Post Contract Management

POST CONTRACT MANAGEMENT
Table of Contents
Introduction................................................................................................................ 2
Task 01: Contract Documents..................................................................................... 3
Identifying Contract Documents in Construction Contracts.....................................4
Various type of Standard form of contracts used in construction works..................5
JCT Standard Form of Contract................................................................................8
ICTAD Standard Form of Contract............................................................................9
Differentiating standard form of contract documents based on various types of
contracts............................................................................................................... 10
Usefulness of proper execution of the contract.....................................................13
Task 02: Cost Management....................................................................................... 15
Method of Payment for permanent works and preliminaries.................................16
Interim payment.................................................................................................... 17
Stage Payment...................................................................................................... 18
Items to be included in an interim valuation.........................................................19
Items to be included in a Final Account.................................................................21
Task 03 : Lump Sum................................................................................................. 22
Reasons for inclusions of Prime Cost Sums in a contract......................................23
Reasons for inclusions of Provisional Sums in a contract......................................24
Examples for Prime Cost....................................................................................... 25
Examples for Provisional Sum............................................................................... 26
Task 04 : Claims........................................................................................................ 27
Definition for variations as stipulated on FIDIC condition of Contract...................28
Identifying entitlements for claims........................................................................31
Task 05 : Dispute Resolution..................................................................................33
Potential causes for disputes during construction.................................................34
Eliminating or minimizing causes for dispute........................................................37
Methods of Alternative dispute resolution.............................................................38
Conclusion................................................................................................................ 39
Reference................................................................................................................. 40
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Introduction
The contact document is a vital factor in the construction industry. It is the document that binds
the contractor and the client legally and it is a must to have a proper knowledge on how to
choose and how to execute work according to the contract document such as claiming for
damages from the client or the contractor also the methods how works are done according o the
contract document. Another important factor is finding resolutions for disputes any disputes can
occur when constructing, it can occur in various way but its highly disadvantageous if you go for
litigation there for its important that every Quantity Surveyor to know about the Alternative
dispute resolutions.
Thank you
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Task 01: Contract Documents
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Identifying Contract Documents in Construction Contracts
According to the Oxford English Dictionary the definition of a contract is a written or

spoken agreement, especially one concerning employment, sales, or tenancy, which is
intended to be enforceable by law. In construction industry the two main parties are known
as the contractor and the Client. The client provides his financial resources and his
requirements to the contractor and the contractor builds the structure according to the clients
requirements with the financial resources the client provides.
In the definition of contract it says which is intended to be enforceable by law .If the
client and the contractor is not bonded legally, the contractor can change the structure, neglect
the requirements of the client, obtain money from the client and not constructing the structure
etc. the contractor can do any change or any unethical works also the client may also neglect
his responsibilities such as doing payments to the contractor but both parties will not be able to
take any action or to retrieve any remedy because they are not legally bonded.
Therefore having a contract agreement is a vital factor in any industry, both parties will
be legally bonded and if one or both parties are breaching the contract the other party will have
the privilege to claim the loss or the damages caused due to the breaching of the contract and
the other party cannot neglect or escape after breaching the contract because they can be
enforced by law. The main purpose of having a contract is to encourage the parties to hold on to
their responsibilities.
Even the both parties are enforced by law there need to be a proper form of contract
document because if the both parties are preparing the contract document it will cause more
time and many disputes between the parties therefore Standard Contract Documents were
published by certain well recognized bodies locally and internationally. There are many contract
documents published by local authorities according to the local requirements and also there are
contracts documents can be used internationally which are published by international
authorities. There are many differences between these contract documents according the type
of work or the method of construction etc.
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Various type of Standard form of contracts used in

construction works
FIDIC Standard form of contract

FIDIC standard form of contract is published by the International Federation of Consultant
Engineers; this is an internationally recognized standard contract. The founding members of
FIDIC are Belgium, France and Switzerland and it has evolved through the years and most of
the countries in the world has obtained the membership of the organized and FIDC standard
form of contract is being used all over the world.
There are several publications by the FIDIC to use according the type of the project and the
willingness of the both parties. The publication of the FIDIC is as follows,
FIDIC Condition of contract for construction (Red Book)

