Part II: Administration of Works Contracts

Table Of Contents
1 Introduction ......................................................................................................................28
2 The Contract Documents .................................................................................................30
2.1 Form of agreement ....................................................................................................30
2.2 Letter of acceptance ..................................................................................................31
2.3 Contractor’s bid ........................................................................................................31
2.4 The Conditions of Contract .......................................................................................33
2.5 The Specification ......................................................................................................33
2.6 The Drawings ............................................................................................................34
2.7 The Bill of Quantities................................................................................................34
3 The parties to a works contract and their duties and responsibilities ..............................35
3.1 The Parties to a Works Contract ...............................................................................35
3.2 Duties and responsibilities of the Employer .............................................................35
3.3 The Engineer’s duties and responsibilities ...............................................................40
3.4 Duties and responsibilities of the Contractor ............................................................43
4 Guidance to the Employer and his staff, in the administration of works contracts .........45
4.1 Assignment of Staff and facilities .............................................................................45
4.2 Familiarization with contract documents and prior history & status of the project..47
4.3 Establishing the lines of communication with the Engineer .....................................48
4.4 Giving assistance and advice: ...................................................................................49
4.5 Land Acquisition and Removal of Obstructions:......................................................49
4.6 Securities ...................................................................................................................51
4.7 Information and Approvals .......................................................................................59
4.8 Site Instructions, Variation Orders and Claims ........................................................60
4.9 Payment Certificates .................................................................................................61
4.10 Sub-Contractors and other Contractors .....................................................................62
4.11 Progress Monitoring..................................................................................................62
4.12 Cost monitoring and control .....................................................................................64
4.13 Quality control ..........................................................................................................65
4.14 Health, safety and environment ................................................................................66
4.15 Reporting...................................................................................................................66
4.16 Taking over of the works ..........................................................................................66
4.17 Concluding Remarks .................................................................................................69

Appendices
Appendix 1: Sample forms from standard works contract documents
Appendix 2: Sample Advance utilization agreement and utilization schedule
Appendix 3: Sample forms of Contractor’s application for payment
Appendix 4: Inspection forms for internal reporting
Appendix 5: Contents of monthly progress report to be submitted by the
Engineer

26
December, 2007
Abbreviations:

FIDIC Federation Internationale Des Ingenieurs – Conseils

(International Federation of Consulting Engineers)
PPA Public Procurement Authority of the Federal
Democratic Republic of Ethiopia
ERA Ethiopian Roads Authority

MOWUD Ministry of Works and Urban Development of the

Federal Democratic Republic of Ethiopia
RRA Rural Roads Authority

PE Project Engineer

APE Assistant Project Engineer

27
December, 2007
1 Introduction
Road construction, rehabilitation and maintenance consumes considerable amount of
money and usually take place over a period of years. Therefore, it is very important that
road projects are: selected through integrated network planning; technically and
economically designed and are properly constructed so as to meet the project objectives
and provide adequate services for which the project is intended.

Although the planning and design phases are very important and often considered more
technically demanding tasks, nevertheless it is the adequate quality and cost control that
is the best guaranty that the investment in roads will provide good service through out
their life. Therefore, in addition to properly planning and designing, compliance with
plans and specifications under the direction of competent contract management and
construction supervision team is very essential element in the realization of project
objectives.

The basic objectives of conducting contract administration of works contracts is to insure

that the quality of work specified is maintained, the works conform with the contract
documents, and of nearly equal importance is the need to control and manage the costs of
construction, timely completion of the works, and to provide proper and consistent as
built records and other project documentation.

In addition to the natural and man made uncertainties which exist in civil engineering
projects, errors caused at the design and procurement stages and inefficiencies contribute
to changes and new issues to arise during execution of the project. Timely identification
of these changes and issues and timely resolving them requires, amongst others: efficient
organization, flow of information and decision making.

This guide intends to make execution of the works flow efficiently and smoothly by
suggesting how the Employer’s personnel should be organized and by providing
recommended set of working principles and procedures to be followed in administering
works contracts.

However, it is essential to mention that this guide is advisory hence does not modify any
contractual obligations and relationships of various parties. Therefore, it is very important
that each responsible person carefully reviews and understands particulars of each
contract for its proper implementation.

The first chapter introduces the objectives and contents of this guide. The second chapter
discusses the set of documents which form works contract (contract documents). The
third chapter discusses the parties to a works contract and their duties and responsibilities.
The fourth chapter, which is the main subject matter of this document, presents guidance
to the Employer and his staff in the administration of works contracts. Relevant clauses

28
December, 2007
of the FIDIC (4th edition) conditions of contract and that of the PPA have been quoted to
illustrate some provisions of the conditions of contract, as appropriate.
In preparing this guide reference has been made to the existing similar guides in ERA.
Nevertheless, its suitability to the RRAs should be tested and its contents enhanced
through lessons gained from experience. It is intended that, the contents will be tested
and improved or refined, as appropriate based on the feedbacks received during
implementation. Therefore comments, suggestions or clarification requests from users are
most welcome.

29
December, 2007
2 The Contract Documents
Contract documents, in a construction works contract, are the documents which make up
and describe the works to be implemented by a Contractor and the conditions under
which those works are to be undertaken and which form the Contract.

The documents forming the Contract are taken as being mutually explanatory of one
another. However, in the event that any discrepancies exist between these several
documents an order of priority of the documents may be defined. In general the
documents and a typical order of priority is shown below:

 The form of Agreement

 Letter of Acceptance
 Contractor’s bid
 Special (particular) conditions of contract
 General Conditions of Contract
 Special specifications
 Specifications
 The Drawings
 Bill of Quantities
 Any Other Document forming part of the contract.

2.1 Form of agreement

In accordance to the standard instruction to bidders prepared by PPA, The notification of

award (Letter of acceptance) will constitute the formation of the Contract, subject to the
Bidder furnishing the Contract Security and signing the contract. Clause 32 of the above
mentioned instruction to bidders states the following:

32. Notification of Award and Signing of Agreement

32.1 The Bidder whose Bid has been accepted will be notified of the award in writing by the
Employer prior to expiration of the Bid validity period and following the elapse of the
notification period in accordance with ITB Sub-Clause 30.2. This notification (hereinafter
and in the Conditions of Contract called the "Letter of Acceptance") will state the sum that
the Employer will pay the Contractor in consideration of the execution, completion, and
maintenance of the Works by the Contractor as prescribed by the Contract (hereinafter and
in the Contract called the "Contract Price").
32.2 The notification of award will constitute the formation of the Contract, subject to the Bidder
furnishing the Contract Security in accordance with Clause 33 and signing the contract in
accordance with Sub-Clause 32.3.

32.3 The contract will incorporate all agreements between the Employer and the successful

30
December, 2007
 Bidder. It will be signed by the Employer and sent to the successful Bidder following the
notification of award. Within 15 days of receipt, the successful Bidder will sign the contract
and deliver it to the Employer.
To this effect the Employer and the selected bidder sign a document called form of
agreement. The standard Forms of Agreement prepared by PPA and FIDIC are included
in appendix 1 for reference. For many organizations signing of the form of agreement is
essential in order to give the contract full effect and proceed with their respective duties
and obligations stated in the contract. For example government organizations require
signing of the contract agreement as one of the criteria to effect payment to a contractor.

2.2 Letter of acceptance

Once the evaluation of Tenders has been completed and the preferred Tender selected
and all necessary approvals to accept the tender obtained, the Employer issues a Letter of
Acceptance. As stated above, the letter of acceptance of bidders offer by the Employer
can constitute formation of contract. Therefore, the date of this letter marks the start of
the Contract and immediately commits both the Employer and the Contractor to fulfill
their obligations as defined in the Contract. It is therefore important that the Employer
ensures that it is able to meet all of its contractual obligations before issuing the Letter of
Acceptance. The letter of acceptance should be signed by the person who has the power
of attorney to bind the Employer.

ERA’s & PPA’s standard form of Letter of Acceptance has been included in appendix 1,
for reference.

2.3 Contractor’s bid

The Contractor’s bid means the Contractor's priced offer to the Employer for the
execution and completion of the Works and the remedying of any defects therein in
accordance with the provisions of the Contract, as accepted by the Letter of Acceptance.

The documents which comprise the Contractor’s bid are, in general, the following:

 The Bid submission form (Form of Tender)

 The Power of Attorney
 The Bidding Data
 The Bid Security
 The Priced Bill of Quantities
 Addenda to the bid (if any)
 Alternative Offers (where applicable)
 Schedules of Supplementary information

31
December, 2007
Of these bid documents, only the following are included in the Contract document. Those
not included are only relevant to the procurement process and not to the works contract:

 The Bid submission form (Form of Tender)

 The Priced Bill of Quantities
 Addenda to the bid including any Minutes of Negotiation (if any).

The Bid submission form (Form of Tender)

The Bid submission form is the Contractor's official letter in which he summarizes his
offer and states his compliance to the various documents comprising his bid. This
letter states the sum for which the Contractor will undertake the Works as described
in the various bid documents.

ERA’s & PPA's standard Bid submission forms (Form of Tender) have been included
in this document in Appendix 1, for reference.

The Priced Bill of Quantities

When the Employer issues bidding documents, the Bill of Quantities as presented to
the bidders does not include any unit rates. But the bidder after examining the bidding
documents and the site submits the bill of quantities which includes the offered unit
rates and the total contract amount. The priced bill of quantities submitted by the
bidder makes part of the contractor’s bid.

Addenda to the Tender

During the bidding period it may be necessary to make, changes, additions or

deletions to the bidding documents. If making changes to the bidding documents is
necessary such changes should be made through issuing addenda. Changes may arise
from own interest of the Employer or from request for clarification made by a
bidder(s). The Employer should also insure that all bidders have received such
addenda in time. The bidders afterwards should incorporate the addenda when
preparing and submitting their offers. The Addenda thereafter becomes part of the
bidder’s offer and if the bidders offer is accepted, it becomes part of the Contract
documents. Similarly, prior to award of a contract to a bidder, the Employer may
hold pre-award meeting(s) with a bidder to clarify matters which arise during the
process of examination and evaluation of the bidder’s offer. The bidder shall be
required to provide written conformation of his agreement to clarifications or
correction of his offer prior to award. Written confirmations and signed minutes of
such meetings by the parties shall become part of the contract documents.

