Construction Law, Contract Administration

Liquidated damages clauses in construction contracts

Most forms of building contract include a clause entitling the Client to a specified level of damages, referred to as “Liquidated Damages” or “Liquidated and Ascertained Damages” if the Contractor is late in handing over the building. LADs replace the Client’s common law right to damages for late completion with a contractual right to a pre-determined sum for the period of delay. …

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Project Management

Techniques to Manage your Schedule

Don’t Manage by Percent Complete

Most project management scheduling tools have a field for entering the percentage complete for each activity. Before an activity starts, it is 0% complete. When it is finished, it is 100% complete. However, in between can be tricky. On the surface, if a team member were 20 hours into a 40 hour activity, you would say he is 50% complete. But is he? He may be close to done, or he may be only 10% done.

The project manager could ask team members to report on their percent complete, but in many cases you will get an inaccurate number. If the activity is overdue, for example, the team member often gives the “90% complete” answer. This means that the first week the activity is late the team member says it is 90% done, the next week it is 95% done, the next week 99% done, etc.

A better way to get the information you need is to ask ‘When will the work be done?’ If the schedule shows an activity should be completed on the last day of the week, and the work is not done, don’t ask the team member for the percentage complete. Instead ask the team member ‘When will the work be done?’ Asking when the work will be completed gives you concrete information you can place on your schedule, while also getting the team member to make another commitment to the new end-date.

Manage the Schedule by Due Date

In most organizations, once the project starts the team does not collect the actual effort hours worked on each activity. Unless tracking effort hours is important to your organization, the project manager should feel comfortable to manage the project schedule based on completion dates – not effort hours.

For example, assume you have an activity that is scheduled to take 40 hours and has two-week duration. If the work is done within the two weeks, it may not be as important to know if the work actually took 35 hours or 50. It would only be important if the difference in effort hours caused another assigned activity due date to be missed. The effort hours are important in the estimating process since they help set completion dates and help balance workloads. But when the activities are assigned, getting the work done on time is usually most important.

If the work is being done by a resource that you are compensating on an hourly basis, it is important to understand both the effort hours and completion date. Now it does matter whether the 40–hour activity actually took 50 hours, since there is an incremental cost to your project.

Use Milestones to Take a Checkpoint and Validate Your Status

A milestone is a scheduling event that signifies the completion of a major deliverable or a set of related deliverables. A milestone, by definition, has duration of zero and no effort. Milestones are great for managers and the sponsor because they provide an opportunity to validate the current state of the project and what the future looks like.

If the milestone is important enough you could perform an end-of phase review. However, many milestones represent the completion of smaller deliverables or deliverable components and don’t rise to the level of holding a full end-of-phase review.

You can do the following activities at every milestone:

Validate that work done up to this point is correct and accurate. The client should have approved any external deliverables produced up to this point.

Make sure that the rest of the project schedule includes all the activities necessary to complete the project.

Double-check the effort, duration and cost estimates for the remaining work. Based on prior work completed to date, you may have a much better feel for whether the remaining estimates are accurate. If they are not, you will need to modify the schedule. If it appears that your budget or deadline will not be met, raise an issue or a risk and resolve the problems now.

Issue a formal status update and make any other communications specified in the Communication Management Plan.

Evaluate the Risk Register to ensure previously identified risks are being managed successfully. You should also perform another risk assessment to identify new risks.

Update all other project management logs and reports.

These activities should be done on a regular basis, but a milestone date is a good time to catch up, validate where you are at, get clear on what’s next and get prepared to charge ahead.

Use a Project Audit to Validate Your Schedule and Budget Status

Sometimes the project manager can get too comfortable (or too uncomfortable) in how the project is progressing. In many cases, it makes sense to have an outside party come in to evaluate the project management processes being utilized and double-check that the project is progressing as expected. This “outside party” could be any qualified person outside of the project manager. In some cases, your organization may have an internal project audit specialist. It is possible that the Project Director or the Project Sponsor could also perform this audit. The outside party could be an outside contractor or consultant, but they do not need to be.

The project manager or functional manager might call for a project audit as part of an overall quality management program. In some cases, such as a government project, periodic audits may be called for as a part of the overall contract. In any event, an outside audit should provide comfort to the project stakeholders that effective project management processes are being utilized and that the project appears to be on-track.