FIDIC Condition of contract for Plant and Design-Build (Yellow Book)
FIDIC Condition of contract for Shot form of contract (Green Book)
FIDIC Condition of contract for EPC/Turnkey projects (Silver Book)
FIDIC Condition of contract for construction (Red Book)
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FIDIC Condition of contract for construction or which is commonly known as the FIDIC Red
Book is commonly used for Building or Civil Engineering work where the designs are done by
the client or by a representative of his or the Engineer of the client. Generally under the
circumstances within this standard form of contract the contractor carries on the construction
work according to the Design provided by the client but there can some level of involvement of
the contractor in the design regarding civil, mechanical, electrical or other related construction
work.
FIDIC Condition of contract for Plant and Design Build (Yellow Book)
Condition of contract for Plant and Design Build or generally known as FIDIC Yellow Book.
This Standard contract is used specially in electrical or mechanical plant work but is used in
building construction also. The designing is usually done by the contractor by himself according
to the requirements of the client. The work may vary from civil, mechanical, electrical or from
general construction work.
FIDIC Condition of contract for EPC/Turnkey Projects (Silver Book)
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FIDIC Silver Book or Condition of contract for EPC/Turnkey projects as the name implies the
standard form of contract is used for EPC or Turnkey projects where, the contractor holds the
full responsibility for the design the execution of the work also the contractor carries out all the
Engineering, Procurement and the construction work (EPC). The client has only very little
involvement in the project and because of the process is based on turnkey method the client
will receive a fully equipped facility ready to operation. Generally this type of contract is used
when building a factory, power plants or a similar facility and when there is a higher certainty on
the final price and time needed to complete the project.
FIDIC Condition of contract for Short Form of Contract (Green Book)
The FIDIC Green book or FIDIC Condition of contract for Short Form of Contract is used for
projects with less capital value. It is used relatively for simpler and for repetitive work of short
duration time. Under the normal circumstances the construction work is carried on according to
the design provided by the client or by the representative of the client but it is also can be used
for projects designed by the contractor.
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Figure 1 : Guide to choose appropriate form of

FIDIC contract
JCT Standard Form of Contract
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for
construction, guidance notes and other standard documentation for use in the construction
industry. From its establishment in 1931, JCT has expanded the number of contributing
organizations. Following recommendations in the 1994 Latham Report, the current operational
structure comprises 8 members who approve and authorize publications. They are the
Association of Consulting Engineers, the British Property Federation, the Construction
Confederation, the Local Government Association, the National Specialist Contractors Council,
the Royal Institute of British Architects, the Royal Institution of Chartered Surveyors and the
Scottish Building Contract Committee. JCT is majorly used in European countries and most
other countries are unfamiliar with JCT contracts.
There are several publications by the JCT but following are the commonly used,
o
o
o
o
o
JCT Standard Form Building Contract

JCT Intermediate Form of Building Contract
JCT Minor Works
JCT Standard Form of Contractors Design
JCT Build and Design Contract
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ICTAD Standard Form of Contract

The Institute for Construction Training and Development (ICTAD) is an organization set up by
the Government of Sri Lanka to develop and promote the domestic Construction Industry,
Contractors, Professionals, Work Force, etc. ICTAD has established itself as a recognized and
important constituent of the Construction Industry.
There are several contract documents published by ICTAD. They are as follows,
ICTAD SBD 01 contracts value between Rs. 10 million to 100 million
of works
ICTAD SBD 02 contracts value between over Rs. 100 million (Major
contracts).
ICTAD SBD 03 contracts up-to Rs. 10 million.( Minor contracts)
ICTAD SBD 04 contracts where the contractor is responsible for
Design & Construction of the works (Design and build)

ICTAD SBD 05 - contracts value up to 100 millions
ICTAD SBD 07 - construction related plant
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Capacity for
variations
Complexity
The involvement
of the client is
relatively low in
FIDIC contracts
when comparing
with the other
contract
documents, but in
FIDIC Yellow
book- Plant and
design build The
involvement of
the client is
higher than other
FIDIC
documents. It
doesnt imply that
there is no client
involvement in
other FIDIC
contract
documents, they
require less
attention of the
client to the
projects when
following other
FIDIC Contract
documents.
Designing is
mostly done by
the client or by a
design team
appointed by
the client. There
for most of the
highly
managerial
decisions are
taken by the
clients, but in
FIDIC Silver
book EPC &
Turn Key or
FIDIC Yellow
Book Design
and bill The
main contractor
plays a main
role in
managing of the
project.
Because of the
less
Involvement of
the Client the
capacity for
variations
might be
higher than
other contracts
FIDIC Contract
documents are
easy to follow
and easily
understandabl
e for either
parties there
for FIDIC is
popular among
many
construction
companies.
Speed
Design and
Management
FIDIC
Client
Involvement
Differentiating standard form of contract documents