32
December, 2007
2.4 The Conditions of Contract

The Conditions of Contract provide the broad contractual framework for the supervision
and administration of the contract and define the general legal relationship between the
contracting parties, including the rights and obligations of each party and the powers and
duties of the Engineer appointed for the purpose of the contract. The conditions of
contract normally are subdivided in to two parts, part I being the general conditions of
contract and part II the special conditions of contract (also referred to as conditions of
particular application).
The PPA in accordance to the power vested to it as per the procurement proclamation no.
430/2005 has issued in 2006G.C. standard contract documents for works contract, among
which are, the general conditions of contract and special conditions of contract. The PPA
recommends such documents to be applied in small works contracts whose value does
not exceed USD 10 million. For works of higher magnitude the PPA does not provide
any other conditions of contract except that it states other suitable conditions of contract
should be used. The Ethiopian Roads Authority (ERA) uses conditions of contract for
works of civil engineering construction part I general conditions, fourth edition, which is
prepared by the International Federation of Consulting Engineers (FIDIC) for contracts
awarded through international competitive bidding; and the standard conditions of
contract issued by MOWUD (December 1994) for contracts awarded through local
competitive biding. These documents are applied by ERA, with special conditions of
contract which supplement and amend the general conditions of contract. ERA in 2002
G.C. published standard bidding documents which includes special conditions of contract
to be used with the FIDIC general conditions of contract.

The special conditions of contract compliments or amends the general conditions of

contract and forms an integral part of the Contract Documents. The contents of the
special conditions of contract take precedence over that of the general conditions of
contract in the event of discrepancy between the two.

It is important, when drawing up the special conditions to avoid unnecessary and

ambiguous terms. It is recommended that the standard issued by ERA or the guidance of
PPA be referred to in drafting the special conditions.

2.5 The Specification

The Specification is a set of definitions and descriptions which define and describe in
detail the character and quality of the materials to be utilized, the construction processes
to be followed and the characteristics of the finished project and its components. It may
also include the method of measurement.

In 2002G.C, ERA produced a Standard Technical Specification for road construction

works. ERA also produced in 2003 G.C standard specification for road maintenance.

33
December, 2007
If it is necessary to modify the Standard Specification or specify new items to suit needs
of each particular project this can be done via issuing a document called Special
Specification (some times referred to as supplemental specification or special provision)
and, as with the special conditions of contract, the Special Specification compliments the
Standard Specification and forms an integral part of the Contract Documents. The
contents of the Special Specification take precedence over the Standard Specification in
the event of a discrepancy between the two parts.

2.6 The Drawings

Whilst the Specification and Special Specification describe the quality and nature of the
materials to be used and the finished product they do not fully define what work is to be
undertaken. Description of the work such as dimensions, locations, strengths etc. is
described in diagrammatic form on the contract drawings. It is these drawings which
describe the exact scope of the works and which determine exactly what is to be
measured in the final Bill of Quantities.

The FIDIC Conditions of Contract defines the Drawings as follows:

"Drawings" means all drawings, calculations and technical information

of a like nature provided by the Engineer to the Contractor under the
Contract and all drawings, calculations, samples patterns, models,
operation and maintenance manuals and other technical information of a
like nature submitted by the Contractor and approved by the Engineer.

2.7 The Bill of Quantities

The Bill of Quantities is a list of items giving descriptions of every item of work to be
undertaken under the Contract, together with the number, quantity, volume etc. and the
cost per number, quantity, volume etc of each item. In admeasurements type of contract
the quantities set out in the Bill of Quantities are the estimated quantities for the Works.
They are not to be taken as the actual and correct quantities of the Works to be executed
by the Contractor in fulfillment of his obligations under the Contract. The actual works
performed are to be measured and paid to the contractor at the rates provided in the BOQ.

34
December, 2007
3 The parties to a works contract and their duties and
responsibilities

3.1 The Parties to a Works Contract

In a typical works contract there is contract between the Employer and the Contractor.
The Employer normally appoints an Engineer to supervise and administer the works
contract. If the Engineer is not from the internal organization of the Employer, as it is the
case in most contracts, the Employer enters in to a contract with the Engineer. Therefore,
there is contract between the Employer and the Contractor and another contract between
the Employer and the Engineer. There is no legally binding contract between the
Engineer and the Contractor, but under the provisions of the conditions of contract
between the Employer and the Contractor, the Engineer has powers to instruct the
Contractor.

The Employer and the Contractor are bound by the obligations stated in the works
contract. The detailed requirements for the Contractor’s work are contained in documents
such as the Drawings, Bills of Quantities, Specifications, etc. The Contractors
compliance with these and the exercise of his general obligations is subject to the
satisfaction of the Engineer. The inclusion of the Engineer's function in the contract,
between the Employer and the Contractor, is effected via the conditions of the works
contract, which define the Engineer's functions, roles, responsibilities and obligations for
the administration of the construction contract. Therefore it is important to see the
functions, duties and obligations of the two parties to the works contract and that of the
Engineer who has a vital role in the supervision and administration of the contract.

Following is summary of the duties and responsibilities of the Employer, the Contractor
and the Engineer:

3.2 Duties and responsibilities of the Employer

The Employer’s duties and responsibilities are:

 Appoint the Engineer and advise the Contractor

 Appoint the Contractor and advise the Engineer
 Providing the site and access to the site for the Contractor to undertake the works.
 Making of payments to the Contractor
 Responding promptly on matters for which the Engineer is required to consult the
Employer before issuing an instruction or making determination.
 Approval of the Securities, insurers and terms of the insurance policies.
 Taking over the works once substantially completed
 Deduction of liquidated damages from monies due to the Contractor when
35
December, 2007
 payable
 Terminating the Contract in the event of the Contractor failing to perform

Appointment of Engineer & Contractor

The Employer being the initiator of the construction project appoints the Contractor and
the Engineer and should advise so to the Engineer and the Contractor respectively. In
most of the cases, by the time the Contractor is appointed, the Engineer has been
appointed earlier. This arrangement enables for the Engineer and the Employer to make
the necessary arrangements and issue the commencement letter to the contractor within
the period specified in the contract. The FIDIC conditions state that ‘the Contractor shall
commence the Works as soon as is reasonably possible after the receipt by him of a
notice to this effect from the Engineer…’ Although this is an obligation of the Engineer it
demonstrates the contractual obligation of the Employer to make a prompt or timely
appointment of an Engineer unless the contract make it quite clear that this obligation, is
to remain in the hands of the Employer.
It is possible that the consultant who has designed the works or another consultant be
appointed to supervise the works. The Employer may also appoint an Engineer from his
own organization. It is up to the Contractor to asses the capacity of the Engineer to make
independent and fair judgment and consider it while submitting his offer. FIDIC general
conditions require the Engineer to be named in the contract change of which requires the
consent of both parties. If the Employer, however, desires to have the option of replacing
him unilaterally, an amendment to the general conditions should be made through the
special conditions of contract to allow the Employer to change the Engineer from time to
time, if required so, and notify the contractor.

Possession of site and access there to:

The Employer as per the contract is required to hand over as much of the site reasonably
required for the performance of the works and agreed means of access. In construction
projects, particularly in road construction projects it may not be necessary to give
possession of the whole site, but it is essential to give sufficient portion of the site
initially (on/before notice to commence is issued) and additional portions of the site from
time to time as requested by the contractor in accordance to the work program. Land
acquisition, resettlement and compensation are time taking tasks. Hence the Employer
should start and finalize these tasks well a head of time, preferably at the design stage,
and make sure (before he issues the letter of acceptance) that sufficient portion of the site
is available and remaining portion will be made available well ahead of time without
causing obstruction to the progress of the works. Any delay due to failure of the
Employer to give possession of site shall entitle to the contractor extension of time and
compensation of additional cost incurred.

If possession of the whole site is not necessary and the Employer intends to give
possession of the site to the contractor only that part of the site that is required by the
contractor to perform the works in accordance to the work program, such should be
clearly stated in the contract. Similarly, if the Employer intends to introduce other

36
December, 2007
contractors into the site such should be provided in the contract and should be checked if
adequate allowance is made in the contractors’ programs. Failure to do so may lead to
claims by the contractors.

Making payments to the contractor

This is one of the primary obligations of the Employer. When the engineer certifies the
amount of money payable to the contractor, the Employer should effect the payment
within the time specified in the contract. In order to discharge his obligation, the
Employer should ensure that sufficient fund is secured for the works before accepting the
Contractor’s offer. Failure to effect payment can lead to sever consequences such as
delay in the progress of the works, additional cost, interest on delayed payment and even
suspension and or termination of the contract.

Responding promptly to Engineers request:

Some decisions to be made by the Engineer require prior consultation or approval

with/from the Employer. The Employer should make him self available for the
consultation and timely respond to issues which require the specific approval of the
Employer. Issues which require the specific approval of the Employer prior to the
Engineer issuing instruction or determination are normally stated in the special conditions
of contract. Examples of such provisions are:

i) PPA’s guidance note for preparing the special conditions of contract suggests:
‘The Employer’s specific approval is required for: [insert any decisions for which
the Employer’s approval is required].
[e.g. If it is considered that the standard GCC clause gives too much authority to
the Engineer, or there is no full-time engineer as Engineer, the following clause
may be inserted to limit the authority of the Engineer and require him to get the
Employer’s approval where there are potential additional costs or extensions of
time involved:
“The Engineer shall obtain specific approval from the Employer before carrying
out any of his duties under the Contract which in the Engineer’s opinion will
cause the amount finally due under the Contract to exceed the Contract Price or
will give entitlement to extension of time. This requirement shall be waived in an
emergency affecting safety of personnel or the Works or adjacent property.”]