Tenstep

Project Management

Manage the Schedule / Techniques

Investigate Further When ‘Completed’ Deliverables Are Not Really Completed

Sometimes a team member says that a deliverable is complete when in reality it is not quite done. This can happen if a deliverable is ’completed’ by the team member but not approved. The team member may say the work is complete, but when the deliverable is checked it is discovered that it is incomplete or needs additional follow-up work. …

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Contract Administration

Turnkey Contracts

By Chris Wilcock
Managing complex disputes can be difficult. The recently-reported Australian case of Alstom v Yokogawa1 highlights how it can go horribly wrong. In March 2002, Alstom entered into a ‘turnkey’ contract with FPP as the owner. Alstom agreed to refurbish an ageing power station to meet a performance specification. The contract sum was AU$148m. There were staged completion requirements and significant delay damages. …

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Construction Law

Interpreting legal terms

By HUGH MURRAY and Joanne Emerson Taqi

THE use of some legal phrases in contract documentation or correspondence is considered, by most, as commonplace. However, it is important to ensure that such phrases are properly understood.
Misunderstanding such terminology, particularly when the interpretation of some key terms can differ depending on whether the words are in a document governed by English law or by another law, can potentially affect the efficacy of the commercial bargain. …

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Construction Law, Contract Administration

Procurement in Abu Dhabi

1 Comment

By KATIE LISZKA and NAZLI OKUSLUK

ABU DHABI Law No 6 of 2008 (procurement law), which governs the procurement of materials, service contracts and works contracts in the Emirate of Abu Dhabi, aims to decentralise, modernise, simplify and facilitate procurement by government departments. It grants the Department of Finance the authority to issue a manual to execute the provisions of the law, pursuant to which the department issued the Purchases, Tenders and Bids Manual in 2008 (manual). This manual sets out provisions, policies and procedures in respect of tenders for purchasing materials, services contracts and executing works and bids, in addition to the terms and policies related to electronic tenders and purchases.ScopeWithout prejudice to the provisions of Law No 21 of 2006 regarding construction contracts and agreements in the field of civil works, the procurement law and the manual are in principle applicable to all government departments and agencies funded under the general budget of Abu Dhabi and apply to all contracts, except for the following:

(a) Direct employment contracts entered into between a government department and employees;

(b) Purchases by and contracts of the Abu Dhabi Police;

(c) Buildings leases provided to the employees of a government department; and

(d) Contracts entered into with other government entities.

In addition, the Executive Council of the Emirate of Abu Dhabi may, at its discretion, determine that the provisions of procurement law and the manual will not apply to a specific tender.

Types of tenders

The two main types of tender process are the general, which is a public tender, and the limited, which is a restricted tender.

• General tender: Designed for contracts exceeding Dh50,000 ($13,611), general tenders are based on three principles, namely, openness, equal opportunity and freedom of competition, and involve four main steps: announcement of tenders; evaluation of proposals; awarding contracts; and supplying goods or performing work.

General tenders can be either global or local. A global general tender is where invitations to tender are open to suppliers and contractors from within the country and abroad and advertised in the local as well as international media. A local general tender is where invitations are restricted to suppliers and contractors within the country and advertised in the local media only.

• Limited tender: Here, the invitation is given to a restricted number of registered suppliers and contractors selected by the relevant department. The minimum number of tenders for this process is three.

Such a tender may be international or local and is sometimes called the “selective tender” or the “tender from the list” as it is based on selecting certain suppliers or contractors from a register (see below) and inviting them participate. This process may be appropriate in circumstances where there are, for example, only a certain number of specialist suppliers.

Except for general advertising, all the rules and procedures for public tenders apply to limited tenders.

Pre-qualification

Registration is a pre-condition of doing business with government entities in Abu Dhabi and the procurement department of each government entity keeps a register of suppliers and contractors qualified to provide services and products to that government entity. If a bidder in a public tender is not on the register, it must fulfil the qualification conditions before the bids are opened.

Qualification standards

Qualification standards and conditions cover the following aspects:

(a) Legal, including the requirement for licences to practice the activity (from Planning and Economic Department, Chamber of Commerce and Industry, or any other entity);

(b) Commercial, including the relationship with licence agencies and previous transactions with the relevant government and other entities;

(c) Financial, including the financial position of the tenderer and arrangements and relationships with its banks and other financing sources;

(d) Technical, including that the tenderer has professional technicians and appropriate and sufficient equipment, workshops and warehouses; and

(e) Expertise, which can be evidenced by the successful completion of previous transactions.

Procedure

• Invitation to tender: The tendering government entity publishes an invitation to tender in newspapers, magazines and its official website (in case of public tenders) or sends the invitation directly to a specific number of suppliers or contractors (in case of restricted tenders) in order to get offers.

• Tender documents: These documents can be collected from the procurement department immediately after the invitation to tender is announced for a cash fee. They must be stamped and signed by the procurement department of the relevant government entity.

