Kluwer Construction Blog

I am a consultant and the appointed “Engineer” working on a harbour construction project in Eastern Asia, using the FIDIC Yellow (Design & Build) Book. Some confusion has arisen over the interpretation of Provisional Sums and reasonable profit.

Few in the UK – or Europe for that matter – will have escaped news of a shrinking construction sector as public sector cuts across the continent look set to drastically reduce funding for public infrastructure projects. Reuters only last month was reporting a forecast 4% decrease in construction output in 2010
In the UK, the head of the National Audit Office (the body scrutinising public spending on behalf of Parliament) has called for a project-by-project review of future private finance initiative contracts, with stricter criteria being employed than in the last two years, to establish the most appropriate funding methods.

Whilst interest in the recent UK judgment in the case of City Inn v Shepherd Construction may be confined to these shores, it is sufficiently important in the UK construction arena to warrant a mention on this Blog. The level of interest generated by this case initially may seem disproportionate to the complexity of issues and the amounts of money at stake. But ever since the option to adjudicate became compulsory for all UK based “construction contracts” in 1996 (Under the Housing Grants, Construction & Regeneration Act – see opsi), there has been a distinct lack of relevant construction UK case law on matters such as causation and delay – as parties choose the quicker, cheap [...]

The Court ruled that by sending a letter terminating the contract in accordance with its termination procedure, Shell had “affirmed” the contract – i.e. treated it as continuing. This cost Shell about $15m.

I am a contractor working on a wastewater project in Eastern Europe, using the FIDIC Yellow Book –Design & Build. Vol.3 of our contract contains the following clause:

“Tests on Completion

The first 30 days shall be a monitoring period during which the Contractor sets up the operation of the plant and conducts his own water quality tests to confirm that the final effluent consent has been met. At the end of this period the Contractor shall notify the Engineer that the plant is complete and meeting the Process Guarantee which then shall be met by a further 30 consecutive days before Taking Over can take place.”

We have met the final 30 consec [...]

In this, the second of my New Year updates, I would like to discuss two interesting cases which have recently been decided by the UK courts. The first is the UK Court of Appeal upholding of a first instance judgment and the comments that the Court made on the recoverability of damages under English contract law.

I thought that I would hail in the new year with an update on some interesting construction developments. Put it down to a period of reflection over the Christmas break! As I want to cover a number of areas, I have split this update into 2 postings.

In this first update, I am going to cover the latest FIDIC news and the new Bribery Bill currently going through the UK parliament. In my next posting I will look at two recent construction cases in English law, the first covering recoverability of damages and the English “remoteness” rule, the second covering treatment of contractual notice bars for claims.

Question:
I am a project manager for the employer on a power plant project based in Europe. We have been on quite good terms with the contractor up until now. Last week the contractor sent us a claim for 12 weeks’ delay to the programme and for compensation costs (we are using the FIDIC Yellow Book (Plant and Design Build) 1999 form and English governing law). They are saying that dealing with contamination in the ground discovered in the last few weeks will cause a delay. We had a couple of site meetings with the contractor and sub-contractor about the programme and the potential delays, prior to the contractor sending the claim. I have two issues with the claim: firstly, we do not believe [...]

In the wake of the current downturn, employers will increasingly look for greater budget certainty under EPC or Turnkey contracts. This is where the contractor undertakes all tasks – design, construction, management etc – so that, upon completion, the employer merely needs to ‘turn the key’ and operation of the plant or building can begin immediately. The whole point is that the contractor assumes price risk in return for relative autonomy over how he delivers the project – provided of course he meets the employer’s output requirements. But often employers want not just price certainty but also to retain control over design approval and how the project is actually delivered. This can [...]

As lawyers, we want what is best for our client. We will fight for that additional clause or that tricksy wording that will give our client that added protection that may, someday, prove decisive in an argument with the contractor or the employer.

One issue that lawyers often fight quite savagely over (but in that overly courteous way beloved of lawyers) in construction contracts is the inclusion or exclusion of a fitness for purpose obligation on a contractor or architect. But do we know what we are fighting over? What will happen if fitness for purpose is not expressly included? And what is the real effect of including a fitness for purpose obligation? Will it be implied into your contract [...]