based on various types of contracts
Because of the
less
complexity of
the
documentation
works and the
designing is
done by the
client the
process can
flow faster but
again with the
less
involvement of
the client
overall the
speed of the
project can be
average
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Capacity for
variations
Complexity
As in FIDIC in
generally the
involvement of
the client in JCT
contract
documents are
comparatively low
and the client has
a low
er risk
Designing is
mostly done by
a 3rd party or by
a team
appointed by
the client
however there
are some
contracts which
allows the main
contractor to
carry on the
designing of the
project
Because of the
less
Involvement of
the Client the
capacity for
variations
might be
higher than
other contracts
JCT contracts
are much
more
complicated
comparing to
other contracts
maybe it can
be one of the
reasons that
its only used
in Europe
countries. In
FIDIC
documents
they narrowed
down all
constructions
for four main
contract
documents but
in JCT there
are many
minor and
major contract
documents
which can be
relatively an
advantage
also because
of the many
number of
documents it
makes the
Speed
Design and
Management
JCT
Client
Involvement
Because of the
complexity of
the
documentation
work and due
to the less
involvement of
the client the
overall speed
of work can be
slow
comparing to
other
contracts.
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Capacity for
variations
Complexity
ICTAD is only
used in Sri Lanka
and it is much
similar to the
FIDIC
publications. In
Sri Lanka if its a
normal
construction such
as a building or a
housing project
the involvement
of the client is
relatively low due
to the lack of
knowledge in
construction but
however some
tends to appoint a
consulting team
but in generally
involvement of
the client is really
low therefore the
contract
document is
favoring less
involvement of
the client
As in JCT and
FIDIC the client
has the freedom
to choose the
contract type, if
he is capable of
managing the
designs he has
to choose a
separate
contract
document or if
he wishes to let
the contractor or
a 3rd party to do
the designing
and
management
there is a
separate
contract
document the
client should
follow therefore
designing and
managing
depends
according to the
will of the client
Because of the
less
Involvement of
the Client the
capacity for
variations
might be
higher than
other contracts
ICTAD
Contract
documents are
easy to follow
and easily
understandabl
e for either
parties there
for ICTAD is
popular among
many
construction
companies
another
advantage is
because of its
a Sri Lankan
publication it is
published in
the native
language
therefore it is
highly used
among Sri
Lankan
companies but
it cannot be
used outside
of the country
Speed
Design and
Management
ICTAD
Client
Involvement
contract
process more
complicated
Because of the
less
complexity of
the
documentation
works and the
designing is
done by the
client the
process can
flow faster but
again with the
less
involvement of
the client
overall the
speed of the
project can be
average
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Usefulness of proper execution of the contract
When two parties enter an agreement or sign a contract, the purpose of having a contract is to
make sure that neither party will neglect his or her obligations. According to the type of the
contract document the employer and the contractor agrees on, the obligations differs from one
another therefore the parties can choose an appropriate contract document according to his or
her needs or according to the type of the project and keep a flexible relationship with possible
obligation to one another. The contract document is the valid document that binds the parties
legally and the document that explains what parties are liable for. The following are the factors
affects and the usefulness of execution a proper contract.
Value of the Project

The parties have the freedom to choose the appropriate contract document according to the
value of the project. Such as in FIDIC publications, the FIDIC red book is generally used for
projects that exceed its value over $500,000 and the FIDIC green book is used for projects
values less than $500,000. By using the proper contract document considering the value of the
project it lowers the risk for the employer because when the value of the project gets higher the
risk of employers cash gets misused or get wasted will be high, therefore by using the suitable
form of contract it will ensure that employers money will get into proper use.
Type of contract
The type of the contract is also an important factor should be because the appropriate contract
document should be used according to the complexity of the project. For an example if the client
wishes to build a certain mechanical plant and if the client dont have the knowledge to design
he will have to let the contractor or his consultant team do the works for him therefore according
to the work load and the complexity of the work the contractor should be liable for any mistake
or damage or any issue occurs .its important to have a such special contract document
because then the contractor knows his losses and responsibilities also what claims he is entitled
to.
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Procedure
There is a procedure to follow before starting the construction works and till the client releases
the contractor this procedure has to be followed. Depending on the type of the project, for an
example the procedure on FIDIC red book is different from the FIDIC yellow book because the
FIDIC yellow book is for contracts where the contractor does all the designing and the
construction therefore the contractor may need more time for the pre contract and the post
contract stages but in the FIDIC red book its commonly used when the contractors
responsibility is only the construction work. Therefore in FIDIC red book it has dedicated less
time for pre and post contract stage than the yellow book. It is an important factor to be
considered to keep the work flowing within the possible time frames to do that it is a must to
choose the most suitable contract document.
Claims
If the contractor or the client breaches the contract or fail to work according to the contract the
other party can claim the damage he/she suffers because of the opposite party but the
entitlements for claims are different from contract document to contract document. If the client or
contractor has no knowledge about the contract documents the opposite party can choose a
contract favoring him and the contractor or the client might be unable to claim for the damages
also they might have to pay for damaged that they are not responsible for. Therefore its
important to choose the appropriate contract for the appropriate project.
Restrictions
There are many organizations publish contract documents such as FIDIC,JCT and ICTAD but
there are some restrictions when using these contracts, for an example ICTAD publications can
be only be used within Sri Lanka it is created according to the Sri Lankan standards also The
JCT is most suitable for Europe countries if someone uses JCT contract in Sri Lanka and ICTAD
contracts in Europe countries they will face many problems regarding everything because Sri
Lankan standards are not accepted by Europeans and Europeans standards are not accepted
my Sri Lankans. The contract document should be selected according to the standards of the
country the construction is going on.
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Task 02: Cost Management
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Method of Payment for permanent works and

