FATMA COLASAN. Past President, ATCEA Former EC Member, FIDIC Member of Business Practice Committee, FIDIC

Transcription

1 FATMA COLASAN Past President, ATCEA Former EC Member, FIDIC Member of Business Practice Committee, FIDIC

2 CASE STUDY DISPUTE ADJUDICATION Construction Works of the Potable Water Supply Facility of the city of XXX -TURKEY

3 Contents of the DAB DECISION REPORT 1. Definitions 2. General information 3. Appointment of the DAB 4. Disputes to be resolved 5. Examinations of the DAB 6. Developments 7. Explanations of the DAB 8. DAB Decision

4 Definitions Employer (Client): Municipality of XXX Contractor: A national firm Engineer: An international firm PWSF: Potable Water Supply Facility GCC: General Conditions of Contract (FIDIC Yellow Book,1999) FCG: FIDIC Contracts Guide (2000) SC: Sub-Clause EoT: Extension of Time for Completion etc.

5 General information Project: Construction Works of the Potable water Supply Facility of the City of XXX inturkey (Design-Build project) Conditions of Contract for Design-Build (Yellow Book) Contract Date: Dec. 18, 2014, Base Date: Nov.20, 2014 Reference day: 28 days before Base Date: Oct.23, 2014 Accepted Contract Amount= , 75 Time for Completion: 480 days DAB (Dispute Adjudication Board) Ad-hoc, one sole member DAB Appointing Entity : ATCEA, Association of Turkish Consulting Engineers and Architects

6 Appointment of the DAB Because the Engineer did not answer the Contractor and did not nominate a candidate to act as the DAB member; after waiting for a reasonable time, the Contactor applied to ATCEA, the Appointing Entity, to name a DAB member. ATCEA appointed the DAB, as one sole member in conformance with the Contract.

7 Disputes to be resolved Claim No: 1 (Dispute 1) Time extension of 24 days days and payment of 47,500,00 arising from unpaid extra works Claim No: 2 (Dispute 2) Time extension of 28 days and payment of cost plus profit, arising from two consecutive floods at the construction site Claim No: 5 (Dispute 3) (Ongoing Claim) Time extension of 213 days and payment of 1.560,500,00 arising from Interference With Tests on Completion Claim No: 8 (Dispute 4) Payment of ,27 arising from Unjustified Deductions in the IPC s

8 Examinations of the DAB All submitted documents by the Parties, namely the Contract (including FIDIC Conditions of Contract for Plant and Design-Build, Employer s Requirements, Technical Specifications, addenda, appendices, drawings etc.), written correspondences between the Parties, minutes of monthly meetings, progress reports, relevant payment certificates, third body statements/comments (user, municipality etc.), DAB s notes taken during two Hearings, and the similar.

9 Developments Two consecutive floods occurred at the construction site on Oct , 2015 and Nov , 2015, which brought mud and debris to the site, causing the Contractor to lose time and costs of remedial works. The Contractor gave Notice to the Engineer for both of the two floods on Nov.03, 2015 under GCC-SC 19.2 (Notice of Force Majeure) and 20.1 (Contractor s Claims). The Contractor sent his relevant Claim to the Engineer on Dec.07, 2015 supported by photos of the consequences of the flood at the site and claimed 28 days of Extension of Time for the two floods, plus cost and profit. He emphasized that the situation, referring to flood, exactly fitted in the conditions of Force Majeure, Clause 19 of the Yellow Book.

10 Developments (cont.) Precipitation recordings in the city of XXX for the first flood was missing owing to the mis-functioning of the State Meteorology Institution s (DMI) equipment at that time, which was testified by DMI as well. The Engineer replied on Jan. 18,2016 and said that, in the absence of required substantiation/documentary evidence, he cannot accept the notice for any agreement or Determination. In his reply, instead of Force Majeure, he referred to GCC-SCs 4.10, 4.11, 4.12 (Unforeseeable Physical Conditions), 17.2 and 17.3 (Contactor s Care of the Works). He emphasized that according to GCC-SC 17.2, the Contractor was responsible for the care of the Works and Goods at the site. The Contractor made a full claim for the second time on May 18, 2016 for Extension of Time 28 days and cost plus profit, but this time he refered to GCC-SC 8.4.c (Exceptionally Adverse Climatic Conditions) upon the Engineer s ignoring the Contractor s reference to Force Majeure and instead, referring to Unforeseeable Physical Conditions.

