Risks

The principal areas of risk to consider are:

feasibility;
site risks;
errors;
damage/injuries;
insolvency;
cost overrun; and
time overrun.

Process:

I.

Principles of Contract:
1 Elements of the Contract
i.
ii.

Offer and Acceptance

Consideration: In every

contract there should be "consideration" for a promise if a

contract is to be formed. In this context, "consideration" means something of value
passing from each party to the other.
For example, a promise to give one's car to a person will not be enforceable, in
contract, by a court. In contrast, a promise to sell one's car to another person for an
agreed amount would be enforced by the courts.

iii. Intention to Create Legal Relations

iv. Certainty: The courts will enforce

contracts where some terms are not sufficiently

expressed provided that those terms can be sufficiently identified. A agrees to sell his
car to B for a price "to be agreed later", the court will not enforce that contract as
there is no agreement on a material term (the price). Such a "contract" would be said
to be void for uncertainty.

v.

Some Contracts Must Be In Writing (e.g. Building Contracts)

vi. Collateral Contracts: A "collateral contract" is a contract which may be formed

supplementary to the main contract. It is usually formed pursuant to the negotiations
leading up to the creation of that main contract.

2 Terms of the Contract

Oral/Written/Implied

3 Misrepresentation

Statements made prior to entry into a contract may or may not

eventually be incorporated into the contract as a term. For example, a statement that
a car is a 1985 model, made prior to the sale of the car, may or may not ultimately
become a term under the contract. This would be relevant to the available remedies
if, subsequently, the car is found to be a 1983 model car.
Effect of Misrepresentation: (i) innocent; (ii) negligent; or (iii) fraudulent.
Representation or Term:

4 Mistake: (i) common (deal between land owned by 3rd party); (ii) mutual (presumably
neither knows of the other's mistake); or (iii) unilateral.

5 Duress (force)/Unconscionable Contract (gunpoint)

6 Remedies under the Contract: Damages, Rectification, Specific Performance,
Injunction, Termination/Rescission, Frustration

NON-CONTRACT REMEDIES:

Negligence
Misleading and Deceptive Conduct
Promissory Estoppel: The legal principle that a promise is enforceable by law when the
promisor (person making the promise) makes a promise to the promisee (person being
promised) who relies on it to his or her detriment.

Restitution (Damage)

Type of Contract:
(elaboration points)
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.

Tender Process
Knowledge of scope before
tendering
Design by whom?
(contractor/Owner)
Possibility of early start of const.
Where is it used?
Frequency of use
Mode of payment
(schedule/lump-sum)
Risk share
Risk levels
Liquidated damage
Payment limits

(Also ref. notebook & tut)

Fixed Price Contracts/Cost Plus
Turnkey Contract
Design & Construct/Design Build
Operate
Project Management Agreement/
Construction Management Agreement
Warranted Maximum Price Contract
Equipment Contracts
Computer Contracts
Operation and Maintenance Contracts
Build Own Operate Transfer (BOOT)
Project / PPP

Contract Documentation
1. Tender Documents:

The Tender response document and the documents submitted by the bidder to the owner, upon successful
selection, form a part of contract document.

The contractor, while submission of tender agrees to follow the terms & conditions of contract e.g.:
liquidated damage, mode of payment etc. mentioned in the tender doc.
2. Formal Instrument of Agreement: Tender & Acceptance Signed Contract, Letter of
Acceptance
3. General Conditions of Contract: (elaborate if needed)
Time under the Contract
Payment under the Contract
Quality
Variation
The Superintendent, Security, Insurance, Liquidated Damage, Security Deposit, Arbitration,
Default/termination etc.

