1. Oct. 2020
Root Cause Analysis & Critical Path Method
FIDIC (Green Book)
Prep. By Eng. Dr. Hesham Saad
Risk Allocation & Risk Transfer
Contractual Cases
Member of the scientific body
of the Justice ACADEMY
Prep. By Eng. Dr. H. Saad 1
4. Sl… 06… Section (1) Introduction
Sl… 12… Section (2) FIDIC Model selection criteria
Sl… 19… Section (3) Risk Allocation and Risk transfer
Sl… 24… Section (4) Risk avoidance (RCA , CPM)
Sl… 38… Section (5) Parties
SL...42… Section (6) Claims
Sl… 48… Section (7) Conflicts – Disputes
Sl… 51… Section (8) ADR, Alternative Disputes Resolution
Sl… 57… Section (9) Similarities
Prep. By Eng. Dr. H. Saad
Index
4
5. Prep. By Eng. Dr. H. Saad
This Presentation aimed at presenting the key concepts of
construction contract Risk Allocation and Risk Transfer, with
focusing, in general, on the point of view, of how to avoid
contracts disputes , where taking in our considerations the
FIDIC Green Book Model.
Abstract
H. Saad
5
6. Prep. By Eng. Dr. H. Saad
Introduction
STRATEGY
LIABILITY, OBLIGATION
(Exceptional events)
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A contract
is a legally binding document between that defines and
governs the rights and duties of the parties to an agreement.
Risk Allocation
Risk Transfer
OBJECTIVE
On Time, On Budget
6
7. Prep. By Eng. Dr. H. Saad
Contract strategy
Contract strategy means selecting organizational and contractual policies required for
execution of specific project , means and methods required for the execution of a
specific project throughout all stages of pre-design, design, construction and post
construction with a goal of meeting main project objectives,
The scope of such contracts is very wide, from a simple purchase of standard article to
multi-million- pound projects. The size and complexity of the contract matter vary
accordingly.
Contract strategy determines the level of management , design , construction,
maintenance and operation . It also determine the level of risk allocated to different
parties
7
8. Contractual Risk Allocation
Developing an effective Contract strategy that support the Employer objectives and
Allocates Risks to those best able to control them , is critical to delivering the project (on
time and on budget) , to the required level of quality and with the fewest possible disputes
'Risk', in a project delivery context, can be defined as 'an uncertain event or set of
circumstances that, should it occur, will have an effect on the achievement of one or
more of the project's objectives'. ... The collective allocation of such risks in
a construction contract represents its 'risk allocation'
Accept
Transfer
Reduce
Avoid
Prep. By Eng. Dr. H. Saad 8
9. Contractual Risk Transfer
Contractual risk transfer is a legally binding way to transfer risk to the party that
may be in the best position to control the risks related to the service to be provided.
Contractual risk transfer is when the language in a non-insurance agreement excuses
one party from financial or legal responsibility associated with specified actions, inactions,
injuries or damages. In contractual risk transfer, one party agrees to indemnify and hold
another party harmless in a contract. The indemnitor, backed by their own insurance
policy, accepts the liability in the indemnitee’s place.
Contractual risk transfer is the ability to transfer a risk/loss from one party to
another party through the language written in a contract.
Prep. By Eng. Dr. H. Saad 9
10. Prep. By Eng. Dr. H. Saad
Selected
FIDIC Model
Drafting
Final
Model
Suggested
Conv. Model
RCA
Merging
Final
Cont.
Administration
Preparation
Formation
CPM
1
• Setting the project objectives and constraints
2
•Selecting a proper contract form / model
•Information , documentation and approval
3
•Contract Negotiation and Resolution
4
•Contract Review and Drafting
5
•Contract Execution
6
•Contract Administration practices
Contract signing stages
Forms Cost or Price Based ?
10
11. Construction contracts , classification
Main Forms of
contracts
Price Based
contract
Unit rate
Lump Sum
Cost based
contract
Target cost
Cost
Reimbursement
Prep. By Eng. Dr. H. Saad 11
13. Small Project , Small risk , Small amount
The (Employer) Engineer undertakes the design
The Contractor undertakes the design
Yes No
No
Yes
Yes
No
Operation (DBO)
Yes No
Fixed Cost
Yes
No
Discuss in detail
The project is a plant and
include a balanced risk allocation ?
