PT Wijaya Karya (Persero) Tbk. DSU Additional Payment Under FIDIC ed !

ook "###

I. INTRODUCTION I.1 Objectives Primary objective of this seminar is to: a. Provide a clear understanding & practical working knowledge of the FIDI onditions of ontract for onstruction for !uilding and "ngineering #orks Designed by the $st "dition% $&&& 'hereinafter referred to as (ed !ook $&&&) together with the likely *default* legal remedies+position in respect of #ika*s entitlement to additional payment 'claims and variations). b. "nable to recogni,e and understand the conceptual of additional payment claims and present+defend them properly. c. "nable to understand the procedure for additional payment claim. I.- Scope of the Seminar/Discussion 'under the (ed !ook $&&& ondition) $. -. 1. 3. 4. I.3 Issues in "ngineer.s /pproval and Instructions. 0he ontractor.s "ntitlement for /dditional Payment. 2ariations. ontractor.s claim procedures. 0he importance of record5keeping. h! "IDIC Stan#ar# "orm Contracts$ FIDI is the International Federation of onsulting "ngineers% known by its French acronym. It was formed in $&$1% with the objective of promoting the interests of consulting engineering firms globally. It is best known for its range of standard conditions of contract for the construction% plant and design industries. 0he FIDI forms are the most widely used forms of contract internationally% including by the #orld !ank for its projects. 0he FIDI 6(ainbow 7uite6 of 8ew ontracts was published in $&&& and includes: $. 0he (ed !ook: onditions of ontract for onstruction for !uilding and "ngineering #orks Designed by the "mployer 'scope of this seminar)9 -. 0he :ellow !ook: onditions of ontract for Plant and Design5!uild9 1. 0he 7ilver !ook: onditions of ontract for "P +0urnkey Projects9 3. 0he ;reen !ook: onditions of 7hort Form of ontract. 0hese 6new6 forms were first editions and designed to be user5friendly% with a standardi,ed approach and a reduction in the general conditions from over <= of the $&>? edition to -= clauses. /dditional forms in use since $&&& include:
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4. 0he !lue !ook: ontract for Dredging and (eclamation #orks9 <. @D!+FIDI ontract: FIDI conditions incorporated in the standard bidding documents of multilateral development banks9 'this form already officially translated in Indonesian). ?. 0he #hite !ook: lient+ onsultant @odel 7ervices /greement9 >. 0he ;old !ook: FIDI Design% !uild and Aperate Projects. 0o assist with implementing its founding objectives% FIDI 6s approach to drafting contracts has always been underpinned by the principle that its contracts must provi#e a fair a%%ocation of ris&s bet'een the parties to a contract( an# that ris&s shou%# be borne b! the part! best ab%e to contro% them . 0herefore with understand the concept of risk allocation under FIDI ontract ondition% will encourage the good understanding to the concept of risk allocation in construction contracts. 1.) The "IDIC Re# *oo& 1+++ 0he (ed !ook has -= general conditions. !oth have guidance to assist in the preparation of particular conditions% and also the option to add Particular onditions. 0he (ed !ook 'the onstruction ontract for !uilding and "ngineering #orks Desi,ne# b! the -mp%o!er. is inten#e# to be use# 'here the emp%o!er is responsib%e for the #esi,n of the 'or&s 'tra#itiona% contract).

