5 .1 Construction Contract Administration - I

5 .
1 Construction Contract Administration - I
Explaining ambiguities
Supply of drawings and instructions
Review and approve contractor’s work program
Approval of materials and quality certificates
Replacement of contractor’s personnel
Suspension of work and determine extra payments arising out
of such suspension
Determining EoT for completion of the work
Documenting reasons for EoT
Certifying Interim Payments
1
Construction/ Engineering Contract
• There are many types of engineering contracts, and
engineering contracts can differ dramatically in nature.
• Engineering contracts, for example, differ fundamentally in
nature from sales contracts, in that engineering contracts
impose obligations of performance over a prolonged period of
time whereas sales contracts, by comparison, could,
theoretically, be performed instantaneously.
• (In this respect, however, a true "turnkey construction
contract’ is more akin to a sales contract than to a traditional
construction contract.)
• Some engineering contracts involve aspects of sales
contracts, for example in an equipment supply and
installation contract.
2
Contract
A contract is an agreement between two parties,

one called the contracting party or
owner/Employer and the other the contracted
party or the contractor to perform a previously
determined scope of work for a previously
determined amount of money.
Contract Document
Documents forming the Contract and their order
of Priority: (GCC 2.3)
1. Agreement 2. Letter of Acceptance
3. Contractor’s Bid 4. Special Condition Of
Contract
5. General Condition of Contract
6. Specifications (Special/Standard)
7. Drawings 8. Bill of Quantities
9. Any other document listed in SCC as part of the Contract
Contract Document/Agreement
• Establishes risks, obligations/ relationship of the
parties for the performance of these elements
systematically.
• Establishes the contractor’s scope of work
• Provides means by which performance can be
assessed and measured
• Establishes the owner’s means of control
• Provides means by which breaches can be identified
• Provides means by which failure can be established
Contract Agreement
• The Construction Agreement is defined as a contract
by which the Contractor:
 Organizes the necessary means,
 Runs such business at it’s own risk and
 Undertakes to construct specific works against a
consideration
• Employer / Engineer should not cross the line that
separates the Contractor in terms of responsibility.
• Serious contractual liabilities can result
if interference
is made by Employer/Engineer with contractor’s
means and methodology.
Contract management/Administration
• is process that enables parties to a contract to
meet their obligations in order to deliver the
objectives of the contract.
• involves building a good working relationship
between the contracting parties
• continues throughout the life of a contract and
involves managing proactively to anticipate and
respond to contract needs.
Contract Management/Administration
The Importance is to ensure:
• All the stakeholders are well informed regarding
their contractual responsibilities and obligations.
• The contract performance is satisfactory and
services are provided to the required standard
within the agreed time frame and cost
• The Employer’ s interests are protected and its
obligations are met;
• The contractual obligations of the Contractor are
met;
• The contract milestones are achieved;
Contract Management/Administration
The Importance is to ensure:
• Key contract deliverables are received;
• Contract related processes are completed;
• Any variations, claims, issues, disputes, and any
additional funding requirements are managed.
Contract Provisions
1.General Conditions Of Contract (GCC)
2. Special Conditions of Contract (SCC )
The Structure of GCC in SNRTP document is as follows:

A. General Clauses
B. Time Control
C. Quality Control
D. Cost Control
E. Finishing the Contract
F. Additional clauses
Contract Administration Experience
General:
• Work Program and Quality Assurance Plan
either not prepared or prepared for the sake
of fulfillment of the requirement only
• Construction survey not done or done as a
new design without reference to Contract
drawings resulting in large variations in
contract quintiles.
• Site specific Construction drawings not
prepared
• Setting out approval/ commencement
approval of work activity not documented
Contract Administration Experience
General:
• Work request form, Site instruction form, Site records
and daily diary either not maintained or properly not
maintained. Mostly work done on verbal instructions
• Lab/Field tests not done as per requirement
• Materials used before receiving test results and
approval
• Workmanship and Quality of completed work do not
match the test results
• Time extension granted even to non performing
contractor against contract provision
• Contract milestones not monitored/liquidated
damage not applied
RAIDP Contract Administration Experience
Inadequate Supervision resulting in:
• Unsatisfactory workmanship and finishing
beyond specified tolerance of both road
formation and structures
• Cut / fill slope not as shown in drawing
• Quality of work visibly detected as
unsatisfactory
• Setting out defects
• Generally little or no curing of cement works
• Pavement failures due to inadequate
compaction
RAIDP Contract Administration Experience
Inadequate Supervision resulting in:
• Unsatisfactory sub base gradation
• Unsatisfactory Otta Seal works due to sub base

finishing defects and distributor defects
• Construction of inappropriate/avoidable
structures
• Necessary work included in BOQ omitted
• As built drawings not submitted
• No supervision during defect liability period
resulting in uncorrected defects and unfulfilled
contractual obligations
Pre- Construction Meeting
A pre-construction (kick-off) meeting provides
opportunity to the parties in the project to:
• understand each party’s roles & responsibilities
for the success of the project,
• plan and discuss detailed arrangements necessary
for project success.
• discuss and understand contractual
requirements/submittals
• clarify responsibilities of Employer, Project Manager
and contractor’s personnel,
Pre- Construction Meeting
• understand supervision arrangement ,lines of
authority and communication
• identify potential issues and the process for
resolution
• identify potential sources of misunderstanding
• update project Schedule
• facilitate the smooth running of the project because
all team members will understand the 'how' and the
'why' of the project administration
• Establish good working relation
• Provide commitment to project success
Planning Pre- Construction Meeting
• Should be held before starting of the construction
• Agenda for the meeting to be prepared
• Identify submittals by the contractor for the meeting
• Written invitation to be sent with meeting agenda to the
contractor and other participants in advance with
adequate time ( 15 days) for the contractor to prepare
the required submittals such as:
- Revised Construction Schedule
- List of Project Personnel, subcontractor,
suppliers
- Name of Authorized persons
Pre- Construction Meeting Agenda
Agenda for the meeting should be prepared to cover the specific
requirement of each contract. However, common agenda for a
pre-startup meeting in general covers the following:
1. Introduction:
a) Employer, Consultant , Contractor , Subcontractor and
their responsible project staffs.
b) Employer’s perspective of contract administration,
approach to problem solving and establishment of
team work (our problem) and expectations from the
Contractor/consultant
c) Contractor’s perspective of implementation of the
work and expectation from Employer/ Consultant
2. Communications:
a) All communications between the Employer/PM and the
Contractor shall be routed through the PM.
b) All "Requests for Information" (RFI's) shall be in written
form to the PM. All responses from the PM will be in
writing addressed to the Contractor's Project Manager.
c) All RFI's shall be consecutively numbered and include
related GCC/SCC specification reference number.
d) Authority of Project Personnel (PM/PSE etc)
3. Insurance Requirement ,Mobilization Advance :
a) Insurance Policy to be delivered as specified
b) Mobilization Guarantee and requirements for
advance payments:
• Mobilization at site and establishment of site camp
• Mobilization of key persons/ equipments as per
contract
• Submission of Insurance Policies
• Submission of revised /updated work schedule
• Submission of acceptable Bank Guarantee
4. Schedules/Program
a) Discuss Updated schedule, Start Date &Completion of
identified critical activities; Verify specified contract
milestones
b) Specified Program updates and late submission effect
5. Other Submittals by the Contractor
a) Quality Assurance Plan, Method Statement, Safety
Plan ,Environment management Plan
b) Joint Construction Survey Report
6. Contract Documents ,Drawings & Specifications, :
a) Confirm Receipt/ Issue required contract documents as
specified in the Contract
b) Discrepancies in the plans, specifications, or details
to brought to PM’s attention and clarified prior to start of
the work. Clarify Contractor’s assumptions will not
justify improper work.
7. Possession / Access to Site/ Other Contractors
8. Establishment of Contractor’s Camp and Laboratory,
9. Starting of Work and Site Administrative Formats :
a) Request for approval to start of work to be submitted and
work to start only after approval
b) Discuss & agree on Site administrative formats such as
work request form, Site instruction, Daily Work program,
Daily Site Record etc.
10. Responsibility for Quality Control & Testing/Contractor’s
Lab, Lab test recording and reporting formats
11. Agree on weekly, monthly meeting dates and progress
report format
12. Shop Drawing/Working Drawing :
a) Contractor to prepare and submit for approval in
approved format; work to start only after approval
b) Deviations from plans or specs shall be brought to the
PM's attention in writing.
13. Work Measurement / Payment Certificate
a) PM/ delegated Representative to check completed
work quantity /quality ; review as built drawings
b) Payment certificate checking and payment period
14. Contract variations and VO approval procedures
15. Signs /Traffic Diversion/ Safety
16. Contractual Provision of Time extension
17. Price Adjustment provisions and requirements
18. Procedures for dispute.
19. Contract provisions for Termination (stoppage of wok
more than 30 days when no stoppage of work is
shown in the work program), Completion and Taking
Over.
20. Other Site Specific issues e.g applicable taxes etc
14. Contract variations and VO approval procedures
15. Signs /Traffic Diversion/ Safety
16. Contractual Provision of Time extension
17. Price Adjustment provisions and requirements
18. Procedures for dispute.
19. Contract provisions for Termination (stoppage of wok
more than 30 days when no stoppage of work is
shown in the work program), Completion and Taking
Over.
20. Other Site Specific issues e.g applicable taxes etc
Contract Documents
• The contract documents are one of the most important pieces that
will guarantee of a successful project.
• This list contains the most common documents that must form
part of every construction contract.
• Agreement
• General Conditions
• Special Conditions
• Bill of Quantities
• Drawings
• Specifications
• Schedule
• Provision in contract documents that the subject agreement
represents the complete and final accord between the contracting
parties, and supersedes all associated oral agreements and
understandings.
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Contract Documents
1 . Agreement
– The agreement to be used by the contracting officer (owner) and
the contractor. The most essential part of the contract documents.
2 . General Conditions
– This contract document will define the obligations and rights on
how to execute the project.
3 . Special Conditions
– This is usually an extension of the contract and to the general
conditions. This part must specify specific conditions and clauses
to each particular project or job.
4 . Bill of Quantities
– This is formed by the list of diverse trades, and
materials included that form part of the construction.
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Contract Documents
5 . Drawings
All set of drawings that form part of the job to be performed. These
drawings are usually the latest drawings and must be received by the
contractor prior to the date of commencement.
6 . Specifications
• The technical requirement to complete, execute and/or perform every
little task or material being incorporated in the construction projects.
Usually, specifications are composed by referencing construction
standards and codes.
7 . Schedules
• The construction schedule is an important piece of the document.
Sometimes, construction contracts will require updated schedules
throughout the construction progress, and might form part of the
monthly, or agreed term, application for payments.
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Ambiguities in the Contract
• After a contract is signed the parties may not need to