4. Drawings & Specifications: Drawings may include technical, detailed, location, existing site condition etc.
Specifications include detailed specifications stating the mode of construction, specifics of items used, T&P specification
etc. (Enlist few types of Speccifications)
Tender/PostTender correspondence (Inc. Notices and correspondences exchanged during the contract)

5.
6. Noncontract documents

Dual Role of Superintendent:

1. Independent assessor/certifier
The Superintendent is not a party to the contract; he is a person named in the contract by
the two parties to the contract (the Proprietor and the Contractor) and given certain
functions under that contract by those two parties.
The role of the Superintendent would usually include: (explain all)
1. Assessment of progress claims and issue of progress certificates
2. Assessment of claims for extra payment for variations to the contract
3. Assessment of claims for extension of time
4. Assessment of quality of materials and workmanship in accordance with the contract
documents
5. Assessment of claims for extra payment (such as claims under the latent conditions
provisions) under the contract
There is a strong contractual argument that if the Superintendent does not act fairly towards
the Contractor, this constitutes a breach of contract by the Proprietor. AS2124-1992 imposes
a direct contractual obligation on the Principal to ensure. The role of the Superintendent
is complex. It requires substantial engineering skills, a sound understanding of the law of
contract, and in particular the provisions of the particular project documents.

2. Agent of the Principal

(Design, Budget/Planning etc.)

The Superintendent is also required to act as the agent/adviser of the principal in respect of
certain other functions:
1. Notification of successful and unsuccessful tenderers
2. Arrangements for execution of contract documents
3. Vetting/Investigation of Contractors' insurances
4. Vetting of security deposits
5. Approvals and clearances by statutory authorities
6. Advice on rate of progress and expenditure
7. Recommendations on contractual actions to be taken by the Proprietor
8. Management of site staf
Liability to Owner & Contractor:
In relation to this role, the Superintendent must:
1. Comply with the instructions of the Proprietor (irrespective of whether those instructions
are reasonable, fair or contrary to the interests of the Contractor); and
2. The Superintendent owes a duty of care to the Proprietor in the performance of those
functions.
The Superintendent has no contractual relationship with the Contractor. Accordingly, to the
extent that he may have potential liability to the Contractor at all it will only be in tort.

"Practical Completion"

is that stage in the execution of the work under

the Contract when (a) The Works are complete except for minor omissions and minor defects (i) Which do not prevent the Works from being reasonably capable of being used for their
intended purpose; and

(ii) Which the Superintendent determines the Contractor has reasonable grounds for not
promptly rectifying; and
(iii) Rectification of which will not prejudice the convenient use of the Works; and
(b) those tests which are required by the Contract to be carried out and passed before the
Works reach Practical Completion have been carried out and passed; and
(c) Documents and other information required under the Contract which, in the opinion of
the Superintendent, are essential for the use, operation and maintenance of the Works have
been supplied
Plus additional pre requisites by the owner (e.g.: operation and maintenance manuals etc.)
Separable Portions for practical completion.

Extension of time:

(beyond Practical Completion)

Delay by principal: (The Principal may have to pay delay costs to contractor
if stated in the contract) Site access, Drawings, Specifications, Provision of water/light
(if specified in contract)

Delays by Contractor: Late arrival on site, slow rate of progress, defects, insufficient
time in tender.
Neutral delays: inclement weather, act of God, war, industrial delays.
Notification of claim: Contractor should notify the superintendent of occurrence of delay
due to owner/contractor or else he would be barred from his EOT Claim.
EOT is granted only for delay of critical activity.
LIQUIDATED DAMAGES: (Rate is mentioned in the Annexure)
Delay Costs: i.e. Additional Indirect costs (crane hire costs, salaries etc.)
PROGRAM The obligation on the Contractor in respect of programming is merely to:
proceed with the Works with reasonable expedition
provide a program within a set period of award of the Contract
achieve practical completion by the Date for Practical Completion
TIME BARS
In that event, the party failing to comply with the time bar may be liable in damages to the
other party (for damages caused by the failure to comply with the time bar), but not barred.

Payment
1. Progress Claim
In all traditional standard form contracts, the Contractor is required to periodically deliver, to
the Superintendent, progress claims for payment under the contract. The Superintendent is
required to assess those progress claims w.r.t. degree of completeness and quality.
The amount due at that time is calculated based on-i) Work completed w.r.t. contract(Qty
Surv.) ii) Breach claim
More complex area is the assessment of payment claims for "breach" of contract. For
example:
Claims for latent conditions
claims for delay costs arising out of extensions of time which were the fault of the
Proprietor
claims for variations which arose out of the Proprietor's additional work caused by
faulty design documentation
claims for variations arising out of directions by the Superintendent relating to works
not included in the contract/tender documents

2. Progress Certificate
Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the
Principal and to the Contractor a payment certificate stating the amount of the payment
which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor
or vice-versa denoting the Calculations employed to arrive at that amount and the reasons.
Under some contracts if it is not issued in time the contractor might claim the whole contract
sum.
3. Progress Payment
If either party does not agree to the Progress certificate then they should make a claim for
dispute within a time specified in the contract document. Else he has to make the payment
as stated in the certificate. Progress certificates, and progress payments, do NOT constitute
evidence that the works are properly performed, or that they have been accepted.