II. -N/IN--R0S DUTI-S 1ND 1UT2ORIT3 Sub4C%ause 3.1 5 Issues in -n,ineer0s 1pprova% an# Instructions 0he "ngineer has an eBtremely important role in the administration of the contract and the way in which he carries out his duties will have major impact on the work of the ontractor and the success of the Project. For the application of FIDI (ed book% FIDI defines the role of the "ngineer ssentially as the agent of the "mployer. 0he "ngineer is primarily responsible for contract administration. 0he "ngineer: issues instructions and notices9 monitors the works9 acts as certifier. Cowever the "ngineer sha%% have no authorit! to amen# the Contract. Note: 0hat the engineer is no longer stated to be impartial as the FIDI (ed !ook $&>? "dition. 5 in the $&&& the en,ineer is #eeme# to an# in practice #oes act for the emp%o!er % but 'hen he is ma&in, a #ecision under 7ub5 lause 1.4 the -n,ineer sha%% ma&e a fair #etermination in accor#ance 'ith the Contract( ta&in, #ue re,ar# of a%% re%evant circumstances.
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0herefore% to obtain the "ngineer.s approval is constrain on the "ngineer.s authority given by the ontract and his freedom to make Dfair. decision. In the $&&& conditions% FIDI have omitted the reEuirement that some notices which sent to the "ngineer must be copied to the "mployer. Note6 0he "ngineer.s approvals that are reEuired and accepted by the "mployer will vary depend on whether the "ngineer is a member of the -mp%o!er0s o'n staff or an in#epen#ent consu%tant. % the -mp%o!er0s o'n staff: may have limits on his authority such as in case of additional payment and+or eBtension of time% reEuires approval from a senior person+higher management or different department. % the in#epen#ent consu%tant: the "ngineer shall has any limit on his authority must be stated. / consultant working for a private "mployer may have been given all necessary authorities% but a consultant working for a ;overnment "mployer will probably have limits placed on his authority and reEuires approval from higher ;overnment officer. The important actions: 1. The Particular Condition must include details any requirements for the Engineer to obtain the Employers approval before exercising any authority which is given to him under the Contract some of the crucial authority which caused additional payment and!or extension time". #. The Contractor does not see the contract between the Engineer and the Employer therefore it is essential to include a clear statement in the Particular Condition regarding to the Engineers $uthority and $pproval. %. &ther recommendation action' % (equire the Employer and!or the Engineer to presentation their pro)ects organi*ation chart in the +ic, off -eeting. % .efore the commencement of the wor,s Prepare and agreed a pro)ect procedure related to the Employers!Engineers $pproval and authority/ the position and the name of the P0C and communication procedure from who and how it should be done email/ fax/ mail etc.".

1. The contractor need to ma,e one copy of some notices which sent to the Engineer related to event which is caused an additional payment and!or extension of time!delay.

III.T2- CONTR1CTOR0S -NTIT7-8-NT "OR 1DDITION17 9138-NT

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Fnder FIDI ondition% the ontractor.s right to an additional payment for some events is state# e:p%icit%! as follows: G0n case the contractor is exposed to an additional cost2 b" he shall have the right to claim the payment of the amount of the $greement by inclusion into it of the cost with a reasonable profit.H 0he following cases+events are some of event which shall especially be given entitlement of ontractor.s laim for /dditional ost under the FIDI (ed !ook $&&&: Sub4 C%ause $.& -.$ 3.? 3.$3.-3 ?.3 >.& $=.$=.1 $$.> $-.3 Tit%e Delayed drawings or instructions Delay of site possession 'right access to the site) "rror in setting out 'if setting out information from the "mployer or the "ngineer specified or notified of reference+on his behalf) Fnforeseen Physical onditions Discovery of any fossils Instruction to vary the location and or details of any testing% or the "mployer.s delay in testing 'other than 0est on ompletion) onseEuence for suspension instruction 0aking Aver and+or using of Part of #orks by the "mployer other than such use as is specified in the ontract or agreed by the ontractor Delay for more than $3 days in carrying 0est on ompletion by a cause for which the "mployer is responsible 0he "ngineer instruction to search cause of defects other than defects which the ontractor is responsible under 7ub5 lause $$.Amission by variation 8ote: especially for this clause FIDI use word G costH in its usual usage% rather than to GCostH or GCost p%us 9rofitH 0he significance of this point: If the ontractor had ordered formwork which was subseEuently omitted by 2ariation% the /cceptance ontract /mount would typically have included direct cost plus profit in respect of this formwork. Fee for 2alue "ngineering% in FIDI 2" will 'i) accelerate completion% 'ii) reduce the cost to the "mployer.s A@ the #orks% 'iii) improve the efficiency+value to the completed #orks% or 'iv) giving other benefit to the "mployer. hanges in Iegislation Financing charges due to delayed payment% the contractor entitlement for this charges is without any formal notices or certification 0he cost and+or delay incurs result for the ontractor.s entitlement to suspend the #orks due to: % 0he "ngineer fails to issue an Interim Payment ertificate % 0he "mployer fails to make payment9 8one! Time B B B B'c) B'c) B B'c) B B B B B B B B B B B 5 B 5 5