11 Developments (cont.) Engineer replied that it was the Contractor s responsibility to take precautions against such events. Contractor argueed that he was not responsible for preventing the flood which started a kilometer away from the construction site owing to overflowing of an open drainage channel after the heavy rain and storm. The second flood s precipitation recordings, as taken from DMI showed that in the city of XXX, the rainfall amount was 29.6 kg/m2 on Nov.01, 2015 and 44.0 kg/m2 on Nov.02,2015. On August 18,2016 the Engineer gave his Determination and rejected the Claim totally; provided an Evaluation Report connected to his Determination. In his report he statedthat the rainfalls in October and November cannot be considered as Exceptionally Adverse Climatic Conditions. The Contractor gave a final Notice on June 10,2017 to the Engineer stating that he intends to refer the dispute to DAB.

12 Explanations of the DAB Claim: Time extension of 28 days and cost plus profit, arising from two consecutive floods at the construction site Contractor s original claim for two consecutive floods refers to GCC-SCs 19.1, 19.4 Force Majeure. Engineer in his reply rejects the claim by referring to GCC-SCs 4.10, 4.11, Unforeseeable Physical Conditions - and not to Force Majeure, also refers to 17.2 and 17.3 Contactor s Care of the Works. Contractor repeats his claim but upon Engineer s reply, this time refers to GCC-SC 8.4.c - Exceptionally Adverse Climatic Conditions.

13 Explanations of the DAB (cont.) Engineers s response on Jan.18,2016 refers to Sub-clause 4.12 which explains Unforeseeable Physical Conditions excluding climatic conditions. Therefore the Engineer s reference to Unforeseeable Physical Conditions at the site and his determination have no grounds with respect to the mentioned Sub-clause of the Yellow Book. Although the Contractor s first Notice and Claim refers to flood and to the Force Majeure Clause; upon the Engineer s response, the Contractor changed his Claim and submitted it for the second time, but this time based the claim on Exceptionally Adverse Climatic Conditions (GCC-SC 8.4.c), instead of Force Majeure.

14 Explanations of the DAB (cont.) GCC Sub-Clause 19.1 (Definition of Force Majeure) reads as follows: Force Majeure means an exceptinal event or cicumstance: (a) which is beyond a Party's control, (b) which such Party could not reasonably have provided against before entering into the Contract, (c) which, having arisen, such Party could not reasonably have avoided or overcome, and (d) which is not substantially attributable to the other Party. Force Majeure may include, but is not limited to, exceptional events or circumstances of the kind listed below, so long as conditions (a) to (d) above are satisfied:.. (v) natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity.

15 Explanations of the DAB (cont.) SC-19.2 Notice of Force Majeure The notice shall be given within 14 days after the Party became aware, or should have become aware, of the relevant event or circumstance constituting Force Majeure. SC-19.4 Consequences of Force Majeure If the Contractor is prevented from performing any of his obligations of which Notice has been given under SC-19.2, and suffers delay and/or incurs Cost by reason of such Force Majeure, Contractor shall be entitled to EoT

16 Explanations of the DAB (cont.) The DAB considers that the Claim fits into GCC Clause 19 (Force Majeure) in general; because it is not the precipitation itself at the site which created a Force Majeure situation, but the flood which caused the flow of mud and debris to the site from the open drainage channel which is close to the site. Therefore flood caused by rainfall elsewhere (not the rainfall itself at the site), being considered a catastrophe fits in the definition of Force Majeure, as flood also might have been listed by FIDIC in addition to the ones given, following the words such as. Force Majeure is not caused by the precipitation itself at the site, but the flood coming from elsewhere. On the other hand, having not given the Notice of Force Majeure in 14 days (GCC-SC 19.2), makes the Contractor lose his rights for the October flood. Since the Contractor gave Notice on Nov.03,2015, 20 days after the October flood, he was late by = 6 days. But his Notice is valid for the November flood with respect to the Force Majeure clause.

