Contract Admin. and Law

SUNYANI TECHNICAL UNIVERSITY
FACULTY OF ENGINEERING
DEPARTMENT OF CIVIL ENGINEERING
LECTURE NOTES
CVE309: CONTRACT ADMINISTRATION
AND LAW
[Credit: 2]
January 2023
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Introduction
This course has been designed to introduce students to the essential modules in contract
administration. This lecture notes touch essentially on the following areas: Contract Principles;
Basics of Contract Administration; Forms of Standard Works/Technical/Consultancy Contract;
Contract Administration Processes Especially Post Award Preliminary Tasks; Monitoring of
Contract Performance and Reporting and Contract Modification.
It also aims at equipping students to gain sufficient knowledge in the valuation of variations,
payments, and claims. Application of contractual techniques in dealing with the risks involved in
the projects. Understanding the requirement of insurance, bonds, and guarantees. Understanding
the importance of dispute resolution techniques.
Course Objectives
By the end of the course, participants will be able to:
• Outline the major activities and procedures of contract administration
• Explore administration tools and techniques that are used during the contract
implementation
• Create a system to evaluate contractors and identify key performance indicators that can
help assess their performances.
• Explain the different types of variation orders, claims and damages and identify several
alternative dispute resolutions
• Prepare for negotiating contract variations and claims to reach a satisfactory settlement
The main outline of the course includes;

Overview of Contract Administration
• Lecture One: Contracts
• Lecture Two: Tendering and Contractor Selection
• Lecture Three: Conditions of Contract and Standard Tender Document
• Lecture Four: Contract Modification/Variation
• Lecture Five: Payment Certificate
• Lecture Six: Claims and Disputes Resolution
• Lecture Seven: Extension of Time, Practical Completion, and Liquidated Damages
• Lecture Eight: Defects and Defects Liability Period
Further Readings / References

• Charles S. Phillips, P.E., Construction Contract Administration (Published by the Society
for Mining, Metallurgy, and Exploration 8307 Shaffer Parkway Littleton, CO 80127).
• Paul Levin, Construction Contract Claims, Changes and Dispute Resolution, Second
Edition 1998. (ISBN 0-7844-0276-0R.).
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• Francis T. Hartman, Ten Commandments of Better Contracting: A Practical Guide to
Adding Value to An Enterprise Through More Effective Smart Contracting 2003. (ISBN
0-7844-0653-7).
• The CSI construction contract administration practice guide, (Published by John Wiley &
Sons, Inc., Hoboken, New Jersey).
• PPA Ghana, Contract Administration Manual for Works, Manual 2, 2016.
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1.0 Overview of Contract Administration
Contract Administration is the management of contracts made with suppliers, contractors,

consultants, or technical service providers to assure that all the parties comply with and fulfills
the terms and conditions of the contract. It includes all dealings between parties to a contract
from the time a contract is awarded until the task has been completed and accepted or the
contract terminated, payment has been made, disputes have been resolved and the contract
closed.
Contract Administration is the responsibility of the Procurement Entity and is distinguished

from the physical performance of the contract which is the responsibility of the Supplier,
contractor, consultant, or technical service provider.
Contract Administration is similar to project management. Each contract is a mini-project. It

has a unique goal, consumes resources, has a beginning and end date, and requires coordination
and planning of relevant activities, as well as documentation in a contract file throughout the
process.
The stages of Contract Administration are intended to ensure that the parties work together to
achieve the objectives of the contract. Contract Administration is based on the idea that the
contract is an agreement, a partnership with rights and obligations that must be met by both
sides to achieve the goal. Contract Administration is aimed not at finding fault, but rather at
identifying problems and finding solutions together with all contracting parties involved.
1.1 Purpose of Contract Administration
It is to regulate confrontation and provide a basis where one party can enforce the promise of
another. It also discourages unscrupulous parties from providing second-rated service.
It is a systematic approach and the ability to administer the contract that will enable the success
and performance of a project, which is the goal of the contract execution.
1.2 Objectives of Contract Administration
The main objectives of Contract Administration are:

• The successful execution of the contract in a timely and economic manner.
• To ensure performance by all parties in accordance with the requirements of the contract.
1.3 The Role of Contract Administration
The need for the Contract Administration function stems from the fact that a contract brings
into existence a relationship over a period of time between the parties to the contract shaped by
the necessity of mutual compliance with its terms and conditions. Contracts may not be perfect
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because of the difficulty of foreseeing all possible developments with absolute accuracy, and
therefore the role of Contract Administration is to steer this relationship as governed by the
contract document. Contract Administration therefore involves:
• Planning for the relationship;
• Monitoring its development as the contract proceeds;
• Measuring its achievement; and, if necessary,
• Taking corrective action to safeguard the interests of the Procurement Entity to ensure
successful execution of the contract.
1.4 Summary of Main Tasks of Contract Administration
• Contract Administration Planning (Policies, Systems, and Procedures)

• Monitoring Contract Performance and Reporting
• Management of Contract Changes/Variations
• Processing Payments
• Resolution of Claims and Dispute Resolution
• Contract Termination
• Managing Contract Records
• Evaluation of Contract Performance, and
• Contract Close-out
Contract Administration Responsibilities
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2.1 Contract –Definition
A contract has been defined as “An agreement, enforceable by law, between two or more
competent parties (legal entities) to perform or not to perform a specific act or acts for a
consideration.”
It is an agreement in which the law will be enforced. The common law rule of privity states that
only involved parties in the contract can be affected by it. This means, one party can take legal
action against the other. When the parties enter into the contract, they are legally bound to fulfill
their obligations which they promise to perform in the contract or agreement.
The term of the contract can be expressed (written or expressed orally by the party) or implied
(not mentioned in the contract but it is logical to be there). However, contracts financed with
public funds are generally made up in writing.
Contracts are required when goods/services are bought.

• The organization supplying these goods are called ‘contractors’ and ‘suppliers’
• The organization paying for them is called the ‘sponsor’, ‘owner’, ‘client’ or ‘customer
2.2 Essential Elements of a Valid Contract
For contracts to be valid to be legally enforceable, the following must be present:

• Agreement: There must be an offer and acceptance
• Capacity to contract – The parties to the contract must have the legal right to enter
into the contract with respect to age, competency, and corporate authority.
• Certainty – The parties to the contract must be of the same mind about what is being
offered and accepted and thus the essential terms must be definite and agreed upon by
them.
• Consideration – The parties to a contract must each give something of legal value to
the other or a third party in return for the benefit he receives.
• Legality of Purpose/Object – The object of the contract must not be one of which the
law disapproves. The law will not enforce an illegal contract, or when it is against public
policy.
• Possibility of Performance – A contract must be possible to perform.
• Voidable if it is made under duress or undue influence.
With certain exceptions, a contract need not be in writing. However, enforceability will depend
on being able to prove the existence and terms of a contract. It is therefore highly recommended
that all contracts be put into writing.
2.3 The Law Applicable to a Contract

No contract exists in a void. There will always be one national law applicable to the formation,
interpretation and application of the contract. Under most legal systems, the parties to
international contracts are free to choose the law applicable to their relationship. This rule, like
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many others are not without exceptions. The laws of one particular country may be of so-called
stringent or mandatory character, meaning that those rules override any provision to the
contrary to the contract between the parties.
The importance of the applicable law, then, is first of all to regulate matters in which the parties
have not addressed in their contract and, secondly, to hold the parties within limits drawn up
by the stringent provisions of the law. In addition, the applicable law is used by the judge or
arbitrator to interpret the contract and fill in gaps in the contract where no contractual
provisions exist.
2.4 Basic Types of Works Contracts
There are three basic and broad types of works contract, from which other variations have been
derived to suit particular circumstances. The circumstances under which the basic types of
contract and some of the common derivatives are used, the documentation required and the
advantages and disadvantages of the different types are explained below.
The basic types of works contracts, are broadly defined and classified in accordance with the
method of payment, and these are as follows:
• Lump Sum
• Unit Rate (Admeasurement or Re-measurement)
• Cost Reimbursable plus Fee
2.4.1 Lump Sum (LS)

Lump sum contracts with Activity Schedules are more rarely used with the assumption that the
risk of variation in quantities is minimal. The contract is split into milestones or activity
schedules and payments are made on the basis of the percentage of completion of each activity.
Lump sum or all-inclusive price contracts are normally used for a small, short duration of one or
two years, well-defined, detailed construction works, which are not subject to a large number of
variations or conditions of high risk; in such cases, contract prices would normally be fixed,
except in conditions of high inflation. Smaller work contracts are used whenever this option
is chosen. Typical LS contracts are culverts and small bridges, rural schools, health clinics,
housing, bus shelters, etc.
Lump sum tenders may also be called for larger works of longer duration, such as industrial
process plants, normally following a two-step tendering procedure with designs prepared by
the successful tenderers; fixed price tenders could be requested if payment is in a steady/stable
currency. Two adaptations of the fixed price LS contract to cope with these uncertainties during
implementation relate to:
• Quantity Variations: where the quantities of a few work items are subject to variation
and can be estimated in advance by tenderers, including provisional quantities for
possible increases over the basic lump sum to be priced competitively by tenderers and
carried forward to the total amount of tender with the removal of the risk of possible
quantity increases.
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• Price Adjustment: for long-duration contracts or in conditions of high risk and inflation,
the price of inputs which may be difficult to predict at the time of tendering can be made
the subject of a price adjustment mechanism to track future price fluctuation and
avoid further speculation in tendering.
2.4.2 Unit Rate (UR) – Admeasurement or Re-measurement

Unit Rate (UR) or Admeasurement or Re-measurement contracts with Bills of Quantities and/or
Price Schedules, which represent the vast majority of Works contracts. FIDIC Conditions of
Contract used for Major works contracts are prepared under the assumption of admeasurement,
i.e., a contract where progress is determined by measuring the quantities of works actually
performed; payments are based on these measured quantities multiplied by the respective
contract unit rates as quoted by the Contractor in the priced Bills of Quantities.
The Unit Rate (UR) type of contract is the most common in general use internationally in the
public sector for the construction of infrastructure projects, both large and small, under
conditions of moderate perceivable risk in sectors such as transportation, power, irrigation, water
supply, and sewerage, etc. Tenderers are invited to quote unit rates for carrying out the
employer’s estimated quantities of different classes of work to be performed. The unit rates are
inclusive of all related inputs of labor, materials, equipment usage, and a proportion of overheads
and profit. The Tender Price comprises the summation of estimated quantities multiplied by the
respective unit rate for all items of work. During contract execution, quantities of work
completed satisfactorily are measured periodically as a basis for payment. The unit rates may be
fixed for short-duration contracts of 18 months or adjustments for variations in the indexed price
of inputs over longer-duration contracts.
2.4.3 Cost Reimbursable plus Fee

Commonly referred to as Cost Plus (CP), this type of contract provides for the periodic
reimbursement of the contractor’s actual costs for measurable inputs to the works, such as labor,
materials, equipment, spare parts, fuel, etc., together with a fee to cover associated overheads,
management, and profit.
The fee may be either a:

• Fixed fee, i.e., independent of total measured costs.
• Percentage of measured costs.
• Variable (incentive) fee, which increases when savings materialize in an agreed
estimate of total contract payments or which reduces cost overruns.
Cost-reimbursable contracts are appropriate in:

• Open-ended emergency situations such as structural collapse or damage,
• Circumstances where works are exposed to conditions of great uncertainty or
unquantifiable risks, such as unstable political situations, war, unknown ground
conditions (tunneling)
• Large unforeseeable price fluctuations
• The private sector, usually on a negotiated basis with a selected contractor
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• Cases when an early start is required on projects which are not completely defined
or designed but are expected to be highly remunerative, such as hotels, casinos,
innovative technical processing and manufacturing plants, etc.
2.5 Characteristics, Merits, and Demerits of Basic Types of Works Contracts
2.5.1 Lump Sum (LS)

The characteristics are reflected in the basic LS tender document for small works and building
normally consists of Instructions to Tenderers (ITT), Conditions of Contract, Technical
Specifications, well-detailed drawings, Forms of Tender, Contract Agreement, and Securities.
Quantities are not normally given for micro-works below GHS15,000, but major quantities are
sometimes indicated for the convenience of tenderers on major works. The payment schedule is
normally a pre-specified proportion of the contract price related to progressive stages of
completion as per the Schedule of Activities.
Some of the advantages of an LS contract from the Employer’s viewpoint are:

• Advance knowledge of the fixed contract amount for budget forecasting, with relatively
minimal variations due to quantities and price adjustments.
• Relatively easy to administer for payment purposes with no or little measurement of
works performed.
• Requires less documentation, normally no detailed Bills of Quantities.
Some disadvantages are:

• Inflexible to design changes, major variations are difficult to price.
• Not suitable where potential future risks and changes are difficult to forecast
• Tenderers may inflate their prices to cover expected costs that do not materialize, and
• Designs for smaller works must normally be complete and drawings prepared in detail
by the Employer, as a basis for tendering.
2.5.2 Unit Rate (UR) – Admeasurement or Re-measurement

The characteristics of UR are reflected in tender documents which consist of the Invitation to
Tender (ITT), General Conditions of Contract (GCC) and Particular Conditions, Technical
Specifications, a detailed BOQ for different classes of work, Drawings in sufficient detail for
quantities to be estimated,
Form of tender, Contract Agreement, and Securities. This use of the FIDIC GCC provides for
the incorporation of custom-designed specialized plant in a major works contract e.g., the
ventilation and/or lighting systems in a tunnel contract, through nominated subcontractors,
while still maintaining the merit of a single-responsibility contract under the prime contractor.
Some of the advantages of the UR contract are:

• Tenderers are competing on the most equitable basis, against the same quantities of work
and complete designs.
• The comparison and evaluation of tenders are straightforward and objective,
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• The provision of flexibility for the contracting parties in handling variations and extra
work.
• Regular accurate cost payments for work completed assist the contractor’s cash flow.
• Reasonably accurate cost estimates can be made for planning purposes and, under normal
circumstances, the Employer can expect only minor discrepancies between the estimated
cost and the lowest tender, and between the contract price and the final basic cost.
• A firm cost estimate is available in advance for determining the appropriate budget
amounts.
Some of the disadvantages of the UR contract are:

• Tenders containing unbalanced unit rates and “front-end loading” create problems in
tender comparison and evaluation;
• Higher cost of documentation than LS in preparing the detailed BOQ;
• Higher supervisory costs, due mainly to the re-measurement of work performed.
• Known to encourage corruption in re-measurement
• Serious audits with adverse effects on beneficiary agency
2.5.3 Cost Reimbursable plus Fee

The characteristics of CP are reflected in the tender document which includes the normal basic
elements, tailored to the particular contract circumstances and method of payment. In cases
where a special end-product is needed, specifications should prescribe functional and
performance requirements, in addition to technical requirements. A provision may also be
included for conversion to a more appropriate form of contracts such as target cost or Unit Rate,
as the work progresses and uncertainties are resolved and designs are completed.
The advantages of CP contracts are:

• Early mobilization of construction resources is possible in emergency situations, and on
works that are poorly defined, and involve high risk or high returns.
• The contractor is reimbursed for all expenditures and assumes little or no risk.
The disadvantages of CP contracts are the:

• Circumstances favoring cost-plus contracts are more conducive to sole source
negotiations with a selected contractor than to competitive tendering, which is normally
required in the public sector.
• Contractor has little incentive to produce quality or timely work if the CP fee is fixed,
• Contractor benefits from higher costs and consequently has limited incentive to have cost
effective with a CP percentage fee.
• Employer needs additional supervisory staff to monitor and verify actual costs.
2.6 Factors Affecting the Choice of Contract Type
In the preliminary stages of procurement, procurement entities may have a choice of

procurement method and/or the type of works contract to be used, depending on prevailing
circumstances. The type of contract chosen will affect the subsequent stages of procurement,
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also the content of the tender documents and, to some extent, the degree of influence that the
employer can exert during contract implementation.
It is important, therefore, at an early stage in the planning process, to consider carefully the types
of contracts that might be suitable for use, and the factors affecting the choice of type.
Some of the general factors which may affect or influence the choice of contract type by an
employer or Procurement Entity are as follows:
• Nature and complexity of the works e.g., building, highway, industrial plant, etc.,
• Size and duration of the contract e.g., minor health clinic or major hospital, feeder/trunk
road or Highway, urban water supply, etc.,
• Degree of the definition of the works and the element of risk/uncertainty.
• Status of design for both preliminary and final.
• Technical capacity, design, and supervisory resources of the employer.
• Financial resources available and/or budget constraints.
• Previous experience of the Employer in a particular type of contract.
• Practices and procedures of the associated funding agencies and the degree of compliance
required with their Standard Tender Documents (STDs).
2.7 Adaptations of the Basic Types of Works Contract

The three (3) basic types of works contract LS, UR, and CP can be adapted or combined to suit
particular contracting requirements and payment provisions. A few of the more common
adaptations and their particular uses are:
• Supply and Erect/Install
• Design and Build/Construct
• Turnkey
• Target Cost
• Public-Private Partnerships (PPPs)
2.7.1 Supply and Erect/Install

This type of contract provides for the supply of major items of manufactured or prefabricated
plant/equipment/goods such as turbines, pumps, generators, transmission towers, pipelines,
boilers, etc., including relatively minor works involved in their erection and/or installation and
commissioning at a site or various sites.
The plant/equipment/goods would be the subject of performance specifications or fabricated to

the design of the Employer/Purchaser on an LS basis. Minor/Micro works might be quoted on LS
based on the design of the supplier, but major works should be undertaken to the design of the
employer/Purchaser on a UR basis. Commissioning or testing the completed project is a
requirement before acceptance.
2.7.2 Design and Build/Construct

This type of contract is used for important buildings, major works, and other infrastructure when
an employer wishes to explore, on a competitive basis, the most innovative designs and the
special expertise and technology of individual contractors, which may not be available to the
employer’s own Engineer/Architect, such as works superstructures and buildings might be using
a variety of configurations in steel, reinforced or pre-stressed concrete, etc., to provide a common
structural equivalence, while substructures using wells, caissons, conventional or proprietary
piling, etc. might equally provide foundations.
Expression of Interest in consulting services and Prequalification for works contractors are
essential features of the tender process in order to select qualified combinations of
engineer/architect/contractor.
A comprehensive site and subsoil survey are provided by the Employer as part of the tender
documentation which should also include the parameters of structural design and loading.
Competitive designs and lump sum tenders are called from qualified tenderers who provide
comprehensive design calculations, quantities, and drawings. Tender evaluation includes:
• Design checks and quantification of design errors
• Times of completions
• Payment schedules
• Assessment of the aesthetics of the different proposals.
Tenderers and Applicants are sometimes compensated, on a sliding scale according to merit,
for the preparation of responsive proposals.
2.7.3 Turnkey
Turnkey contracting is used for the procurement of complex industrial process facilities and
plants such as steel mills, food processing, petroleum refineries, etc. when alternative systems
and processes could not provide satisfactory end-product requirements, and would therefore be
undesirable or impractical to prepare definitive designs and complete technical specifications in
advance.
A two-step tender procedure is normally followed, first inviting unpriced technical proposals and
outline designs which are subject to clarification and adjustment by the employer, followed by
the submission of detailed technical proposals and priced tender in the second step.
The turnkey contractor undertakes to provide detailed designs, production process plant and
equipment, manufacturers’ authorization, related construction, procurement licenses, guarantees,
recruitment, and training of operating staff, commissioning, start-up, initial operation and
maintenance and final handover of the “key” to the employer for him to “turn”.
The contract price is normally quoted LS with periodic payments against specified stages of
partial completion. Price adjustment clauses may be provided for contracts of longer duration
of about two years and contractors may be encouraged to tender on a fixed price basis and
absorb the risk of future price fluctuation with payment in a hard foreign currency.
2.7.4 Target Cost

This type of contract may be used in conditions of high uncertainty and unquantifiable risk
which make it difficult to define the value and scope of the works precisely before inviting
tenders. It is essentially a cost-reimbursable plus incentive fee type of contract, where the initial
fee is adjusted with a bonus or penalty according to whether the final contract cost is less or
greater than an agreed Target Cost.
This form of contracting is more suited to single-source procurement, where an Initial Target
Cost (ITC) can be the subject of competitive tender on a UR basis against provisionally
estimated quantities of work, with overheads and fees priced separately but competitively. As
the work progresses, the scope of the project and the target cost can be more precisely defined.
The ITC is updated periodically to include agreed variations, extra works, actual and estimated
quantities of work and price adjustment, if any, which becomes the Final Target Cost (FTC)
upon completion.
Payment to the Contractor is made on a cost-reimbursable basis against actual inputs to the
contract and upon completion, total payments are compared with the FTC to determine the
amount of the final fee.
2.7.5 Public-Private Partnerships (PPPs)

A Public Private Partnership is a partnership between the public sector and the private sector
for the purpose of delivering a project or service traditionally provided by the public sector.
PPPs come in a variety of different forms, but at the heart of every successful project is the
concept that better value for money may be achieved through the exploitation of private sector
competencies and the allocation of risk to the party best able to manage it.
It is important to note that PPPs acknowledge the constraints to investment in physical

infrastructure and make efforts to promote effective public-sector spending and private-sector
investment and to interpret investment trends.
In effect, PPPs, therefore, have long-term, contractual partnerships between the public and
private sector agencies, specially targeted towards financing, designing, implementing, and
operating infrastructure facilities and services that were traditionally provided by the government
and/or its agencies. These collaborative ventures are built around the expertise and capacity of
the project partners and are based on a contractual agreement, which ensures appropriate and
mutually agreed allocation of resources, risks, and returns. PPP is the approach of developing
and operating public utilities and infrastructure by the private sector under terms and conditions
agreeable to both the government and the private sector
2.7.5.1 Public-Private Partnerships (PPPs) Models

