Giz CCDM TM

Training Material on Construction Claims & Disputes Management
Training Material on
Construction Claims & Disputes Management
By
Zewdu Tefera Worke
Engineering Contracts Lawyer
January, 2019
Organized & Delivered by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 1
Training on
Table of Contents
………………………………………………………………………………………………………………
 Introduction & Objectives

 Construction & Non-Contract Enforcement
 Construction Contract Enforcement
 Claims Path & Construction Claims
 Construction Claims Management
 Construction Disputes Management
 Case Study Exercises
Training Program On
Trainer: Zewdu Tefera Worke

……………………………………………………………………………………………………………
(Day 1) Monday, January, .2019

Morning
Training Overview 9:00-9:30 am Trainees & the Trainer
Non-Contract Enforcement* 9:30-10:30 am The Trainer: *Exercise Planned
Tea Break 10:30-11:00am
Construction Contract Enforcement 11:00-12:00 am The Trainer
Construction Claims & Non-claims 12:00-12:30pm The Trainer
Path
Afternoon
Construction Claims Management 2:00-3:30 pm The Trainer
Process
Tea Break 3:30-4:00 pm
Process
(Day 2) Tuesday, January, 2019
Morning
Construction Claims Management 9:00-10:00 am The Trainer
Process
Construction Claims Management 10:00-10:30am By the Trainees
Process* Exercise Planned
Tea Break 10:30-11:00am
Process
Afternoon:
Process
Tea Break 3:30-4:00pm
Construction Disputes Management 4:00-5:00pm The Trainer
System: Settlement
(Day 3) Wednesday, January, 2019
Morning
Construction Disputes Management 9:00-9: 30am The Trainer
System: Settlement
Construction Disputes Management 9:30-10: 30 am The Trainer
System: Judgmental
Tea Break 10:30-11: 00 am
Construction Disputes Management 11:00-12: 30 pm The Trainer
System: Judgmental
Afternoon
Construction Disputes Management 2:00-3;00pm The Trainer
System: Judgmental
Construction Disputes Management 3:00-3:30pm
System: Judgmental
Tea Break 3:30-4:00 pm
General & complementary Discussion 4:00-4:30pm The Trainees & the Trainer
Reflections 4:30-5;00pm The Trainees & the Trainer
1. Introduction & Objectives
Introduction to the Training
The present training has been organized on the following four issues: construction & non-
contract enforcement; construction contract enforcement; construction claims
management; and construction disputes management.
Non-contract enforcement issues, as related to construction, particularly concern extra-

contractual claims & unjust enrichment claims. Such claims originate from the legal
regime (i.e., applicable law).
Enforcement of construction contract may take two forms: voluntary & compulsory
enforcement. The voluntary enforcement system focuses on the following four distinct
paths: viz., non-claims path; consultation path; claims-path; and settlement path. The
construction disputes management system based itself on both voluntary enforcement (viz.,
the settlement or non-judgmental sub-system) & compulsory enforcement (viz., the
judgmental sub-system).
Objectives of the Training
At the end of the training, the trainees be able:
 to explore & understand the concept of non-contract enforcement as applied to

construction;
 to define the concept & to explore the scope of construction contract enforcement;
 to define & understand the concept claim & construction claim;
 to identify & explore the base & types of construction claims;
 to identify & explore requirements for construction claims;
 to identify & understand the construction claims management process & its
framework;
 to define & understand the concept of; cause for & scope of construction disputes
including its management system & its specific methods known as judgmental &
non-jedmenetal;
Construction Contract & Law: Overview
………………………………………………………………………………………
The Formula
………………………………………………………………………………………………………………
D
KP and/or LP: ROLE
V…?
(Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer)
………………………………………………………………………………………………………
The Legend
L: Law
K: Contract
P: Persons
and/or: cumulative with/alternatively (K and/or L)
D: Delivery
R: Relationship
O: Obligation
L: Liability
E: Enforcement
V: Variability (context) of all the above concepts (viz., LKPDROLE);
…………………………………………………………………………………………………………………………………………………………………
The Application
LV: Law…?
KV: Contract…?
PV: Persons…?
DV: Delivery…?
RV: Relationship…?
OV: Obligation…?
LV: Liability…?
EV: Enforcement…?
V: Variability (context) of all the above concepts….?;
2. Construction & Non-Contract Enforcement

 Background
 Non-contract enforcement concerns about two issues:
 extra-contractual claims; the objective, in terms of its remedy, being
compensation; and
 unjust enrichment claims; the objective, in terms of its remedy, being
restitution;
 Extra-contractual claims are also known as tort claims;
 Extra-contractual liability is a legal liability claim; and may originate from
the following three sources as per the Civil Code: viz.,
 liability based on fault; as governed under Article 2027 (1) cum 2028-
2065;
 liability based strict liability; as governed under Article 2027 (2) cum
2066-2089; and
 liability for the actions of others or vicarious liability; as governed
under Article 2027 (3) cum 2124-2136;
 Unjust enrichment claims are also known as quantum meruit claims as related to the
field of construction; as governed under Article 2162-2178 cum 3146 (2) of the Civil
Code;
 Both claims are legal claims originating from the applicable law not from the
contract like the road or building construction contract;
 Both claims are thus legally recognized & regulated by the Ethiopian legal system;
 Extra-contractual Claims
 The consideration & scope of application of extra-contractual claims as
related to the field of construction could be diverse;
 The following could be illustrative:
 a claim by a third party against an employer (as an owner of the
project) as related to the construction project; see like under Article
2027 (1) cum 2028 ff;
 a claim by a third party against a contractor (as executor of the

project based on its “activity” or construction operation) as related to
the construction project; see like under Article 2027 cum 2028 or
otherwise cum 2031;
 a claim by a client against a consultant or an engineer (as designer or
supervision consultant) as related to a construction project; see like
under Article 2027 (1) cum 2031 (by practicing a (design or
supervision profession);
 a claim by a contractor against a consultant or an engineer (as
designer or supervision consultant); see like under Article 2027 (1)
cum 2028 cum 2031;
 a claim by a contractor (say as a successful bidder) against an
employer; see Article 2027 (1) cum 2028 cum 3146 (1) (as related to
public construction contract or project); or see under Article 2027 (1)
cum 2055 (Pre-contractual Negotiations) as related to private
construction contract;
 All the four claims are legally recognized & regulated under the Civil Code
Article 2027-2161 (Extra-Contractual Liability); and by the Law of
Administrative Contract; see Article 3131-3206 of the Civil Code and
particularly Article 3146 (1): Liability in Case of Non-conclusion of Contract;
 Such kind of claims against an employer or against a contractor or against a
(design or supervision) consultant by a third party are based on the
independent legal status (namely., having their own legal personality &
capacity) of the employer or of the contractor or of the consultant;
 In case of a contractor & a consultant their professional status is also an
added legal factor to be considered;
 The extra-contractual claim of a contractor (as a successful bidder) against a
certain employer is the focus of this part of the training;
 The basis for such type of claim shall be the absence of contractual (K)
relationship (R) between an employer & a planned contractor (as a
successful bidder);
 Extra-contractual claim by a successful bidder against an employer (as a

contemplated employer) may arise as per Article 3146 of the Civil Code;
 The said legal provision reads, verbatim, as follows:
(1) Wherever the administrative authorities (an employer) do not conclude a
contract, they (an employer) shall indemnify the person (like the Enterprise as
a successful bidder who hopes to become a contractor at the culmination of the
works (like water works project) procurement process) who has incurred
expenses in view of the conclusion of such contract (like water works
construction contract), where such expenses have been incurred through the
fault of the administrative authority (an employer), by reason of the attitude
taken by the latter (the employer) in the course of the pre-contractual
negotiations; (Underline & Emphasis added)
(2) The administrative authorities (the employer) shall, even in the absence of
fault, indemnify the person (like the Enterprise) who, as a consequence of
negotiation with such authorities, has made studies, drawn up plans, initiated
works or incurred expenses, where such expenses or disbursements have been
made with the consent of the administrative authorities and the latter (the
employer) derived a benefit there from.
(Underline & Emphasis added)
 Article 3146 (1) of the Civil Code deals with the possible extra-contractual
claims of the successful bidder against an employer;
 Whereas, Article 3146 (2) of the Civil Code deals with the possible unjust
enrichment claim of a successful bidder (or possibly a contractor) against an
employer;
 From the clear wording of the said legal provision (Article 3146), it is to be
noted that:
 extra-contractual claims being fault based; whereas
 unjust enrichment claims being non-fault liability based;
 For the successful bidder to succeed in such unjust enrichment claim shall
fulfill a number of legal requirements; like
 establishing the fault of the employer;
 establishing nexus or causation between the damage so caused & the

behavior of an employer;
 identification of expenses;
 quantification of such expenses;
 justification of such expenses;
 The prior legal requirements may also be of the following:
 the participation of such bidder in the said bidding process;
 securing the letter of acceptance from a certain employer;
 invitation by such employer of such successful bidder for the said pre-
contractual negotiations;
 the behavior of such employer exhibited during such pre-contractual
negotiations, which causes the said expenses/damages;
 and so forth;
 This is the stage where there is no contractual relationship between say such
employer & the future contractor or successful bidder;
Questions for Discussions
 What would be the extent (quantum) of the extra contractual claims of the
successful bidder against such employer?
 Would such extra contractual claim include loss of profit claim of the successful
bidder? Why or why not?
 Would such extra contractual claim include loss of profit claim of such successful
bidder (as related to other construction projects for which said contractor were
surely to compete for)? Why or why not?
 Have you ever encounter such kind of claim situation?
 Unjust Enrichment Claims

 Background
 Unjust enrichment or quantum meruit claims in the field of construction may
arise at different construction project phases: viz.,
 during pre-construction phase; and
 during construction phase;
 According to Bunni (1998), it (unjust enrichment claim) is based on the
principle that an individual has the right to be paid a reasonable
remuneration for work done. This is referred to in some legal systems as
quantum meruit or “as much as one earned” and has been often equated to a
claim for undue enrichment. The principle of quantum meruit have also been
applied to cases where there is a contract in existence but the price is not
stipulated; instead the contract expressly provides that the amount to be paid
will be based on a reasonable sum or the price will be agreed from time to
time;
 In all such unjust enrichment claim cases, the general legal principles
developed for unjust enrichment under the Civil Code Article 2162-2178
shall apply;
 Pre-construction Phase
 During pre-construction phase (i.e., before the signing of the underlined
draft water works or building or road construction contract), the specific
legal basis for unjust enrichment claim by a successful bidder against a
certain public employer seem (because of its specific wording) Article 3146
(2) cum 2162-2178 of the Civil Code;
 Such successful bidder shall fulfill the required legal principles as related to
unjust enrichment; viz.,
 enrichment: the benefit (i.e., enrichment) of such public employer by
the works of the successful bidder;
 loss: the loss or deprivation or impoverishment of such successful
bidder; and
 no just cause; absence of any just cause for such enrichment say by
such public employer;
 Establishing consent of such public employer seems a specific legal
requirement here under Article 3146 (2) of the Civil Code;
 How the consent of such public employer be established under such
circumstances?
 Construction Phase
 Construction phase may include both the performance & defects liability
period;
 Quantum meruit claim may exist in the following two scenarios: under no
contract scenario or under contract but void contract scenario;
 During construction phase, the specific legal basis for unjust enrichment
claim by a contractor against a public employer shall be Article 2162-2178 of
the Civil Code;
 The contractor shall fulfill the required general legal principles for unjust
enrichment: viz.,
 the benefit (i.e., enrichment) of such public employer by the works of
the Enterprise;
 the deprivation or impoverishment of the contractor; and
 absence of any just cause for such enrichment say by such public
employer;
 What would be the possible extent or quantum of the claims of the successful bidder
as related to unjust enrichment claim?
 Does it include overhead & profit other than the value of the work executed?
 Does it include mobilization & demobilization cost other than the value of the work
executed?
 Do you see any other ground of claims under the circumstances? Identify & discuss.
3. Contract Enforcement
 Background
 Contract enforcement basically concerns about enforcement of the legitimate
expectations of the contracting parties under a given contract like water
works construction contract;
 The generic expectations of the contracting parties under such construction
contract could be:
 the Employer: to see the completion of the works which serves the
reasonable purpose intended; and
 the Enterprise (as the Contractor): to get a reasonable financial
benefit in terms of profit;
 Contractual expectation is a shifting concept, which may vary depending on
the particular claim ground & the remedies (contractual or legal) provided
for it;
 It means that the contractual and/or legal remedies so sought & secured may
or may not help achieve the said expectations wholly or partially;
 The very basis for contractual liability is the respective obligations of the
contracting parties under the given water works construction contract & the
applicable law;
 Such liability is then the foundation for contract enforcement;
 Enforcement of construction contract may be categorized in to two broad
categories: viz.,
 voluntary enforcement; and
 compulsory enforcement;
 Voluntary Enforcement
 Voluntary enforcement may include the following four paths:
 non-claim path; i.e., enforcement of the construction contract based
on the relevant clauses of the contract itself;
 consultation path: i.e., enforcement of the construction contract

based on consultation made by the Engineer, before the Engineer
formally determines on the pending construction claims;
 claims-path: i.e., enforcement of the said construction contract
based on the determination on the claims by the Engineer;
 settlement path; i.e., enforcement of the said construction contract
based on the amicable settlement made by & between the contracting
parties (like through negotiation or mediation or conciliation) after
determination by the Engineer and/or at any stage thereafter;
 Compulsory Enforcement
 Compulsory enforcement is basically related to the following judgmental
dispute resolution methods like: resolution of construction dispute through:
 construction adjudication: dispute board or Dispute Review
Expert;
 construction arbitration: by a constituted arbitration tribunal; or
 construction litigation: by the court of law having jurisdiction
over the dispute;
 Settlement (as part of voluntary enforcement) & compulsory enforcement
shall be dealt with under construction disputes management system;
 Non-Claims Path
 All construction related problems may not necessarily undergo a claim-path
for the enforcement of the construction contract;
 The relevant clause (s) or provision (s) of the signed construction contract
itself may suffice for its enforcement;
 In this case, two contractual grounds (instruction & action) are relevant: viz.,
 instruction: the instruction of the Engineer; and
 action: the respective action(s) of the contracting parties (viz., the
employer or the contractor);
under the specific water works construction contract is so critical;
 The following are illustrative for the enforcement of the water works
construction contract based on its clauses as triggered by:
 the instruction of the Engineer; or
 the action of the Employer; or
 the action of the Contractor;
 Instruction of the Engineer: see sub-clause 3.3 of the MDB-FIDIC;
Clause 12 of the PPA
 the contractor is under clear contractual obligation to comply with the
instruction of the Engineer (or its delegated assistant); see sub-clause 3.3 cum
Art. 2616 (2) of the Civil Code;
 such instruction could be: in writing (as a matter of principle) or orally, as an
exception but subject to subsequent confirmation in writing; see sub-clause
3.3 (a) (b) (c);
 the purpose of such instruction of the Engineer is twofold:
 execution of works: related to the execution of the works; and
 remedying defects: related to remedying of defects in the works;
 following are some illustrative instructions of the Engineer;
 testing: of the plant or workmanship or material as per Clause 7.4 of the
MDB-FIDIC with a view to ensure quality of the road;
 demolishing & rework: with a view to ensure quality of the road as per
Clause 7.5 of the MDB-FIDIC;
 retesting/rejection: of the plant or workmanship or material as per
Clause 7.5 of the MDB-FIDIC with a view to ensure quality of the road;
 remedying defects: either by removing and replacing or removing & re-
executing any work with a view to ensure quality as per the contract; as per
 making good deterioration or defects: as related to resumption of work
after suspension with a view to ensure the safety of the road; as per Clause
8.12 of the MDB-FIDIC;
 retesting: as related to tests on completion if tests on completion fails with a