If it is desired that the limitations on the Engineer’s authority be more clearly

defined, then the following may be used instead:
“The Engineer shall obtain the specific approval of the Employer in writing
before taking any of the following actions specified in the General Conditions of
Contract:
Certifying additional costs under Clause 44;
Determining an extension of the Intended Completion Date under Clause 28;

37
December, 2007
 Issuing a variation order under Clause 40 except in an emergency situation as
reasonably determined by the Engineer or if the variation does not increase the
Contract Price;
Fixing rates under Clause 40;
Ordering suspension or termination under Clause 59;
[Add other limitations and quote clauses]”

ii) ERA 2002, particular conditions of contract based on FIDIC conditions of contract
suggests:
‘The Engineer shall obtain the specific approval of the Employer before taking
any of the following actions specified in Part I, such approval to be copied to the
contractor:

(a) Consenting to the subletting of any part of the Works under Clause 4;
(b) Certifying additional cost determined under Clause 12 or Clause 53;
(c) Awarding an extension of time under Clause 44;
(d) Issuing a variation under Clause 51, except:
(i) In an emergency situation, as reasonably determined by the Engineer; or
(ii) If such variation would increase the Contract Price by less than the amount
stated in the Appendix to Tender.
(e) Issuing any variation, if the sum of all variations issued has exceeded five
percent (5%) of the Contract Price;
(f) Certifying payment if the Contract Price will be exceeded;
(g) Issuing any Taking-Over Certificate;
(h) Authorizing the use of Provisional Sums in excess of the monetary limit for
variations;
(i) Certifying additional payment under Clause 65; and
(j) Major changes to the Design and/or Specifications. Minor changes to be
notified to the Employer within 7 days.’

Approval of securities, insurers and the terms of the insurance policies

Securities such as advance guarantee, performance security, insurance of the works etc.
are required to be submitted by the contractor to the Employer with a copy to the
Engineer. The terms, the security providing institution and the amount of cover are
subject to the approval of the Employer. Items to be checked for compliance in order to
approve the securities will be discussed in more details in another chapter of this
document.

Taking over the works

Once the Contractor has completed the works, the contractor applies to the Engineer to
certify the substantial completion of the works and issue the taking over certificate. The
Engineer will do so if he is satisfied that that the works are substantially completed. After
the issuing of the Taking-Over Certificate, the Employer is required to take over the

38
December, 2007
Works. Failure to do so, for whatever reason, could result in delays to the demobilization
of the Contractor with associated costs to the Employer.

Under the general conditions of contract (both PPA and FIDIC 4th) the Engineer does not
require the approval or consent of the Employer to issue the Taking-Over Certificate. In
the event that an Employer wishes to be consulted or give approval prior to the issuance
of the taking over certificate, it is essential that such provision be made in the special
conditions of contract at tender stage.

Deducting liquidated damages

When the contractor delays the completion of the works or part(s) of the works from
completion date(s) specified in the contract plus extension(s) of time awarded in
accordance to the contract, the Employer deducts agreed amount of money for each
delayed day up to a maximum amount specified in the contract. In accordance to the
terms of the contract, it is the Employer not the Engineer who can deduct liquidated
damages.

Termination of the contract

Under the terms of the contract, there are situations where both the Employer and the
Contractor can terminate the contract. The Employer may terminate the contract due to
default of the contractor or for his convenience. Defaults of contractor which may lead to
termination of the contract are:
o If the Contractor is made bankrupt or goes into liquidation other than for a
reconstruction or amalgamation.
o Assigns the contract or any part thereof without prior consent of the Employer
o Or if the Engineer certifies to the Employer with a copy to the contractor, that
in his opinion, the Contractor
 Without reasonable excuse has failed to commence the works
 Rate of progress is not adequate and hasn’t shown sufficient improvement
after receiving notice to do so.
 Has not complied to make good or remove defective materials, plants and
workmanship within the period specified in the contract
 Is persistently neglecting to comply with any of his obligations under the
contract
 Has sub-contracted part of the works without the approval of the Engineer
unless it is provided otherwise in the contract.

Termination of contract will have consequences such as settlement of outstanding issues

with the contractor and selection of another contractor which may take considerable time
and cost. Therefore, the Employer should make all efforts required on his side for the
successful completion of the contract before deciding to terminate. Moreover, the
Employer should have sufficient grounds for such decision. The Employer should be
aware that, termination of contract without sufficient grounds or for his own convenience

39
December, 2007
can cause him claims for additional costs incurred by the contractor due to termination of
the contract.

3.3 The Engineer’s duties and responsibilities

Duties and responsibilities of the Engineer include (but not limited to) the following
under the Conditions of the Works Contract:

 The issue of information (drawings, specs etc.) and instructions to the Contractor
 Commenting on the Contractor’s proposals for carrying out the work
 Ensuring that materials and workmanship are as specified
 Measurement of works done by the contractor
 Certifying to the Employer that the Contractor is eligible for payments
 Evaluation of claims
 All other matters of an administrative nature

Once the construction Contract has been awarded to the Contractor the Employer steps
back from routine administration activities and delegates most of the contract
administration activities to the Engineer. Details of the Engineers duties and
responsibilities are to be stated in the supervision agreement between the Employer and
the Engineer (Consultant). However, it is not necessary to disclose all of those duties and
responsibilities in the works contract. The Engineer’s duties, as normally provided in
works contract, include general administration, ensuring compliance by the Contractor
with time and quality obligations, approval of the program and method statements (and
requesting up-dated versions as and when appropriate), issuing instructions for variations
and negotiating rates for payment thereof, issuing drawings and ordering tests. For
convenience the duties and powers can be reviewed under three headings representing the
main functions of the Engineer.

Approval and Acceptance

 permission to sub-let parts of the works
 approval of program and proposed methods of working
 approval of contractor’s representative and employees
 acceptance of workmanship and quality of materials
 approval of measures to deal with problems such as slow progress
 unforeseen physical obstructions or conditions
 issue of taking-over certificate
 issue of defects liability certificate

Instruction
 issue drawings
 variations of the works
 suspend the work
 dealing with unforeseen physical obstructions and conditions

40
December, 2007
  uncovering and making openings
 removal of improper work or materials
 provisional sums, and employment of nominated sub contractors
 day works
 contemporary records with regards to claims

Evaluation and Adjudication

 ambiguities and discrepancies
 obstructions or conditions unforeseen
 delays and additional costs
 liability for damage to the works
 avoidance of damage to roads
 assessment of progress
 measurement for interim payments and final account
 variations and new rates
 settlement of disputes

The Engineer’s role: as Agent of the Employer and or as Independent (Impartial)

When the FIDIC general Conditions of Contract define the authorities and
responsibilities of the Engineer, it describes two distinct roles of the Engineer:

 Agent of the Employer e.g. giving permission to sub-contract the works, issuing
drawings etc.
 Independent and impartial e.g. fixing rates, valuation of claims, certification of
payments etc.

As per FIDIC conditions, the Engineer, in so far as any of his duties are discretionary,
shall act fairly as between the client and the contractor.

Sub clause 2.6 of the FIDIC Conditions of Contract provides:

‘Wherever, under the Contract, the Engineer is required to exercise his discretion by:
(a) giving his decision, opinion or consent,
(b) expressing his satisfaction or approval,
(c) determining value, or
(d) otherwise taking action which may affect the rights and obligations of the
Employer or the Contractor he shall exercise such discretion impartially within the terms
of the Contract and having regard to all the circumstances. `

On the other hand the PPA conditions of contract require the Engineer to make his
decision in the role representing the Employer. Clause 4 of the PPA general conditions of
contract provides:

41
December, 2007
‘Except where otherwise specifically stated and subject to any restrictions in the special
conditions of contract, the Engineer will decide contractual matters between the
Employer and the Contractor in the role representing the Employer.’
But the Contractor can refer his case to an independent body if he is not satisfied with the
decision of the Engineer as provided in clause 24 of the PPA conditions of contract which
states:
‘If the contractor believes that a decision taken by the Engineer was either outside the
authority given to the Engineer by the contract or that the decision was wrongly taken,
the decision shall be referred to the Adjudicator within 14 days of the notification of the
Engineer’s decision.’
It is important to realize, however, that neither the Employer nor the Contractor is finally
bound by the Engineer’s interpretation or determination. All contract documents provide
for the subsequent steps to be taken should either or both of the parties are not satisfied
with the decision of the Engineer. Therefore, in any case it is essential that the
Engineer’s decision be reasonable and fair to increase the likely hood of being accepted,
get final and binding effect by the parties and avoid subsequent dispute resolution
processes.

Authorities of the Engineer:

The Engineer may issue instructions, directions and orders to the Contractor so that the
construction of the Works can proceed. He may comment on the Contractor’s proposals
for carrying out the Works and must ensure that the workmanship and quality of
materials are in accordance with the Specifications. He will measure and value the work
done by the Contractor and will issue payment certificates to enable the Employer to pay
the Contractor.

But it should be noted that many organizations would like to be consulted before the
Engineer issues instructions which can have substantial implications on cost and time. If
the Employer wishes to limit the authority of the Engineer this must be clearly stated in
the Conditions of contract. Examples of circumstances under which the Engineer is
usually required to seek the specific approval of the Employer have been discussed
earlier. In these cases it would be necessary for the Engineer to obtain the Employer’s
approval prior to issuing any instructions.

The Engineer may have considerable powers but he has no authority to do anything that
relieves the Contractor of any of his obligations under the Contract.

Engineer’s Representative

The Engineer may not be able to devote all his time to the management and control of
only one contract. In order to carry out the responsibilities of each particular contract, the
Engineer may appoint his Representative to supervise the construction process. The
representative is required to carry out such duties and exercise as may be delegated by the

42
December, 2007
Engineer, in writing, with copies to the Employer and the Contractor. Principally, he will
supervise the construction of the Works and ensure that they are completed in general
accordance with the requirements of the works contract.

What powers to delegate to his representative and what powers to retain is within the
responsibility of the Engineer, but it should be supported by reasoned assessment. In case
of supervision contracts, the best division is one which gives the representative the
authority to act in those areas where relatively rapid decisions and /or specific knowledge
of the site is needed, leaving issues of longer range and wider consequences for the
Engineer.