refer to it again unless a dispute arises.
• When a problem develops and escalates and the
contract is consulted, you might think that the
relevant clause supports the stance taken by your
company, but the other side could say the exact same
thing, then the ambiguity is said to be aroused in the
contract.
• This could be because the contract was not written
clearly enough in the first place.
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Ambiguities in the Contract
• The English language is not always as clear as we imagine
it to be.
• When drafting legal documents, complex principles need to
be conveyed. If you keep the language too simple some of
what you are trying to say may get omitted, but make it too
complicated and nobody will be able to understand what
you're trying to say at all.
• Language may be used to convey a particular technical,
legal or scientific meaning which may be different from
everyday usage.
• It is important that all the parties to the contract have the
same understanding of the context in which the language is
going to be used.
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Explaining Ambiguities in the Contract
• The first step could simply be to contact the other party to see if the issue can be
worked out through discussion and negotiation, on the basis that it is in everybody's
interest to try to put the problem behind you.
• Rectification: rewriting the contract to reflect the parties' intentions. If only one side
has made a mistake, rectification may still be available - but only if the other party
noticed the mistake, is going to benefit from it and has failed to draw attention to the
mistake.
• Interpretation: where there has not been a clear mistake in a contract, things
become more complex. A very literal reading might give one particular meaning to a
clause, but another party might say that this meaning was obviously not the one
which both sides had meant to achieve during negotiations or when they signed the
contract. A court's first point of reference will be the Golden Rule: words should
be interpreted in line with everyday usage and given their natural and ordinary
meaning. This should apply unless it results in an absurdity or inconsistency with
the rest of the contract. In this case, the grammar and ordinary sense of the words
can be modified as far as is needed to resolve the absurdity or make business
common sense of the contract if it is clear what the parties must have meant, but
no further.
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Explaining Ambiguities in the Contract FIDIC
1.2 Interpretation
• In the Contract, except where the context requires otherwise:
– (a) words indicating one gender include all genders;
– (b) words indicating the singular also include the plural and words indicating the
plural also include the singular;
– (c) provisions including the word “agree”, “agreed” or “agreement” require the
agreement to be record in writing;
– (d) “written” or “in writing” means hand-written, type-written, printed or
electronically made, and resulting in a permanent record; and
– (e) the word “tender” is synonymous with “bid”, and “tenderer” with bidder” and
the words “tender documents” with “bidding documents”.
• The marginal words and other headings shall not be taken into
consideration in the interpretation of these Conditions.
• In these Conditions, provisions including the expression “Cost plus
profit” require this profit to be one-twentieth (5%) of this Cost unless
otherwise indicated in the Contract Data.
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Explaining Ambiguities in the Contract FIDIC
1.5 Priority of Documents
• The documents forming the Contract are to be taken as mutually
explanatory of one another. For the purposes of interpretation, the
priority of the documents shall be in accordance with the following
sequence:
– (a) the Contract Agreement (if any),
– (b) the Letter of Acceptance,
– (c) the Letter of Tender,
– (d) the Particular Conditions - Part A,
– (e) the Particular Conditions - Part B,
– (f) these General Conditions,
– (g) the Specification,
– (h) the Drawings, and
– (i) the Schedules and any other documents forming part of the Contract.
• If an ambiguity or discrepancy is found in the documents, the Engineer
shall issue any necessary clarification or instruction.
34
Explaining Ambiguities in the Contract PPMO
2. Interpretation
• 2.1 In interpreting these GCC, singular also means plural, male
also means female or neuter, and the other way around. Headings
have no significance. Words have their normal meaning under the
language of the Contract unless specifically defined. The Project
Manager shall provide instructions clarifying queries about these
GCC.
• 2.2 If sectional completion is specified in the SCC, references in
the GCC to the Works, the Completion Date, and the Intended
Completion Date apply to any Section of the Works (other than
references to the Completion Date and Intended Completion Date
for the whole of the Works).
35
Explaining Ambiguities in the Contract PPMO
2. Interpretation
• 2.3 The documents forming the Contract shall be
interpreted in the following order of priority:
– (a) Contract Agreement,
– (b) Letter of Acceptance,
– (c) Contractor’s Bid,
– (d) Special Conditions of Contract,
– (e) General Conditions of Contract,
– (f) Specifications,
– (g) Drawings,
– (h) Bill of Quantities (or Schedules of Prices for lump sum
contracts), and
– (i) Any other document listed in the SCC as forming part of the
Contract. 36
Contract Drafting Tips
• The clearer the drafting of a contract, the less room there is for
ambiguity and dispute.
• some tips to make drafting clearer:
– avoid jargon – technical language can be misinterpreted;
– use clear definitions;
– avoid tautology (saying the same thing twice in different words) and
excessive numbers of adjectives;
– cut out superfluous words and padding;
– use short sentences and paragraphs;
– use the active voice and avoid the passive if possible;
– avoid ambiguity – take care that your words can only be interpreted
in one way;
– avoid similar-sounding words which may confuse a layman;
– proof read the contract – or, preferably, get somebody else to proof
read it. 37
Review and Approve
Contractor’s Work Program
• Submitting work program and making it updated is the obligation of the
contractor as per the PPA 2007 and PPR 2007.
• PPA 2007
– (2) The procurement contract under Sub-section (1) shall include the terms
and conditions as referred to in the bidding documents, documents relating
to proposal and documents relating to sealed quotation and such terms and
conditions may, according to the nature of the contract be the following:-
• (d) Work performance schedule,
• PPR 2007
– 111. Provision Concerning Execution of Contract: (1) While executing a
procurement contract, the Public Entity shall be required to carry out the
following activities, according to necessity:-
• (b) Preparing work plan and work-schedule relating to contract
execution,
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Review and Approve
Contractor’s Work Program
• The Contractor shall, whenever required by the Engineer,
submit details of the arrangements and methods which the
Contractor proposes to adopt for the execution of the Works.
No significant alteration to these arrangements and methods
shall be made without this having previously been notified to
the Engineer (Clause 4.1 Contractor’s General Obligations,
CoC, FIDIC 2010)
39
Review and Approve
Contractor’s Work Program (FIDIC 2010)
• 8.3 Programme
• The Contractor shall submit a detailed time programme to the
Engineer within 28 days after receiving the notice under Sub-
Clause 8.1 [Commencement of Works]. The Contractor shall also
submit a revised programme whenever the previous programme
is inconsistent with actual progress or with the Contractor’s
obligations. Each programme shall include:
– (a) the order in which the Contractor intends to carry out the
Works, including the anticipated timing of each stage of design (if
any), Contractor’s Documents, procurement, manufacture of Plant,
delivery to Site, construction, erection and testing,
– (b) each of these stages for work by each nominated Subcontractor
(as defined in Clause 5 [Nominated Subcontractors],
40
Review and Approve
• 8.3 Programme
– (c) the sequence and timing of inspections and tests specified in the
Contract, and
– (d) a supporting report which includes:
• (i) a general description of the methods which the Contractor intends to
adopt, and of the major stages, in the execution of the Works, and
• (ii) details showing the Contractor’s reasonable estimate of the number
of each class of Contractor’s Personnel and of each type of
Contractor’s Equipment, required on the Site for each major stage.
• Unless the Engineer, within 21 days after receiving a programme,
gives notice to the Contractor stating the extent to which it does
not comply with the Contract, the Contractor shall proceed in
accordance with the programme, subject to his other obligations
under the Contract. The Employer’s Personnel shall be entitled to
rely upon the programme when planning their activities.
41
Review and Approve
• 8.3 Programme
• The Contractor shall promptly give notice to the Engineer of
specific probable future events or circumstances which may
adversely affect the work, increase the Contract Price or delay the
execution of the Works. The Engineer may require the Contractor
to submit an estimate of the anticipated effect of the future event
or circumstances, and/or a proposal under Sub-Clause 13.3
[Variation Procedure].
• If, at any time, the Engineer gives notice to the Contractor that a
programme fails (to the extent stated) to comply with the Contract
or to be consistent with actual progress and the Contractor’s
stated intentions, the Contractor shall submit a revised
programme to the Engineer in accordance with this Sub-Clause.
42
Review and Approve Contractor’s
Work Program (PPMO, SBD, 2014)
• 2.6 Programme
• 26.1 Within the time stated in the SCC, after the date of the Letter
of Acceptance, the Contractor shall submit to the Project Manager
for approval a Program showing the general methods,
arrangements, order, and timing for all the activities in the Works.
In the case of a lump sum contract, the activities in the Program
shall be consistent with those in the Activity Schedule.
• 26.2 An update of the Program shall be a program showing the
actual progress achieved on each activity and the effect of the
progress achieved on the timing of the remaining work, including
any changes to the sequence of the activities.
43
Review and Approve Contractor’s
Work Program (PPMO, SBD, 2014)
• 26.3 The Contractor shall submit to the Project Manager for
approval an updated Program at intervals no longer than the
period stated in the SCC. If the Contractor does not submit an
updated Program within this period, the Project Manager may
withhold the amount stated in the SCC from the next payment
certificate and continue to withhold this amount until the next
payment after the date on which the overdue Program has been
submitted. In the case of a lump sum contract, the Contractor
shall Provide an updated Activity Schedule within 15 days of
being instructed to by the Project Manager.
• 26.4 The Project Manager’s approval of the Program shall not
alter the Contractor’s obligations. The Contractor may revise the
Program and submit it to the Project Manager again at any time. A
revised Program shall show the effect of Variations and
Compensation Events. 44
Approval of Materials and
Quality Certificates
• Not mentioned clearly in PPMO CoC
• Mentioned well in FIDIC 2010 under Clause 7
• 7. Plant, Materials and Workmanship
– 7.1. Manner of Execution
– The Contractor shall carry out the manufacture of
Plant, the production and manufacture of Materials,
and all other execution of the Works:
• (a) in the manner (if any) specified in the Contract,
• (b) in a proper workmanlike and careful manner, in
accordance with recognised good practice, and
• (c) with properly equipped facilities and non-hazardous
Materials, except as otherwise specified in the Contract.
45
• 7. Plant, Materials and Workmanship (FIDIC 2010 )
– 7.2. Samples
– The Contractor shall submit the following samples of
Materials, and relevant information, to the Engineer for
consent prior to using the Materials in or for the Works:
• (a) manufacturer’s standard samples of Materials and samples
specified in the Contract, all at the Contractor’s cost, and
• (b) additional samples instructed by the Engineer as a
Variation.
– Each sample shall be labelled as to origin and intended
use in the Works.
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Plant, Materials and Workmanship (FIDIC 2010 )
• 7.
– 7.3. Inspection
•The Employer’s Personnel shall at all reasonable times:
– (a) have full access to all parts of the Site and to all places from which natural Materials
are being obtained, and
– (b) during production, manufacture and construction (at the Site and elsewhere), be
entitled to examine, inspect, measure and test the materials and workmanship, and to
check the progress of manufacture of Plant and production and manufacture of Materials.
•The Contractor shall give the Employer’s Personnel full opportunity to carry out these
activities, including providing access, facilities, permissions and safety equipment. No
such activity shall relieve the Contractor from any obligation or responsibility.
•The Contractor shall give notice to the Engineer whenever any work is ready and before it
is covered up, put out of sight, or packaged for storage or transport. The Engineer shall
then either carry out the examination, inspection, measurement or testing without
unreasonable delay, or promptly give notice to the Contractor that the Engineer does not
require to do so. If the Contractor fails to give the notice, he shall, if and when required by
the Engineer, uncover the work and thereafter reinstate and make good, all at the
Contractor’s cost.
47
• 7.4. Testing
• This Sub-Clause shall apply to all tests specified in the Contract, other than the Tests
after Completion (if any).
• Except as otherwise specified in the Contract, the Contractor shall provide all apparatus,
assistance, documents and other information, electricity, equipment, fuel, consumables,
instruments, labour, materials, and suitably qualified and experienced staff, as are
necessary to carry out the specified tests efficiently. The Contractor shall agree, with the
Engineer, the time and place for the specified testing of any Plant, Materials and other
parts of the Works.
• The Engineer shall give the Contractor not less than 24 hours’ notice of the Engineer’s
intention to attend the tests. If the Engineer does not attend at the time and place agreed,
the Contractor may proceed with the tests, unless otherwise instructed by the Engineer,
and the tests shall then be deemed to have been made in the Engineer’s presence.
• The Contractor shall promptly forward to the Engineer duly certified reports of the tests.
When the specified tests have been passed, the Engineer shall endorse the Contractor’s
test certificate, or issue a certificate to him, to that effect. If the Engineer has not
attended the tests, he shall be deemed to have accepted the readings as accurate.
48
• 7.5. Rejection
• If, as a result of an examination, inspection, measurement or
testing, any Plant, Materials or workmanship is found to be
defective or otherwise not in accordance with the Contract, the
Engineer may reject the Plant, Materials or workmanship by
giving notice to the Contractor, with reasons.
• The Contractor shall then promptly make good the defect and
ensure that the rejected item complies with the Contract.
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• 7.6. Remedial Work
• Notwithstanding any previous test or certification, the Engineer may instruct the
Contractor to:
• (a) remove from the Site and replace any Plant or Materials which is not in
accordance with the Contract,
• (b) remove and re-execute any other work which is not in accordance with the
Contract, and
• (c) execute any work which is urgently required for the safety of the Works, whether
because of an accident, unforeseeable event or otherwise.
• The Contractor shall comply with the instruction within a reasonable time, which
shall be the time (if any) specified in the instruction, or immediately if urgency is
specified under sub-paragraph (c).
• If the Contractor fails to comply with the instruction, the Employer shall be entitled
to employ and pay other persons to carry out the work. Except to the extent that the
Contractor would have been entitled to payment for the work, the Contractor shall
subject to Sub-Clause 2.5 [Employer’s Claims] pay to the Employer all costs arising
from this failure. 50
• 9. Test on Completion
• 9.1. Contractor’s Obligations
– The Contractor shall carry out the Tests on Completion in accordance with
this Clause and Sub-Clause 7.4 [Testing ], after providing the documents
in accordance with subparagraph (d) of Sub-Clause 4.1 [Contractor’s
General Obligations].
– In considering the results of the Tests on Completion, the Engineer shall
make allowances for the effect of any use of the Works by the Employer
on the performance or other characteristics of the Works. As soon as the
Works, or a Section, have passed any Tests on Completion, the Contractor
shall submit a certified report of the results of these Tests to the Engineer.
• 9.3. Retesting
– If the Works, or a Section, fail to pass the Tests on Completion, Sub-
Clause 7.5 [ Rejection] shall apply, and the Engineer or the Contractor
may require the failed Tests, and Tests on Completion on any related work,
to be repeated under the same terms and conditions. 51
• 9. Test on Completion
• 9.4. Failure to Pass Tests on Completion
• If the Works, or a Section, fail to pass the Tests on Completion repeated
under Sub- Clause 9.3 [Retesting], the Engineer shall be entitled to:
– (a) order further repetition of Tests on Completion under Sub-Clause 9.3;
– (b) if the failure deprives the Employer of substantially the whole benefit
of the Works or Section, reject the Works or Section (as the case may be),
in which event the Employer shall have the same remedies as are provided
in subparagraph (c) of Sub-Clause 11.4 [ Failure to Remedy Defects]; or
– (c) issue a Taking-Over Certificate, if the Employer so requests.
• In the event of sub-paragraph (c), the Contractor shall proceed in
accordance with all other obligations under the Contract, and the
Contract Price shall be reduced by such amount as shall be appropriate
to cover the reduced value to the Employer as a result of this failure.
52
Replacement of Contractor’s Personnel
FIDIC 2010 clause 6.9- 6.12
• 6.9. Contractor’s Personnel