$1.-

$1.? $3.> $<.$

B'c) B'c) B

B 5 B

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PT Wijaya Karya (Persero) Tbk. DSU Additional Payment Under FIDIC ed !ook "###

$?.3

$&.3

% 0he "mployer fails to provide the financial arrangements onseEuence of "mployer.s (isk events: % /ny "mployer.s (isk which can be classified as Force @ajeure % Fse or occupation of Permanent #orks by "mployer% eBcept as specified by the ontract % (isk related to any design of the #orks+its parts by "mployer% "mployer.s personnel or by others for whom the "mployer is responsible onseEuences for Force @ajeure for

B B'c) B B B'c) cost B

B J the contractor has right for add cost p%us reasonab%e profit + "A09 B'c) J the contractor has right on%!

Note6 an be seen that within the scope of FIDI (ed !ook $&&& ondition% although the contractor.s right to an additional payment is not the same as the time eBtension situations and vice versa. Note6 ontractually% when the above mentioned occurs during the project eBecution then the ontractor the ontract already establish his entitlement+right under a specific relevant clause. Cowever his ri,ht 'i%% subject to his fu%fi%%ment to the pre4re;uirement of the Contractor0s C%aim proce#ure 'will discuss later in section 2).

I<. <1RI1TIONS Sub4C%ause 13 5 Issue re%ate# to <ariations Fnder FIDI % besides the entitlement for additional payment which arisen within the above mentioned 7ub5 lauses% the additional pa!ment/costs ma! be arisen from eventua% 'or&s chan,es 'ithin C%ause 13 =<ariations an# 1#justments> and in this case the ontractor ma! has an a##itiona% pa!ment c%aim #ue to Instruction of <ariation. Note6 Fnder FIDI the 2ariation is not an event 'hich is #irect%! ,ivin, an entit%ement for a##itiona% pa!ment9 the ontractor shall do the ontract provision '2ariation procedure) in order to make his additional payment claim arisen from any 2ariation Instructions. I<.1 hat constitutes as <ariation$ Sub4C%ause 13.1 2ariations may be initiated by the "ngineer at any time prior to issuing the 0aking5Aver. 1n! chan,es after the issuin, Ta&in,4Over Certificate is not a <ariation.

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Fnder the FIDI (ed !ooks% a variation means: G an! chan,e to the or&s % 'hich is instructe# or approve# as variation un#er C%ause 13 K3ariations and $d)ustmentsL. Fnder the FIDI (ed !ook $&&&% changes to the works can arise by: an employer6s instruction9 an employer6s reEuest for a proposal9 a contractor6s 6value engineering6 proposal. "ach 2ariation may include 'the hanges to the #orks): a. changes to the Euantities of any item of work included in the ontract ' ho'ever( such chan,es #o not necessari%! constitute a <ariation)% b. changes to the Euality and other characteristics of any item of work% c. changes to the levels% positions and+or dimensions of any part of the #orks% d. omission of any work un%ess it is to be carrie# out b! others% e. any additional work% Plant% @aterials or services necessary for the Permanent #orks% including any associated 0ests on ompletion% boreholes and other testing and eBploratory work% or f. changes to the seEuence or timing of the eBecution of the #orks. Note6 0hat a%% chan,es mentione# above sha%% be instructe#/approve# as <ariation b! the -n,ineer% then the on%! such chan,es can be constitute# as <ariations. Note6 0he ontractor sha%% not ma&e an! chan,es to the 9ermanent or&s% un%ess an# unti% the -n,ineer instructs or approves a <ariation . 0herefore: if the Contractor acts without an instruction he will have no grounds to claim for the cost of such variation. The important actions:
1. -a,e sure that the Contract defines the 3ariations and 3ariations Procedure. -a,e

the proper Pro)ect Procedure related to 3ariation Procedure.