The Engineer or his Representative may appoint number of people to act as “assistants”
to the Engineer’s Representative. The number required and the minimum qualification &
experience are stated in the supervision agreement. The assistants may not have any
authority to issue instructions to the Contractor other than to the extent that such
instructions may be necessary to enable them to carry out their duties and to record their
acceptance of work, materials etc. The Engineer’s representative should issue to each
assistant a job description defining duties, rights and responsibilities under the Contract.
The Contractor must be notified, under the provisions of the Conditions of works
Contract, of the appointment, names, duties and scope of authority for each assistant. The
number and function of assistants will vary considerably from site to site, depending on
the complexity of the works to be carried out.

The Engineer as Dispute Settler

The PPA conditions do not state specifically the role of the Engineer as dispute settler;
instead it provides a dispute to be referred to an adjudicator if it arises. But in accordance
to the FIDIC conditions, the Engineer has a role as settler, in the first instance, of any
disputes that arise between the Client and the Contractor. Disputes may arise from a
variety of sources under the Contract. A dispute mostly occurs when the Contractor is not
satisfied with the decisions of the Engineer. The party not satisfied with the Engineers
decision must submit the matter in dispute to the Engineer, upon which the Engineer will
open up the case and make his decisions in accordance to clause 67 of the conditions of
contract. With regards to the matter in dispute, it is essential that both the reference to the
Engineer by the Contractor and the Engineer’s decision are in writing and specifically
state that they are made under the provisions of Clause 67 of the Conditions of Contract.
If either of the parties or both are not satisfied with the Engineers decision made as per
clause 67 of the general conditions of contract they may proceed to the subsequent
dispute resolution mechanism stated in the contract.

3.4 Duties and responsibilities of the Contractor

FIDIC Clause 8.1 States: ‘The Contractor shall, with due care and diligence, design (to
the extent provided for within the contract), execute and complete the Works and remedy

43
December, 2007
any defects therein in accordance with the provisions of the Contract. The contractor
shall provide all superintendence, labor, materials, plant, contractor’s equipment and all
other things, whether of a temporary or permanent nature, required in and for such
design, execution, completion and remedying of any defects, so far as the necessity for
providing the same is specified in or is reasonably to be inferred from the Contract’.

The above outlines the fundamental and overall obligation of the contractor to execute
the works and remedy any defects prior to the end of the Defects Liability Period.
The Contractors duties and obligations are further stated in several clauses of the
contract, which includes: -

 Signing the contract agreement if called upon to do so

 Constructing, completing and maintaining the works within the contract period.
 Providing all the required labour, materials, plant etc. and avoiding any unreasonable
noise, disturbance and damage.
 Provide the required securities.
 Carrying out the instructions of the Engineer and his representative.
 Providing adequate superintendence.
 Setting out the works.
 Providing program together with methods of working and updates.
 Care of the works during construction period and making good any damage.
 Providing for the safety and security of the site and all construction operations.
 Providing plant and labour returns.
 Compliance with statues, regulations and bye-laws.
 Notifying any claims for payment supported by such contemporary records and
particulars as are necessary for proper investigation and assessment.

The aforementioned Clause 8.1 indicates obligation for the contractor to carry out and
complete the works described within the several documents comprising the contractual
agreement. As long as the works are clearly defined with sufficient precision the
Contractor cannot abandon the works, however close he might be to completion.

There are, of course, circumstances which may release the Contractor from his
obligations. They are demonstrated under Clause 20.4 (Employer’s Risks). The
Contractor’s remedies are contained within Clauses 65 & 66, whereby he may receive
payment for works completed up to the point of termination of the contract. Likewise,
under Clause 69, there are circumstances, usually related to payments whereby the
Employer defaults and the Contractor must notify that he is terminating the contract.
Another measure is for the Contractor to ‘suspend’ the works (Clause 69.4) until such
time that the ‘fault’ be remedied or even slow his rate of progress down. The situations
which may give rise to termination or suspension as per clause 69 are:

1. failure to pay the amount certified pursuant to Clause 60.1

2. refusing or interfering with the issue of such a certificate
3. act of bankruptcy or liquidation

44
December, 2007
 4. Notice by the Employer of his inability to meet his contractual obligations due
to economic reasons.

It must be noted that the Contractor will not be entitled to terminate/ suspend the works in
the cases of disputes which he feels he is entitled to receive additional payments for. It is
the failure to pay agreed and certified money which will trigger action under this Clause
of the contract.

4 Guidance to the Employer and his staff, in the

administration of works contracts

4.1 Assignment of Staff and facilities

In the earlier chapter we tried to see the duties & responsibilities of the Employer in
works contracts. In addition to those duties and responsibilities, the Employer has the
duty to monitor the progress of the works for the successful achievement of the project’s
objectives. The Employer, in order to meet its obligations and monitor progress, should
have the required resources and should be properly organized.

The current typical structure of the RRAs is as shown below. Duties and responsibilities
are recommended to be assigned to certain management bodies based on the chart below.
In the event that changes to the organization chart are made in future, the duties and
responsibilities should be suitably adjusted to fit the new organization chart.

RRA
Board

General
Manager

Audit Legal
Services Services

Operations Planning and Contract Human Resource Development

Division Administration Division and Finance Division

Maintenance Branch Planning and Personnel and

Programming Branch Training Branch

Supplies and Community Road Development Finance Branch

Equipment Branch Co-Ordination Branch

Engineering and Contract Administration Procurement Branch

Construction Branch Branch

45
December, 2007
The General Manager of the company is the highest body of the organization that is
authorized to give decisions that can bind the Employer. Therefore, matters which require
the approval or consent of the Employer should be signed by the GM or his delegate.
However, the GM or even the division manager may not be able to make themselves
available to communicate and discuss with the Engineers and the Engineers
representatives on each and every matter of each contract. Therefore, it is very important
that depending on the extent and type of contracts the RRA has, it should appoint
appropriate staff. Equally important is that such staff should have sufficient delegation
and facilities needed to perform their duties.

Every project and preferably every contract, as some projects comprise of more than one
contract, should have a project counterpart who may be designated as assistant project
engineer and project engineer. The Project Engineer (PE) will be responsible for a project
and the Assistant Project Engineer (APE), for one particular contract in a project.
Individual contracts on a project may be awarded to different contractors and may also be
supervised by different consultants; hence the recommendation that each contract has a
separate Assistant Project Engineer can be beneficial. This is even more essential if the
Project Engineer is responsible for more than one project. If there are no many contracts
to be handled by the RRA, the branch head for contract administration can perform the
duties of the PE.

The PE should be delegated sufficient responsibility and encouraged by the RRA

management to take decisions without constantly having to refer matters to more senior
personnel. Some matters will of course, require that the PE confirms his decision or
response with superiors. If he is in doubt about his response he can also seek advice from
senior staff working in the RRA. The designated PE should be based in the RRA
headquarters and the RRA should inform both the Engineer and the Contractor. The
Project Engineer should similarly encourage his APE(s) to take as much responsibility as
they feel they are able to minimize the involvement of the PE, especially on routine
matters. The APE should also be based at headquarters visiting site when necessary. The
APE shall report to the PE.

The RRAs at the moment are not very familiar with land acquisition and compensation.
There are no trained staffs, relevant government policies and procedures and the
responsible department for this function is not properly identified. This is mainly because
the RRAs experience of out sourcing road works to contractors is very limited. With the
likely hood of future increment in outsourcing construction and maintenance works this
function of the RRAs should be strengthened. Sufficient staff should be appointed; the
staff should receive adequate training along with the required documents (ERA may be
requested to provide assistance in this regard), and the responsible body should be
identified, preferably the staff(s) who are assigned to perform land acquisition and
compensation tasks (RoW agents as they are referred to in ERA) should be under the
legal service unit and hence the legal service unit assumes the responsibility. The task of
the APE/PE will be to work closely with the legal service to ensure the timely acquisition
of the land and removal of obstructions.

46
December, 2007
The APE should visit site at least once a month - for the monthly progress meeting and
will, at the very least, spend a couple of days on site so that he keeps up-to-date with
construction activities and is available for discussions with the Resident Engineer. The
number of visits of the Resident Engineer to the RRA head quarters ‘to see the Employer’
should be kept to a minimum. The RE should pass most of his time on site. If the APE
wishes to observe construction operations to enhance his knowledge and increase his
experience this should be possible by extending his monthly visit or by making a
subsequent visit during the month.

The PE should visit site occasionally. During the early stages of the contract he should
attend all the monthly progress meetings. These meetings can be arranged on
consecutive days for the various contracts on the same project, to minimize his traveling.
The workload of each PE should be monitored by the Planning and Contract
Administration division/department to assess if any PE/APE is becoming overloaded.
Action will then have to be taken to alleviate this situation.

The RRA must ensure that transport is available for all APEs so that when they are
required to visit site they can do so without delay. The APE should arrange that he has
suitable office facilities and equipment on site for his use within the consultant’s site
compound. He will also need suitable accommodation (as will the PE occasionally) either
on site or near the site office.

4.2 Familiarization with contract documents and prior history &

status of the project

The PE and APE should first of all familiarize themselves with Contract Details through
reviewing the contract documents, holding discussion with staff of the RRA involved in
the design and procurement stages and reviewing files and correspondences related to the
contract. Arrangement should be made for handing over of documents, status and
prevailing issues of the project from the person/body involved in the prior stage of the
project (i.e. design and procurement) to the body responsible for following up the
implementation of the contract.
In order for the Hand-Over to be complete and effective it should take the form of formal
minuted meeting. In addition to the hand over of physical documentation, drawings and
computer records, these meetings should include the presentation of an oral and written
history of the project up to that point in time.

The meeting will necessitate handing over of a complete set of tender documents, copies
of all post tender correspondence, copies of minutes of all post tender meetings, details of
any important considerations during the tender evaluation period, any other details of

47
December, 2007
post tender decisions, agreements and the Contract Document including the Letter of
Award, construction drawings and RoW authorizations etc.

