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Contract ManagementTraining to Keppel Seghers (3 & 4 September 2015)

Mark Castell – Regional Managing [email protected]

mailto:[email protected]

http://www.drivertrett.com/

Our expert witness support service. World-class quantum,delay, and technical experts for litigation and provision ofinternationally experienced adjudicators, arbitrators, andmediators.

Provision of project management alongside transactionadvisory services to clients for the delivery of concessionprojects using PFI, PPP and DBFO procurement options.

Our project controls team, delivering commercialmanagement, quantity surveying, and planning servicesthroughout the project lifecycle.

Our dispute and advisory team, delivering high-levelcommercial and contract management, procurementadvice, planning and programming services, disputeresolution support and training and seminars.

What we do

• Driver Group is a global construction consultancy, providing

construction and engineering focused services since 1978

• Stock exchange listed plc. – AIM (2005)

• Driver Trett established in 2012 when Trett Consulting became

part of the Driver Group.

• Market leader in expert witness, planning, commercial and

disputes.

• Nearly 500 global staff. >£40m turnover.

• Network of offices across Europe, Africa,

Americas, Asia Pacific, and the Middle East.

• Global reach with projects undertaken

worldwide.

GROUP OVERVIEW

DRIVER GLOBAL PRESENCE

Some questions to start with…

6

Q: What is a Contract?

A: Simply speaking, it is an agreement.

Q: What is the objective of a contract?

A: To define the relationship and how the

parties act – the ‘rules of the game’.

Q: What is common to every project?

A: Contracts, whether with a client, a

supplier or a subcontractor.

7

Q: What is contract management and

what does it cover?

A: Management of:Risks & opportunities

Change

Entitlement

Claims

The Client or Subcontractor

It should include the avoidance of Disputes

Is this not project management?

8

Q: When should the management of

contracts begin?

A: At the conception of a contract.

Q: When should the management of

contracts end?

A: At the finalisation of all matters.

Contracts involve a process – from ‘conception to grave’

Understanding the clients’ needs and the risks involved

Making an offer, or tender

Forming a legal agreement

Understanding the parties’ obligations under the agreement

Monitoring the parties’ actions against these obligations

Identifying any variance

Invoking the terms of the contract according to the circumstances

Issuing and / or receiving requests for payment and additional time

Agreeing financial and other matters

9

10

From time to time, you may have experienced a bad

contract. What do we mean by the term ‘bad

contract’?

Discrepancies / anomalies

Unclear wording

Too much risk

Technical difficulties

Price too low

Schedule too tight

etc10

1111

Q: Is it true (or fair) to say that a bad

contract is the fault of those involved

at the tender stage?

A: No. Why?

Q: Is it true (or fair) to say that an

unprofitable project is the fault of those

involved at the implementation stage?

A: No. Why?

Q: Who is involved in managing a contract?

A: Everyone within the business...

12

I suggest that this could be the key

challenge with respect to contract

management

Revised Q: Who should be involved in

managing a contract?

Managing contracts must be ‘from conception to grave’;

hence, course agenda

Pre-contract phase Tendering Procurement and sub-contracting Contracts and letters of intent

Introduction to FIDIC standard forms

Implementation phase Setting up the project Planning and progress

Commercial issues Management of change Claims – time and / or money Dispute Resolution

13

Contract Management Workshop Objectives

To:

Increase your awareness and understanding of contract management.

Demonstrate how you can improve Keppel Seghers contractual and commercial position in both the pre-contract and post-contract phases of projects.

Introduce the main FIDIC standard forms of contract.

Explain the philosophy of the main FIDIC standard forms of contract and what their use means.

14

The tender stageWhat is its main purpose?

Pre-contract phase

Photograph credits to FreeDigitalPhoto.net & Grant Cochrane

The priority is for a tenderer to understand what will beexpected of him.

This involves:

Studying all parts of the RFQ or tender documents. Verify all documents have been received

Verify the correct documents have been received

Recognising the responsibilities to be placed on the parties.

Risk and opportunity management. Identification

Quantification

Evaluation

16

The client will have considered risk allocation.Remember:

Risk should be allocated to the party best able to manage it.

Standard Forms of Contract (such as one of the FIDIC forms)

generally allocate risk reasonably and fairly.

What type of risks should be considered?

17

Some Contracting Risks

1. Clear scope of work

2. Provision of bonds, guarantees

3. Security for payment

4. Physical conditions and access

5. Practicality of schedule dates

6. Use of specialist suppliers/sub contractors/ third parties

7. Extension of time provisions

8. Safety provisions

More Contracting Risks

1. Clarity of the contract wording and provisions (no

discrepancies)

2. Wording and provisions that can be easily understand

by all concerned

3. Document submittals at, or just after commencement

4. Conditions precedent clauses

5. Notice requirements

6. Requirement for record keeping

7. Change process

8. Claims process

Manner in which contract was secured

The consultants and their roles

The level of definition of the works

Feasibility

The procurement status

Financial circumstances

Political aspects

Legal / contractual

New concept

20

Contracting risks are often indicated by:

Apart from risk allocation, why else should major revisions

to Standard Forms of Contract be considered carefully by

tendering contractors?

21

The revisions may prevent the contract from working in certain circumstances.

In other words, links from one clause to another may be broken.

22

To understand the customer’s needs

To see whether the proposed contract describes the same

thing

To influence the customer’s way of thinking

To influence the provisions of the contract (terms and

conditions)

To influence the allocation of risk

To agree the duration for undertaking the works

To agree the price for undertaking the works

To agree security of payment

etc

What opportunities exist at tender stage?

Management of the tender stage also requires.

Clarifying the responsibilities and / or risks. Document control essential – single point communication?

Register of questions and answers – summarises status

Records of any verbal discussions and meetings – how?

Establishing a commercial strategy for the project.

23

24

Exercise 1 –tender phase

Procurement and sub contracting

Risk should be allocated to the party best able to manage it.

In sub-contract relationships, risk that is passed on should be stepped down.

