claims fidic indonesia

Electronic copy available at: http://ssrn.com/abstract=1898436

1

THE MAIN CAUSAL FACTORS OF CONSTRUCTION CLAIMS

UNDER FIDIC CONTRACT IN INDONESIA1

Dr. Sarwono Hardjomuljadi 2

Special Advisor to the Minister,

Ministry of Public Works

Jl. Pattimura 20

Jakarta Selatan

Indonesia

ABSTRACT

In the construction industry in Indonesia, most of claims submitted by the contractor especially in the

public sector construction will finally create disputes between the employer and the contractor. Claims and

disputes arising during the construction were largely due to the uncertainties inherent in the projects and

were not due to the use of certain conditions of contract.

This paper presents the causal factors of Construction Claims in Indonesia, based on the research through

the questionnaire distributed among the users of FIDIC Conditions of Contract from the construction

society i.e. employer, engineer and contractor. The result showed that the possession of site and the

changing in design were the main causal factor of claims in Indonesia. Besides those causal factors, the

different interpretation also created disputes

Construction Contract using the FIDIC Conditions of Contract accommodates all variations through the

clauses of variation and sets up the procedure on how to submit a claim related to the variation and/or the

impact of variations by the contractor. That is the reason why the multilateral development bank endorse

and support the development of FIDIC Conditions of Contract for Construction, MDB Harmonised Edition

as a fair and balanced conditions of contract..

No matter what kind of conditions of contract was used, the bad understanding of the contract, particularly

General Conditions of Contract was one of the main causal factors of disputes often occurred and became

an obstacle to the construction services development in Indonesia. This could be avoided only by a good

knowledge and deeper understanding generally on the philosophy of the construction contract and

particularly on the FIDIC Conditions of Contract.

Key Words: Main causal factors, Claims, FIDIC Conditions of Contract.

1 Presented at FIDIC-JICA International Construction Management Training, Jakarta, 26th – 29th July 2010. 2 Special Advisor to the Minister of Public Works Republic of Indonesia.

Vice Chairman, Indonesian National Board for Construction Services Development.

Lecturer on Construction Contract Administration, S2 & S1 Tarumanagara University, Jakarta

Lecturer on Construction Contract Administration, S2 Parahyangan University, Bandung


2

1. Background

Most of the final contract prices for large projects in Indonesia are higher than the original

contract prices but still under the appraisal cost prepared by the lending institution-borrower-

design consultant as seen in the table below with the example of hydro electric power plants

projects in Indonesia.

Since a hydro electric power plant project covers most of construction such as dam, tunnels,

channels, roads, buildings etc., the writer considers that it may represent the construction in

general and it could be used as the basis of further discussion.

Table. 1: Original and final contract prices of the hydro electric power plants construction in

Indonesia3

No

Project Name

Contract Price (Equivalent. IDR)

Appraisal Original Final

1 Saguling HEPP IDR 112,666,840,010 IDR 223,725,333,750 IDR 235,909,375,000

2 Cirata HEPP IDR 147,454,542,000 IDR 294,868,371,000 IDR 325,978,887,050

3 Bakaru HEPP IDR 46,363,050,000 IDR 106,498,314,000 IDR 169,756,290,000

4 Singkarak HEPP IDR 164,543,673,285 IDR 274,732,481,931 IDR 203,713,500,000

5 Kotapanjang HEPP IDR 110,291,088,890 IDR 151,990,912,374 IDR 129,657,185,200

6 Besai HEPP IDR 79,793,043,480 IDR 180,363,563.910 IDR 227,700,000,000

7 Musi HEPP IDR 120,805,734,387 IDR 413,294,161,780 IDR 206,625,760,000

8 Sipansihaporas HEPP IDR 163,305,435,568 IDR 259,611,561,745 IDR 399,079,687,500

9 Renun HEPP IDR 161,561,617,760 IDR 752,799,541,027 IDR 590,686,322,000

1.1. Main causal factors of the claims

Disputes in the construction industry arise from the unsettled claims, mainly due to the

unavailability of contemporary record and the different interpretation on contract.

The best way to avoid the disputes, particularly to reduce its impact, is firstly to understand the

main causal factors of claims and then the employer should try to find the pre contract strategy

and to improve the monitoring system of the project. Both parties i.e. the employer with the

assistance of the engineer and the contractor should have good and organized records and detailed

particulars to be kept as the supporting tool for the negotiation, and/or other Alternative Dispute

Resolution (ADR) or for the litigation. Document of claims should be presented in a clear and

less complicated way to ensure that it could be easily understood by the parties including the third

party appointed as the ADR board member (if any).

