHICH CONTRACTOR RESPONSIBLE
•
PROBLEMS WITH DEFECT RECTIFICATION
•
CERTIFICATION – DELAY, NON-ISSUE, ETC.
•
LIABILITY UNDER LIMITATION ACT
•
RECENT DEVELOPMENTS
•
RELEVANT CASES
*
HII SOO CHIONG V BOARD OF MANAGEMENT YEE TING PRIMARY SCHOOL [1973] 2 MLJ 204
*
LEO TENG CHOY V BEETILE CONSTRUCTION [1982] 2 MLJ 304
© HSKS
*
DANCOM ENGINEERING PTE LTD. V TAKASAGO THERMAL ENGINEERING CO. LTD. [1989] BLD [MAY] 606
*
PIRELLI GENERAL CABLE WORKS LTD. V OSCAR FABER & PARTNERS [1983] 2 AC 1
*
PEARCE & HIGH LTD. V JOHN BAXTER & MRS. A.S. BAXTER [1999] BLR 101
*
BAGOT V STEVEN SCANLON & CO. [1996] 1 QB 197
*
DUTTON V BOGNOR REGIS UNITED BUILDING CO. LTD. & ANOR [1972] 1 QB 373
*
STEVEN PHOA CHENG LOON & 72 ORS V HIGHLAND PROPERTIES SDN. BHD. & 9 ORS [2000] 3 AMR 3567
© HSKS
STANDARD OF WORKMANSHIP
PATENT DEFECT
LATENT DEFECT
TYPES
QUALITY OF MATERIAL
STANDARD OF DESIGN
NATURE
DEFECTS: PRINCIPAL TYPES AND NATURE
FIG. 10-1 : DEFECTS – PRINCIPAL TYPES AND NATURE © HSKS
DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE
MANAGEMENT FEE CONTRACTING
TRADITIONAL GENERAL CONTRACTING
‘PACKAGE DEAL’ DEAL’ TYPES OF CONTRACTS • Quality of Materials
• Standard of Workmanship WHOLLY EMPLOYER DESIGNED CONTRACT
PARTLY EMPLOYER DESIGNED CONTRACT
• Standard of Design
• Quality of Materials
• Quality of Materials
• Standard of Workmanship
• Standard of Workmanship
• Standard of Design (For elements of design in contractor’s scope of work)
PARTLY EMPLOYER DESIGNED CONTRACT
WHOLLY EMPLOYER DESIGNED CONTRACT •
Quality of Materials
•
Quality of Materials
•
Standard of Workmanship
•
Standard of Workmanship
•
Standard of Design (For elements of design in contractor’s scope of work)
FIG. 10-2 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE © HSKS
ARISING FROM ‘FAIR WEAR AND TEAR’ HAVING NUMBER OF CAUSES, CONTRACTOR’S PORTION BEING MINOR
ARISING FROM MISUSE/ ABUSE BY USERS / EMPLOYER
DEFECTS FOR WHICH CONTRACTOR IS GENERALLY NOT RESPONSIBLE
WAIVED BY EMPLOYER
ARISING FROM WORK WHICH IS NOT CONTRACTOR’S RESPONSIBILITY OUT OF TIME OR STATUTE BARRED
FIG. 10-3 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY NOT RESPONSIBLE © HSKS
POST-COMPLETION STAGE
PRE-COMPLETION STAGE
•
Or Post-Handing Over Stage
•
Or During ‘Defects Liability Period’, etc.
POST-CMGD STAGE
•
Or Pre-Handing Over Stage
•
•
Or During Currency of Construction, Installation, etc.
Or Post-Certification of Completion of Making Good Defects
•
Or During Limitation Period
CONTRACTOR’S LIABILITY FOR DEFECTS: PRINCIPAL STAGES OF CONTRACT
FIG. 10-4 : CONTRACTOR’S LIABILITY FOR DEFECTS – PRINCIPAL STAGES OF CONTRACT © HSKS
DETERMINATION OF CONTRACTOR’S EMPLOYMENT UNDER THE CONTRACT
THIRD PARTY ACTION TO MAKE GOOD DEFECTS
EMPLOYER’S PRINCIPAL REMEDIES FOR CONTRACTOR’S DEFAULT IN RECTIFYING REPORTED DEFECTS AT PRECONTRACT COMPLETION STAGE
POSTPONEMENT/NONCERTIFICATION OF COMPLETION OF WORKS
EMPLOYER MAY UNDERTAKE RECTIFICATION WORKS HIMSELF
FIG. 10-5: EMPLOYER’S PRINCIPAL REMEDIES FOR CONTRACTOR’S DEFAULT IN RECTIFYING REPORTED DEFECTS AT PRE-CONTRACT COMPLETION STAGE © HSKS
MISCELLANEOUS ACTS E.G. RAILWAYS ACT 1991 (SECTION 97) CIVIL LAW ACT 1965 (SECTION 7(5), ETC.