Security
Cash retention/ Bank guarantee security
Conversion of security:
Prior to Practical Completion
Historically, 5% retained from every Progress Claim till practical completion to keep
Contractor obliged.
Purpose: Maintain interest, Rectify defect at Contractors expense.
Recently replaced by Bank guarantee
Superintendent notes all the amounts deducted.
Usually 50% repaid on practical completion. (2.5% still retained)
Defects Liability Period
12months- Major; 3months- minor.
2 years or more on a complex industrial project requiring lengthy commissioning
periods for equipment.

Part is retained throughout this period to rectify any defects at the cost of contractor if he fails to do so.

PostFinal Completion
Contractor is required to submit endorsed as Final Payment Claim
Contractor is barred from bringing any further claims (since it has been 12months
after work completion)
Superintendent issues the certificate and returns security monies after necessary
deductions.

Final Certificate
End of Defects Liability Period
Bar to Further Claims by Contractor
Either party can make a claim for disputes or non-conformance within a specified time in the
contract (say 15 days) after the issue of Final CC.

Valuation of Progress Claims

Construction contract: progressive payment throughout the completion of the Works

until practical completion.

Payment: based on contract sum & not of actual work completed; may be greater
than or less than the actual value of the work.
Payment modes: i) Pure valuation basis, ii) Payment made and then deducted from
the contract sum
When financers are involved in funding second method is adopted (explain reason of
assurance of sufficient fund at any time)
The Contract will provide that the Contract Sum is to be a lump sum, a schedule of
rates, or any other combination as agreed in the contract (explain)

Fixed Price (% complete basis) (explain Fixed Price)

Schedule of Rates (explain Schedule of rates)

Bill of Quantities: From time to time, the tenderers will be asked to bid on a fixed price basis but
subject, however, to a bill of quantities.
Priced bill of quantities (explain when the quantities fall out of scope)
In addition to the above, the Contract may also provide for the Contractor, after he has been
awarded the Contract (and the price has been agreed) to prepare a Priced Bill of Quantities.
The Priced Bill of Quantities is usually prepared to assist the valuation of progress claims,
variations, and other assessment purposes.
Payment for Offsite goods
The Contract will usually expressly provide whether the Contractor is entitled to include, in
progress claims, an amount for goods which have been either ordered, or supplied, but for
particular reasons not yet delivered to the site.
For example, bulk steel where that steel has to be purchased and then shipped to a
fabrication site prior to delivery to the construction site.
Risks to Principle (Cl. 42.4): Loss or stolen goods; low quality but payment already made
to contractor resulting in liquidation.

Variations
Whether work constitutes a Variation:
Contractor may claim for the work performed from time to time whether it is
variation. The court declares it to be variation if it is out of the scope/terms
mentioned in the contract document.
Can claim where the work isnt mentioned or the scope varies than what is
mentioned in contract doc.
Owner: Decides for variation/addition, analyses the quotation of contractor, makes
decision
Superintendent: Analyses the variation (more skill than tech) w.r.t. contract doc.
Variation in absence of written direction

The Contract will usually provide that the Contractor is not entitled to payment for
variations unless the Principal/Superintendent has given the Contractor a written
instruction.

E.g. of lawful variation without written direction:

i.
ii.
iii.

Beyond scope of work in contract

Wrongly rejected by superintendent & thus re-performed
Separate agreement for additional works

 Valuing (Cl.40.5): i) Principal/Superintendent. & Contractor agree for variation. ii)

Disapproval leads to analysis by Superintendent (refers to base contract for rates)

arrives at rates. iii) In case of no pre-agreement he arrives at a reasonable sum
Cl.40.5 in descending= Rates by Contractor- BOQ- Superintendent assessment- allow
reasonable profit
According to some contract- contractor is bound to perform the variation but the
prices being agreed upon later. Upon failure to agree the prices the superintendents
word be ultimate.

