Construction Law/Delay Damages under Sub-Clause 8.7
I am working with the consultant firm on a contract based on FIDIC 1999 conditions of Contract. The Contractor has failed to complete the Works within the Scheduled Time for Completion and time is at large. The Employer has notified under Sub-Clause 2.5 for deduction of Delay Damages. Sub-Clause 8.7 states that “ the Contractor shall subject to notice under Sub-Clause 2.5 pay delay damages to the Employer for this default”. My questions are as follows;
(i) Should the Delay Damages be deducted just by passing the Scheduled Time for Completion or the Employer has to wait until the issuance of TOC for the Works which will define the delay period?
(ii) If the Delay Damages are deducted before issuance of TOC and then afterward an EOT is awarded, then the Contractor is to be entitled for the compensation of the deducted amount for the awarded time period?
Usually, the Delay Damages are to be applied after the Time for Completion is settled, i.e. after the Contractor's claim (if any) for EOT as per 20.1 is determined by the Engineer according to 3.5 or the Parties agree to an EOT. Then, the Employer notifies a claim 2.5 and 8.7 for Delay Damages from the new Date of Completion to the actual date when the Works are finalized according to the Taking Over Certificate. In practice, the Employer notifies a claim 2.5 and 8.7 after the Completion Date, asking Delay Damages, provisionally, up to the date of the notice 2.5, and mentioning that they will calculate further Delay Damages, up to the actual Completion Date, but not exceeding the maximum amount of the Delay Damages included in the Appendix to Tender. Then, further notices 2.5 and 8.7, and determinations 3.5 are to be issued for Delay Damages (either from time to time, or another one at the end), up to the actual Completion Date, but nor exceeding the maximum amount of Delay Damages.
Therefore, the answer to your questions are:
i) the Employer should not wait the TOC to issue a notice 2.5 and 8.7, but he should wait at least after the initial Completion Date, if not after the new contractual Completion Date (the initial one plus EOT) to issue it.
ii) In this case, the Contractor should issue a claim 20.1 for claiming back his money (the Delay Damages applied from the original Completion Date to the new Completion Date, as per the EOT awarded). This is why in practice the Employer waits until the EOT claims of the Contractor are solved, then notifies a claim 2.5 and 8.7.
Hope it is clear.