MEETING MINUTES DISCUSSED WORK PROGRESS OF PFEIFFER AND EMIT

JV OF PACKAGE A1

Meeting was held on 07 April, 2020 at PMU office at 9:30 a.m.

Participants
1. O.Lkhagvatseden, Head of Public utility policy implementation and coordination
department
2. D.Munkhbaatar, Senior analyst of Public utility policy implementation and
coordination department
3. E.Ravjaadelgerekh, Head of governor’s office of DAG
4. P.Batsukh, Investment, policy, and development department of DAG
5. Ts.Udval, Consultant engineer of DUS JSC
6. T.Buyandelgerekh, Chief engineer and Deputy director of DUS JSC
7. N.Bold-Erdene, Supervision engineer of PMUD
8. B.Batkhishig, Monitoring and evaluation specialist, PMU
9. T.Enkhtuvshin, Financial specialist, PMU
10. Ts.Oyun-Erdene, Administration and operation support officer/translator
11. D.Myagmar, Deputy team leader, LIC
12. Z.Yanjindulam, Consultant, LIC
13. Marko Stojsin, Deputy Construction Manager, Pfeiffer and Emit JV
14. Rastko Jovanovic, Representative of Pfeiffer and Emit JV
15. Batbolor Yeruult, Translator, Pfeiffer and Emit JV

Discussed issues:
Work progress of the Package A1 or Wastewater Treatment Plant and Pumping
stations

DISCUSSED:

О.Lkhagvatseden: As we have agreed in the previous meeting we will discuss updated

work program of the Main Contractor, procurement plan, and activities to be executed in
future. Let us hear your proposals or comments on them.
Marko Stojsin: The Main Contractor has updated the work program and made changes
without losing dates for handing over the WWTP and turnkey contract. Most of the
construction works will be carried out from April-July and mechanical and electrical works
have been planned to be done from the end of July till September. Besides the work

1
program we have submitted letters from the suppliers to the Employer. By utilizing the
manpower who are working at the project site we have made plans how to carry out the
construction works. Besides the manpower who are working at the project site we will
mobilize 120-130 manpower within 7-10 days if the subcontractor’s work permissions will
be approved.
N.Bold-Erdene: There is a date for Operational and Maintenance support for 12 months in
previous work plan. ADB has submitted comments that there shall be 1 year for defect
liability period since 12 April, 2021. As per the contract the Main Contractor stated that he
does not agree with these comments and told us that reply will be given after discussion
with his manager who is in charge of invoices.
E. Ravjaadelgerekh: Has it been included in the Contract?
N.Bold-Erdene: In the Contract it is stated that the operational support will be done within
12 months by 4-6 persons. Operational support will start after handing over to the State
commission. The Main Contractor has replied that the operational support will start in
parallel to the State commission.

O.Lkhagvatseden: Let us study this issue.

Marko Stojsin: This clause is found in page 50 of the GCC 6.1.2.6 of the Contract.

Our suppliers informed us that as per the updated work program dates of the supply of
goods and materials cannot be determined.

O.Lkhagvatseden: Have you included the comments from the suppliers in this work
program?

Marko Stojsin: Suppliers have not submitted the dates of goods and materials. If they will
inform us about it, we will also inform the Employer. Due to Corona-19 virus we have
planned to supply of mechanical equipment in May-July and install them from end of July till
September.

O.Lkhagvasteden: Let us hear the comments from the local authorities.

P.Batsukh: The Main issue for Darkhan-Uul aimag is that as per the plans WWTP has to
be completed in June and hence, DAG needs to repay the loans to MOF. When we met
with MOF authorities it was told that the MOF has started to pay the loans to ADB from 15
February, 2020 and requirements were given to us that it is not possible to delay the dates
for the repayment of loans and payments shall be made as per the contract agreement.
This issue has been submitted from DAG authorities to ADB by the official letter, but the
2
reply has not been given yet. Due to the Main Contractor’s incapability this issue has been
raised. DAG authorities have supported and taken measures for this implementation of the
project. Subsidiary loan agreement signed with MOF is a contract that mortgages the DAG
account. If the payments will not be paid the money will be withdrawn from the DAG
account without any disputes. If the account will be closed all things will be stopped in
Darkhan-Uul aimag.

E.Ravjaadelgerekh: I have 3 clarifications to ask. The Main Contractor has updated the
work plan 5 times now. If the works will not be executed as per the updated work program
what kind of responsibilities will hold the Main Contractor? I cannot accept the issue of
updating the delayed work plan.