The meeting should be attended by at least the following members of the RRA:

 Contract administration division head

 Contract administration branch head
 The PE

The agenda for the meeting should include, but not necessarily be limited to, the
following:

 Project History
 Design Philosophy and Criteria
 Project Funding
 Technical and Financial Constraints
 RoW status
 The Tender Process and the Tender Evaluation.
 Handing Over of the following documents:
o Feasibility Study
o Final Design Report
o Tender Document
o Post Tender Correspondence
o Post Tender Meeting Minutes
o Tender Evaluation Report
o Signed Contract Documents including Drawings
o Copy of the Letter of Acceptance
o Consultant Supervision Contract
o All project correspondence
o Computer files
o RoW authorizations
 Supervising Consultant
 Other Departments and Organizations
 Any Other Business

In the event of changes of PE/APE similar handing over between the outgoing PE/APE
and the incoming PE/APE should be made.

4.3 Establishing the lines of communication with the Engineer

It is recommended that the PE arranges an introductory meeting with the Engineer and
his representative to introduce the APE and discuss the contract, especially lines of
communication, mobilization, work program etc.

It is recommended that the APE becomes the initial point of contact for the consultant’s
site staff’s (Engineer’s Representative) day to day/routine communications with the
RRA. In-coming correspondence, however, should be directed through the PE who

48
December, 2007
should pass everything on to the APE for either action or information. The PE will be the
point of contact for the Engineer in the first instance if matters dictate that decisions are
taken ‘above’ site level.

4.4 Giving assistance and advice:

The contract may require the Employer to assist in issues like obtaining residence & work
permit to expatriate personnel, writing letters to government offices which may be
necessary or appropriate for the prompt and effective implementation of the contract. The
APE should advise and give assistance on how to obtain Residence permits, Work
permits and any other assistance to be given to the Engineer and or the Contractor as
required by the contract.

If there is any possibility that, for example, old landmines may be encountered on
deviations or on new alignments the Contractor should be advised of this possibility. The
APE and consultant should investigate these items thoroughly.

Assistance should be given to the Contractor if liaison is required with other Government
Authorities. Customs procedures and the obtaining of radio and explosives licenses have
led to claims on road projects, the Contractor contending that the Employer did not act
quickly to assist them, causing them to be delayed. Such situation can be prevented if the
Employer gives the required assistance promptly.

4.5 Land Acquisition and Removal of Obstructions:

Before the notice of commencement is given the RRA should make all efforts and follow
up to acquire the necessary land and accesses to the site. Property affected by the
construction work should be identified during the design or design review stage and the
land acquisition report itemizes those properties or cultivated land which may require
compensation payments to be made to the owners. The procedures for arranging/making
any compensation payments should be well advanced prior to the Contractor arriving on
site.

Similarly arrangements should be made to make the borrow pits and quarries identified
during the pre-construction stage available to the Contractor. The Contractor may or may
not use such borrow pits and quarries, he may locate other sources which he considers to
be more suitable. It is the Contractor’s responsibility to provide material that complies
with the specification. His requirements for land for borrow pits and quarries may not be
known until he carries out investigations; therefore, the sources identified during the
design stage should be available for him to commence activities such as removal of
overburden, stockpiling etc. if this is necessary.

49
December, 2007
There may be some matters of land acquisition which cannot be resolved until the
Contractor arrives on site and has prepared his program for the Works. Areas for site
camps and how he intends to accommodate traffic can only be addressed after he has
advised the Engineer and the Employer of his intentions. The APE should then act
immediately and must take full responsibility to follow up the procedures that are
necessary, to ensure that they are completed as quickly as possible and that compensation
payments are finalized. This can involve discussions with and action by, amongst others,
the legal service of the RRA. The APE should monitor progress to ensure that any other
parties involved act efficiently to process whatever is required.

The PE/APE should make all efforts to identify the list of obstructions and requirements
of the contractor for borrow pits, quarries, camp construction, diversion roads etc well
ahead of time and closely follow up the process of compensation and removal of
obstructions so as not to cause any impediment to the contractor in performing the works.

If the Contractor does not have possession of site when he needs to commence work he is
entitled to, and usually will, claim for being delayed under sub-clause 21.1 of the PPA
conditions of contract or Sub-Clause 42.2 of FIDIC.

In accordance to the FIDIC conditions of contract the contractor commences the works as
soon as the Engineer issues the notice to commence. Clause 42.2 of FIDIC conditions
also states that possession of so mush portion of the site and access to site shall be given
with the Engineer’s notice to commence. The portion of the site adequate for the
contractor to commence works is to be decided in accordance with the program referred
to in Clause 14 if any or in accordance to request of the Contractor reasonably made
through a notice to the Engineer with a copy to the Employer. This conflicts to some
extent with giving possession with the notice to commence the Works. It is suggested
that giving sufficient access to the site with the notice of commencement and at the same
time requesting which parts of the Site the Contractor requires to possess to commence
and proceed with the works, should protect ERA from any possibility of Sub-Clause 42.2
being invoked. That is assuming, of course, that the Employer gives possession when
requested to, without undue delay.

In accordance to the PPA conditions of contract the contractor is required to commence

the works on the start date which is specified time period (14 days as per the
recommendation of PPA’s guide) after the letter of acceptance. Hence a separate notice to
commence from the Engineer is not required to start the works. Furthermore possession
of site is not related to date of commencement. The Employer should give possession of
the site to the Contractor as defined in the Contractor’s approved work program. The
Program is to be submitted within specified period after the Letter of Acceptance and this
may not give the Employer a great deal of time. If the Contractor is delayed or incurs
costs due to a failure by the Employer to give necessary possession, the Engineer is to
grant an extension of time and costs.

50
December, 2007
The APE should visit the area of the Works before the Contractor commences on site and
consult local representatives to explain the extent of the construction work in their area.
Areas of significance and land which may be sensitive to residents can then be identified.
This could avoid the Contractor being disrupted by local inhabitants during the contract.

Utilities such as power line, telephone line, water supply line, etc which exist with in the
right of way have to be relocated. The Engineer should well ahead of time identify those
utilities to be relocated and advise the Employer. The Employer then arranges for the
relevant utility corporation to do the work and pays them directly. If delays occur in such
instances it could result in a claim being made by the Contractor.

4.6 Securities

In order to reduce the risk of loss in certain events, the Employer seeks some forms of
security. Examples of events where the Employer requires security are:

 The Contractor has gone in to liquidation or becomes bankrupt.

 The Contractor’s quality of work or rate of progress is so poor that the contract is
terminated by the Employer.
 The works are damaged or delayed by natural or accidental disasters e.g. floods,
fire, earthquakes etc.

Therefore, under works contracts, the Employer requires the Contractor to submit a
number of different types of securities. These include:

 Performance Security
 Advance Payment Security
 Insurance
 Retention Security

The above securities are to be submitted in accordance to a prescribed format and or

approved format. These securities provide for financial compensation in case of certain
occurrences which cause loss to the Employer. Therefore, the Employer should check
that there is sufficient cover prior to approval. The terms (exclusions, deductibles, and
conditions), amount of cover, period of cover and the institution are amongst those to be
checked.

Contract securities can take a number of different forms/types e.g.

 A bond, defined as “a written acknowledgement of an obligation to pay a sum or

to perform a contract”.

51
December, 2007
  A guarantee, defined as “a promise, especially a collateral agreement to answer
for the debt, default or miscarriage of another”.

 Insurance, defined as "securing of compensation in the event of loss or damage by

advance regular payments"

A surety is defined as:

“a person who assumes legal responsibility for the fulfillment of another’s debt or
obligation and himself becomes liable if the other defaults”.

Bonds and Guarantees

Construction contracts usually require a number of different types of bonds/guarantees. In

their usual form, the surety agrees to pay the beneficiary a certain sum of money in the
event that the principal fails to perform the relevant contractual duties. The surety
normally signs counter indemnity agreement and or holds co-lateral to enable it recover
the payments from the principal (in other words the Contractor).

The most commonly used bonds/guarantees encountered in works contracts are:

 Bid Bonds/Guarantees
 Performance Bonds/Guarantees
 Advance Payment Bonds/Guarantees
 Retention Bonds/Guarantees

Conditional and Unconditional Bonds/Guarantees

A conditional bond/guarantee sometimes termed an ‘on-default’ bond/guarantee is one

which can be called when a contractor fails to comply with its obligations under the
contract.

An unconditional bond/guarantee sometimes referred to as an ‘on-demand’

bond/guarantee is one which may be called by the employer even when there may be no
justifiable cause for such calling. The very reason why some Employers demand
unconditional bond/guarantee is because their demand can be settled quickly without
going into any possible arguments on determining whether the Contractor is on-default or
not. Nevertheless, the employer should not demand without justifiable cause (just
because he can do so) as such action may not benefit the implementation of the contract.
If the RRA intends calling the performance security, it is recommended that the matter be
discussed fully with the Engineer, and such an action should preferably result from a
recommendation of the Engineer.
52
December, 2007
The Current procurement guideline of the FDRE (July 2005) allows both unconditional &
conditional performance security and advance security from bank or insurance
institutions to be accepted for local (domestic) Contractors. Foreign contractors,
however, are required to submit unconditional performance and advance securities. If a
local contractor chooses to submit conditional security for advance payment, then release
of the advance payment will be made to a special account (joint account) to be operated
by two signatories one from the Employer and the other from the Contractor. The release
of the advance payment to the joint account is subject to a special agreement to be signed
by the Employer and Contractor (a sample of which is shown in appendix 2) which
amongst others provides that the advance payment to the Contractor will be released in a
number of installments. The second and subsequent installments of which will be made
provided that the Contractor has utilized the released portion of the advance payment for
the contract and in accordance to approved advance payment utilization schedule.

It is important to note that the APE/PE of the RRAs should always be aware of the
current and applicable Government regulation in this regard and more importantly the
provisions of the contract document in approving the securities. Consultations with senior
RRA staff and the Legal Service may be made if necessary. If the security is not
acceptable then the Contractor must be advised to obtain the security from another source
or make amendments as appropriate.

Institutions

Usually guarantees are issued by banks whereas bonds and insurances are issued by
insurance companies. The APE/PE should carefully review the provisions of the contract
in approving the institution issuing the security. Inmost of the cases only those
institutions which operate in Ethiopia are allowed to issue the above mentioned
securities. In case of Contractors (mostly foreign) who wish to provide security from
foreign financial institutions, the security provided from the foreign financial institution
may be required to be counter guarantied by a financial institution operating in Ethiopia.

