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Sample Letter - StudyCase-1

The letter from Project Director expresses grave concern over the contractor's poor performance, as their actual progress was only 30% against the 70% plan, resulting in a 40% slippage. Due to continued delays beyond the revised scheduled completion date, the company will take over some portions of the work according to the contract terms to mitigate further delays, and has invited the contractor to a meeting to finalize the handover.

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1K views2 pages

Sample Letter - StudyCase-1

The letter from Project Director expresses grave concern over the contractor's poor performance, as their actual progress was only 30% against the 70% plan, resulting in a 40% slippage. Due to continued delays beyond the revised scheduled completion date, the company will take over some portions of the work according to the contract terms to mitigate further delays, and has invited the contractor to a meeting to finalize the handover.

Uploaded by

Irfan Gunadi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Ref :

Date : 13 September 2017

CONTRACTOR “A”
Address & Contact

Attention to : Mr. X (Project Director)

Dear Sir,

SUBJECT : CONTRACTOR POOR PERFORMANCE

This is to highlight COMPANY’s grave concern on CONTRACTOR’s poor performance despite several
reminders from COMPANY.

Based on Weekly Report dated 11 September 2017, actual progress was achieved only 30% against
70% plan, resulted in 40% progress slippages. This is a tremendously delay to the PROJECT and not
acceptable to COMPANY.

It is becoming reasonably apparent that the progress of the WORKS is delayed even after second
revision of Scheduled Mechanical Completion Date (SMCD) by 5 December 2017 where actual soil
condition and work requirements shall have been considered during development of the SMCD
second revision.

Pursuant to Article XX of General Condition of CONTRACT, COMPANY deems necessary to take over
some portion of the WORKS to mitigate further delay by CONTRACTOR. The scope demarcation and
handover procedure are determined in accordance with Attachment-1 (Scope Demarcation and
Handover).

Further, CONTRATOR is cordially invited to attend a meeting on Wednesday, 20 September 2017 at


9:00am to finalise the scope demarcation and handover.

Thank you.

Yours faithfully,
For and on behalf of PC Muriah Ltd.

……………………………………………….
ACB
Project Director
XYZ Project
ANALYSIS:

A. Default by CONTRACTOR.

The above letter is written provided that all COMPANY’s argument in the Background are facts and
valid. Progress percentages in the letter only to indicate the delay. The first Extension of Time (EOT)
was granted in considering that CONTRACTOR did not has sufficient information about actual soil
condition from Boring Log Report.

However, in second EOT to amend SMCD to 5 December 2017, CONTRACTOR has already
experienced with site condition and work requirements within live plant. This amended schedule
shall be made in considering these concerns.

In standard Construction Contract, usually, there is a clause about de-scoping. In this case, COMPANY
can exercises his right to de-scoping some part of the scope. The demarcation and handover in
Attachment-1 shall be clear enough to avoid any disputes in the future. This de-scoping need to be
agreed among Parties. Cost compensation to CONTRACTOR shall be negotiated at the minimum.

From governance point of view, subjected to COMPANY’s Limit of Authority and procedures, approval
may also require from Tender Committee. The PMT may need to have approval prior to execution of
this de-scoping and appointing new Contractor for part of the scope.

B. Default by COMPANY.

However, in case, of CONTRACTOR’s argument that site condition and work requirements is valid and
CONTRACTOR still does not has sufficient data and information during development of the the
second amendment of SMCD, COMPANY may need to discuss on the de-scoping strategy.

Option-1: COMPANY can issue third EOT with detail condition on resources and cost

Option-2: If COMPANY is in doubt of CONTRACTOR’s performance, COMPANY can still exercise the
right for de-scoping with reasonable compensation to the current CONTRACTOR. In this
Option, Selection of new Contractor for execution of part of the scope should be reviewed
in more detail based on specified technical criteria’s.

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