• Service Contract
o Government/public authority hires a private company or entity to carry out one or
more specified tasks or services for a period, typically 1–3 years,
o Public authority remains the primary provider of the infrastructure service and
only contracts out portions of its operation to the private partner.
o Private partners must perform the service at the agreed cost and must typically
meet performance standards set by the public sector.
• Management Contract
o Management contract expands the services to be contracted out to include some or
all of the management and operation of the public service i.e., utility, hospital,
port authority, telecommunication, etc.,
o Daily management control and authority is assigned to the private partner or
contractor, even though the ultimate obligation for service provision remains in
the public sector, and in most cases, the private partner provides working capital
but no financing for investment.
o Private contractor is paid a predetermined rate for labor and other anticipated
operating costs.
• Lease Contract
o Duration of the leasing contract is typically 10 years and may be renewed for up
to 20 years.
o Responsibility for service provision is transferred from the public sector to the
private sector and the financial risk for operation and maintenance is borne
entirely by the private sector operator.
o The operator is particularly responsible for losses and unpaid consumer debts.
o Leases do not involve any sale of assets to the private sector
2.7.6 Concessions
A concession type of contract may be considered when an Employer/Owner has a limited budget
and/or borrowing capacity, or otherwise wishes to involve the private sector in financing a
typical public sector project. It is essentially a concessionary turnkey type of contract, which
includes financing in addition to the design, construction, operation, and maintenance of public
and private revenue-earning projects such as power generation and distribution, toll roads and
bridges, water supply, etc. Total costs and risks are borne by the private BOT investors over the
concession period, which may be some 20-30 years.
The concession type of contract is one of a growing family of concessionary contracts involving
private sector financial participation, each of the different features.
The drafting of the Concession Agreement by the responsible public authority is an important
element in this type of contracting and should cover amongst others:
o Use of land, existing property, and utilities
o Design and performance standards,
o Environmental requirements,
o Risk sharing by the contracting parties,
o Regulation of tariffs,
o Subsidies, if any, and other public-sector financings
o Operating and maintenance requirements
o Conditions of facilities at transfer and transfer price, and
o Provisions for a possible extension of the concession period
2.7.6.1 Types of a concession contract

• Build, Operate, and Transfer (BOT)
o Arrangements are a kind of specialized concession in which a private operator or
consortium finances and develops a new infrastructure project or a major
component according to performance standards set by the government.
o The private partner provides the capital required to Build the new facility, Operate
& Maintain (O&M) for the contract period, and then return the facility to the
Government as per agreed terms.
o Private operator now owns the assets for a period set by contract—sufficient to
allow the developer time to recover investment costs through user charges.
o The public sector assumes ownership but can opt to assume operating
responsibility, contract out the responsibility of the operations to the private
operator, or award a new contract to a new partner.
• Build, Operate and Own (BOO)

o Contractual arrangement whereby a private operator is authorized to finance,
construct, own, operate, and maintain an Infrastructure or Development facility
from which the private operator is allowed to recover his total investment by
collecting user levies from facility users.
o Private operator owns the assets of the facility and may choose to assign its
operation and maintenance to a facility operator,
o Transfer of the facility to the Government, Government Agency, or Local
Authority is not envisaged in this structure.
o Government, may terminate its obligations after a specified time period
• Build, Operate, Own and Transfer (BOOT)

o Contractual arrangement whereby a private operator is authorized to finance,
construct, own, operate, and maintain an Infrastructure or Development facility
from which the private operator is allowed to recover his total investment by
collecting user levies from facility users.
o Private operator owns the assets of the facility and may choose to assign its
operation and maintenance to a facility operator.
o Transfer of the facility to the Government, Government Agency, or Local
Authority is envisaged in this structure.
o Government, may terminate its obligations after the specified time period
2.8 Important Parties in a Works Contract

The FIDIC Conditions unite in one single document the roles and responsibilities of the three
most important parties in a works contract, namely the:
• Employer,
• Engineer/Project Manager. And
• Contractor.
Given the very sensitive nature of works contracts, which are inherently prone to variations
more than any other type of contract the Engineer/Project Manager is the central figure of
the contract and the main party to which contract administration is formally assigned. This
derives from the fact that the Engineer/Project Manager is invested with the authority to act on
behalf of the Employer in making sure that the work would be completed successfully in terms
of quality, time and cost. One of the biggest mistakes in the administration of works contracts is
the belief that once you hire a competent Engineer all your troubles are over. But this is only true
in exceptionally rare cases because an effective contract administration requires a high degree of
involvement from the implementing agency/entity and there can never be a full and complete
outsourcing of contract administration since the implementing agency/entity must retain critical
key functions within the process, at least final verification of documents and payment.
In large works contracts as well as in projects with many contracts a wide geographical
spread the implementing agency/entity might also benefit from the expertise and experience of
third-party technical auditors. These can be hired as an additional layer of supervision
responsible for checking how the contract parties, Contractor, and Employer, including the
engineers, are fulfilling their duties and responsibilities toward the successful completion of the
contract
2.8.1 Specific contractual responsibilities of the Employer

Apparently, the employer’s actions in the contract are rather few, since the day-to-day aspects of
the contract supervision are delegated to the Engineer. Employer’s rights and responsibilities as
stipulated in the General Conditions of Contract are limited to the following:
• Gives the Contractor the right access to and possession of the Site.
• Facilitates obtaining of approvals and permits.
• Ensures that its own staff or other Contractors comply with the contractual safety and
environmental rules.
• Submits to the Contractor reasonable evidence of the financial arrangements that would
enable the Employer to pay for the work.
• Approves the Performance Security.
• Pays to the Contractor the Advance Payment, all subsequent Interim Payment
Certificates, Retention Money and Final Payment.
• Pays penalties for delayed payment.
• Takes over the work.
• Terminates the Contract.
2.8.2 Specific contractual responsibilities of the Engineer

He has the power to give orders, approvals, and issue certificates. He contributes to the design
and specifications of the project.
The Engineer has a multitude of roles and responsibilities in the Conditions of the Contract,
virtually every contractual sub-clause refers to the Engineer in one way or another. However, out
of the many contract supervision responsibilities, the most important would be the following:
• The Engineer must notify the Commencement date.
• The Engineer may reject any program submitted by the Contractor
• The Engineer participates in the tests and is allowed to reject any Plant, Materials or
workmanship
• The Engineer inspects the Works
• The Engineers measure the Works
• The Engineer determines new rates
• The Engineer evaluates and determines variations
• The Engineer determines extensions of Time for Completion
• The Engineer certifies payments
• The Engineer approves or disapproves and determines claims
• The Engineer gives instructions The Engineer issues the Taking-Over and Performance
Certificates
2.8.3 The Contractor

A contractor as the main or prime contractor is responsible for the day-to-day oversight of a
construction site, management of vendors and trades, and communication of information to
involved parties throughout the course of a project.
The contractor is a manager and possibly a tradesman, employed by the Employer as an outcome
of a tender process or on the advice of the architect, engineer, or quantity surveyor or by the
Employer him/herself. A contractor is responsible for the overall coordination of a project and
must first assess the project-specific documents, referred to as tender. Depending on the project
delivery method, the contractor will submit a fixed price tender, cost-plus price, or an estimate
with unit rates.
The contractor must consider the cost of home office overhead, general and special conditions,
specifications for materials and equipment as well as the cost of labor to provide the employer
with a price for the project. Contract documents include drawings, project manuals including
general, supplementary, and/or special conditions and specifications, addenda, or modifications
issued prior to tender and prepared by a design professional.
Responsibilities
A contractor is responsible for providing all of the material, labor, equipment, and services
necessary for the construction of the project. The contractor may hire specialist contractors and
specialized subcontractors to perform all or portions of the construction work. Responsibilities
may include applying for permits, securing the property, providing temporary utilities on site,
managing personnel on site, providing site surveying and engineering, disposing or recycling
construction waste, monitoring schedules, and cash flows, and maintaining accurate records
2.8.3.1 Subcontracting, Contractor’s Rights, and Obligations

The contractor shall not assign any functions to a 3rd party without the consent of the employer.
In doing so, the employer has the right to terminate the employment of the contractor. The
contractor is responsible to the employer for all the works and he is liable for any defects, delays,
and other defaults committed by the subcontractor. Since there is an absence of privity between
the subcontractor and the employer, neither party can direct recourse against the other.
2.8.3.2 Nominated and Domestic Subcontractor

The nominated subcontractor is chosen by the employer to participate in the project. He may
undertake specialist works like lift, AC, mechanical, electrical installation, etc. The advantage is
that the employer has control over the choice of subcontractor even though the main contractor
shall be liable for defaults done by the nominated subcontractors.
A domestic subcontractor is chosen by the contractor and not by the employer. He undertakes
carpentry, joinery, plastering, and other builder trades. The contractor shall not subcontract any
part of the works without the prior written consent of the architect.
2.8.4 Designated Subcontractors and Nominated Subcontractors

A designated subcontractor/ supplier is one whose name is known in advance and is included in
the tender document. He assumes a prior contract with the employer and subsequently agrees to
have his agreement novated to the contractor.
A nominated subcontractor is appointed by the architect after the main contractor has been
awarded. The main contractor is required to enter into a subcontract with the nominated
subcontractor or nominated supplier selected by the architect unless he has a valid reason for
objection. In short, a designated subcontractor/supplier is known in advance in the tender
documents but the nominated subcontractor/ supplier is not known until the architect issues an
AI for the nomination after the main Contractor is awarded. The contractor is given the right to
reasonably object to the architect’s nomination for the nominated subcontractor/ supplier but not
for the designated subcontractor/ supplier.
2.8.4.1 Contractor Responsibilities on his Subcontractors

The contractor is responsible for his entire subcontractors; designated, nominated, and domestic.
The contractor shall make good on any damages or losses suffered by the employer caused by a
breach of the subcontractor and shall indemnify the employer for the damages or losses.
2.8.4.2 Termination of a Subcontractor

In the event of repudiation or abandonment of the designated or nominated subcontractor or
termination by the contractor, the contractor with the consent of the architect may select another
subcontractor or supplier to complete the works or carry out himself and be paid the same sum as
agreed by the original subcontractor.
3.0 Tendering and Contractor Selection
Introduction
Implementation of a project usually begins with a contract between the client and the contractor.
To come out with a contract, a few processes need to be done such as preparing the project brief
and then visualizing in the form of drawing, tender document preparation, offer to the contractor,
evaluation of tender, and acceptance of tender.
3.1 Tendering
Project tendering is the process by which bids are invited from interested construction
contractors to carry out specific packages of construction work. It is a common procurement
method to obtain construction services. The tendering process is an important means by which a
fair price and the best value for undertaking the works are obtained.
The processes involve the selection of a suitable contractor at a suitable time for a project, i.e.,
work or service. The offer of a price is required from the contractor at the appropriate time and
evaluation of these prices is done along with the conditions, the contract drawing and BOQ make
up the contractual agreements and give the legal basis to the rights, liabilities, and duties of the
parties to the contract.
A detailed design and adequate information are needed to obtain tenders. Information like works
to be performed, quality of work expected, contractual conditions, and cost of finished works
should be determined. The descriptions and quantities are derived from contract drawings and
they are prepared by the Quantity Surveyor.
3.2 Why Tendering

• Procurement of goods, services, and works in the public interest;
o Efficiency
o Economy
o Transparency
• Fair & Equitable treatment of suppliers/contractors
• Promotion of Competition
Tendering Process
3.3 Tender Preparation
3.3.1 Tendering Choices/Selection Process

There are a variety of approaches in which an employer may approach the market and conduct
the tender process. These include;
• Call for Registration (CFR) - A Call for Registration is an approach to market used by
employers to seek details about potential suppliers of a good or service.
• Expression of Interest (EOI) - An Expression of Interest is used primarily to determine

the market’s ability or desire to meet the employer’s procurement need, after which the
employer may need to collect additional information to make procurement decisions. An
EOI is not an invitation to bid, is not binding on either party and is usually followed by a
selective Request for Tender based on a more detailed specification.
• Request for Information (RFI) – A Request for Information is commonly used on

major procurements particularly if the employer’s requirements could potentially be met
through several alternate means. An RFI is not an invitation to bid, is not binding on
either party, and in some circumstances may be followed by a selective RFT, RFP, or
RFQ.
• Request for Quotation (RFQ) – A Request for Quotation is used when detailed
specifications of a good or service are known and competitive bids are to be evaluated,
mainly on price.
• Request for Proposal (RFP) - A Request for Proposal is used to directly purchase goods
or services when the employer clearly understands its business needs but does not have
defined details of the solution. This approach is often used for the procurement of
professional services.
• Request for Tender (RFT) - A Request for Tender is used when an employer is seeking
potential suppliers for a scope of work that has been designed and specified in detail. An
RFT is often used for building and construction works, plant and equipment, and
evaluation is based on price and a range of technical factors.
3.4 Tender Documentation
A tender is defined as an offer in form of money and time proposed by the contractor to
complete the project.
A document refers to all written or printed used for record purposes of proof.
A tender document is defined as all written or printed documents that become a reference to a
specific offer/project that has been proposed by the contractor.
3.4.1 Purpose of Tender Document