preliminaries
The work contractor is responsible to execute under the contract is known as permanent works,
as in an example in a building project construction of the building is the permanent work the
works thats come under the contract that client is entitled to use after the construction works
are completed.
In every construction there should be some work done before the work starts on the
construction such as building the site offices, store rooms, labour huts, yards to store
aggregates or sand etc. For these work the contractor will have bear an additional cost other
than the construction work therefore therefore the cost for these works are billed as preliminary
Items. Also as in for construction of these items each month there will be an additional cost for
maintenance, electricity, food and lodging for labours as well as for engineers and the staff etc.
these items are also billed under the preliminary bill but the cost for these items are included to
the preliminary bill monthly.
However for both preliminary and permanent works the method of payment is done through a
Interim payment or by a lump sum payment it depends on the contract the employer wished to
follow.
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Interim payment
Interim payment is done for a period of time as agreed on the contract, if it is a smaller project
and the scope of work is comparatively low the contractor can apply for the interim payment
once in 3 months or once a month but if it is a large project the contractor can apply for the
interim payment once in 10 or 15 days because the value of the work done is high.
The payment for preliminary items such as labour huts, site office stores are included in first
interim payment or 1st, 2nd and 3rd interim payments depending on the performance of the
contractor and for items such as electricity, water, lodging, food, sanitary etc. they are added to
every interim payment additional to the permanent works.
The method of payment differs from contract document to contract document, there is one
method of payment mentioned in FIDIC publications and there is another method mentioned in
the ICTAD publications but relatively they are similar there are only some slight differences.
According to the FIDIC publications the contractor should submit a statement to the Engineer
with including the following items,
The estimated contract value of the works executed and the contractors documents
produced up to the end of the interim payment period (including variations)
Any items to be added and deducted for changes in legislation and changes in cost
Any amount to be deducted for retention, calculated by applying the percentage of retention
stated in appendix to tender to the total of the above amounts, until the amount so retained
by the employer reaches the limit of Retention money stated in the appendix to tender
Any amounts to be added and deducted for the advance payment and repayments.
Any amounts to be added and deducted for plants and materials
Any other additions or deductions which may have become due under the contract or
otherwise including them under extra works, claims, dispute and arbitration etc.
The deduction of amounts certified in all previous payments certificates.
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The contractor should submit six (06) copies of the statements containing above mentioned
items with the supporting documents showing in detail the amount the contractor consider
himself to be entitled.
The interim payment certificate which is the amount that is fairly determined by the Employers
engineer should be handed over to the Employer after 28days after receiving the statement and
the supporting documents from the contractor.
The Employer is entitled to pay the contractor within 56 days after receiving the statement and
the supporting documents submitted by the contractor. The payments should be done to a bank
account nominated by the contractor from the currency that is mentioned in the contract.
Stage Payment
In stage payment the payments are done according to the stages the project is divided, The
project is divided for several stages and the contractor can obtain his payment once he has
complete the stage. If its a building project the stages can be divided as follows
Sub structure up to foundation level,

Up to the first floor structural works,
Up to first floor,
Up to 2nd floor structural works,
Up to top of 2nd floor whole works,
Roof level and
All external and internal works
The method of payment is similar to the Interim method the items included are also the same
only the time period may differ according the work scopes on certain stages.
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Items to be included in an interim valuation
The estimated contract value of the works executed and the contractors documents
produced up to the end of the interim payment period (including variations)
The contractor should submit the value of the work done within the interim payment
period with evidence. For an example if the contractor has completed constructing a
certain structure the measurement sheets for the structure should be attached together
with the interim bill including the quantities of concrete volume, reinforcement weight,
form area etc. For each structure separate supporting documents should be submitted
as evidence and to justify the value of work done within the interim period. The total cost
for preliminaries or for mobilization and overheads are also added to the interim bill
Any items to be added and deducted for changes in legislation and changes in cost
Price fluctuations, change in taxes or adding of new taxes by the government can cost
the contractor more than the agreed rates on the agreement. Also the costs can be
increased due to unforeseeable events or because of clients ignorance such as, if the
client is responsible for clearance and maintenance of access roads but due to weather
changes or other events if the contractor has to bear extra costs to transport materials to
site the cost will be changed there for it should be added as an extra cost to the interim
bill.
Any amount to be deducted for retention, calculated by applying the percentage of

retention stated in appendix to tender to the total of the above amounts, until the
amount so retained by the employer reaches the limit of Retention money stated in
the appendix to tender
After calculating the total work done for the interim period including the variations, day
works and the extra works, the agreed percentage for deduction of the retention should
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be deducted from the total value of the work done. The deduction for retention can be
reduced from the interim bill only till it reaches the agreed amount by the client and the
contractor.
Any amounts to be added and deducted for the advance payment and repayments.
The contractor receives an advance payment from the client before starting the work on
the project, this advance payment is deducted from each interim bill. The recovery of the
advanced payment is also done to an agreed percentage to be deducted from each
interim bill. Also if the contractor is entitled to any other payments regarding the project
the contractor has the ability to add that amount to the interim bills.
Any amounts to be added and deducted for plants and materials