• Clarification meetings: In order to assist the bidders in preparing their bids, meetings may be held prior to submitting bids for the purpose of replying to any enquiries or questions. To ensure equal opportunity, the same information will be provided to all bidders. The manual strictly prohibits any information being provided to bidders by other means.

• Bid submission: Bids must be submitted in the required form to the envelopes opening committee, which comprises of at least three members with experience and competence in legal and financial aspects of the procurement.

A participant is permitted to submit more than one bid, provided that he shall provide for each bid a separate set of original tender documents. Submissions received after the deadline shall not be accepted.

• Bid security: For bids exceeding a value of Dh1 million ($272,238), the procurement department may decide that bid security is required.

• Reviewing bids: Once the bids are opened by the envelopes opening committee, they are delivered to the concerned technical division of the tendering government department to conduct a technical assessment. Bids accepted from a technical perspective shall be forwarded to the procurement department for financial evaluation in the case of procurement of materials, and in the case of procurement of services and works, to the relevant division.

• Notifying the successful bidder: The successful bidder will be notified of the acceptance of its bid by letter no later than a week from the date at which the procurement department approves the recommendations of the tenders and auctions committee. For unsuccessful bidders, envelopes will be returned along with a letter clarifying the reason for rejection.

• Performance bond: The successful bidder is required to submit a performance bond within 15 days from the date it is notified of the acceptance of its bid. The performance bond, to be provided before execution of the contract, is for between five and 10 per cent of the bid’s value. No interest will accrue on this bond.

If the successful bidder fails to provide the performance bond within the prescribed time period, the procurement department may call on the bid security and perform the subject of the tender in whole or in part on its behalf without taking any legal action and without prejudice to any of its legal rights.

• Contract execution: The successful bidder must sign the contract after being notified of the award and submitting the performance bond. If the successful bidder fails to sign the contract, without reasonable justification, within 15 days of being notified of the award, it shall be deemed to have withdrawn and the bid security can be called on.

Other provisions

Apart from tender procedure, the manual also contains information on internal procedures and regulates contract periods, penalty payments and dispute resolution, among other things.

• Internal procedures: The manual specifies in detail the relevant committees (such as the tenders and bids committee, and the envelopes opening committee) and officials (such as the officer in charge of contract management) who will be running the procurement process as well as their tasks and duties.

• Delay penalty: If there is a delay in completing the works within the specified time, a delay penalty will be imposed on the contractor, in accordance with the conditions of its contract. That penalty should not exceed 10 per cent of the total value of the contract.

• Claims and disputes: The relevant department must solve the contractual problems amicably by consent as far as possible. If these cannot be so resolved, the dispute shall be settled in accordance with the terms of the contract. If a dispute cannot be settled amicably, the parties have the right to go to the courts and may appeal to arbitration either under the terms of the original contract or by a separate agreement.

Gulf Construction Online

Project Management

Estimate the Project Work Before Gathering Detailed Requirements

There is concern from many project managers that they are expected to present a detailed estimate of the project work when the charter and schedule are created. However, the detailed requirements have not been gathered yet. So how are you supposed to estimate the work without having captured the detailed requirements? It seems like a valid question. Yet, when you talk about gathering detailed requirements, you are usually talking about the Analysts Phase of a project lifecycle, not the up-front project management work of defining and planning the project.  …

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Construction Law, Contract Administration

JCT and ICE Payment Certificates under Scrutiny

The Process

The Certification process in the construction industry has been in place for many a long year and is an integral part of both building and civil engineering. It involves client, consultant, main contractor and subcontractor alike. The very existence of large numbers of companies who make their living in the construction industry depend upon the certification process. On many standard forms of main contract the contractor is entitled to be paid the sum which is certified by the Architect, Engineer or Contract Administrator. Main contractors in an effort to ensure that they do not finish up paying out more than they receive link the payment under the subcontract to the amount certified under the main contract. …

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Contract Administration, Project Management

Concurrent delays

Concurrent delays
By Jad Chouman
When delays occur on a construction project, it is not uncommon for each party to attempt to use concurrent delays in defense against the opposing party’s delay damages: Employers often cite concurrent delays by the contractor as a reason for awarding an extension of time without compensation, whereas contractor’s claims usually ignore the concurrent delay from the claimed delays in order to claim full prolongation costs stemming from the employer delays and to prevent exposure to liquidated damages. …

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Contract Administration, Project Management

Coordination – the magic wand

By Philip Adams
In a previous article I referred to the term ‘coordination’ and given recent experiences, I thought it would be useful to expand on the subject a bit more. I have come to the conclusion that this word is considered by some to be an ancient mystical symbol infused with magical qualities. When faced with problems on site one only has to utter this word and ‘poof’ they miraculously disappear! …

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