Risk born mainly by the contractor
Selection Criteria Flowchart
The Yellow Book:
Conditions of Contract for Plant
and Design-Build
The Gold Book:
FIDIC Design, Build and
Operate Projects
The Silver Book:
Conditions of Contract for
EPC Turnkey Projects
The Red Book:
Conditions of Contract for
Construction for Building and
Engineering Works Designed by the
Employer
The Green Book:
Conditions of Short Form of Contract
The Blue Book:
Contract for Dredging and
Reclamation Works
The White Book:
Client/Consultant Model
Services Agreement
The Pink Book (or the MDB/FIDIC
Contract):
Modified FIDIC Contract
incorporating special conditions
terms for use where MDBs are
providing financing
Prep. By Eng. Dr. H. Saad 13
14. Prep. By Eng. Dr. H. Saad
Book model / Issue 90’s 2000’s 1st update 2nd update
Red (Constructions) 1999 2017
Pink (Development Banks MDB) 2010
Yellow (Plant- Design- Build) 1999 2017
Silver (EPC – Turn Key) 1999 2017
Orange (Merged, Yellow + Silver) 1995
Gold (DBO - Maintenance) 2008
Green (Shor Form) 1999
Blue (Dredging works) 2006 2016
White (appoint Consultant) 1999 2006 2017
Contracts standard Model (Conditions)
14
15. Comparison Matrix - 1
Prep. By Eng. Dr. H. Saad
Parameter Red Yellow Silver Green
Design Employer Contractor Employer Employer or
contractor
Design
Approval
Only
Contractor’s
Design (if any)
Engineer
approves or
rejects before
execution
N.A. Only contractor’s
Design (if any)
Financial
Proposal
Unit Price Lump Sum Price Lump Sump Price Unit Price /
Lump sum Price
Engineer Yes Yes Generally No No. employer
representative
may assign if
needed
Who will be responsible for the Design, that is the question?
15
16. Prep. By Eng. Dr. H. Saad
Parameters Red Yellow Silver Green
Payment
Schedules
Measured
quantities
Payment % Payment
Calendar /
Payment %
Measured
quantities or %
Tests during
construction
Significant no.
tests
Relatively less
and simpler
Generally no tests Limited or no
tests
Test at
completion
Relatively less
and simpler
Very detailed and
complicated
performance
tests
Very detailed and
complicated
performance
tests
Limited or no
tests
Risk Distribution Employer caries
the design risks
Distributed Contractor carries
the risks
Varies
Comparison Matrix - 2
16
17. Prep. By Eng. Dr. H. Saad
FIDIC EPC – PPP Family ( Public Private Partnership)
Yellow book ( 1st Ed 1999 – updated 2017) : Condition of the contract is for Plant and Design – Build
for electrical and mechanical plant and for building works , the majority of the design by the contractor
and is responsible for performance specification prepared by the employer ( fitness for purpose) , the
yellow book is lump sum price financed by Employer m payment made on basis of certification by
engineer ( like the Red book)
Silver book ( 1st Ed 1999 – updated 2017) : Condition of the contract is for EPC (Engineering ,
Procurement , Construct / Turnkey / BOT ( Build, Operate , Transfer) for Project financed by third party
lenders ( mostly). The contractor to provide ` completed facility that is ready to operated at this
contract is used where the certainty of the price and completion date is important with single
responsibility (fitness for purpose). There is no engineer under Silver Book ( responsibility are assumed
by the employer
Gold book ( 1st Ed 2008 – no update) : DBO Contract Condition of the contract is for Design Build and
Operate Projects, the contractor at his own risk to operate and maintain the completed project (owned
by the Employer for a period of typically 20 years against set of targets returned to the Employer in an
agreed condition. The contractor has no responsibility for financing the project
17
18. Model
Contract Agreement r r- If any r r- if any r
Letter of Acceptance r r - r -
Letter of Tender r r - r -
Tender - - r - -
Particular Condition r r r r( Part A , B) r
General Condition r r r r r
Employer Requirement - r r r -
Specification r - - - r
Drawing r - - - r
BOQ r - - - r
Time Schedules r r - r -
Contractor’s Proposal (Tendered Design) - r - r r
Other Doc. As a part of contract If any If any If any If any If any
Contract Documents
Prep. By Eng. Dr. H. Saad 18
20. Prep. By Eng. Dr. H. Saad
Risk
Conflict
Claim
Not Clearly
assigned
Not Clearly
managed
Not Clearly
resolved
Dispute
"a conflict”, can exist without a dispute,
but
“a dispute”, cannot exist without a conflict.
According to John Burton (1990):
Dispute is a short-term disagreement that can
result in the disputants reaching some sort of
resolution; it involves issues that are negotiable. ...
Conflict, is a long-term with deeply rooted issues
that are seen as “non-negotiable”.
20
21. Construction CONTRACTs Form , and Risk allocation
02_2- Cost Plus fixed Fee
02_3- Cost Plus Fixed Fee + % Profit
02_4- Cost Plus Incentive Fee
03- Cost Plus Variable Fee
04- Guaranteed Max. Price C.