If the client is providing materials or plants to the contractor, the cost for plants and
materials are deducted from the interim bill also if the contractor has to bear additional
cost for any special materials or special plants it is added to the interim bill.
Any other additions or deductions which may have become due under the contract or
otherwise including them under extra works, claims, dispute and arbitration etc.
Variation in the structure can occur in any construction project. It can occur due to the
fault of the contractor or due to faults of the client, also there can be extra works claims
for losses of the contractor . The contractor can calculate the extra costs with supporting
documents and obtain the additions through the interim bill.
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Items to be included in a Final Account

Preparing the final account is the process of calculating and agreeing any adjustments to the
contract sum (the amount originally set out in the contract to be paid to the contractor for
completion of the works) so that the amount of the final payment can be determined. The
amount of the final payment is then set out in the final certificate (or final statement). It is
possible for the final certificate to show that money is owed to the client, rather than due to the
contractor.
Important Items thats needed to be included in the final account;
Variations.
Fluctuations
Prime cost sums.
Provisional sums.
Payments to nominated sub-contractors or nominated suppliers.
Statutory fees.
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Payments relating to the opening-up and testing of the works.
Loss and expense.
Liquidated and ascertained damages.
Contract claims imposed as a result of the contractor's operations (such as a thirdparty claim resulting from contractor negligence or contractual breach, for example,
flooding a neighbors property).
The release of any remaining retention.
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Task 03 : Lump Sum
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Reasons for inclusions of Prime Cost Sums in a contract
A prime cost sum (sometimes called a PC sum) is an allowance usually calculated by the cost
consultant for the supply of work or materials to be provided by a contractor or supplier that will
be nominated by the client. The allowance is exclusive of any profit mark up or attendance
(such as material handling, scaffolding and rubbish clearance etc.) by the main contractor.
The reasons for inclusion of prime cost sums are,
For long delivery items where design and manufacturing times could not wait for the
appointment of a main contractor. For example, lifts, switchgear or refrigeration plant.
Where specialist design input was required in the early stages of design development.
For example, for a cladding system.
Where the client directly orders a preferred piece of equipment on which design is to be
based. For example, an MRI scanner, laboratory fumes cupboards or bottling plant.
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Reasons for inclusions of Provisional Sums in a contract
A provisional sum is an allowance usually estimated by the cost consultant and inserted into
tender documents for a specific element of works not yet defined in enough detail for
contractors to price. This, together with a brief description, allows tenderers to apply mark up
and attendance costs within their overall tender price and make allowance for this element of
work in the contract program.
An example of a situation where a provisional sum might be appropriate is where work is
required underground, or below an existing structure, where the conditions cannot be
determined until the work begins and the existing structure demolished or the ground opened
up.
Provisional sums can be 'defined' or 'undefined':
Defined provisional sums are considered to have been accounted for within the
contractor's price and program. In effect the contractor is taking the risk that their
estimate will be sufficient.
Undefined provisional sums are not accounted for in the the contractor's price and
program. This means that the client is bearing the risk for the works and the contractor
may be entitled to an extension of time and additional payments.
They should only be used as a last resort, they should not be an 'easy' fall-back position for
consultants when designs are incomplete or information is difficult to obtain, as this can burden
the client with considerable unnecessary risk and uncertainty. The risks are significant enough
that the NEC Engineering and Construction Contract does not have any allowance for
provisional sums.
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Examples for Prime Cost

Prime Cost Items are items that either have not been selected or whose price is not known at
the time the contract is entered into, and for which the cost of supply and delivery the builder
has made allowance for in the contract price. Examples include
white-goods
tap-ware
Light fittings.
Elevators
Tiling
Installation of machinery etc.
Valuation of prime cost sum

The cost for certain item is mentioned as Prime Cost when the cost engineer finds something
that is not specified by the client, after consulting the client the cost engineer will calculate a
reasonable for the item and add it as a Prime Cost Sum. After the work has been executed if the
item costs less than the estimated cost the contract will settle the remaining value of the prime
cost for that particular item to the client and if the item costs more than the estimated cost the
client will pay the contractor for the additional cost occurred.
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Examples for Provisional Sum

Provisional Sums are estimated allowances for work that involves both supply of material,
labour and associated work. This normally involves a specialist subcontractor or a specialized
work that is difficult to measure or unforeseeable works and for services required such as,
Excavation works
Constructing beneath an existing structure
Rock Excavation
Piling work
Demolition of a structure
And places where the condition cannot be determined until the work is being
executed
Obtaining Permits
Temporary Telephone/ Internet lines
Accommodation
Valuation for provisional sums