17 Explanations of the DAB (cont.) On the other hand, if one considers the repeated Claim No: 2, which this time is given with respect to Exceptionally Adverse Climatic Conditions (GCC SC-8.4.c), it is observed that GCC-SC 17.3 item (h), explaining Employer s Risks reads as: any operation of the forces of nature which is unforeseeable or against which an experienced Contractor could not reasonably have been expected to have taken adequate preventive precautions.

18 Explanations of the DAB (cont.) Also, Questions & Answers contained in the Tender Dossier reveals that the short listed Contractors, before the Tender, asked the Employer for the confirmation of unnecessity for a flood protection requirement, and the Employer in his answer confirmed. FCG 8.4.c (FIDIC Contracts Guide) FIDIC Contracts Guide refers to Exceptionally Adverse Climatic Conditions as one of the causes of Extension of Time. The relevant paragraph reads as: In order to establish whether such climatic conditions occurred, it may be appropriate to compare the adverse climatic conditions with the frequency with which events of similar adversity have previously occurred at or near the site. An exceptional degree of adversity might, for example, be regarded as one which has a probability of occurrence of four to five times the Time for Completion of the Works (for example, once every eight to ten years for a two-year contract).

19 Explanations of the DAB (cont.) Base Date of the project is Nov.20, 2014 and, 28 days before Base Date is Oct.23, 2014 which is the date after which the Contractor should be aware of all relevant existing legislation according to the Yellow Book and should investigate the climaic conditions etc. beforehand. Time for Completion is 480 days with regard to the Contract. If 5 times Time For Completion is taken as the investigation period, it corresponds to 480 days x 5= 2400 days before the reference day, reference day being 28 days before the Base Date. DMI recordings show that max. precipitation in this period occurred in October 2012 as 91.3 mm of rainfall in the city of XXX. This date falls into the investigation period. When the average of the rainfall amounts of the closest four towns to the city of XXX is evaluated with regard to DMI records on Oct. 5, 2015, the average of 42.9 mm rainfall can be considered as valid for the city of XXX as well, since no measurement could be done by DMI in XXX.

20 Explanations of the DAB (cont.) Since the average precipitation of the neighborhood towns is estimated to be 42.9 mm, which is considered by the DAB to be taken as similar to the precipitation in the city of XXX, the rainfall on October 5, 2015 in XXX cannot be considered as Exceptionally Adverse Climatic Condition when compared to the precipitation of 91.3 mm of October The tables prepared by the DMI showing rain precipitations in the city of XXX in November during the years 2008 to 2014 are submitted by the Contractor. The tables show that during the month November from 2008 through 2014, the max precipitation which occurred in XXX on Oct.23,2009 and is recorded as 38.9 mm., whereas the DMI table indicates that XXX received 44 mm of rainfall on Nov.02,2015 (which is the subject of Claim 2, part two for November). Therefore this proves that the rain precipitation of 44 mm can be considered as Exceptionally Adverse Climatic Condition in the city of XXX in November.

21 Summary with regard to Exceptioanally Adverse Climatic Conditions N/A = not applicable Validity of Claim Incident Precipitation in the city of XXX N/A Avg. Prec. of Neighborhood Towns Max. Prec. in XXX during days before the Base Date NO Precipitation in October N/A 42.9 mm 91.3 mm YES Precipitation in November 44.0 mm N/A 38.9 mm

22 DAB Decision With regard to the evaluations given above, the Contractor s CLAIM IS FOUND PARTLY REASONABLE and the Contractor is entitled to 14 days of Extension of Time either with regard to GCC-SC 8.4.c (owing to Exceptionally Adverse Climatic Conditions which occurred in November 2015) or with regard to GCC-SC 19.1 (Definition of Force Majeure), SC 19.2 (Notice of Force Majeure), and SC 19.4 (Consequences of Force Majeure) owing to the flood which occurred again in November The Contractor is also entitled to payment of the costs, but not the profit.

23 Thank you...