Conditions of Contract for :-
01- Fixed Price Contracts
01_1- Lump Sum contract
01_2- Unit Price Contract
02- Cost Plus Contracts
02_1- Cost Plus % of Cost
05- Project Management
06-Turnkey
07- Joint _ Venture
Prep. By Eng. Dr. H. Saad
Turnkey
Lump Sum , Unit Price
Cost Plus (Risk sharing)
Owner Direct Force
Employer Risk
Contractor Risk
0%
0% 100%
100%
21
22. • Red Book: Risk is “balanced” between the Employer and Contractor;
Contractor responsible for execution of all work prior to the Take-Over Certificate.
Employer is responsible for all designs and specifications, providing access to the
site to the Contractor
Prep. By Eng. Dr. H. Saad
FIDIC Model - Risk Allocation
• Green Book: Overall, the risk allocation has moved slightly in the contractor's
favor. The contractor allowed to recover time and money for rectifying damage to works,
goods and documents caused by employers risks which are most of the force majeure
list plus use or occupation and design by the employer. (GBSC 2.3, 7.3, 10.3 and 10.4)
GMP
Employer Risk
Contractor Risk
0%
0% 100%
100% Red Book
Yellow Book
Silver Book - EPC
Gold Book - DBO
Green Book
22
23. Prep. By Eng. Dr. H. Saad
Design Control Risk Allocation
• Red Book: “The Employer, under the 1999 Red Book Conditions of Contract – is
completely responsible for the specifications, drawings and overall design of the project.
• “For Buildings and Engineering works Designed by the Employer”
• Green Book: SC 5.2 - “The Contractor shall remain responsible for his tendered design and
the design under this Clause, both of which shall be fit for the intended purposes defined in
the Contract and he shall also remain responsible for any infringement of any patent or
copyright in respect of the same”.
The Green Book continues to reflect the principles and allocation of risk between the parties as the
FIDIC Red and Yellow Books.
It allows for either lump sum or other pricing and
It allows for design by either the Employer or the Contractor.
23
25. Prep. By Eng. Dr. H. Saad
Common uses of the Ishikawa diagram are Process and Performance defects prevention to
identify potential factors causing an overall effect.
What Is the Root Cause Analysis (RCA)
25
26. Contractor caused delays for
reasons under their control
Errors and omissions in the
contract documents
Personality conflicts
between the
project’s team
Delays for reasons
beyond the contractor or
Employer control
ِEmployer caused delays
for reasons under their
control
c
o
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t
r
a
c
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r
M
i
s
c
.
Prep. By Eng. Dr. H. Saad
Leading cause of claims
and disputes in general
Noncompliance of contractual obligations
BOQ, DWG , Specs
Construction Schedule
Scope of work
Not having enough labor
force on site
c
o
n
t
r
a
c
t
Cash flow issues
Lack of proper planning and
management of the project
Contractual problems between the
prime contractor and subcontractors
Scope changes, Cash flow
A higher level political factor that
impacted the project’s progress
E
m
p
l
o
y
e
r
Late processing of contractor’s requests
for clarifications and change orders
Limiting contractor’s access to
parts of the site
the team making things difficult
on site that cause delays.
T
e
a
m
Strick
Out of state
manufacturer’s shut down
Unusual weather
conditions
A subcontractor going out of business
in the middle of the project
General , Condition
Epidemic
A fishbone Diagram, Root Causes and effect analysis
26
27. A Pareto chart is a type of chart that contains both bars and a line graph, where individual values
are represented in descending order by bars, and the cumulative total is represented by the line.
The purpose of
the Pareto chart
is to highlight the
most important
among a
(typically large)
set of factors
Pareto Chart
Prep. By Eng. Dr. H. Saad 27
28. Is the clause valid and
enforceable ?
Does the clause
define and provide a
list of force majeure
events?
Is the occurred event
included in the list?
Follow the required
notice procedure
What is the legal
system of your
contract ?
In the common law
legal system the
doctrine of
frustration may apply
In the civil law legal
system the force
majeure provision
may apply
A force majeure event
occurred
Is the force majeure
clause in the
contract?
Yes No
No
No
No
Prep. By Eng. Dr. H. Saad
“Exceptional Events”,
(Epidemic)
What is a force majeure clause?
What if there is no force majeure clause?
Will Covid-19 trigger a force majeure clause?
Is Covid-19 a force majeure event?
Performance is more difficult or expensive
now – is that enough?
28
29. Prep. By Eng. Dr. H. Saad
What is a force majeure clause?
120. Force majeure may include, but is not limited to, exceptional events or circumstances of the kind listed
below, so long as conditions (a) to (d) above are satisfied:
(i) war, hostilities (whether war be declared or not), invasion, act of foreign enemies, rebellion, terrorism,
revolution, insurrection, military or usurped power, or civil war;
(ii) riot, commotion, disorder, strike or lockout by persons other than the Contractor’s Personnel and other
employees of the Contractor and Sub-Contractors;
(iii) munitions of war, explosive materials, ionising radiation or contamination by radioactivity, except as
may be attributable to the Contractor’s use of such munitions, explosives, radiation or radioactivity; and
(iv) natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity.