• The Contractor’s Personnel shall be appropriately qualified, skilled
and experienced in their respective trades or occupations. The
Engineer may require the Contractor to remove (or cause to be
removed) any person employed on the Site or Works, including the
Contractor’s Representative if applicable, who:
– (a) persists in any misconduct or lack of care,
– (b) carries out duties incompetently or negligently,
– (c) fails to conform with any provisions of the Contract, or
– (d) persists in any conduct which is prejudicial to safety, health, or the
protection of the environment.
• If appropriate, the Contractor shall then appoint (or cause to be
appointed) a suitable replacement person.
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FIDIC 2010 clause 6.9- 6.12
• 6.10. Records of Contractor’s Personnel and Equipment

• The Contractor shall submit, to the Engineer, details showing the
number of each class of Contractor’s Personnel and of each type of
Contractor’s Equipment on the Site.
• Details shall be submitted each calendar month, in a form approved
by the Engineer, until the Contractor has completed all work which
is known to be outstanding at the completion date stated in the
Taking-Over Certificate for the Works.
• 6.11. Disorderly Conduct
• The Contractor shall at all times take all reasonable precautions to
prevent any unlawful, riotous or disorderly conduct by or amongst
the Contractor’s Personnel, and to preserve peace and protection of
persons and property on and near the Site.
54
PPMO CoC 2014 clause 9
• 9. Personnel and Equipment