Security of Payment Act

Traditional-Retention Money (5%)
Recent- Bank Guarantee, should be mirror to Retention money, 2.5% on commencement
and 2.5% on halfway. 1st half returned on Practical completion and later half at end of defect
liability.
Security to Principal:
Principal is always at an advantage coz he pays after the part work is completed.
Bank guarantee by Principal:
e.g.: Principal is not the real owner of land, Principal has minimal assets, foreign company.
The value of the part of work completed by the Contractor, for which he has not yet
been paid.
Retention money/bank guarantee
Circumstances for disbursing:
Contractors Liquidation
Contractual Dispute
Principal terminates. In each case Principal is in power.
SECURITY TO REMEDY DEFAULT
(9 e.g. where owner disburses the security deposit)
In case of defective works: i) Contractor rectifies, ii) owner rectifies at the contractors
expense, iii) Adjustments in next payment.
CONVERSION OF BANK GUARANTEES
Ability to Convert to Cash: Form of Guarantee
E.g. where Principal is restricted to convert the Guarantee: during court proceeding /
Arbitration
Right to Convert to Cash
The Principal will, under the Contract, become entitle to take the cash retention monies
and/or convert a bank guarantee to cash and use those funds in limited circumstances only.
Such circumstances:
i)
Rectify contractors defective works at any period
ii)
Contractor fails to perform part/ whole of work
iii)
Failure to complete by practical completion
(Cl. 5.3 Recourse of conversion of security)
i)
Party has become entitled to claim the right
ii)
The party has given the other party notice in writing for the period stated
in the Annexure, or if no period is stated, five days of the party's intention
to have recourse
iii)
The period stated in the Annexure or if no period is stated, five days has or
have elapsed since the notice was given.
Injunction to Restrain Presentation of Guarantee
Presentation of Guarantee at a bank is a serious step by contractor.

When contractor becomes concerned about intention of Principal to present the

guarantee he can indirectly restrain it by way of injunction.
In theory Principal holding guarantee is holding cash.
Wrongful practice by contractor in real. (E.g. Principal has disputed the contract)
In one view the contractor will have to pay any losses caused to owner during
proceeding of such an injunction (written form)
The principal is however inconvenienced as he has to arrange alternate funds for the
remaining works.

Building and Construction Industry Security of Payment Act

2002 (Vic)
1. Where a claimant is entitled to progress payments, it may deliver a payment claim
to the respondent liable to make the payment.
2. In relation to progress claims relating to construction work, the respondent must deliver a
payment schedule, within 10 business days of receiving the payment claim, failing
which the full amount of the payment claim becomes due (albeit only a payment on
account, which can be challenged under the Contract).
3. Where the payment schedule is for less than the payment claim, the Act provides a
system of fast, independent, adjudication.
4. The Act provides for enforcement of the amount due, and judgment in favor of the
claimant if required.
Payment claim/Payment schedule
The key points from Sections 14-15:
1. It must be in writing and must state that it made under the Act.
2. It must identify the work the subject of the payment claim.
3. The respondent must deliver a payment schedule within the time specified in the Act.
4. The payment schedule must specify what the respondent proposes to pay, and reasons
why that amount is less than the amount in the payment claim.
5. If no payment schedule within the specified time, the claimant may recover the whole
amount claimed.
6. The time to deliver a payment schedule is 10 business days after receiving the payment
claim.
Purpose of the act: Fair & efficient Cash flow.

Adjudication
Where the claimant disputes the amounts contained in a payment schedule, he/she may
lodge an adjudication application within 10 business days including a copy of the contract, payment claim, payment schedule
submissions in relation to the adjudication application
any other relevant documents
The process is generally as follows:
1. The claimant forwards an application for adjudication to an authorized nominating
authority (ANA) appointed under the Act, with a copy to the respondent;
2. The ANA must refer the application to an adjudicator as soon as practicable, who
must notify both parties that he is willing to adjudicate by serving a Notice of
Acceptance;

3. The respondent may make submissions to the adjudicator within 2 business days of
receiving the Notice of Acceptance from the adjudicator, or within 5 business days of
receiving the copy of the adjudication application, whichever is later;
4. The adjudicator determines the claim within 10 business days of notifying his/her
agreement to adjudicate, including:
The amount to be paid under the Contract;
The date it was due;
The interest rate on late payments;
Cost of the Adjudication Process
Expensive- additional costs other than project.
Cost depends on seniority- $600 to 700/ hr ($60-70,000 in process)

Quality, Defects, Default, Termination

(ref. ppt for Cl.)

