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Construction Law/Payment of Retention Money, Sub-Clause 14.9, FIDIC Plant and Design Build, 1999 First Ed.


Dear Mr. Elliott, I am Resident Engineer for a hotel project being executed under a FIDIC Plant and Design-Build Contract, First Ed., 1999 in Guyana, South America.

Taking over of Sections of the Works was agreed upon with a very substantial section being taken over in the first instance, another less substantial but important section later and a small section is still in progress.

The Defects Notification Period for the first section ended recently; the Contractor still has many defects to remedy, a few are major e.g. malfunctioning HVAC System, others are less significant but are numerous.

1. Please guide me generally on the application of the Sub-Clause 14.9.

2. Specifically, please explain "estimated cost of the Works". Defects include a) non-submission of asbuilt documents and O&M Manuals which could not reasonably be done by the Employer or a Third Party Agent, b) rectification of HVAC (air quality not to specification, attic stock, etc. We have deducted some costs in valuing the Works for drawings and manuals before obtaining the retention value. Does "estimated cost" mean the value taken from the Contract BoQ or rather an Engineer's estimate of what it would cost to engage a Third Party to do the outstanding tasks?   

3. There is not percentage value in the Appendix. The retention money released was calculated on the retention costs for the Taken Over Sections. I am not clear by the statement in the last paragraph that "no percentage of either half of the Retention Money shall be released, etc" Please explain.

Best Regards


Dear Paul,

1. Clause 14.9 has advantages for both the Employer and the Contractor.  For the Employer, there is the advantage to use part of the project before the whole is complete.  For example, if the Employer can take over several floors of a multistorey building, then he has the possibility to fit out and rent those floors.  For the Contractor, early partial taking over can reduce the liability for delay damages.  If no Sections are defined in the Contract, then it is a matter of negotiation between the parties.  

2. In order to protect the Employer's interests, the amount withheld should be sufficient to cover the cost of another contractor completing the work, but must be reasonable and not penalise the Contractor.  Thus the amount may have no relation to the amount shown in the BoQ for the outstanding or defective work.  There are companies which specialise in producing O&M Manuals, but I guess that they would be expensive, as they would have to survey the existing works, especially underground works and contact manufacturers and suppliers of installed equipment.  

3. If there is no percentage in the Appendix, I assume that there were no section specified and thus the taking over has been done on an ad hoc basis.  If there are no sections and no percentage, then there should not have been a release of retention until the whole project was taken over.  I suggest that it would be difficult to recover any over payment without discussions with the Contractor to prepare the ground.  It might even lead to a breakdown in relationships and legal action.  

If the a/c is non-compliant, then I suggest that you check the tests at taking over.  

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Peter M. Elliott


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 before submitting a question.


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