– 9.1 The Contractor shall employ the key personnel and use the
equipment identified in its Bid to carry out the Works, or other
personnel and equipment approved by the Project Manager.
The Project Manager shall approve any proposed replacement
of key personnel and equipment only if their relevant
qualifications or characteristics are substantially equal to or
better than those proposed in the Bid.
– 9.2 If the Project Manager asks the Contractor to remove a
person who is a member of the Contractor’s staff or work force,
stating the reasons, the Contractor shall ensure that the person
leaves the Site within seven days and has no further connection
with the work in the Contract.
55
Suspension of Work
• Situations may occur during contract performance that cause the
Client to order a suspension of work, or a work stoppage.
• a contractor may wish to respond to actual or alleged breaches of
contract by an employer by suspending works, or an employer may
wish to respond by suspending payment.
• A suspension of work under a construction or architect-engineer
contract may be ordered by the contracting officer for a reasonable
period of time.
• If the suspension is unreasonable, the contractor may submit a written
claim for increases in the cost of performance, excluding profit.
• There is a very close relationship between suspension and termination
and, depending on how the clause is drafted, the end result of a
suspension clause may be much the same as a termination clause in
that either party will have the right to terminate the contract at the end
of the agreed suspension period.
56
Suspension of Work FIDIC 2010 clause 8.8- 8.12
• 8.8. Suspension of Work

• The Engineer may at any time instruct the Contractor to
suspend progress of part or all of the Works. During such
suspension, the Contractor shall protect, store and secure
such part or the Works against any deterioration, loss or
damage.
• The Engineer may also notify the cause for the suspension. If
and to the extent that the cause is notified and is the
responsibility of the Contractor, the following Sub- Clauses
8.9, 8.10 and 8.11 shall not apply.
57
• 8.9. Consequences of Suspension
• If the Contractor suffers delay and/or incurs Cost from complying with
the Engineer’s instructions under Sub-Clause 8.8 [Suspension of Work]
and/or from resuming the work, the Contractor shall give notice to the
Engineer and shall be entitled subject to Sub-Clause 20.1 [Contractor’s
Claims] to:
– (a) an extension of time for any such delay, if completion is or will be
delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and
– (b) payment of any such Cost, which shall be included in the Contract Price.
• After receiving this notice, the Engineer shall proceed in accordance
with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.
• The Contractor shall not be entitled to an extension of time for, or to
payment of the Cost incurred in, making good the consequences of the
Contractor’s faulty design, workmanship or materials, or of the
Contractor’s failure to protect, store or secure in accordance with Sub-
Clause 8.8 [Suspension of Work]. 58
• 8.10. Payment for Plant and Materials in Event of

Suspension
• The Contractor shall be entitled to payment of
the value (as at the date of suspension) of Plant
and/or Materials which have not been delivered
to Site, if:
– (a) the work on Plant or delivery of Plant and/or Materials
has been suspended for more than 28 days, and
– (b) the Contractor has marked the Plant and/or Materials as
the Employer’s property in accordance with the Engineer’s
instructions.
59
• 8.11. Prolonged Suspension

– If the suspension under Sub-Clause 8.8 [Suspension of Work]
has continued for more than 84 days, the Contractor may
request the Engineer’s permission to proceed.
– If the Engineer does not give permission within 28 days after
being requested to do so, the Contractor may, by giving
notice to the Engineer, treat the suspension as an omission
under Clause 13 [Variations and Adjustments] of the affected
part of the Works.
– If the suspension affects the whole of the Works, the
Contractor may give notice of termination under Sub-Clause
16.2 [Termination by Contractor].
60
• 8.12. Resumption of Work

– After the permission or instruction to proceed is
given, the Contractor and the Engineer shall jointly
examine the Works and the Plant and Materials
affected by the suspension.
– The Contractor shall make good any deterioration or
defect in or loss of the Works or Plant or Materials,
which has occurred during the suspension after
receiving from the Engineer an instruction to this
effect under Clause 13 [ Variations and
Adjustments ].
61
Termination of Contract
PPMO SBD 2014 clause 57
• 57.1 The Employer or the Contractor may terminate the Contract
if the other party causes a fundamental breach of the Contract.
• 57.2 Fundamental breaches of Contract shall include, but shall not
be limited to, the following :
• (a) the Contractor stops work for 30 days when no stoppage of work
is shown on the current Program and the stoppage has not been
authorized by the Project Manager;
• (b) the Project Manager instructs the Contractor to delay the
progress of the Works, and the instruction is not withdrawn within
30 days;
• (c) the Employer or the Contractor is made bankrupt or goes
into liquidation other than for a reconstruction or amalgamation.
• (d) a payment certified by the Project Manager is not paid by the
Employer to the Contractor within 90 days of the date of the Project
Manager’s certificate; 62
• (e) the Project Manager gives Notice that failure to correct a
particular Defect is a fundamental breach of Contract and the
Contractor fails to correct it within a reasonable period of time
determined by the Project Manager;
• (f) the Contractor does not maintain a Security, which is
required; and
• (g) the Contractor has delayed the completion of the Works by the
number of days for which the maximum amount of liquidated
damages can be paid, as defined in the SCC.
• (h) If the Contractor, in the judgment of the Employer has engaged
in corrupt or fraudulent practices in competing for or in executing
the Contract, pursuant to GCC 58.1
63
• 57.3 When either party to the Contract gives notice of a
breach of Contract to the Project Manager for a cause
other than those listed under GCC 57.2 above, the
Project Manager shall decide whether the breach is
fundamental or not.
• 57.4 Notwithstanding the above, the Employer may
terminate the Contract for convenience.
• 57.5 If the Contract is terminated, the Contractor shall
stop work immediately, make the Site safe and secure,
and leave the Site as soon as reasonably possible.
64
5 Construction Contract Administration - II
Determining EoT for completion of the work
Documenting reasons for EoT
Variation Order (VO)
New rates
Provisional sums
Nominated Sub contractor
Substantial completion
Work completion- measurement and valuation
Contractor’s claim
Actions on unacceptable performance
65
EXTENSION OF TIME
66
Extension of Time
Contract Document Provision:
• The PM shall extend the Intended Completion Date if a
Compensation Event occurs or a Variation is issued
which makes it impossible for Completion to be
achieved by the Intended Completion Date
• The Project Manager shall decide whether and by how
much to extend the Intended Completion Date within 21
days of the Contractor asking the Project Manager for a
decision upon the effect of a Compensation Event or
Variation and submitting full supporting information at
least 7 days prior to the intended completion date. 67
Extension of Time
SNRTP Document Provision:
• If the Contractor has failed to give early warning of a
delay or has failed to cooperate in dealing with a
delay, the delay by this failure shall not be considered
in assessing the new Intended Completion Date.
• The Project Manager shall duly record all delays
caused by the contractors not meeting the approved
program and inform the same to the Contractor with a
copy to the Employer. Such delays shall be considered
while assessing the extension of intended completion
date.
68
Extension of Time
Compensation Events :
(a) The Employer does not give access to a part of the Site by the
Site Possession Date
(b) The Employer modifies the Schedule of Other Contractors in
a way that affects the work of the Contractor
(c) PM orders a delay or does not issue Drawings, Specifications,
or instructions required for execution of the Works on time.
(d) PM instructs the Contractor to uncover or to carry out
additional tests upon work, which is found to have no Defects.
(e) PM unreasonably does not approve a subcontract to be let.
69
Extension of Time
(f) Ground conditions are substantially more adverse than
could reasonably have been assumed before issuance of the
Letter of Acceptance
(g) PM gives an instruction for dealing with an unforeseen
condition, caused by the Employer, or additional work
required for safety or other reasons.
(h) Other contractors, public authorities, utilities, or the
Employer does not work within the dates and other
constraints stated in the Contract, and they cause delay or
extra cost to the Contractor.
70
Extension of Time
(i)The advance payment is delayed.
(j)The effects on the Contractor of any of the Employer’s Risks.
(k)The PM unreasonably delays issuing a Certificate of
Completion.
(l) Force majeure events as determined by the PM.
71
Extension of Time (EoT)
• Many construction contracts allow the construction period to
be extended where there are delays that are not
the contractor's fault. This is described as an extension of
time (EOT).
• When it becomes reasonably apparent that there is a delay, or
that there is likely to be a delay that could merit an EoT,
the contractor gives written notice to the contract
administrator identifying the relevant event that has caused
the delay.
• If the contract administrator accepts that the delay was
caused by a relevant event, then they may grant an EoT and
the completion date is adjusted.
• extension of time and liquidated damages are complex legal
issues and both of them are inter-linked.
Provisions of Extension of Time (EoT)
• PPA 2007:
• 56. Provision Concerning Extension of Contract Period:
• (1) Provisions concerning the extension of period of
procurement contract shall be as provided in the concerned
procurement contract.
• (2) Notwithstanding anything contained in Sub-section (1),
if the period of procurement contract is to be inevitably
extended due to force majeure, failure of the Public Entity
to make available the materials to be made available by it
or other reasonable causes, the competent authority may
extend the period on the prescribed grounds upon
submission of application by the person obtaining
procurement contract.
• PPR 2007:
• 120. Time of Procurement Contract may be Extended:
• (1) If the work under the procurement contract cannot be
completed within the time of such contract due to the
occurrence of conditions set forth in Section 56 of the Act, the
concerned construction entrepreneur, supplier, service provider
or consultant shall have to make an application, stating causes
thereof, for extension of time, to the concerned Public Entity
at least seven days before the expiry of time of such contract.
• (2) Upon receipt of the application pursuant to Sub-rule (1),
the competent authority may conduct or cause to be conducted
necessary inquiry in respect thereof. In so conducting or
causing to be conducted inquiry the entity must take into
account the following matters:-
• PPR 2007: 120. (2)…
• (a) Whether the concerned construction entrepreneur, supplier,
service provider or consultant had made, to the extent of his/her
best efforts to complete the work under the procurement contract
on time or not,
• (b) Whether the concerned Public Entity had made available to
the construction entrepreneur, supplier, service provider or
consultant the matters to be made available as per the contract or
not,
• (c) Whether the work is delayed due to force majeure or not,
• (3) If, upon an inquiry made pursuant to Sub-rule (2), the causes
referred to in the application are found to be reasonable, the
authority accepting the bid may extend a period of up to six
months and the Departmental head may extend a period above it.
• Relevant events for EoT may include:
• Variations.
• Exceptionally adverse weather.
• Civil commotion or terrorism.
• Failure to provide information.
• Delay on the part of a nominated sub-contractor.
• Statutory undertaker’s work.
• Delay in giving the contractor possession of the site.
• Force majeure (such as an epidemic or an 'act of God').
• Loss from a specified peril such as flood.
• The supply of materials and goods by the client.
• Strikes.
• Changes in statutory requirements.
• Delays in receiving permissions that the contractor has taken
reasonable steps to avoid.
• PPMO SBD 2014
• GCC16. The Works to Be Completed within intended
Completion Date
• 16.1 The Contractor may commence execution of the Works on
the Start Date and shall carry out the Works in accordance with
the Program submitted by the Contractor, as updated with the
approval of the Project Manager, and complete them within the
intended Completion Date.
• 27. Extension of the Intended Completion Date
• 27.1 The Project Manager shall extend the Intended Completion
Date if a Compensation Event occurs or a Variation is issued
which makes it impossible for Completion to be achieved by
the Intended Completion Date without the Contractor taking
steps to accelerate the remaining work, which would cause the
Contractor to incur additional cost.
• PPMO SBD 2014
• 27.2 The Project Manager shall decide whether and by how
much to extend the Intended Completion Date within 21 days
of the Contractor asking the Project Manager for a decision
upon the effect of a Compensation Event or Variation and
submitting full supporting information at least 7 days prior to
the intended completion date.
• If the Contractor has failed to give early warning of a delay
or has failed to cooperate in dealing with a delay, the delay by
this failure shall not be considered in assessing the new
Intended Completion Date.
• FIDIC 2014
• 8.4 Extension of Time for Completion
• The Contractor shall be entitled subject to Sub-Clause 20.1
[Contractor’s Claims] to an extension of the Time for
Completion if and to the extent that completion for the purposes
of Sub-Clause 10.1 [Taking-Over of the Works and Sections] is
or will be delayed by any of the following causes:
• (a) a Variation (unless an adjustment to the Time for Completion
has been agreed under Sub-Clause 13.3 [Variation Procedure])
or other substantial change in the quantity of an item of work
included in the Contract,
• (b) a cause of delay giving an entitlement to extension of time
under a Sub-Clause of these Conditions,
• FIDIC 2014
• 8.4 Extension of Time for Completion
• (c) exceptionally adverse climatic conditions,
• (d) Unforeseeable shortages in the availability of personnel or
Goods caused by epidemic or governmental actions, or
• (e) any delay, impediment or prevention caused by or
attributable to the Employer, the Employer’s Personnel, or the
Employer’s other contractors.
• If the Contractor considers himself to be entitled to an extension
of the Time for Completion, the Contractor shall give notice to
the Engineer in accordance with Sub-Clause 20.1 [Contractor’s
Claims]. When determining each extension of time under Sub-
Clause 20.1, the Engineer shall review previous determinations
and may increase, but shall not decrease, the total extension of
time.
The Society of Construction Law (SCL) rule