Quality/Defects

Requirements under the Contract

Provision of Quality term in Contract (Other than Drawings & Specifications)
Implied Terms
(i) fit for the purpose for which it was intended;
(ii) Merchantable quality;
(iii) Unless otherwise specified, new;
(iv) Performed with reasonable care and skill....
Codes
The nature of engineering contracts is such that SAA (Standards Association of
Australia) codes are included.
E.g. Steelwork- requirements inc. in Specification or all works conform to that code
While forming drawing & specification draftsman usually refers expressly to a code for a
particular work. On the other hand where particular codes are expressly referred, one
could infer that other codes, not expressly included, do not need to be complied with.
(Court cases)

Defects
The test on quality, historically, is performed by superintendent. (Be it the owner
himself/representative).
The identification of defects is complex- & requires personal engineering skill- for making the
assessment. Further, such judgments are often the subject of bitter disputes. For example, a
contractor may take the view that work has been satisfactorily completed, which has some
minor defects which can be easily rectified.
Direction to Remedy (Cl.30.3)
When the superintendent concludes that a work is defective and needs remedies, 1 st step is
to issue a written notice to contractor stating the purpose and notifying the remedy needed.
Cl.30.3 If the Superintendent discovers material or work provided by the Contractor which is
not in accordance with the Contract, he may direct to (a) remove it from the Site;
(b) demolish the work;
(c) reconstruct, replace or correct; or
(d) not to deliver the material or work to the Site.
The Superintendent may direct the time within which the Contractor must
commence (usually 7 days after receiving the notice). Failure to do would result in
the works being carried out by the owner hiring another person at the expense of the
contractor (a notice regarding this too is also given to the contractor).

If this notice is constructed in a wrong manner, it will result in a variation.

Further complication: Contractor claims that the rectification is out of the scope, thus
claiming variation.

Quality Assurance
1. Nature of Programs (Tests)
By nature, a structured method of the parties agreeing on procedures is to test, record,
certify, and if necessary, rectify, all relevant aspects of quality on a particular contract.
Requirementsi.
The provision of particular forms recording test results
ii.
Completion of forms and signing of of test results by each parties
iii.
The preparation of lists of items requiring rectifications
iv.
The rectification of such defective works
v.
Schedules of items requiring signing of by the Superintendent/principal (as the case
may require)
They prevent defects in works & are pro-active in nature.
2. Contractual Requirement to Comply
(Cl.30.2)
The Contractor shall, if requirements are so stated in the Contract (e) Plan, establish and maintain a quality system which conforms to those requirements;
(f) Provide the Superintendent with access to the quality system of the Contractor and each
of the subcontractors to enable monitoring and quality auditing.
Any such quality system shall be used only as an aid to achieving compliance with the
Contract and to document such compliance. Such system shall not relieve the Contractor of
the responsibility to comply with the Contract.
3. DEFECTS LIABILITY PERIOD
Obligation and Privilege of the Contractor
The Defect Liability period can extend to any time while forming the contract but usually is
as discussed above.
(Cl.37) DEFECTS LIABILITY
As soon as possible after the Date of Practical Completion, the Contractor shall rectify any
defects or omissions in the work under the Contract existing at Practical Completion.
At any time prior to the 14th day after the expiration of the Defects Liability Period, the
Superintendent may direct the Contractor to rectify any omission or defect in the work
under the Contract. The direction shall identify the omission or defect and state a date by
which the Contractor shall commence & complete the rectification.
If the work of rectification is not commenced or completed by the stated dates, the Principal
may have the work of rectification carried out at the Contractor's expense, but without
prejudice to any other rights.
Liability for Defects after Defects Liability Period: The contractor cant make any
payment claim to Principal