• To describe all the client’s requirement to ensure that the other party (contractor) respond
clearly and correctly based on the requirement.
• Given to the contractor for valuing and next come out with an offer.
• As the initial document where after agreed, a part will become a contract document
• As a reference during the construction or project management or as a record for future
3.4.2 Tender Documents Prepared Include;

• The Letter of Acceptance (and any minutes of final contract negotiations, if any, and/or
• clarifications),
• The Agreement (Form of contract)
• The Particular conditions of the contract (Special conditions),
• The General conditions of the contract,
• The Drawings,
• The Priced Bill of Quantities and the Day work schedule included therein,
• The Schedule of Rates and process (if any), and
• Other relevant documents or reference materials forming part of the Contract.
All the above-mentioned documents should be physically incorporated and bound into one
original contract version (or two originals, each party taking his own copy) in which the parties
have initialed each constituent page. The only exception might be that the General Conditions of
Contracts are incorporated by reference to a well-known and easily accessible set of General
Conditions of Contract.
Note: Upon receipt of the tender documents, the contractors enter their cost estimates. The
Tender bids will be evaluated against the price and other considerations by the QS who will
make recommendations to the client.
3.5 Conditions of Contract & Articles of Agreement
Conditions of Contract, sets out the principal Legal Relationship between the parties to a
construction project, determining the Allocation of Risk and consequently, Price.
The Fédération Internationale des Ingénieurs - Conseils (FIDIC) Conditions of Contract for
construction have become the prevailing international standard for works contracts because they
present a multitude of advantages over other forms and conditions of contract, it covers in a clear
and precise manner a lot of circumstances and events that may and often occur during the
implementation of a works contract, and also provides a clear image on the roles and
responsibilities of each party.
The conditions of the contract spell out in detail the legally enforceable contractual obligations of
the parties, the law applicable to the contract, the mode and the forum for setting disputes, and
the procedures for inspection, measurement, insurance, payment, bonding (securities), and
alterations. In a competitive tender situation, all participants must tender on the basis of identical
terms in order to make their tender prices comparable. For this reason, the conditions of the
contract form part of the tender documents.
3.5.1 GOG Standard Forms of Works Contracts/Standard Tender Documents

The frequency of use of the UR type of works contract in Ghana encouraged the PPA to redesign
its Standard Tender Documents (STDs) for Works in 2014 for the guidance of employers. A
simpler Standard Tender Document intended for use on Micro and Minor works contracts was
also prepared.
A Standard Prequalification Document (SPD) has been also prepared.
A list of STDs already issued by the PPA includes those for:
• Procurement of Micro Contracts
• Procurement of Minor Contracts
• Procurement of Medium Contracts-Ad-measurement
• Procurement of Medium Contracts - Lump Sum
• Procurement of Major Contract
GOG Standard Forms of Works Contracts
The GOG Standard tender document is divided into Eight (8) main Sections (I – VIII)
Section I: Covers matters relating to instruction to tenderers including the following aspects:
• General Matters
o Scope of the works, source of funding, eligibility, qualification, cost of tendering,
site visit, etc.
• Tender documents
o Content of tender documents, clarification of tender documents, and amendment
of tender documents.
• Preparation of tenders
o Language of tenders, currency, tender price, etc.
• Submission of tenders
Section II: Covers Tender Data Sheet (TDS)

• General particulars of the works and qualification of tenderers.
• Tendering documents (additional documents and employers address)
• Agreements
• Letter of Acceptance
Section III: This section covers the general conditions of the contract
• The rights and obligations of the parties are spelled out in the general conditions and the
particular conditions.
• All necessary information should be provided in the Appendix to the agreement
• The Agreement incorporates the tenderer's offer and its acceptance in one simple
document.
Section IV: Covers Contract Data

Section V: Specifications
Section VI: Drawings
Section VII: Schedule of Activities
Section VIII: Security Forms
3.5.2 Advantages of Using Standard Forms of Contract

• Terms and Conditions are specified and agreed upon by the parties so this prevents
misunderstanding and disputes.
• Terms and Conditions are subjected to interpretations by the court; therefore, their
applications are clearer.
• Terms and Conditions are drafted by subject experts and recognized by accredited bodies
that represent all industries.
• It is easier for those who use the document regularly and are familiar with the content.
3.6 Call for Tenders/Invitation to Tender (ITT)/ Invite Tenderers
An effective bid management and tender process provide a positive evaluation approach that
leads not only to the appointment of appropriate contractors/suppliers but to ensure that the
ongoing relationship is mutually beneficial. A wholly balanced and highly efficient bid and
tender management process improve the quality of the supply chain while reducing costs and
managing risks.
A tender is a submission made by a prospective contractor/supplier in response to an invitation to
tender. It makes an offer for the supply of goods or services or works. As procurement routes
have become more complex, tenders may be sought for a wide range of goods and services (for
example, on a construction management contract the works are constructed by a number of
different trade contractors each contracted to the client) and contractors may take on additional
functions such as design and management.
The type of tendering process in construction the employer wants to choose depends on the
nature of the contract, the complexity of the construction, the expertise needed, and other
several reasons.
The 3 main types of tenders are:

• Open tendering.
• Selective tendering.
• Nomination (negotiation) Tendering.
3.6.1 Open Tendering

An open tender is the main tendering process in construction employed by both the government
and the private sector. The government or client advertises the tender offer in the local
newspaper and media giving detailed and key information about the proposed works and inviting
interested contractors to tender.
If the pre-requisite to tendering on the form of possession for tender of the necessary registration
has been identified in the tender paper, then the advertisement is directed to only that particular
class of the agency or firm having the said qualifications. To reduce the number of inquiries, the
earnest money is deposited (for private & govt. projects). Until the receipt of a bonafide tender is
selected then it will be returned. Although the price is very important in the decision on which
tender or bid to accept, it is not the only factor taken into account. The client does not bind to
accept the lowest or any offer.
There is an assumption amongst clients that the more tenderers there is the lower the price for
which the work can be carried out.
Advantages
• It allows any interested contractor to tender. Therefore, it allows an unknown contractor
to compete for the work.
• Allowing the tender list to be made without bias. The client will obtain the bargain
possible.
• No favoritism in selecting contractors.
• Ensuring good competition but not obliged to accept any offers.
• It is a traditional method of tendering and is familiar to all sectors of the engineering and
construction industry.
Disadvantages
• The tender list can be long as too many contractors tendering for the job.
• Uneconomic use of the resource.
• Public accountability may be questioned if the lowest offer is not accepted.
3.6.2 Selective Tendering

The selective tendering process in construction is the one alternative developed to address the
limitations of the open tendering procedure. In this method, a shortlist of contractors who are
considered suitable to carry out the proposed project is drawn up and they are invited to submit
tenders. The names may be selected from an approved list or specially chosen. The client can
prepare a Pre-Qualification questionnaire which can be structured in a way to ensure the client
has the ability to exclude contractors thought to be unsuitable.
The purpose of the selective tendering process in construction is to improve the quality of the
bids received and to ensure that contractors with the necessary experience and competence are
allowed to submit the necessary bids, due to the urgent work involved. To make the tendering
process in construction more manageable and less of a burden on the parties involved.
Advantages
• It reduced the cost of tendering and the Economic use of resources.
• Reduce tender documentation.
• Shorter tender periods.
• Better management of the tender process.
• Only the competent contractors were invited to tender, then the lowest can be accepted.
Disadvantages
• Reduces the availability of work for other contractors, especially new contractors.
• Tender Prices may invariably be higher than would have been in open tendering.
• Greater chance of collusion.
• Favoritisms may occur in the shortlisting.
• The tendering period is longer because it involved two distinct stages.
3.6.3 Nomination (Negotiation) Tendering

The negotiation tendering process in construction is mostly used in the engineering and
construction industry commencing from tendering to dispute resolutions, i.e., under the pre-
contract negotiations & post-contract negotiations. Usually with a single contractor but may be
up to three contractors.
Negotiated tendering in effect is the tendering process whereby the tendering is carried out with
only one contractor, the client, and the contractor negotiating the scope, risk apportionment, and
costs. This type of process is normally used where a client already knows, and has worked with a
contractor and has a preference to use them again.
The negotiation process involves are as follows:

• Identification by the employer of a suitable contractor to negotiate with.
• The contractor can be selected either from the employer’s list of preferences or on the
advice of the professional team.
• The contractor is apprised of the work scope. Negotiations can be applied to the
following type of contracts.
• In this type of tendering process in construction, the employer has a long-term business
relationship with the contractor.
• Where the contractor is involved in the financing of the project.
• Where there is a pressing need to have a very early start of work on the site and to
complete the works on a fast-track basis.
Advantages
• this type of tendering process in construction reduces the risk of failure.
• The best alternatives for the employer to adopt are special circumstances such as
emergencies, security reasons, etc.
• Early Commencement of work on site. It decreases the period involved in appointing the
contractor for any tendering work.
• The Contractor can contribute his expertise during the design stage.
Disadvantages
• The cost of work is likely higher than competitive tender.
• Reduces the availability of work for other contractors
3.7 Tender Meetings

It is recommended that all information provided between the parties is treated as confidential and
commercial-in-confidence. The employer should ensure that
• All briefing meetings held for tenderers are minuted. Minutes are then forwarded to all
tenderers and are included as part of the tender documentation.
• The employer’s contact person responsible for dealing with inquiries from tenderers is to
document all such inquiries, noting the time, the date, and the issue discussed.
• Information provided to one tenderer is also promptly given to all other tenderers.
• In the case where an inquiry reveals a significant error, omission, ambiguity, or
discrepancy in the tender documents, the information provided to resolve the issue is
promptly forwarded in writing to all tenderers.
3.8 Amendments to Tender Documents

A structured review of the tender documents prior to issue will minimize the requirement to
amend tender documents due to errors or omissions. Where significant issues arise that make it
necessary to amend the tender documents during the tender period, the amendments are advised
as an addendum, forwarded to all tenderers. Each addendum is issued in sufficient time for all
tenderers to consider the amendments properly and fully before tenders close. The tender period
may need to be extended, particularly if the addendum is issued late in the tender period.
Each addendum contains a returnable covering sheet so that tenderers can acknowledge its
receipt in writing. A statement of confirmation that allowance has been made for each addendum
is required in the submission of the tenders. The employer should ensure that each tenderer
acknowledges receipt of each addendum in writing and confirms in their tenders that allowance
has been made for each addendum.
3.8 Submission And Closing of Tenders

It is recommended that the employer ensures that;
• The security and confidentiality of all tenders received are achieved following the closing
of tenders. Procedures for the security of documents, access to documents and the
availability of price-sensitive information are to be developed in advance of the closing
of tenders.
• Tenders are generally received in a secure tender box and opened in the presence of a
specially qualified team (not less than two people).
• One copy of each of the tenders (the original) is separately stored in a secure location
from working copies, for reference purposes.
• Each tenderer is informed in writing that its tender has been received.
• In the event that the lot feeder is prepared to consider late tenders and non-conforming
offers, the conditions in the tender documentation should describe how the lot feeder will
treat late tenders and non-conforming or alternative offers.
3.9 Tender Evaluation
3.9.1 Opening and Recording Tenders