LIMITATION ACT 1953 (REV. 1981) - WEST MALAYSIA LIMITATION ORDINANCE 1959 (REPRINT 1965) SARAWAK
LIMITATION: RELEVANT STATUTORY ENACTMENTS
PUBLIC AUTHORITIES PROTECTION ACT 1948 (REV. 1978)
LIMITATION ORDINANCE 1952 (REPRINT 1966) SABAH LIMITATION ACT (CAP 14) REVISED EDN. 2000 BRUNEI
FIG. 10-6 : LIMITATION – RELEVANT STATUTORY ENACTMENTS © HSKS
EXPIRY OF PERIOD FOR RECTIFYING DEFECTS: OPTIONS AVAILABLE TO CONTRACT ADMINISTRATOR
DEFECTS REMAINING OUTSTANDING AND/OR UNRECTIFIED
ALL DEFECTS SATISFACTORILY MADE GOOD/RECTIFIED • Contract administrator to: a) Prepare and b) Issue the Performance Certificate forthwith.
• See express clauses under ICTAD/SBD/02
DEFECTS ARE EITHER:
DEFECTS ARE EITHER:
• minor or not material
• Serious and/or
• Impracticable or inconvenient for contractor to make good
• Material
Contract administrator to:
• Carry out diminution in value; and • Prepare and Issue Certificate of Making Good Defects
EMPLOYER TO UNDERTAKE WORKS HIMSELF I.E. DEPARTMENTALLY
RD PARTY ACTION TAKE 3RD
• Deduct costs involved from:
•
Deduct costs involved from:
a) money due to contractor and/or
a) money due to contractor and/or
b) Performance bond and/or
b) Performance bond and/or
c) as a liquidated demand
c) as a liquidated demand
FIG. 10-7 : EXPIRY OF PERIOD FOR RECTIFYING DEFECTS – OPTIONS AVAILABLE TO CONTRACT ADMINISTRATOR © HSKS
OFFICIALLY ENDS THE DEFECT LIABILITY PERIOD (DLP)
OBLIGATIONS UNDER THE CONTRACT ARE NOT RELIEVED
DISCHARGES CONTRACTOR’S RIGHTS UNDER CONTRACT TO PHYSICALLY ATTEND TO DEFECTS
CONTRACTOR’S LIABILITY FOR LATENT AND PATENT DEFECTS CONTINUES FOR THE STATUTORY PERIOD OF LIMITATION
MARKS THE BEGINING OF THE CONTRACTUAL PERIOD FOR PREPARATION OF FINAL ACCOUNT
PARTIES’ OUTSTANDING
ISSUE OF CERTIFICATE MAKING GOOD OF DEFECTS: PRINCIPAL EFFECTS ON PARTIES
DISCHARGES LIABILITY OF
GUARANTORS, INSURERS, ETC. UNDER THE CONTRACT
FIG. 10-8:
EMPLOYER HAS TO RELEASE SECOND MOIETY OF RETENTION SUM THAT IS WITHHELD
MARKS THE COMMENCEMENT OF THE CONTRACTUAL PERIOD FOR CONTRACT ADMINISTRATOR TO ISSUE FINAL CERTIFICATE
ISSUE OF CERTIFICATE OF MAKING GOOD OF DEFECTS – PRINCIPAL EFFECTS ON PARTIES © HSKS
POST-COMPLETION AND FINAL ACCOUNT
© HSKS
11.0
POST COMPLETION AND FINAL ACCOUNT
•
LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN:
*
TRAINING
*
O & M MANUALS
*
AS-BUILT DRAWINGS
•
FINALISATION OF ACCOUNT ISSUES
•
FINAL CERTIFICATE ISSUES
•
POSTPOST-FINAL CERTIFICATE PROBLEMS
•
RELEVANT CASES
*
FAIRWEATHER LTD. V ASDEN SECURITIES LTD. [1979] 12 BLR 40
*
CHEW SIN LONG CONSTRUCTION CO. LTD. V COSY HOUSING DEVELOPMENT PTE LTD. [1988] 1 MLJ 331
*
THAMESA DESIGNS SDN. BHD. & ORS V KUCHING HOTELS SDN. BHD. [1993] 3 MLJ 28
*
TOKEN CONSTRUCTION CO. LTD. V CHARLTON ESTATES LTD. [1973] 1 BLR 48
*
SHEN YUAN PAI V DATO’ WEE HOOD TECK & ORS [1976] 1 MLJ 16
© HSKS
SERVICING & MAINTENANCE: AN OVERVIEW
GENERAL POSITION • •
PURPOSE
Must follow express Contract stipulations
•
Most Contracts e.g. M&E have such provisions in the specifications.
