Contract Administration

Delay – what is the common law position? Why is a completion date needed?
If no agreement is reached on the time within which a service must be performed, it only needs to be performed within a reasonable time. Whilst this may be workable in the context of, say, a contract for the delivery of a new washing machine, it is not satisfactory when applied to something as complex as a construction project. …

Delay and extensions of time in construction contractsRead More »

Most forms of building contract include a clause entitling the Client to a specified level of damages, referred to as “Liquidated Damages” or “Liquidated and Ascertained Damages” if the Contractor is late in handing over the building. LADs replace the Client’s common law right to damages for late completion with a contractual right to a pre-determined sum for the period of delay. …

Liquidated damages clauses in construction contractsRead More »

By KATIE LISZKA and NAZLI OKUSLUK

ABU DHABI Law No 6 of 2008 (procurement law), which governs the procurement of materials, service contracts and works contracts in the Emirate of Abu Dhabi, aims to decentralise, modernise, simplify and facilitate procurement by government departments. It grants the Department of Finance the authority to issue a manual to execute the provisions of the law, pursuant to which the department issued the Purchases, Tenders and Bids Manual in 2008 (manual). This manual sets out provisions, policies and procedures in respect of tenders for purchasing materials, services contracts and executing works and bids, in addition to the terms and policies related to electronic tenders and purchases.ScopeWithout prejudice to the provisions of Law No 21 of 2006 regarding construction contracts and agreements in the field of civil works, the procurement law and the manual are in principle applicable to all government departments and agencies funded under the general budget of Abu Dhabi and apply to all contracts, except for the following:

(a) Direct employment contracts entered into between a government department and employees;

(b) Purchases by and contracts of the Abu Dhabi Police;

(c) Buildings leases provided to the employees of a government department; and

(d) Contracts entered into with other government entities.

In addition, the Executive Council of the Emirate of Abu Dhabi may, at its discretion, determine that the provisions of procurement law and the manual will not apply to a specific tender.

Types of tenders

The two main types of tender process are the general, which is a public tender, and the limited, which is a restricted tender.

• General tender: Designed for contracts exceeding Dh50,000 ($13,611), general tenders are based on three principles, namely, openness, equal opportunity and freedom of competition, and involve four main steps: announcement of tenders; evaluation of proposals; awarding contracts; and supplying goods or performing work.

General tenders can be either global or local. A global general tender is where invitations to tender are open to suppliers and contractors from within the country and abroad and advertised in the local as well as international media. A local general tender is where invitations are restricted to suppliers and contractors within the country and advertised in the local media only.

• Limited tender: Here, the invitation is given to a restricted number of registered suppliers and contractors selected by the relevant department. The minimum number of tenders for this process is three.

Such a tender may be international or local and is sometimes called the “selective tender” or the “tender from the list” as it is based on selecting certain suppliers or contractors from a register (see below) and inviting them participate. This process may be appropriate in circumstances where there are, for example, only a certain number of specialist suppliers.

Except for general advertising, all the rules and procedures for public tenders apply to limited tenders.

Pre-qualification

Registration is a pre-condition of doing business with government entities in Abu Dhabi and the procurement department of each government entity keeps a register of suppliers and contractors qualified to provide services and products to that government entity. If a bidder in a public tender is not on the register, it must fulfil the qualification conditions before the bids are opened.

Qualification standards

Qualification standards and conditions cover the following aspects:

(a) Legal, including the requirement for licences to practice the activity (from Planning and Economic Department, Chamber of Commerce and Industry, or any other entity);

(b) Commercial, including the relationship with licence agencies and previous transactions with the relevant government and other entities;

(c) Financial, including the financial position of the tenderer and arrangements and relationships with its banks and other financing sources;

(d) Technical, including that the tenderer has professional technicians and appropriate and sufficient equipment, workshops and warehouses; and

(e) Expertise, which can be evidenced by the successful completion of previous transactions.

Procedure

• Invitation to tender: The tendering government entity publishes an invitation to tender in newspapers, magazines and its official website (in case of public tenders) or sends the invitation directly to a specific number of suppliers or contractors (in case of restricted tenders) in order to get offers.

• Tender documents: These documents can be collected from the procurement department immediately after the invitation to tender is announced for a cash fee. They must be stamped and signed by the procurement department of the relevant government entity.

• Clarification meetings: In order to assist the bidders in preparing their bids, meetings may be held prior to submitting bids for the purpose of replying to any enquiries or questions. To ensure equal opportunity, the same information will be provided to all bidders. The manual strictly prohibits any information being provided to bidders by other means.

• Bid submission: Bids must be submitted in the required form to the envelopes opening committee, which comprises of at least three members with experience and competence in legal and financial aspects of the procurement.

A participant is permitted to submit more than one bid, provided that he shall provide for each bid a separate set of original tender documents. Submissions received after the deadline shall not be accepted.

• Bid security: For bids exceeding a value of Dh1 million ($272,238), the procurement department may decide that bid security is required.