Tenders should be opened and recorded in a way that maintains the security of the tenderer’s
intellectual property and that offers no advantage to one tenderer over another. It is good practice
to open and summarize tenders as soon as possible after the closing time. The tenders should be
opened, checked, and recorded by at least two people.
3.9.2 Tender Clarifications
The evaluation team may seek clarification of any issues from applicants, verbally or in writing,
but may not solicit new information. The tender clarifications need to be carefully managed
to ensure that confidentiality is maintained and tenderers are treated equitably and ethically.
3.9.3 Tender Selection and Award

The employer should ensure that unsuccessful tenderers are advised in writing that their tenders
have been unsuccessful. In the finalization of the contract documentation, the employer and
the successful tenderer shall ensure that the contract incorporates the tender submission of the
successful tenderer and any qualifications during the tender process. It is noted that this phase of
the process is to settle all outstanding technical, commercial, and/or legal issues necessary for the
finalization of the contract. It is not an opportunity for either party to vary the final contract price
or to materially alter the proposal
3.10 Bond Requirements
Three types of bonds are associated with construction contracts: bid bonds, payment bonds, and
performance bonds. They are three-party instruments that protect the Owner from damage or
default by the Contractor through a bonding company (Surety). Claims for damage may arise
should a Contractor fail to sign a contract after being declared the low bidder (bid bonds cover
this), fail to pay Subcontractors and suppliers (payment bonds cover this), or fail to complete the
work according to the plans and specifications (performance bonds). The bonds ensure that
compensation is made to the appropriate party for each of these problems. Owners set their bond
requirements based on project type, size, location, and prior relations with the Contractor. The
bond limits must be stipulated in the bid documents.
3.11 Pre-Qualification
To increase the probability that the client will get what is required, it is usual to introduce some
procedure to ensure that only experienced and competent contractors are allowed to tender. This
procedure known as "pre-qualification", involves an investigation into the potential contractor's
financial, managerial and physical resources and his experience with similar projects and an
assessment of the firm's integrity.
4.0 Contract Modification/Variation
4.1 Introduction
Contract modifications are only normal in a contract and are very necessary to correct
shortcomings in the design, to improve the proposed technologies, to allow for the use of newer
or better materials etc. As long as they are carefully analyzed and duly justified from a technical
and economical perspective, variations should not be regarded as attempts of the Contractor to
get money in dubious ways.
Variation is defined as changes from the original contract description and intention. It includes
changes to the design, quality, or quantity of material or method of construction.
4.2 Why Variation/Change Orders

Changes in quantities of work occur in virtually any works contracts for a variety of reasons;
• quantities could not be accurately measured at the time of design, modifications of the
conditions on site etc.
Variations are therefore not only normal in a works contract, but also necessary to correct
shortcomings in the design, to improve the proposed technologies, to allow for the use of newer
or better materials etc. As long as they are carefully analyzed and duly justified from a technical
and economical perspective, variations should not be regarded as attempts of the Contractor to
get money in dubious ways.
The Engineer is again the most important player in this equation because it is the Engineer’s
duty to make sure that the variations requested by the Contractor are;
o Necessary
o Make technical and economic sense.
The next step would be to evaluate the financial impact of the respective variations and duly
inform the Employer about it. Depending on the limits of the Engineer’s authority established in
the Particular Conditions, the Employer should approve the variations that exceed the respective
threshold.
4.3 Types of Variations

A variation (sometimes referred to as a variation instruction, variation order, or change order)
is an alteration to the scope of works in a construction contract in the form of an addition,
substitution, or omission from the original scope of works. Almost all construction projects vary
from the original design, scope, and definition. Whether small or large, construction projects will
inevitably depart from the original tender design, specifications, and drawings prepared by the
design team. This can be because of technological advancement, statutory changes or
enforcement, changes in conditions, geological anomalies, non-availability of specified
materials, or simply because of the continued development of the design after the contract has
been awarded. In large engineering projects, variations can be very significant, whereas on small
building contracts, they may be relatively minor.
Variations may include:
• Alterations to the design.
• Alterations to quantities.
• Alterations to quality.
• Alterations to working conditions.
• Alterations to the sequence of work.
Variations may also be deemed to occur if the contract documents do not properly describe the
works actually required.
4.4 Variations may not (without the contractors’ consent):

• Change the fundamental nature of the works.
• Omit work so that it can be carried out by another contractor.
• Be instructed after practical completion.
• Require the contractor to carry out work that was the subject of a prime cost sum.
In legal terms, a variation is an agreement supported by consideration to alter some terms of

the contract. No power to order variation is implied. Hence there should be express terms in
contracts which give the power to instruct variations. In the absence of express terms in the
contract the contractor may reject instructions for variations without giving rise to any legal
consequences. Standard forms of contract generally make express provisions for the contract
administrator, generally the architect or engineer, to instruct variations. Such provisions enable
the continued, smooth administration of the works without the need for another contract.
Variation instructions must be clear as to what is and is not included, and may propose the
method of valuation.
4.5 Variation Analysis

The following main issues should be considered when analyzing a variation:
• Check if it is a variation or a mere change in quantities following re-measurement;
according to FIDIC, changes in quantities are not necessarily variations,
• Verification of supporting documents; how appropriate or necessary are the proposed
variations,
• Check how the variation was valued; existing contract rates were correctly used; new
rates were correctly constructed based on fair market prices etc.,
• Check if a change in unit rates would be appropriate or required according to the
Contract,
• Check if the time impact, extension of time for completion, was correctly assessed and
is duly justified,
• Check the level of approval by the Engineer or Employer),
• Check if the variation does not require an appropriate amendment to the Contract; all
variations that determine changes in unit rates, bill items, or the scope of works should be
included in contract amendments.
4.6 How to handle variation/change requests
• Agree on a Change Request procedure.
This should include:
o When a change is required
o Who should receive change requests? Both parties should nominate a
representative to be the main point of contact when it comes to making and
accepting Change Requests.
o What information should the request contain?
o Timings -- what are the timings of approving/rejecting a request (this will be
dependent on the scope of the change, but the timing should always be
reasonable).
• Review each Change Request.

When you receive a Change Request, you will need to review it and approve (or deny) the
request. This will often involve several different departments (possibly even the director or C-
level) to consider the scope and impact of the change – including any possible risks, costs, likely
timelines, etc.
• Estimate the implications of the request

Even though a Change Request can come from either of the parties, the supplier, as the party
supplying the services, should provide the customer with a written estimate of the change impact,
detailing:
o The time required to implement the change
o Any necessary variations to the fees
o The likely effect of the change on the project/services
o Any other impact of the change on the terms of the contract.
• Accept/Reject the request

Consideration of the proposed changes by the other party and then accept or reject the proposal
within a certain agreed time period, i.e., a week.
• Complete the request

If approved by both parties, the Change Request will be deemed incorporated into the terms of
the contract, you should now consider the next steps.
This is the important bit. You now need to execute the changes you’ve agreed to. This will often
include holding a meeting with your customer to iron out the details and to either create new (or
amend existing) plans and schedules, business process documents, etc.
4.7 Written and Verbal Instruction and Direction

The contractor must comply with all written orders given by the Architect. Verbal or written
orders need not be complied with if the Architect fails/refuses to confirm. No claim will be
allowed without a written or confirmed order. All verbal orders must be deemed given in writing
provided that; The contractor confirms in writing to the Architect within 14 days when the order
is given and the architect does withdraw his verbal orders within 14 days of receiving the
contractor’s written confirmation.
If the architect withdraws his verbal order within 14 days of receiving the contractor’s written
confirmation, the contractor is entitled to recover compensation that he incurred for complying
with the architect’s verbal orders.
4.7.1 COW verbal/written orders

Any verbal/written direction and instruction given by the COW has no effect unless;
• It is confirmed in writing by the architect OR
• It is confirmed in writing by the contractor to the architect within 14 days of receiving the
orders from the COW and it is not objected to in writing by the architect within 14 days
of receiving the
4.7.2 Contractor’s written confirmation.

If the contractor carries out any work without confirmation, the contractor is not entitled to claim
expenses incurred.
4.7.3 Non-compliance with the architect’s Directions or Instructions

If the contractor fails to comply with the architect’s written orders, the architect shall issue a
written notice.
Within 7 days of receiving the written notice, the contractor must comply with the orders. Failing
this, the employer can employ another contractor to complete the work. The employer shall
claim the extra cost from the contractor under the certificate of cost of other contractors’ work
issued by the architect. OR within one month of receiving the written notice, the contractor must
comply with the architect’s order, failing which, the termination certificate is issued to the
contractor and he is terminated from the project.
4.7.4 Classification by Architect that is Not Binding

Architect’s classification is important to the contractor because, for a given Instruction, the
contractor is entitled to additional payment whereas a given Direction does not. If the contractor
disagrees with the architect’s classification, he must challenge the classification within 28 days
of receiving the written direction by disputing it or claiming extra payment in writing. He may
also give notice of arbitration.
4.8 Valuing Variation

Variations under a contract can be valued by a number of methods.
If the work is off;
• Similar character - similar conditions – no significant change in the total quantity
o BOQ rate
• Similar character - different conditions – a significant change in the total quantity

o BOQ rate + allowance
• Different character - different conditions- a significant change in the total quantity

o New valuation/schedule of rate
• Where it is impossible to use the above methods
o Day work rate
4.8.1 Schedule of Rates

The Schedule of Rates provides cost details and breakdowns and is used for the valuation of
variation work. These contract rates, priced by the contractor himself, are deemed to include all
works ordered in quantities or at times and locations that are absorbed into the Contractor’s
program.
Description Information Solution
Replace all 125mm thick The rate in the Schedule 125mm thick = Ghc300/m2
internal concrete walls of rates for 125mm 200mm thick = 200/125 x Ghc300
with 200mm thick thick =Ghc480 per m2 (New Extrapolated
concrete walls. This concrete wall - Ghc300 Rate)
project is a 10-storey per m2
building with 150m of2 Omission= (150m2 X 10 storey) x
walls per storey. Ghc300 per m2 = Ghc450,000
Addition = (150m2 x 10 storey) x

Ghc480 per m2 = Ghc720,000
Net Addition = Ghc720,000-

Ghc450,000 = Ghc270,000
Remove a fallen tree, due Schedule of daywork Daywork rates for a laborer-Ghc15per
to heavy rain, near the rates: Labour-Ghc15 hour, Daywork rate for a chainsaw-
entrance of the site. The per Ghc500 per day
Clerk-of-Works recorded Hour, Chain saw –
that it took one working Ghc500 per day Daywork rate calculation
day, 6 workers, and 2 = [(6 Workers x 1 Day X 8 Hours x
chain Ghc15) + (2 chainsaw x Ghc500)] +
saws to remove the fallen 15%
tree = [Ghc720+ Ghc1000] + Ghc258
= Ghc1978
Pour 8m3 of additional Schedule of Rates: Concrete Grade 40 breakdown:

G40 concrete for the Concrete Grade 40 – Material 60%, Labour 25%, Plant &
enlargement of columns Ghc3000 per m3. Profit 15%
after 7 pm. Breakdown of rates:
Material 60% Ghc3000/m3= (60% x Ghc3000),
Labour 25% (25% x Ghc3000), (15% x Ghc3000)
Plant & Profit 15%
Ghc3000/m3
Material = Ghc1800
Labour = Ghc750
Plant & Profit = Ghc450
The overtime rate for Labour is 1.5
times the normal working
time.
New G40 rate = 1800 + (750 X 1.5) +
450 = Ghc3375 per m3
Omission= 8m3 x Ghc3000 per m3

= Ghc24000
Addition = 8m3 x Ghc3375per m3

= Ghc27000
Net Addition = Ghc27000- Ghc24000

= Ghc3000
4.8.2 Day Works

Day works apply when a payment is made to a contractor based on the cost of materials and
wages plus a percentage for overheads and profits. For work that is minor or incidental, where
it is a variation, the work can be carried out on a day’s work schedule.
Day works are bound to come up from time to time since it is impossible working from a Bill of
Quantities to cover all eventualities. Daywork is worked for which the contractor is paid on the
basis of the cost of labor, materials, and plant plus an agreed percentage for overheads and profit.
Payment in this way is usually reserved for items that cannot be measured and priced in the
normal way.
For variations in a lump sum contract, wherein work will be evaluated in accordance with the
Day Work Schedule included in the Contract. Daywork rates for material, labor, plant and
contractor profits will be mentioned in the contract. In such cases the Contractor should consider
supervision charges in his bid that will not be paid separately. For variation purpose in an item
rate contract; when item rates are not available within bill of quantities for extra items to be
executed, the method of day works can be adopted as an option
5.0 Payment Certificate
5.1 Introduction
Payment of the Interim Payment Certificates issued by the Engineer based on Contractor’s
monthly statements are one of the Employer’s key responsibilities and also the moment with the
maximum involvement of its technical, procurement, and financial staff.
Contractors expect to be paid for work done, and in construction contracts, contractors are
entitled to payment for work properly executed. Depending on the size and duration of the
contract, payment may be made either at the end of the contract (e.g., jobbing works) or
intermittently through interim valuation certificates (e.g., large projects). Generally, a contractor,
who operates a systematic planning and cost control, is able to compare at any point in time,
what is happening in relation to what was budgeted to happen and can reconcile cost and value.
Moreover, a contractor’s own internal valuation enables him/her to determine interim valuation
levels –important data for planning cash flow requirements. While it is recognized that
maintenance of good cash flow is the lifeblood of a contractor’s business, a contractor may
experience the following process of payment which disrupts his/her efforts to maintain good cash
flow: -
• Interim certificates which do not reflect the true value of work properly executed,
• Interim certificates issued at irregular periods,
• Failure of the Employer to honor interim certificates on time, and
• Late settlements of final account and contractual claims for loss and/or expense.
Factors contributing to the foregoing domain of conflict are many and may include the
following:
• Interim valuation prepared by an over-cautious Quantity Surveyor or Engineer who is in
fear of overpayment to a contractor,
• Extent of works under-measured by the Quantity Surveyor or Engineer in the contract
bills of quantities,
• Quantity Surveyor or Engineer failing to prepare an interim valuation statement in good
time to enable the architect to issue an interim certificate,
• Engineer’s/Architect’s failure to process the interim certificate in good time,
• Failure of the Quantity Surveyor and the contractor to value and agree variationsn s
executed for inclusion in the current interim valuation,
• Quantity Surveyor failure to prepare and settle a final account in good time,
• Delays by the contractor in submitting contractual claims for loss and /or expense,
• Delays by the contractor in submitting details of the claim for fluctuations in wages and
materials,
• Poor performances by contractors employing an unplanned or unspecified method,
untrained or incompetent operatives or planning with inaccurate data, and
• Under-priced items in bills of quantities by the contractor – estimating error.
The foregoing shows that care and attention are required if conflicts under this heading are to be
avoided. Employer’s professional advisers should ensure that the accuracy of the bills of
quantities, reasonably accurate interim valuations and prompt payment of interim certificates,
and prompt settlement of final accounts and contractual claims. Also, adequate time should be
given to contractors for tender action to affect the preparation of reasonable accurate estimates
and/or tenders. Contractors, on the other hand, should ensure a reasonably accurate estimate,
proved timely information for interim variations, final accounts, and contractual claims, and
improve productively on site
5.2 Periodic Valuation

The contractor submits a payment claim on the last day of the month or a specific date in the
Appendix of the contract document.
5.3 Contractor’s Right to be Present at Measurement

The contractor can choose to be present or not where physical measurement is required. If the
contractor is not present, the site measurement is considered final and binding once the QS
communicates the measurement to the contractor via post within 14 days after the measurement
is taken. If the contractor is present, the contractor has the right to dispute the measurement
within one month from the date the measurement is communicated to the contractor by the QS.
5.4 Interim Payment Certificates

They are provisional or short-term payments made progressively to a Contractor at weekly, bi-
weekly, or monthly intervals based on the periodically estimated value of work that the
Contractor has carried out. It is also known as progress payment or stage payment. Interim
payments paid to the contractor are based on the amounts stated in the interim certificates issued
by the architect. The contractor submits a claim on the completion of each stage of work
progress. Unfixed goods and retention sums do not apply to stage payments.
5.5 Temporary Finality of certificate

All decisions and certificates issued by the architect during the contract period shall have
temporary finality unless they are made in case of fraud. The architect can issue further interim
certificates during the contract period to correct any error in an earlier interim certificate but he
has no power to decide or certify any claim for breach of contract.
5.6 Retention Monies

The purpose of this retention is to provide some incentive for the contractor to complete the work
and it also provides some security should the contractor default in construction.
10%- Work Done
20%- Materials on Site
5.7 Review and Approval of Payment Applications/Invoices

The review and approval of payment applications should imply the following:
• Existence of a well-established mechanism for the verification and approval of payment
documents – internal audit, four eyes principle, etc.
• Verification of unit rates, prices, and quantities;
• Verification of supporting documents (invoices; interim payment certificates; monthly
statements; actual re-measurement; timesheets; proofs of actually incurred expenditures
etc. as applicable);
• Existence of required approvals (duly certified monthly statements and interim payment
certificates; signed timesheets; Engineer’s approvals etc.);
• Price adjustment – applicability; verification of indexes (base values, correct reference to
applicable indexes) and weightings (for materials, labor, equipment);
• Use of Provisional Sums and contingencies - check if their use was appropriate or
necessary (requests and/or approval from the Engineer);
• Check if the requested amounts have not been already paid;
• Verification of invoices (correct name, address, identification information and bank
account of the payee);
• Check if the payee’s information in the invoice is the same as in the contract and
previous payments;
• Check if the payment request fits the payment schedule/milestones in the contract;
• Check if the appropriate percentage recovery of the advance payment has been deducted;
• Availability of funds and applicable payment method (payment from Special Account;
Direct Payment etc.)
5.8 Security of Payment Act (SOPA)

The purpose of SOPA is to address the issue of cash flow in the construction industry. It protects
the contractors’ rights to claim in-progress payments and ensure the right to payment is
preserved through the process of adjudication.
Adjudication Process (Payment dispute unresolved)
5.9 Final Accounts
5.9.1 Definition
The final account is a document consisting of several sections each detailing the different
adjustments that are required to the contract sum.
5.9.2 Purposes:
• Confirms the agreed adjustments to the contract sum and shows clearly how the final cost
of the project has been arrived at.
• Ascertains employers’ total financial commitment
• Ascertains contractors’ total payment entitlement under the contract
• Precedes the issue by the contract administrator of the final certificate
• Confirms the effects of extensions of time granted under the contract
5.9.3 Sections of a Final Account

The different sections are:
• Final account summary
• Variation accounts (including day works account)
• Adjustment of prime cost sums (A prime cost is defined as 'an item that has not been
selected, or whose value is not known, at the time a construction contract is entered into
and for the cost of supply and delivery of which the builder must make a reasonable
allowance in the contract)
• Adjustment of provisional sums/ quantities. (A provisional sum is an amount of money
included in the contract sum to cover work or materials, or both, the extent of which
cannot be specifically detailed when entering a contract).
• Contractual claims
• Fluctuations
5.9.4 Information sources:

• Architects’ instructions
• Contract correspondences and minutes of project meetings
• Day worksheets
• Wage sheets and material invoices
• Contract bills (and taking-off on which these are based)
• Contract drawings (i.e., original and revisions)
• Subcontractor records
• Site diaries
5.9.5 Adjustments process

Each adjustment account consists of measured items grouped as omissions and additions process,
thus involving the omission of relevant items/ sums from contract bills and the addition of new
or substituted items/ sums. Special double-column bill paper is used one column each for
omissions and additions. Totals for omission and additions are then cast and the result carried
forward to the final account summary.
6.0 Claims and Disputes Resolution
6.1 Introduction
Disputes arise out of works contracts due to the complexity of operations on site with wide and
divergent views leading to claims that might lead to disputes. This chapter analyzes the
resolution of claims, and settlement of deputies and draws up their relationship.
6.2 Remedies Against Non-Performing Contractors
6.2.1 Performance Security

Performance security is perhaps the most important and powerful contractual tool available in
works and goods contracts (there is no performance security in consulting contracts). Despite
having access to this powerful instrument, practice shows that the contract administration teams
are rather hesitant when deciding to enforce remedies against performance security. This
happens because of two main reasons:
• The forfeiture of the performance security is (rightfully) perceived as an extreme
remedy (almost as drastic as the termination of the contract);
• The conditions of the contract provide very little guidance on the exact situations and
mechanisms to enforce a claim on security.
The FIDIC Conditions of Contract only state that “The Employer shall not make a claim under
the Performance Security, except for amounts to which the Employer is entitled under the
Contract”, which leaves the Employer to discern and make a judgment. However, the Employer
is entitled to make a claim under the performance security under the following situations:
• Failure of the Contractor to remedy a default after receiving the Employer’s notice
requiring the default to be remedied,
• Failure of the Contractor to pay an amount due to, claimed by, or determined in the favor
of the Employer, following Employer’s claims, arbitration, etc.,
• Failure of the Contractor to adequately extend the validity or increase the amount
of the security as may be requested under the Contract as in the case of amendments,
• Occurrence of an event that entitles the Employer to terminate the Contract.
6.3 Delay or Liquidated Damages

Another important instrument that the contract administration team has access to is the delay
damages or liquidated damages for delay. These are penalties that are much easier to enforce
because they are strictly quantifiable - all contracts provide a percentage or an amount to be
deducted from the payments due to the Contractor if it fails to deliver the works within the
stipulated time. It is a monetary amount fixed and agreed upon by both parties in advance. The
damage is payable in the event of a breach of contract. The LD is payable only if the contractor
fails to complete it on time. However, the employer cannot rely on LD if the employer hinders or
prevents the contractor’s progress for work.
The Employer should just multiply the number of days/weeks of delay by the said
percentage or amount and deduct the product of this multiplication from the next payment due to
the Contractor. There is usually a limit on this amount mostly at 10% of the Contract Price, and
sometimes there is also a contract termination condition once the penalty has reached this limit.
It is important therefore to have a payment schedule that would allow this deduction of penalties.
6.3.1 Importance of LD clause

If no provision is made, the employer has to go through the hassle of having to prove his claim
for damages. He must show evidence to the court of all the expenses which he has incurred as a
result of the delay. If he were unable to do so, he is unable to claim damages.
6.3.2 Procedure for LD claim