view to make sure that the completed works are in accordance with the
contract; as per Clause 9.3 cum 9.4 (a) of the MDB-FIDIC;
 rejection of the works: (like the road and/or bridge) if the failure on tests
on completion deprives the employer of substantially the whole benefit of the
Works or Section; as per Clause 9.4 (b) MDB-FIDIC;
 reducing contract price: if the tests on completion results in reduced
value of the work to the Employer as per Clause 9.4 (c) of the MDB-FIDIC;
 repeating tests: during defects liability period as per Clause 11.6 of the
MDB-FIDIC;
 searching for defect: ordering the Contractor during defects liability
period as per Clause 11.8 of the MDB-FIDIC;
 provisional index: determining the provisional index for the issue of IPC
as per Clause 13.8 of the MDB-FIDIC;
 advance payment reduction: done through percentage deductions as
determined by the Engineer as per Clause 14.2 of the MDB-FIDIC;
 full advance re-payment: to the Employer as per Clause 14.2 MDB-
FIDIC if the advance were not fully repaid before issuance of the Taking
Over Certificate or in case of termination by the Employer or suspension or
termination by the Contractor or optional termination;
 no payment: certification or approval without first submitting a
Performance Security to the Employer by the Contractor as per Clause 14.6
of the MDB-FIDIC;
 payment withholding; for work done or supplied made by the Contractor
not in accordance with the Contract as per Clause 14.6 of the MDB-FIDIC;
 payment withholding; for work or obligation not performed by the
Contractor in accordance with the Contract as per Clause 14.6 of the MDB-
FIDIC; like reinstatement of the site after completion;
 correction or modification of IPC; by the Engineer in such cases as per

 retention money payment; to be certified to the Contractor by the
Engineer when the Taking Over Certificate issued as per Clause 14.9 of the
MDB-FIDIC;
 withholding of certification: of the second balance of the retention
money by the Engineer if the Contractor were not remedying defects during
the defects liability period as per Clause 11 cum 14.9 of MDB-FIDIC;
 IPC for agreed final payment: the Engineer to deliver an Interim
Payment Certificate for the agreed part of the final payment as per Clause
14.11 of the MDB-FIDIC;
 Action of the Employer
 remedying defects; by the employer or by others if the contractor fails to
remedy defects within a reasonable time during the defects liability period;
as per Clause 11.4 (a) MDB-FIDIC; or
 requiring reduction of the contract price during the defects
liability period; as per Clause 11.4 (b) cum Clause 3.5 of the MDB-FIDIC;
or
 termination; of the contract as a whole or in respect of such major part
which cannot be put to the intended use during defects liability period as per
Clause 11.4 (c) of the MDB-FIDIC;
 selling or disposing: of items (like remaining equipment or temporary
works or rubbish…) by the Employer not cleared by the Contractor upon
receiving the Performance Certificate as per Clause 11.11 of the MDB-
FIDIC;
 completing the works: to complete the balance of the work by the
employer or by another contractor where the Contract were terminated due
to the default of the Contractor as per Clause 15.2 of the MDB-FIDIC; (the
remedy is called substituionary performance); due the substitution of the
employer itself or some other contractor to perform or to complete the

balance of the remaining project commence by the terminated contractor;
 using contractor’s property: the Employer or the new contractor to use
the Goods, Contractor’s Documents & other design documents made by or
on behalf of the terminated Contractor;
 selling: the items (Contractor’s Equipment or Temporary Works) which
belong to the (terminated) Contractor may be sold by the Employer to satisfy
its payment as per Clause 15.2 of the MDB-FIDIC as related to the
termination of the Contract;
 withholding further payment: by the Employer until the costs of the
execution, completion & remedying defects and other related costs and
damages are established as per Clause 15.4 of the MDB-FIDIC;
(Notes: it means no automatic payment to the terminated Contractor
immediately after termination);
 termination for convenience: the Employer entitled to terminate the
Contract for its convenience (i.e., without the default of the Contractor) as
per Clause 15.5 of the MDB-FIDIC; see also Article 3180 of the Civil Code;
see also Clause 21 (2) (O) of the PPA 2011;
 liquidated damages; enforcing liquidated damages clause directly by the
public body; see Clause 27 of the PPA 2011;
 demolishing & reconstruction: to demolish & to reconstruct the works,
based on the instruction of the Engineer, which do not satisfy the
requirements of the contract, at the expense of the contractor; see Clause 85
(2) of the PPA 2011;
 Action of the Contractor
 financing charges: the Contractor is to be entitled to financing charges
without notice or certification as per Clause 14.8 MDB-FIDIC;
 reducing rate of progress: by the Contractor in case of delayed payment
as per Clause 16.1 of the MDB-FIDIC;
 suspension of work: by the Contractor in case of delayed payment as per

 terminating the contract: by the Contractor in case of delayed payment
& including other grounds as per Clause 16.2 of the MDB-FIDIC; see also
Clause 21 (3) PPA 2011;
 Consultation Path: see Clause 3.5 MDB-FIDIC (2006); Clause 69: PPA
2011
 The consultation path deals with the power of the Engineer, under MDB-
FIDIC Clause 3.5, to consult with each Party (i.e., the Employer and/or the
Contractor) in an endeavor to reach agreement as related to a pending
formal claim issue;
 This gives the clear consultative role or “mediation” power to the Engineer;
 The clauses of the MDB-FIDIC have made express reference to Clause 3.5 on
which issues the Engineer is empowered to proceed as per Clause 3.5 & to
undertake consultation with each party;
 The MDB-FIDIC however gives no clue about the procedure how the
Engineer discharges such important consultation task or consultative role;
 If agreement is reached, each party is bound to give effect or to enforce the
agreed deal as per the contract; see Clause 3.5; NB: the effect being no claim
if agreed & settled & enforced as such;
 The following are illustrative of the consultative power/role of the Engineer:
 delayed drawings or instructions: see MDB-FIDIC Clause 1.9
cum 3.5; the Engineer is required under the said clause to agree with
each party on the delay claims of the Contractor caused by such
delayed drawings or instructions;
 right of access to the site: see MDB-FIDIC Clause 2.1 cum 3.5 the
Engineer is required under the said clause to agree with each party on
the delay claims of the Contractor caused by such delayed site or
possession of same;
 employer’s claims: see MDB-FIDIC Clause 2.5 cum 3.5 the

Engineer is required under the said clause to agree with each party on
the claims of the Employer; the claims of the Employer may relate to
time (see Clause 11.3: Extension of Defects Notification Period) and/or
cost;
 setting out: see MDB-FIDIC Clause 4.7 cum 3.5; the Engineer is
required under the said clause to agree with each party on the claims
of the Contractor (time, cost plus profit) as related to error in setting
out;
 unforeseeable physical conditions: see MDB-FIDIC Clause 4.12
each party whether and to what extent these physical conditions were
unforeseeable and (if unforeseeable) to what extent they impact on the
time & cost of the Contractor;
 electricity, water & gas: see MDB-FIDIC Clause 2.5 cum 4.19 cum
3.5; the Engineer is required under the said clause to agree with each
party as related to the claims of the Employer (under Clause 2.5) on
the quantities consumed & the amount due (at these prices) for such
services;
 employer’s equipment…: see MDB-FIDIC Clause 4.20 cum 3.5;
the Engineer is required under the said clause to agree with each party
the appropriate quantities & the amounts due (at such stated prices)
for the use of Employer’s Equipment;
 fossils: see MDB-FIDIC Clause 20.1 cum 4.24 cum 3.5; the Engineer
is required under the said clause to agree with each party as related to
the claims (time & cost) of the Contractor as related to the finding &
reporting of fossils;
 testing: see MDB-FIDIC Clause 20.1 cum 7.4 cum 3.5; the Engineer
is required under the said clause to agree with each party in relation to
the claims (time, cost & profit) of the Contractor in complying with
the Engineer’s instructions as related to further testing;
 failure to pass tests on completion: see MDB-FIDIC Clause like
clause 9.4 cum 3.5; the Engineer is required under the said clause to
agree with each party the extent of the reduction of the Contract Price
to be credited to the Employer as a result of failure of passing tests on
completion;
 failure to remedy defects: see MDB-FIDIC Clause 11.4 (b) cum
3.5; the Engineer is required under the said clause to agree with each
party a reasonable reduction in the Contract Price during such defects
liability period;
 evaluation: (“valuation”) see MDB-FIDIC Clause 12.3 cum 3.5; the
Engineer is required under the said clause to agree with each party as
to the Contract Price by evaluating (“valuating”) each item of work,
applying the measurement agreed;
 omissions: see MDB-FIDIC Clause 12.4 cum 3.5; the Engineer is
required under the said clause to agree with each party as related to
the cost of omission;
 adjustment for changes in legislation: see MDB-FIDIC Clause
13.7 cum 3.5; the Engineer is required under the said clause to agree
with each party as related to the time & cost effect of such changes in
legislation;
 valuation at the date of termination: see MDB-FIDIC Clause
15.3 cum 3.5; the Engineer is required under the said clause to agree
with each party the value of the Works, Goods & Contractor’s
Documents, and any other sums due to the Contractor for work
executed in accordance with the Contract;
 contractor’s entitlement to suspend work: see MDB-FIDIC
Clause 16.1 cum 3.5; the Engineer is required under the said clause to
agree with each party as related to the effects (time, cost & profit) of
the said suspension taken by the Contractor;
 consequences of employer’s risks: see MDB-FIDIC Clause 17.4
each party on the time & cost effects of rectifying the loss or damage to
the Works, Goods or Contractor’s Documents as a result of the
Employer’s Risk under Clause 17.3;
 consequences of force majeure: see MDB-FIDIC Clause 19.4
each party the effects of force majeure in terms of time & cost
(including the costs for rectifying or replacing the Works and/or
Goods damaged or destructed by Force Majeure except or less
insurance indemnity, if any);
 claims for additional payment; this is the only clear contractual
ground for the Engineer to make prior consultation with the
employer, if required with the contractor, before it determines on the
financial claims of the contractor; see Clause 69: PPA 2011; see also
Clause 74 ( Compensation Events for Allowing Time Extension), no
such consultation;
 Consultation Benefit: Do you see any benefit from the consultative role of the
Engineer (as supervision consultant) under such claims situation? As employer? As
contractor?
 Experience: Do you experience, as supervision consultant, or undertake such kind of
consultation before deciding on submitted claims say by the contractor under any of
given international construction contract like FIDIC? As employer? As contractor?
 Experience: Do you have, as supervision consultant, any experience related to such
kind of consultation before deciding on submitted claims say by the contractor
under any of given local construction contract like PPA (see Clause 69)? As
employer? As contractor?
3. Claims Path & Construction Claims

 Background
 The issue of construction claims management, through claims-path, comes
thus after reviewing the pre-claims management processes, if any: viz., those
contractual issues which could have been addressed through:
 non-claims path: first by the instruction of the Engineer or by the
respective actions of the Employer or the Contractor; or
 consultation path: second by the consultative role of the Engineer;
 The construction industry is said to be more prone in germinating claims,
and if such claim is not settled/resolved, thus disputes come in to exisetence;
 This may be related to the nature of the construction project/contract as
described, as follows;
 Factors Contributing to Construction Claims
 Complexity: construction project by nature being a complex project in
terms of its design and/or construction process;
 longevity: construction project/contract requires long duration for its
execution & completion;
 stakeholders: construction project being stakeholder intensive or presence
of multitude of stakeholders for its realization;
 uncertainty: construction projects exposed to many uncertainties which are
outside of the control of the contracting parties;
 risk: construction projects are exposed to physical and/or financial risks due
to various reasons;
 project team: construction projects may bring different personalities,
cultures & behaviors and lack of effective communication among same;
 documentation: construction projects involve so many contract
documentation the un-clarity; incompleteness and/or inconsistency
(ambiguity or discrepancy) of which being liable to cause claims;
 un-kept promises; the level of not keeping the contractual promises made
by the contracting parties (both for execution & completion of the water
works project by the contractor side & payment from the employer side);
 lack of adjudicator; the water works project may not have its own
adjudicator (or dispute board/DRE) during its whole life time, which might
otherwise play to prevent claims and then disputes;
 These and other factors might be the reasons for construction claims, and
then disputes;
 If there is no or less preventive factor in the construction contract performance &
management process, the occurrence of claim, and if such not settled, construction
disputes, are an unavoidable phenomena;
 Water Projects: What are other possible causes which may contribute to the
generation of construction claims as related to water works construction projects?
 Road Projects: What are other possible causes which may contribute to the
generation of construction claims as related to road construction projects?
 Building Projects: What are other possible causes which may contribute to the
generation of construction claims as related to water works construction projects?
 Tunneling; What are possible causes which may contribute to the generation of
construction claims as related to tunneling works/projects?
 Timing: Discuss them separately such causes:
 During performance period?
 During defects liability period? and
 During legal warranty period, if any?
 Definition of Claim
 There is no formal definition given to the concept of claim under any of the
relevant standard conditions of construction contract;
 However, the concept of claim may be defined as an assertion to or a demand
or request for right or remedy;
 Such remedy in construction contract fundamentally related to:
 time remedy; in the form of extension of time;
 cost remedy; in the form of additional payment; or
 both time remedy & cost remedy;
 including other measures or remedies;
 Time remedy is expressed in terms of extension of time for completion of the
project under consideration by the contractor or extension of defects
notification period for the employer (see Clause 11.3 of the MDB-FIDIC
2006);
 Cost remedy may be expressed in terms of recovery of additional payment or
cost from the other party like the contractor from the employer or vice
versa;
 Base for Claims
 The base for the claims of the employer or the contractor shall be the
construction contract itself or the applicable law or both;
 Remedy Under the Construction Contract
 Where the basis for the claim is the contract, the specific clause or sub-
clauses of the underlined construction contract shall be invoked or cited to
support the claim;
 like the signed road or building construction contract;
 Remedy under the Law
 Remedy under the applicable law, relates to a claim arising out of the
contract based on the grounds that a term of contract had been breached but
where the remedy is not designated in the contract;
 Under this circumstance, if the claim is valid, the remedy lies under the
provisions of the applicable law;
 This is specially related to: damages; performance; and cancellation:
namely.,
 damages: the assessment of general damages (see Article 1771 (1)
1790-1805 cum 1790 (1) cum 2090-2123 of the Civil Code); or
 performance: specific (compulsory) performance of the contract
(see Article 1771 (1) cum 1776-1783 of the Civil Code) or
 cancellation: requesting (the court) cancellation of the contract or
direct cancellation of the contract by the interested party; (see Article
1771 (2) cum 1784-1789 of the Civil Code);
 general damages: With respect to assessment of general damages only
courts or the arbitral tribunal or the adjudicator is empowered to assess &
determine/decide based on the principles of damages or compensation;
 specific performance: With respect to specific performance only courts or
the arbitral tribunal is empowered to decide or give an award based on the
principles of the applicable law;
 In such a situation, the Engineer is not empowered to assess & determine any
(general) damages or order specific performance of the construction contract
under the applicable law;
 The remedy would be sought through adjudication (if empowered under the
contract), arbitration or litigation unless the claim is settled amicably;
 The legal remedy in case of general damages may extend to the
determination of liability with respect to the consequential damages &
assessment of quantum of same, termination of contract as provided under
the law ( in serious cases);
 Types of Claims
 Construction claims may involve the following types of claims:
 time related claims; like due to exceptional adverse weather
conditions;
 cost related claims; like due to disruption claims or price adjustment