29
30. Force Majeure is defined in clause 19.1 of the 1999 Red Book as (an exceptional event or
circumstance)
(a) which is beyond a party’s control,
(b) which such party could not reasonably have provided against before entering into the
contract,
(c) which, having arisen, such party could not reasonably have avoided or overcome, and
(d) which is not substantially attributable to the other party.
Clause 19.1 further provides a non-exhaustive list of exceptional events or circumstances
which may fall under the definition of Force Majeure if the above conditions are met.
What is the definition of Force Majeure? In Red Book
Prep. By Eng. Dr. H. Saad 30
31. What is the definition of Force Majeure? In Green Book
13.2 If a Party is or will be prevented from performing any of its obligations by Force Majeure, the Party
affected shall notify the other Party immediately. If necessary, the Contractor shall suspend the execution of the
Works and, to the extent agreed with the Employer, demobilize the Contractor’s Equipment.
If the event continues for a period of 84 days either Party may then give notice of termination which shall take
effect 28 days after the giving of the notice.
After termination, the Contractor shall be entitled to payment of the unpaid balance of the value of the
Works executed and of the Materials and Plant reasonably delivered to the Site, adjusted by the following:
1.a) any sums to which the Contractor is entitled under Sub-Clause 10.4,
2.b) the Cost of his suspension and demobilization,
3.c) any sums to which the Employer is entitled.
The net balance due shall be paid or repaid within 28 days of the notice of termination.”
Prep. By Eng. Dr. H. Saad 31
32. Prep. By Eng. Dr. H. Saad
Site Condition, Case Study (1)
• Red Book: Inclement Weather remains a legitimate reason for an extension of
time claim under these Conditions of Contract.
SC 19.1, “Definition of Force Majeure” – (v) “natural catastrophes such as earthquake,
hurricane, typhoon or volcanic activity
• Green Book: Inclement weather is NOT provided for in the Green form,
though it is possible for the parties to insert an express provision, allocating risk to
one party or the other for such eventuality.
• Since inclement weather is not a risk of the employer, the contractor is not entitled
under 7.3. to an extension of time.
Subject to Sub-Clause 10.3, the Contractor shall be entitled to an extension to the
Time for Completion if he is or will be delayed by any of the Employer's Liabilities.
On receipt of an application from the Contractor, the Employer shall consider all
supporting details provided by the Contractor and shall extend the Time for
Completion as appropriate.
7.3 Extension of Time
32
33. a common clause in contracts that essentially frees both parties from liability or
obligation when an extraordinary event or circumstance beyond the control of the parties,
such as a war, strike, riot, crime, epidemic or an event described by the legal term act of
God, prevents one or both parties from fulfilling their obligations under the contract.
In practice, most force majeure clauses do not excuse a party's non-performance
entirely, but only suspend it for the duration of the force majeure.[1] Force majeure is
generally intended to include occurrences beyond the reasonable control of a party
What is the procedure for relying on the clause?
What is the effect of relying on the clause?
Practical steps if seeking to rely on a force majeure clause
Covid-19, Case Study (2)
Prep. By Eng. Dr. H. Saad 33
34. Prep. By Eng. Dr. H. Saad
Time bar
of Typical sequence of principal events during contract of construction
Issue of
Performance
Security
4.2 Return of
performance
security
28 day
<28 day
<21 day
8.2 Time for
Completion
Submission of
the Tender
Issue of the
letter of
Acceptance
8.1
Commencement
Date
10.1 Issue of
Taking over
certificate
Tender
Period
Base Date
Delay
attributable
to
contractor
Test of
Completion
11.9 issue of
performance
certificate
Defects
notification
period
11
notifying
of defect
Treat of
defect
Issue of Tender
Document
34
35. Project Planned Time Schedule , Steel Making field
Gantt Chart
Prep. By Eng. Dr. H. Saad 35
36. Prep. By Eng. Dr. H. Saad
What Is the Critical Path Method (CPM)
Identifies the Most Important Tasks
Helps Reduce Timelines
Compares Planned with Actual
Activity Sequence
Network Diagram
PERT (Program Evaluation and Review Technique)
36
37. Prep. By Eng. Dr. H. Saad
As-planned schedule.
As Planned vs AS Built Time Schedule
As-built schedule.
37
38. Prep. By Eng. Dr. H. Saad
FIDIC contracts,
Parties… GB vs RB Scope
38
39. Prep. By Eng. Dr. H. Saad
Scope and Content
• Red Book for large Construction Projects
• Green Book for smaller, less complicated Construction Projects – not necessarily defined by
money value.