After the latest date of completion has passed, the architect shall issue a Delay Certificate to the
employer. Once the delayed certificate is issued, the employer may deduct LD from the
contractor. The architect is to issue a “Termination of Delay Certificate” if EOT is allowed due
to AI issued by the architect. Once Termination of Delay Certification is issued, LD cannot be
collected when EOT is granted. If the contractor fails to complete within the further EOT, the
architect shall issue a “Further Delay Certificate”. This means that the work is incomplete and
the employer can continue to deduct LD from the contractor. LD claim shall stop when the
architect issues Completion Certificate.
Timeline Diagram
First delay period: 12 Aug 2017 to 14 Aug 2017 = 3 Days

Second delay period: 20 Aug 2017 to 30 Aug 2017 = 11 Days
Liquidated Damages = 14 Days x GHc2,500 = GHc35,000
6.4 Unliquidated Damage

Construction most often contains provisions that set out remedies for breach of that contract. In
construction when the breach emanates from the client, the contractor is entitled to claims from
the client for direct loss and expenses, this is known as Unliquidated damage.
6.5 Claim on the performance security or delay damages – which one to use?
Which one of these two contractual tools should the contract administration team use in the case
of delays in the contract implementation delays in the completion of the works?
Most contracts have an explicit or implied provision stating that you cannot impose two different
penalties for the same breach of the Contractor’s obligations. Consequently, only one of these
penalties should apply. But which one?
Normally the employer prefers quite correctly to use the delay damages because they are the
obvious and most straightforward choice particularly when it comes to justifying and calculating
the actual damage/loss. However, situations may occur when we should also apply for remedies
under performance security. One of these situations is when most of the contract price has
already been paid and the outstanding payments are less than the amount of the delay damages,
the delay damages have reached the 10% limit, but we only have 5% left to pay to the contractor.
In this situation, we are entitled to claim the difference of 5% from the proceeds of the
performance security without breaching in any way the contract provisions.
Another situation is when the delay is linked to or has been caused by some other breach of
contract on the part of the contractor, as listed above. In such cases, the employer is entitled to
apply both types of remedies, delay damages and claim under the performance security, if it can
adequately prove and justify the respective damages.
Even if the Government agrees to an extension of the contract, it may still recommend the
Procurement Entity to impose delay damages or forfeiture of the performance security if the said
extension was not 100% caused by the employer or Force Majeure. Consequently, agreeing to an
extension of time for various reasons on the extension does not prejudice the employer’s rights to
impose remedies.
6.6 Relationship between Claims and Disputes Resolution
The problem is that the subject of “Claims” is often so emotive issue that stigmatizes and tends
to polarize the two sides. Contracts prepared in haste affect cash flow with outstanding Claims,
which can best be resolved with a better understanding of the basis and principles of contracts.
Professional representatives should understand the business side of the industry and rather
appreciate the circumstances of tendering by contractors, their attitudes, and tactics referred to as
“Loophole Engineering”.
• What is to be done?
• The time in which it is, or has had to be done,
• What is to be paid?
“Claims” is used in connection with “what is to be paid” and what constitutes a claim can be a
matter of a pointless dispute. The simplest course is to accept that claim is anything not agreed
upon between the contractor and the project manager and additional payments as entitlements
and/or considerations. The key issue is to understand and establish the nature of Claims because
it determines:
• Where to look for grounds\
• Whether the project manager has the powers to deal with it
• Basis of evaluation
There are three (3) Categories of Claims:

• Contractual: Where there is a provision in the Contract within the Project Manager’s
powers.
• Extra-Contractual: Where the Contract does not make express provision – resort to
Common Law – The project manager has no powers except authority given by the
employer to examine and make recommendations.
• Ex-gratia: Basically, an award since such claims have no grounds and either party
cannot successfully sue; an “act of grace” and acknowledgment of moral obligation.
6.7 Claim Events/ Disputes
Claim Events/Disputes on the other hand arise when negotiation fails, over variations in the
scope of work, unforeseen physical conditions, and delay and disruption of the works. There is a
Breach of Contract when one party fails to fulfill his part or one-party states that he will not
perform the Contract or alternately puts himself in such a position that he will be unable to
perform.
Breach by the employer when he/she fails to pay appropriate consideration, delays payment
beyond the stipulated period, and fails and/or delays in executing work he is bound to. Breach by
the contractor when he/she fails to perform and delays beyond the agreed period
6.7.1 Disputes Caused by Employer include:

• Failure to give early possession of the Site,
• Delays in payment,
• Failure to execute work to supplement completion
• Disagreement on overpayment and compensation for direct loss and/or expense
• The Employer modifies the Schedule of Other Contractors in a way that affects the work
of the Contractor under the Contract.
6.7.2 Disputes caused by Engineer/Project Manager

• The Project Manager unreasonably delays issuing a Certificate of Completion
• The Project Manager gives instructions for dealing with an unforeseen condition, caused
by the Employer, or additional work required for safety or other reasons.
• The Project Manager orders a delay or does not issue Drawings, Specifications, or
instructions required for the execution of the Works on time.
• The Project Manager instructs the Contractor to uncover or to carry out additional tests
upon work, which is then found to have no Defects.
• The Project Manager unreasonably does not approve a subcontract to be let.
6.7.3 Disputes caused by Contractor:

• suspension or abandonment of work,
• Delay in Completion,
• Defective Work
6.7.4 Neutral Events & Third-Party Causes

• Force Majeure
• Ground conditions are substantially more adverse than could reasonably have been
assumed before issuance of the Letter of Acceptance from the information issued to
Tenderers (including the Site Investigation Reports), from information available publicly,
and from a visual inspection of the Site.
• Public authorities and other utility providers do not work within the dates and other
constraints stated in the Contract, and they cause delays or extra costs to the Contractor.
6.8 Resolution of Claims
6.8.1 Time for completion

Project completion time is normally specified by the Employer, but where it is made an object of
completion, it is specified by a Contractor. In either case, it is expected that a contractor will
complete the whole of the work within the agreed time. However, at times, Contractors fail to
complete projects on time and deny Employers early use of their developments. A defaulting
Contractor may attribute overrun on the contract Programme to:
• Failure of Employer to give possession of site timely as specified and/or agreed,
• Lack of construction information from the architect/engineer at the appropriate time,
• Late issue of construction information and /or variations by the architect/engineer,
• Disruption of construction Programme by either numerous variations or artisans
employed directly by the Employer, and
• Inequitable extension of time for project completion by architect/engineer.
In the case of the architect’s/engineer’s failure to grant an extension of time when a delay has
been caused by the Employer, a Contractor may, sometimes, argue defensively that time is at
large which, in simple terms, means that the completion date is no longer applicable and,
therefore, his/her contractual obligation is reduced to completion of the project within a
reasonable time. A Contractor may also put forward the above defense either to avoid payment
of a penalty for non-completion and/or claim for reimbursement for loss and expense.
To prevent conflict under this heading, construction information, instructions and variations
should be adequate and made available in good time. Extension of time, when necessary, should
be granted equitably to enable Contractors to complete the work.
6.8.1.1 Time at Large
It describes the situation where there is no identified date for completion. The contractor is no
longer bound by the obligation to complete the works by a certain date. If time is at large,
liquidated damages cannot be applied as there is no date fixed from which LD can be calculated
from. An employer cannot claim LD (if it is his fault)
6.8.1.2 Time Is of The Essence

It is used as a legal term within a contract where time is of high importance and delays have
major consequences. When “time is of the essence” any delay in performance is dealt with by
immediate termination of the contract without regard to the magnitude of the breach. No such
clause now as there are provisions for the delay, EOT, and payment of damages.
6.8.2 Quality of workmanship
In construction contracts, Contractor’s covenant to undertake and complete construction works to

a standard of quality specified at a price Employers expected to pay. Therefore, a Contractor will
only have a satisfied Employer if he/she is able to provide a finished product of good quality on
time. It is, therefore, incumbent on a contractor to execute the works diligently and exhibit good
workmanship at all times. However, there are occasions when contractors have achieved a speed
of construction at the expense of quality. On such occasions, the quantity of output is regarded as
more important than quality, and when substandard work is challenged, in defense; a contractor
may put forward the following:
• Standard of required quality lacks clarity in contract documentation,
• Inadequate communication at the site level on issues concerning quality standards,
• Design details do not promote billability on which quality depends, and
• Standard of quality envisaged by the Employer is not included in the contract
documentation.
The above conflicts may be avoided if the design and detailing facilitate buildability, reflect the
the skill of readily available operatives, and ensure a good selection of materials and
components, standard of quality required clearly shown in contract documentation, work
inspected constantly for quality, and communication on quality issues improved on site.
6.8.2.1 Quality of Work and Materials

As requested by the Engineer/Architect, the contractor shall give full evidence and information
to confirm that all materials comply with the contractual requirements. Failing this, the architect
is entitled to issue a direction to remove and replace materials at the contractor’s expense.
6.9 Dispute Resolution
Methods of Dispute Resolution and Settlement in Ghana include:

• Arbitration
Arbitration is a proceeding in which a dispute is resolved by an impartial arbitrator or
panel whose decision the parties to the dispute have agreed, or legislation has decreed,
will be final and binding with limited rights of review and appeal of arbitration awards.
• Mediation
Mediation refers to any instance in which a third party helps others reach an agreement.
More specifically, mediation has a structure, timetable, and dynamics that ordinary
negotiation lacks. The process is private and confidential, enforced by law in Ghana with
participation typically voluntary. The mediator acts as a neutral third party and facilitates
rather than directs the process.
• Dispute Review Board

Dispute Review Board (DRB) in the construction industry works with the aim of
assisting
construction project managers predict and handle potential problems and challenges
before they occur. The Board provides advisory opinions on questionable or disputed
matters and provides an alternate dispute resolution process to settle any disputes that
cannot be settled between the parties to the construction contract.
• Mini Trial
The mini-trial is an alternative dispute resolution (ADR) procedure that is used by
businesses to resolve legal issues without incurring the expense and delay associated with
court litigation. The mini-trial does not result in a formal adjudication but is a vehicle for
the parties to arrive at a solution through a structured settlement process. It is used most
effectively when complex issues are at stake and the parties need or wish to maintain an
amicable relationship.
• Negotiation
Negotiation is a method by which people settle differences and a process by which
compromise or agreement is reached while avoiding argument and dispute. In any
disagreement, individuals or organizations understandably aim to achieve the best
possible outcome for their position with principles of fairness, seeking mutual benefit and
maintaining a relationship as keys to a successful outcome.
• Litigation
A lawsuit may involve dispute resolution of private law issues between individuals,
business entities, or non-profit organizations. A lawsuit may also enable the state to be
treated as if it were a private party in a civil case as a plaintiff or defendant regarding an
injury or may provide the state with a civil cause of action to enforce certain laws. The
conduct of a lawsuit is called litigation. The plaintiffs and defendants are called litigants
and the attorneys representing them are called litigators. The term litigation may also
refer to a criminal trial.
Other dispute resolution methods are as follows:
• Adjudication
Adjudication is a process by which an adjudicator reviews evidence and argumentation,
including legal reasoning set forth by opposing parties to come to a decision that
determines rights and obligations between the parties involved.
• Conciliation
Conciliation is an ADR process whereby the parties to a dispute use a conciliator, who
meets with the parties both separately and together in an attempt to resolve their
differences. They do this by lowering tensions, improving communications, interpreting
issues, encouraging parties to explore potential solutions, and assisting parties in finding
a mutually acceptable outcome.
• Dispute Resolution Advisor