due to changes in cost as driven by market forces;
 time & cost related claims; like a claim due to delay caused by the
employer; (the claims shall be EOT & recovery of prolongation cost);
 The sources of such claim could be the contract and/or the applicable law;
 Types of claim may thus be categorized in to the following two categories
based on their basis of remedy;
 contractual claim & contractual remedy; where the remedy lies in the
signed construction contract itself;
 contractual claim but legal remedy; where the type of claim being
contractual however the remedy lies in the applicable law;
 Construction claims may be categorized in to the following types based on
who the claimant is:
 contractor’s claims; see Clause 20.1 of MDB-FIDIC (2011); see Clause
69 (financial claims) & Clause 74 (time claims) of contractor’s claims
under PPA 2011;
 employer’s claims; see Clause 2.5 of MDB-FIDIC; no contractual base
for employer’s claims under PPA 2011;
 Employer’s Claims
 time claims: see Clause 2.5 cum 11.3 cum 1.1.3.7 MDB-FIDIC; as related to
extension of the Defects Notification Period;
 cost claims: see Clause 2.5 cum 4.19 Electricity, Water & Gas MDB-FIDIC;
 cost claims: see Clause 2.5 cum 4.20 Employer’s Equipment under MDB-
FIDIC;
 cost claims: see Clause 2.5 cum 8.7 Delay Damages under MDB-FIDIC;
 cost claims: see Clause 2.5 cum 9.4 Reduction of the Contract Price under
MDB-FIDIC;
 cost claims: see Clause 2.5 cum 11.4 (reduction of the Contract Price)
during defects liability period under MDB-FIDIC;
 cost claims: see Clause 2.5 cum 4.14 Avoidance of Interference (Indemnity)
under MDB-FIDIC;
 cost claims: see Clause 2.5 cum 4.16 Transport of Goods (Indemnity) under
MDB-FIDIC;
 cost claims: see Clause 2.5 cum 13.8 (adjustment of contract price in case
of fall of prices) under MDB-FIDIC;
 cost claims: see Clause 2.5 cum 15.4 Payment after Termination (recovery
of damages, costs, expenses plus delay damages) under MDB-FIDIC;
 Contractor’s Claims
 time claims: see Clause 20.1 cum the relevant clauses of MDB-FIDIC;
 cost claims: see Clause 20.1 cum the relevant clauses of MDB-FIDIC;
 profit claims: see Clause 20.1 cum the relevant clauses of MDB-FIDIC;
 time & cost claims: see Clause 20.1 cum the relevant clauses of MDB-
FIDIC;
 other contractual remedies other than time and/or cost are not governed
under sub-clause 20.1;
 see also PPA 2011 Clause 74 for extension of time claims & Clause 69 for
financial claims;
 Remedies for Construction Claims
 The same as claims, construction related remedies may be categorized in to
the following; source, claimant & nature;
 source: based on source: legal & contractual remedies;
 claimant: based on claimant; contractor’s remedies & employer’s
remedies; and
 nature: based on their nature; time, financial & other remedies;
 Legal Remedies
 Legal remedies applicable both to the employer or the contractor are of the
following;
 Specific Performance; see Article 1771 (1) cum 1776-1783 of the Civil
Code;
 Cancellation of Contract; see Article 1771 (1) cum 1784-1789 of the

Civil Code;
 General Damages; see Article 1771(2) cum 1790-1805 of the Civil
Code;
 They are governed under Article 1771-1805 of the Civil Code cum other
applicable laws;
 The issue of serving notice is also crucial like in case of notice of termination;
see Article 1772-1775 of the Civil Code;
 Where other applicable laws become the basis for the remedy, they have to
be considered as well;
 Contractual Remedies
 Contractual remedies may be classified in to the following three categories:
 time related remedies;
 cost related remedies; and
 other remedies;
 They may be relevant to the remedies of the contractor & of the employer,
as follows;
 contractor’s remedies as per MDB-FIDIC
 time remedies: i.e., extension of time for completion of the works to the
contractor;
 variation: see Clause 8.4 (a) due to Variation;
 Clause 8.4 (b) see below in conjunction with other relevant Sub-
clauses;
 climatic conditions: Clause 8.4 (c) due to exceptionally adverse
climatic conditions;
 epidemic or act of government: Clause 8.4 (d) due to
unforeseeable shortages in the availability of personnel, or Goods
caused by epidemic or governmental action;
 delay: Clause 8.4 (e) due to any delay, impediment or prevention
caused by or attributable to the Employer, the Employer’s personnel
(including the Engineer see Clause 1.1.2.6 or the Employer’s other

contractors;
 drawing & instruction: Clause 8.4 (b) cum Clause 1.9 (a) due to
delay in issuing drawing & instructions by the Engineer to the
Contractor;
 site: Clause 8.4 (b) cum Clause 2.1 (a) due to delay in providing
access to the Site by the Employer;
 setting out: Clause 8.4 (b) Clause 4.7 (a) due to delay caused due to
error in Setting out;
 unforeseeable factor: Clause 8.4 (b) cum Clause 4.12 (a) delay due
to unforeseeable physical conditions;
 fossils: Clause 8.4 (b) cum Clause 4.24 (a) delay caused due to
discovery & reporting of Fossils;
 testing: Clause 8.4 (b) cum Clause 7.4 (a) delay caused by the
Employer in relation to Testing;
 suspension: Clause 8.4 (b) cum Clause 8.8 delay caused by
suspension as ordered by the Engineer;
 prolonged suspension: Clause 8.4 (b) cum Clause 8.11 delay
caused due to prolonged suspension provided the Contractor opted
for resuming the performance of the Works after such prolonged
suspension;
 suspension or reduction in progress: Clause 8.4 (b) cum Clause
16.1 (h) delay caused to the Contractor due to suspension or reduction
in the progress of the Works by the Contractor due to delay in
payment;
 financial remedies: may include the following sub-categories: viz.,
 cost;
 profit;
 financing charges; and
 indemnity (compensation);
 Cost
 drawing & instruction: Clause 1.9 (b) due to delayed issuance of
drawings & instructions to the Contractor caused by the Engineer;
 site: Clause 2.1 (b) due to delay caused in providing access to the Site
caused by the Employer (Initial Delay);
 setting out: Clause 4.7 due to delay suffered by the Contractor in
case of error in setting out;
 unforseeability: Clause 4.12 (b) due to delay caused by
unforeseeable physical conditions;
 fossils: Clause 4.24 (b) due to delay caused in case of discovery &
reporting of fossils;
 testing: Clause 7.4 (b) due to delay suffered by the Contractor caused
by the Employer in case of testing;
 suspension: Clause 8.9 (b) due to delay caused by the effect of
suspension as ordered by the Engineer;
 tests: Clause 10.3 (b) due to delay caused by the interference of the
Employer with Tests on Completion;
 tests: Clause 11.6 due to incurring of costs by the Contractor with
respect to repetition of Tests;
 changes in legislation: Clause 13.7 cum 14.3 (b) due to incurring of
cots in relation to adjustment for changes in legislation;
 changes in cost: Clause 13.8 due to incurring of costs in relation to
adjustment of changes in cost;
 value engineering: Clause 14.3 (a) cum Clause 13.2 entitlement to
additional cost in case of cost reduction in relation to Value
Engineering; no value engineering under PPA 2011;
 termination for default: Clause 15.4 (c) getting the balance, if any,
in relation to termination of the Contract due to the default of the
Contractor & the completion of the project by the Employer or third

party (or new contractor);
 suspension: Clause 16.1 (b) due to suspension of works by the
Contractor, as caused by the problem of payment & thereby incurred
cost;
 reduction of progress: Clause 16.1 (b) due to reduction of the
progress of the works by the Contractor as caused by the problem of
payment & thereby incurred cost;
 termination for default: Clause 16.4 (c) due to termination of
Contract by the Contractor due to the default of the Employer &
recovering costs incurred thereby;
 risks of the Employer: Clause 17.4 (b) costs incurred due to
consequences of the Employer’s Risks;
 force majeure: Clause 19.7 (b) entitlement to some payment in case
of release from performance of the Contract (Frustration);
 claims: Clause 20.1 cum Clause 14.3 (f) payment of additional
payment due to claims of the Contractor;
 Profit:
 drawings & instructions: Clause 1.9 (b) in case of delayed
issuance of drawings & instruction by the Engineer;
 site: Clause 2.1 (b) in case of delay in providing access to the Site by
the Employer;
 setting out: Clause 4.7 (b) in case of error in Setting out;
 testing: Clause 7.4 (b) in case of delay suffered by the Contractor
caused by the Employer in relation to Testing;
 interference: Clause 10.3 (b) in case of interference with Tests on
Completion by the Employer;
 suspension & reduction: Clause 16.1 (b) in case of suspension &

reduction of the progress of the work by the Contractor caused by
payment related problem;
 risks: Clause 17.4 (b) cum Clause 17.3 (f) & (g) in case of Employer’s
Risks;
 PPA; there seems no profit claim under PPA 2011; see Clause 69;
 Financing Charges:
 Clause 16.1 cum 14.8 to the contractor in case of delayed payment by
the Employer;
 Indemnity:
 as per dictionary meaning indemnity (in law) means an undertaking
to compensate another for damage, loss, or trouble or expenses or the
money paid by way of such compensation…;
 Indemnity includes claims, damages, losses & expenses including legal
fees & expenses; it means simply compensation;
 performance security related: Clause 20.1 cum 4.2 in case of
calling the Performance Security by the Employer to the extent to
which the Employer was not entitled to make the claim under the
Performance Security;
 indemnity in general: Clause 17.1 general obligation in relation to
indemnifying the Contractor by the Employer;
 intellectual rights: Clause 17.5 indemnifying the Contractor in
relation to intellectual & industrial property rights;
 other remedies:
 By other remedies we understand those contractual remedies other
than time and/or cost;
 The enforcement of these remedies itself may, in turn, cause time
and/or cost related remedies;
 Other remedies may include the following; deceleration; suspensions;
and termination;
 Deceleration (reduction) of the progress of the Works by the

contractor; due to delay in payment; Clause 8.6 cum 16.1 MDB-
FIDIC
 Suspension of the performance of the Works by the contractor; due
to delay in payment; Clause 14.8 cum 16.1 MDB-FIDIC
 Termination of the Contract; Clause 8.11 cum Clause 16.2 (f) due
to prolonged suspension of the Works by the Employer by the
contractor;
 Termination: Clause 16.2 (a) through (j) due to the default of the
Employer by the contractor;
 Termination: Clause 16.2 (h) due to delay in payment & other
grounds by the contractor; MDB-FIDIC;
 employer’s remedies: time & cost remedies
 time remedy:
 Clause 2.5 cum 11.3 cum sub-clause 1.1.3.7 in relation to Defects
Notification Period;
 financial remedies: may include the following sub-categories:
 delay damage;
 indemnity; and
 reduction of the contract price;
 delay damage:
 delay: Clause 2.5 cum 8.7 in relation to delay by the Contractor in
completing the Works within the time for completion or as extended;
 indemnity:
 Indemnity includes claims, damages, losses & expenses including legal
fees & expenses; it means simply compensation;
 the contractual ground for the employer to demand indemnity might
vary; it may include the following grounds;
 laws: Clause 1.13 in relation to the Contractor’s failure to comply

with laws;
 sub-contractor’s: Clause 4.14 in relation to the Contractor’s
responsibility for the acts or defaults of any sub-contractor, his agents
or employees;
 goods: Clause 4.16 (c) in relation to the transport of Goods;
 risk: Clause 17.1 in relation to bodily injury, sickness, diseases, or
death of any person …;
 intellectual rights: Clause 17.5 in relation to claims pertaining to
intellectual & industrial property rights;
 reduction in contract price
 testing: Clause 4.9 in relation to testing;
 utilities: Clause 4.19 in relation to the cost of electricity, water &
gas;
 employer’s property: Clause 4.20 in relation to Employer’s
Equipment & Free-issue-Materials;
 termination: Clause 15.4 (c) in relation to payments (of the balance,
if any) after termination of the Contract by the Employer due to the
default of the Contractor;
 defects: Clause 11.4 (c) in relation to failure to remedying defects by
the Contractor during defects liability period;
 Other Remedies:
 By other remedies, we understand those contractual remedies
available to the employer other than time and/or cost;
 These are of the following:
 suspension;
 termination; and
 substitutionary contract performance;
 The enforcement of these remedies itself may, in turn, cause time

and/or cost related remedies/claims;
 suspension;
 see Clause 8.8 in relation to suspension of the Performance of the
Works by the employer (through the Engineer);
 NB: this measure may not necessarily be related to default of the
contractor;
 termination;
 see Clause 11.4 (c) in relation to Tests on Completion;
 termination:
 see Clause 15.2 in relation to default of the Contractor;
 termination:
 see Clause 15.2 (f) in relation to corruptive practices of the
Contractor;
 termination:
 see Clause 15.6 in relation to corruptive practices of the Contractor;
 substitutionary performance:
 see Clause 15.4 in relation to the terminated construction contract due
to the default of the contractor;
4. Construction Claims Management
 Requirements: threefold
 As related to contractual, time and/or cost related and contractor’s claims,
the following three cumulative requirements have to be fulfilled for a valid
construction claim to exist;
 These requirements are: threefold: viz.,
 procedural requirement;
 substantive requirement; and
 proof requirement;
 see Clause 20.1: Contractor’s Claims; See Clause 2.5: Employer’s Claims;
MDB-FIDIC 2006;
 See Clause 69: PPA 2011;

