causes of claims and avoidance
DESCRIPTION
CAUSES OF CLAIMS AND AVOIDANCE. N D Sharma. CLAIM. A Claim is a request for reimbursement of cost and / or time from one Party to another. This may be for a progress payment or a variation, or something else - PowerPoint PPT PresentationTRANSCRIPT
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CAUSES OF CLAIMS AND AVOIDANCE
N D Sharma
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CLAIM
A Claim is a request for reimbursement of cost and / or time from one Party to another. This may be for a progress payment or a variation, or something else
Under the Contract either party may have a claim’ (PPMO SBD does not envision Employer’s Claim)
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CLAIMS
Contract provides for procedures making contractual claims by the contractor arising out of including:
• A response to events which the contractor was not required to anticipate
• For additional payment or additional time• The legal/contractual consequence of events
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CLAIMS
Contractual Claims include:• Additional work claims – cost & profit• Damages claims – cost only• Neutral risk claims – time only
Common Legal (outside the Contract) Claims:• Claims in tort• Ex- Gratia
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CLAIMS
Claims may be arising out of several factor including:
• Manner in which contract was secured (Low bidding )
• The Engineer and roles in designing • The level of definition of the scope of works• Political aspects• Legal / contractual
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CAUSES OF CLAIMS• Inability to recognize all the risks and failure to
deal adequately with those including their sharing amongst the contracting parties
• Risks being either ignored or dealt with arbitrarily
• Employer’s tendency to own all the rights and shift risks and obligations to the contractor
• Inadequate pre-bid investigations; developing projects hastily not knowing the potential risks
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RISKS OWNERSHIPFIDIC/PPMO Cls.
Risk Employer
Contractor
1.9/20.1 and 42©
Delayed drawings and instructions
√
1.9 Error in Employers requirements
√ √
2.1/21 Right of access to the site
√
4.7 Setting out √ √
4.12/42.1(f) Unforeseeable physical conditions
√
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RISKS OWNERSHIP
FIDI/PPMOCls.
Risk Employer
Contractor
4.24 Fossils √
7.4/42 and 33 Testing delays by the Employer
√
7.5 /35.5 Def Rejection of Materials √
7.6/34 Remedial works √
8.4(a)/27.1 Extension for time for completion - Variation
√
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RISKS OWNERSHIP
FIDIC/PPMO Cls
Risk Employer Contractor
8.4(b)/na Extension for time for completion – delay giving entitlement to EOT
√
8.4(e)/na Exceptionally adverse climatic conditions
√
8.4(d)/na Unforeseeable shortages and the availability of personnel or goods caused by epidemic or by government action
√
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RISKS OWNERSHIP
FIDIC/PPMO Cls
Risk Employer Contractor
9.4/33 Failure to pass Tests on Completion
√
11.4/35 Failure to remedy Defects
√
12.1 and 14.1/37 and 38
Increase of quantities √
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RISKS OWNERSHIP
FIDIC/PPMO Cls
Risk Employer
Contractor
12.4/na Omission of work through a Variation
√
12.4 Failure to pass tests after Completion
√
13.3/37 and 38 Variation procedure √
13.7/45 Adjustment for changes in legislation
√ √
13.8/45 Adjustment for changes in cost
√ √
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RISKS OWNERSHIP
FIDIC/PPMO Cls
Risk Employer Contractor
14.8/41 Delayed payment √
15.4/61 Payment after Termination
√
17.1 Indemnities √ √
17.2/na Care of the Works prior to the Taking Over Certificate
√
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RISKS OWNERSHIPFIDIC/PPMO Cls
Risk Employer Contractor
17.4/11 Consequences of Employer's risks
√
19.4/42 Consequences of force majeure
√
20.1/na Contractor's claims √
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CAUSES Of CLAIMS• Awards of contracts going to very low rate
bidding contractors, looking for opportunity to put in claims leading to disputes.
