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Construction Law/Late Release of Retention Money

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Question
Dear Sir!

We are Contractor and working under FIDIC EPC 1999. Contract started on 08 April 2013. "Some circumstances lead the delay of overall project by 2 yrs.  The Employer granted us EOT for 1 yr only (in Dec 2015). Say Original Contract Finish date was 08 Oct 2015. Now, new finish date is fixed as 08 Oct 2016. The 50% Retention Money was planned to be released on 08 Oct 2015 at TOC.

Sir! I have 3 Question. (1) Is the Contractor entitled to receive Financial Charges on late release of half of the Retention Money, because in new circumstances after EOT, 50% Retention Money will be released at TOC date which is now planned as 08 Oct 2016.

(2)  Say Contract Amount is 100 m Rs. and Limit of Max Retention Money is 5% of the Contract Amount i.e 5 m Rs. On 08 Oct 2015, 88% of Total Retention Money (4.4 m Rs) was deducted in AIP's. My question is "Is the Contractor entitled to claim delay in releasing of half of 88% Retention Money. starting from 09 Oct 2015. The reason in support of his entitlement for Fin Chg is that his Retention Money is being kept for 1 more yr.

(3)  The Employer has granted 1 yr EOT while 1 yr has not been granted. In other words 50% delay days are admitted on the default of the Employer. On this base, can Financial Charges of late release of half of Retention Money be claimed starting from mid of the extended period. What amount should be the principal amount: "half of 4.4 million or half of 5 million.

For information plz note , that in n Dec 2015, full 5% Retention Money was reached so no further Retention Money is being Deducted in coming AIPs.

Sir, yesterday I asked this question to Mr. Florin. He replied immediately. I am thankful to him. I tried to send him a followup question but his status today is being shown as "on Vacation". So,I hope you (& Mr. Florin) will not mind it and guide me.

Answer
Dear I
Following are your  Answers:

1)Yes, the Contractor may claim the financial charges and other incurred cost,if the EOT is granted purely on the delaying events attributable to the Employer.But, if it has been given on the basis of concurrent delay(on the basis of delaying events attributable to both the Parties to the Contract) and/or it was granted on the adverse climatic conditions,then the Contractor is not entitled for financing charges.
2) Please note that 50% retention is due on TOC. Has the work COMPLETED, if it is not completed as I foresee, then 50% retention will not be due for  payment.However,if EOT is granted on the basis of Employers's risk and is compensable , then the Contractor may raise his claims, if he has followed the prescribed procedure of clause 20.1 and the other pre-requisites.
3) When the ToC under clause 10 will be issued, the Contractor may claim the release of 50% of the full 5% Retention Money.

It is not necessary that the Employer will grant further Eot of one year.It is possible that the Engineer has evaluated one year extension on the basis of Contractor's request for two year  extension in time.

Regards
Engr Arshad Mahmood

Construction Law

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Arshad Mahmood

Expertise

I may answer to the questions relating to FIDIC 4th as well as FIDIC 2010 MDB Harmonized version,price adjustment ,Variations,Eot and Cost claims,EPC Contract,Bidding Document,consultancy Contracts,certification,Standard Forms, Dispute resolution; and others pertaining to Contract implementation.

Experience

Contract management and Contract Administration, using FIDIC Conditions of 4th Addition as well as Fidic 1999 Red, Yellow and Silver Books including MDB Harmonized Edition 2010. Particularly in the area of Procurement of Contracts, Certification,Price Adjustment, variations,disputes management, EoT and Cost Claims; and other contractual issues arises from time to time during currecy of the Contracts.

Organizations
Member -Pakistan Engineering Council Member -Pakistan Engineering Congress Member -FIDIC Organisation

Publications
Joint Venture and Consortium Agreements for Pakistan Engineering Council,Pakistan

Education/Credentials
BSc Civil Engineering; Basic Management course; Hydro power Projects; and various other on Job Trainings

Awards and Honors
Commendation Certificate for the excellent management qualities and dedication at Ghazi Barotha Hydropower Project; and Certificate of Excellent work performed during Survey Camp.

Past/Present Clients
Water and Power Development Authority (WAPDA),Associate Consulting Engineer(ACE) and National Engineering services Pakistan(Pvt.) Limited (NESPAK)

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