•
EXTENT
FREQUENCY
To ensure Contractor meets contractual obligations
•
Per stipulations in:
•
•
Implied from: a) Statutory requirements
To minimize defects and downtime and prolong lifetime and efficiency.
• • • • •
Daily Weekly Monthly Quarterly Yearly
EXPRESS EXPRESS REQUIREMENTS •
As stipulated: a) In Contract b) In Manufacturer’s Warranties/ recommendations c) In O & M Manuals
•
Generally, most contracts require contractor to do monthly/ quarterly servicing.
To carry out and/or erroneous/negligent servicing.
•
P.C. may not be issued
•
Period may be extended
•
Use of 3rd Parties at Contractor’s Cost
•
Warranties may be compromised.
•
Possible action in contract, tort, statute, etc.
b) Trade usage c) Local practice
PREVALENT PREVALENT PRACTICE PRACTICE
EFFECT OF FAILURE
a) Contract and/or b) O & M Manuals
Not to nullify equipment warranties.
•
PROCEDURE FOR MONITORING
IMPLIED REQUIREMENTS REQUIREMENTS • In absence of express stipulations implied from: a) Trade usage b) Local practice c) Statute • General implication is that Employer will undertake daily and weekly servicing and maintenance.
CONTRACT ADMINISTRATOR’ ADMINISTRATOR’S RESPONSIBILITY
CONTRACTOR’ CONTRACTOR’’S S DUTY DUTY •
Proper and effective record keeping of: a) Compliances b) Deviations c) Unusual observations
•
Timely recording and signing-off.
•
Monitoring of Contractor’s work
•
Signing-off the records
•
Reporting to Employer of unusual observations
EMPLOYERS EMPLOYERS OBLIGATIONS •
Undertaking of routine servicing and maintenance e.g. daily, weekly, etc.
•
Affording Contractor proper access to work being serviced.
•
Attending to unusual observations reported.
FIG. 11-1 : SERVICING AND MAINTENANCE – AN OVERVIEW © HSKS
PLANS OF COMPLETED WORKS
‘AS-BUILT’ DRAWINGS
COMMON LABELS FOR RECORDS/ DRAWINGS OF COMPLETED WORKS
‘AS-INSTALLED’ DRAWINGS
‘AS-CONSTRUCTED’ DRAWINGS
FIG. 11-2 : COMMON LABELS FOR RECORDS/DRAWINGS OF COMPLETED WORKS © HSKS
‘AS-BUILT’ DRAWINGS: AN OVERVIEW
GENERAL POSITION •
Must follow express Contract stipulations as to: a) b) c) d)
•
Type/Nature Contents Quantity Timing for Submission
Most Contracts have express provisions incorporated.
TIMING FOR SUBMISSION
TYPES/ NATURE
•
Must comply with express contract stipulations.
•
Normal practice is:
•
a) Before CPC b) After CPC c) Before CMGD •
Contractor’s responsibility at least during Limitation Period for: a) Revisions due to product improvement.
Usual requirements include draft copies for approval prior to finalization.
Professionals to update on safety issues and errors detected.
OPERATION & MAINTENANCE SCHEMATICS /DIAGRAMMES
•
In Contract and Tort
•
In Tort, on joint and several basis
•
Primary responsibility for errors, omissions, etc.
•
Especially so for signing-off/ endorsing ‘Qualified Person’.
RECORDS OF FINAL MEASUREMENT
•
Permanent record of works
•
To supplement O&M Manuals
•
Undertaken by Contract Administrator jointly with Contractor.
•
Suitably detailed for future reference.
•
Contents, etc. to express contract stipulations/industry practice.
•
To facilitate preparation of Final Account.
•
PROFESSIONAL’S RESPONSBILITY
CONTRACTOR’S RESPONSBILITY
b) Errors/ inaccuracies •
AS-BUILT/ AS-CONSTRUCTED/ AS-INSTALLED DRAWINGS
ACCURACY
UPDATING
Contents, etc. to express contract stipulations/industry practice.