Sometimes risk is retained at main contractor level.

Risk sharing and allocation

Examples of typical risks

Clear scope of work (including design) and interface

Provision of bonds and guarantees

Practicality of programme dates within overall duration

Extension of time provisions

Notice and reporting provisions

Safety provisions

If we are main contractor, what do we want to happen with these risks in our subcontracts?

If we are a subcontractor, what do we want to happen with the contents of the main contract?

Which terms and conditions are to be used for a subcontract?

The ‘main’ contract conditions?

Revised ‘main’ contract conditions? If so, how to revise?

The Keppel Seghers standard terms?

Revised Keppel Seghers standard terms? If so, how to revise?

The phrase ‘back to back with the main contract’? If so, what

does it mean?

28

Back to back

A commonly used phrase that can lead to practical problems

How can ‘applying the provisions of a main contract to a

subcontract’ work in practice?

Is Contract Price the same as Subcontract Price?

Are all the main contract conditions applicable?

Involvement of the client (i.e. approvals)?

Values of bonds?

Insurance coverage?

It’s not a shortcut for proper drafting of sub-contracts

Can create a strong potential for disputes29

30

Examples of subcontract wording…

Article 3.1 says that ‘Subcontractor shall be deemed to have full knowledge of the provisions of the Main Contract...Contractor shall (if requested) make available a copy of the Main Contract.

Article 3.2 says ‘Subcontractor shall carry out and complete Subcontract Works so that no act or omission of the Subcontractor shall result in any breach of the Main Contract by the Contractor.

Article 3.3 says ‘to the extent that such obligations and liabilities relate to the Subcontract Works, the Subcontractor shall perform the obligations and assume the liabilities of the Contractor under the Main Contract.’

Article 3.4 says ‘Subcontractor shall indemnify the Contractor against any claim, arising from any breach or non observance of such obligations or non compliance therewith.’

Which terms and conditions are to be used for the subcontract?

The ‘main’ contract conditions?

Revised ‘main’ contract conditions? If so, how to revise?

The Keppel Seghers standard terms?

Revised Keppel Seghers standard terms? If so, how to revise?

All can work but in all cases, the parts of the main contract

relevant to the subcontract need identifying (and possibly

revising), and then be incorporated into the subcontract.

31

32

ContractsPre-contract phase

Photograph credits to FreeDigitalPhoto.net & Boians Cho Joo Young

33

A Contract is an agreement, which

should be based upon the mutual

understanding that was built up in

the tender stage.

‘Contractual agreement’

But, to be a legal contract, there must be:

Capacity (i.e. authority)

Offer, acceptance and consideration

What is what?

What is a counter offer?

34

35

You receive a Purchase Order from a customer that does not

refer to a Keppel Seghers quotation or terms.

The Purchase Order includes certain terms and has on the

back of the document, the customer’s general terms and

conditions.

The first general term and condition says that “acceptance of

this order constitutes unconditional acceptance of these conditions”.

What is the Purchase Order?

What should you do?

Offer and Acceptance with POs

‘Contractual agreement’

But, to be a legal contract, there must be:

Capacity (i.e. authority)

Offer, acceptance and consideration

What is what?

What is a counter offer?

A requirement (i.e. the scope of work)

A willingness to undertake the requirement

Terms of contract for the requirement

36

Contract terms comprise

Express terms

Implied terms – generally from Statute or Civil Code

To provide for changes in scope i.e. variations

To provide for changes in duration i.e. EoT

To allocate responsibilities and risksTo set out who does what and when

To provide for time and money

38

What is the consequence of a

party failing to comply with the

contract?

Failure to comply is a breach of contract

Follow contractual procedures if an express term

If an implied term, potential claim for damages

Stated damages for delay

Stated damages for late completion allow definition of risk, if it is the only remedy for delay.

If none stated, damages still apply.

Liquidated damages (LDs) must be a genuine pre-estimate of the likely damage and not a penalty (under English Law).

41

What if works are to start

prior to a contract being in place?

Who’s problem is it?

Who should resolve it?

What can you do / ensure happens?

It is the customer’s problem.

It may however, be in your interest to start.

Resolution needs to be undertaken together.

But you must ensure the basis upon which work is

started should be defined in writing

Letters of Intent

Advantages:

When customers / employers are faced with time constraints in negotiating full contract documentation

To enable the start of the procurement process where there are long lead in times, or the start of engineering

Alternative to delaying contract commencement

Offers protection to the contractor

One available option is....

Letters of Intent

Difficulties:

Sometimes unclear as to the extent of the parties’ commitment (i.e. entire project, initial works)

Are they binding? Often, one party’s intention towards another and no agreement.

Sometimes the description of work to be performed or material to be procured is inadequate

Letters of Intent

Required inclusions for agreement:

A full description of the work to be done and a direction to start work

The time period or end date that the work must be done by

The payment to be made – maybe a maximum

The terms and conditions governing the work

46

Consider the following

(exercise 2)

Part 1

Example Letter of Intent sent by main contractor to sub-contractor

“As you know from our meeting this morning, we have just received a letter of

intent from [X] for the [Y] project, which includes your [equipment].

In our turn, we are pleased to confirm that it is our intention to enter into a sub

contract with [you] for your [equipment], this will be generally be on the basis of

the Sub Contract document that we discussed this morning (ref…)

We also agreed that we would incorporate your final comments on the draft Sub

Contract and that you would provide details of the Advance Payment Bond, on-

demand Performance Bond and insurance that you can offer.

The main contract commencement date is…

Please acknowledge receipt.”

Please consider what this letter is saying and what your response would be

Part 2

Second example Letter of Intent sent by main contractor to sub-contractor

“This is to place a letter of intent (LOI) for [W] works to [X] ... by [Y] … strictly in

accordance with the following terms and conditions and to give an authorisation to

proceed immediately with the engineering, procurement and manufacturing in

accordance with this requisition.”

Sections then cover matters including:

Scope and Price

Payments Terms

Delivery Terms and Date

Contract Documents

Etc.