Insurance
CARE OF THE WORKS: (Cl.16)
The contractor is supposed to care & control the site from the time the owner gives him
access till he returns the possession of site to the owner (4 p.m. on the Date of Practical
Completion). He is also supposed to make good all defects during this period.
Without limiting the generality of the Contractor's obligations, the Contractor shall be
responsible for the care of unfixed items the value of which has been included in a payment
certificate under Clause 42.1, things entrusted to him by the Principal for the purpose of
carrying out the work under the Contract, things brought on the Site by subcontractors for
that purpose, the Works, the Temporary Works and Constructional Plant, and the Contractor

10

shall provide the storage and protection necessary to preserve these items and things, and
the Works, the Temporary Works and Constructional Plant.
After 4 p.m. on the Date of Practical Completion the Contractor shall remain responsible for
the care of outstanding work and items to be removed from the Site by the Contractor and
shall be liable for damage occasioned by the Contractor in the course of completing
outstanding work or complying with obligations under Clauses 30.6, 31.1 and 37.

Reinstatement
The contractor is supposed to make good any damage caused to the said at his own cost
within 4:00 PM.
Cl.16.3 Excepted Risks
(a) Any negligent act or omission of the Principal, the Superintendent or the employees,
consultants or his agents
(b) Any risk specifically excepted in the Contract;
(c) War or confiscation by order of any Government or public authority;
(d) Contamination by radioactivity from any nuclear fuel or from any nuclear waste from
the combustion of nuclear fuel not caused by the Contractor
(e) Use or occupation by the Principal or the employees or a Nominated Subcontractor
engaged by the Principal
(f) Defects in the design not provided by the Contractor.
Cl.17. DAMAGE TO PERSONS AND PROPERTY OTHER THAN THE WORKS
17.1 Indemnity by Contractor
i) Loss or damage to Principals property
ii) Claims by any person against Principal w.r.t. injury/death or loss of or damage to any property,
During the execution of the work. Contractors responsibility proportionately reduces
if Principals agents are involved.
Cl.17.1 shall not apply ifi)
Contractors liability is limited to another provision in contract
ii)
Any other right to be indemnified to principal
iii)
Unavoidable damage resulting out of construction
Contractually, therefore, the Principal need not insure the works during the period that the
Contractor is responsible.

TYPES OF CONSTRUCTION INSURANCE

1. Contractors All Risk (from commencement till Handing Over)
Includes: i) Weather &
ii) Accidents
(Also explain that contractor has to spend in absence of this insurance)

2. Public Liability/Third Party Liability (Principal/Contractor or both)

If, for example, a crane was to tip over while working on the site and fall across the fence
onto parked cars in the adjacent street, those property owners might typically sue either the
Contractor or the Principal or both.
Personal injury claims from workers injured on the site.

3. Workers Compensation
To the extent that any workman employed on the site is injured or becomes ill the workman
would usually have his normal remedies under the work-care legislation against his
employer.
4. Other Insurances: Motor vehicle insurance, Marine insurance (where goods are to be
supplied from overseas),
Environmental insurance.
WHO EFFECTS THE INSURANCE (According to what is mentioned in Contract) (Cl.18A)
Contractors All Risk (P/C)
Third Party Liability (P/C)
Workers Compensation (C)

11

Cl.18A Insurance cover excludes: Wear & Tear, faulty design, workmanship and materials,
consequential loss of any kind, Delay compensation, nuclear waste damage, excepted risks in Cl.16.3.
Insurance amt. not less than: Contract Sum+ demolition cost+ consultant fees+ value of
material supplied by Principal.
Project Insurance (Covers all above mentioned insurances)
In recent years, on major projects, the trend has been for the Principal to efect projects
insurance to cover all of the various kinds of insurance over the entire project.
Professional indemnity insurance: In recent years Contractors have started D&C thus
hiring engineers, architects, project managers etc. Thus, for these services the insurance is
required.

Default/Termination
Default by Contractor:
If the Contractor commits a substantial breach and the Principal considers that damages
may not be an adequate remedy, the Principal may give the Contractor a written notice to
show cause. (ref. Cl. 40.2)
1. Delayed Progress
Contractor is obliged to complete it till Practical Completion (or else Owner takes steps for
termination &/or liquidated damages). During progress of contract, the contractor should
provide a programme (which isnt a contract doc.) to the Superintendent for the timely
performance of works. If he lags than the programme then Superintendent might ask him
to. (Rarely causes termination)
2. Defective Work/Failure to Rectify
Superintendent concludes that the work is defective- when Contractor fails to rectify he is at
default. (Ref. above quality defects)

Default by Principal: (usually for failure to pay on a due date)

i) Failure to issue Practical completion Certificate or Progress certificate on time.
ii) Failing to produce evidence of insurance
iii) Failing to give possession of site, services (water, electricity), Drawings etc.

