Construction Law/PEnalty RAte

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Question
HEllo Femi,

Is there any rules in determining the amount of penalty and its max. amount and duration of giving penalty to Contractor due to delay they have caused?Our Contract is L.S. and Qatar GCOC.


Thank you,


REy

Answer
Dear Rey,

Thank you.

Determination of amount of Penalty for non-completion has no standard rule and it is just being fixed as anyone who is charged with such responsibility for the fixing feels reasonable. However, as a professional, if any rule should be considered before fixing penalty under contract, there are few factors to consider so as to make the penalty effective enough capable of facilitating and motivating the Contractor to timely finish the works. Among these factors are:
1. What is the contract sum and the percentage of the penalty to the CS?
2. What is the duration and the percentage of the duration for which the penalty would continue to be applied in relation to the CP?
3. Is the percentage of the penalty to the CS reasonable enough to compel or facilitate timely completion be to Contractor?
4. What is the maximum penalty (i.e. cap) to be charged under the contract?
5. Is the impact of the penalty (prior to reaching the cap)enough to take substantial part of the contractor's profit and more so as to be effective?
6. Is the penalty allowed per period enough to offset the damages / inconveniences suffered by the Employer for non-completion by the contractor per period?

If you consider the above, you would see that, using penalty is not the best except it is fixed in such a manner that, its application (as would be understood by the contractor before entering into the contract) would have capability to facilitate timely completion by the Contractor.

Finally, LAD is better.

Hope this helps you.

Femi

Construction Law

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Femi Alofe

Expertise

I can answer all questions relating to the followings: 1. Contract Administration - variations, contract clauses interpretation, all post contract procedures, valuations and certificates questions, extension of time issues and prolongation cost matters. 2. Contract Practice - Any questions regarding forms of contract like JCT, FIDIC & other Bespoke forms. 3. Quantification, measurements and Estimating questions 4. Contracts and construction law questions and dispute resolutions problems. 5. All FIDIC Conditions of contracts

Experience

Out of my 24 years experience in construction industry, i have the following specific experience: 1. Contract Administration - 15 years in contract administration with over 10yrs in Managerial positions covering africa and the middleeast. 2. Contract Practice - 15 years experience with over 10yrs in Managerial and expert positions covering africa, north america and the middleeast. 3. All pre-contract procedures, Tendering, Quantification, measurements and Estimating questions - 20 years experience. 4. Contracts and construction law questions and dispute resolutions problems - 15 years experience with over 10yrs in Managerial and expert positions and 5 years expert witness and active practice in arbitration proceedings covering africa and the middleeast.

Organizations
1. FAIQS - Fellow, Australian Institute of Quantity Surveyors, Australia 2. FRICS - Fellow, Royal Institution of Chartered Surveyors, UK 3. CCP - Certified Cost Professional AACEI, USA 4. PQS - CIQS, CANADA 5. ACIArb. - CIArb, UK 6. MNIQS - NIQS, NIGERIA 7. RQS - QSRBN, NIGERIA

Publications
1. AACEI RP on Estimating, 2010

Education/Credentials
1. B.Tech (QS) 2. RICS professional course, CEM - UK 3. MSc , UK NARIC 4. Professional Doctorate ( to commence 2016)

Past/Present Clients
1. Larsen & Toubro Ltd, Dubai UAE 2. Larsen & Toubro (oman) LLC 3. Archi + Web consortium, Abuja Nigeria 4. George Dike & Associates, Minna Nigeria 5. Public works Authority (Ashghal), Doha Qatar

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