notices for further drawing/ clarification (equest for 0nformation" or instruction to prevent delay or disruption to progress and notification of error/ omission/ fault or defect in the design or 5pecification.
%. 6o not ta,e any action for alteration/ changes unless and until the Engineer

instructs!approves a 3ariation. Provided that this step ta,en by the Contractor the proper notification related to such omission!deficiency and or any changes with contents stipulated in 5ub4Clause 1%.% 73ariation Procedure8 have been given to the Engineer and the Contractor still proceed with the 9or,s other than such the relevant parts" :with due expedition and without delay; unless and until he receives the Engineer response or instruction. ).? The Contractor0s Ob%i,ations to the <ariations Instruction
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7ub5 lause $1.$: 0he ontractor shall eBecute and be bound by each 2ariation% unless the ontractor promptly gives notice to the "ngineer stating 'with supporting particulars) that: 'i) the ontractor cannot readily obtain the ;oods reEuired for the 2ariation% or 'ii) it will reduce the safety or suitability of the #orks% or 'iii) it will have an adverse impact on the achievement of the Performance ;uarantee. ).3 The <ariation Instruction -n,ineer0s Su,,estion or Ora% Instruction @Sub4C%ause 3.3. Ane issue to be aware of is whether the engineer6s suggestions can be deemed to be variations. 0his will be determined by the facts of a particular event. 0he (ed !ooks provide that if the "ngineer gives an oral instruction and the contractor confirms that instruction in writing within two '-) working days then% if the "ngineer does not reject this confirmation within two '-) working days% than the ontractor.s written confirmation is deemed to constitute a written instruction of the "ngineer. Note6 The ora% instruction is not constitute as a va%i# <ariation instruction. The minute of meetin, @8O8. @either in the site meetin, or in the office. an# an! su,,estion or comment in the Contractor Dra'in, during the approval process or the contractor6s progress report are un%i&e%! to constitute proper notice. The important actions' 1. To ensure that any verbal!oral instruction it may be as a suggestion in the site"/ -&- that changes the scope of the wor,s is confirmed in writing (equest for 0nstructions!(<0" or as,ing the Engineer to issue 3ariation instruction in writing (equest for Proposal!(<P". #. 6o not any alteration before the Engineers written confirmation or instruction has been received. %. 0n relation with the actions in point 00 above/ ma,e sure that the confirmation or the instruction is issued by the person who has the authority to do so. ).) <ariation 9roce#ure ontractor.s responses to "ngineer.s (FP: If the "ngineer reEuests a proposal% prior to instructing a 2ariation% the ontractor shall respond in writing as soon as practicable% either by giving reasons why he cannot comply 'if this is the case) or by submitting: 'a) a description of the proposed work to be performed and a programme for its eBecution%
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'b) the ontractor.s proposal for any necessary modifications to the programme according to 7ub5 lause >.1 KProgrammeL and to the 0ime for ompletion% and 'c) the ontractor.s proposal for evaluation of the 2ariation. 0he "ngineer shall% as soon as practicable after receiving such proposal 'under 7ub5 lause $1.- K3alue EngineeringL or otherwise)% respond with approval% disapproval or comments. Note6 0he word Gshall respond in writing as soon as practicableA is #ebatab%e. 0he fo%%o'in, event after the <ariation instruction has been issue# is the Contractor0s C%aim. The important actions' 1. The Contractor and the Engineer could relies on the $ctual 9or,s Progress and the 9or,s sequences to determine the response period for specific (<P in order to prevent any delay. #. The Contractor could indicate his claim intension for additional cost and!or time in his response to (<P without the amount claimed by him. This will prevent his failure in giving claim notice under the 5ub4Clause #=.1 7Contractors Claim8. <. CONTR1CTORBS C71I8S Sub4C%ause ?C.1 5 Issue in Contractor0s C%aim proce#ures / key obligation under the (ed !ooks is the reEuirement to serve notice in respect of a claim for an eBtension of time or additional payment. The contractor must ,ive notice of its intention to c%aim as soon as possib%e an# no %ater than ?D #a!s after the contractor becomes a'are( or shou%# have become a'are( of an event. The Contractor must then submit its fu%%! #etai%e# c%aim 'ithin )? #a!s of becomin, a'are of an event or circumstance that ,ives rise to a c%aim. Note6 Fnder the FIDI (ed !ook ondition% the ontractor 'i%% %ose his entit%ement to compensation/c%aim if the contractor fai%s to serve the Contractor0s C%aim notices. The important actions' 1. 0n accordance with this 5ub4Clause/ if the contractor considers he has the right to additional payment within any provision!5ub4Clause under the Contract Condition or by any other way related to the Contract/ the Contractor must 5end the Engineer a warning notice/ in which he explains the situation or conditions causing his suspicions.
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#. The Contractors warning shall be delivered as promptly as possible and not more than #> days from the observation by the contractor of the situation or condition. %. The Contractor must sent to the Engineer his suspicion containing all the detailed information which forms the basis of his suspicion and of additional payment within 1# days following the observation or the needed observation" of the situation or condition or within another period which can be proposed by the Engineer and accepted by the contractor. 1. 0n case the situation or the condition which has caused suspicion is continuously occur' The Contractor shall clearly stated that his detailed claim amount during the occurrence of such situation is considered as an intermediate claim. The Engineer specifies the total claimed amount accumulated as well as the other documents which can reasonably be as,ed for by the Contractor by sending intermediate claims in a monthly basis? The Contractor shall sent a final claim within #> days following the extinction of the situation or conditions effects or within another period which can be proposed by the Engineer and agreed by the Contractor. <ollowing this application/ the Engineer acts as per sub4article %.@ 6eterminations" and ma,es a deal on the additional payment if there is one" in which the Contractor has acquired a right within the agreement and ma,es a determination. @. 0f there is no Contractors Claim procedures in the Contract then the concept is the contractors intention to claim shall be notified to the Engineer and!or the Employer as soon as after the circumstances which become the reason of his claim arisen. A. Bighly recommended to include a specific clause about the Claim Procedure in the Contract/ Then the Contractor and the Engineer could ma,e a Pro)ect Procedure related to Claim procedure.