In clause 13.5 [Provisional Sums] of the 1999 FIDIC Red Book provides that Each Provisional
Sum shall only be used, in whole or in part, in accordance with the Engineers instructions, and
the Contract Price shall be adjusted accordingly. The total sum paid to the Contractor shall
include only such amounts, for the work, supplies or services to which the Provisional Sum
relates, as the Engineer shall have instructed.
Therefore according to the FIDIC publication the valuation of the provisional sums are done by
the clients Engineer or the cost Engineer. The work requires a provisional sum will be
thoroughly evaluated by the Engineer and the valuation is done according to the information the
Engineer provides therefore when valuing a provisional sum the Engineer of the client plays a
major role.
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Task 04 : Claims
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Definition for variations as stipulated on FIDIC condition of

Contract
Variation and change fall under the same definition, and mechanisms for managing the impact
of the variation or change are usually expressly provided for in terms of the contract .In other
words, there are generally contractual mechanisms, which enable the contractor or the
employer under certain construction contracts, the 1999 First Edition of the FIDIC contract to
claim additional payment or extensions of time when variation or change takes place. Usually
there is some benchmark against which to measure the extent or impact of the variation or
change which operates together with these change management mechanisms.
Variation or change usually follows from the occurrence of one or more of the following
circumstances:
Additions to the work described

Omissions from the work described
Changes in material or methods to be used
Changes in construction sequence
Restrictions in working hours
Corrections to rectify discrepancies in the contract documents
Corrections to the descriptions in the bills of quantities
Corrections to the quantities in the bills of quantities
Changes to the kind, quantity or timing of work to be performed by others
Changes to the quality, quantity or timing of free issue equipment or materials
Changes to the time of execution of the work required by the agreed program
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Changes resulting from unexpected natural events and physical conditions.
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Figure 2 : Circumstances for

variations
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Figure 3 : FIDIC Variations
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Identifying entitlements for claims
Clause/ Sub Clause Number
Entitlement
Client (Employer)
Contractor
Clause 1 General Provisions

Sub Clause 1.9 Delayed Drawings or
Instruction
Contractors Entitlement
Clause 2 The Employer

Sub Clause 2.1 Right of Access to the site
Sub Clause 2.5 Employers claims
Clause 4 The Contractor

Sub Clause 4.7 Setting out
Sub Clause 4.12 Unforeseeable physical
conditions
Sub Clause 4.19 Electricity, Water and Gas
Sub Clause 4.20 Employers Equipment and
Free-Issue Material
Sub Clause 4.24 - Fossils
Clause 7 Plants, Material and
Workmanship
Sub Clause 7.4 - Testing
Sub Clause 7.5 Rejection
Sub Clause 7.6 Remedial Work
Clause 8 Commencement, Delays and
Suspension
Sub Clause 8.4 Extension of time for
completion
Sub Clause 8.5 Delays caused by authorities
Sub Clause 8.6 Rate of Progress
Sub Clause 8.7 Delay Damages
Sub Clause 8.9 Consequences of suspension
Clause 9 Tests and completion
Sub Clause 9.4 Failure to pass tests on
completion
Clause 10 Employers taking over
Sub Clause 10.2 Taking over of parts of the
work
Sub Clause 10.3 Interference with test on
completion
Employers Entitlement
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Clause/ Sub Clause Number

Clause 11 Completion of Outstanding
Work and Remedying Defects
Sub Clause 11.3 Extension of Defect
Notification period
Sub Clause 11.4 Failure to Remedy Defects
Sub Clause 11.8 Contractor to search
Entitlement
Client (Employer)
Contractor
Clause 12 Measurement and Evaluation

Sub Clause 12.4 - Omissions
Clause 13 Variations and Adjustments

Sub Clause 13.2 Value Engineering
Sub Clause 13.3 Variation Procedure
Sub Clause 13.7 Adjustments for changes in
Legislation
Clause 14 Contract Price and payment

Sub Clause 14.8 Delayed payment
Clause 15 Termination by the Employer
Sub Clause 15.4 Payment after Termination
Clause 16 Suspension and Termination by