• Rule 1
If there is an Employer’s delay, which is beyond the
Contractor’s control, and if this delay impacts the
Completion Date of the Works,
the Contractor should be entitled to receive an

Extension of Time (EOT).
[This will effectively result in an extended Time for

Completion and will relieve the Contractor from having to
pay penalties for delay (or Delay Damages under FIDIC)]
Rule-2
For the case of recovery of delay (or prolongation) costs incurred
due to the Employer delays, the Contractor must be able to prove
that there has been no other delay, which is in his own control,
and which is equally (or partly) contributing for delaying the
Time for Completion.
This category of delay is called a ‘Concurrent’

(or Contractor’s) Delay
[In order to win a Delay Costs Claim, the Contractor

must be able to prove that he has not been responsible
for Concurrent Delays to the Time for Completion]
Rule-3
Where Contractor’s Delay to Completion
occurs concurrently with Employer’s Delay to
Completion, the Contractor’s concurrent delay
should NOT reduce any Extension of Time
(EOT), which is due.
[Result of Rule No. 1 will not change and is

irrespective of the result of Rule No. 2]
• 57. Payment of Bill or Invoice: Subject to the procurement
contract, the Public Entity shall have to make payment of the
bill/invoice as prescribed (PPA, 2007)
• 123. Payment of Bill or Invoice (PPR, 2007) :
• (1) The procurement contract may provide that in making
payment of running bill, any other bill or invoice, the Public
Entity may, as per the terms and conditions of contract, make
payment in accordance with any or all of the following basis:-
• (a) On monthly basis,
• (b) On the basis of actual work performed as technically
measured and recorded in the measurement book,
• (c) If the procurement contract sets forth work performance
milestones, upon receipt of such milestones and if such milestone
are not set forth, on the basis of the work performed,
• (1)…
• (d) On the basis of the quantity of work handed over or
completed,
• (e) Pursuant to Sub-rule (1) of Rule 122 or on the basis of terms
and conditions of the letter of credit.
• (2) In order to receive payment of a running bill, any other bill or
invoice, the supplier, construction entrepreneur, service provider
or consultant shall have to submit the documents required as per
the procurement contract.
• (3) The Public Entity shall have to make payment, as per the
procurement contract, against the bill or invoice submitted
pursuant to Sub-rule (1) within thirty days of approval of such
running bill, any other bill or invoice and documents by the
concerned authority.
• (4) In making payment pursuant to Sub-rule (1), the Public
Entity shall have to deduct, for retention money, five percent
amount of the amount stated in the running bill or invoice
and keep the same.
• (5) Where a procurement contract provides that upon prompt
payment of the amount under bill and invoice by the Public
Entity, the supplier, construction entrepreneur, service
provider or consultant will provide discount of a certain
amount or percentage of such payment, the Public Entity
shall provide such payment only after deducting such
discount.
• (6) In a procurement contract, the Public Entity may provide the
following:-
• (a) That if in any previous running bill of the procurement
contract or any other bill or invoice anything was for any reasons
or mistakenly stated necessitates correction of the payment, the
Public Entity may, itself or at the request of the concerned
supplier, construction entrepreneur, service provider or consultant,
correct or change such payment amount in the running bill or any
other bill thereafter, and
• (b) That if the supplier, construction entrepreneur, service
provider or consultant does not perform the work in accordance
with the terms and conditions of the procurement contract, the
Public Entity may deny or deduct the payment under a running
bill or any other bill or invoice.
• (7) The Public Entity shall have to make the payment as
provisioned under Sub-rule (1) within the period specified in the
procurement contract. If it does not make payment within that
period, it shall have to pay interest thereon as per the procurement
contract provision.
• (8) The payments under clause (a), (b), (c) and (d) of Sub-rule (1)
to the supplier, construction entrepreneur, service provider or
consultant of an amount exceeding twenty five thousand Rupees
shall be made through account payee cheque.
• PPMO SBD, 2014:-
• 40. Payment Certificates
• 40.1 The Contractor shall submit to the Project Manager
monthly statements of the estimated value of the work
executed less the cumulative amount certified
previously.
• 40.2 The Project Manager shall check the Contractor’s
monthly statement and certify the amount to be paid to
the Contractor within 30 days of submission by
contractor.
• 40.3 The value of work executed shall be determined by
the Project Manager.
• PPMO SBD, 2014:-
• 40. Payment Certificates
• 40.4 The value of work executed shall comprise:
• (a) In the case of an Unit Rate contract, the value of the quantities of
work in the Bill of Quantities that have been completed; or
• (b) In the case of a lump sum contract, the value of work executed
shall comprise the value of completed activities in the Activity
Schedule.
• 40.5 The value of work executed shall include the valuation of
Variations and Compensation Events.
• 40.6 The Project Manager may exclude any item certified in a
previous certificate or reduce the proportion of any item
previously certified in any certificate in the light of later
information.
• PPMO SBD, 2014:- 41. Payment
• 41.1 Payments shall be adjusted for deductions for advance payments and
retention. The Employer shall pay the Contractor the amounts certified by
the Project Manager within 30 days of the date of each certificate. If the
Employer makes a late payment, the Contractor shall be paid interest as
indicated in the SCC on the late payment in the next payment. Interest
shall be calculated from the date by which the payment should have been
made up to the date when the late payment is made.
• 41.2 If an amount certified is increased in a later certificate or as a result
of an award by the Adjudicator or an Arbitrator, the Contractor shall be
paid interest upon the delayed payment as set out in this clause. Interest
shall be calculated from the date upon which the increased amount would
have been certified in the absence of dispute.
• 41.3 Items of the Works for which no rate or price has been entered in
BOQ shall not be paid for by the Employer and shall be deemed covered
by other rates and prices in the Contract.
• FIDIC, 2010:- 14. Contract price and Payment
• 14.3 Application for 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].
• The Statement shall include the following items, as applicable,
which shall be expressed in the various currencies in which the
Contract Price is payable, in the sequence listed:
– (a) the estimated contract value of the Works executed and the
Contractor’s Documents produced up to the end of the month
(including Variations but excluding items described in sub-paragraphs
(b) to (g) below);
• FIDIC, 2010:- 14.3 Application for Interim Payment Certificates
• (b) any amounts to be added and deducted for changes in legislation and changes
in cost, in accordance with Sub-Clause 13.7 [Adjustments for Changes in
Legislation ] and Sub-Clause 13.8 [Adjustments for Changes in Cost];
• (c) any amount to be deducted for retention, calculated by applying the
percentage of retention stated in the Contract Data to the total of the above
amounts, until the amount so retained by the Employer reaches the limit of
Retention Money (if any) stated in the Contract Data;
• (d) any amounts to be added for the advance payment (if more than one
instalment) and to be deducted for its repayments in accordance with Sub- Clause
14.2 [Advance Payment];
• (e) any amounts to be added and deducted for Plant and Materials in accordance
with Sub-Clause 14.5 [ Plant and Materials intended for the Works];
• (f) any other additions or deductions which may have become due under the
Contract or otherwise, including those under Clause 20 [Claims, Disputes and
Arbitration ]; and
• (g) the deduction of amounts certified in all previous Payment Certificates.
• FIDIC, 2010:-
• 14.4 Schedule of Payments
• 14.6 Issue of Interim Payment Certificate
• No amount will be certified or paid until the Employer has received and
approved the Performance Security. Thereafter, the Engineer shall, within
28 days after receiving a Statement and supporting documents, deliver to
the Employer and to the Contractor an Interim Payment Certificate which
shall state the amount which the Engineer fairly determines to be due,
with all supporting particulars for any reduction or withholding made by
the Engineer on the Statement if any.
• However, prior to issuing the Taking-Over Certificate for the Works, the
Engineer shall not be bound to issue an Interim Payment Certificate in an
amount which would (after retention and other deductions) be less than
the minimum amount of Interim Payment Certificates (if any) stated in the
Contract Data. In this event, the Engineer shall give notice to the
Contractor accordingly.
• FIDIC, 2010:-
• 14.6 Issue of Interim Payment Certificate
• An Interim Payment Certificate shall not be withheld for any other
reason, although:
– (a) if any thing supplied or work done by the Contractor is not in accordance
with the Contract, the cost of rectification or replacement may be withheld
until rectification or replacement has been completed; and/or
– (b) if the Contractor was or is failing to perform any work or obligation in
accordance with the Contract, and had been so notified by the Engineer, the
value of this work or obligation may be withheld until the work or obligation
has been performed.
• The Engineer may in any Payment Certificate make any correction
or modification that should properly be made to any previous
Payment Certificate. A Payment Certificate shall not be deemed to
indicate the Engineer’s acceptance, approval, consent or
satisfaction.
• FIDIC, 2010:-
• 14.7 Payment
• The Employer shall pay to the Contractor:
• (a) the first instalment of the advance payment within 42 days after
issuing the Letter of Acceptance or within 21 days after receiving
the documents in accordance with Sub-Clause 4.2 [Performance
Security ] and Sub-Clause 14.2 [Advance Payment ], whichever is
later;
• (b) the amount certified in each Interim Payment Certificate within
56 days after the Engineer receives the Statement and supporting
documents; or, at a time when the Bank’s loan or credit (from
which part of the payments to the Contractor is being made) is
suspended, the amount shown on any statement submitted by the
Contractor within 14 days after such statement is submitted, any
discrepancy being rectified in the next payment to the Contractor;
and
• FIDIC, 2010:-
• 14.7 Payment
• the amount certified in the Final Payment Certificate within 56 days
after the Employer receives this Payment Certificate; or, at a time
when the Bank’s loan or credit (from which part of the payments to
the Contractor is being made) is suspended, the undisputed amount
shown in the Final Statement within 56 days after the date of
notification of the suspension in accordance with Sub- Clause 16.2
[ Termination by Contractor ].
• Payment of the amount due in each currency shall be made into the
bank account, nominated by the Contractor, in the payment country
(for this currency) specified in the Contract.
• FIDIC, 2010:-
• 14.8 Delayed Payment
• 14.9 Payment of Retention Money
• 14.11 Application for Final Payment Certificate1
• 4.13 Issue of Final Payment Certificate
• 14.15 Currencies of Payment
Variations
 literally means change, alteration, modification etc
 ;fj{hlgs vl/b lgodfjnL cg';f/M
“vl/b ;Dem]f}tf adf]lhd sfo{ z'? eO{ ;s]kl5 k|fljlws
sf/0faf6 To:tf] sfo{[[[[sf] kl/df0fdf yk, 36 ug{ jf gofF
cfO6d yKg jf ;66f ug]{ cfjZos b]lvPdf b]xfosf]
clwsf/Ln] To:tf] yk36 tyf gof‘ cfO6dsf] nfut t}of/ u/L
P]gsf] clwgdf /xL e]l/Pzg cfb]z hfl/ ug{ ;Sg] .”
 allows PM/Employer to modify the contract as
required during the performance of contract.
 allows to execute unforeseen works without breach of
contract or a new contract
 are required for the satisfactory completion and 99
Variations
 are required for the satisfactory completion and

functioning of works”
 Greater the elements of unknown more chances of
variations
 Contractor is not bound to execute more than
contracted unless contractual provisions bind him
 In construction contracts, a variation is usually defined
as a change to the Works. Each standard form of
contract in general includes provisions relating to
variations and their management.
100
Variations
Types of variations
• an unavoidable variation;
• a variation for the convenience of the client;