Performance Security

A Performance security is a promise by a third party to cover any cost (in the case of a
guarantee) incurred by the Employer as a result of non or poor performance by the
Contractor; or to complete the works (in the case of a surety bond) for the same reasons.
These costs could relate to the employment of a second contractor to complete the works
or the demolition and reconstruction of unacceptable elements of the works etc.

Works contracts usually require the Performance Security to be furnished prior to the
formal signing of the contract and within a specified period after the award of the
Contract. The amount (usually 10% of the contract price) is to be specified in the
contract. If substantial additions (usually above 25%) are made to the contract price, the
Contractor may be requested to increase the performance security proportionally.

53
December, 2007
Until performance security is submitted and accepted no application by the Contractor for
payment is to be certified by the Engineer. Bid security is to be returned to the Contractor
upon submission of acceptable performance security.

The Performance Security is very valuable financial document, presentation of which

may be required to cash in the amount specified. It is therefore very important that the
guarantee document be retained in a safe place.

On satisfactory completion of the works the Employer is required to return the guarantee
to the Contractor thereby releasing the Contractor from all liabilities with regard to the
performance of the works.

The performance security is to be returned certain days after the taking over certificate or
after issuing of the defects liability certificate. The APE/PE should refer to the contract to
determine the date by which it should be returned.

The Advance Payment Security

The works contract may provide for the Employer to give interest free advance payment
in the form of loan to the Contractor to help him cover initial expenditures associated
with mobilization. In accordance to the current procurement guideline of the FDRE,
advance payment up to a maximum amount of 30% is allowed. This figure is usually
20% for most of works contracts.

In order to avoid the risk of the Contractor disappearing without repaying the loan, the
Employer will usually require the Contractor to provide some form of security to
guarantee the repayment.

This advance payment is repaid to the Employer by deducting pre agreed amounts from
each of the payments made to the Contractor. Following the full repayment of the
advance payment the security is returned to the Contractor for cancellation.

Retention & retention security

In addition to the above Performance securities works contracts usually provide for the
Employer to retain a small percentage of all payments made to the Contractor as a
further, more readily available or liquid, security. The reason for this additional security
is that the Performance Security is provided by a third party and is considered to be
available for “more serious” failures by the Contractor e.g. where the Employer is
required to undertake the completion or rectification of the works.

The amount to be retained from each payment is to be specified in the contract. In

accordance to the current procurement guideline of the government the amount is 5%.

54
December, 2007
The amount retained is to be released to the Contractor in two stages: the first half on the
issuance of the Taking-Over Certificate, the second half on the issuance of the Defects
Liability Certificate.

The retention of cash from payments can create cash flow problems to the Contractor. In
order to improve their cash flow, contractors may prefer to replace the retained cash with
a guarantee. The guarantee should be in the same amount as the retention payment to be
released. Like any other guarantee the terms, amount, validity and the institution
providing the security should be checked. As with all security documents it is important
that the Retention guarantee be retained in a safe place as it is required to be returned to
the Contractor once they have fulfilled their obligations as described above.

Insurance

All contracts require that the Works, Plant & Equipment, Personnel, Vehicles etc. be
covered by insurance for damage, loss, theft, injury etc. for the duration of the project.
The responsibility for taking out this cover is usually that of the Contractor and the cost
of this is included in the Contract Price.

The insurances are usually required to be taken out in the joint names of the Employer
and the Contractor in order to facilitate claims by both parties. In addition both parties are
required to indemnify each other from claims by a third party against damages caused by
the other party.

Under the General conditions of Contract the Contractor must obtain insurance cover on
the following: The works (including materials & plant to be incorporated into the works);
contractor’s equipment; third party (person & property); workmen’s injury or death.

The requirements for insurance are summarized in the following table, in order to assist
the APE/PE in his evaluation.

55
December, 2007
Types of Insurance of Insurance Against Period of Insurance
Insurance
Insurance of The works (including Damage from any Up to taking over certify date and
works materials & plant to be cause except the during defects Liability Period if the
incorporated into the ‘Employer’s risks’ damage or loss is caused due to a
works), plus additional or “exclusions” as cause which occurred prior to the
sum (usually 10 to 15%) stated in the defects liability period or occasioned
to be specified in the conditions of by the contractor in complying with
contract. contract. his obligations during the defects
liability period.
Contractors Contractor’s equipment Same as above Same as above
equipment for the sum sufficient to
provide for their
replacement at site.
Third Party Any person or property Damage arising out Up to Defects Liability Certificate
of execution of the
works, remedying
any defects, against
all claims, etc.
Workmen’s All Contractor’s and Any accident Whilst anyone is employed on the
compensation Subcontractor’s works
Liability Employee on the works.

The Employer, under the contract is required to approve the Insurance Company and the
terms of all policies. The insurance must be in the joint name of the Contractor and the
Employer as per the PPA conditions. The works and third party insurance should be in
the joint names of the Employer and the Contractor as per the FIDIC conditions. The
insurance shall provide for compensation to be payable in the types and proportions of
currencies required to rectify the loss or damage incurred.

The APE/PE through the RE should press the Contractor to forward the policies as soon
as possible. The provisions of the policies should be checked with special attention being
paid to any provisions, exceptions and deductibles.

Main Points to be checked

o Amount of Cover and deductibles (excesses)

The amount of cover should be enough to enable recover the maximum

possible damage by the event covered under the policy, therefore the
minimum acceptable is normally specified. Insurance companies may
provide in their terms to deduct a fixed amount from any payment made
against a claim. The purpose may be to discourage many small claims
which would be time consuming to administer. Generally the deductibles
(excess) accepted by a Contractor the cheaper will be the insurance
56
December, 2007
 charges. However, if such deductibles accepted by the Contractor are high
they will not provide sufficient cover to the Employer, in the event he
wants to make a claim. Therefore, it would be advisable to check that the
deductibles are not more than acceptable limits.
The following is provided by the PPA guide:

“Greatly, depending on the nature and value of the works, it is safer to

select a higher level of minimum cover and lower deductibles. If in doubt,
Procuring Entities should obtain professional advice on acceptable
minimum cover limits. The following values are given in US Dollars as a
guide only, but may be varied and may be specified in Ethiopian Birr or
another appropriate currency:
(a-b) minimum cover for loss of or damage to the Works, Plant, and
Materials: 110% of the Contract Value with US$50,000 maximum
deductible
(c-d) minimum cover for loss of or damage to Equipment: 100% of the
value of equipment required for the performance of the contract with
US$25,000 maximum deductible
(e-f) minimum cover for loss of or damage to property (except the
Works, Plant, Materials, and Equipment) in connection with the Contract:
US$250,000 with US$25,000 maximum deductible
g) minimum cover for personal injury or death: US$500,000 with no
deductible.

o Exceptions (exclusions) in the Standard Insurance Policy

These should be carefully studied to see whether their acceptance would

place unreasonable risks upon the Employer or Contractor.

Subcontractor’s work may be excluded, in which case the subcontractors

own policies should be called for and examined.

o Period of Insurance

Some policies run for period announced in the tender and others are
applicable over the period of the Contract. If the policy is for the period
named in the Tender, the Contractor would then be liable for an additional
premium for any extension of completion time. Insurances may be valid
for a period of one year to be renewed every year after paying the
necessary premium. The APE/PE through the RE should make sure that
the insurance is valid and premiums are settled on time. During the course
of the Contract the RE should examine receipts for premiums and ensure
the policies are updated to account for variations /time extension that may
have occurred.

57
December, 2007
 o Vehicles

For the Contractor’s vehicles the (RE) should check the policies to ensure
that they cover the third party risks, including passengers, when driven by
the engineer’s staff as sometimes these may be used as replacement
vehicles. For vehicles supplied for the specific use of the Consultant check
whether these are covered by comprehensive insurance policies.

o Definition of Site

See that the policy definition does not exclude quarries or other remote
installations and the access routes thereto. In case of vehicles the area of
coverage should not be limited to the site as there will also be frequent
traveling outside the site.

Employer’s risk

There are special risks which are unlikely to happen but are very expensive to insure. The
contract normally does not require the Contractor to take out insurance against such risks,
instead the Employer takes such risks and incase they occur and damage results, the
Employer will be liable. Such risks are called Employer risks:
Employer’s risks in accordance to PPA conditions:
“Unless otherwise specified in the SCC, from the Start Date until the Defects Correction
Certificate has been issued, the following are Employer’s risks:
a) The risk of personal injury, death, or loss of or damage to property (excluding the Works,
Plant, Materials, and Equipment), which are due to:
4.6.1.1 Use or occupation of the Site by the Works or for the purpose of the Works,
which is the unavoidable result of the Works, or
4.6.1.2 Negligence, breach of statutory duty, or interference with any legal right by
the Employer or by any person employed by or contracted to him except the
Contractor.
b) The risk of damage to the Works, Plant, Materials, and Equipment to the extent that it
is due to a fault of the Employer or in the Employer’s design, or due to war or
radioactive contamination directly affecting the country where the Works are to be
executed.

From the Completion Date until the Defects Correction Certificate has been issued, the risk of
loss of or damage to the Works, Plant, and Materials is Employer’s risk except loss or damage
due to
a) A Defect which existed on the Completion Date,
b) An event occurring before the Completion Date, which was not itself a Employer’s
risk, or
c) The activities of the Contractor on the Site after the Completion Date.

58
December, 2007
Employer’s risks in accordance to FIDIC conditions are:

(a) war, hostilities (whether war be declared or not), invasion, act of foreign enemies,
(b) rebellion, revolution, insurrection, or military or usurped power, or civil war,
(c) ionising radiations, or contamination by radio-activity from any nuclear fuel, or
from any nuclear waste from the combustion of nuclear fuel, radio-active toxic explosive
or other hazardous properties of any explosive nuclear assembly or nuclear component
thereof,
(d) pressure waves caused by aircraft or other aerial devices travelling at sonic or
supersonic speeds,
(e) riot, commotion or disorder, unless solely restricted to employees of the Contractor
or of his Subcontractors and arising from the conduct of the Works,
(f) loss or damage due to the use or occupation by the Employer of any Section or part
of the Permanent Works, except as may be provided for in the Contract,
(g) loss or damage to the extent that it is due to the design of the Works, other than any
part of the design provided by the Contractor or for which the Contractor is responsible,
and
(h) any operation of the forces of nature against which an experienced contractor
could not reasonably have been expected to take precautions

Users are advised to refer to the provisions of the applicable general conditions and
special conditions of each contract to know the Employer’s risks of each contract.