Consider what this letter is saying and what your response would be

49

Introduction to FIDIC

FIDIC(Fédération Internationale des

Ingénieurs-Conseils)

Federation of national associations of consulting engineers

Based in Geneva

Founded in 1913 with original founding members from France, Belgium and Switzerland

UK joined 1949, USA joined 1958

Seen as international from 1970s and members from about 70 counties

FIDIC aims

High ethical standards

High professional standards

Development of engineering profession in developing countries

FIDIC documents

Standard Forms of Contracts – since 1957

Guides to Standard Forms of Contracts

Tendering procedures

Model Agreements

53

Standard Forms of Contract

General principles of FIDIC Standard Forms of Contract - 1

Often known by their colour i.e. red, yellow, silver, blue.

Historically based on Anglo Saxon type contracts. So, more reliance on documentation.

Drafted for general use on an international basis. So,applicable law and ruling language needs to be stated.

Modifications may be required in some jurisdictions. These should be included as revisions.

General principles of FIDIC Standard Forms of Contract - 2

FIDIC standard forms are generally accepted to be well-written and capable of being understood by users.

They recognise there will be problems and potential for conflict and dispute on projects but set out processes to resolve them including:

Placing a significant administrative burden on the parties and;

Requiring the parties to deal with issues at the time.

56

The Current FIDIC Standard Forms of Contract

Current FIDIC Main Standard Forms of Contract

Green (1999)Blue (2006) Red (1999) Pink (2010)

Yellow (1999) Silver (1999) Gold (2008)

http://fidic.org/books/construction-contract-mdb-harmonised-ed-version-1-may-2005-harmonised-red-book


http://fidic.org/books/dbo-contract-1st-ed-2008-gold-book



Green book.Short Form

Blue book.Dredgers Contract

Red book.Construction

Contract

Pink book.MDB

Construction Contract




Yellow book.Plant and

Design-Build Contract

Silver book.EPC/Turnkey

Contract

Gold book.DBO Contract



For dredging & reclamation works, the Blue book

When do you use which standard form?

STRAIGHTFORWARDPROJECT ?< $500K or < 6 months

EMPLOYER DESIGN ?

CONTRACTOR DESIGN

All types of project withpotential for high unforeseenrisks

Little employer involvementno major unforeseen risks

no

noyes

Otherwise, which contract should be used?

yes

yes

Ongoingoperation no

yes

no

yes



62

Overview of Current FIDIC

Standard Forms of Contract

63

The Red book

Generally – Red Book

FIDIC produces the General Conditions (20 clauses) and anticipates separate Particular Conditions to be used (notes for guidance are included).

Appendix to Tender used to contain project-specific information.

Forms of Letter of Tender, Contract Agreement (including Appendix to Tender), Dispute Adjudication Agreement and Forms of Securities are included.

Letter of Acceptance signifies a contract has been entered into.

Tenderers issued with Specification, Schedules (includes Bill of Quantities) and Drawings

Clause 1 - General Provisions

Clauses 2 to 4 – The Employer, the Engineer and the Contractor

Clause 5 – Nominated Subcontractors

Clauses 6 and 7 - Staff, labour, plant, materials and workmanship

Clause 8– Commencement, delays and suspension

Clauses 9 and 10 – Tests on Completion and Employer’s Taking Over

Clause 11 - Defects Liability

Clause 12 – Measurement and Evaluation

Clause 13 – Variations and Adjustments

Clause 14 – Contract Price and Payment

Clauses 15 and 16 – Termination and suspension

Clauses 17 to 19 – Risk, Insurance and Force Majeure

Clause 20 – Claims, Disputes and Arbitration

Red Book General Conditions

65


Clause 1 includes:

Definitions (sub-clause 1.1).

Communications shall be in writing, transmitted using specific methods and to the addresses stated in Appendix to Tender. Allowable electronic systems of transmission also stated in Appendix to Tender (clause 1.3).

Applicable law and ruling language stated in Appendix to Tender (sub-clause 1.4).

Priority of documents provisions (sub-clause 1.5).

Contract Agreement to be put into place after contract entered into if Letter of Acceptance used (sub-clause 1.6).Otherwise, signifies contract entered into.


Employer has a limited role after contract is signed (clause 2).

Engineer appointed as representative of Employer acting after contract is signed (sub-clause 3.1).

Engineer can delegate specific duties and authority to assistants (sub-clause 3.2).

Contractor shall comply with instructions in respect of the Works given by the Engineer (sub-clause 3.3).

Contractor appoints Contractor’s Representative who is the only person authorised to receive instructions (sub-clause 4.3).


Contractor to commence Works on the Commencement Date and complete within the Time for Completion (sub-clauses 8.1 and 8.2).

Provision for Tests on Completion (clause 9).

Employer issues Taking Over Certificate to signify works are ready for taking over and not necessary complete (sub-clauses 10.1 and 10.2).

Period for undertaking outstanding work and remedying defects stated in the Appendix to Tender (sub-clause 11.1).

Performance Certificate issued at the end of Defects Notification period and confirms Employer acceptance of the Works (sub-clause 11.9)


Works to be valued on a re-measurable basis (clause 12).

Only the Engineer (or delegated assistants) can vary the Works (sub-clause 13.1).

Variations is a defined term.

The Engineer certifies the monthly interim payments to be paid to the Contractor (clause 14).

Notice shall be issued by Contractor whenever it considers it to be entitled to more time and / or money and within 28 days of being aware (or should have been aware). Failure to comply means a loss of rights to claim (sub-clause 20.1).

Subsequent procedure for submission of any claims also subject to timescales (sub-clause 20.1).

DAB appointed to resolve disputes (sub-clause 20.2).

70

The Yellow book

Generally – Yellow Book





Tenderers issued with Employer’s Requirements


Clauses 2 to 4 – The Employer, the Engineer and the Contractor

Clause 5 – Design





Clause 12 – Tests after Completion






Yellow Book General Conditions

72

Generally – Yellow Book (as Red Book)

Clause 1 includes:






Generally – Yellow Book (as Red Book)


Engineer appointed as representative of Employer acting after contract is signed (sub-clause 3.1).