• Inefficient contract administration on the part of the Employer/Purchaser
• Force-Majeure conditions not recognized.• Failure on the part of the actors of the
contract to timely discharge their duties and meet contractual obligations
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CLAIM TIMELINE
• If the Contractor considers himself to be entitled to an EOT or addition payment or both, he must give notice to the Engineer as soon as practicable and “not later than28 days after the Contractor became aware, or should have become aware, of the event or circumstance” giving rise to the claim. If he fails to make claim on time he is not entitled to it.
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CAUSES OF CLAIMS AND AVOIDANCE
AVOIDANCE OF CLAIMS
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AVOIDANCE OF CLAIMS• Parties must know their contracts well; • ‘Every contract is unique’; though this
saying is somewhat diluted by the introduction of SBDs, elaborate regulations (PPR) and the PPA
• Parties must understand that they are at par as sovereign partners of the contract, to be regulated by their contract and the governing law.
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AVOIDING CLAIMSAvoidance of Claims through Contract Administration• Drawings, information and ‘Holds’• Approvals• Ground conditions• Relationships• Consultants’ performance• Access to works• Public authority / government bodies• Payment• The manner in which early problems are dealt with• Performance of nominated sub-contractors
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AVOIDING CLAIMS
Avoidance of Claim Situations by Contractor’s Actions:
• carefully review the bidding documents including drawings and specifications;
• price the job adequately to make fair profit;• manage and perform contract with due
diligence;• respect specifications and instructions;
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AVOIDING CLAIMS
Avoidance of Claim Situations by Contractor’s Actions:
• use materials, plant as specified and ensure quality;
• take care of works in progress by appropriate measures;
• comply with all applicable laws, regulations including safety related;
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AVOIDING CLAIMS
Avoidance of Claim Situations by Contractor’s Actions:
• inform the Employer in advance whenever an event occurs which is likely to increase the cost of the works and or the time of completion;
• remedy defects well before expiry of the defect liability/ defect notification or warranty period; and
• present claims, if any, in a timely manner.
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AVOIDING CLAIMS
Avoidance of Claim Situations Good documentation:
CONTRACTOR’S PROGRAM• Reflect Contract requirements• Include Contract milestones• Show sequence of works• Incorporate resource and other constraints• Supported by Method Statement
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AVOIDING CLAIMS
Employer’s Actions at. thé Procurent Stage:• inform and instruct bidders on the procedure
for preparation and submission of bids; • describe the standards required; • inform bidders of the criteria for evaluating
bids; and • also inform that the only bidder having the
experience and capacity to execute the
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AVOIDING CLAIMS
Employer’s Actions at. thé Procurent Stage:• in the case of works, provide detailed site
investigation report and other information related to the site of which the Employer is in possession
• define the conditions of contract and method of payments;
• describe procedures for acceptance of final products ;
• and for issuance of contract amendments
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AVOIDING CLAIMS
Employer’s Actions at. thé Procurent Stage:• define adequately quality control procedures• inform about the rights and duties of the parties
and the remedy against defaulter• provide for amicable settlement, adjudication and
arbitration mechanisms for settlement of disputesFIDIC- Based conditions stipulate that:– an independent Engineer, empowered with
authority to administer the contract with some pre-disclosed restrictions, will supervise the contract.
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AVOIDING CLAIMS
Employer’s Actions at. thé Procurent Stage:• the Employer has produced a design for the
work through a competent Engineer • the possession of site and access thereto will
be made available as specified in the documents or within reasonable time so that the activities as scheduled would not be adversely affected
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EMPLOYER’S CLAIM
Employer’s Claim:• Entitlement: under any Clause of the
contact or otherwise in connection with the Contract.
• No time bar for the notice (should be given as early practicable- can be given by the Employer or by the Engineer
• Engineer to refer to engineer for determination!
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Engineer's Supremacy
• Employer is denied to set off against or make any deduction from a certified amount or otherwise claim against the Contractor unless done in accordance with the contract provisions under Clause
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HANDLING OF CLAIMSEmployer and Contracor’s Joint Actions: • Keep good record systems and agree on facts• Respond to challenges / issues promptly• Monitor progress• Establish claims systems and procedure• Review resourcing• Do not assume everything will come good at
the end of the day• Settle amicably or go for adjudication