Also, due to Main Contractor’s delays of the construction works operational cost of DUS
has been increased. We are requesting the Main Contractor to recover those damages of
UDS. Due to warm weather condition complaints came from 100,000 citizens of Darkhan-
Uul aimag in regards to issue of odor at WWTP to DAG authorities. I have received 17
complaints related with odor of WWTP. I do not agree that the work performance will be
improved by updating the work program. I am requesting the Main Contractor to complete
the works as per the work program approved by the previous PSC meeting. What is the
reason for terminating the contracts with the subcontractors? There are 4-5 companies
which have the special licenses and can work as subcontractors in Darkhan-Uul aimag.

1st it is necessary to recover damages of DUS;

2nd Decide the issue related with odor of WWTP;

3rd It is necessary to continue to carry out the construction works as per the work program
approved by the PSC meeting on 23 December, 2019.

Marko Stojsin: We have terminated the subcontract agreement with Urguu khan LLC. We
have selected Khanjinstei LLC as a subcontractor. Khanjinstei LLC is ready to start the
construction works with 45 people at site.

There are two different issues one is to update the work program and second is extend the
contract. We are not violating any clauses of the contract for the updating a work program.
I agree that we have updated several times the work program. However, works were done
from November till February. Although we have planned to mobilize manpower from
abroad at the end of 2019 it had become impossible to mobilize the manpower. Therefore,
we are finding some ways to mobilize manpower from local entities. We contacted with
3
companies which are carrying out activities in Darkhan in December, 2019. As you have
mentioned there are 4-5 companies which want to contact with us again. However, key
persons have not been mobilized from abroad. We are trying to resolve these issues.
Previous work program is not possible to be implemented by adjusting to the current
conditions. There are three possible ways to decide the odor issue from the Contractor’s
side.

 Treatments can be done at AST and it needs to improve the process of treatments;
 Minimize the size of AST and hence, the cost will be saved.
 To place temporary screens at chambers which are in front of the FST. We think that
these solutions will resolve the odor issue. DUS can implement the first proposal by
itself and the remaining two solutions can be done by DUS and the Main Contractor.
We are in process of procuring the materials which are necessary for installation of
equipment of fine screens.

We disagree with increased payments that will be paid for DUS. We would like to get an
official detailed information.

E.Ravjaadelgerekh: You have told us that it is not possible to implement the previous work
program. Is this plan prepared by the Main Contractor?

Marko Stojsin: Some of the things have been changed from December, 2019 until April,
2020 by not depending on us. We are following the work plan approved in December but
we could not mobilize our manpower as we have planned. If we mobilize them the condition
will be different.

E.Ravjaadelgerekh: Khanjinstei LLC is not specialized company in this direction. Please

select a company with much more work capacity. жиллуул. Please select the
subcontractors by yourselves and be responsible for them. We are informing you that we
cannot support on this matter again from the Local authority and Employer’s sides.

Marko Stojsin: As per the Contract the Main Contractor will be responsible for all project
activities. However, the subcontractor will be responsible for contract signed with the Main
Contractor. Subcontractor’s issue is our internal issue.

P.Batsukh: When contract will finish?

O.Lkhagvatseden: The main contract has not been changed, it is still valid. The
construction work will be completed on April 20, 2020, and the pre-commissioning test will

4
be completed by June 08, and the State Commission will start from June 08. The
Operational support work will go parallel with State Commission for 365 days. According to
the updated plan of the main Contractor, the work process has been proposed to be
extended by 6 months. The Employer will discuss the contractual liability and penalties will
be calculated. It is also not clear whether the new plan will be implemented on time. On
previous meeting, we have agreed on construction works will begin within March, but works
have not started yet. Due to the Covid – 19 virus, plan works accordance with the
Emergency decision. As the plan is being updated, the issue of contract extension will
appear. Therefore, determine the date and time of the contract penalty, agree with the
PMU, and officially submit your proposal to the Ministry of Construction and Urban
Development. This issue will also need to be discussed with the PSC and DAG. It was
agreed with the DAG that if the planned work is completed on time, the approval of IPC will
not be delayed and the Construction Development Center will be tasked to sign them.
There should also be a report on the work done and decisions by the dispute resolution
consultant. This issue needs to be clarified.

O.Lkhagvatseden: A project coordinator has not been officially appointed, and D.

Enkhbayar, a PMU procurement specialist, is also acting project coordinator and project
manager. The Ministry of Construction and Urban Development will send an official letter
about this issue. Do you have any questions?

Marko Stojsin: The contract finishes on June 8. Please clarify what requests we need to
make until this date?