 Procedural Requirement: Notice
 It means that the contractor is to give its intention to claim, via notice of
claim, to the Engineer;
 Such notice is time bound; the failure to comply with such time scale may
lead to the loss (waiver) of the claim itself & cessation of the liability of the
employer towards the contractor;
 see Sub-clause 20.1 of the two FIDIC versions (MDB-FIDIC & FIDIC 1999
New Red Book) in this regard;
 Substantive Requirement: Contract and/or Law
 This requirement also known as legitimacy requirement;
 It means that, when the contractor prepares & submits its full claim, he is
required to show or indicate the basis (legitimacy or authority) for its claim
either:
 contract: based on specific applicable thus relevant clause (s) or sub-
clause (s) of the construction contract signed; and/or
 law: the provision of the applicable law, if any;
 The requirement said to be substantive because it is related to the
establishment of a right or an entitlement (to the claimant or obligation on
the other) under the contract and/or the applicable law;
 see Sub-clause 20.1 of the two FIDIC versions in this regard;
 Proof Requirement: Records
 By proof requirement it means that the contractor, when it submits its full
claim, is required to substantiate its claims by all available evidence/records:
 Records are of two types:
 contemporary records; and
 historical records;
 see Sub-clause 20.1 of the two FIDIC versions (MDB (2006 & 2010) & New
Red Book 1999) in this regard;
 see also the appendix attached to this training material as related to Records;
 Proof requirement is also a legal requirement: he who alleges must prove its
assertion; see Article 2001-2026 of the Civil Code (Proof in Relation to
Contract);
 Two legal obligations: the obligation to produce the evidence (viz., like
records) & the obligation to persuade;
 Means of proof could be documentary; witness (expert opinion; factual
witness); presumptions; (like see Sub-clause 10.1: Takeover of the Works by
the Employer) project site visit; and so forth;
 Proof at the stage of claim (mainly focused on documentary type of evidence
known as contemporary records) & at the stage of dispute resolution may
vary (documentary plus expert opinion plus factual witness…);
 Construction Claims Management Process
 Construction claims management process may undergo the following three
interrelated steps (Dr. Wubishet):
 claim submittal;
 claim processing; and
 claim enforcement;
 Claim Submittal
 This is a process by which the claimant is obliged to claim within a
reasonable period of time (28-30 days in most contracts) followed by the
claimant’s preparation for all substantial documents & legal aspects
supporting its entitlements for an official submittal.
 This constituted that a claim has been filed for its consideration if all the
three sub-processes called:
 Claim Notification;
 Claim Preparation; and
 Claim Submittal; and are fully undertaken by the claimant;
 Claim Processing
 This phase is classified further in to the following three sub-processes:
 Claim Handling;
 Dispute Resolution; and

 Claim Approval;
 Claim Handling:
 this sub-process initiates checking of the claim whether:
 it is legally or contractually supported or not (i.e., Legitimacy
Requirement);
 documents provided are valid and reliable to substantiate the claim
for consideration or not(i.e., Proof Requirement); and
 Overall procedural requirements have been followed or not (i.e.,
Notice Requirement).
 After verifying the validity of the claim, proper computations &
evaluations will be carried out to present the proposed compensation
for the contractual parties the claim is applicable to;
 Dispute Resolution:
 The contractual parties will pass through different dispute resolution
system depending on their acceptance over the proposed
compensation varying from the simplest mediation by the consulting
engineer to the final court ruling in the form of litigation;
 Three types of dispute resolution systems are well recognized. These
are:
 Preventive Dispute Resolution System; (by use of partnering,
dispute resolution advisors, facilitators, …)
 Amicable Dispute Resolution System; (through negotiation,
mediation, conciliation, mini-trial, …)
 Judgmental Dispute Resolution System; (through Dispute
Adjudication Board, Arbitration, Litigation…)
 Where dispute was handled in any form of its resolution
System, it is termed as Dispute Resolution;
 Claim Approval:
 Once the contractual parties agree on the final outcome of the claim
process, then they have reached in to a stage where the claim is
approved;
 The claim approval may come from the Engineer positive
determination or dispute board’s decision or recommendation or
arbitration award or court judgment as the case may be;
 Claim Enforcement
 This phase is sub-divided in to the following two sub-processes:
 Claim Enforcement; and
 Claim Closure;
 The claim enforcement sub-process will entertain the inclusion of the
approved claim in to payment certificates where their enforcement is due;
 Once this compensation or entitlement is due in accordance with the
approved claim and its enforcement requirements, then it is concluded for its
closure;
 In order to account for such an administration process, contracts provide
claim clauses within their provisions in their conditions of contract;
 Procedure for the Claims of the Contractor: under Clause 20.1
 According to Bunni, the following procedures (based on FIDIC 1999 New
Red Book) were described;
 Step 1:
 An event or circumstance occurs with a potential of a claim by the
Contractor against the Employer under any of the Contract
conditions or otherwise (i.e., the applicable law) in connection with the
Contract;
 Step 2:
 The Contractor shall give notice of the claim to the Engineer
describing the event or circumstance give rise to the claims;
 Step 3:
 The Contractor should keep substantiating contemporary records,

which the Engineer may monitor and/or instruct the Contractor to
keep further contemporary records;
 Step 4:
 Within 42 days of the event, the Contractor should submit a fully
detailed claim which includes full supporting particulars of the claim.
The period may be varied if approved by the Engineer.
 Step 5:
 Within 42 days after receiving the claim or any further particulars
supporting a previous claim, the Engineer should respond with
approval or disapproval and detailed comments. He (the Engineer)
may also request any necessary further particulars, but shall
nevertheless give his response on the principles of the claim within
such time.
 Step 6:
 Substantiated amounts for any claim should be included in each
Payment Certificate.
 Step 7:
 The Engineer should then proceed in accordance with sub-clause 3.5
to agree or determine (i) the extension of time (if any) and/or (ii) the
additional payment (if any) to which the Contractor is entitled under
the Contract;
 Step 8:
 The Engineer should consult with each Party in an endeavor to reach
agreement, failing which he is required to make a fair determination
in accordance with the Contract;
 Step 9:
 If agreement between the parties is achieved, the Engineer is required
to give with notice a particular. Otherwise, he is required to give a
notice his determination with particulars;
 Step 10:
 Each Payment Certificate shall include such amounts for any claim as
have been reasonably substantiated as due under the relevant
provisions of the Contract;
 Step 11:
 If the Engineer’s determination is not acceptable to the Parties, the
dispute arising should be resolved in accordance with Sub-clause 20.2
to Sub-clause 20.8;
 Procedure for the Claims of the Employer: under Clause 2.5
 According to Bunni, the following procedures (based on FIDIC 1999 New
Red Book) were described;
 Step 1:
 An event or circumstance occurs with a potential of a claim by the
Employer against the Contractor under any of the Contract
conditions or otherwise (i.e., the applicable law) in connection with the
Contract;
 Step 2:
 The Employer or the Engineer should give notice & particulars of the
claim to the Contractor;
 Step 3:
 The Engineer should then proceed in accordance with Clause 3.5 to
agree or determine (i) the amount(if any) which the Employer is
entitled to be paid by the Contractor; and/or (ii) the extension (if any)
of the DNP in accordance with sub-clause 11.3;
 Step 4:
 The Engineer should consult with each party in an endeavor to reach
agreement, failing which he is required to make a fair determination
in accordance with the Contract;
 Step 5:
 If agreement between the parties is achieved, the Engineer is required

to give with notice a particular. Otherwise, he is required to give a
notice his determination with particulars;
 Step 6:
 The amount determined may be included as a deduction in the
Contract Price & Payment Certificate. The Employer shall only be
entitled to set off against or make any deduction from an amount
certified in a Payment Certificate, or to otherwise claim against the
Contractor;
 Step 7:
 If the Engineer’s determination is not acceptable to the Parties, the
dispute arising should be resolved in accordance with Sub-clause 20.2
to Sub-clause 20.8;
5. Construction Disputes Management System
 Background
 The root & formal cause for construction dispute is the un-settled or un-
resolved construction claim originating from the construction claims
management framework;
 The scope or extent of such un-resolved claim could be the whole of the claim
of the contractor or part thereof;
 Causes
 For systematic understanding of construction disputes, the causes for
construction disputes could be categorized in to the following:
 These are:
 breach related;
 right related; and
 event or risk related.
 Breach Related Construction Disputes
 Contract-Breach related construction disputes are common causes;
 By breach based dispute it means that the contractor or the employer has
failed to perform its contractual obligation under the relevant construction
contract; like road construction contract;
 The breach may have thus resulted, against the other, loss of time and/or
cost;
 Breach based dispute is, therefore, a process of securing such remedial rights
(viz., in the form of time extension and/or recovery of cost) from the other;
 The following could be illustrative of breach based disputes:
 delay related claims of the contractor (as such delay caused by the
employer/the Engineer or for which the employer being liable; see
Clause 1.9 or 2.1 cum 20.1 MDB-FIDIC;
 claims related to delay damages of the employer; as caused by the
contractor; see Clause 8.7 cum 2.5 MDB-FIDIC;
 claim related to delay in payment of the contractor; as caused by the
employer; see Clause 14.8 cum 20.1 MDB-FIDIC;
 non-performance of contract related claims; the remedy may lie
under the contract or the applicable law;
 claims related to defective performance, if any;
 Right Based Construction Disputes
 Right based construction disputes may come in to picture in relation to
exercising a right under the contract either by the employer or by the
contractor;
 The employer may exercise such contractual right either directly by itself or
through the Engineer;
 Exercising a right under the contract may not, by itself, lead to claims and
then to construction disputes;
 Disputes may thus be generated if due to exercise of such contractual right
under the contract, the contractual interests of the other contracting party
affected & such interests were not addressed through claims management
framework;
 Contractual interest may take the form of time and/or cost;
 The following could be illustrative of right based disputes:

 variation related claims; see Clause 13.1 cum 20.1 MDB-FIDIC;
 measurement related claims; see Clause 12.1 cum 20.1 MDB-FIDIC;
 acceleration related claims; see Clause 8.6 cum 20.1 MDB-FIDIC;
 suspension of performance of works related claims; if such
suspensions was taken by the Employer through the Engineer; see
Clause 8.8 cum 20.1 MDB-FIDIC;
 suspension of the performance of work by the contractor; see Clause
16.1 cum 20.1 MDB-FIDIC;
 termination of contract for employer’s convenience related claims; see
Clause 15.5 cum 20.1 MDB-FIDIC; see also Article 3180 (Termination
of Contract) & 3181 (Compensation) of the Civil Code;
 Event/Risk Related Construction Disputes
 Disputes originating from the occurrence of specified events in the contract
or external risk factor are the third category of causes for construction
disputes.
 They are outside of the control of the contracting parties, in principle, and
are also the most difficult and complex types of construction disputes;
 Specified events are provided in the contract & are also regulated by the
applicable law (as in the case of force majeure, for example). They might
give rise to some form of claim in terms of time and/or additional cost;
 The risk factors are out of the control of the contracting parties. Such risk
factors might be:
 related to act of government;
 related to market forces;
 related to forces of nature or act of God;
 related to third parties or other risk factors;
 The following could be illustrative of event/risk related construction
disputes:
 government: changes in legislation; see Clause 13.7 cum 20.1 MDB-
FIDIC;
 market: decrease or increase of cost due to market driven causes; see

Clause 13.8 cum 20.1 MDB-FIDIC;
 ground conditions; claims related to adverse ground conditions; see
Clause 4.12 cum 20.1 MDB-FIDIC
 risks: occurrence of employer’s risks; see Clause 17.3 cum 20.1 MDB-
FIDIC
 weather: occurrence of exceptionally adverse weather conditions; see
Clause 8.4 (c) cum 20.1 MDB-FIDIC;
 Perspectives
 The construction dispute management system is based on the following three
dimensions/perspectives:
 preventive perspective;
 settlement perspective; and
 judgmental perspective.
 Preventive Perspective
 Prevention of construction claims and thus disputes is the primary goal of the
construction dispute management system.
 In the dispute prevention process, the following, at least, may play a
contributory factor: viz.,
 the contract document;
 the contracting parties;
 the Engineer; and
 the adjudicator (s) (re: dispute board/DRE);
 Contract Documents:
 Contract documents regulate the relationship & behavior of the
parties to the construction contract;
 To be an effective regulator, all parts of the contract document have
to be prepared by considering the following attributes: viz., in terms
of their clarity; completeness; consistency; and balanced risk
allocation;
 This requires integration among all professionals who are in charge of

preparing the standard bidding documents including the draft
construction contract documents;
 Contracting Parties:
 Contracting parties themselves may play a decisive role in preventing
construction claims thus disputes.
 This could be done by the top management of the contracting parties
through creating a project governance environment, within which
partnering & other forms of collaborative mechanisms are to be used,
with a view to prevent & even to avoid construction claims and thus
disputes at earlier possible phase of its development;
 The Engineer:
 Under the construction contract, the Engineer has been provided,
though limited, with consultation & determination function which
emanates from its professional role.
 In such claims thus dispute prevention process, the Engineer may play
its role in the following two ways:
 in terms of undertaking a balanced & effective consultation
between the employer & the contractor before its formal
determination on the claim so arisen & submitted to it; and
 if such consultation fails, in terms of considering &
determining the contracting party’s claim so professionally.
 The Adjudicator (Dispute Board/DRE)
 For the adjudication system to serve as preventive mechanism, it has
to be instituted in the project right from the commencement of the
project through its completion.
 The reason for adjudication being a factor for prevention of
construction disputes is the deep & equal familiarization of the
construction process & understanding of potential problems by the
adjudicator.
 Parties are not encouraged to initiate & submit a non-genuine & less
founded construction claims or disputes to the adjudicator (DB/DRE).
 Construction Dispute Settlement
 Background
 Under (amicable) settlement, the following three methods of construction
dispute settlement are identified:
 These are: negotiation; mediation; and conciliation;
 negotiation; see Article 3307-3317 (Compromise) of the Civil Code
cum see also Clause 20.5 MDB-FIDIC;
 mediation; Clause 20.5 MDB-FIDIC; Amicable Settlement
 conciliation; see Article 3318-3324 (Conciliation) cum 3307-3317
(Compromise) cum see also Clause 20.5 MDB-FIDIC (Amicable
Settlement);
 These dispute settlement methods are not unique to the construction
industry, however. There are also other numerous comparable methods;
 The settlement perspective fundamentally characterized by the following
fundamental common features: viz.,
 outcome: in terms of control of the outcome of the dispute by the
disputing parties;
 process: in terms of designing and/or of the settlement process by the
parties/by third party (like mediator or conciliator), if any;
 interest: in terms of the outcome of the settlement process, if any,
being interest-based; i.e., settling the dispute based on the mutual
interest of the disputing parties;
 time & cost: settlement methods are cost effective & non-time
consuming to the disputing parties;
 win-win: in terms of psychological benefit to the disputing parties;
viz., creating win-win situation to the disputing parties; and
 relationship: keeping & sustaining good future relationship between