Remedies:
1. Notice to Comply: The failure to comply with rectification notice is, itself, a default
under the Contract.
2. Take Works Out of the Contractors Hands: This is an extremely serious remedy for
the Contractor.
3. Termination: Consequences- removing the Contractor from the site, making no further
payment to the Contractor, Retaining any plant which might be necessary for completion of
work, Completion of works by others.
When the Principal terminates the contract, it might sometimes Back Fire (court decisionWrongful termination)
4. Conversion of Security to Cash
WRONGFUL TERMINATION: Contractor leaves the site and sues the Principal for wrongful
termination

CLAIMS: results in addl. payment, EOT, Delay cost

Types:
Administrative Based
Technical Based

12

Performance Based
Site Based

QUANTIFICATION OF CLAIMS
Direct Costs: sub-contractors, suppliers, equipment, labour.
Job-Related Overheads: site shed hire, supervisor salaries site security, electricity, and
other services, crane usage
Non-Job Related Overheads: Head office cost, Profit
Loss of Productivity: For example, where a contractor is meant to have sole access to a
work area, but finds that there are other contractors on that site, and this has the efect of
increasing the duration which might be expected for a particular task, the contractor will
have a claim, for extension of time and delay costs, to reflect that loss of productivity.
Increased labour or additional crews arising from acceleration or increased work scope.
Overtime.
Adverse weather.
Out of sequence work.
Contract changes.
Restricted access.
Restitution Claims

Evaluation of Tenders

On price
On hurdle & then price
Multi criteria evaluation
Value selection

Best value for money bid

Note: For complex PPP projects interactive tendering may be considered

Issues considered in evaluation: Relevant experience, Track record, financial viability, Technical skills, Management skills,
Methodology, Quality Assurance, Price
Decision making Matrix analysis method (weighted scoring) v/s Value selection

Highest weighted score- most attractive offer.

Consideration is then given to cost, which in the Victorian Government approach, is not weighted.
Evaluators need to assess whether a higher point score justifies paying a higher price when this situation occurs.

Best Value Selection

Letter of Consolidation:

13

Standalone letter that summarises the agreed outcomes of all previous negotiation correspondence.
Must be received by contractor prior to Letter of Acceptance is sent out.

Conduct of Evaluation:
1.
2.

Registration and Checking: opening of Bids in standard Procedure.

Initial Review: Evaluation Project Team Chair will conduct this. Sub- panels will
commence their evaluation simultaneously.

3. Check for completeness: If the sub-panel finds that any part is missing

then they will seek the Chair for further decision whether to discard the bid or
inform the contractor to submit the same within 24 hrs.

6.

Complying & Non-Complying Bids: Sub-panels will assess the bids for compliance w.r.t. Part-B section 5
and the short-coming bids will be referred to the Evaluation Project Team Chair who will further
assess and refer it to the Project steering committee.
Proposal Presentations: It is not a session for clients clarification for bid but is for seeking outstanding
issues of bid. The Evaluation Project Team Chair might ask questions at the end. All
bidders are given equal time and structure.
Assessing Responses Against the Evaluation Criteria: This criteria is mentioned in the RFP as a
guideline for the bidders to present their information. The evaluation team may amend the scores. The
weightage is outlined in the table above.
Each Sub-panel should rate independently. In case of a tie the sub-panel head makes a decision. When he
fails to make a decision he should report to the Evaluation project team chair.
Evaluation project team is responsible to ensure fair evaluation process. They have authority to call the
sub-panel head for justification of scores. They ultimately prepare an evaluation Matrix.

7.

Errors in Proposal Documentation (Bid)

4.

5.

The Evaluation Project team gives chance to the bidder to rectify it and it is responsible for further
communication
8.

Proposal Clarification: Evaluation Project team can ask the bidder for any clarification

regarding the bid (on behalf of sub-panel or itself) by issuing a notice. The bidder is expected
to reply in a certain time.
9.

10.

