Expert: Peter M. Elliott - 1/22/2012

Question
QUESTION: A Contractor made an unforeseen physical conditions claim under an Infrastructural Works Contract using FIDIC Red Book 1999 ed. It was not in issue that unforeseen physical conditions obtained at the time and the Contractor's claim was satisfied. Approximately 15 months after accepting the payment the Contractor makes another claim for payment for the same unforeseen physical conditions arguing that the rate utilized was incorrect and requested a rate enhancement. The Engineer was of the opinion that the claim was outside the period provided for in section 20.1 and in any event the Contractor had already accepted payment and could not now come and ask for a rate enhancement. To date the final account is unagreed because of this issue. Please advise.

ANSWER: Dear Donna,

If we have a re-measurment contract, then it is possible that the Contractor has a valid comment, but not necessarily a claim, yet.  I hate engineers who rely on time bar to reject claims.  The Engineer must justify his use of the rate, rather than rejecting the claim as time barred.  It is possible for the Contractor to decide to go to arbitration, in which case the Engineer would have to justify his use of the rate.  A claim does not exist until disagreement arises.  If I was the Contractor, I would argue that the rate used in IPC's was on account and unfinalised.  Now we come to the final account and it is obvious that the rate is not going to be changed.  Now I realise that I have extra costs and my claim is no longer time barred.  Remember, everything can be opened up, reviewed and amended until the Performance Certificate is issued.  

Ask the Contractor and the Engineer to justify their comments and come to an agreement or be prepared for arbitration.

---------- FOLLOW-UP ----------

QUESTION: The issues in this matter are numerous and goes back to 2005(Trinidad and Tobago Law which in most respects follow UK Law):
1. the Engineer paid at the time agreed rates for item of original and additional works, the Contractor now disagrees and suggests increasing the overall project cost by 30%: Engineer disagrees with the percentage amount on the basis that the Contractor utilized poor construction methods, most of the work was subcontracted, Contractor took lengthy periods to supply test results for materials to be used occasioning delays, the unforeseen physical conditions did not affect the entirety of the works. The Contractor has countered that payments must take account of obvious costs such as preliminary cost over the extended period, financing cost and disproportionate loss of material.
2. Deductions were made in cases where no proof of purchase of materials by the Contractor could be shown. the Contractor contends that because the quantities of the item were relatively small it is unreasonable for him to provide such evidence.
3.Contractor argues that there was no specific date of occurrences giving rise to their claim as the unforeseen physical conditions persisted throughout the contract. The Engineer has countered that a Contractor is under a duty in such a circumstance to continue submitting notices at monthly intervals where in his opinion the events are ongoing.
4. Contractor has not substantiated his claim for rate enhancement.
5. The Client took over certain aspects of the Works and made payments to the Contractor without him completing the items due to the delays on the part of the Contractor (waiver) and issued minor contracts to have the substandard elements completed and etc.
All and all the Engineer is adamant that the claim should not be entertained

ANSWER: Dear Donna,

From the extra information, it appears that the Engineer probably has the rights of the case, but he must put his comments in writing to the Contractor within 42 days of receiving the notification.  With cases of EoT, I suggest that people download and study the the SCL Delay and Disruption Protocol www.eotprotocol.com as it is a good basic guide to the presentation and review of claims for EoT.  

It seems as if some emotion is entering the discussion rather than objective facts, so it might be useful to get an objective review of the case.  

---------- FOLLOW-UP ----------

QUESTION: Thank you very much so far. The Engineer has on several occasions answered the Contractor but the Client requested a supposed independent assessment which supported the Contractor but in my own opinion it was not based on the facts nor in my opinion did they justify their view point. I even asked several Engineers familiar with FIDIC and unconnected to the matter and they took the same view and the Engineer. A lot of politics seems to be at play and the Engineer went as far in one case to evaluate the Contractors claim in the event that the Client wished to waive section 20.1 and the evaluation came down to .5 million as opposed to the 2+ million dollars that the Contractor is claiming but the Engineer advised the client that payment would amount to a waiver of the contract clause and it could open a flood gates situation.

Answer
Dear Donna,

It is always the political, or personal, rather than technical, effects which make construction so interesting.

It seems to me that this problem will be solved only by the Contractor starting arbitration proceedings, which will take years and cost a fortune.