the disputing parties;
 Outcome
 Under all settlement process, the outcome of the dispute is fully
controlled by the disputing parties themselves;
 Control of outcome means to settle or not to settle the construction
dispute under consideration, and if mutually agreed to settle same, to
freely determine the substantive content of the settlement itself;
 Process
 The degree of control of the process varies depending on the specific
settlement method chosen;
 the process could solely be designed & enforced by the disputing
parties in case of direct negotiation; and jointly be designed by the
disputing parties and the relevant neutral (like the mediator or the
conciliator);
 The process is either fully or partially controlled by the disputing
parties, as shall be discussed hereunder;
 Interest
 By interest based it means, the settlement process & outcome follows
the underlined & mutual interests of the disputing parties not
necessarily the contract and/or the applicable law;
 The settlement method thus generally characterized as the process of
re-definition of the original contractual and/or legal position by the
disputing parties;
 Such settlement process is, therefore, a conscious process to re-
define the originally agreed contractual rights and obligations and/or

the original position of the applicable law to the legal solution to the
dispute;
 Negotiation
 Negotiation, basically, is of two types: viz., deal negotiation & dispute
negotiation;
 deal negotiation: as related to undertaking pre-contract negotiation
with a view to enter in to construction contract, for example; and
 dispute negotiation: as related to settling the underlined
construction dispute, for example;
 We discuss negotiation here from the latter (dispute) perspective;
 Such negotiation is then of two types:
 direct negotiation: negotiation between the disputing parties or their
representatives; and
 assisted negotiation: like undertaking negotiation between the
disputing parties in the presence of a mediator or conciliator;
 Under (direct) negotiation, the disputing parties fully design the process;
fully control both the settlement process & the outcome of the dispute;
 The outcome is expected to reflect their mutual interest;
 Negotiation could be undertaken directly by the disputing parties and/or
through their representatives;
 required competence & skill: both for direct & assisted negotiation;
 to influence the outcome, two types of skills are required from the
negotiating parties: viz.,
 knowledge on the subject matter: i.e., on the agenda (specific dispute)
to be negotiated; and
 process skill: i.e., the art of negotiation;
 legal power:
 Legal requirements are also there in case of public construction
projects; viz., having the requisite legal power (capacity) to settle
disputes out of court;
 NB; ERA is a typical public institution which (legally & expressly)
fulfills this legal & public policy requirement;
 good faith:
 The other legal requirement in case of settlement process is behaving
in good faith during negotiation process by the disputing parties;
 Mediation
 Under mediation (also called assisted negotiation), the disputing parties fully
control the outcome of their dispute;
 The role of the (neutral) mediator is merely to facilitate the communication
& the negotiation process between the disputing parties;
 Both the disputing parties & the mediator jointly establish/design the
mediation process;
 However, for the purposes of effective facilitation of such assisted
negotiation, the mediator controls & enforces the procedure or process so
established/designed jointly;
 Under mediation process, the outcome is said to be ensuring the mutual
interest of the disputing parties;
 Mediation has a clearly established process structure;
 Mediation is not yet recognized under the Ethiopian legal framework;
 Conciliation
 Under conciliation, the (neutral) conciliator may play the following four
roles; viz.,
 facilitative role;
 evaluative role;
 predictive role; and
 suggestive role;
 facilitative role:
 like the mediator, the conciliator is there to facilitate the information
flow between the disputing parties & the negotiation process;
 see Article 3320 (1) of the Civil Code;
 evaluative role:
 By evaluative role of the conciliator it means that the conciliator is

able to assess the strength & weakness of the merit of the dispute and
the respective positions including behavior of the disputing parties,
and to reflect his/her opinion thereon;
 predictive role:
 By predictive role of the conciliator it means that the conciliator is to
assess & present to the parties, if requested, the fate of the dispute if
it were submitted to a certain judgmental forum like arbitration or
litigation;
 this role of the conciliator is typical in construction disputes;
 suggestive role:
 By suggestive role of the conciliator it means that in case the disputing
parties fail to settle the dispute by themselves based on the evaluation,
and prediction, if any, made by the conciliator, the conciliator
recommends/suggests a solution to the disputing parties to settle the
dispute;
 see also Article 3320 (2) of the Civil Code;
 As to controlling the outcome, even if the conciliator has the power, finally,
to propose or suggest a recommendation for the settlement of the dispute, the
disputing parties fully control the outcome of the dispute in the following two
ways:
 by generating their own settlement option based on the evaluation
and/or prediction, if any, of the dispute made by the conciliator; or
 by accepting or rejecting the recommendation (suggestion) made by
the conciliator; see Article 3322 (2) of the Civil Code;
 process: The conciliation process may be established jointly both by the
conciliator & the disputing parties;
 However, more strongly, the process so jointly established is to be controlled
& enforced by the conciliator;
 interest based: The outcome of the conciliation said to serve the respective
interests of the two disputing parties: viz., interest-based;
 Judgmental Methods
 Background
 Under judgmental perspective, the following three methods of dispute
resolution are, basically, identified: viz.,
 These are: construction adjudication; arbitration; and litigation;
 construction adjudication (DB/DRE); see Clause 20.2-20.4; MDB-
FIDIC;
 construction arbitration; see Clause 20.6 MDB-FIDIC; see also
Clause 26.6 of the PPA cum Article 3325-3346 of the Civil Code cum
Civil Procedure Code: Article 315 ff; 350 ff;
 construction litigation; see the federal & regional Courts
establishment & court establishment jurisdiction legislations cum the
Civil Procedure Code; see Clause 26.5 of the PPA 2011;
 The judgmental perspective fundamentally characterized by the following
three features: viz.,
 in terms of control of outcome;
 in terms of design and/or control of process; and
 in terms of the outcome being right-based;
 There are indeed other fundamental features of the judgmental sub-system:
 like being non-cost effective; being time consuming; win-lose scenario; not
keeping relationship;
 Outcome:
 Under judgmental method & process, the disputing parties are not
controlling the outcome of their disputes;
 The outcome of the dispute shall, however, be determined & thus controlled
by a neutral & an impartial third party: viz.,
 by the decision of the adjudicator, under construction adjudication process
or the recommendation of the DRE like in road construction contract;
 by the award of the arbitrator, under construction arbitration process; or
 by the judgment of the judge at the court of law, under litigation process;
 Process:
 There may be virtually no or some degree of control over the process in
relation to such judgmental methods;
 The disputing parties have no right to control over the court/litigation
process;
 The litigation or judicial process has already been determined by the
applicable procedural law(i.e., the Civil Procedure Code);
 Neither the parties to the dispute nor the judge have any legal power to
change the process so determined by such procedural law;
 In case of both adjudication & arbitration, the disputing parties & the
adjudicator or the arbitrator jointly establish/design the process, as the case
may be;
 However, the procedure so established/designed jointly being so strongly
controlled & enforced by such adjudicator or arbitrator, as the case may be;
 right-based Outcome:
 The outcome of the case or the construction dispute under consideration, in
all such judgmental methods & processes, is right-based.
 It means that, though the degree of formality & complexity differs, in all
such judgmental processes, the outcome of the construction dispute is based
on and/or influenced by the following four critical factors: viz.,
 contract;
 law;
 evidence; and
 argument;
 contract: proper identification & sound analysis of the signed construction
contract by the disputing parties; and interpretation & application of same
by such neutral (namely, by the adjudicator or by the arbitrator or by the
judge);
 law: proper identification & sound analysis of the applicable law by the
disputing parties; and interpretation & application of same by such neutral
(namely, by the adjudicator or by the arbitrator or by the judge);
 evidence: proper identification & presentation of the evidences &
persuasion of the neutral by the disputing parties & weighing of such
evidences by such neutral (namely, by the adjudicator or by the arbitrator
or by the judge); and
 argument: the sound (written & oral) arguments so made by the respective
disputing parties; and well consideration of such arguments by such neutral
(namely, by the adjudicator or by the arbitrator or by the judge);
 The disputing parties have thus no role to play to determine the outcome of
the case except to exert their maximum professional effort to secure a
positive outcome by well presenting & supporting their case by such contract
and applicable law; and to submit such evidence and/or argument in the
process;
 Adjudication
 Definition
 Adjudication can be defined as a process whereby an appointed neutral &
impartial party is entrusted to take the initiative in ascertaining the facts
and the law relating to a dispute to reach a decision within a short period of
time;
 Adjudication may be defined as a process where a neutral third party gives a
decision, which is binding on the parties unless or until it is revised in
arbitration or litigation;
 Features
 Adjudication may be characterized by the following features; Those features
distinguished it from arbitration;
 uniqueness:
 adjudication is unique to the construction industry, in terms of its
historical emergence & current development & application;
 part of procurement:
 adjudication is part of the procurement planning;
 the appointment of DAB members with their names is communicated
with tender documents to the prospective bidders during such
tendering phase;
 real time:
 adjudication is a real time dispute resolution process;
 it means that the members of the dispute board are there right from
the commencement of the project up to its completion;
 in principle, adjudication is a permanent contractual body; it does
not dissolve itself once it issues its decision/recommendation;
 inclusive mutual consent:
 appointment of dispute board members shall be undertaken based on
the mutual consent of all the disputing parties;
 it means that the contracting/disputing parties express their
respective consent on the appointment of all the three members of the
dispute board;
 three partite agreement:
 there shall be an agreement to be signed between the members of the
board & the disputing parties;
 all recent FIDIC versions provide the contents of such agreement;
 for example, the form of agreement to be signed between the
contracting/disputing parties & the members of the dispute board
has been attached, as Appendix, with MDB-FIDIC; see pp 70-76;
 shared remuneration:
 the remuneration has to be paid to such members equally by the
disputing parties;
 it is reflected in the tripartite agreement to be signed between the
disputing parties & the members of the dispute board;
 one dispute:
 only one dispute at a time shall be referred to such process;

 short time:
 a decision/recommendation has to be given within a short period of
time;
 extension of time is allowed based on the consent of the disputing
parties;
 Types
 The type of adjudication may be considered by taking some specific factors
like:
 outcome as a factor; decision or recommendation or both;
 institutional factor; permanent vs. ad hoc;
 legitimacy factor; statutory vs. contractual;
 outcome-based: three types of dispute board or adjudication are
recognized based on its possible outcome: viz.,
 adjudication: dispute adjudication board (DAB) which provides a
decision; see Clause 20.2-20.4 MDB-FIDIC
 review: dispute review board (DRB) which provides
recommendation; and (NB: like DRE in case of ERA practice);
 combined: combined dispute board (CDB) which may provide either
recommendation or decision depending on the request & justification
made by the disputing parties;
 institutional-based: from institutional perspective adjudication could be
permanent or ad hoc;
 permanent: in line with its historical background & the clauses of
the FIDIC conditions of contract; under permanent adjudication the
DB be there from the commencement of the project up to its
completion; or
 ad hoc: in which case a dispute board is constituted in the middle of
the construction project & dissolves itself once it gives its decision or
recommendation, as the case may be;
 The Ethiopian construction industry uses:

 adjudication: to provide decision under the PPA, 2006 version;
however, the PPA 2011 version dispenses with the use of adjudication
from public construction contract;
 dispute review expert (DRE): to provide a recommendation; it is in
practice in most of the ERA road projects;
 legitimacy-based: from legitimacy perspective, adjudication could also be
contractual or statutory:
 contractual: most countries (including Ethiopia) follow contractual
adjudication; thus adjudication is not recognized in the Ethiopian
legal system;
 statutory: in the UK & some other countries statutory adjudication
is followed; statutory means an adjudication system is established by
law;
 Arbitration
 Background
 Arbitration is the oldest form of dispute resolution method;
 It is not so unique to the construction industry thus to construction disputes;
 As defined, as per Article 3325 (1) of the Civil Code: the arbitral submission
is the contract whereby the parties to a dispute entrust its solution to a third
party, the arbitrator, who undertakes to settle the dispute in accordance with
the principle of law;
 Arbitration is thus consensual i.e., based on an agreement of the disputing
parties to arbitrate their disputes;
 The outcome of an arbitration process, in principle, is a decision; Such
decision is reached based on the principles of law;
 The decision of the arbitrator is recognized, legally, as an award;
 The award is also legally recognized & enforceable through the use of public
justice system. i.e., the court;
 Types
 There are so many types of arbitration based on different criterion; the
following are some based on Clause 20.6 MDB-FIDIC; viz.,
 international vs. domestic arbitration; the details has to be provided in the
special conditions of contract;
 institutional vs. ad hoc arbitration; this type of arbitration is based on
arbitration process management ownership;
 Institutional arbitration:
 is the type of arbitration whose process is administered by an
arbitration institution. The dispute under consideration heard &
decided by an arbitral tribunal constituted under such arbitration
rules of the said institution, if any;
 like the construction dispute under the International Chamber of
Commerce (ICC, Paris); or
 like the construction dispute under the London Court of International
Arbitration (LICA, London); or
 like the construction dispute under Arbitration Institute of the AA
Chamber of Commerce & Sectoral Associations;
 ad hoc arbitration:
 under this type of arbitration, both the disputing parties & members
of the arbitral tribunal directly manage the process;
 Process
 The arbitration process may have the following basic structure; however, it is
beyond what has been presented here;
 The general process framework may include the following:
 agreement: having an agreement to arbitrate;
 dispute: occurrence of a construction dispute;
 composition: composition or organizing an arbitral tribunal;
 meeting: undertaking preliminary meeting;
 pleading: exchange of written pleading/argument;
 hearing: undertaking oral hearing;

 costs: submission of arbitration costs;
 award: rendition of final award;
 agreement
 since arbitration being consensual, the agreement to arbitrate is a sine qua
non (condition precedent) for the arbitration process to exist;
 this is evident in case of road construction contracts based on FIDIC; see
Clause 67 FIDIC 4th; see also Clause 20.6 MDB-FIDIC (2006);
 see also Article 3325-3346 of the Civil Code of Ethiopia;
 dispute
 for the arbitration process to be triggered, a dispute has to be arisen between
the employer & the contractor under the said construction contract;
 to initiate an arbitration process under Clause 20 of MDB-FIDIC, there are
three pre-conditions: viz., decision; notice; and settlement;
 decision: a DAB has rendered its decision;
 notice: the dissatisfied disputing party has served the Notice of
Dissatisfaction to initiate arbitration (then the decision of the DAB
ceases to be final & binding); and
 settlement: an amicable settlement has to be attempted by the
disputing parties, and such attempt has become unsuccessful;
 composition:
 The tribunal may be composed of sole arbitrator or of three arbitrators or of
more arbitrators;
 By composition of the arbitral tribunal it thus means the process of
appointment of the sole arbitrator or co-arbitrators by the respective
disputing parties;
 In case of collegiate arbitral tribunal (a tribunal with 3 or more arbitrators),
the presiding arbitrator may be appointed by such respective co-arbitrators;
 The appointment of arbitrators may be undertaken by: the parties

