Construction Law/Direct appointment

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Question
Dear Mike,
Hope this text finds you well.

I have an inquiry regarding a project,where the owner directly appointed a contractor (Main fitting out contractor) without tendering stage to avoid any time loss as it is a fast track project.

the owner has sent (letter of award) to the main contractor along with drawings,specs and BOQ those which were produced by the main project architect.
in that LOA he (the owner) mentioned that "The contractor is awarded to perform the general items/preliminaries for the mentioned project which are Mobilization,permits,offices,shopdrawings and preparing bids for MEP package in addition to preparing priced BOQ for the whole work he (owner) called this as stage 1.

in another words he awarded the preliminaries to the contractor and put the remaining works on hold until the owner checks whether the priced BOQ which will be in stage 1 is acceptable or not,and if not then the owner will compensate whatever cost on stage 1 and cancel the contract.

The questions are as below:
1) what is the risk in that scenario?
2) the owner has asked the management office (separated contractor/separated contract) to generate a CONTRACT in this stage to be ready for stage 2 (all remaining works apart of stage 1), IN THAT CASE WHAT ARE THE CONTRACT DOCUMENTS WILL BE taking in consideration there was no tender documents ... shall the contract will not include the word "Tender" to the Drawings,specs ...etc and what is the suitable wording to be used?

Note: the contract form of condition is fidic red book 1999

thanks & Regards,

Answer
Hi Hadi

The LOA gives a clear scope of work for stage 1 and promises to pay the cost of the works done.
The word "cost" does not include profit & overheads.
There is no mention of time for completion of stage 1 - this has to be ascertained.
It will need to be clarified as to what happens if - as part of the prelims - the contractor installs infrastructure such as site huts and services and stage 2 does not go forward.

Q1 - There is vey little risk in such a scenario - it is not unusual for such 2 stage contracts to be set in place.
Q2 - The contract documents for stage 2 will be the same as for any regular construction project based - as you say - on the FIDIC red book 1999.

My advice is to take the opportunity offered.

Best regards
Mike Testro

Construction Law

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Mike Testro

Expertise

Anything related to extensions of time and delay analysis.

Experience

45 years in the Construction Industry 15 Years as a consultant delay analyst - I now hold myself to be expert in this field.

Organizations
Society of Construction Law Adjudication Society ex Planning Engineers Organisation

Publications
6 articles on the relevance of the India Contract Act 1872 and its relevance to modern construction in India. Waiting Publication

Education/Credentials
Associate Member of the Institue of Building

Past/Present Clients
Currently employed in India by Punj Lloyd as expert delay analyst. Engaged in ongoing arbitrations and EoT claims. Prior an Indepenent consultant in delay analysis.

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