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Construction Law/Sub clause 1.13 “Compliance with Laws-FIDIC Harmonized. May2005

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Question
Dear Sir,
I am working in a road project in India under the World Bank fund as a Resident Engineer on behalf of consultants. The contract is under FIDC, Harmonized Edition May’2005.

I want a clarification on Sub clause 1.13 “Compliance with Laws”.  The Contractor has not obtained the NOC’s for some plants like stone crusher, Hot Mix Plant and WMM plant from the pollution control board even after lapse of the original contract period of 30 months. The contract now is in under the extension of period. The contractor at one instance notified the Employer, the difficulties in obtaining the NOC’s and sought assistance from them for getting the NOC’s.  There has been no official communication from them on the matter. But, they expressed in a meeting that it the obligation of the contract to comply with the contract.   Please, note that the works are not been stopped due to this non-compliance by the contractor.

In this regard, I would like to seek guidance from you on what kind of action shall be taken as an Engineer. Is the responsibility of obtaining permissions is ambiguous? (Refer cl 2.2 also). What Shall I write to the contractor and/or Employer?

Thanking you
N.Saravanan.

Answer
Dear N.Saravanan,

There are a few things to consider here.  The Contractor has to comply with the local laws and if the law requires a NOC for any item of plant, then the Contractor must get the required NOC before starting work.  As the Engineer, you are required to certify payment for works that are compliant with the Contract.  If certain items do not have the required NOC, then they are not compliant with the contract and no payment for any output is due.  However, you have condoned non-compliance for some months and thus it would be difficult, but not impossible under the Contract, to withhold payment for any previous or future work due to non-compliance.  

The other matter is clause 8.5 delays caused by the authorities.  If the Contractor has complied with the requirements to get a NOC and the NOC has been delayed, then he might have a claim for an extension of time under clause 8.5.  You would have to check that he made a realistic allowance for getting the NOC in his critial path programme.

I would move very slowly and carefully in this matter.  Depending on the relationship between the Employer and the Contractor, you might find that your contract has been terminated if you create too much trouble.  Discuss the situation with the Employer and possibly the funder before moving any further.  Talk to the environmental protection agency and seek their opinion.  You might find that they will impose the law and halt work at the plants without further action from you.  Of course, you might have to explain to the Employer why you certified payment when the work was non-compliant with the Contract.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

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