themselves; or by the agreed arbitration institution; or by court; as the case
may be;
 meeting:
 Since such meeting is to be held at the earliest phase of the arbitration
process, it is known as preliminary meeting;
 The time to undertake such meeting is mostly before the commencement of
the exchange of written pleadings;
 The very purpose of undertaking a preliminary meeting by the arbitral
tribunal & the disputing parties being:
 to establish the road map for the arbitration process;
 to define the roles of the disputing parties & of the arbitral tribunal in
the arbitration process; and
 to determine the power of the arbitral tribunal;
 The procedural time table for the arbitration process shall also be
fixed at such meeting;
 Such time table basically serves the purpose to guide & regulate, in terms of
the arbitration program, the submission of the written pleadings by the
disputing parties & other submissions to the arbitral tribunal, if any;
 see also the detail issues/agenda to be discussed at such preliminary meeting,
in this training material at pp 77-80;
 pleading:
 concept: By pleading it means exchange of written pleading/argument by the
claimant (employer or contractor) & the respondent (contractor or
employer);
 designation: The whole written pleading is called Memorials in international
commercial arbitration;
 aspects: The written pleading may contain the following four aspects:
 claimant: request for arbitration by the claimant;
 respondent: reply to the request by the respondent plus its counter-

claim, if any;
 claimant: counter reply to the reply & reply to the counter claim by
the claimant;
 respondent: counter reply to the reply as related to the counter
claim by the respondent;
 This is the core of the process which takes the lion share of the time of the
arbitration process;
 hearing:
 There is a possibility for the parties to undertake no hearing at all (then the
arbitration type being documents only arbitration); or may decide to have
short procedure with hearing or full procedure with full oral hearing;
 purpose: the purpose of undertaking a full oral hearing being to hear
evidences & oral arguments of the parties provided the disputing parties
have decided to have such full oral hearing;
 impact: hearing is time consuming & resource intensive; it requires serious
planning & organization including scope determination;
 structure: the following is the basic structure of the full oral hearing:
 opening statement: making opening statement (written): first by the
claimant, and then by the respondent, as the tribunal directed;
 evidence-in-chief: introducing respective evidence-in-chief of the identified
witnesses (expert and/or factual); by the claimant & the respondent,
respectively;
 cross examination: undertaking cross examination of such identified
witnesses by the respondent to cross examine the witnesses of the claimant;
and by the claimant to cross examine the witnesses of the respondent, if any;
 re-direct examination: undertaking re-direct examination by the
claimant & the respondent its own identified witnesses;
 closing statement: closing statement by the claimant & the respondent to

be made orally just at the end of the hearing & subsequently submitted in
writing, as the tribunal may direct;
 clarifications: the members of the arbitral tribunal may have also certain
defined role in asking clarification questions at any stage of such hearing;
 costs:
 instruction: submission of cost of arbitration of the disputing parties to the
arbitral tribunal shall be undertaken based on the procedural order of the
tribunal;
 purpose: such cost submission aimed to recover costs of the arbitration by
one disputing party from the other (by the claimant from the respondent &
vice versa);
 timing: submitted to the arbitral tribunal mostly after hearing, if any, as the
tribunal may direct;
 scope: the scope of arbitration costs is diverse; may include costs like
 claims expert fee; as claimant has engaged claims expert to determine
chances of success & risks associated therewith;
 law firm fee; to lead counsel; to assistant counsels; to Para legal’s;
 case related costs: this is basically a category of cost incurred as related to
the study, development & submission costs or expenses of the case incurred
by and to be reimbursed to the law firm; like documentation cost;
communication expenses; accommodation costs; and so forth;
 arbitrator (s) fee; to the sole arbitrator or to the members of the collegiate
arbitration tribunal;
 administrative expenses: this is the cost of the arbitration institution, if
the type of arbitration were institutional;
 direct hearing expenses; like transcription cost to be shared both by the
claimant & the respondent;
 other hearing related costs; accommodation; transportation; and so

forth for claimants/respondent’s team; expert witnesses; eye witnesses;
 expert witness fee;
 other possible costs;
 final award:
 The award is the document which records the disposition or decision of the
construction dispute under consideration by the tribunal;
 The scope of the award may include the tribunal’s ruling:
 on the preliminary objection (s), if any;
 on the merit of the case (claims/counterclaims, if any);
 on apportionment of costs; and
 on other related issues, if any;
 preliminary objection (s): unless it is done by interim award, the final
award may contain ruling on preliminary objections, if any; if there were
preliminary objection issues, they have to be addressed by the tribunal
before the merits of the case; like the request on the arbitration tribunal has
no jurisdiction; see Article 3330 (2) of the Civil Code;
 merit: deliberation & write-up of the final award by the arbitral tribunal on
the merits of the case & issuance of such award; the merit may include the
claims of the claimant & the counter claims of the respondent, if any;
 costs: the final award also contains ruling on costs of the arbitration;
 depending on the power of the arbitral tribunal, the tribunal may include other
forms of reliefs in the final award; like payment of interest;
 enforcement: the arbitral tribunal does not by itself enforces its own
award;
 Role of Courts
 Background
 Courts may have two roles: Resolutive role & facilitative role as related to
construction disputes;
 Resolutive role:
 is to be played by courts under litigation where courts themselves
hear & decide on construction disputes;
 see below under Litigation
 Facilitative role:
 is to be played by courts as related to arbitration;
 scope: to be discussed here;
 Facilitative Role
 The facilitative role of courts may come in to picture in the following three
construction arbitration phases: viz.,
 pre-arbitration phase;
 during arbitration phase; and
 post-arbitration phase;
 The facilitative role of courts in all such phases is based on the fundamental
public policy reason: viz.,
 pre-arbitration phase: agreement
 the agreement to arbitrate has to be recognized by public justice
system, i.e., the courts;
 arbitration process phase: process
 a judicial assistance has to be provided to the arbitration process by
public justice system, i.e., the courts; and
 post-arbitration process phase: outcome
 the outcome of the arbitration process (i.e., the award) has to be
recognized & enforced by the public justice system i.e., by courts;
 The facilitative role of courts shows that the jurisdiction & power of an
arbitral tribunal is so limited due to the private justice system nature of
arbitration & lack of coercive power, which is rested with the courts, as part
of state organ;
 pre-arbitration process phase

 During such phase the following issues have to be addressed by courts if a
judicial request has been made by the interested disputing party to such
court having jurisdiction over the case;
 non-arbitrability:
 non-arbitrability of the construction dispute may be at issue;
 see Article 315 (2) of the Civil Procedure Code cum Article 3131 ff of
the Civil Code, as related to the concept of administrative contract;
like contract of public works being an administrative contract;
 the court is required to render a declaratory judgment whether or not
the dispute under consideration being arbitrable or not arbitrable;
 preliminary objection:
 submission of a dispute which is said to be part of an agreement to
arbitrate to a court & the procedural issue of preliminary objection;
 see Article 3344 (1) of the Civil Code cum Article 244 (2) (g) of the
Civil Procedure Code;
 the court is expected to rule whether or not it has jurisdiction over the
case;
 specific performance:
 refusal to abide by agreement to arbitrate (see Article 3344 (1) of the
Civil Code);
 the court is expected to rule on specific performance of the agreement
to arbitrate on such disputing party who refuses to abide by its
agreement to arbitrate;
 specific performance:
 a given disputing party may declare its intention or take an action not
to be bound by the arbitration submission;
 the other party may take a judicial action to compel the refusing party
to be abided by the agreement to arbitrate;
 see Article 3344 (1) of the Civil Code);
 validity of the agreement to arbitrate;

 issue as related to the validity or otherwise of the agreement to
arbitrate itself may arise;
 the court is expected to rule on the issue whether the agreement to
arbitrate itself being valid or not valid;
 it is the sole jurisdiction of the court to rule on the validity or
otherwise of the agreement to arbitrate;
 see Article 3330 (3) of the Civil Code
 appointment of arbitrator (s);
 this is related to the formation of an arbitral tribunal;
 an arbitral tribunal may not be composed or constituted without
arbitrators;
 if the court were requested to appoint arbitrators, it is required to do
so or order the disputing parties to appoint their respective
arbitrators;
 any interested disputing party may initiate such judicial proceeding;
 see Article 3332 (3) of the Civil Code;
 arbitration process phase
 During such phase, the following issues have to be addressed by courts if a
judicial request has been made by the interested disputing party to such
court having jurisdiction over the case;
 injunctive relief proceeding ; see Article 154ff Civil Procedure
Code:
 property attachment proceeding: see Article 151ff Civil
Procedure Code:
 compelling witnesses; see Article 317 (3) Civil Procedure Code:
 challenge proceeding: ruling on challenge against members of the
arbitral tribunal: see Article 3340 (2); 3342 (3) the Civil Code:
 post arbitration process phase

 During such phase, the following issues have to be addressed by courts if a
judicial request has been made by the interested disputing party, in relation
to the award, to such court having jurisdiction over the case; viz.,
 enforcement proceeding;
 appeal proceeding; and
 set aside proceeding;
 enforcement proceeding;
 see Article 319 (2) the Civil Procedure Code;
 such proceeding may be initiated by the disputing party who now to
be considered as award-creditor (winner);
 issue of recognition & enforcement of foreign arbitral award may
bring in to picture the application of the laws of other countries
and/or the applicable public international law (like the New York
Convention (1958) on the recognition & enforcement of foreign
arbitral award);
 Ethiopia is not yet party to such Convention;
 appeal proceeding:
 see Article 319 (1) cum 350-354 the Civil Procedure Code;
 such proceeding may be initiated by the disputing party who now to
be considered as award-debtor (loser);
 to initiate or not to initiate such proceeding the finality of the award
has to be considered; finality of award may be agreed under the
agreement to arbitrate;
 set aside proceeding:
 see Article 355-357 the Civil Procedure Code;
 the purpose of such proceeding shall be to get a declaratory judgment
from the said court for the rejection (nullity) of the award;
 such proceeding may be initiated by the award-debtor to cause the

non-recognition or non-enforcement of the award under
consideration;
 the grounds for set aside are provided under the Civil Procedure
Code;
 Litigation
 Background
 Litigation is the forum for the Resolutive role of the courts;
 Litigation is thus a compulsory legal process to be conducted before the
courts of law to resolve (like construction) disputes;
 If a given court has jurisdiction over the case, that particular dispute is to be
submitted to that court & such court (like federal vs. regional vs. local) hears
the case, renders its decision in form of judgment & enforces its judgment;
 If a construction dispute arisen in connection with PPA (2011) version is not
resolved amicably & if the parties to such construction dispute have no legal
power to submit their disputes to arbitration, that construction dispute is to
be submitted to the court having jurisdiction over the case & the court hears
& decides the dispute, and enforces its decision, accordingly;
 This whole process is called litigation;
 Process
 The process to be followed at the court of law has already been provided by
& regulated under the Civil Procedure Code;
 Litigation process is a full-fledged process; it requires no assistance from
other institutions;
 Level
 The level of courts could be federal or regional;
 The jurisdictions of the federal & regional courts have been provided by the
FDRE Constitutions;
 The specific federal & regional court’s jurisdiction have been provided by
the respective federal proclamations & regional proclamations;
Dam Construction:
Irrigation Related Hypothetical Case

 A certain public contractor has concluded (with a certain public employer) a contract to
construct a dam for irrigation purpose;
 The agreed duration of the Project was 1460 calendar days;
 The Contract price agreed was ETB 4 Billion;
 The dam has been studied & designed by a renown local specialist consultant (for the
employer) to impound 20 Billion cm water and to irrigate 100, 000 hectares of land; (Notes:
the Contract Price for study, design & supervision in total was ETB 100 Million);
 The said contractor has constructed & completed the dam and handed over same to the
employer;
 The employer has also engaged another contractor, parallel to the first one (dam
contractor), for the construction of the irrigation canal & drainage structures (both totaling
5000 km with some bridges as well) and with some electrical & mechanical works to
pressurize the flow of water with the contract price of ETH 2 Billion; the project duration
was 1095 calendar days;
 The Canal contractor has constructed & completed the construction of all required canal &
drainage structures (including such bridges & electro-mechanical works) as designed &
agreed ahead of the dam construction;
 Due to environmental reasons, however, the dam failed to impound the raw water as
designed but only able to impound 15 Billion CM water;
 The environmental factor has thus:
 resulted 25% of shortage of required water; and, this in turn;
 resulted, only to irrigate 75, 000 hectares of land; and
 resulted the abandonment of the already constructed canal & drainage structure
(including other civil, electrical & mechanical works) to irrigate the 25, 000
hectares of land;
 the employer has decided to bring a claim & to be compensated for such economic loss:
viz.,
 25% of the contract price already paid to the dam contractor;
 25% of the contract price already paid for the Canal Contractor; and
 25% of future loss on return on investment planned to be generated from the sale of
the agricultural produces (assume any attractive or suitable cash crop);
 The design Consultant was also a supervision consultant for such same Project;
 Consider the following questions based on MDB-FIDIC (2006) or PPA 2011and other
applicable standard contracts;
Exercise Questions
(Liability & quantum of liability)
………………………………………………………………………………………………
a) The Dam Contractor: Do you see any possible liability against the Dam Contractor?
 Is the dam contractor liable? If yes, how? if not, why not?
 If the dam contractor were liable, what would be the extent (quantum) of its
liability?
b) The Canal Contractor: Do you see any possible liability against the Canal
Contractor?
 Is the Canal Contractor liable? If yes, how? If not, why not?
 If the Canal Contractor were liable, what is the extent of its liability?
c) The Consultant: Do you see any possible liability against the consultant who has
undertaken the study & design of the dam? (Notes: the hydrology & environmental study
latter found to be inadequate to determine the yield of the raw water to be impounded by
the dam;)
 Is the Consultant liable? If yes, how? If not, why not?
 If the Consultant were liable, what is the extent (quantum) of its liability towards
the employer?
d) The Employer: Do you see any strategic failure on the part of the employer in
implementing both the construction of the dam; and the construction of the canal &
drainage structures and related works, concurrently?
e) The Consultant:
 Do you see any possible liability on the part of the consultant if the consultant had
advised the employer to implement both projects concurrently?
 If the consultant were liable, what would be the extent of liability of the consultant
towards the employer?
Dam Construction:
Supply Related Hypothetical Case
………………………………………………………………………………………………………
 A certain public contractor has concluded (with a certain public employer) a contract to
construct a dam for urban water supply purpose;
 The agreed duration for the construction of the dam was 2000 calendar days;
 The Project being an urgent one, the dam has been designed based on the available
hydrology study (due to lack of time) by a renown local specialist consultant to impound 40
Billion CM raw water; and latter to treat & to supply some defined quantity of water to
the designated urban setting; (Notes: the Contract Price for design & supervision in total
was ETB 80 Million);
 Due to the urgency of the Project, the employer has engaged two other contractors, parallel
to the dam contractor, for the following two technically related purposes:
 Electro-Mechanical Contractor (EMC):
 for the erection & commissioning of water treatment plant capable of
treating 500, 000 CM/d;
 the Contract Price agreed was: ETB 1.5 Billion;
 Civil Contractor (CC): for the construction of (treated) water transmission &
distribution network consists of the following works:
 100 km treated water transmission line;
 1 terminal reservoir with some defined capacity;
 20 service reservoirs with different capacity within the urban setting;
 400 km new & replacement pipe laying (installation) work with different
diameter size; and
 25 pumping stations; including other ancillary civil works;
 the Contract Price agreed was: ETB 2 Billion;
 The dam contractor has constructed & completed the dam as designed & agreed; and
handed over same to the employer; the dam will reach to its full raw water impoundment
capacity only after 2 years of the completion of the dam based on the hydrology study;
 This technical information & limitation was included & reflected in the three construction
contracts: viz.,:
 in the dam construction contract;
 in the water treatment plant erection contract; and

