Bilal R. Alsharif, Water

Authority of Jordan

Importance of Contract

Administration for

Employers

Water Authority of Jordan as an Employer

• The body responsible for all the new water projects in Jordan, either

directly or indirectly

• Annual projects spending of around 200 million USD / Committed

projects 1.1 Billion USD

• Node for coordination and communication with Funding Agencies,

Consultants, Contractors and Water Operators.

• Forms of Contract used for WAJ Projects falls under the Red Book,

Yellow Book and sometimes Silver Book. Some projects as BOT.

Why Contract Administration?

• Considering the volume of Projects implemented annually by WAJ, a

solid Contract Administration for its Contracts with Consultants and

Contractors is needed

• Weakness in Contract Administration comes from the fact that the

“Employer’s Representative” and/or “The Engineer” are not experienced

in managing the Contract

• Most of time, We have a good technical manager but not “Contract

Administrator”

• Good Contract Administration starts by careful choice of The

Person representing the Owner for a Project, The Engineer and/or

the Engineer’s representative.

Why Contract Administration?

• Weakness in Public Employers and Private Employers as well

• Both share the same problems / over confidence

• Not understanding the importance of soft cost

• Trying to save in the soft cost as much as they can

• Being left at the end on their own trying to close out a Project they know

nothing about.

What we Consider as the most Important Contract

Administration steps for us

• Proper choice of Contract before Tendering Phase• Part of it is using Lessons Learned

• Making sure that Particular Conditions meet the Specific Employer’s

requirements (also Lessons Learned to be used)

• Implementing correct steps upon initiating the Contract

• Proper Variation procedure

• Proper Claim Management Procedure

• Implementing Taking Over Procedure as per the Conditions

What we lose by not having a good Contract

Administration?While the Quality Control / Inspections part is duly covered by the

Engineer, the shortage in proper Contracts knowledge / Contract

Administration results in the following for us as an Employer : -

• Unrecovered / Uninitiated Employer’s Claims

• Improper Document control (e.g. No RFI records, no Shop drawings

records, ….)

• Missing documents to respond to Claims

• Delays (e.g. Delays in responding to RFIs or submittals leading to

Delays in Work)

What we lose by not having a good Contract

Administration?• Improper Variation Order procedure and approval which leads to Over

spending

• Wrong implementation of Determination Clause

• Loss of Employer’s rights during DNP

• Project Close out phase is poorly implemented

…And many more

Good and Solid Contract Administration will lead to:

• On Time Delivery of Project OR at least minimum unjustified delays

• No unjustified / unneeded Cost Overrun

• Proper Payment procedure which prevents harm to Employer or

Contractor

• Proper Variations procedure

• Proper and complete documents control

• The Employer is paying only what he has to pay / no more

• Liability / Responsibility for errors are clear

• And much more….

What Clients need from The Engineer

• In order to make sure that the Employer is getting what he needs in

terms of Contract Administration, the Engineer’s team should :-• Be familiar with the FIDIC form of contract used.

• The Engineer and his employees on site should know what are the Contractual rights

and responsibilities of each party under the Contract so that they are able to monitor

compliance.

• Contains some one who is proficient with Cost part of the Contract / Variations / Pricing

• Contains someone who is proficient with Time Control / EOT Claims.

• Not to be afraid of giving the right advice / decision / recommendations to the Employer

What Went wrong when the Engineer did not perform

• Project A • Pipeline, Pump stations and Reservoirs

• International Contractor / International Consultant

• EOT claim with prolongation cost

• The Engineer studied the claim and submitted his recommendations to the Employer

• Two options in the recommendation!! Left for the Employer’s discretion

• It was then discovered that the Engineer is not aware of any principles / rules / clauses

regarding Extension of Time, Delays, associated costs, etc….