<I. T2- I89ORT1NC- O" R-CORD4E--9IN/ Meeping adeEuate records is essential to: establish entitlements to money and time9 defend subcontractor claims9 comply with the contract6s reporting obligations.

Decide at the outset how and what records should be kept% ensuring of course that this also complies with the contract. 0here is no point putting in place an unnecessarily detailed or compleB procedure that your administrative or site team will be unable to follow. <I.1 Contemporar! Recor#s 0he ontractor.s ob%i,ations re%ate# to recor#s6
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a. 0he ontractor must maintain :such contemporary records as may reasonably be necessary to support any claim he may subsequently wish to ma,e;. b. 0he "ngineer must on receipt of a notice from the ontractor pursuant to lause 41.$ Ginspect such contemporary records and may instruct the Contractor to ,eep any further contemporary records as are reasonable and may be material to the claimH. c. 0he ontractor must allow the "ngineer to inspect the records and to supply copies thereof Gas and when the Engineer so instructsH. 0he FIDI ;uidelines highlight item b above and state that this is to the ontractor.s advantage as the "ngineer must inspect and i#entif! if he re;uires an! other recor#s to be &ept. onseEuently the "ngineer is not permitted to state at the end of the ontract that the records that have been maintained are not good enough 'as often happens). <I.? hat Constitutes 1 Contemporar! Recor# * ontemporary (ecords. includes: $. N ontemporary recordsN meant original or primary documents% or copies thereof% pro#uce# or prepare# at or about the time ,ivin, rise to the c%aim % whether by or for the contractor or employer. '8ote : 0he definition refers to documents Fprepare#F at the time hence it is not therefore fatal to a ontractor.s entitlement that the records were inspected by the "ngineer at that tim. -. N ontemporary recordsN did not mean witness statements produced after the time giving rise to the claim where such statements could not be considered to be original or primary documents prepared at or about the time giving rise to the claim. 1. here there 'as no contemporar! recor# to support a c%aim( that c%aim fai%e#. @Note6 This point cannot be overemphasiGe#. Simp%!( if there are no recor#s( a c%aim @no matter ho' stron, in princip%e. 'i%% fai%. Conse;uent%!( if there is on%! one thin, %earne# from atten#ance at to#a!0s seminar( I 'ou%# %i&e the above to be it. 9%ease reco,niGe the conse;uence of not maintainin, recor#s an# correct this prob%em at !our projects.