An innovative dispute resolution system that has been designed and used in Hong Kong
to meet the challenge of resolving disputes speedily at construction site level with rigid
response time requirements, involvement of nominated subcontractors and good faith
negotiation.
• Expert Resolution
Expert resolution is a flexible alternative procedure for the resolution of disputes based
upon the decision of an independent third party, the expert. The participants agree
beforehand to be bound by the decisions of an independent expert. It is often the quickest
and most effective way of resolving disputes which are relatively simple in content or are
essentially technical in nature.
7.0 Extension of Time (EOT)
7.1 Purpose of EOT

It is to retain a defined time for completion. It preserves the employer’s right to liquidated
damages against acts of prevention. It is to give the contractor relief from his strict duty to
complete on time for delays caused by neutral events.
7.2 Absence of EOT

There must be a provision made in the contract for EOT to be granted. Without it, the architect
has no power to issue EOT. As a result, there will be a breach of contract if the contractor fails to
complete the work by the given date. When the employer causes the delay, the contractor is no
longer bound to complete the works by the contract completion date. The employer can no
longer rely on the LD provisions. No EOT clause means that the employer loses his right to
enforce LD. As a result, time is at large so the contractor shall complete the works within a
reasonable time.
7.3 Procedure for EOT Claim

The contractor shall notify the architect within 28 days in writing of any events which entitle him
to EOT. Upon receiving the notification, the architect has one month of receiving the notice to
inform the contractor whether or not the event in principle entitled him to an EOT claim.
The architect may request more information and evidence to enable him to properly estimate the
EOT. The contractor has 28 days upon receiving the request to provide the architect with the
information. Failing this, the architect is not required to determine the estimate for EOT
7.4 Significance of Issuance of Completion Certificate

• Employer shall cease claiming LD from the Contractor
• The Contract shall be deemed completed
• Commencement of maintenance period
• Release 1st half of the limit of retention monies to the Contractor
7.5 Engineer’s/Architect’s power the following Objection
7.5.1 Valid Objection Based on Financial Standing, Solvency, Competence, or Reliability

of the Subcontractor
The architect may make a new nomination or may instruct the contractor to carry out the work
himself. He may also instruct the contractor to enter into the subcontract despite having a valid
objection. However, there is a consequence. The employer will guarantee the contractor against
any loss, damage, claim, or expenses incurred by the contractor because the contractor is unable
to claim such losses. Architects can grant EOT.
7.5.2 Valid Objection Based on Unsatisfactory Subcontract Terms
The architect may make a new nomination or may instruct the contractor to carry out the work
himself. He may also instruct the contractor to enter into the subcontract despite having a valid
objection. However, there are consequences. No liability will be imposed on the contractor with
respect to the subcontractor’s work. The employer will also indemnify the contractor against any
damage, loss, or claim due to terms validly objected to. EOT is granted.
7.6 Power of Engineer/Architect to Sanction EOT/Variation
The architect can issue a variation order at any time during the contract period. He can sanction
variation carried out by the contractor without prior authorization. However, the contractor is not
entitled to additional payment or EOT if its negligence or omission on part of the architect or
employer and an emergency when it is not practical to obtain prior authorization.
The contractor should not carry out any variation work without confirmation in writing by the
architect. In doing so, the contractor will not be compensated.
7.7 Practical Completion
Usually, it (completion) will mean bona fide completion free of known or patent defects so as to
enable the owner to enter into occupation". The words 'practical' or 'substantial' in English
standard forms probably do no more than indicate that trivial defects not affecting beneficial
occupancy will not prevent completion. It can also mean the state of completion where the works
may not be absolutely completed or entirely free from defects but have reached the state where
they can be taken over and used by the employer for their intended purpose and where the
unfinished items of work and the remaining defects (patent) are only of a minor nature and
extent and their completion or rectification will not unreasonably interfere with or interrupt the
taking over of the works.
When in the opinion of the architect/ contract administrator, works or sections of the works have
been achieved and the contractor has complied sufficiently with all the clauses of the contract.
• In the case of the works, the architect/contract administrator shall forthwith issue a
certificate to that effect (the practical completion certificate).
• In the case of a section, he/she shall forthwith issue a certificate of practical completion
of that section (a section completion certificate).
7.7.1 Significance of certificate of practical completion:

• Rectification period begins
• The contractors’ liability for insurance ends
• The employer’s right to deduct full retention ends and half retention is due for release
• The contractor’s license to be on-site ends
• Regular interim certificates cease
• The period of review of extensions of time begins
8.0 Defects and Defects Liability Period
A defects liability period is a set period of time after a construction project has been completed
during which a contractor has the right to return to the site to remedy defects. A typical defects
liability period lasts for 12 months. After completion, the contractor must make good on defects
and maintain the works for between 6-12 months. Upon completion, the engineer/architect shall
issue a completion certificate. Once issued, the commencement of the maintenance period takes
effect.
8.1 Purpose of a defect’s liability period
Defects liability periods - also known as rectification provisions - can be of benefit to both
parties. For the contractor, it is likely to be more economical and efficient for it to carry out
remedial works itself than to pay the costs of another contractor hired by the employer. From the
employer's perspective, it will not need to hire an alternative contractor to carry out the work or
to carry out the work itself and reclaim the cost.
The employer will also not run the risk that any warranties provided by the original contractor
may be affected by a third party carrying out works on the site. If there is a contractual right for
the contractor to rectify defects, and the employer either does not notify the contractor that
rectification is needed or refuses access to the site, then the employer may be in breach of
contract.
Case law illustrates, however, that the contractor will not normally be 'let off the hook' if this
happens. The employer will still have a claim for the cost of rectifying the defects, but the claim
is likely to be limited to the amount it would have cost the original contractor to carry out the
works. It will not be able to claim remedial works or working methods found not to be strictly
necessary. The employers should therefore give careful consideration to the provisions in the
contract before hiring a new contractor to carry out remedial works. This is especially important
if the contract stipulates that the employer must notify the original contractor that remedial works
are needed before it can make a claim for recovery of any costs of rectification.
8.2 Procedure for dealing with defects during the defect’s liability period
Although the process will be similar under most agreements, the exact process will depend on
the terms of the contract concerned. It contemplates the following process:
• The principal/employer discovers a defect and brings it to the engineer/superintendent’s
attention.
• The engineer/superintendent directs the contractor to address the defect. The engineer/
superintendent’s direction must be in writing, provide sufficient particulars of the defect
and state a completion date (and ideally a completion time) for the rectification work. A
direction that does not satisfy these requirements may not be effective.
• The contractor must rectify the defect in accordance with the engineer’s/superintendent’s
direction, causing as little inconvenience as possible.
• The engineer’s/superintendent’s direction may provide that there will be a further defects
liability period in respect of the rectification work. If a further defect appears during this
extended period, this process may be repeated until the defect has been satisfactorily
rectified.
• If the contractor does not comply with the engineer’s/superintendent’s direction, the
employer/principal can have another contractor carry out the rectification works and can
recover the costs of doing so from the contractor. The engineer/superintendent will
certify these costs, and the employer/principal can have recourse to the contractor’s
security if the contractor fails to pay them.
8.3 Investigation Defects
The architect shall issue Instructions or Directions for the purpose of investigating any defects to
the work. The works are subject to open for inspection hence carrying out the test or
investigation may lead to postponing further works until the results of the investigation are
known. If the defective work is due to a breach of contract, the architect shall issue direction to
the contractor so that he complies with the contractual requirements at his own expense and with
no EOT. If the defective work is not due to the contractor’s fault, the architect shall issue an
Instruction. The Contractor will be compensated and EOT is granted.
8.4 Engineer’s Architect’s Power during the Maintenance Period
The maintenance period shall commence upon the issuance of the completion certificate. During
this period, the contractor shall complete any outstanding works. The Architect may give orders
to make good of any defects which become apparent in the works. If the defects are due to a
breach of contract, the contractor shall repair and make good of the defects at his own cost
(Architect’s Direction). If not caused by the contractor, the architect shall issue Instructions and
the contractor is entitled to payment for rectifying the fault.
8.5 Maintenance Certificate
The architect shall issue a maintenance certificate to the contractors and a copy to all the
Domestic Subcontractors (DSC) and Nominated Subcontractors (NSC). With the issuance of the
maintenance certificate, it discharges the contractors from any further physical attendance upon
the works for making good of defects.
8.6 Provisional Sum

The Provisional Sum means a sum included in the Contract and so designated in the Bill of
Quantities for the execution of any part of the construction works or for the supply of goods,
materials, plant or services, or for contingencies which sum may be used, in whole or in part,
or not at all on the instructions of the Engineer represented by the implementing agency of this
sub-project. The Contractor shall be entitled to only such amounts in respect of the work, supply
or contingencies to which such Provisional Sums relate as the Engineer shall determine in
accordance with the contract.

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SUNYANI TECHNICAL UNIVERSITY

The main outline of the course includes;

Further Readings / References

Contract Administration is the management of contracts made with suppliers, contractors,

Contract Administration is the responsibility of the Procurement Entity and is distinguished

Contract Administration is similar to project management. Each contract is a mini-project. It

1.1 Purpose of Contract Administration

1.2 Objectives of Contract Administration

The main objectives of Contract Administration are:

1.3 The Role of Contract Administration

1.4 Summary of Main Tasks of Contract Administration

• Contract Administration Planning (Policies, Systems, and Procedures)

Contract Administration Responsibilities

Contracts are required when goods/services are bought.

2.2 Essential Elements of a Valid Contract

For contracts to be valid to be legally enforceable, the following must be present:

2.3 The Law Applicable to a Contract

2.4 Basic Types of Works Contracts

2.4.1 Lump Sum (LS)

2.4.2 Unit Rate (UR) – Admeasurement or Re-measurement

2.4.3 Cost Reimbursable plus Fee

The fee may be either a:

Cost-reimbursable contracts are appropriate in:

2.5 Characteristics, Merits, and Demerits of Basic Types of Works Contracts

2.5.1 Lump Sum (LS)

Some of the advantages of an LS contract from the Employer’s viewpoint are:

Some disadvantages are:

2.5.2 Unit Rate (UR) – Admeasurement or Re-measurement

Some of the advantages of the UR contract are:

Some of the disadvantages of the UR contract are:

2.5.3 Cost Reimbursable plus Fee

The advantages of CP contracts are:

The disadvantages of CP contracts are the:

2.6 Factors Affecting the Choice of Contract Type

In the preliminary stages of procurement, procurement entities may have a choice of

2.7 Adaptations of the Basic Types of Works Contract

2.7.1 Supply and Erect/Install

The plant/equipment/goods would be the subject of performance specifications or fabricated to

2.7.2 Design and Build/Construct

2.7.4 Target Cost

2.7.5 Public-Private Partnerships (PPPs)

It is important to note that PPPs acknowledge the constraints to investment in physical

2.7.5.1 Public-Private Partnerships (PPPs) Models

2.7.6.1 Types of a concession contract

• Build, Operate and Own (BOO)

• Build, Operate, Own and Transfer (BOOT)

2.8 Important Parties in a Works Contract

2.8.1 Specific contractual responsibilities of the Employer

2.8.2 Specific contractual responsibilities of the Engineer

2.8.3 The Contractor

2.8.3.1 Subcontracting, Contractor’s Rights, and Obligations

2.8.3.2 Nominated and Domestic Subcontractor

2.8.4 Designated Subcontractors and Nominated Subcontractors

2.8.4.1 Contractor Responsibilities on his Subcontractors

2.8.4.2 Termination of a Subcontractor

3.2 Why Tendering

3.3.1 Tendering Choices/Selection Process

• Expression of Interest (EOI) - An Expression of Interest is used primarily to determine