Engineer can delegate specific duties and authority to assistants (sub-clause 3.2).

Contractor shall comply with instructions in respect of the Works given by the Engineer (sub-clause 3.3).


Generally – Yellow Book

Contractor to design and construct the Works so they are fit for the purposes for which the Works are intended as defined in the Contract (sub-clause 4.1).

Intended purpose must be specified in the Employer’s Requirements as defined in sub-clause 1.1.1.5.

Treatment of errors in the Employer’s Requirements provided for by the ‘experienced contractor test’ (sub-clause 5.1).

Resolution could be as a Variation or a claim.

Procedure for the Engineer to review and / or approve submitted documents (sub-clause 5.2).

Generally – Yellow Book (mainly as Red Book)


Provision for Tests on Completion (clause 9) and Tests after Completion (clause 12).


Period for undertaking outstanding work and remedying defects stated in the Appendix to Tender (sub-clause 11.1).


Generally – Yellow Book (mainly as Red Book)

Only the Engineer (or delegated assistants) can vary the Works (sub-clause 13.1).


Works to be valued on a lump sum basis (clause 14).

The Engineer certifies the monthly interim payments to be paid to the Contractor (clause 14).


Subsequent procedure for submission of any claims also subject to timescales (sub-clause 20.1).


78

The Silver book

Generally – Silver Book (as Yellow Book)





Tenderers issued with Employer’s Requirements


Clauses 2 to 4 – The Employer, the Employer’s Administration and the Contractor

Clause 5 – Design





Clause 12 – Tests after Completion






Silver Book General Conditions

80


Clause 1 includes:






Generally – Silver Book (different to Yellow Book)


Employer’s Representative may be appointed to act on Employer’s behalf after contract is signed (sub-clause 3.1).[Prime duties restricted to monitoring progress, quality and testing]

Employer or Employer’s Representative can delegate specific duties and authority to assistants (sub-clause 3.2).

Contractor shall comply with instructions in respect of the Works given by the Employer or Employer’s Representative (sub-clause 3.4).


Contractor to design and construct the Works so they are fit for the purposes for which the Works are intended as defined in the Contract (sub-clause 4.1).

Intended purpose must be specified in the Employer’s Requirements as defined in sub-clause 1.1.1.5.

Contractor generally responsible for the accuracy of the Employer’s Requirements (sub-clause 5.1).

Procedure for the Employer or Employer’s Representative to review submitted documents (sub-clause 5.2).




Provision for Tests on Completion (clause 9) and Tests after Completion (clause 12).


Period for undertaking outstanding wok and remedying defects stated in the Appendix to Tender (sub-clause 11.1).



Only the Employer (or delegated assistants) can vary the Works (sub-clause 13.1).


Works to be valued on a lump sum basis (clause 14).

The Employer assesses the monthly interim payments to be paid to the Contractor (clause 14).


Subsequent procedure for submission of any claims also subject to timescales (sub-clause 20.1).[Responsibility for nearly all risk with the Contractor]


86

Exercise 3

Employer design

Contractor design

Re-measurable

Lump Sum

Low High

For each book:

1. Who has design responsibility?

2. What is the basis of valuation?

3. Who supervises the Works?

4. Where do you find the project specific data?

5. Arrange in the order of risk to Contractor (low to

high).

Exercise

Engineer

Employer’s Representative

Appendix to Tender

Particular Conditions

Employer design Contractor design

Re-measurable Lump Sum

Answer - 1

Engineer Engineer Employer’s Representative

Appendix to Tender

Particular Conditions anticipated

Appendix to Tender

Appendix to Tender



Contractor design

Lump Sum

Low High

Answer - 2

Setting up a project

Internal issues to be addressed

Organisational At project level Inter company conflict Role of Project Manager

Project definition Specified time, cost, quality Risk management Available resources

What happens at Keppel Seghers?

91

Have a process for transferring knowledge internally;

from tender to implementation personnel?

If so, what is discussed? Who is involved?

Do you?

Review your contract to identify obligations and the need for

project-specific systems?

If so, what for?

Notices Deliverables Discrepancies Securities and guarantees; insurance requirements Planning Payments Correspondence and reporting

Do you?

Have a kick off meeting with the client?

If so, what do you cover:

Confirmation and clarification of scope or uncertainties Agreement of formats / procedures for reporting and coordination Communication routes / details

How useful is a kick off meeting with the client when considering commercial strategy for a project?

Do you?

Issues to be addressed continued

Internal procedures

Planning

95

The Planning process

The planning process involves deciding

What to do

How to do it

When to do it

What resources to use

Planning and Programming

A programme is a project management tool used to monitor and control the project

It is not just a ‘picture’

97

Consider

Should the Contractor submit a programme (schedule) early in the implementation stage?

On what basis should this programme (schedule) be put together?

Should the submitted programme (schedule) be the ‘real’ one?

How should the programme (schedule) show sub-contracted works?

Should the programme (schedule) be agreed?

99

The programme (schedule) should:

Reflect Contract requirements (the baseline)

Show Contract milestones

Show intended sequence of works

Incorporate any resource constraints

Show the critical path

100

Sub-clause 8.1 - Engineer gives notice of Commencement Date

- Contractor shall proceed with due expedition and

without delay

Sub-clause 8.2 - Contractor shall complete in the Time for Completion

Sub-clause 8.3 - A detailed time programme to be provided within 28

days of notice to commence

- Engineer has 21 days to give notice if it does not

conform to the contract

- Contractor to proceed in accordance with it

- Revised programmes to be submitted in various

situations

FIDIC endorses these principles

The Critical Path - Why it is important?

Determines the earliest completion date for the project.

Determines the earliest and latest completion dates for

individual activities.

Calculates float.

Identifies which activities are important to the completion of

the project.

Identifies areas of risk.

