Construction Law/Delay Damages
we are admiring a Design-Build project under FIDIC yellow book. The project is to construct an Intake,Water Treatment Plant, 8 Distribution reservoirs and distribute water to 8 catchments.The details are as follows.
Date of Commencement : 06th March,2012
Time for Completion (as given in Appendix to Tender) : 30 months
(Accordingly, the original Time for Completion is 5th September, 2014.)
the contractor is extremely delay and he was granted EOT twice as follows.
At first : up to 30th December, 2014 (but he failed to complete by that)
Then, he was granted second EOT up to 30th June, 2015 with two Milestones and two different type of delay damages specified in the EOT letter.
# Milestone 1 was to distribute water only for 3 catchments including completing Intake and Water Treatment Plant by 31st March, 2015. Failure to achieve this will result in delay damages with effect from 1st January, 2015.
# Milestone 2 was to complete balance scope of the work of the project by 30th June, 2015(ie to distribute water to other 5 catchments).Failure to achieve this will result in delay damages with effect from 1st April, 2015.
However, the as at today (13th July, 2015), the contractor failed to achieve neither Milestone 1 nor 2.
At the failure to complete Milestone 1 by 30th March 2015, the Engineer notify the contractor under Clause 2.5, due to failure to comply with 8.2, the contractor shall subjected to pay delay damages with effect from 1st January, 2015. (again please refer the date as with effect from 1st January, 2015).
In the meantime, on 22nd May, 2015, he appealed to waive off delay damages stating that most of the items within Milestone 1 are completed.
In reply to that letter, Engineer replied to contractor stating that,
# the contractor has failed to comply with 8.2 due to not completing the specified tests on completion
# reject the appeal for waive of delay damages
# further, he stated the following para.
"According to sub clause 3.5, i make my fair determination for the application of delay damages with effect from 1st April, 2015 to a proportionate value of the delay damages to the works of the Milestone 1 not completed by 31st March 2015. Simillary, failure to complete the balance scope of the work of Milestone 2 by 30th June 2015, the delay damages for the same shall also be applied proportionally with effect from 1st July 2015."
By the time, 30th June 2015 also passed and the Engineer put up another letter telling that delay damages for Milestone 2 shall also applied with effect from 1st July 2015.
With that my questions are as follows.
1. Can Engineer grant conditional EOT ? accordingly, can we include delay damages clauses as we included?
2. Even though the FIDIC says about sectional Taking over, can we state completion dates for each section within the time for completion and claim delay damages for such in proportionate values? in our case, the logic we raised was we expect to distribute water to 3 catchments and to gain revenue but failed.is it ok ?
3. if we can put up delay damages claim as to Milestone 1, what shall be the proportionate value ?
(delay damages per day*value of completed work/total project cost) or (delay damages per day*value of not completed work/total project cost)
4. if you notice, the engineer changed his decision wrt application of delay damages. In the EOT letter and the first notice letter for claim, LD for Milestone 1 to be applied from 1st January 2015. After their appeal letter, the date changed as with effect from 1 st April 2015. the questions are can we put back dated dates for application of LD as 1st January 2015 and secondly, is it ok to change the dates ?
5. Accordingly, what is your idea to claim delay damages as both of the Milestones are not achieved ? it is clear that since the engineer has not granted any extension further, the full LD value per day will be applied with effect from 1st July 2015. But, what is the idea in LD for Milestone 1?
6. Our maximum amount of LD is for 150 days. We are very much sure that the contractor will not complete by such. as per my understanding, he may need 300 days more. Then, can we claim additional claim under sub clause 8.6.? the clause says about revised methods, but my opinion is all those shall be within the Time for Completion and shall include in the program.
But in last sentence of para, it says in addition to delay damages. that refers to a time beyond the EOT. is there any contradictory in clause 8.6?
7. if you notice our order for delay damages, the engineer notified, then contractor appealed and later engineer gave his fair determination changing the date of application of LD. But if you refer clause 3.5, after the notice, he shall consult each party to reach agreement and if not only, engineer to make the fair determination. is our procedure ok? can we consider the engineer's letter as the "consult" and his appeal as the "agreement not met" and later the "fair determination"?
7. finally, the contractor has request an EOT again on 7th July 2015. Can we accept any claim beyond 30th June 2015 ? do we have to analyze it or simply reject under 20.1?
I know that it will take you a lot of time to read and answer this but i very much appreciate your valuable thoughts on this matter.
My apologies for the delayed response, but your query was rather complicated.
1. Yes, with the approval of the Employer.
2. Yes, provided that you get an addendum signed by both parties.
3. The second alternative - (delay damages per day*value of not completed work for Milestone 1/total cost to be done for milestone 1)
4. Everything is provisional until the final certificate and can be opened up, reviewed and changed, except for EoT.
5. The LD for milestone 1 is as described in answer 3.
6. It all depends on the applicable law. Some jurisdictions allow the Employer to claim the full extent of his losses due to the Contractor's delays and consequential breach of contract. Others do not.
7. Don't really understand this question. It seems a bit confused.
7. Always advise against rejecting claims due to time bar. The rejection might be overturned by DAB or in arbitration. Better to reject on contractual grounds if possible.