Remedy on Contractors failure to insure

If the Contractor fails to effect and keep in force the insurances required the Employer
can effect such insurance and pay the premium by deducting from payments payable to
the contractor.

4.7 Information and Approvals

One of the principal responsibilities of the APE is to ensure that any information or
assistance requested by the Engineer or the Contractor is given in due time and that the
Contractor (particularly) is not delayed by a lack of information or by matters which
require the Employer’s assistance.
The APE should prepare a special follow up list (file) to record the status of issues which
require assistance, information or approval from the Employer. If an issue is delayed he
should promptly report to the PE who should try to resolve it himself or discuss/report to
higher or other relevant personnel to resolve the issue as early as possible.
If the information required by the Contractor is to be provided by the Engineer (for
example drawings), the APE should request that a release of information schedule is

59
December, 2007
prepared by the consultant which indicates dates for issue of information/drawings to the
Contractor and which corresponds to the Contractor’s program.

Any confirmation which is required, under the Conditions of Contract to be given by the
Employer to the Engineer before he advises/instructs the Contractor on a particular
subject, has to be given without delay. If decisions are required they must be made
quickly. The PE and APE should, however, ensure that they are not making decisions
that should be made by the Engineer. The PE and APE should carefully understand
which matters require the confirmation or approval of the Employer. Correspondence
requesting approval from the Employer should contain recommendations made by the
Engineer. It is not the responsibility of the Employer to propose solutions to problems
posed by the Contractor. The Engineer should do this and seek confirmation from the
Employer, where such is required by the Conditions of Contract.

4.8 Site Instructions, Variation Orders and Claims

The APE must be aware of (be issued with) any instructions given to the Contractor by
the Engineer. A site instruction file should be kept in the APE’s office and he should
check it every time he visits site. Some S.I.’s may need approval before issuing but
others may not. If there are financial implications to any of these instructions the APE
should ensure that a Variation Order is issued by the Engineer and if so required,
approved by the Employer. The APE should ensure that the Engineer values all
variations and that the Engineer copies all such details to him. The APE will in turn
advise the PE of the same.
Any variation orders that could result in extensions of time and or additional cost should
be advised to the PE by the Contractor and Engineer. The terms of the contract will
generally require that the Employer has to approve such extensions of time before the
Engineer notifies the Contractor. The PE must ensure that the RRA respond quickly to
such requests, and should consult more senior personnel as necessary.
Changes to the design or scope of the Works required/proposed by the Employer should
be discussed initially with the Engineer by the Project Engineer and the Engineer will
then issue the necessary instructions to the Contractor. The Employer/Project Engineer
should not propose/instruct a change to the Contractor directly. The supervising
consultant should also not make changes to the design (except minor realignments or
level changes) or specification without referral to the APE or PE. If errors in design
become evident to the Engineer during construction or if the Contractor discovers such
errors they should be brought to the attention of the PE. The Project Engineer should
then communicate the Employer’s requirements and authorize the necessary action to be
taken by the supervisory team. In such cases he shall not propose a solution, that is the
Engineer’s job, but he will have to consider any financial and time implications and the
correctness of the engineering solution before authorizing the Engineer to order the
change.

60
December, 2007
The procedure for dealing with claims is covered in the Conditions of Contract. The
main responsibility of the PE (and APE) is to ensure that the Engineer has provided a
well considered and detailed response to the Contractor’s claim. Some of the response
may require the consent of the Employer before the Engineer gives his determination or
certification to the Contractor. The PE and APE must therefore review the Engineer’s
response thoroughly and reply to the Engineer as quickly as possible. The PE and APE
must also ensure that the Engineer gives his recommendation to the Employer without
delay.

4.9 Payment Certificates

An important part of the Project Engineer’s duties is to ensure that applications for
payment are processed quickly by both the Engineer and the RRA. The APE, by visiting
site regularly, should be in a position to agree the Engineer’s certificate without too many
queries. If liquidated damages are to be applied then the Employer deducts this on
recommendation from the Engineer (the Engineer does not deduct them himself on his
certificate).
The APE should act on certificates for payment immediately he receives them and then
pass them for approval and payment. He should follow up the process of payment at the
RRA to ensure that the contractor receives payment in time. If the Contractor is paid
before the deadline for payment it often leads to better relations on site and assists the
Contractor to carry out his obligations, as it improves his cash flow.
Sometimes disputes occur when the Engineer does not certify what the Contractor has
claimed. Differences may occur due to a varying interpretation of what work has been
completed. The APE needs to monitor if there are such differences and attempt to
resolve the matter to the satisfaction of both parties. Such disagreements often lead to
deteriorating relationships between the Contractor and the Engineer and can result in
claims for underpayment by the Contractor.
The APE should carefully review the increases in cost under Clause 70 and should ensure
that the Engineer has done so in his certification, especially with regard to the foreign and
local currency proportions. The APE will ask the consultant to give him a summary of
the escalation costs each month and should check the calculations during the early stages
of the contract and periodically thereafter.
A standard format for payment application by a Contractor being used by ERA is shown
in appendix 3. The same format may as well be used by the RRAs.

61
December, 2007
4.10 Sub-Contractors and other Contractors

If the Contract requires the Engineer to obtain prior approval of the Employer before he
approves sub contractor proposed by the Contractor, the PE should be responsible for
reviewing the suitability of the sub-contractor and the program.
In the case of sub-contractors nominated by the Employer, such nomination must be
made in sufficient time and the consent of the Contractor obtained to enable the
Contractor to perform his obligations under the contract.
If the Employer intends to undertake work on site himself or employs other contractors,
he should make sure that such actions of the Employer does not interfere with the works
of the Contractor. The PE and APE should be aware of this.

4.11 Progress Monitoring

Normally the Engineer is the one who approves the work program. The Contractor’s
work program is to be submitted within the time specified in the Contract. The Engineer
should make necessary effort and follow up to have it presented in time. A program is a
tool to help progress and it must thus show the works in sufficient detail for planning,
monitoring and reporting purposes. The program needs to be supported by cash-flow and
equipment and manpower utilization schedules. It should also identify the critical
activities, delay of which affects the overall completion of the project.

The practice of having program updates regularly so as to keep the program alive and
take into account actual performance and remaining activities to date should be
encouraged. The over all completion time cannot be changed while updating a program,
unless due to approved time extensions. The time interval at which program updates
should be submitted by a Contractor is sometimes specified in the contract. At site level
whenever the Contract is suffering slippage the Engineer should insist on the submission
of short term schedules (monthly or weekly). This will assist in meeting partial targets
(slippage of one week shall be recovered within the succeeding week) to cope with the
monthly schedule progress and so on.

In accordance to the General Conditions of Contract the Contractor is fully responsible

for the timely completion of the works. Clause 41 and Clause 43 & 47 of the FIDIC
conditions respectively state: “The Contractor… shall proceed with the works with due
expedition” and … “the whole of the works shall be completed within the time stated in
the tender … or … extended time …” “if the Contractor shall fail … he shall pay
liquidated damages.”

However, the Engineer can often see the overall progress position better than the
Contractor, thus he has the duty to: provide the Contractor with information and
necessary help, and Exercise effective pressure on him at the time when delays occur by
means of programming the works and closely monitoring the progress.
62
December, 2007
The Engineer monitors the overall progress of the Works. He should make the Employer
aware of areas of construction that may be falling behind the contract program. These, of
course, will be discussed at the monthly meetings and will be highlighted in the
Engineer’s Report. The APE should, however, keep up-to-date on matters that may be
affecting progress and require answers from the Engineer and Contractor. Often when
progress falls behind schedule the Contractor may claim that he is being delayed by
matters beyond his control. The APE should always try to establish the facts at monthly
meetings and to question if this may be because of the Employer’s lack of action or the
Engineer’s shortcomings. He will report the same to the PE who may then need to attend
the next Progress Meeting. Resolving these matters may avoid a claim situation and/or
deterioration in relations between the Contractor and the Engineer.

As per the conditions of contract “The manner and speed of execution of the works are to
be to the satisfaction of the Engineer”

The R.E. should jointly with the Contractor’s Site representative lay-down the procedures
for progress monitoring.

At section level, reviews must be carried out weekly and at project level, twice a month
or monthly; the principal means being progress meetings and reports, backed-up by
updated programs and short term schedules.

The main purpose of the meetings would be to review:

o The availability and flow of information

o The progress of work
o Contractor’s proposals for future activities
o Any obstacles currently hindering or likely to hinder the progress of work
o Proposed remedies
o Program updates

Special attention should be given to items/ activities on the critical path. Notes of agreed
/required actions resulting from these meeting should be circulated and acted upon
quickly.

Good working relations between the RE’s and Contractor’s staff; confidence between the
Engineer and Employer and between the RE and the Contractor’s Representative are
essential for effective contract administration and supervision.

It is equally important to gain the Contractor’s trust. This can be achieved at the early
stage of the contract; by the Supervision Consultant (engineer) When the Engineer’s
knowledge of the works is greater than that of Contractor, offering the Contractor all
necessary help and information concerning the Contract. It is thus important that as early
as possible the RE is fully briefed on all aspects of the project by the Engineer who
should ensure that a maximum effort is made in order to help the Contractor.

63
December, 2007
Dealing with Delays

The conditions of contract state: should the rate of progress be, in the opinion of the
Engineer, too slow to ensure completion by the prescribed time, the Engineer shall notify
the Contractor. The Contractor shall there upon take such steps as the Contractor may
think necessary and the Engineer may approve to expedite progress so as to complete
within the time for completion.