Identifies areas where action should be taken to reduce the

project duration or recover from delays.

Critical path

The Critical Path - Shortest route between work and the pub

1

2

3

4

ActivityNo 1 2 3 4 5 6 7 8 9 10 11 12Time (days)

New Wall

13 14 15 16 17 18 19 20 21 22 23

5

6

7

8

Critical path analysis

Link Activity

Excavate the trench

Pour the foundation

Raise the brickwork

Place the coping

Complete

Critical Link

Critical Activity

1

2

3

4


New Wall

13 14 15 16 17 18 19 20 21 22 23

5

6

7

8


Excavate the trench

Pour the foundation

Raise the brickwork

Place the coping

Complete

1

2

3

4


New Wall

13 14 15 16 17 18 19 20 21 22 23

5

6

7

8


Critical Link

Critical Activity

Excavate the trench

Pour the foundation

Raise the brickwork

Place the coping

Complete

Order concrete

Design

Order bricks

1

2

3

4


New Wall

13 14 15 16 17 18 19 20 21 22 23

5

6

7

8


Excavate the trench

Pour the foundation

Raise the brickwork

Place the coping

Complete

Order concrete

Design

Order bricks

1

2

3

4


New Wall

13 14 15 16 17 18 19 20 21 22 23

5

6

7

8


Excavate the trench

Pour the foundation

Raise the brickwork

Place the coping

Complete

Order concrete

Design

Order bricks

Total Float

110

Exercise 4 –planning

111

Make a programme (schedule) for:

When you are alone

When you have a friend helping

When you have two friends helping

Activity No Description Duration010 Apply hand brake 0020 Find spare wheel 2 min030 Check that there is air in the spare wheel 1 min

(if 020 & 030 are unsuccessful the whole sequence is obsolete)

040 Find something to chock wheels 2 min(safety should be planned into a project)

050 Chock car wheels 1 min060 Find car jack & wheel brace 2 min070 Loosen wheel nuts 6 min080 Position jack 3 min090 Raise car 4 min100 Remove wheel nuts 1 min 110 Remove wheel 1 min120 Install spare wheel 1 min130 Replace wheel nuts 1 min140 Tighten wheel nuts 2 min150 Lower car 1 min160 Final tighten wheel nuts 2 min170 Remove jack 1 min180 Stow jack, wheel brace & punctured wheel 2 min190 Remove chocks 1 min200 Wipe hands 1 min210 Complete 0

112

When you are alone

Barchart for Wheel Change - Alone (35 minutes)Activity Activity Description Duration Hour 1

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

10 Apply hand brake 0

20 Find and remove spare w heel 2

30 Check air in spare tyre 1

40 Find something to 'chock' w heels 2

50 Chock car w heels 1

60 Find and remove jack & brace 2

70 Loosen w heel nuts 6

80 Position jack 3

90 Raise car 4

100 Remove w heel nuts 1

110 Remove w heel 1

120 Install spare w heel 1

130 Replace w heel nuts 1

140 Tighten w heel nuts 2

150 Low er car 1

160 Final tighten w heel nuts 2

170 Remove jack 1

180 Stow jack, brace & punctured w heel 2

190 Remove chocks 1

200 Wipe hands 1

210 Wheel change complete 0

Legend :

Project : Wheel Change Current Plan

Date : 1 Jan 2015

Prepared by : Superplan

113

When you are with a friend

Barchart of Wheel Change - With a Friend (26 minutes)Activity Activity Description Duration Hour 1

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40








80 Position jack 3

90 Raise car 4


110 Remove w heel 1




150 Low er car 1


170 Remove jack 1


190 Remove chocks 1

200 Wipe hands 1


Legend :

Project : Wheel Change Driver Passenger

Date : 1 Jan 2015

Prepared by : Superplan

114

When you are with two friends

Barchart for Wheel Change - With 2 Friends (24 minutes)Activity Activity Description Duration Hour 1

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40








80 Position jack 3

90 Raise car 4


110 Remove w heel 1




150 Low er car 1


170 Remove jack 1


190 Remove chocks 1

200 Wipe hands 1


Legend :


Date : 1 Jan 2015

Prepared by : Superplan 2nd Passenger

115

Resource planningBarchart for Wheel Change - With 2 Friends (24 minutes)

Activity Activity Description Duration Hour 1

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26








80 Position jack 3

90 Raise car 4


110 Remove w heel 1




150 Low er car 1


170 Remove jack 1


190 Remove chocks 1

200 Wipe hands 1


Legend :


Date : 1 Jan 2015

Prepared by : Superplan 2nd Passenger Critical path

Driver

Passenger

2nd Passenger

116

Cha

ngin

g w

heel

40 2 50 1

10 0 20 2 30 1 80

60 1 70 1 90 3 100 4

110 1 120 1 130 1 140 1 150 2

170 2 190 1

160 1 180 1 200 1 220 1 230 0

210 1

zoek blokken

blokkeer de wielen

zoek krik en

verwijder wieldop

los de wielbouten

Trek handrem

zoek het reserve

controleer druk in

krik de auto

verwijder wiel

verwijder wiel

plaats reserve

maak handen

wiel is verwisseld

trek wielbouten

plaats wieldop

laat auto zakken

Plaats de krik

verwijder blokken/st

verwijder krik

berg krik, de sleutel

plaats wiel bouten

zet bouten vast


Internal procedures

Planning (or scheduling)

Progress Reporting

117

The need for progress records & monitoring

Accurate assessment of status of project Accurate & agreed records in case of dispute Record and keep results

How deal with changes? Plot and compare results Analyse trends - predict the future Compare different trends

Contractor may not want to declare the actual status of project Contractor may not want accurate & robust records – confuse the

issue

Contractors Progress Records & Monitoring

Consider…

The items the contractor should include in its progress reports.

Should the contractor prepare different progress reports for

internal circulation to that submitted to the customer?

If so, what would be the differences?