This paper will present the result of the research by Sarwono (2008)4 on the main causal factors

of the construction claims in Indonesia with reference to the hydro power projects. Since a hydro

power project consists of many field of civil engineering construction i.e. tunnels, roads,

buildings, waterways, dams etc. it could be considered as suitable and proper to be used as a

comprehensive reference for various construction projects. The result was validated by the

experts and experienced engineers involved in various civil engineering construction projects.

3 State Electricity Corporation of Indonesia (1988-2005): “Completion Reports”, Jakarta.

4 Hardjomuljadi, Sarwono (2009): “Pre Contract Strategy for Minimizing Construction Claims Impact

on Hydro Electric Power Plant Projects in Indonesia” , Dissertation, Jakarta.


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Based on the study conducted by Sarwono (2008), it was proved that the main causal factors of

construction claims under the contracts using FIDIC Conditions of Contract are as follows:

1. Constructive change orders

2. Variation orders

3. Inadequate site investigation

4. Oral change orders by employer

5. Possession of site

6. Changes in design

7. Subsurface conditions of geology

8. Other contractors’ interference and delay

9. Inefficiency and disruption

From the diagram below, the first layer causal factors or the most frequent circumstances are

Constructive Changes Order and Inadequate Site Investigation which are affected by the second

and third layer causal factors i.e. Changes in Design, Oral Changes Order by the Employer,

Possession of Site but on the other side Variation Order is a means of claim settlement. Those

causal factors are related to contractual or legal matters and in order to minimize claim and

dispute, special attention should be given to such circumstances and an engineered conditions

contract is undoubtedly required.

Figure 01: Relationship between claim and its causal factors in hydro electric power projects 5

5 Hardjomuljadi, Sarwono (2009): “Pre Contract Strategy for Minimizing Construction Claims Impact

on Hydro Electric Power Plant Projects in Indonesia” , Dissertation, Jakarta.

CLAIM

CONSTRUCTIVE

CHANGES ORDER

CHANGES IN DESIGN

VARIATION ORDER

INADEQUATE SITE

INVESTIGATION

ORAL CHANGES ORDER

BY EMPLOYER

POSSESSION OF SITE

+

+

+ +

+

+

+

-

72,6%

90,3% 81,7%

88,2%

64,7%

55,4%

4

0000 Additional Cost & Extension of Time

1101 Land Acquisition

1201 Planning/Regulation of Land

Use.

1202 Cultural Approach

1302 Staff Capability

1000 Possession of Site

1301 Regional Government Action.

1402 MANAGEMENT

DECISION

1.2. The analysis of the third layer causal factors

The analysis on the third layer casual factors i.e. possession of site and changes in design found

that there are some causal factors able to be controlled through the management decision but

other causal factors lie beyond the control.

1.2.1. Possession of site

Based on the research by Sarwono (1999) 6, there are three major elements related to the

possession of site i.e. the land acquisition, the availability of infrastructure and the availability of

other utilities those should be planned and provided in due time.

Figure 03: Possession of Site – Land Acquisition

6 Sarwono Hardjomuljadi (1999): “The Importance of Management Decision in the Applications of FIDIC

Conditions of Contract for Civil Engineering Works 4th

edition”, Pikitring Sumut & Aceh.

1401 BEYOND THE

CONTROL

5

Figure 04: Possession of Site – Infrastructure availability



1203 Contractor’s Capability

1102 Infrastructure Availability

1305 Equipment Availability

1406 Recruitment / Employment System

1303 Financial Ability

1502 Bid Evaluation.

1408 MANAGEMENT DECISION

1204 Planning of Interfacing

1503 Government Decision

1304 Human Resources

1501 BEYOND THE CONTROL.

1404 Contract’s Price

1403 Financial Management

1405 Contract’s Escalation Clause

1504 BEYOND THE CONTROL

1407 BEYOND THE CONTROL.

1306 Planning Capability



6

Figure 05: Possession of Site – Other utilities

0000 Additional cost & Extension of Time

1103 Other Utilities

1205 Telecommunication Availability


1206 Electric Power Supply Availability

1307 Condition in the Specification

1409 Specification’s Preparation.


.