 in the water transmission & distribution network construction contract;
 Due to this limitation, the defects liability period (under the dam construction contract) has
been agreed between the dam contractor & the employer to be for 2 years to test & to verify
the full impoundment capacity of the dam;
 The dam has only & effectively capable of impounding 30 Billion CM raw water; and this
remains to be so, unfortunately, for the rest of the life of the dam;
 The EM Contractor has also completed its erection & commissioning of the water treatment
plant; the plant capable of treating (by taking all safety factors in to consideration) only
400, 000 CM/d; the EM Contractor has been paid in full except some agreed retention
money, for which the EM Contractor has deposited Retention Bond;
 The Civil Contractor has already constructed & completed all stated hydraulic structures
as designed & agreed; the Civil Contractor has been paid in full except some agreed
retention money, for which the CC has deposited Retention Bond;
 A technical committee has been established to establish the core technical reason not
achieving the desired objective of all the three contractors under such respective contracts;
It has technically been established by such committee that the hydrology study was 10 years
old (on which the whole project objective been based) which obviously were requiring full
technical review;
 The finding of the Technical Committee has thus:
 resulted 25% of shortage of required raw water; and, this in turn;
 resulted 25% of reduction of the water treatment plant capacity; , and
 resulted 25% reduction of the technical capacity of all the subsequent hydraulic
structures (re: transmission & distribution network);
 The employer has decided to bring a claim & to be compensated for such economic loss:
viz., to recover:
 25% of the contract price already paid to the dam contractor;
 25% of the contract price already paid to the EM Contractor;
 25% of the contract price already paid to the Civil Contractor;
 25% of future loss on water sales for the life of the Project less some reasonable
deductible costs there from;
 The design Consultant was also a supervision consultant for such same Project;
Exercise Questions
(Liability & quantum of liability)
………………………………………………………………………………………………
A. The Dam Contractor: Do you see any possible liability against the Enterprise?
 Is the dam contractor liable? If yes, how? If not, why not? (viz., as related to the
reduction of the dam impounding capacity & loss of water sales claims);
 If the dam contractor were liable, what would be the extent of its liability?
B. EM Contractor: Do you see any possible liability against the EM Contractor?
 Is the EM Contractor liable? If yes, how? If not, why not? (viz., as related to
reduced plant capacity & loss of water sales claims;)
 If the EM Contractor were liable, what is the extent of its liability?
C. Civil Contractor: Do you see any possible liability against the Civil Contractor?
 Is the Civil Contractor liable? If yes, how? If not, why not? (viz., for the reduced
technical use of all such hydraulic structures & loss of water sales claims);
 If the Civil Contractor were liable, what is the extent of its liability?
D. The Consultant: Do you see any possible liability against the design & supervision
consultant who has undertaken the design of the dam based on the un-reviewed hydrology
study due to the urgency of the project & pressure by the employer?
 Is the Consultant liable? If yes, how? If not, why not? (if liable for what aspect of
the Project becoming liable);
 If the Consultant were liable (for all or some defined aspect of the said project),
what is the extent of its liability towards the employer?
E. The Employer: Do you see any strategic failure on the part of the employer’s decision
in terms of:
 the parallel implementation of the three aspects of the Project on urgent basis; and
 requiring the design consultant to proceed with the design without reviewing the
hydrology study;
F. The Consultant:
 Do you see any possible liability on the part of the consultant if the consultant had
expressly advised the employer to implement the three aspects of the Project
concurrently (in terms of its project procurement assistance services)?
 If the consultant were liable, what would be the extent of liability of the consultant?
 Is it not a professional negligence on the part of such consultant proceeding directly

to a design work without undertaking any review on such hydrology study even if
the employer insists to design without review?
 If you were a consultant for such same project, what do you do under such similar
circumstances: advising the employer & walking from the business or otherwise?
Groundwater Development Project: Hypothetical Case

Yield & its Impact on the Subsequent Hydraulic Structures
………………………………………………………………………………
 A certain public employer has decided to develop groundwater resources for urban water
supply purpose;
 The said employer has employed a consultant, a hydro-geological firm, specializing in the
field of groundwater, to study the groundwater potential, yield, quality & recharge
sustainability & related technical & scientific issues;
 A contract agreement has been signed between the employer (as the client) & the consulting
firm; contract price ETB 50 Million;
 The consultant has studied the potential, confirms high potential, determined, based on
representative test wells high yield having no quality problem for water supply purposes;
the number of service wells has been determined to be 40 boreholes within a certain km
radius; to provide 150 liter/second average; totally to get 115, 200.000 liter/d; or 216, 000
CM/d;
 Based on the study of the consulting firm, the employer has employed, based on a specific
construction contract, a water drilling company to develop the said groundwater resources;
 The drilling company has designed & developed all the said 40 boreholes, installed all
designed & supplied (by itself) submersible pumps, tested all the boreholes; constructed the
water treatment facility; and executed all required electrical & mechanical works;
regarding test wells were decided to use them for monitoring purpose;
 The individual well test confirms exactly the planned yield (216, 000 CM/d) as
recommended by the consulting firm;
 Now the groundwater potential has become no more a potential but a tangible resource for
further development to achieve the final objective of the project: viz., water supply;
 The employer has commissioned another consultant for the preparation of the detail design;
standard bidding document plus contract documents including instruction to bidders to
launch a civil work project;
 The consultant based on the Completion Report of the hydro-geologist consultant & based
on the Completion Report of the drilling company has prepared the said documentation;
 The employer has thus invited bids for the construction of water transmission &
distribution network; a certain public contractor has become the winner of the bid;
 A construction contract has been signed between such public contractor & the employer for
the said civil works; viz.,
 55km water transmission line installation with some defined pipe diameters;
 a terminal reservoir with some defined capacity;
 250km distribution network pipe installation (main & sub-system) with different
diameter sizes within the urban setting;
 15 service reservoirs with different capacity due to topographical feature of the
project area;
 10 pumping stations; and other ancillary works;
 The Contract Price was Birr 2 Billion; and the duration of the project being 730 calendar
days;
 The public contractor has completed the said hydraulic works (structures) as designed &
agreed;
 Now all the 40 boreholes have to be operated jointly to supply the planned yield of water to
the urban dwellers;
 The yield of the water to be supplied, unfortunately, has been reduced by 50%/d;
 The employer has refused to take over the works from the said contractor; notified to such
contractor withholding of all payments under the contract due to the contractor; say ETB
400Million; and wrote a serious letter to recover the whole contract price already paid to
such contractor;
Exercise Questions
(Liability & Quantum of Liability)

………………………………………………………………………………………………………………
a. Objective: Do you think that the employer has achieved its final project objective?
 If yes, how?
 If not, why not?
b. The Contractor: Do you see any possible liability coming against the said contractor?
 Is the contractor liable to the employer? If yes, how? If not, why not?
(viz., as related to the reduction of the yield of the groundwater to be supplied & as
related to less economic use of the constructed hydraulic structures ;) Notes: see also
the Information below under f; The Employer;
 If the contractor were liable, what would be the extent of its liability?
c. The Second Consultant: Do you see any possible liability against the Second
Consultant?
 Is the Second Consultant liable? If yes, how? If not, why not? (viz., as related to the
reduction of the yield of the groundwater to be supplied ;)
 If the Second Consultant were liable, what would be the extent of its liability?
d. The Drilling Contractor: Do you see any possible liability against the Drilling
Contractor?
 Is the Drilling Contractor liable? If yes, how? if not, why not? (viz., as related to the
reduction of the yield of the groundwater to be supplied;)
 If the Drilling Contractor were liable, what would be the extent of its liability?
e. The First Consultant: Do you see any possible liability against the First Consultant?
 Is the First Consultant liable? If yes, how? if not, why not? (viz., as related to the
reduction of the yield & quality of the groundwater to be supplied;)
 If the First Consultant were liable, what would be the extent of its liability?
The Employer: Info

………………………………………………………………………………
 The employer has commissioned an independent foreign consultant to establish the
true cause for not achieving the very objective of the said Project;
 A contract agreement has been signed with such foreign consultant with the
contract price of ETB 30 Million;
 This consultant has undertaken the required study & reached on the following
critical finding & conclusions:
 Individual well test not undertaken as per the required standard;
 Undertaking no group well test as per the standard;
 High interference among the boreholes due to proximity of the aquifers;
 Lack of clear indication as to the sustainability of recharge of aquifers;
 No clear or adequate analysis & recommendation on vulnerability;
 Lack of adequate environmental impact studies, risk analysis & effective
mitigation measures to ensure the sustainability of the yield & quality of the
groundwater;
 Indication of risk of landslide or subsidence if rate of discharge not seriously
monitored;
 5 boreholes already not meeting the standard for drinking water; have to be
abandoned;
 Do you see any strategic failure on the part of the employer? Discuss
 From the Civil Contractor’s perspective;
 From the First Consultant perspective;
 From the Drilling Company perspective;
 From the Second Consultant Perspective;
 Do you see any possibility that the employer may have a claim against somebody?
viz., against the Civil Contractor or the Second Consultant or the First Consultant
or the Drilling Company; Provide contractual and/or legal ground plus sound
reasons;
Exercise on Road Construction Claims
Case No. 1 Time Related Claims
………………………………………………………………………………………
 A certain public employer has entered in to a contract with a certain contractor for the
construction of 150 km asphalt concrete road & 5 bridges;
 Such employer has given the required possession of site & access thereto and the
Contractor has duly & fully mobilized and commenced execution of the Works and
proceeding well for 5 months;
 On the 6th month as per the claims of the Contractor an adverse weather occurred and
affected the execution of the Project for 30 consecutive days;
 The Contractor has given due notice about the event to the Engineer in such an interval as
the Contract requires;
Questions for Discussion
 What would be the possible contractual claims (under MDB-FIDIC) of the Contractor
against the employer?
 What would be the contractual and/or legal base for the Contractor’s claims?
 What would be the required contemporary records to justify or substantiate its EOT claims
as related to such adverse weather conditions? Identify the record & discuss
 What would be the required historical record to compare the said adverse weather
condition vis-à-vis the current one?
 Is the Contractor allowed, under the Contract, to claim damages for its resources (assume
that 4 machineries were carried away by the flood) lost by such heavy rain?
Case No. 2 Time & Cost Related Claims

………………………………………………………………………………
 A certain public employer has entered in to a contract with a certain international
Contractor for the construction of 300 km new asphalt concrete road & 12 bridges;
 Due to the urgency of such road Project, the Contractor has been allowed by the Engineer,
in consultation with the employer, indeed, to mobilize fully and the Contractor has done so;
 Based on this requirement, the Contractor has also engaged 10 (Grade 1) local sub-
contractors (20 km road for each sub-contractor and 3 nominated international sub-
contractors for 4 special bridges 2 for each and 1 km tunneling work) all with the approval
of the Engineer & submitted its full Work Program;
 Based on the Program, the Contractor has requested the handover of the whole of
possession of the site & access thereto;
 The employer has failed initially to provide possession of such site and/or access thereto to
the Contractor for 120 days;
 This initial delay has obviously contributed to the critical delay of the said Project for such
120 days;
 Due to community request, there has also been a road alignment change which demanded
new design; and abandonment of the already executed 5 km earth work; plus additional 180
days & which is duly assessed & provided; also with additional payment to the Contractor;
the new alignment also caused new method to be adopted by the contractor (viz., from
machine to that of blasting), which, in turn, contributed 120 day of delay to import the said
blasting material;
 One of the nominated sub-contractor has delayed the completion of the two critical bridges
for 60 days for reasons fully attributable to itself;
 The Contractor has duly served the notice; based its claims on the clauses of the contract &
identified & submitted the required (contemporary & all historical) records for the
assessment & determination of its claims;
 Contractor’s Claims: What would be the possible construction claims of such
international Contractor against the employer?
 Contractor’s Claims: What is the total extent of the EOT to be granted, if justified, to
such international Contractor? Why?
 Contractor’s Claims: Is such international Contractor allowed under the contract to

request EOT for the delay caused by the (specialist bridge) nominated sub-contractor? Why
not?
 Contractor’s Liability: Would such international contractor become liable under the
circumstances for the 120 days of delay as related to importation of the said blasting
material? Why or why not?
 Contractor’s Claims; Is such international Contractor allowed under the contract to
request any remedy for such method change?
 Contractor’s Claims: Such international Contractor has also requested a disruption
claims amounting ETB 10 Million? Is the contractor allowed to do so? If yes, what are the
basis & scope of such claims?
Case No. 3 Suspension Related Claims