119

Clause 4.21 – progress reports

To be submitted monthly from Commencement Date until completion of all work

Comprehensive - shall include:

a) Charts & descriptions of progress for each stage

b) Photographs

c) Manufacture report

d) Contractor’s personnel & equipment

e) QA documents, test results etc

f) Notices of claims (Employer’s and Contractor’s)

g) Safety statistics

h) Comparisons planned versus actual progress, risks and mitigation measures

120

FIDIC requirements

FIDIC standard forms place significant importance on

planning and progress. This is apparent by sub-clause 8.6

in the red, yellow and silver books:

“If, at any time:

1. Actual progress is too slow to complete within the Time for Completion,

and / or

2. Progress has fallen (or will fall) behind the current programme under

Sub-Clause 8.3…

other than as a result of a cause listed in Sub-Clause 8.4 [Extension of

Time]…121

Sub-clause 8.6 – rate of progress (continued)

…then the Engineer [Employer] may instruct the Contractor to submit…a revised programme…

Unless the Engineer [Employer] notifies otherwise, the Contractor shall adopt these revised methods, which may require increases in the working hours and / or in the numbers of Contractor’s Personnel or Goods, at the risk and cost of the Contractor…

…If these revised methods cause the Employer to incur additional costs, the Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay these costs to the Employer, in addition to delay damages (if any) under Sub-Clause 8.7 below.”


Internal procedures

Planning (or scheduling)

Progress Reporting

Other submittals

123

Assuming a longer duration FIDIC project, list with clause references:

The documents that the Contractor should expect to submit within a period of say 28 days of Contract Award

The ‘things’ that the Contractor should expect to receive from the Employer and/or his representative within say 28 days of Contract Award

124

Exercise

Exercise - answers

The documents that the Contractor should expect to submit within a period of say 28 days of Contract Award:

Sub-Clause 1.6 [Contract Agreement] says that the Employer and Contractor shall enter into a Contract Agreement within 28 days of the Contractor receiving the Letter of Acceptance.

Sub-Clause 4.2 [Performance Security] states that the Contractor shall provide to the Employer Performance Security.

Sub-Clause 4.3 [Contractor’s Representative] provides for the Contractor to appoint a Representative who will have the authority to act for the Contractor (including issuing and receiving communications).

A detailed time programme (and separate report) under sub-clause 8.3 [Programme].

If Sub-Clause 14.4 [Schedule of Payments] applies and the Contract does not contain a schedule of payments, the Contractor shall submit to the Engineer within 42 days of the Commencement Date, non-binding estimates of the expected payments during each quarterly period.

If Sub-Clause 14.2 [Advance Payment] applies, the Contractor shall provide to the Employer an advance payment guarantee.

Sub-Clause 18.1 [General Requirements for Insurances] requires that the relevant insuring Party shall provide to the other Party evidence that the insurances have been effected, copies of policies and evidence of payment of premiums; and give notice of such to the Engineer.

Exercise - answers

The ‘things’ that the Contractor should expect to receive from the Employer and/or his representative within say 28 days of Contract Award:

• Sub-Clause 1.6 [Contract Agreement] says that the Employer and Contractor shall enter into a Contract Agreement within 28 days of the Contractor receiving the Letter of Acceptance.

• Sub-Clause 2.1 [Right of Access to Site] says that the Employer shall give the Contractor right of access to, and possession of parts of the Site as stated in the Appendix to Tender.

• Sub-Clause 3.2 [Delegation by the Engineer] allows the Engineer to assign duties and / or delegate authority to Assistants; this would include authority to communicate with the Contractor on certain matters.

• Not less than 7 days notice of the Commencement Date (sub-clause 8.1).

• If Sub-Clause 14.2 [Advance Payment] applies, the Employer shall pay the advance payment in accordance with Sub-Clause 14.7 [Payment].

• Sub-Clause 18.1 [General Requirements for Insurances] requires that the relevant insuring Party shall provide to the other Party evidence that the insurances have been effected, copies of policies and evidence of payment of premiums; and give notice of such to the Engineer.

No contract goes completely

to plan

Indicators of potential problems-at tender

Manner in which contract was secured

The consultants and their roles

The level of definition of the works

Feasibility

The procurement status

Financial circumstances

Political aspects

Legal / contractual

128

Early days of project execution

Drawings, information and ‘Holds’

Approvals

Relationships

Consultants’ performance

Access to works

Public authority / government bodies

Payment

The manner in which early problems are dealt with

Performance of nominated sub-contractors

129

The project under way

130

Major design changes Policy changes by client Many variations Lots of day work Long information

outstanding list Inability to procure long

lead items Payment problems Valuation problems Interim payments not

detailed

Widening gap between application and certification

Programme slippage Problems with

sub-contractors Labour disputes Poor drawings Arguments about

consultants’ responsibilities

Acceleration Tone of letters Relationships

The Management of Change / Variations

Example areas of ‘change’

132

Additional or omitted work

Varied or modified work Substituted work Standard of work Physical or geological or

marine conditions Time of year work

carried out Location work is carried

out

New or revised drawings being issued

Holds being placed on drawings

Identity of owner representative/ consultants/ subcontractors/ vendors

Identity of contractors personnel

Late access to site Late issue of material

So can affect scope and/ or schedule and/ or conditions

The customer can ‘change’

The scope of work

The location of the work / equipment within

The timing and extent of access to site

The amount of information available to the Contractor

The period for drawing review / approval

The period for responding to requests for information

The extent of interference

The amounts and timing of payment

The supervisory staff or personnel

The type of equipment or materials it provides 133

The contractor can ‘change’ its:

Method of working

Sequence of working

Coordination of the work processes

Timing of undertaking the works

Quality or standard of the permanent works

Submission of required records and notices

Workers, staff or supervision personnel

Provision of access / facilities / materials to Subcontractors

Design

Use of Subcontractors134

The subcontractor can ‘change’ its:

Method of working

Sequence of working

Timing of undertaking the works

Quality or standard of the permanent works

Submission of required records and notices

Workers, staff or supervision personnel

Manning levels

Price of work

Location of off site works

Design 135

In Construction / Engineering projects, ‘change’ means what?

