Tuesday, July 16, 2024
Tuesday, July 16, 2024
HomeContract ManagementProvisions for Contractor’s Extension of Time under FIDIC Contracts

Provisions for Contractor’s Extension of Time under FIDIC Contracts

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One of the success criteria for a project is that it should be completed within time stipulated in the contact. However, there are so many issues and reasons crop up during the project execution that completion of project within specified time becomes difficult sometimes. Some of the reasons of delay are attributed to the contractor and some are attributed to the employer. There may be some other reasons which are beyond control of the contractor as well as the employer. In case, the contract is not completed within time, the contractor suffers financial burden and the employer is also effected in several ways due to project objectives are not met. The contract has to be extended in these cases to achieve the objectives of the project. Establishment of proper mechanism for granting extension of time is therefore necessary in the contracts to handle this issue. Provision for extension of time under FIDIC contracts is discussed in this article.

If the contract is extended due to delay from the contractor, then the employer is entitled to get compensation for delay. In such case, there is a provision in the contract that the employer may deduct delay damages (liquidity damages) from the payments of the contractor. These damages are pre agreed and the calculated as per the procedure laid down in the contract. This is however, not that easy as the contractor will always try to put the reason for delay on the shoulders of the employer.

Normally, in case when the delay is caused due to the reason attributed to the employer, the employer does not pay delay damages to the contractor as there is no such provision in the contract. The contractor is entitled to ‘an extension of time for completion of the work (EOT)’. The contractor does not pay any delay damage to the employer in such cases.

If the cause of the delay is attributed to the employer, then the contractor may claim the compensation due to delay. In such cases, generally the employer does not directly pay the compensation. The contractor may approach to dispute resolution board in such cases to get the compensation for the delay.

In the FIDIC Conditions of Contract for Construction, Second Edition, 2017, also called ‘the FIDIC Red Book’, the provision for ‘extension of time’ is stipulated in ‘Clause 8.5- Extension of Time for Completion’ of ‘General Conditions of Contract’.

The clause states that the contactor has to comply with the Sub- Clause 20.2 [Claims for Payment and/or EOT] to be entitled to extension of time.

The clause also describes that this clause will only be applicable to the extent that completion for the purposes of Sub-Clause 10.1 [Taking Over the Works and Sections] is delayed by any of the causes given in this clause.

It means that a delay to completion of the work as provided by sub clause 10.1 will only be compensated and not any other delays will be compensated. If we say in simple words, then the delay caused on the critical path of the works, which directly affects the ‘taking over the work’ by the employer will be compensated by giving the EOT.

Clause 20.2 describes procedure to apply for claim for payment and/ or EOT. Clause 20.2 states that

“The claiming Party shall give a Notice to the Engineer, describing the event or circumstance giving rise to the cost, loss, delay or extension of DNP for which the Claim is made as soon as practicable, and no later than 28 days after the claiming Party became aware, or should have become aware, of the event or circumstance (the “Notice of Claim” in these Conditions).

If the claiming Party fails to give a Notice of Claim within this period of 28 days, the claiming Party shall not be entitled to any additional payment, the Contract Price shall not be reduced (in the case of the Employer as the claiming Party), the Time for Completion (in the case of the Contractor as the claiming Party) or the DNP (in the case of the Employer as the claiming Party) shall not be extended, and the other Party shall be discharged from any liability in connection with the event or circumstance giving rise to the Claim.”

The cause of delay under ‘Clause 8.5’ for which the contractor is entitled for extension of time are stipulated as follows:

The cause of delay under ‘Clause 8.5’

A Variation (any substantial change in the quantity or scope of the work)

If there is a substantial change in the scope of work which is affecting the time of completion of the work, then the contractor will be entitled for ‘extension of time’ under this clause.