• Red Book (1999) contains 20 Clauses and over 166 Sub-Clauses over 62 pages.
• Green Book (1999) contains only 15 Clauses and only 52 Sub-Clauses over 10 pages.
(1) Value of less than USD 500,000.00 however it has evolved and now it is used for
(2) non-complex works regardless of value as it is clearly the complexity of the works
(3) In terms of time ... this model of contracts is suitable for short-term projects that take
between 6 and 12 months .
As the name suggests the Short Form is much briefer than the more detailed Red and Yellow Books with only
fifteen clauses and four thousand five hundred words compared to the thirty thousand plus, word count for
the Red Book
39
40. Engineer Duties
Red Book: “Engineer” empowered to be “impartial” with regards to making “fair
determinations” between the Contractor and the Employer.
Green Book: SC 3.2 - “Engineer” formal position eliminated; “Employees Representative” –
who COULD BE an Engineer - acts for and in the interests of the Employer. There is no dual
role or duty to be impartial.
Employer
Owner Rep.
DAB
Engineer
contractor
Contract
The Parties in a FIDIC contract
Prep. By Eng. Dr. H. Saad 40
41. Prep. By Eng. Dr. H. Saad
Employer
Design
Contractor
construct
Technological
supplier
Work packages
contractor
Work packages
contractor
Engineer
DAB, Dispute
Adjudication Board
Failure to understand and/or comply with
its contractual obligation by the
employer/contractor/subcontractor
Incomplete design information
or employer requirements
Failure to administer the contract
Errors and/or omissions in the contract document
There is no Engineer as with the Red and
Yellow Books, but the Employer may
nominate his Representative which may
or may not be a professional engaged to
manage the Contract Works.
41
43. Claims lifecycle and Causes
1- Problem identified
2- Disagreement arises
3- Result or action disputed
4- Paper war starts
5- Dispute
6- Litigation
Prep. By Eng. Dr. H. Saad
1- Contract
2- Fast Track Construction
3- Design Errors
4- Contract Administration
5- Pre - Design Investigation
6- Contractor Problems
7- Owner Problems
8- Project Conditions
9- Outside Forces
43
44. Prep. By Eng. Dr. H. Saad
indicated seven basic procedures for claims and change order
administration. They are:
1) recognition and identification of change,
2) notification of change,
3) systematic and accurate documentation of change,
4) analysis of time and cost impacts of change,
5) pricing of change,
6) negotiation of claim, and
7) dispute resolution and settlement.
1st group classifies claims into
two basic types by the objectives of claims.
They consist of
(1) claim for extra time to complete the contract, and
(2) claim for extra money arising out of the contract.
2nd group, classified claims into four major types:
(1) Delay claim,
(2) Scope-of-work claim,
(3) Acceleration claim, and
(4) Changing-site-condition claim, in order to
facilitate the calculation of damages of claims
44
45. Claims
• Red Book: SC 20.1; “Contractors Claims”
• “If the Contractor considers himself to be entitled to
any extension of the Time for Completion and/or any additional payment, under any
Clause of these Conditions or otherwise..., the Contractor shall give notice to the
Engineer, describing the event or circumstance giving rise to the claim. The notice shall
be given as soon as practicable, and not later than 28 days after the Contractor became
aware, or should have become aware, of the event or circumstance.”
Green Book: SC 10.3; “Early Warning”
• “The Contractor shall submit to the Employer an itemized make-up of the value of
Variations and claims within 28 days of the instruction or of the event giving rise to the
claim. The Employer shall check and if possible agree the value. In the absence of
agreement, the Employer shall determine the value
Prep. By Eng. Dr. H. Saad 45
46. Red Book: SC 20.1; “Contractors Claims”
• “If the Contractor fails to give notice of a claim within such period of 28 days, the Time
for Completion shall not be extended, the Contractor shall not be entitled to additional
payment, and the Employer shall be discharged from all liability in connection with the
claim. Otherwise, the following provisions of this Sub-Clause shall apply.”
Green Book: SC 10.5; “Variation and Claim Procedure”
• “The Contractor's entitlement to extension to the Time for Completion or additional
payment shall be limited to the time and payment which would have been due if he had
given prompt notice and had taken all reasonable steps.”