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1.2.2. Changes in design

Figure 06: Changes/ Variations


4000 Variations

4101 Formal Change

4102 Constructive Change

4201 Ommission, Increase, or Decrease of

quantity.

4202 Ammend Previously Approved Drawing Drawing

4203 Change the Quality of Material

4204 Any kind Necessary for Completion of the

Work


4205 Constructive Acceleration

4206 Unspecified Administrative Requirement

4207 Inaccurate Information

4208 Over-

inspection 4209 Improper Rejection


4303 Data/information Collected during Tender Preparation

4304 Knowledge and Experience of Supervisor

4401 Staff Capability


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3. Conditions of Contract 3.1. Definitions

Based on Black Law Dictionary (Bryan A. Garner, 2004) 7 “Contract is an agreement between

two or more parties creating obligations that are enforceable or otherwise recognizable at law”,

while Oxford Dictionary of Law (Elizabeth A. Martin and Jonathan Law, 2006)8 mentioned

“Contract is a legally binding agreement. Agreement arises as a result of “offer and acceptance”,

but a number of other requirements must be satisfied for an agreement to be legally binding”.

Construction Contracts Dictionary (Chow Kok Fong, 2006)9 mentioned that “Contract is a legally

binding agreement formed when one party accepts an offer made by another and which fulfills

the conditions”.

Besides the above definitions, (John Adriaanse 2007)10

said that “A variety of factors makes a

construction contract different from most other types of contracts. These include the length of the

project, its complexity, its size and the fact that the price agreed and the amount of work done

may change as it proceeds”.

Contract is based on some conditions established. Garner stated that “Conditions is a future and

uncertain event on which the existence or extent of an obligation or liability depends; an

uncertain act or event that triggers or negates a duty to render a promised performance”

Henkin 2005 11

said “The Conditions of contract is intended to regulate the relationship between

the parties to the contract; it defines the parties and their responsibilities to each other as well as

their responsibilities for various aspects of the contract. In several standards conditions of

contract, the liabilities of each of the parties and the respective risk s to be taken by them are

usually implicit in the defined responsibilities, but because of the complexity it is preferable to

those liabilities to be explicitly defined”. In this case FIDIC Conditions of Contract explicitly

defined all liabilities of the parties and also supported by the so called “claim management

rules”12

in order to avoid disputes.

The General Conditions of Contract for public sector projects currently used in Indonesia vary

from Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken known as

AV 41 (translated into Indonesian by Soekarsono Malangjoedo) to FIDIC Conditions of Contract

for Works of Civil Engineering Construction published by Federation Internationale des

Ingenieurs Conseils, Geneva, Switzerland. Most of conditions of contract for public sector and

private sector construction work in Indonesia was “tailor-made” and has not been standardized.

The use of standardized conditions of contract in public sector construction contract in Indonesia

will make the parties get familiar to the contract, reduce the unnecessary effort in the procurement

process and improve the efficiency in the contract administration activity. The use of standardized

conditions of contract will be advantageous for both the employer and the contractor since the

parties need not spend too much time in examining the conditions of contract of different

projects.

7 Bryan A.Garner (2004): “Black’s Law Dictionary”, Thomson West

8 Elizabeth A Martin and Jonathan Law (2006): “Oxford Dictionary of Law”, Oxford University Press

9 Chow Kok Fong (2006):” Construction Contracts Dictionary”, Sweet & Maxwell Asia

10 John Adriaanse (2007): “Construction Contract Law”

11 Henry Henkin (2005): “ Drafting Engineering Contracts”, Elsevier Applied Science,

12 Axel-Volkmar Jaeger and Gotz-Sebastian Hok (2010):”FIDIC – A Guide for Practitioners”, Springer

9

So far, big projects in Indonesia were constructed and financed by international lending

institutions such as the World Bank, Asian Development Bank (ADB), New JICA formerly Japan

Bank for International Cooperation (JBIC). The international lending institutions usually require

the use of FIDIC Conditions of Contract for Works of Civil Engineering Construction published

by Federation Internationale des Ingenieurs Conseils, Geneva, Switzerland. JICA in particular

still adopt I their Standard Bidding Document, the FIDIC Conditions of Contract 4th edition (1987

amended 1992) which is actually have some difference in the philosophy, which ca be seen in the

comparison as follows.