A cause of delay giving an entitlement to EOT under a Sub-Clause

There are several sub- clauses in the contract which entitle the contractor an EOT. The list of such sub- clauses is listed as below:

Sub- Clause No.Sub- clause nameDescriptionEOTAdditional Cost
1.9Delayed Drawings or InstructionsIf the Contractor suffers delay and/or incurs Cost as a result of a failure of the Engineer to issue the notified drawing or instruction within a time which is reasonable and is specified in the Notice with supporting details, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes
2.1Right of Access to the SiteIf the Contractor suffers delay and/or incurs Cost as a result of a failure by the Employer to give any such right or possession within such time, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes
4.6Co- operationIf the Contractor suffers delay and/or incurs Cost as a result of an instruction under this Sub-Clause, to the extent (if any) that co-operation, allowance of opportunities and coordination was Unforeseeable having regard to that stated in the Specification, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes
4.7Setting OutIf the Contractor suffers delay and/or incurs Cost from executing work which was necessitated by an error in these items of reference, and an experienced contractor could not reasonably have discovered such error and avoided this delay and/or Cost,   the Contractor shall give notice to the Engineer and shall be entitled subject to Sub- Clause20.1 [ Contractor’s Claims] to: (a) an extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4 [ Extension of Time for Completion], and (b) payment of any such Cost plus reasonable profit, which shall be included in the Contract Price.YesYes
4.12Unforeseeable Physical ConditionsIf and to the extent that the Contractor suffers delay and/or incurs Cost due to unforeseeable physical conditions which have an adverse effect on the progress and/or increase the Cost of the execution of the Works, having complied with Sub-Clauses 4.12.1 to 4.12.3 above, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost.YesYes
7.4TestingThis Sub-Clause shall apply to all tests specified in the Contract, other than the Tests after Completion (if any).   If the Contractor suffers delay and/or incurs Cost from complying with any Engineer’s instruction or as a result of a delay for which the Employer is responsible, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of Cost Plus Profit.   If the Contractor causes any delay to specified tests (including varied or additional tests) and such delay causes the Employer to incur costs, the Employer shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to payment of these costs by the Contractor.YesYes
8.5Extension of Time for CompletionIf the contractor wants EOT as per the provisions mentioned under this clause, the he shall give notice to the engineer under sub- clause 20.1 [Contractor’s claims].YesNo
8.6Delays Caused by AuthoritiesIf the authorities or entities delay or disrupt the Contractor’s work and the delay or disruption was unforeseeable, then this delay or disruption will be considered as a cause of delay under sub-paragraph (b) of Sub-Clause 8.5 [Extension of Time for Completion].YesNo
8.10Consequences of SuspensionIf the Contractor suffers delay and/or incurs Cost from complying with an Engineer’s instruction under Sub-Clause 8.9 [Employer’s Suspension] and/ or from resuming the work under Sub-Clause 8.13 [Resumption of Work], the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes
8.12Prolonged SuspensionIf the suspension under Sub-Clause 8.10 [Employer’s Suspension] has continued for more than 84 days, the Contractor may give a Notice to the Engineer requesting permission to proceed.   If the Engineer does not give a Notice under Sub-Clause 8.13 [Resumption of Work] within 28 days after receiving the Contractor’s Notice under this Sub-Clause, the Contractor may (a) agree to a further suspension, in which case the Parties may agree the EOT and/or Cost Plus Profit (if the Contractor incurs Cost), and/or payment for suspended Plant and/or Materials, arising from the total period of suspension;   Yes Yes
10.2Taking Over PartsIf the Contractor incurs Cost as a result of the Employer taking over and/ or using a Part, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to payment of such Cost Plus Profit.NoYes
10.3Interference with Tests on CompletionIf the Contractor suffers delay and/or incurs Cost as a result of being prevented from carrying out the Tests on Completion, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes
11.8Contractor to SearchThe Contractor shall, if instructed by the Engineer, search for the cause of any defect, under the direction of the Engineer.   Unless the defect is to be remedied at the cost of the Contractor under Sub-Clause 11.2 [Cost of Remedying Defects], the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to payment of the Cost Plus Profit of the search.NoYes
12.4OmissionsWhenever the omission of any work forms part (or all) of a Variation;   (a) the value of which has not otherwise been agreed; (b) the Contractor will incur (or has incurred) cost which, if the work had not been omitted, would have been deemed to be covered by a sum forming part of the Accepted Contract Amount; (c) the omission of the work will result (or has resulted) in this sum not forming part of the Contract Price; and (d) this cost is not deemed to be included in the valuation of any substituted work;   then the Contractor shall, in the Contractor’s proposal under sub-paragraph (c) of Sub-Clause 13.3.1 [Variation by Instruction], give details to the Engineer accordingly, with detailed supporting particulars.NoYes
13.2Value EngineeringThe Contractor may, at any time, submit to the Engineer a written proposal which (in the Contractor’s opinion) will, if adopted:   (a) accelerate completion; (b) reduce the cost to the Employer of executing, maintaining or operating the Works; (c) improve the efficiency or value to the Employer of the completed Works; or (d) otherwise be of benefit to the Employer.   The proposal shall be prepared at the cost of the Contractor and shall include the details as stated in sub-paragraphs (a) to (c) of Sub-Clause 13.3.1 [Variation by Instruction].   If the Engineer gives his/her consent to the proposal, with or without comments, the Engineer shall then instruct a Variation.YesNo
13.6Adjustments for Changes in LawsIf the Contractor suffers delay and/or incurs an increase in Cost as a result of any change in Laws, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost.YesYes
14.8Delayed PaymentIf the Contractor does not receive payment in accordance with Sub-Clause 14.7 [Payment], the Contractor shall be entitled to receive financing charges compounded monthly on the amount unpaid during the period of delay.NoYes
16.1Suspension by ContractorIf the Contractor suffers delay and/or incurs Cost as a result of suspending work (or reducing the rate of work) in accordance with this Sub-Clause, the Contractor shall be entitled subject to Sub-Clause 20.2 [Claims For Payment and/or EOT] to EOT and/or payment of such Cost Plus Profit.YesYes

