Construction Law/Suspension of work

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Question
We are employer and using fidic 4th edition and fidic 99 on our projects.in recent past due to certain restraints we are unable to make timely payments to the contractors.after waiting for the required time as per contract,contractors have started serving notices for slow down in rate of progress and suspension of works.
Our top brass is of the view that contractors were prequalified and later on they submitted the financial data in technical proposal as well where contractors have mentioned certain credit lines from the banks for these project,therefore contractors have no right to slow the progress or suspend the work unless they have exhausted limit of this credit line because technical proposal is part of contract documents.
I want to have your views on the issue considering fidic as our contract document.

Answer
Daer Hafeez

AOA and welcome to ALL Expert.com. I thank you for your question which is very valid in the circumstances you are in. The brief answer to your question is that the contractors are doing things for which they are entitled under the Contract and I am afraid that the views of your top brass do not seem to be in line with the Contract.

I am of the view that financial health of the contractor gives confidence to the Employer that the contractor is capable of completing the project but this does not mean that he will start financing the project because he is not the Financier. He is only a service provider who does a job for the Employer and gets payment for it. This is why despite the fact that he shows a sound financial health, yet he is assisted by the Employer in the shape of giving him advances for mobilization and other assistance. He and the Employer both are bound by the Conditions of the Contract and these conditions apply to both of them equally. These conditions spell out various situation which can be faced by either party and gives its solution within the ambit of the Contract. Just making his technical and financial proposal part of the Contract does not mean that Conditions of Contract have changed. The Employer did not have even thought of such a situation at time of awarding the Contract otherwise he would have changed the relevant clauses e.g Sub clause 69.4 of COC in case of FIDIC 1992 and Sub Clause 16.1 in case of FIDIC 1999 but he did not do it confirming that such thinking is an after thought.

The Contract is governed by the Conditions of Contract agreed and signed between the parties which cannot be altered unilaterally. My advice to you will be that you must follow what has been agreed between the parties as Conditions of Contract unless you find something which categorically overrules it. Merely by submitting his financial resources or a credit line does not entitle the Employer to exploit the situation in his favour.

I hope this answers your question. If you need any further clarification, kindly feel free to ask for it.

Thanks and regards.

ABDUL MAJID KHAN

Construction Law

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Abdul Majid Khan

Expertise

I am interested in questions related to time Extension, Liquidated Damages,variations, price adjustments,payments, disputes and Dispute Board under FIDIC IV, FIDIC 1999 and FIDIC 2006 Harmonized Documents.

Experience

I have been heading the Construction Management Division and Contract Divisions of National Engineering Services Pakistan (PVT) Limited, NESPAK, the largest Consulting Engineering Firm in Pakistan, for more than seven years and two years respectively. I have also worked as "The Engineer" on a number of projects. I have been working in Saudi Arabia for about seven years on a road projects. Additionally I worked as Arbitrator and am member of few Dispute Boards in individual capacity on Asian Development Bank funded projects.

Organizations
Inland and in Middle East. I have worked with National Engineering Services Pakistan (Pvt) Limited (NESPAK)as my Employer for more than 27 years in Pakistan. In Saudi Arabia I worked for Rashid Engineering, Consulting Engineers during 80s. After retirement I provided advisory services to NESPAK on technical and contractual matters to its various divisions and lately I was appointed as Advisor to Managing Director NESPAK on Technical and Contractual matters. Currently I work as Free Lance Contract Specialist on Fidic Form of Contracts.

Education/Credentials
I am a graduate with a B.E (Civil Engineering) degree. My year of graduation is 1970.

Awards and Honors
A few appreciation Letters and Honorariums during my service in NESPAK. I remained member of Administrative Committee and Board of Management of NESPAK. I had been part of the Management Committee in the absence of Managing Director.

Past/Present Clients
Most of the Clients used to be Government Departments, Corporations and Authorities. In Saudi Arabia the Client was Ministry of Communications. As Arbitrator and Dispute Board (DB) member, I provide services to various Government Departments and Contractors.

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