O.Lkhagvatseden: Please review the updated plan. The plan is unrealistic and seems like
not to be completed this year. Extensions and penalties should also be discussed with the
PMU. This issue will then be presented to the PSC. Does the LIC have any comments on
this?

D.Myagmar: According to tasks of 58 and 59 of the General plan, the remaining

mechanical and electrical equipment permits that were not approved in May for equipment
procurement will be obtained from LIC and PMU and delivered to the site on June 28.
Depending on the situation, if equipment arrives after 2 months, is it possible to complete
the works according to the general plan on time?

Marko Stojsin: Yes, it is possible.

5
O.Lkhagvatseden: AST construction works need to be finished in August. All the
construction works should be completed during summer time.

Marko Stojsin: Can I directly hire people under the name of Ludwig Pfeiffer?

O.Lkhagvatseden: Permanent Establishment is not a legal entity and can not obtain
special license. If you start company officially, you can get a special license and hire
workers.

Marko Stojsin: We have opened a permanent establishment in Mongolia. A letter from our
law agency states that it is legal to obtain a special license.

O.Lkhagvatseden: Do you pay the operating tax like business entity that is registered in
Mongolia? The Mongolian National Construction Association responded that an entity is not
eligible to operate or obtain a license unless it is a tax-paying legal entity.

D.Myagmar: You have two options. It is possible to continue your works with company that
have special license as it has done before or obtain a special license yourself. It is up to
you to decide which one is most effective for you in the short term.

Marko Stojsin: We have applied for a license, but it is a project funded by ADB and we
have not received a response on whether we need a special license.

O.Lkhagvatseden: Construction licenses are issued by the Mongolian National

Construction Association, a non-governmental organization. We will review your request
and respond officially. However, we did not require a license when project starts. Delays in
obtaining special license is not acceptable for us.

Marko Stojsin: If we don't have a special license, we will do the work through our
subcontractors. Does it mean that if we have a special license, we can hire our own
construction workers? We will send an official letter obtaining a license to the Ministry of
Construction and Urban Development.

P.Batsukh:

P.Batsukh: Is the contract legally or is the plan more competent? It is not clear that the
plan has been updated without an extension. According to the contract, after State
Commissioning, DAG will make a contract with DUS JSC related to the loan repayment.
You will be paid a certain amount of loan repayment. Governor of Darkhan – Uul aimag
made a contract with the Minister of Finance on 31 st of March in 2016. If there is a problem

6
with time extension, we will request payment from the Contractor. The Contractor may
receive invoice due to they made our city in economic risk.

Marko Stojsin: Based on the work plan, we will request time extension. Repayment is not a
matter for the Contractor and it can be changed as agreed between ADB, the Ministry of
Construction and Urban Development and DUS JSC. It is also not clear whether the
equipment will be delivered on time and whether the people who will install the equipment
will be on time. Contractor's management costs are increasing as the project is delayed.

Ts.Udval: If we had completed works on time, such a problem would not have arisen. In
addition to the contractual penalty, you will be extra paid for End user’s additional cost
because of delaying.

O.Lkhagvatseden: For more information, Khanjinstei LLC does not meet the licensing
requirements. It is important to understand that the subcontractor must perform the work in
a scope of special license.

N.Bold-Erdene: Focus on increasing the staff of your currently contracted Subcontractors.

E.Ravjaadelgerekh: The local government stated that the contract will not be extended,
and we would like to inform you that we will send the notice of claim to the Contractor due
to the delay in the contract.

DECISIONS OF THE MEETING

1. Revise the general plan with proposals of Ministry of Construction and urban
Development, PMU, DAG and LIC.
2. Finalize the contractor's delays and penalties discussing with PMU in accordance with
the contract extension.
3. Submit the revised plan and contract penalty estimates to the Ministry of Construction
and Urban Development officially.
4. Installation of temporary solution of fine screen and grit removal chamber for solving
odor control with PMU and DUS JSC; deadline: April 18, 2020
5. Submit the request of obtaining special license to Ministry of Construction and Urban
Development.
6. Mobilize the Subcontractors and start construction works.
7. Purchase material and equipment that can be procured from locally.

7
Approved by:

1. Head of Public utility policy implementation O.Lkhagvatseden

and coordination department

2. Head of governor’s office of DAG E.Ravjaadelgerekh

3. Investment, policy, and development P.Batsukh

department of DAG

4. Deputy Construction Manager, Pfeiffer and Emit JV Marko Stojsin

5. Deputy team leader, LIC D.Myagmar

Prepared by:

Supervision engineer of PMUD: N.Bold-Erdene