the contractor
Sub Clause 16.1 Contractors Entitlement to
suspend work
Sub Clause 16.4 Payment on Termination
Clause 17 Risk and Responsibility
Sub Clause 17.1 Indemnities
Sub Clause 17.4 Consequences of
Employers Risks
Clause 18 Insurance
Clause 18.1 General Requirements for
Insurances
Clause 18.2 Insurance for Works and
Contractors Equipment
Clause 19 Force Majeure
Sub Clause 19.4 Consequences of Force
Majeure
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Task 05 : Dispute Resolution
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Potential causes for disputes during construction
Uncertainty
Uncertainty is the difference between the amount of information required to do the task and the
amount of information available (Galbraith, 1973). The amount of information required depends
on the task complexity and the performance requirements, usually measured in time or to a
budget. The amount of information available depends on the effectiveness of planning and
requires the collection and interpretation of that information for the task.
Contractual problems
Standard forms of contract clearly prescribe the risks and obligations each party has agreed to
take. Such rigid agreements may not be appropriate for long-term transactions carried out under
conditions of uncertainty.
Behavior
Since contracts cannot cater for every eventuality, wherever problems arise either party may
have an interest in gaining as much as they can from the other. Equally, the parties may have a
different perception of the facts. At least one of the parties may have unrealistic expectations,
affecting their ability to reach agreement. Alternatively, one party may simply deny responsibility
in an attempt to avoid liability.
Acceleration
It is not uncommon for commercial property owners to insist upon acceleration of a construction
project. Such examples might include the completion of a major retail scheme, and the need to
meet key opening dates or tenant occupation in an office development. The construction costs
associated with acceleration are likely to be less than the commercial risk the developer may
face if key dates are missed.
Co-ordination
In complex projects involving many specialist trades, particularly mechanical and electrical
installations, co-ordination is key, yet conflict often arises because work is not properly coordinated. This inevitably leads to conflict during installation which is often costly and timeconsuming to resolve, with each party blaming the other for the problems that have arisen.
Ineffective management control may result in a reactive defense to problems that arise, rather
than a proactive approach to resolve the problems once they become apparent.
36 | P a g e
Culture
The personnel required to visualize, initiate, plan, design, supply materials and plant, construct,
administer, manage, supervise, commission and correct defects throughout the span of a large
construction contract is substantial. Such personnel may come from different social classes or
ethnic backgrounds.
Differing goals
Personnel engaged on a large construction contract are likely to be employed by one of many
subcontracted firms, including those engaged as suppliers and manufacturers. Each of these
firms may have their own commitments and goals, which may not be compatible with each other
and could result in disputes.
Delays
Disputes frequently arise in respect of delays and who should bear the responsibility for them.
Most construction contracts make provision for extending the time for completion. The sole
reason for this is that the owner can keep alive any rights to delay damages recoverable from
the contractor. On international construction projects the question of any rights the contractor
might have to extend the time for completion was a matter often addressed towards the end of
the contract, when an overrun looked likely. From the owners point of view, this made the
examination of the true causes of delay problematical and inevitably led to disputes between the
contractor and the owner as to the contractors proper entitlement.
Design
Errors in design can lead to delays and additional costs that become the subject of disputes.
Often no planning or sequencing is given to the release of design information, which then
impacts on construction. Equally, the design team sometimes abrogate their responsibilities for
the design, leaving the contractor to be drawn into solving any design deficiencies by carrying
out that part of the work itself to try to avoid delays, and, in doing so, innocently assuming the
risk for any subsequent design failures.
Engineer and Employers Representative
The personality of the Engineer or the Employers Representative and their approach to the
proper and fair administration of the contract on behalf of the Employer is crucial to avoiding
disputes, yet a substantial proportion of disputes have been driven by the Engineer or the
Employers Representative exercising an uneven hand in deciding differences in favour of the
Employer.
Quality and workmanship
In traditional construction contracts, disputes often arise as to whether or not the completed
work is in accordance with the specifications. The specification may be vague on the subject of
37 | P a g e

the dispute in question, and each party to the contract may have a different view on whether the
quality and workmanship is acceptable
Site conditions
If the contract inadequately describes which party is to take the risk for the site conditions,
disputes are inevitable when adverse site or ground conditions impede the progress of work or
require more expensive engineering solutions.
Even if the Employer, in good faith, provides detailed information on the site conditions to the
contractor, if that information is discovered to be incorrect and the contractor has relied on it and
acted upon it to their detriment, the Employer may be liable to the contractor for the
consequences.
Variations
Variations are a prime cause of construction disputes, particularly where there are a substantial
number, or the variations impact on partially completed work or are issued as work is nearing
completion. The nature and number of variations can transform a relatively straightforward
project into one of unmanageable complexity. The new Parliament building in Edinburgh is such
an example. The building was planned to house 329 people, but through variations the building
increased in size and complexity to house 1200 people. It was perhaps not surprising that the
total cost of construction exceeded 500 million, almost ten times more than the original budget.
Value engineering
This term often lacks definition in construction contracts and can lead to disputes, particularly
where the saving is to be shared between the contractor and the owner. Savings in respect of
the supply and installation of the material or product in question might be relatively easy to
determine and agree, but these are not the only benchmarks, and a proper value engineering
approach needs to take full account of the life cycle costs of any proposed change.
38 | P a g e
Eliminating or minimizing causes for dispute
Project team selection