• Missing documentations / wrong instructions giving during a certain person which weakened

the Employer’s position

• Issuing Determination without getting the Employer’s approval

Settlement

What Went wrong when the Engineer did not perform

• Project B• Hotel Tower

• International Contractor / Local Consultant (consortium)

• Major delays in the Project – more than 1 year of lost operation profit.

• No proper documentations by the Engineer / No record keeping

• Employer was not able to claim for Delay Damages or extension of DNP due to

missing records

• Wrong Taking Over procedure / not as per the Contract

• No proper snag lists / follow up on rectifying of comments

• Issuing Variations instructions and Paying for them without getting Employer’s approval

• Big Dispute at completion

• Settlement with a big loss to the Employer

What Went wrong when the Engineer did not perform

• Project C

• SCADA system

• Wrong choice of the Contract by the Employer

• Silver book

• No Engineer on site / turned out to be that the Employer is not able to

supervise the works

• Contractor is working without proper supervision and monitoring

• Lower quantity / delays

Improvement to Contract Administration

• In many cases, there were misunderstanding by The Employer

and the Engineer regarding certain clauses and procedures in

the Conditions of Contract.

• In most cases, we argued (Employer, Engineer and Contractor)

through out the whole life of the Project regarding the

interpretation of certain clauses.

• We believe that there was a major improvement to this issue in

FIDIC 2017 eliminating the need to speculate / argue.

Example from the point of view of the Employer :

Imprvements to Clause 3 in FIDIC2017

• Major improvement to Clause 3 in FIDIC 2017 from the 1999

version.

• Logical and Clear steps for the Engineer to follow AND the

Employer / Employer’s rep to know what should be done

• Even non-technical / non-experienced Clients/ Clients reps can

follow the steps to make sure the Engineer is doing it right.

• Example : Detailing and Improvement to Clause 3 – The

Engineer

3.1 The Engineer• The definition of the word “Engineer” under FIDIC 1999 was not

clear to many. The Engineer’s reps at site kept working out of

their limits.

• Now, this is clear under FIDIC 2017, with no room for different

understanding

“…If the Engineer is a legal entity, a natural person employed by the Engineer shall

be appointed and authorized to act on behalf of the Engineer under the Contract”

3.1 The Engineer

And not any person can do it

“The Engineer (or, if a legal entity, the natural person appointed to act on its behalf)

shall be:

(a) a professional engineer having suitable qualifications, experience and

competence to act as the Engineer under the Contract; and

{b) shall be fluent in the ruling language defined in Sub-Clause 1 .4 [Law and

Language].”

3.2 Engineer’s Duties and Authority

• Since many Employers used to put limitations on the Engineer

to Authority/ power to issue Determinations, FIDIC 2017 advised

against this practice

“There shall be no requirement for the Engineer to obtain the Employer's

consent before the Engineer exercises his/her authority under Sub-Clause

3.7 [Agreement or Determination]. The Employer shall not impose further

constraints on the Engineer's”

3.5 Engineer’s Instructions

• Excellent change

• Summary : Engineer can issue an instruction to the Contractor at

any time

• If its stated in the Instruction that it’s a variation, then clause

13.3.1 applies

• If its not stated, and the Contractor considers that it’s a variation,

he shall send a notice to the Engineer that it’s a variation.

• If the Engineer does not respond within 7 days, then the Instructions is revoked

3.5 Engineer’s Instructions

• Excellent change

• Summary : Engineer can issue an instruction to the Contractor at

any time

• If its stated in the Instruction that it’s a variation, then clause

13.3.1 applies

• If its not stated, and the Contractor considers that it’s a variation,

he shall send a notice to the Engineer that it’s a variation.

• If the Engineer does not respond within 7 days, then the Instructions is revoked

3.7 Agreement or Determination

• Step by Step procedure

• Huge improvement to this very important clause

• Covering all possible scenarios

• Agreement

• Dissatisfaction with Determination

• Dissatisfaction with part of Determination

• Failure to agree with Agreement or Determination by a party