• a variation for the convenience of the
Contractor / Consultant.
101
Variations
Variation may include:
• changes to the quantities work included in the Contract,
• changes to the quality and other characteristics of any work,
• changes to the levels, positions and/or dimensions of any part
of the Works,
• omission of any work unless it is to be carried out by others,
• any additional work, Plant, Materials or services necessary
for the Permanent Works, including any associated Tests on
Completion, boreholes and other testing and exploratory
work, or
• changes to the sequence or timing of the execution of the
Works.
102
Variations
Effect of variation:
• Satisfactory completion and functioning of works
• Reduction/increment in scope of work
• Reduction or increase in volume of work
• Increment /reduction in project cost
• Time extension
• Increment in price escalation cost
• Revision of contract rates
• Fixation of new rates
• Dispute/Claim situation
103
Variations
Contract Provision
GCC clause -----:
The Contractor shall provide the Project Manager with a
quotation for carrying out the Variation when requested to
do so by the Project Manager.
Clause ----- Changes Contract Price
---- (a) if final quantity differs by>25% & change exceeds
2% of initial contract price, PM to adjust rate to allow for
the change.
(b) prior approval of Employer necessary to adjust rate if
change increases the contract price by >10%.
(c) contractor to provide cost breakdown
104
Variations
Contract Provision
• PM to access quotations given by contractor
• BOQ item ,change in quantity within limit, unchanged
timing of execution then BOQ rate otherwise quotation
may include new rate.
• unreasonable rate PM to determine as appropriate.
• VO may be treated as compensation event in emergency
if time does not allow for quotation.
• no additional cost that could be avoided by early warning
by the contractor.
• Contract Data restricts authority of PM for issue of
variation and adjustment of rates
105
Variations
Negotiation Basis of New Rate/Rate Revision
• provision of contract document.
• Minor and major item
• approved norms, existing market
• breakdown of contractor’s existing rates
• contractor’s overhead scenario e.g. mobilization situation.
• change of situation e.g. work nature, market rate, quarry
site, taxes etc.
• effect of escalation clause ,currency proportion, exchange
rate if applicable
106
Variations
Benefits &Risks associated with variation:
• Increase in project cost; delay in project completion
• absence of fund may result in scope curtailment.
• high rate pricing for varied works due to uncompetitive rate
arrived through negotiation
• Rate negotiation generally an advantage to the contractor.
• Competitive bid could result to be more costly due to
increase in BOQ item quantity with escalated rates.
• Opportunity for non performing contractor for excuse for
time extension.
• Contract litigation
107
VO and VO Approval
• A variation order is a change, often in construction, that
modifies all or part of an existing order.
• Many construction projects undergo changes, especially
after the beginning of building, and the cost impact on a
construction project with a variation order can be costly.
• A variation order may simply be an addition to an existing
order, or it may replace the order entirely.
• Other variations may include alterations to design,
alteration to quantity, modification in sequencing of work,
quality alterations and working condition alterations.
• Variation orders affect not only the cost o the project, and
may affect completion dates as well.
VO and VO Approval
• Variations may include:
• Alterations to the design.
• Alterations to quantities.
• Alterations to quality.
• Alterations to working conditions.
• Alterations to the sequence of work.
• Variations may not (without the contractors consent):
• Change the fundamental nature of the works.
• Omit work so that it can be carried out by another contractor.
• Be instructed after practical completion.
• Require the contractor to carry out work that was the subject
of a prime cost sum.
VO and VO Approval Provisions
• PPA, 2007
• 54. Variation Order:
• (1) Unless otherwise provided for in the procurement contract, if
the circumstances that could not be foreseen at the time of
signing of procurement contract arise in the course of
implementation of the procurement contract, the competent
authority may, by stating clear reasons thereof, issue as
prescribed, a variation order for a variation of up to fifteen(25%)
percent and for a variation order above it, a variation order may
be issued as per the decision made by the Government of Nepal
Council of Ministers by complying with the procedure as
prescribed in the case of the Public Entity under sub-clause (1) of
clause (b) of Section 2 and in the case of other Public Entity as
decided by the supreme executive body of such entity.
VO Fifth Amendment dated 09 March 2017
(2073-11-26)
Variation Order (%) Issuing Authority
1.Gazetted 2nd Class Officer or equivalent official of the
1. Up to 5 concerned public entity. However, if the project cost has
2.Up to 10 been approved by the higher authority, the authority to
issue the variation order should also not be lower
3.Up to 15
authority.
4.From 15 to 25 2.Gazetted 1st Class Officer or equivalent official of public
5.Above 25 (for the Public Entities entity. However, if the project cost has been approved by
prescribed in Section 2(b) (1) of the higher authority, the authority to issue the variation
PPA) order should also not be lower authority.
6.Above 15 (for the Public Entities 3.Departmental Head
prescribed in Section 2(b) (2) of 4.Secretary of Ministry or equivalent head of the public entity
PPA 5.Council of Ministers, Government of Nepal
6.Supreme Executive Authority. For example, Governor of
Nepal Rastra Bank, Managing Director of Nepal Oil
Corporation etc.
• PPA, 2007
• (2) The variation order under Sub-section (1) shall be
issued in the following manner:-
• (a) To be so issued as not to change the basic nature or
scope of the concerned work,
• (b) There must have been made arrangements for budget
and,
• (c) Approval of the competent authority must have been
obtained.
• (3) Other provision concerning the issuance of
variation order shall be as prescribed.
• PPR, 2007
• (1) After having started the work in accordance with the
procurement contract, if there is required addition to and
reduction in the quantity or addition of new item to or
substitution in such work due to technical reasons, the following
authority may, after preparing the cost estimate of such alteration
and new item, issue a variation order subject to the provision of
Section 54 of the Act as hereunder:-
• (a) In cases where the drawings, design and specifications etc. of
the construction work need not be changed but the quantity of
the work will be altered, the variation order of up to five percent
of the contract price by the chief of the public entity of gazetted
second class rank.
• PPR, 2007, 118. Variation Order:
• (1)
• (b) Variation order of up to ten percent of contract price, whether the
drawing, design and specifications of construction work requires to be
changed or not, by the chief of the Public Entity of the gazetted second
class by obtaining the approval of one level higher authority, and variation
order of up to fifteen percent by the Departmental head by assigning
technical justification,
• (c) In the case of procurement of goods and other services, variation order
of up to fifteen percent(25%) of the contract price, by the chief of the
concerned Public Entity by assigning technical justification, and
• (d) In the case of procurement of consultancy services, variation order of
up to ten percent of the contract price, by the chief of the concerned Public
Entity by assigning technical evidence and variation order of up to fifteen
percent by the Departmental head by assigning technical justification.
• (2) If a variation order exceeding fifteen percent of the contract price
requires to be issued pursuant to Sub-rule (1), a proposal shall be submitted,
with the recommendation of a committee consisting of chief of the financial
administration section, concerned Departmental head and one officer
concerned with subject matter or expert designated by the secretary under the
chairpersonship of the concerned secretary in the case of the Public Entity
under sub-clause (1) of clause (b) of Section (2) of the Act, to the Council of
Ministers, Government of Nepal and in the case of other Public Entity to the
supreme executive body of that entity.
• (3) A variation order shall not be issued with rates exceeding the rates stated
in the procurement contract. If a variation order requires to be issued with
higher rates, an approval shall be obtained from one level higher authority
after making the rate analysis as well.
• (4) If a new item requires to be added to the construction works under the
procurement contract, the Public Entity shall have to determine the rate by
analyzing the rate as well of such new item.
• (5) In issuing a variation order pursuant to this Rule, there shall be
clearly stated the nature of variation, large item, small item, whether
time requires to be extended or not; if time requires to be extended how
much time is to be extended, whether the rate of variation item is lesser
or higher than that of stated in the bill of quantities, what is the
percentage of the total contract price in terms of updated modifications,
the source to meet additional amount for the work required to be carried
out under the variation order; what will be the percentage of the total
sum after variation compared to the initial contract price.
• (6) If any additional work requires to be done immediately due to lack
of time for any reasons or due to occurrence of conditions requiring an
emergency work to be done, if any, the Public Entity may further the
proceedings of variation order by obtaining prior approval of the one
level higher authority.
• PPMO SBD,2014:- 38: Variations
• 38.1 All Variations shall be included in updated Programs, and, in
the case of a lump sum contract, also in the Activity Schedule,
produced by the Contractor.
• 38.2 The Contractor shall provide the Project Manager with a
quotation for carrying out the Variation when requested to do so by
the Project Manager. The Project Manager shall assess the
quotation, which shall be given within seven (7) days of the
request or within any longer period stated by the Project Manager
and before the Variation is ordered.
• 38.3 If the Contractor’s quotation is unreasonable, the Project
Manager may order the Variation and make a change to the
Contract Price, which shall be based on the Project Manager’s own
forecast of the effects of the Variation on the Contractor’s costs.
• PPMO SBD,2014:- 38: Variations
• 38.4 If the Project Manager decides that the urgency of varying the work
would prevent a quotation being given and considered without delaying the
work, no quotation shall be given and the Variation shall be treated as a
Compensation Event.
• 38.5 The Contractor shall not be entitled to additional payment for costs that
could have been avoided by giving early warning.
• 38.6 In the case of an Unit Rate contract, if the work in the Variation
corresponds to an item description in the Bill of Quantities and if, in the
opinion of the Project Manager, the quantity of work above the limit stated in
GCC 37.1 or the timing of its execution do not cause the cost per unit of
quantity to change, the rate in the Bill of Quantities shall be used to calculate
the value of the Variation. If the cost per unit of quantity changes, or if the
nature or timing of the work in the Variation does not correspond with
items in the Bill of Quantities, the quotation by the