Final Scoring and Selection of Preferred Proponent: The EPT evaluates the weighted scores and makes
its decision. In case if it is unable to distinguish in 2 or more bids then a sensitivity analysis is carried out.
Generation of Evaluation Report: A final RFP Evaluation Report will be prepared by

the EPT Chair to be signed by EPT members.

11. Advising Unsuccessful Respondents: Steering Committee is responsible
Debriefing of Unsuccessful Respondents: The EPT Chair or his nominee is to be available to
debrief any unsuccessful Bidders at the conclusion of the tender process.
12.

EOT
Entitlement to extension
No fault delays (force majeure)
Weather
Industrial relations
(Non-site specific)
Any other causes

Contract procedures
Notice of Occurrence of delay
Details of extent

Determination of extensions of time

14

 Adjustment of date for practical completion

Complexities in assessment
Is it a delay which entitles the Contractor to an extension of time?
Extent of actual delay
Critical activity?
Who owns the float?
Program of work?
Concurrent delays
Time Related claims:
Extension of time; pure delay claim
Delay cost claim
Direct acceleration cost claim
Loss of productivity claim
Why is time a key Concern...?
Running Costs:
Cranage & Hoisting, Amenities (400 men), Scaffolding & Protection, Staff, Finance & Insurances, Miscellaneous, Off Site Overheads
$20-$30,000+ per day
Liquidated Damages can double this cost.

Construction full of uncertainty (Causes of Delays)

Weather, Subcontract performance, Availability of labour, Productivity, Ground conditions, Design / scope

Programming & Time Management

After passage of certain period a program becomes irrelevant.

Updating a program: decide the interval according to the necessity.
Keep in mind while updating: status of each activity (e.g. complete, remaining duration), variations
included in program, re-sequenced works, re-estimate of timing.

Ownership of Float: What events and circumstances entitle me to an Extension of Time? (Mentioned in contract doc.)
Project Phases:
1. Pre-contract / Pre-construction: Feasibility, Tender formation
2. Contract Award: Contractual completion date, Construction Program
3. During Construction: Detailed planning, Progress monitoring
4.
Post Contract: Extensions of Time
Programming a Project: Establish scope- List activities and subs- duration- plan (Network,
MS Project)
Total Float is the amount of time an activity may be delayed without delaying the project end date
Free Float is the amount of time an activity may be delayed without delaying the start date of another activity.

Contract Variations: Variation may occur in the following conditions below:

Typical variations: Change of scope, Directions from Superintendent, Latent Conditions, Material costs,
Quantities, Defective work, Acceleration &/or prolongation

Latent Conditions: AS 4000 (Cl. 25) Physical conditions on the site and its near surrounds, including artificial
things but excluding weather conditions, which differ than what contract has anticipated.

Valuation (Cl. 40.5) (ref. above: Variation of Prices above) e.g.: agreed prices or increased/decreased fees.
Daywork (Cl. 41): Variation in agreed prices like wages, services etc. (decided by Superintendent) according to
market conditions. (Overheads)

15

Direct Job Related: Time sheets, Pay sheets, Plant work sheets, Daily work sheets, Equipment hire records, Load
tally sheets, Material, OH& Profit, Subcontractor and supplier costing, Monthly cost sheets.
Support documentation: All documents supporting the variation claim.

16

Dispute Resolution & Negotiation

Litigation
Process
Pleadings

Discovery
Witness
Statement
s
Trial
Judgment
Appeal
Binding
outcome

Commercial
Arbitration
Historical Development
Contractual arbitration
agreement
Process mirror of
litigation
Current reforms
Commercial Arbitration
Act 2011 (Vic)
International
commercial
arbitration: Courts from
one country dont interfere
with decision of courts from
other countries.

Limited appeal rights

Binding outcome
Advantages:-

Expert
determination
Historical
Development
Contractual
Expert
Determination
Agreement
Process
fast/cheap/imper
fect
Limited ability to
challenge
The outcome is
binding &
considered equal
to legal
litigation.

1. Fast process
2. Usually to the point i.e.
Arbitrator has knowledge
about the project
3. Usually cheaper than
Litigation

Abrahams Principles for Risk:

Give the contractor the risks only which he can handle.

17

Mediation
Process
Consensual
Court reforms
universal.
Non-binding
Informal