Designers and other advisers are selected based on their ability to work well together as a
team, as well as their technical skills and track record. Particularly with more complex projects,
greater certainty of cost and constructability is achieved when the client engages a head
contractor and key subcontractors to work with engineers, architects and other advisers on
option development and early design and planning work.
Scope of work
The scope of the work and the functionality or performance characteristics to be delivered by
the asset should be clearly documented. This should include the time within which the asset is
required, and take into account the characteristics of the site on which it is to be constructed,
including adequate geotechnical analysis.
Risk management
A thorough risk register, identifying possible risks to achieving required time, cost and
functionality, and strategies to mitigate those risks, is shared with designers and contractors.
Responsibility for managing each risk is clearly allocated to the organization or person best able
to manage it, and that organization or person is paid to assume the risk.
Clients project management
The clients most senior representative charged with making decisions under the head contract
is given a clear brief to act in the best interests of the project, including monitoring the quality of
project team relationships. That representative may be an employee of the client, or a
consultant.
Communication protocols
The head contract will require communication protocols that encourage open communication
and the solving of problems or issues as quickly as possible. It will include a framework for
formal, alternative, issue resolution, focused on rapid identification of issues, and escalation of
issues that cannot be resolved by agreement at site level, to the lowest possible level of off-site
negotiation and resolution.
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Methods of Alternative dispute resolution
Alternative Dispute Resolution provides a voluntary alternative for litigation. In construction

industry regarding the cost and the time it is not practical to go for litigation therefore alternative
dispute resolutions are the most effective and the reliable way to solve disputes in construction
industry.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Arbitration
Party Autonomy
Legally Enforceable
Private and Confidential
Encouraged By every Legal
system
Power to grant order; court
powers
Time frame is limited
Independence and
impartibility
Regulated by the Arbitration
Act
Comparatively Expensive
10.
Shorter procedures and

faster decisions
11.
Arbitrators decision can

legally appoint as the final
decision
The parties has the freedom
to choose the place, the
time and the arbitrator
12.
Adjudication
Party Autonomy
Not Legally Enforceable
Mediation
Party Autonomy
Not Legally Enforceable
No power to grant orders
No power to grant orders
No limitations
No Guarantee on
Independence or
impartibility
No limitations
No Guarantee on
Independence or
impartibility
Comparatively
inexpensive
Procedure may take
longer and decisions
might take longer
relatively
Final decision is not
certain
Comparatively
inexpensive
Procedure may take
longer and decisions
might take longer
relatively
Final decision is not
certain
The Adjudication board

decides
The Mediator decides
40 | P a g e
Conclusion
This is the final page of the assignment & it was
really difficult to find information on some topics
even on the internet so I referred the tutorials I
was given regarding this subject. Most of my
conclusions on the topics are mentioned in the
assignment.
I hope Ive done the assignment according to the
proper criteria & I Thank you for spending your
valuable time to take a look at this assignment
41 | P a g e
Reference
http://www.imca-int.com/documents/contracts/IMCA-RiskGuideline.pdf [Accessed 02 February

2013].
. Introduction to ADR. . [ONLINE] Available at: http://www.hilldickinson.com/pdf/A
%20Comparison%20between%20Mediation%20and%20Arbitration.pdf. [Accessed 23 February
2013].
A Practitioner's Guide to Construction Law - John G. Cameron, Jr. - Google Books. 2013. A
Practitioner's Guide to Construction Law - John G. Cameron, Jr. - Google Books. [ONLINE]
Available at: http://books.google.lk/books?
id=QbhWUGXkEy0C&pg=PR31&lpg=PR31&dq=introduction+to+construction+law&source=bl&o
ts=0EA7Z6fV8u&sig=TVSaSL4YGyn0F72SxUNYaSPaBxY&hl=en&sa=X&ei=8igoUaX1G8bPrQ
eYpoDYCw&ved=0CCsQ6AEwAA#v=onepage&q=introduction%20to%20construction
%20law&f=false. [Accessed 10 February 2013].
http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=3691&context=lcp
Construction Contracts: Law and Management - John Murdoch, Will Hughes - Google Books.
2013. Construction Contracts: Law and Management - John Murdoch, Will Hughes - Google
Books. [ONLINE] Available at: http://books.google.lk/books?
id=r8okNWl1zN4C&printsec=frontcover#v=onepage&q&f=false. [Accessed 12 February 2013].
CONSTRUCTION CONTRACTS. 2013. CONSTRUCTION CONTRACTS. [ONLINE] Available
at: http://www.lexinter.net/WEB7/ks-constr.htm. [Accessed 12 February 2013].
http://lbms03.cityu.edu.hk/theses/abt/engd-bc-b23751083a.pdf [Accessed 12 February 2013].
http://democracy.scarborough.gov.uk/mgConvert2PDF.aspx?ID=15663 [Accessed 19 February
2013].
42 | P a g e

http://www.designingbuildings.co.uk/wiki/Final_account [Accessed 19 February 2013].
http://toolboxes.flexiblelearning.net.au/demosites/series10/10_01/content/bcgbc4005a/01_apply
[Accessed 20 February 2013]._contract/03_variations/page_009.html
43 | P a g e

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