• Contractor shall be in the form of new rates for the relevant items of work.
• FIDIC,2010:- 13: Variations and Adjustments
• 13.1 Right to Vary
• Variations may be initiated by the Engineer at any time prior to
issuing the Taking-Over Certificate for the Works, either by an
instruction or by a request for the Contractor to submit a proposal.
• The Contractor shall execute and be bound by each Variation,
unless the Contractor promptly gives notice to the Engineer stating
(with supporting particulars) that:-
– (i) the Contractor cannot readily obtain the Goods required for the Variation,
or
– (ii) such Variation triggers a substantial change in the sequence or progress
of the Works.
• Upon receiving this notice, the Engineer shall cancel, confirm or
vary the instruction.
• 13.1
• Each Variation may include:
– (a) changes to the quantities of any item of work included in the Contract
(however, such changes do not necessarily constitute a Variation),
– (b) changes to the quality and other characteristics of any item of work,
– (c) changes to the levels, positions and/or dimensions of any part of the Works,
– (d) omission of any work unless it is to be carried out by others,
– (e) any additional work, Plant, Materials or services necessary for the Permanent
Works, including any associated Tests on Completion, boreholes and other testing
and exploratory work, or
– (f) changes to the sequence or timing of the execution of the Works.
• The Contractor shall not make any alteration and/or modification of the
Permanent Works, unless and until the Engineer instructs or approves a
Variation.
• 13.2 Value Engineering
• 13.3. Variation Procedure
• If the Engineer requests a proposal, prior to instructing a
Variation, the Contractor shall respond in writing as soon as
practicable, either by giving reasons why he cannot comply
(if this is the case) or by submitting:
• (a) a description of the proposed work to be performed and
a programme for its execution,
• (b) the Contractor’s proposal for any necessary
modifications to the programme according to Sub-Clause
8.3 [Programme] and to the Time for Completion, and
• (c) the Contractor’s proposal for evaluation of the Variation.
• 13.3. Variation Procedure
• The Engineer shall, as soon as practicable after receiving such
proposal (under Sub- Clause 13.2 [Value Engineering] or
otherwise), respond with approval, disapproval or comments.
The Contractor shall not delay any work whilst awaiting a
response.
• Each instruction to execute a Variation, with any requirements
for the recording of Costs, shall be issued by the Engineer to
the Contractor, who shall acknowledge receipt.
• Each Variation shall be evaluated in accordance with Clause 12
[Measurement and Evaluation ], unless the Engineer instructs or
approves otherwise in accordance with this Clause.
Price Adjustment and New Rates
• PPA, 2007
• 55. Price Adjustment in Procurement Contract:
• (1) Unless otherwise provided in procurement contract, if price needs to be
adjusted in the course of implementation of a procurement contract having
duration exceeding fifteen months the competent authority may adjust price.
• Provided that where a procurement contract has been concluded to procure a
public construction work following the invitation of national level bidding
and the price of any construction materials is increased or decreased
unexpectedly by more than ten percent of the previous price, price shall be
adjusted as prescribed by deducting ten percent in the amount so increased or
decreased.
• (2) Notwithstanding anything contained in Sub-section (1), price adjustment
cannot be made where the work under the contract is not completed within the
period prescribed in such contract and has taken more time due to the delay by
the person who has obtained procurement contract or if procurement contract
is concluded on the basis of lump sum contract or fixed budget.
• PPR, 2007
• 119. Price Adjustment:
• (1) The Public Entity has to provide a statement in the procurement
contract that price adjustment can be carried out.
• (2) The price adjustment provision in the procurement contract shall
contain the following matters as well:-
• (a) Condition of price adjustment,
• (b) Formula to determine,
• In determining formula pursuant to this clause, formula shall be so
formulated as to adjust the price only of the labor, materials and
equipment used on the works completed,
• (c) Maximum amount of price adjustment,
• (d) Composition of price to be used in the formula under clause (b),
(the price of labor, equipment, materials, fuel etc.),
• PPR, 2007
• (1)
• (e) The relevant price indices to be used to adjust the price of each
component,
• (f) the method of measuring fluctuation of exchange rate between the
currency used for the indices and the currency to be used for making
payment,
• (g) Baseline date to be used for application of price adjustment formula,
• (h) Interval of time for application of price adjustment formula, and
• (i) Minimum price escalation to be determined by the use of price
adjustment formula and other terms and conditions and restrictions to be
fulfilled for application of the provision relating to price adjustment.
• PPR, 2007
• (3) The maximum amount of price adjustment to be
made pursuant to this Rule shall not generally be more
than twenty five percent of the initial contract prices.
• The procurement contract may provide that if the amount
of price adjustment exceeds to that price, the Public
Entity may terminate the procurement contract or
negotiate with the construction entrepreneur, supplier,
service provider or consultant in order to limit the
contract price within the approved budget or may pursue
other measures or arrange for additional budget.
Provisional Sum
• FIDIC
• 1.1.4.10 “Provisional Sum” means a sum (if any) which
is specified in the Contract as a provisional sum, for the
execution of any part of the Works or for the supply of
Plant, Materials or services under Sub-Clause 13.5
Provisional Sums].
• 13.5 Provisional Sums
• Each Provisional Sum shall only be used, in whole or in
part, in accordance with the Engineer’s instructions, and the
Contract Price shall be adjusted accordingly. The total sum
paid to the Contractor shall include only such amounts, for
the work, supplies or services to which the Provisional Sum
relates, as the Engineer shall have instructed.
Provisional Sum
• FIDIC
• 13.5 Provisional Sums
• (b) Plant, Materials or services to be purchased by the
Contractor, from a nominated Subcontractor (as defined in
Clause 5 [Nominated Subcontractors] or otherwise; and for
which there shall be included in the Contract Price:
– (i) the actual amounts paid (or due to be paid) by the Contractor, and
– (ii) a sum for overhead charges and profit, calculated as a percentage
of these actual amounts by applying the relevant percentage rate (if
any) stated in the appropriate Schedule. If there is no such rate, the
percentage rate stated in the Contract Data shall be applied.
• The Contractor shall, when required by the Engineer, produce
quotations, invoices, vouchers and accounts or receipts in
substantiation.
Sub Contracting
• PPMO SBD:
• 7.1 The Contractor may subcontract with the approval of the
Project Manager, but may not assign the Contract without the
approval of the Employer in writing. Subcontracting shall not
alter the Contractor’s obligations.
Nominated sub-contractor
• A nominated sub-contractor is one that is selected by
the client to carry out an element of the works.
• Nominated sub-contractors are imposed upon the main
contractor after the main contractor has been appointed.
• The mechanism for nominating is an instruction in relation
to a prime cost sum to which a main contractor is entitled
to add its mark up and attendance costs.
• It allows the client to have direct separate negotiations
with major suppliers of goods or services and feed
their appointment and design input into the contract after
works by the main contractor have commenced.
Sub Contracting
• FIDIC 2010:
• 4.4 Sub Contractors
• The Contractor shall not subcontract the whole of the Works.
• The Contractor shall be responsible for the acts or defaults of any Subcontractor,
his agents or employees, as if they were the acts or defaults of the Contractor.
Unless otherwise stated in the Particular Conditions:
• (a) the Contractor shall not be required to obtain consent to suppliers solely of
Materials, or to a subcontract for which the Subcontractor is named in the
Contract;
• (b) the prior consent of the Engineer shall be obtained to other proposed
Subcontractors;
• (c) the Contractor shall give the Engineer not less than 28 days’ notice of the
intended date of the commencement of each Subcontractor’s work, and of the
commencement of such work on the Site; and
• (d) each subcontract shall include provisions which would entitle the Employer
to require the subcontract to be assigned to the Employer under Sub-Clause 4.5
[Assignment of Benefit of Subcontract] (if or when applicable) or in the event of
termination under Sub-Clause 15.2 [Termination by Employer].
Sub Contracting
• FIDIC 2010:
• 5. Nominated Sub Contractors
• 5.1 Definition of “nominated Subcontractor”
• In the Contract, “nominated Subcontractor” means a
Subcontractor:
• (a) who is stated in the Contract as being a nominated
Subcontractor, or
• (b) whom the Engineer, under Clause 13 [Variations and
Adjustments], instructs the Contractor to employ as a
Subcontractor subject to Sub-Clause 5.2 [ Objection to
Notification ].
Sub Contracting
• FIDIC 2010:
• 5.2 Objection to Nomination
• The Contractor shall not be under any obligation to employ a
nominated Subcontractor against whom the Contractor raises
reasonable objection by notice to the Engineer as soon as practicable,
with supporting particulars. An objection shall be deemed reasonable
if it arises from (among other things) any of the following matters,
unless the Employer agrees in writing to indemnify the Contractor
against and from the consequences of the matter:
• (a) there are reasons to believe that the Subcontractor does not have
sufficient competence, resources or financial strength;
• (b) the nominated Subcontractor does not accept to indemnify the
Contractor against and from any negligence or misuse of Goods by
the nominated Subcontractor, his agents and employees; or
Sub Contracting
• FIDIC 2010:
• 5.2 Objection to Nomination
• (c) the nominated Subcontractor does not accept to enter into a
subcontract which specifies that, for the subcontracted work (including
design, if any), the nominated Subcontractor shall:
• (i) undertake to the Contractor such obligations and liabilities as will
enable the Contractor to discharge his obligations and liabilities under
the Contract,
• (ii) indemnify the Contractor against and from all obligations and
liabilities arising under or in connection with the Contract and from
the consequences of any failure by the Subcontractor to perform these
obligations or to fulfil these liabilities, and
• (iii) be paid only if and when the Contractor has received from the
Employer payments for sums due under the Subcontract referred to
under Sub- Clause 5.3 [ Payment to nominated Subcontractors ].
Sub Contracting
• FIDIC 2010:
• 5.3 Payments to nominated Subcontractors
• The Contractor shall pay to the nominated Subcontractor the
amounts shown on the nominated Subcontractor’s invoices
approved by the Contractor which the Engineer certifies to be
due in accordance with the subcontract. These amounts plus
other charges shall be included in the Contract Price in
accordance with sub-paragraph (b) of Sub-clause 13.5
[ Provisional Sums ], except as stated in Sub-Clause 5.4
[ Evidence of Payments ].
Price Adjustment
• To adjust Fluctuation (rise/fall) in the costs of
resources :
 Labor
 Material
 Equipment
• No adjustment is to be applied to work valued on the