Whenever the Contractor is late, or going to be late, for a particular work item, this
should be brought to his attention in writing or at monthly meetings. The Contractor must
then submit in writing his remedial proposals. Remedial measures may include i)
improving the site organization; ii) induction (addition) of equipment; iii) increasing the
labor-force and/or iv) extending the working hours.

If progress does not improve it may be necessary to institute weekly scheduling subject to
review during corresponding weekly meetings. These are intended to keep a firmer grip
on the situation but, at the same time, to ensure more flexibility.

Often, time delays are closely related to the Contractor’s cash-flow problems which result
in a lack of financial support to the site Organization. Typical indicators of lack of
financial support are i) delayed payment of salaries and wages, ii) shortage of fuel and
spare parts, iii) shortage of construction materials and iv) claims emanating from
subcontractors /suppliers, amongst others.

When such occurrences happen, the R.E. should report them to his Head Office for these
matters to be discussed at the Employer and Contractor’s Management level.

4.12 Cost monitoring and control

Changes to the originally estimated cost may occur due to the following:
o Increase in quantities
o Additional works ordered
o Price adjustment
o Claims

In order to ensure the completion of the project on budget or otherwise to timely secure
additional budget if additional cost is unavoidable, the APE/PE must closely follow up the
costs incurred during execution of the project. The APE/PE should do the following:

64
December, 2007
 o Require the Engineer to submit “estimated cost to complete” of the project
regularly. The estimated cost to complete a project should be updated at
least each quarter to incorporate changes which happen during the quarter.
The “estimated cost to complete” of a project will aware the Employer
what the project cost will be by the time it is completed, hence will
provide him a valuable information in deciding on whether to order
additional works or not and in securing additional budget if necessary.
o Check the applications for payment including (if price adjustment is
applicable in the contract) the base and current indices (prices) are correct
and from appropriate & reliable sources. It is of course the duty of the
Engineer to check and certify the Contractors applications, but the RRA’s
project engineers should also check that the Engineer is performing his
duties in an appropriate manner and see that errors are not made.
However, the APE/PE must be aware that checking of the applications
should be done promptly and within the time specified in the contract.
o Require the Engineer to report summary and status of the claims made by
the Contractor if any.

4.13 Quality control

Again it is the duty of the Engineer to supervise and control the quality of the works. But the
APE/PE should periodically visit the site and inspect the works so as to ensure that the
Engineer is properly supervising the works and the works are performed in accordance to the
contract. In doing so the APE/PE shall:
o Check that the Engineer has submitted appropriate quality plan.
o Check that tests are conducted in the number and the frequency stated in
the specifications and quality plan.
o Check how non conformance is treated
o Check that sufficient and qualified supervision staffs are at site and
inspection is being adequately conducted.
o Check that sufficient and appropriate testing equipment is available on site
and that they are properly calibrated.
o Review the relevant test, inspection, calibration and other records on site.
The APE/PE should immediately advise the Engineer, if they observe non compliance with
the requirements. Inspection form developed by ERA to be used by the APE/PE is shown in
appendix 4.

65
December, 2007
4.14 Health, safety and environment

It is the requirement of the law and the contract that the parties observe the relevant
regulations and bi-laws to protect the health, safety of the workers and the environment. The
contractor should submit to the Engineer his plan of action which should be in compliance to
the requirements of the law & the contact and to the satisfaction of the Engineer. The
Engineer should follow up compliance of the Contractor during execution. The task of the
RRA’s project engineers will be to check that an approved plan exists, that the Engineer is
monitoring the actual execution, and verify so through inspection of the site and relevant
documents.

4.15 Reporting

The APE/PE monitor the progress of the works through reports they receive from the
project engineer, visit to the site and holding periodic meetings. The Project Engineer
should advise the Engineer, of the RRA’s requirement regarding the format and contents
of the Engineer’s monthly report. Standard formats for Progress Reports on Construction
Contracts being applied by ERA are included in appendix 5 for reference and may also be
applied by the RRA’s as well.
One of the most important items of the report is the financial status of the contract. The
Engineer should provide an estimated ‘cost to completion’ every three months. It is the
PE’s duty to ensure that there are sufficient funds available to pay the Contractor as the
contract nears completion, so control of variations is essential. It is vital that the Project
Engineer is made aware of this by the Engineer (and APE) and a quarterly estimate of the
Final Contract Price should identify these items so that any requisite action can be taken.
Another report is the report compiled by the APE for the PE to pass on to the senior
management. Again a standard format for such reports being applied by ERA, is
included as annex. Only the relevant sections should be completed in the early stages of
the contract.

4.16 Taking over of the works

Procedure for full or partial completion and taking-over of works is given in the
conditions of contract. The Contractor upon substantial completion of the works shall
notify the Engineer to issue the taking over certificate together with an undertaking to
complete outstanding works and rectify defective works. The Engineer shall either issue
the taking over certificate within the stated time in the contract or instruct the Contractor
to complete remaining activities (along with a list of activities to be performed) which, in
his opinion should be performed for the works to be stated as substantially completed. If
the contract requires the Engineer to obtain the approval of the Employer prior to issuing
taking over certificate, he should do so and obtain the required approval prior to expiry of

66
December, 2007
the specified period. It is recommended that the RRA sends inspection team to satisfy
itself that the works are completed to its satisfaction. Prior to the inspection team from
the head office it is recommended that the engineer and his staff at site with the
contractor’s project manager and staff at site jointly make an initial inspection and list out
the outstanding works and defects. Before the issue of the Taking-Over Certificate the
R.E. should list the outstanding work and press the Contractor to perform them while he
still has equipment and skilled labor on the site. An efficient Contractor is usually keen to
complete this quickly and close down the site as soon as possible though he may leave
behind some limited resources to tackle correction work during the Maintenance Period.
Alternatively, he may wish to leave all correction work to be done later but before the
end of the Defects Liability Period and return to do it all at once. Provided that the
defects do not affect operations or the safety of the works, this is usually acceptable. But
if there is any outstanding or repair work which the Engineer considers to be urgently
necessary for safety of the works, such works must be done by the Contractor
immediately.

If the Engineer determines that the works are substantially completed, suitable time can
then be arranged for the final inspection to be conducted in the presence of delegates
from the head office. The inspection team should include, but not be limited to, the
following:

From the Employer

- APE, PE
- Representative of operation department/division (department from the
RRA which takes over the completed project)
- Representative from the designer (if the designer is different from the
supervision engineer).

Form the Engineer

- Senior Contract Engineer (from head office of the Engineer)

- Resident Engineer & relevant staff
- Quality Control & Pavement Design Expert

From the Contractor

- Project Manager & relevant staff

It is recommended that the APE checks that the following are ready to facilitate
the inspection

For Field Inspection

- Survey Team
- Laboratory Team

67
December, 2007
 At the Site Office

- As-Built Drawings
- Final Quantity Computations
- Updated List of Outstanding Works
- Update List of Deficiencies
- Correspondence Files
- Laboratory Tests by Category of Works
- Regular and contemporary records.

The inspection should start with an assessment meeting to be chaired by the R.E., and
then the RE will organize the office and field activities to be conducted during the
inspection. Official minutes of the meeting will be prepared to record findings and
conclusions. The minutes will be signed by the members of the Inspection team.
Outstanding works and defects shall be listed and sent to the Contractor for their
completion.

The resulting minutes should clearly sate whether there are still defects and outstanding
works to be undertaken during the Defects Liability Period. The Contractor, during the
defects liability period, shall carry out the outstanding and remedial works and latent
defects identified during the defects liability period. The purpose of the Defects Liability
Period is to allow time after completing construction for defects in the Works to come to
light and to be put right by the Contractor while he is still on call. It is not a period during
which the Contractor has to rectify the effects of fair wear and tear free of charge.

During defects liability period, the Contractor is entitled to additional payment for all his
work, except for:

(a) completing outstanding works

(b) remedying defects “due to the use of materials or workmanship not in
accordance with the contract or failure to comply with any obligation under
the Contract” (Classes 49 (3) and 64)
(c) correcting for a defect for which he is liable (C1.50)

Before the end of the Defects Liability Period the Engineer must inspect the works and
then inform the Contractor within two weeks of the expiry date, of the defects still to be
remedied (C1.49 (2)) or searched for (C1.50)

Partial Taking over

In accordance to the procedures set out, partial taking over of parts of the works may be
made under the following circumstances:

68
December, 2007
 o Separate time for completion is provided in the contract for any
section of the works.
o Substantial part of the permanent works which has been both
completed and occupied or used by the Employer or
o Any part of the permanent works which the Employer has elected
to occupy or use prior to completion.

4.17 Concluding Remarks

The Project Engineer and Assistant Project Engineer have very important tasks to
perform and they can contribute considerably to the success of a works contract. Their
principal aim should be to have a contract that runs smoothly and one on which all parties
work together, including the Employer, to achieve the desired outcome, i.e. a project built
on time, to specification, and as far as possible for the price quoted in the tender.
The PE should respond quickly to reports and letters from either the Contractor or the
Supervising Engineer with a clear, unambiguous decision or answer to whatever has been
requested. In order to achieve this, the RRA must have sufficient and qualified project
engineers in accordance with the number of contracts at hand in the RRA. At the moment
the number of contracts being handled by the RRAs is not significant and in some of the
RRA’s all of the ongoing projects are being executed by own force. But with the existing
rural roads strategy, it is anticipated that the number of contractors to be outsourced will
increase. Therefore the RRAs should make themselves ready for the future. Equally
important is to make sure that the APEs/PEs have the required ability to perform the task
assigned to them. In this regard offering short term training directly related to the task
will be very beneficial. ERA, which has better experience, may be requested to give
assistance in this regard. If the PE has acquired the required ability, through training and
experience, giving them sufficient delegation to perform most of the tasks on their own
should be encouraged. Similarly, in the event that a number of contracts are to be handled
by him, the PE should assign APE(s) to assist him and should encourage them to take
responsibility particularly on routine matters. However if the APE is new to the job he
may require close supervision, assistance and training until he is able to handle the tasks
on his own.
The PE should ensure existing formats for reporting are adhered to by the Engineer and
that claims procedures required by the Conditions of Contract are followed by the
Contractor.

69
December, 2007