Prep. By Eng. Dr. H. Saad 46
47. Prep. By Eng. Dr. H. Saad
Claims for Extension of Time and Additional Payment
<28 days
28 days or as agreed upon
Claim Event Notice
Interim
Particulars
Final Particulars
42 days
Interim
Particulars
Monthly
End of effects
47
49. Dysfunctional
Conflict
Claims
Dispute
Conflict Handling Style Negotiation
Dispute Handling Style Negotiation
Mediation
Contract
and Process
Project
uncertainty
People and
behavior
The Time which the conflict is realized , Time Flow
Other Sourcing
Improvement
(relationship
+ Quality)
Functional
Conflict
Latent
Perceived
Felt
Conflict Event
Manifest
Prep. By Eng. Dr. H. Saad 49
50. Mediation
Arbitration
Expert Determination
Court – Home Jurisdiction
Court – Foreign Jurisdiction
Expedited Arbitration
Expert Determination
Mediation
Expedited Arbitration
Arbitration Court – Home Jurisdiction
Court – Foreign Jurisdiction
(Source: WIPO International Survey on Dispute Resolution in Technology Transactions)
Relative time and cost of resolving disputes
Prep. By Eng. Dr. H. Saad
Avoiding and solving construction disputes
Sometimes, disputes are inevitable. However, they can be avoided or solved once they’ve been
brought to light. In each case, consulting an experienced attorney can prevent spending time and
money down the road.
50
51. Prep. By Eng. Dr. H. Saad
FIDIC Contracts,
GB vs RB,… ADR and Differences
51
52. Prep. By Eng. Dr. H. Saad
Non - Binding Binding
Decision by Disputing Parties Decision by Third Party
Alternative Dispute Resolution (ADR)
Gradation of Dispute Resolution Methods
Avoidance Negotiation Mediation Conciliation Arbitration Litigation
DAB
52
53. Prep. By Eng. Dr. H. Saad
Alternative Dispute Resolution, ADR
DAB gives
its decision
Arbitrator/s
appointed
<28 day <28 day
<84 day <56 day
Amicable
settlement
Parties present
submission to
the DAB
8.1
commencement
Date
20.2 Parties
Appointed DAB
20.4 Parties
refers a dispute
to the DAB
20.4 Parties may
issues “ notice of
dissatisfaction”
20.4 Parties may
initiate
Arbitration
Time bar of Typical Sequence of dispute management during contract of
construction in clause 21
53
54. Alternative Dispute Resolution, ADR
• Red Book: SC 20.4; Obtaining Dispute Adjudication Boards Decision
• If a dispute (of any kind whatsoever) arises between the Parties in connection with, or arising out of,
the Contract or the execution of the Works, including any dispute as to any certificate, determination,
instruction, opinion or valuation of the Engineer, either Party may refer the dispute in writing to the DAB
for its decision, with copies to the other Party and the Engineer. Such reference shall state that it is
given under this Sub-Clause
• Red Book: SC 20.5; Amicable Decision
• Where notice of dissatisfaction has been given under Sub-Clause 20.4 above, both Parties shall
attempt to settle the dispute amicably before the commencement of arbitration. However, unless both
Parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on
which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.
• Red Book: SC 20.6; Arbitration
• Unless settled amicably, any dispute in respect of which the DAB’s decision (if any) has not become final
and binding shall be finally settled by international arbitration. Unless otherwise agreed by both Parties:
• Red Book: SC 20.6; Arbitration
a)The dispute shall be finally settled under the Rules of Arbitration of the International Chamber of
Commerce,
b) The dispute shall be settled by three arbitrators appointed in accordance with these Rules, and
c)The arbitration shall be conducted in the
language for communications defined in Sub- Clause 1.4 [Law and Language].
Prep. By Eng. Dr. H. Saad 54
55. Prep. By Eng. Dr. H. Saad
Sequence of dispute events envisaged in Clause 20
Time bar of Typical Sequence of dispute management during contract of construction in clause 21
55
56. • Green Book: SC 15.1; Adjudication
• Unless settled amicably, any dispute or difference which arises between the Contractor and the
Employer out of or in connection with the Contract, including any valuation or other decision of the
Employer, shall be referred by either Party to adjudication in accordance with the attached Rules for
Adjudication ("the Rules"). The adjudicator shall be any person agreed by the Parties. In the event of
disagreement, the adjudicator shall be appointed in accordance with the Rules.
• Green Book: SC 15.2; “Notice of Dissatisfaction”
• If a Party is dissatisfied with the decision of the adjudicator or if no decision is given within the time set
out in the Rules, the Party may give notice of dissatisfaction referring to this Sub- Clause within 28 days of
receipt of the decision or the expiry of the time for the decision.
• Green Book: SC 15.2;
• If a Party is dissatisfied with the decision of the adjudicator or if no decision is given within the time set
out in the Rules, the Party may give notice of dissatisfaction referring to this Sub- Clause within 28 days
of receipt of the decision or the expiry of the time for the decision.
• Green Book: SC 15.2;
• If no notice of dissatisfaction is given within the specified time, the decision shall be final and binding on
the Parties. If notice of dissatisfaction is given within the specified time, the decision shall be binding on
the Parties who shall give effect to it without delay unless and until the decision of the adjudicator is
revised by an arbitrator.