Something different from the contractual agreement.

It can affect scope and/ or schedule and/ or conditions

And can be initiated by:

subcontractor’s

and/ or

contractor’s

and/ or

customer’s.136

137

Management of change

Involves awareness that change will occur, recognition of the change itself and

the subsequent actions - 5 steps


1. Read the contract to understand the baseline2. Identify a change has occurred3. Follow the appropriate contractual process4. Maintain records5. Assess the time and money effects

138

Contracts contain obligations and responsibilities

What if the obligations within the contract are unclear?

Is there a contract clause for dealing with anomalies?

Does it matter whether such a clause exists?

139

Yellow Book

Sub-clause 1.5 states:“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 …:

[a] The Contract Agreement (if any)[b] The Letter of Acceptance[c] The Letter of Tender[d] The Particular Conditions[e] These General Conditions[f] The Employer’s Requirements[g] The Schedules, and[h] The Contractor’s Proposal and any other documents

forming part of the Contract

If an ambiguity or discrepancy is found … the Engineer shall issue any necessary clarification or instruction.”

As an example…

140

Contracts contain obligations and responsibilities

What if the obligations within the contract are unclear?

Is there a contract clause for dealing with anomalies?

Does it matter whether such a clause exists?

Contracts also foresee / allow certain types of changes

What types?

141

Yellow Book

This provides for various types of changes, including:

1) Failure of the Employer to give the Contractor right of access to Site

(Sub-Clause 2.1).

2) The existence of Unforeseeable physical conditions (Sub-Clause 4.12).

3) Suspension of part or all of the Works by the Engineer (Sub-Clause 8.8).

4) Variations (Sub-Clause 13.1).

5) The Contractor to propose value engineering (Sub-Clause 13.2).

6) The whole or part use of Provisional Sums (Sub-Clause 13.5).

7) Force Majeure (Clause 19).

As an example…

142

Allowable and foreseeable changes - issues

What constitutes each type of change?

Has the correct procedure been followed?

Who has the authority to initiate each type of change?

Are there any limitations or restrictions?

143

Yellow Book

In the case of variations under Sub-Clause 13.1, further details are contained elsewhere and include:

1) The definition of a Variation (Sub-Clause 1.1.6.9).

2) The communications rules (Sub-Clause 1.3).

3) The language for communications (Sub-Clause 1.4).

4) The Engineer’s duties and authority (Sub-Clause 3.1).

5) Any delegation of duties and authority by the Engineer (Sub-Clause 3.2).

6) Instructions of the Engineer (Sub-Clause 3.3).

7) Variation procedure (Sub-Clause 13.3).

As an example…

144



145

Early identification is essential

Be aware that changes will occur

Appreciate that the correct contractual process may not always

be followed

Refer back to the baseline as a reference point

Constantly monitor events, occurrences and communications to

identify the cause or effect of change

Drawings – new ones, revisions and holds

Progress updates

Cost reports

146



147

Contractual processes- issues

What type of change has occurred?

What is the correct procedure to be followed in this case?

Written notification is often required.

Is there a specified timeframe in which to do it?

Format of the notice?

Who from and who to?

Is it condition precedent to payment and / or extension of time?

If an instructed change, must the contractor comply?

148

Sub-clause 20.1 – Contractor’s claims

Notices must be submitted to the Engineer within 28 days of

Contractor being aware (or should have been aware) of an event

or circumstance that gives rise to entitlement to an Extension of

Time and / or additional payment

It must state the event and be clear it’s notice of a potential

claim

Note, it’s mandatory and condition precedent to additional

payment / extension of time

149

As an example…

Instructed changes

Who from? Sub-clause 3.1 gives authority to the Engineer but

sub-clause 3.2 allows delegation to assistants

Sub-clause 3.3 says contractor must comply but if a Variation,

clause 13 applies

Sub-clause 13.1 allows limited cases in which contractor is not

bound by a Variation

Note, written notice to the Engineer is then required

150

As an example…

151

Exercise 5 –identifying the

changes



152

Record Keeping

Why?

What type?

Should they be agreed?

How should they be maintained for future use?

153


Records to be maintained and Engineer permitted to view

154

As an example…



155

Valuation of change

What type of change has occurred?

Any procedural requirements for the valuation?

Time frames for submission

Time frames for response

What is the correct method for valuation to be followed?

Money – value, cost or cost and profit?

Time – prospective or respective?

Consider direct and indirect effects.

156

And what is a ‘claim’?

Simply, a request for reimbursement, from one party to another, of

the money and / or time consequences flowing from an event that

the contractor was not required to anticipate.

Valuation rules again apply – money mainly cost or cost and profit;

time either prospective or respective.157

Under FIDIC, what is a ‘variation’?

Simply, an instructed change to the baseline scope of work.

Definitions vary for each book.

Valuation should include time impact as well as money impact.

Valuation rules apply – money is often value; time either

prospective or respective.

As an example…


Notices must be submitted within 28 days of any event or

circumstance that gives rise to entitlement including full

supporting particulars

Records shall be kept, Engineer permitted to view

Fully detailed claim to be submitted within 42 days of any

event or circumstance that gives rise to entitlement including

full supporting particulars

Further claims to be submitted on a monthly basis if ongoing

Final submission within 28 days of end of effects

158

As an example…


Engineer to respond with 42 days of submission

May request further particulars but must respond on principles of claim

Interim payments allowed for amounts substantiated

Engineer to agree / fairly determine (clause 3.5)

159

Money impact

Valuation of variations

Adjustments to the Contract Price are to be agreed or determined by the Engineer (Employers Representative)

Reasonable profit is to be included

161

Valuation of claims

To be at Cost (see definition)