As explained above, most conditions of contract in public sector being used in Indonesia was

“tailor made”, where some clauses in the FIDIC Conditions of Contract were deleted or replaced

by newly made clauses for Employer’s sake and the Contractor was in the position of “take it or

leave it”. Even though the intention was to protect the employer, this action was mostly than none

creating the disputes in the future, because the contractor would obviously try to minimize the

loss.

If the disputes cannot be solved by the parties and then come to the litigation process i.e. the

court, whatever the decision is, the employer will always become the looser. If the decision is for

the contractor’s sake, the employer has to pay the penalties and if the decision is for the

employer’s sake, there is a possibility that the completion will be delayed since the contractor has

no enough resources to conduct the construction until completion and another possibility is the

bad quality of construction result due to the financial difficulties. With such understanding, the

best effort should be given to establish a fair and balanced conditions of contract. The easiest and

fastest way is by using the acknowledged international standard conditions of contract i.e. FIDIC

General Conditions of Contract, from “Work of Civil Engineering Construction (1987) - Short

Form of Contract (1999) – Construction (1999) – EPC/Turnkey Project (1999) until MDB

Harmonised Edition (2006) and others”. To come to the National Standards, the last three

conditions of contract were translated and published in Bahasa Indonesia which in the future will

become the embryo of such National Standards.

FIDIC Conditions of Contract is an engineered conditions of contract required by the

international lending institution, unfortunately in Indonesia there is a misperception in the

employer side that the use of FIDIC Conditions of Contract facilitates the contractor in submitting

their claims which used to create disputes. In the writer’s opinion the spirit of equality between

employer and contractor should not allow such misperception. The clause allowing the contractor

to submit claim and the clause of Unforeseeable Physical Conditions and the like are clauses

provided so the contractor can recover their loss, but the latest clause some times interpreted by

the contractor as the entry gate to the claim. The clauses in FIDIC GCC give room for the

contractual changes but the parties should first understand the original scope of works or the

original extent of the contract agreed by both parties at the time of bid and was signed as a

contract agreement. If during the construction period there are no changes in the scope of work as

well as the contract itself, it meant that no time adjustment is required. It should be clearly

recognized that once the original scope of works was changed during the construction period, it

means that additional and/or extra works are placed and consequently cost and time adjustment

are required.

The writer experienced in using FIDIC GCC for Works of Civil Engineering Construction,

starting from the 2nd

edition 1969 for Saguling Hydro Electric Power Plant Project, the 3rd

edition

1977 for Cirata Hydro Electric Power Plant Project, the 4th edition 1987 amended 1992 for Renun

Hydro Electric Power Plant Project and the FIDIC GCC for Construction 1st edition 1999 for

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Upper Cisokan Pumped Storage Power Plant Project. Based on the writer’s observation, many

clauses had been developed and become more fair and balanced, for example:

3.2. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: POSSESSION OF SITE

FIDIC GCC for Work of Civil Engineering Construction 2nd

edition (1969)

Clause 42 (1): Possession of Site. 42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the

Contractor is to be given possession from time to time and the order in which such portions shall be made

available to him and subject to any requirement in the Contract……………………as may be required to

enable the contractor to commence and poceed with the construction of the Works in accordance with the

programme referred to in Clause 14 hereof,……………… from time to time as the Works proceed give to

the Contractor possession of such further portion of the site

If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession

in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion

of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum

shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 3rd

edition (1977)

Clause 42 (1): Possession of Site 42 (1) Save in so far as the Contract may prescribe the extent of portions of the Site of which the

Contractor is to be given possession from time to time and the order in which such portions shall be made

available to him and subject to any requirement in the Contract……………………as may be required to

enable the contractor to commence and proceed with the construction of the Works in accordance with the

programme referred to in Clause 14 hereof………………….from time to time as the Works proceed give to

the Contractor possession of such further portion of the site.

If the contractor suffers delay or incurs expense from failure on the part of the Employer to give possession

in accordance with the terms of this clause the Engineer shall grant an extension of time for the completion

of the Works and certify such sum as in his opinion shall be fair to cover the expense incurred which sum

shall be paid by the Employer.