3. #here there were contemporary records to support part of a claim although not its entirety% the claim might succeed on that part of the claim which was supported by contemporary records but not the balance unless: inferences could be properly drawn from the eBtant contemporary records to show that the otherwise unsupported part of the claim was made out% and those inferences allowed the engineer or arbitrator to be satisfied to the civil standard of proof that the eBtant contemporary records substantiated the otherwise unsupported part of the claim. 4. In drawing such inferences the engineer or arbitrator might rely on witness statements only to identify or to clarify eBtant contemporary records. / witness

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statement could not supplement% or be a substitute for% incomplete contemporary records. <. laims have to be notified at the time the! arise% contemporar! recor#s have to be &ept an# re,u%ar accounts ren#ere#. 0he whole contractual system is aimed at the ear%! reso%ution of any Eueries at the time the claim arises% and with the strong likelihood that plant% manpower% eBperts and witnesses are still on site. It is #esi,ne# to avoi# pro%on,e# #isputes.

?. 0he definition of the word *record* was re5iterated as being :documents which either give effect to a transaction itself or which contain a contemporaneous register of information supplied by those with direct knowledge of the facts .C / hypothetical eBample provided for the above was if there was a dispute about whether labour was employed on site on a certain date it would be acceptable to produce the timesheets of the labourers% or the invoice of the labourers to a main contractor showing hours worked for that week% or perhaps even a statement from a contractor made at the time to say that they worked that week. #hat would not be a record within this definition would be a witness statement made at a much %ater #ate to say that the labour was provided that week. It would therefore be highly unusual if a document prepared for the purposes of litigation could be regarded as a record. >. Contemporar! #oes not mean prepare# instant%!. Cowever% it would be eBceptional if any record could be regarded as contemporary if it was made more than a fe' 'ee&s after the event it recor#s . G0hat is not to be regarded as a bench5mark% however: an arbitrator may well find as fact that a record produced two weeks after an event might not be contemporary or that one produced four months later was contemporary. It would be necessary to look% inter alia% at the custom and practice of the industry and at the circumstances in which the record came into being in making that finding. In seeking to clarify that record and the circumstances in which it come into being it would be perfectly permissible for the arbitrator to take into account a subseEuent witness statement which addressed those issues. &. 0he rights of the "mployer to inspect the records at the time the claim arises% to conduct his own investigation as to the veracity of the claim with others on site% and to challenge the eBtent of the claim at the time the claim arises are fundamental to the FIDI procedure. $=. / contractor who fails to meet his contractual obligations cannot put himself in a better position by so doing% and must accept the conseEuential detriment as a result if he fails to keep comprehensive contemporary records. H.3 -:amp%es of recor#s un#er "IDIC Con#itions a. Programme setting out what the contractor had intended for the order% seEuence and timing of the various activities at the time of tender. b. /n estimate of resources and anticipated eBpenditure in units of time% which are reEuired to achieve the programme. c. /ny update and revision programmes in accordance with events which may occur during the progress of the work.
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d. Progress programmes setting out the progress of the various activities against the clause $3 programme. e. (ecords of actual resources and actual eBpenditure based on progress. f. (ecords of any resources which were standing or uneconomically employed. g. (ecords of overtime worked% and the cost thereof. h. Progress photographs and + or videos. i. Drawings register 'with details of amendments and updates% if any). 8ote where it is ontractor drawings 'i.e. most commonly for !uilding 7ervices design claims) a note of who updated the drawing% the cause of the update and how long it took would suffice in substantiating a claim for additional design costs. j. 7ite diaries. k. /pproved minutes of meetings. l. Iabour allocation sheets. m. Plant allocation sheets.

SU881R3 0he effective administration of a FIDI construction contract is essential to ensure that time and money claims are protected. It is important to write notices in clear and uneEuivocal terms O do not hint or insinuate. Meeping effective records will assist contractors and employers to prove their entitlements and enable both parties to accurately ascertain their positions in the event that a dispute arises.

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