Reasonable profit is only to be included where stated

162

Time impact –Extension of Time claims

Extension of Time

An Extension of Time does not mean an entitlement to

additional money

An Extension of Time relieves Contractor liability to pay delay

damages

An Extension of Time establishes a new completion date

An Extension of Time allows the Employer to impose delay

damages after the new completion date

164

Extension of Time - considerations

Contract provisions define the basis of entitlement

Delay to be on the critical path

‘Ownership’ of Float

Effect of Concurrency

Choice of delay analysis technique

165

Sub-clause 8.4 – Extension of Time

Sub-clause 8.4 - Lists grounds for entitlement

Varies between books

Sub-clause 8.4 - Refers to clause 20.1 i.e. notice, submissions of

details

Sub-clause 8.4 – entitlement if completion for Taking Over is

delayed

No provision for Engineer to unilaterally award Extension of Time

166

Delay analysis techniques

Time extensions after completion of project (retrospective): Impacted As-Planned Time Impact Analysis Collapsed As-built As-planned –v- As-built (plus Windows Analysis)

Retrospective or Actual Based Analysis

168

ACTIVITY A

ACTIVITY B

ACTIVITY C

1 2 3 4 5 6 7 8 9 10 11Activity

Why Delay?

OriginalCompletion



Time extensions during currency of project (prospective) Impacted As-Planned Time Impact Analysis

Prospective or Model Based Analysis

170

ACTIVITY A

ACTIVITY B

ACTIVITY C

1 2 3 4 5 6 7 8 9 10 11Activity

Event

Estimate of Delay

OriginalCompletion



Time extensions during currency of project (prospective) Impacted As-Planned Time Impact Analysis

Activity AActivity BActivity CActivity DActivity ECompletion

• The as-planned programme

Impacted as-planned method


• Impact (add) the delaying event


Delaying event


• Reschedule the programme


Delaying event

Impacted completion date

(extension of time)

Advantages Quick Simple to carry out and understand Transparent As-built programme not required Can demonstrate acceleration and mitigation

Disadvantages Theoretical conclusions Requires a reasonable and robust as-planned programme Ignores actual progress Can hide concurrent delay



• The as-planned programme

As-planned v as-built method


• Plot the as-built programme



• Identify the employer delay events



• Assess delaying effect of events


(extension of time)(contractor culpable)

Advantages Simple to understand Transparent Does not require a networked programme Relies upon actual progress

Disadvantages Subjective assessment of critical delays Depends also on opinion Requires as-built programme

As-planned –v- as-built method

Which technique should be used?

Consider: Contract conditions Records available Time available Applicable law Value of dispute Most practical and common sense approach in circumstances

Delay analysis methods

X

or X or X


From SCL Delay and Disruption Protocol, paragraph 4.13

As-planned programme

without network

Networkedas-planned programme

Updatedas-planned networked programme

As-built records

As-planned v as-built

Impacted as-planned

Collapsed as-built

Time impact analysis

X and X

X

and X

X or X and X

Factual material

Type of analysis

An ‘X’ indicates the factual material that is required for a particular analysis

in some cases there are alternatives, as indicated in the table:

183

Recovering time and / or money impact following

a change

Recovery of entitlement

Requires timely notice

Require a well drafted document, showing:

Contractual entitlement

Narrative / story

Cause and effect

Apportionment

Quantum of time or money

Requires recognition of strengths and weaknesses

6 Steps for making an Extension of Time Claim

1. The contract

2. The records

3. The facts

4. The planning analysis

5. The Scott Schedule

6. The Statement of Claim

185

6 Steps for making an Extension of Time ClaimStep 4 – The planning analysis

186

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1 STEEL FRAME

2 WALLS & ROOF

3 SWITCH GEAR

4 ACCESS GANTRY

200T CRANE

Sub-Contractor A

Main Contractor

Sub-Contractor B

Main Contractor

Main Contractor

Approved Programme

PlannedCompletion

Delay 3Inherent Design Fault

Discovered

plus1 week’s float

6 Steps for making an Extension of Time ClaimStep 5 – The Scott Schedule

187

Event No

Description Brief Facts Clause Notice Ref Relevant Docs

Activity Affected

Period of Delay

1 Design Fault to Access Gallery

The connection detail for the upper part of the gantry was identified as being underspecified on 10.10.01. The engineer was immediately notified. A revised drawing was issued on 22.10.01 and the works proceeded on 24.10.01.

26.4(ii) Letter 10.10.01

MOM 31.10.01Drg 201 rev A dated 27.10.01Progress report 30.11.01

Act 4.AG 2 wks

6 Steps for making an Extension of Time Claim

Step 6 – The Statement of Claim

In accordance with clause x, the contractor claims a 2 week extension of time arising from Event 1, notified on 10.10.01, all as particularised in the Scott Schedule and planning analysis.

188

ENTITLEMENT/OBLIGATION

CAUSE

GIVES RISE TO ENTITLEMENT/BREACH

EFFECT

[THE BURDEN OF PROOF]

Dispute resolution

Dispute avoidance

1. A clear, comprehensible contract

The enquiry Scope Conditions Risks

The negotiated agreement

Shared understanding

191

Dispute avoidance – the basics

Have a commercial strategy

Work procedures

Agree records

Encourage, submit and respond to notices

Publish in compliance with the contract

192

Dispute resolution - generally

193

Non-binding

Negotiation us Mediation us with help Conciliation us with more help Mini trial us with even more help Expert determination them Adjudication them

Binding Arbitration them Litigation them

Resolution of Disputes under FIDIC

If not agreed, Engineer to fairly determination (cl. 3.5).

Any dispute can be referred to the procedure in cl. 20:

Adjudication by a Dispute Adjudication Board (DAB) in accordance with the rules in the standard form

If any Party dissatisfied or decision not made when it should, Notice of Dissatisfaction issued within 28 days

Arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC)

194

Yellow Book typical sequence of dispute events envisaged in clause 20

<28d >56d<28d<84d

Parties present submissions to DAB Amicable settlement

196

Mark CastellRegional Managing Director

[email protected]

Photograph credits to FreeDigitalPhoto.net & David Castilo Dominici

mailto:[email protected]

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