FIG. 11-3: ‘AS-BUILT’ DRAWINGS – AN OVERVIEW © HSKS
FINAL CERTIFICATE MISCELLANEOUS LABELS
FINAL ACCOUNT CERTIFICATE
CERTIFICATION UPON EXPIRY OF CONTRACT PERIOD: COMMON LABELS
PERFORMANCE CERTIFICATE
ULTIMATE CERTIFICATE
FINAL PAYMENT CERTIFICATE
FIG. 11-4 : CERTIFICATION UPON EXPIRY OF CONTRACT PERIOD – COMMON LABELS © HSKS
ISSUED UPON EXPIRY OF THE CONTRACT PERIOD ACTUAL EFFECT DICTATED BY THE PRECISE TERMS OF THE APPLICABLE CONDITIONS OF CONTRACT
ISSUED BY THE CONTRACT ADMINISTRATOR
FINALCERTIFICATE: PRINCIPAL CHARACTERISTICS
RENDERS THE CONTRACT ADMINISTRATOR ‘FUNCTUS OFFICO’
LAST OF THE VARIOUS CERTIFICATES ISSUED DURING CONTRACT PERIOD
PRIMA FACIE, SIGNIFIES DISCHARGE OF THE CONTRACT BY PERFORMANCE
FIG. 11-5 : FINAL CERTIFICATE – PRINCIPAL CHARACTERISTICS © HSKS
ISSUE OF PERFORMANCE CERTIFICATE (P.C.)
SATISFACTION OF ALL OTHER OBLIGATIONS/DUTIES UNDER CONTRACT
EXPIRY OF DEFECT NOTIFICATION PERIOD (DNP)
TYPICAL PRE-CONDITIONS TO THE ISSUE OF THE FINAL CERTIFICATE
FORMAL APPLICATION FOR THE FINAL PAYMENT CERTIFICATE
CERTIFICATION OF COMPLETION OF SERVICING AND MAINTENANCE
PREPARATION AND FINALIZATION OF THE FINAL ACCOUNT
FIG. 11-6 : TYPICAL PRE-CONDITIONS TO THE ISSUE OF THE FINAL PAYMENT CERTIFICATE © HSKS
THAT ALL THE CONTRACTOR’S FINANCIAL CLAIMS HAVE BEEN PROPERLY ACCOUNTED FOR
SATISFACTION OF THE COMPLETION CRITERIA AS SPELT OUT IN THE CONTRACT AND WHERE IT IS STIPULATED TO BE TO THE REASONABLE SATISFACTION OF THE CONTRACT ADMINISTRATOR
EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE – PRINCIPAL MATTERS FOR WHICH CERTIFICATE PROVIDES ‘CONCLUSIVE EVIDENCE’
THAT ALL EXTENSIONS OF TIME OFFICIALLY GRANTED ARE CORRECT
FIG. 11-7 :
THAT EXCEPT FOR ANY COMPUTING ERRORS, ETC. ALL RELEVANT ADJUSTMENTS (ADDITIONS/ DEDUCTIONS) HAVE BEEN MADE TO THE CONTRACT SUM
EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE – PRINCIPAL MATTERS FOR WHICH CERTIFICATE PROVIDES ‘CONCLUSIVE EVIDENCE’ © HSKS
FRAUD/DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR UNDISCOVERED DEFECTS E.G. LATENT DEFECTS, ETC. COMPUTATIONAL ERRORS, ACCIDENTAL INCLUSIONS/EXCLUSIONS, ETC. CERTIFICATE NOT GIVEN IN CORRECT FORM CERTIFICATE NOT GIVEN ON TIME CERTIFICATE NOT GIVEN BY AUTHORIZED PERSON
FINAL CERTIFICATE: TYPICAL CHALLENGES TO ‘CONCLUSIVENESS’/’FINALITY’
CERTIFIER ACTING ‘ULTRA VIRES’ CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED FRAUD/COLLUSION BETWEEN CERTIFIER AND OTHER PARTY CERTIFICATE EMBODIES WRONG DECISION ON A POINT OF LAW THE EFFECT OF THE PRESENCE OF AN ARBITRATION CLAUSE MISCELLANEOUS CHALLENGES/GROUNDS FOR CHALLENGING
FIG. 11-8: FINAL PAYMENT CERTIFICATE – TYPICAL CHALLENGES TO ‘CONCLUSIVENESS’/ ’FINALITY’ © HSKS
THANK YOU
© HSKS
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