………………………………………………………………………………
 The Contractor, as per its approved Program, has duly & fully mobilized its resources like
50 different machineries & also 70 crews (configured based on the specified & approved
crew formation) for the execution of the road project, which is 125 km & 10 bridges;
 The public employer has delayed the payment of ETB 12 Million due to the Contractor X
under IPC No. 3 for 90 days;
 Following such delay in payment the Contractor has reduced its rate of progress of the
works by half for 30 days; no notice has been given by the Contractor to the Engineer or the
employer;
 Where the payment is not yet effected by the employer the Contractor has decided to
suspend the whole of the Works & has done so for 2 months; no notice has been given by
the Contractor to the Engineer or the employer;
 The employer has effected the said payment fully to the Contractor on the last day of such
90th day & officially requested the Contractor, through the Engineer, to resume the Project;
Questions for Discussion:
 Contractor’s Claims: What are the possible heads of claims, if any, of the Contractor
against the employer (under MDB-FIDIC), if any?
 Notice: Is the Contractor required, under the Contract (like MDB-FIDIC), to give notice
to the employer or to the Engineer (and copy to the employer) for such reduction of the
progress of the Works?
 Notice: Is the Contractor required, under the Contract (like MDB-FIDIC), to give notice
to the employer or the Engineer (and copy to the employer ) for the suspension of the
Works?
 Contractor’s Remedies: What would be the possible available remedy to the
contractor if the employer continues to fail in terms of its payment obligation?
Case No. 4 Contract Termination Related Claims

………………………………………………………………………………
 A certain public employer has entered in to a contract with a certain contractor for the
construction of 100 km new asphalt concrete road with 10 bridges;
 The Accepted Contract Amount was ETB 4 Billion;
 The duration of the Project was 760 calendar days;
 Delay damages has been agreed as ETB 150,000/d with 10% as a maximum;
 10% of advance payment has been given to the said Contractor against insurance bond (less
15% VAT);
 10% Performance Security has been provided by the Contractor to the employer;
 Full possession of site & access thereto has been given to the Contractor as per its Work
Program;
 The Contractor has fully mobilized & commenced the works;
 4 IPCs were processed & ETB 1 Billion has been paid to the Contractor; only 25% of the
advance has been repaid;
 The Contractor has delayed the Project for more than 500 days for reasons fully
attributable to itself;
 AACRA deducted up to the maximum limit of the delay damages under the Contract; and
then decided to terminate the Contract; and the employer has done so;
 The assets (20 machineries & 23 small vehicles & heavy duty trucks) and the camp site with
full furniture including 50 computers) & design documents of the terminated contractor
remained in the hands of the employer;
 Following termination, the employer has expelled the terminated contractor from the site;
 Then the employer has employed & engaged a new contractor following the relevant
procurement rules after one year;
 The new contractor has been engaged by the employer with a new Contract Price of ETB 5
Billion; with 1000 calendar days project duration;
 The new contractor has completed the said Project but with a delay of 250 days; the
employer has deducted the agreed delay damages;
 Contractor’s Claims: What would be the possible claims of the terminated Contractor
against the employer, if any?
 Employer‘s Claims: What would be the possible claims of the employer against the
terminated Contractor, if any?
 Employer’s Claims: What would be the possible claims of the employer against the
new Contractor, if any?
 Notice: The terminated contractor has brought a legal action against the employer that
the termination has no basis since the employer has terminated the Contract without first
giving any notice of termination? What do you think?
 Valuation: The terminated Contractor has also claimed that since there is no valuation at
the date of termination, he is entitled to claim based on its records in terms of the work
executed & the balance of any payment? What do you think?
 Notice: The terminated contractor has also claimed that the deducted delay damage to be
returned to it with interest since the delay damage was deducted without following claims
procedure? What do you think?
 Calling Security: Is the employer entitled to call the Performance Security for the
purposes of executing & completing the balance of the Project?
 Calling Security: Is the employer entitled to call the advance repayment bond
automatically? Why not?
 Engineer: Is there an Engineer (like the supervision consultant) to manage such claims of
the employer & of the terminated contractor?
 Experience: Does the Corporation ever encounter such similar situation? If so, wht is the
its experience? Identify & discuss;
Review & Discussion Questions

As related to Construction Dispute Management
………………………………………………………………………………………......................................
a) What do you understand by the concept of dispute & construction dispute?

b) Identify & discuss the factors which may contribute to the prevention of construction
project related disputes;
c) Identify & discuss the root causes for construction disputes?
d) What are the causes for the existence of road or water or building or tunneling work
construction project related disputes?
e) Identify & discuss the construction dispute settlement (non-judgmental) methods?
f) Identify & discuss the possible similarities & differences among such construction dispute
settlement (non-judgmental) methods?
g) Identify & discuss the construction dispute judgmental methods?
h) Identify & discuss the possible similarities & differences among such construction dispute
resolution by judgmental methods;
i) Identify & discuss the similarity, if any, and the differences between construction dispute
settlement (non-judgmental) & judgmental methods;
j) Identify & discuss the role of the Engineer under MDB-FIDIC (2006) & under FIDIC 4th
(1987) as related to construction claims management;
k) What is the status of the decision of the Engineer before any subsequent arbitration or
judicial forum under PPA (2011)?
l) What is the legal status of the decision of the dispute adjudication board (DAB) before the
subsequent arbitration forum under MDB-FIDIC (2006)?
m) What are the possible pre-conditions to be fulfilled under MDB-FIDIC (2006) to commence
arbitration?
n) What are the basic features which distinguishes adjudication from arbitration?
o) Identify & discuss the possible role of the courts as related to arbitration process;
p) What do you understand by litigation as related to the resolution of construction disputes?
q) Identify & discuss the possible challenges to submit construction disputes to the courts for
the resolution of construction disputes? Do you see any solutions for the identified
challenges, if any?
r) What is your understanding about the concept & scope of alternative dispute resolution
(ADR)?
Delay Claim Life Cycle

(Taken from Delay Analysis in Construction Contracts book p.10)
………………………………………………………………………………………………………………
 Baseline program is established;

 Project commences;
 Deviation from baseline program is identified or projected;
 Delay occurrence/discovery;
 Delay analysis;
 Delay claim submission & presentation;
 Delay claim response;
 Negotiation (and award of extension of time);
 Revised baseline program is established & agreed;
 Dispute resolution procedure(if award is not agreed);
 Delay claim resolution;
Scope of Construction Project Records

Taken from an article entitled:
Construction Claims:
Identification; Communication & Record Keeping
By R. Max Wideman, 1990
………………………………………………………………………………………………………………
 Original Contract Tender Documents;

 Issued for Construction Set, and all subsequent revisions;
 Instruction to Contractors;
 Contemplated Change Notices, issued by the owner, Change Estimates, and Change orders
received;
 Sub-contractor’s quotes, contracts, purchase orders & correspondence;
 Shop drawings, originals, all revisions & re-submissions;
 Shop drawings transmittal, and transmittal log;
 Day time records;

 Daily equipment use;
 Daily production logs, e.g., concrete pours, etc;
 Material Delivery & Use Records, including expediting;
 Accounting Records; pay-roll; accounts payable & receivable, etc;

 Progress Payment Billings under the Contract;
 Daily Force Account Records, pricing & billings;
 Contact Milestone Schedule or Master Schedule;

 Short Term Schedules & updates;
 Task Schedules & analysis;
 Original Tender Estimate;

 Construction control budget;
 Actual Cost Reports, weekly or monthly, including Exception Reports;
 Forecast-to-Complete Estimate updates;
 Productivity Analysis/Reports;
 Interoffice correspondence, including memos & faxes(all filed by topic);

 Contract correspondence;
 Minutes of Contractual Meeting;
 Minutes of Site Coordination Meetings;
 Requests for Information;
 Notice of claims for delays and/or extra cost by contractor;
 Government Inspection Reports;

 Consultant Inspection Reports;
 Accident Reports;
 Daily diary or journal entries;

 Notes of telephone conversations;
 Progress Reports, weekly or monthly or quarterly;
 Progress photographs;
 Any other reports, such as consultant special reports;
 A Filing Record of All the Record Files that are being maintained;
Dispute Management: arbitration

Possible Issues/Agenda for Preliminary Meeting
………………………………………………………………………………………………………………
 Attendance
 for the claimant: senior representative; legal representative; authentication;
 for the respondent: senior representative; legal representative; authentication;
 Confirmation:
 name of the claimant & the respondent
 of the arbitration agreement;
 of the composition of the arbitration tribunal;
 seat of the arbitration;
 of the applicable law to arbitration;
 of substantive law applicable to arbitration;
 of arbitration rules;
 Name & Addresses and Contact Information
 for the claimant
 for the respondent
 procedure for information on an any change
 Outline of Disputes
 referred to arbitration;
 counter-claim, if any
 issues-relative importance of same;
 agreed list of issues;
 Jurisdiction of the Arbitral Tribunal
 confirmation to rule on its own jurisdiction; see 3330(2) of the Civil Code
 Power of the Arbitral Tribunal
 to decide based on the principles of law ; see 3325 of the Civil Code; or
 to decide as amiable composietur (or on equity basis); see Article 317 (2) of the Civil
Procedure Code;
 Date of Commencement of the Arbitration
 Administrative Services for the Arbitration & Mechanism for Communication
 venue for the arbitration;
 venue for delivery & dispatch of documents…;

 arrangement & agreements to be made with arbitration institution, if any;
 Language of the Arbitration
 confirmation of the working language for the arbitration;
 role of the Amharic language, if any;
 language for witness statements;
 need for translation;
 Timetable for Service of Submissions re: procedural time table
 for claimant’s claim;
 for respondents reply & counter-claim, if any;
 claimant’s counter- reply to respondent’s reply & reply to respondent’s counter-
claim, if any;
 respondent’s counter-reply to claimant’s reply to counter-claim, if any;
 Procedure for Varying for Submissions
 limits for varying dates of submission;
 limits for number of queries;
 Procedure for Dealing with queries on Submissions
 left to tribunal’s discretion & decision;
 Party-Appointed Experts re: by claimant and/or respondent
 need for experts
 number of experts
 field of expertise;
 meetings;
 access for experts;
 minutes of agreement;
 mutual exchange of reports;
 reports serve as evidence-in-chief;
 Witnesses of Fact re: factual witness
 need for factual witness;
 number of factual witnesses;
 employer, position & profession of the witness;
 mutual exchange of statements;
 statements serve as evidence-in-chief;
 Site Visits
 need for site visit;
 timing: before or during or after hearing;
 permission from third party for such visit, if any;
 organizational issues: transportation; accommodation; and related matters;
 the tribunal to be accompanied by equal number of both parties;
 whether or not evidence should be taken during site visit(s);
 Pre-Hearing Review
 date; time; and venue;
 procedural issues to be narrowed down & clarified; (re: scope of hearing)
 any issues to be narrowed down & clarified;
 issues not worth pursuing;
 The Hearing
 venue for hearing;
 arrangements & agreements to be made with the arbitration institution (if not ad
hoc), by the parties;
 number of days for sitting for hearing; with specific dates;
 commencement date for hearing;
 specific time table for sitting for hearing for such every day; (morning & afternoon;
sitting for hearing; tea break & lunch);
 estimated duration of the hearing;
 Hearing Management
 submission date for opening statement ahead of commencement of the hearing;
submitting both to the tribunal & to the other party;
 submission date for closing statement ahead of commencement of the hearing;
submitting both to the tribunal & to the other party;
 arrangement of transcription services;
 representation at the hearing by the claimant & the respondent; re: who attends;
 either party not requiring reasoned award;
 Standard Directions re: communication
 communication in writing with the tribunal; copied to the other party; marked as
such; sent concurrently to the other party & the to the two-party appointed
arbitrators;
 correspondence between parties not to be copied to the tribunal; except action

required from the tribunal;
 no communication any party & any member of the tribunal as related to the
dispute;
 no meeting with any part with any meme bro the tribunal as related to the dispute;
 no ex parte meeting of the tribunal with any disputing party;
 fax communication in urgent cases & subsequently to be made in writing;
 no telephone communication with the members of the tribunal urgent calls to
arbitration institution, if any;
 no email communication;
 Submission of Documents
 to be agreed in advance;
 like drawings;
 like photographs;
 like other documents;
 Determination on Costs
 to be considered in the arbitration;
 Confirmation on the Appointment of the Arbitral Tribunal
 official letter to be submitted to the tribunal by the parties;
 Any Other Business
 procedural issues;
 to be raised by the parties;
 to be include d by the tribunal;
 Costs of Preliminary Hearing
 to be considered in the arbitration, if any;
 Liberty to Apply
 right given to the parties;
 application to the tribunal;
 to amend these directions;
 to make additions thereto
 Other specific Issues, if any

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Training Material on Construction Claims & Disputes Management

Construction Claims & Disputes Management

Zewdu Tefera Worke

Engineering Contracts Lawyer

 Introduction & Objectives

Construction Claims & Disputes Management

Trainer: Zewdu Tefera Worke

(Day 1) Monday, January, .2019

1. Introduction & Objectives

Introduction to the Training

Non-contract enforcement issues, as related to construction, particularly concern extra-

Objectives of the Training

At the end of the training, the trainees be able:

 to explore & understand the concept of non-contract enforcement as applied to

Construction Contract & Law: Overview

and/or: cumulative with/alternatively (K and/or L)

V: Variability (context) of all the above concepts (viz., LKPDROLE);

V: Variability (context) of all the above concepts….?;

2. Construction & Non-Contract Enforcement

 a claim by a third party against a contractor (as executor of the

 Extra-contractual claim by a successful bidder against an employer (as a

 establishing nexus or causation between the damage so caused & the

 Unjust Enrichment Claims

 consultation path: i.e., enforcement of the construction contract

under the specific water works construction contract is so critical;

 retesting: as related to tests on completion if tests on completion fails with a

 correction or modification of IPC; by the Engineer in such cases as per

employer itself or some other contractor to perform or to complete the

 suspension of work: by the Contractor in case of delayed payment as per

 employer’s claims: see MDB-FIDIC Clause 2.5 cum 3.5 the

3. Claims Path & Construction Claims

 cost related claims; like due to disruption claims or price adjustment

 Cancellation of Contract; see Article 1771 (1) cum 1784-1789 of the

(including the Engineer see Clause 1.1.2.6 or the Employer’s other

Contractor & the completion of the project by the Employer or third

 suspension & reduction: Clause 16.1 (b) in case of suspension &

 Deceleration (reduction) of the progress of the Works by the

 laws: Clause 1.13 in relation to the Contractor’s failure to comply

 The enforcement of these remedies itself may, in turn, cause time

 See Clause 69: PPA 2011;

 Dispute Resolution; and

 The Contractor should keep substantiating contemporary records,

 If agreement between the parties is achieved, the Engineer is required

 The following could be illustrative of right based disputes:

 market: decrease or increase of cost due to market driven causes; see

 This requires integration among all professionals who are in charge of

 relationship: keeping & sustaining good future relationship between

define the originally agreed contractual rights and obligations and/or

 By evaluative role of the conciliator it means that the conciliator is

 only one dispute at a time shall be referred to such process;

 The Ethiopian construction industry uses:

 hearing: undertaking oral hearing;

 The appointment of arbitrators may be undertaken by: the parties

 respondent: reply to the request by the respondent plus its counter-

 closing statement: closing statement by the claimant & the respondent to

 other hearing related costs; accommodation; transportation; and so

 pre-arbitration process phase

 validity of the agreement to arbitrate;

 post arbitration process phase