• Reviewing bids: Once the bids are opened by the envelopes opening committee, they are delivered to the concerned technical division of the tendering government department to conduct a technical assessment. Bids accepted from a technical perspective shall be forwarded to the procurement department for financial evaluation in the case of procurement of materials, and in the case of procurement of services and works, to the relevant division.

• Notifying the successful bidder: The successful bidder will be notified of the acceptance of its bid by letter no later than a week from the date at which the procurement department approves the recommendations of the tenders and auctions committee. For unsuccessful bidders, envelopes will be returned along with a letter clarifying the reason for rejection.

• Performance bond: The successful bidder is required to submit a performance bond within 15 days from the date it is notified of the acceptance of its bid. The performance bond, to be provided before execution of the contract, is for between five and 10 per cent of the bid’s value. No interest will accrue on this bond.

If the successful bidder fails to provide the performance bond within the prescribed time period, the procurement department may call on the bid security and perform the subject of the tender in whole or in part on its behalf without taking any legal action and without prejudice to any of its legal rights.

• Contract execution: The successful bidder must sign the contract after being notified of the award and submitting the performance bond. If the successful bidder fails to sign the contract, without reasonable justification, within 15 days of being notified of the award, it shall be deemed to have withdrawn and the bid security can be called on.

Other provisions

Apart from tender procedure, the manual also contains information on internal procedures and regulates contract periods, penalty payments and dispute resolution, among other things.

• Internal procedures: The manual specifies in detail the relevant committees (such as the tenders and bids committee, and the envelopes opening committee) and officials (such as the officer in charge of contract management) who will be running the procurement process as well as their tasks and duties.

• Delay penalty: If there is a delay in completing the works within the specified time, a delay penalty will be imposed on the contractor, in accordance with the conditions of its contract. That penalty should not exceed 10 per cent of the total value of the contract.

• Claims and disputes: The relevant department must solve the contractual problems amicably by consent as far as possible. If these cannot be so resolved, the dispute shall be settled in accordance with the terms of the contract. If a dispute cannot be settled amicably, the parties have the right to go to the courts and may appeal to arbitration either under the terms of the original contract or by a separate agreement.

Gulf Construction Online

The Process

The Certification process in the construction industry has been in place for many a long year and is an integral part of both building and civil engineering. It involves client, consultant, main contractor and subcontractor alike. The very existence of large numbers of companies who make their living in the construction industry depend upon the certification process. On many standard forms of main contract the contractor is entitled to be paid the sum which is certified by the Architect, Engineer or Contract Administrator. Main contractors in an effort to ensure that they do not finish up paying out more than they receive link the payment under the subcontract to the amount certified under the main contract. …

JCT and ICE Payment Certificates under ScrutinyRead More »

By KATIE LISZKA
IN Gulf Construction’s June 2011 issue, I looked at two cases where the courts (one in Dubai and the other in England) had prevented calls on what on their face appeared to be “on-demand” bonds, on the basis of the provisions in the underlying construction and engineering contracts. …

Issues in calling on-demand bondsRead More »

By Nick Kramer
Red Book
For all its innovation and spectacular achievements, the construction industry in the United Arab Emirates has been slow to move on from its close relationship with the International Federation of Consulting Engineers Red Book (fourth edition). The Red Book was superseded years ago, and it is little used outside the Gulf region any more. …

I Thought You’d Never Notice: The Civil Code and the Red BookRead More »

It is not often that I will get the opportunity to report a case from the Falkland Islands Supreme Court, but the case of Attorney General for the Falkland Islands -v- Gordon Forbes Construction deals with a point of general interest in the management of claims.

Forbes had entered into a contract with the Falkland Islands government for the construction of the infrastructure of the East Stanley Housing Development in the Falkland Islands. The contract was based upon the FIDIC Conditions of Contract for Works of Civil Engineering Construction, 4th Edition.

…

Contemporary recordsRead More »

By Dr Chandana Jayalath

In Qatar’s public works, the employer and the engineer mostly operate as the same entity, although they are two different entities in the strict contractual sense.

As such, the dispute clause, which is available in any typical infrastructure project in Qatar, generally considers both the employer and the engineer as one party to the dispute. This may be why the dispute clause talks about disputes between employer or engineer and the contractor. …

Can disputes be settled like gentlemen?Read More »

Whenever there is delay in a construction project, parties immediately look to the liquidated damages clause. This is understandable, as the Contractor carries the risk of delay resulting from events for which it is responsible, and that risk is usually quantified by the provision of liquidated damages.
However, where such events are caused by an act or omission by the Employer, the Employer bears the risk. In such event, unless there is a clear mechanism for extending the time for completion, the Employer’s right to levy liquidated damages will fall away.
It is for this reason that most standard form contracts usually provide for an extension of time mechanism which allows for the time for completion to be extended upon an event of prevention or impediment by the Employer. The purpose is primarily to enable the Employer to protect its right to potential liquidated damages in the event of its own default. …

Time At LargeRead More »