In this blog post, Steering Committee member, Mark Watson, answers questions related to EOT claims arising from COVID-19. These questions are excerpted from our fifth Construction Clinic session, which took place in May 2020. The entire webinar may be viewed on-demand on YouTube.
Question 1
Question: In the FIDIC Yellow Book, 1999 Edition, Sub-Clause 17.3 (Employer’s Risks), foresees one of the Employers’ risks as any operation of forces of nature. This might be associated with the current pandemic, COVID-19. That is a force of nature. But in the FIDIC Yellow Book, the 2017 Edition, the clause for Employer’s risks does not exist. So my question is, does FIDIC 2017 override all contracts made before 2017?
Answer: The 2017 Edition of the FIDIC forms of contract, does not override any of the previous editions of the FIDIC standard form contracts. And the reason is that each edition of the FIDIC contract is, by itself, a separate and independent contract. So it will not override any previous editions.
Question 2
Question: We are using the FIDIC Red Book, 1999, consequently coronavirus is considered a force majeure The site’s still working as fast, but affected a bit. So how can Contractors submit an EOT claim or are they not entitled?
Answer: If I understand it correctly, the contractor is still progressing the works, although at a much slower rate than what was planned to progress the works under his Sub-Clause 8.3 programme. If this is correct, then your question and the following question are very similar and I will respond to those simultaneously.
The following question is, “If a contract is signed after the commencement of COVID-19 pandemic, would you agree that disruption cause would not be considered force majeure?”
In response to both questions, the disruption or the rate of progress changes would not be considered a force majeure. Therefore, you would not raise your EOT claim under Sub-Clause 19.4 (Consequences of Force Majeure). These rate of progress issues you will refer to the provisions of Sub-Clause 8.6 (Delays caused by Authorities).
Now Sub-Clause 8.6 has got two circumstances. The first circumstance relates to where your actual progress is going to delay completion of the works, and the second circumstance relates to where your actual progress is less than your planned progress under your Sub-Clause 8.3 programme.
In both those circumstances, you can raise your claim for extension of time for completion under Sub-Clause 8.4 (Extension of Time for Completion). And specifically, because this deals with the COVID-19 pandemic, I would raise it under Sub-Clause 8.4(e), because under the COVID-19 limitations, you might be required to have fewer people on site because of the social distancing issue. Sub-Clause 8.4 provides a clause that says, “. . . is or will be delayed.” Now, where your rate of progress delays completion, that falls under that first category, is delayed. Where your rate of progress is less than your planned progress, it could potentially cause delay in the future of your works.
If you do not raise your EOT claim under Sub-Clause 8.4, you run two risks. The first risk is you could run into a time bar scenario. The second risk is that the Engineer, when he sees that your rate of progress is less than what you planned under your Sub-Clause 8.3 programme, can instruct you to provide additional resources to accelerate and provide additional goods, to meet or to catch up to your progress plan under the 8.3. Therefore, it is very important that under these circumstances, your claims went under 8.4 and you submit those notices timeously.
Question 3
Question: In reference to FIDIC Red Book, the 1995 Edition, if a party submits notice of dissatisfaction, the DAB’s decision does not become final and binding. Therefore, is this party entitled to withhold any due payments until the dispute is finally resolved through arbitration?
Answer: In the circumstance where a party raises a notice of dissatisfaction under Sub-Clause 20.4 (Related Claims), the DAB’s decision will still be binding on both parties and the catchword phrase is that unless or until it is revised in an arbitral award. Until it is revised by an arbitral award, the DAB decision will still be binding. Therefore, you cannot withhold any payments, and this we often refer to as “rough justice”. That means, pay now, dispute later.
Question 4
Question: Assume there was a construction contract being signed under FIDIC conditions or else. Now, in the course of implementing the contract, there was a delay, and the delay was caused by the Employer due to design changes. Now down the line, the Contractor came up with a claim head that he’s entitled to compensation on overhead costs due to benefits paid to employed project superintendents, foremen, field engineers, etc.
This matter was referred to the Adjudicator for him to decide. The Adjudicator is coming up with an argument that the Contractor has to produce evidence to show that the Contractor’s employees were onsite all the time, the project was delayed for the claim head to be valid and with merit. My question is, is the line of following by the Adjudicator correct?
Answer: Now I’m going to respond to this question under two separate contracts. But what is important to realize, is that the answer herein lies and is dependent upon the adjudication clauses provided under the specific contact you are working under. So if I refer to the 1999 Edition of FIDIC Red and Yellow Books, Sub-Clause 20.4 (Related Claims), specifically paragraph three, which provides that the Adjudicator or the DAB can request additional information that will assist him or them in making a decision. So under Sub-Clause 20.4, the Adjudicator and the DAB have the right to ask for additional information.
Similarly, under the NEC dispute resolution clause W1.35, the Adjudicator may request the party to provide additional information, and the Adjudicator can take the initiative to ascertain the facts linked to the dispute. That means that the Adjudicator can take initiative to request additional information, to ask more probing questions. So under these two contracts, the Adjudicator or the DAB can request additional information.
The one issue here is that as a Contractor, you have an obligation to retain or keep records that substantiate your actual plan and submit those records together with your plan. What this tells me is that your claim was not properly substantiated and also that the cause and effect of the claim were not properly set out. Therefore, if you do not provide information, the Adjudicator can proceed on the basis that this information doesn’t exist and his decision can be detrimental to you, the Contractor. Therefore, it’s important that you keep and retain the correct information that substantiates your claim.
The questions covered in this blog were answered by ICCP Steering Committee member, Mark Watson.
If you would like to learn more about claims, check out our training partner, Claims Class.
Enjoying the ICCP’s articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.