Exceptionally adverse climatic conditions

If exceptionally adverse climatic conditions occur during the execution of work, then the contractor is entitled for and EOT, provided that the climatic conditions are extreme and unforeseeable as compared to the climatic data made available by the employer and/or climatic data published in the Country for the geographical location of the site.

Unforeseeable shortages in the availability of personnel or Goods

If due to epidemic or government actions, there is unforeseeable shortages of availability of manpower or material, then the contractor is entitled to get EOT.

Any delay, impediment or prevention caused by or attributable to the Employer

If the contractor is prevented from performing his obligations under the contract by the employer, the contractor shall be entitled to get the EOT without any ‘delay damage’ levied on him. This is called the ‘prevention principle’ in the common law.

Summary

‘Extension of Time (EOT)’ is an important provision of any contract. In practical scenario, the construction contracts have so many issues that sometimes, it is really difficult to complete the contract within time. The ‘Extension of Time (EOT)’ clause empowers both the employer as well as contractor to extend the time of completion of contract in case it is not being completed within stipulated time period. If this clause will not be incorporated in the contract, then the contract has to be terminated without achieving the objectives of the project until the parties make an amendment for it. In case, any party wants to extend the time of contact then it should follow the procedure laid down in the contract to avoid any conflict.

References:

  1. FIDIC Conditions of Contract for Construction, Second Edition, 2017
  2. https://ahmedmohd.com/contractor-extension-of-time-fidic-red-book-99-clause-8/
  3. https://fidic.org/

Disclaimer

  1. The description of sub- clauses given in this article is only a part of the whole clause which is relevant to the EOT. For whole provision under the sub clauses refer to FIDIC Conditions of Contract for Construction, Second Edition, 2017
  2. The content of this article is only for education purpose and it cannot be used as a legal advice. For any legal issue a suitable professional may be consulted.
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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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