FIDIC GCC for Work of Civil Engineering Construction 4th

edition (1987 amended 1992)

Clause 42.1: Possession of Site and Access Thereto 42.1 Safe insofar as the Contract may prescribe:

(a) the extent of portions of the Site of which the Contractor is to be given possession from time to time, and

(b) the order in which such portions shall be made available to the Contractor and subject to any

requirement in the Contract as to the order in which the Works shall be executed…

give the Contractor possession of:

(c) so much of the Site

(d) such access as, in accordance with the Contract, is to be provided by the Employer as may be required

to enable the Contractor to commence and proceed with the execution of the Works in accordance with the

programme referred to in Clause 14, if any…..

The Employer will, from time to time as the Works proceed, give to the Contractor possession of such

further portions of the Site as may be required to enable the Contractor to proceed with the execution of the

Works with due dispatch…………

42.2 If the Contractor suffers delay and/or incurs costs from failure on the part of the Employer to give

possession in accordance with the terms of Sub-Clause 42.1, the Engineer shall, after due consultation with

the Employer and the Contractor, determine:

(a) any extension of time to which the Contractor is entitled under Clause 44, and

(b) the amount of such costs, which shall be added to the Contract Price..

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FIDIC GCC for Construction 1st edition (1999)

Clause 2.1: Right of Access to the Site 2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within

the time stated in the Appendix to Tender. ……………However the Employer may withhold any such right

or possession until the Performance Security has been received.

If no such time is stated in the Appendix to Tender, the Employer shall give the Contractor right of access

to, and possession of, the Site within such times as may be required to enable the Contractor to proceed in

accordance with the programme submitted under Sub-Clause 8.3 [Programme]

If the Contractor suffers delay and/or incurs Costs as a result of failure by the Employer to give any such

right or possession within such time, the Contractor shall give notice to the Engineer and shall be entitled

subject to Sub-Clause 20.1 [Contractor’s Claim] to:

(a) an extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4

[Extension of Time for Completion], and

(b) payment of any such Cost plus reasonable profit, which shall be included in the Contract Price.

After receiving this notice, the Engineer shall proceed in accordance with Sub-Clause 3. [Determination]

to agree or determine these matters. However, if and to the extent that the Employer’s failure was caused

by any error or delay by the Contractor, including an error in, or delay in the submission of, any of the

Contractor’s Documents, the Contractor shall not be entitled to such extension of time, Cost or profit

FIDIC GCC for Construction MDB Harmonised edition (2006) 13

Clause 2.1: Right of Access to the Site 2.1 The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within

the time stated in the Contract Data. ……………However the Employer may withhold any such right or

possession until the Performance Security has been received.

If no such time is stated in the Contract Data, the Employer shall give the Contractor right of access to,

and possession of, the Site within such times as required to enable the Contractor to proceed without

disruption in accordance with the programme submitted under Sub-Clause 8.3 [Programme]

FIDIC 1st edition 1999 facilitates this factor by Clause 2.1 [Right of Access to the Site]. The spirit

of this clause is giving Right of Access to and possession of the Site within such times as may be

required to enable the contractor to proceed in accordance with the programme submitted under

Clause 8.3 [Programme]. In case that the Employer cannot fulfill his obligation, the contractor

shall be entitled to, subject to Clause 20.1 [Contractor’s Claim], an extension of time and/or

payment of any such cost incurred because of the failure to get the access and/or the possession.

3.3. THE CLAUSES OF MAIN CAUSAL FACTOR OF CLAIM: VARIATIONS

Other main causal factor of claims is Changes in Design and/or Variations. This factor is

also accommodated by FIDIC GCC for Construction Clause 13 [Variations and

Adjustment]. Engineer has an important role in Changes in Design besides the Possession

of Site.

FIDIC GCC for Work of Civil Engineering Construction 2nd

edition (1969) Clause 51(1): Variations

51 (1) The Engineer shall make any variation of the form quality or quantity of the Works or any part

thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall in his

13

Federation Internationale Des Ingenieur Conseils (2006): “General Conditions of Contract For

Construction”, Multilateral Development Bank Harmonised Edition

12

opinion be desirable shall have power to order the Contractor to do and the Contractorshall do any of the

following:

(a) increase and decrease the quantity of any work included in the Contract

(b) omit any such work

(c) change the character or quality or kind of any such work

(d) change the levels lines position and dimensions of any part of the Works and

(e) execute additional work of any kind necessary for the completion of the Works

and no such variation shall in any way vitiate or invalidate the Contract but the value (if any) of all such

variations shall be taken into account in ascertaining the amount of the Contract Price.