• Green Book: SC 15.3; Arbitration
• A dispute which has been the subject of a notice of dissatisfaction shall be finally settled by a single
arbitrator under the rules specified in the Appendix. In the absence of agreement, the arbitrator shall be
designated by the appointing authority specified in the Appendix. Any hearing shall be held at the place
specified in the Appendix and in the language referred to in Sub- Clause 1.5.
Prep. By Eng. Dr. H. Saad 56
57. Prep. By Eng. Dr. H. Saad
FIDIC Contracts,
GB vs RB, Similarities
57
58. Red Book: SC 14.10; “Statement at Completion”
Within 84 days after receiving the Taking-Over Certificate for the Works, the Contractor shall
submit to the Engineer six copies of a Statement at completion with supporting documents,
in accordance with Sub-Clause 14.3 [Application for Interim Payment Certificates], showing:
Red Book: SC 14.10; “Statement at Completion”
a) The value of all work done in accordance with the Contract up to the date stated in the Taking-
Over Certificate for the Works,
b) Any further sums which the Contractor considers to be due, and
c)An estimate of any other amounts which the Contractor considers will become due to him under
the Contract. Estimated amounts shall be shown separately in this Statement at completion.
Prep. By Eng. Dr. H. Saad
Statement at Completion
Green Book: SC 8.1 Completion;
The Contractor may notify the Employer when he considers the works are completed
Green Book: SC 8.2 Taking over Notice;
The Employer shall notify the contractor when he consider that the contractor has completed the works
stating the date accordingly. Alternatively, The Employer may notify the contractor that the works,
although not fully complete are ready for taking over stating the date accordingly. The employer shall
take over the works upon the issue of this notice. The contractor shall promptly complete any
outstanding work and subject to clause 9 , clear the site
58
59. Interim Payment
Red Book: SC 14.3;“Application to Interim Payment Certificates”
• “The Contractor shall submit a Statement in six copies to the Engineer after the end of each month, in a form
approved by the Engineer, showing in detail the amounts to which the Contractor considers himself to be entitled,
together with supporting documents which shall include the report on the progress during this month in accordance
with Sub-Clause 4.21 [Progress Reports].”
Red Book: SC 14.6; “Issue of Interim Payment Certificates”
• “...Thereafter, the Engineer shall, within 28 days after receiving a Statement and supporting documents, issue to
the Employer an Interim Payment Certificate which shall state the amount which the Engineer fairly determines to
be due, with supporting particulars.”
Prep. By Eng. Dr. H. Saad
Green Book: SC 11.3;
“Interim Payments”
• “Within 28 days of delivery of each statement, the employer shall pay to the contractor amount shown in the contractor’s statement
less retention at the rate stated in the Appendix, and less any amount for which the Employer has specified his
reasons for disagreement.”
• Also, the Employer shall not be bound by any sum previously considered by him to be due to the Contractor.
Green Book: SC 11.2;
“Monthly Statements”
• “The Contractor shall submit each month to the Employer a statement showing the amounts to which he considers
himself entitled.”
59
60. Red Book: SC 14.11;
“Application for Final Payment Certificate”
a)The value of all work done in accordance with the Contract, and
b) Any further sums which the Contractor considers to be due to him under the Contract or
otherwise.
Red Book: SC 14.11;
“Application for Final Payment Certificate”
• “If the Engineer disagrees with or cannot verify any part of the draft final statement, the
Contractor shall submit such further information as the Engineer may reasonably require and shall
make such changes in the draft as may be agreed between them. The Contractor shall then
prepare and submit to the Engineer the final statement as agreed. This agreed statement is
referred to in these Conditions as the “Final Statement”.
Prep. By Eng. Dr. H. Saad
Final Payment
Red Book: SC 14.11;
“Application for Final Payment Certificate”
“Within 56 days after receiving the Performance Certificate, the Contractor shall submit, to the
Engineer, six copies of a draft final statement with supporting documents showing in detail in a
form approved by the Engineer:
60
61. Prep. By Eng. Dr. H. Saad
Administration Impairments Resulting from Imbalanced Contract
Conditions: Owner Payment Default
Occurrence of
event giving rise
to the claim
Contractor gives
a notice of claim
Contractor sends
to engineer a fully
detailed claim
Engineer shall
respond
Either Party
refers dispute
to DAB
DAB gives its
decision
Either Party
may initiate
arbitration
Either Party may issue a
notice of dissatisfaction
42 days 42 days 84 days 28 days 56 days
28 days
61
62. Red Book: SC 14.12; “Discharge”
• “When submitting the Final Statement, the Contractor shall submit a written discharge which
confirms that the total of the Final Statement represents full and final settlement of all moneys due
to the Contractor under or in connection with the Contract. This discharge may state that it becomes
effective when the Contractor has received the Performance Security and the outstanding balance of
this total, in which event the discharge shall be effective on such date.”
