Construction Law/FIDIC 2010

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Question
SIR,

HOW ARE YOU I AM USING FIDIC 2010 KINDLY ANSWE THESE QUEESTIONS

1:  AMORTIZATION AND REPAYMENT
2:  PROCEDURE FOR  MAKING DISPUTE BOARD
3:  COMMENCEMENT DATE IS STARTED OR LINKED ACCORDING WITH ADVANCE PAYMENT CLAUSE 8.1
4:  MAX. DURATION FOR NO ESCALATION AS PER PAKISTAN ENGINEERING COUNCIL


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Answer
Dear Imran,
Thank you for your question.
My Response is as follows.

1. AMORTIZATION AND REPAYMENT
Both are different things. Installment / repayment is what you pay to cover your loan. Then comes in amortization. When you pay your installment, a part of it goes to bear the interest and one part of it covers up the principal amount. The reducing of the principal by the amount paid is amortization. So your principal amount is amortized over the whole period during which you pay your loan in installments.

2. PROCEDURE FOR  MAKING DISPUTE BOARD
Disputes can be adjudicated by referral to a Dispute Adjudication Board (DAB). The DAB
will comprise of one or three members. (Clause 20.2)
How are the DAB members appointed? The contract may include a list of potential
members, from which the board is selected. If three members, each party nominates one
member for approval by the other party. Parties and members agree on the appointment
of the third member, who will be chairman. (Clause 20.2.) Alternately, these can be appointed by parties within 84 days of the start of work for full time board. Some times only adhoc board is appointed in similar manner when a dispute arises. To drive full benefits of dispute board option, the proffered way is to appoint full time board at the start of the project. Another aspect which need consideration is that a DAB member is an experienced professional having worked in dispute resolution mechanism in the capacity of Engineer / Engineer's representative or have worked as DAB member previously on a similar project. The choice and appointment of DAB member is a critical factor for its success.
The form of the DAB appointment is normally through Dispute Adjudication
Agreement, as set out in the contract and entered into by the parties and the
member. It is a Tri-Partite Agreement (TPA).
Can DAB members be replaced? Yes, parties can agree to replace a member at any
time, or if a member declines to act, dies, resigns, on disability or termination of a member’s appointment.
What is the effect of the DAB decision? Generally speaking,  The decision is binding, and must be complied
with immediately, until revised by amicable settlement or arbitration. Parties must give
effect to it. If no notice of dissatisfaction is served, it is final and binding. (Clause 20.4.)
Unless settled amicably, any dispute in respect of which the DAB decision (if any) has not
become final and binding shall be finally settled by arbitration to be processed as per local law.The Rules of Arbitration shall apply as per arbitration act of the country.

3.COMMENCEMENT DATE IS STARTED OR LINKED ACCORDING WITH ADVANCE PAYMENT CLAUSE 8.1
To quote an example, the Harmonized MDB Pink Book rewrites Clause 8.1, a point of interest to consider. The amended clause recognises the following conditions precedent must be complete before
the works start:
•Contract signed by both parties.
•Receipt by the contractor of “reasonable evidence of the employer’s financial arrangements”.
•Site possession given to the contractor.
•Provision of any advance payment and corresponding guarantee/bond.

4.MAX. DURATION FOR NO ESCALATION AS PER PAKISTAN ENGINEERING COUNCIL
As per PEC standard guidelines and formula for price adjustment, only contracts having duration of more than  twelve (12) months should be liable to price adjustment. Contracts of less than twelve months duration will be considered as fixed price contracts. This duration limit has been relaxed in few cases to 6 months. It all depend on the timing and investment climate for construction industry when a particular tender is being floated.
Regards and best wishes,
Liaqat Hayat
Cell 0092-333-5610760

Construction Law

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Liaqat Hayat

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I can answer questions based on FIDIC 4 and FIDIC 1999 [design-build] with particular reference to time extension , price adjustment and disputes. I am in particular more inclined for response to points pertaining to how claims should be framed and put up in case of technical or other contractual shortcomings. Regarding procurement matters I have spent over 5 years as procurement specialist for highway authority and dealt with numerous claims and disputes in the capacity of "The Engineer" .

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