basis of Cost or current prices.
136
Price Adjustment
ADB /World Bank Procurement Guidelines:
• Compulsory for contract period more than 18 months
PPA/PPR Provisions :
• For contract period more than 15 months
• adjustment provision for abnormal price increment in
construction material in excess of 10% irrespective of
contract duration. Adjustment is applicable for
additional percent above 10%. Contact indicates the
applicable construction material
• Maximum adjustment amount (up to 25%) for price to
be stated in the contract as per PPA.
137
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5 .

1 Construction Contract Administration - I

A contract is an agreement between two parties,

The Structure of GCC in SNRTP document is as follows:

• Unsatisfactory Otta Seal works due to sub base

• After a contract is signed the parties may not need to

• 6.9. Contractor’s Personnel

• 6.10. Records of Contractor’s Personnel and Equipment

• 9. Personnel and Equipment

• 8.8. Suspension of Work

• 8.10. Payment for Plant and Materials in Event of

• 8.11. Prolonged Suspension

• 8.12. Resumption of Work

The Society of Construction Law (SCL) rule

the Contractor should be entitled to receive an

[This will effectively result in an extended Time for

This category of delay is called a ‘Concurrent’

[In order to win a Delay Costs Claim, the Contractor

[Result of Rule No. 1 will not change and is

 are required for the satisfactory completion and

• a variation for the convenience of the client;

• No adjustment is to be applied to work valued on the

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