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Construction Law/Application for Final Payment Certificates

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QUESTION: Dear Sir,

In our project, FIDC MDB 2006 edition is being used. The Contractor has failed to submit Statement at Completion (Sub-Clause 14.10) even after the due date of 84 days after TOC. Sub-Clause 14.14 states,

”The Employer shall not be liable to the Contractor for any matter or thing under or in connection with the Contract or execution of the Works, except to the extent that the Contractor shall have included an amount expressly for it:
(a) in the Final Statement and also
(b) (except for matters or things arising after the issue of the Taking-Over Certificate for the Works) in   the Statement at completion described in Sub-Clause 14.10 [Statement at Completion].
However, this Sub-Clause shall not limit the Employer’s liability under his indemnification obligations, or the Employer’s liability in any case of fraud, deliberate default or reckless misconduct by the Employer.”

I have following two questions;
(1)   How this failure will effect Contractor’s Entitlements?
(2)   Is this necessary for the amount (due to matters arising before TOC) which Contractor wishes to include in Final Statement after this failure, must also be expressly stated in Statement at Completion? Because Sub-Clause 14.14 (a) states the word “in the Final Statement and also”

Your expert opinion is requested.

Regards,
UMER SHABBIR

ANSWER: Dear Umer Shabbir

Thanks for the question. I have checked in detail but could not find any provision in Clause 14 like the one stated in Sub Clause 20.1 (If the contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended.........................and the Employer shall be discharged of all liabilities in connection with the claim). I therefore understand that 'Statement at completion [Sub Clause 14.10] can be submitted even later than 84 days after TOC is issued because it is a prerequisite for submitting the final statement. Moreover the provision in Sub Clause 14.14 refers to all claims expressly mentioned in 'Statement at Completion' plus 'any matters or things arising after the issue of the Taking-Over Certificate for the Works'. This makes submission of 'Statement at Completion' mandatory before submission of 'Final Statement'.

It is similar to the condition stated in Sub Clause 14.11 where the contractor is bound to submit 'Final Statement' within 56 days of receiving the Performance Certificate. A Final Statement submitted later can never be denied only on this ground, as such provision show the methodology and chronology of events and are not as harsh in nature as the provision in Sub Clause 20.1 above.
 
I hope the question is answered. Please do not hesitate to ask for for any further clarifications.

Regards

Abdul Majid Khan



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

QUESTION: Sir,

Thanks for your comments.

I also would like to ask that if Performance Certificate has been issued and the Contractor submits Final Statement without Statement at Completion, then the Contractor still be entitled for the amount which is due for the matters before TOC?

Thanking again in anticipation.

Regards,

UMER SHABBIR

Answer
Dear Umer

Thanks for the follow up. I understand that the main purpose of 'Statement at completion' is to allow the contractor some payments due as the procedure for payment of 'Final Payment' takes a longer time. The 'Statement at completion' as is obvious from its meaning takes care of the payments due before the TOC is issued. In the absence of such a statement, the Final Statement should take care of these due payments. The only damage is that the Contractor, by not submitting 'Statement at Completion' has deprived himself of an opportunity to receive payment at an early stage. He is still entitled under the Contract for all the payments due at the 'Statement at Completion'. Item (a) of Sub Clause 14.11 [Application for Final Payment Certificate] refers to the amount due under 'Statement at Completion'.

I hope the question is answered.

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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