Prep. By Eng. Dr. H. Saad
Red Book: SC 14.13;
“Issuance of Final Payment Certificate”
• “Within 28 days after receiving the Final Statement and written discharge in accordance with Sub-
Clause 14.11 [Application for Final Payment Certificate] and Sub-Clause 14.12 [Discharge], the
Engineer shall issue, to the Employer, the Final Payment Certificate which shall state:
Red Book: SC 14.13;
“Issuance of Final Payment Certificate”
a) The amount which is finally due, and
b) After giving credit to the Employer for all amounts previously paid by the Employer and for all
sums to which the Employer is entitled, the balance (if any) due from the Employer to the Contractor
or from the Contractor to the Employer, as the case may be.
62
63. Prep. By Eng. Dr. H. Saad
Green Book: SC 11.6;
2. “Within 28 days after the submission of this final account, the Employer shall pay to the Contractor
any amount due. If the Employer disagrees with any part of the Contractor's final account, he shall
specify his reasons for disagreement when making payment.”
Green Book: SC 11.6;
1. “Within 42 days of the latest of the events listed in Sub-Clause 11.5 above, the Contractor shall
submit a final account to the Employer together with any documentation reasonably required to enable
the Employer to ascertain the final contract value.
63
64. Red Book: SC 14.8;
• Unless otherwise stated in the Particular Conditions, these financing charges shall be calculated
at the annual rate of three percentage points above the discount rate of the central bank in the
country of the currency of payment, and shall be paid in such currency.
Green Book: SC 11.8;
• The Contractor shall be entitled to interest at the rate stated in the Appendix for each day the
Employer fails to pay beyond the prescribed payment period.
Prep. By Eng. Dr. H. Saad
Red Book: SC 14.8;
• This period shall be deemed to commence on the date for payment specified in Sub-Clause 14.7
[Payment], irrespective (in the case of its sub- paragraph (b)) of the date on which any Interim
Payment Certificate is issued.
Red Book: SC 14.8;
• If the Contractor does not receive payment in accordance with Sub-Clause 14.7 [Payment], the
Contractor shall be entitled to receive financing charges compounded monthly on the amount
unpaid during the period of delay.
Delayed Payment
64
65. Prep. By Eng. Dr. H. Saad
Sequence of payment events envisaged in Clause 14 of FIDIC contracts
65
66. Red Book: SC 1.8; “Care and Supply of Documents”
• “If a Party becomes aware of an error or defect of a technical nature in a document which was
prepared for use in executing the Works, the Party shall promptly give notice to the other Party of such
error or defect .”
Green Book: SC 10.3; “Early Warning”
• “A Party shall notify the other as soon as he is aware of any circumstance which may delay or disrupt
the Works, or which may give rise to a claim for additional payment. The Contractor shall take all
reasonable steps to minimize these effect.”
Prep. By Eng. Dr. H. Saad
Duty to Report
66
67. Red Book: SC 17.2;
• The Contractor shall take full responsibility for the care of the Works and Goods from
the Commencement Date until the Taking-Over Certificate is issued (or is deemed to
be issued under Sub-Clause 10.1 [Taking Over of the Works and Sections]) for the
Works, when responsibility for the care of the Works shall pass to the Employer.
Prep. By Eng. Dr. H. Saad
Red Book: SC 17.2;
If a Taking-Over Certificate is issued (or is so deemed to be issued) for any Section or part of the
Works, responsibility for the care of the Section or part shall then pass to the Employer.
Green Book: SC 13.1;
The Contractor shall take full responsibility for the care of the Works from the Commencement
Date until the date of the Employer's notice under Sub- Clause 8.2. Responsibility shall then
pass to the Employer. If any loss or damage happens to the Works during the above period, the
Contractor shall rectify such loss or damage so that the Works conform with the Contract.
Green Book: SC 13.1;
Unless the loss or damage happens as a result of an Employer's Liability, the
Contractor shall indemnify the Employer, the Employer's contractors, agents and
employees against all loss or damage happening to the Works and against all claims
or expense arising out of the Works caused by a breach of the Contract, by
negligence or by other default of the Contractor, his agents or employees.
Contractor’s Care of the Works
67
68. Oct. 2020
Root Cause Analysis & Critical Path Method
FIDIC (Green Book)
Prep. By Eng. Dr. Hesham Saad
Risk Allocation & Risk Transfer
Contractual Cases
Member of the scientific body
of the Justice ACADEMY
Prep. By Eng. Dr. H. Saad 68