(2) No such variations shall be made by the Contractor without an order in writing of the

Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of

any work where such increase and decrease is not the result of an order given under this Clause, but is the

result of the quantities exceeding or being less than those stated in the Bill of Quantities……………….

FIDIC GCC for Work of Civil Engineering Construction 3

rd edition (1977)

Clause 51(1): Variations

51 (1) The Engineer shall make any variation of the form, quality or quantity of the Works or any

part thereof that may in his opinion be necessary and for that purpose or if for any other reason it shall, in

his opinion be desirable, he shall have power to order the Contractor to do and the Contractor shall do any

of the following:


(b) omit any such work


(d) change the levels, lines, position and dimensions of any part of the Works, and


and no such variation shall in any way vitiate or invalidate the Contract, but the value, if any, of all such

variations shall be taken into account in ascertaining the amount of the Contract Price.

(2) No such variations shall be made by the Contractor without an order in writing of the

Engineer. Provided that no order in writing shall be required for increase and decrease in the quantity of

any work where such increase and decrease is not the result of an order given under this Clause, but is the

result of the quantities exceeding or being less than those stated in the Bill of Quantities……………….

FIDIC GCC for Work of Civil Engineering Construction 4th

edition (1987 amende 1992) Clause 51.1: Variations

51.1 The Engineer shall make any variation of the form, quality or quantity of the Works or any part

thereof that may, in his opinion be necessary and for that purpose, or if for any other reason it shall, in his

opinion be appropriate,, he shall have the authority to order the Contractor to do and the Contractor shall

do any of the following:


(b) omit any such work (but not if the omitted work is to be carried out by the Employer or by another

contractor).


(d) change the levels, lines, position and dimensions of any part of the Works


(f) change any specified sequence or timing of construction of any part of the Works.

No such variation shall in any way vitiate or invalidate the Contract, but the effect, if any, of all such

variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to

13

vary the Works is necessitated by some default of or breach of contract by the Contractor or for which he is

responsible, any additional cost attributable to such default shall be borne by the Contractor.

51.2 The Contractor shall not make any such variation without an instruction of the Engineer. Provided

that no instruction shall be required for increase and decrease in the quantity of any work where such

increase or decrease is not the result of an instruction given under this Clause, but is the result of the

quantities exceeding or being less than those stated in the Bill of Quantities.

FIDIC GCC for Construction 1

st edition (1999)

,Clause 13.1: Right to Vary

13.1 Variations may be initiated by the Engineer at any time prior to issuing the Taking-Over Certificate

for the Works, either by an instruction or by request for the Contractor to submit a proposal.

The Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice

to the Engineer stating (with supporting particulars) that the Contractor cannot readily obtain the Goods

required for the Variation. Upon receiving this notice, the Engineer shall cancel, confirm or vary the

instruction.

Each variation may include:

(a) changes to the quantities of any item of work included in the Contract (however, such changes do not

necessarily constitute a Variation).

(b) changes to the quality and other characteristics of any item of work,

(c) changes to the levels, positions and/or dimensions of any part of the Works,

(d) omission of any work unless it is to be carried out by others,

(e) any additional work, Plant, Materials or services necessary for the Permanent Works, including any

associated Tests on Compl,etion, boreholes and other testing and exploratory work, or

(f) changes to the sequence or timing of the execution of the Works.

The Contractor shall not make any alteration and/or modification of the Permanent Works, unless and until

the Engineer instructs or approves of the Work.

6. CONCLUSION

1. Comparing the appraisal cost, contract cost and final cost of most projects using FIDIC GCC

Indonesia, it was found that most of the final costs were higher than contract costs but lower than

the appraisal costs. The analyses showed that:

the appraisal cost was high because the designer prepared a very conservative price

analysis

the contract price was low because the contractor tried to get the project first and get the

compensation later through claims.

the final contract price was higher than the original contract prices because the original

contract price was sometimes too low, but since the final contract price was lower than

the appraisal costs meant that the final contract price was still reasonable.

2. It is understandable that the most important thing is that there is an offer and acceptance agreed

by parties, whatever the contract is. Especially for the construction contract, good conditions of

contract should accommodate the possibility of changes which might occur but with the

minimum potential disputes occurrence and in this case FIDIC GCC fits the criteria.

3. In the FIDIC Conditions of Contract there are clauses containing employer, engineer and

contractor’s obligation to be fulfilled by each parties in completing the project in due manner and

if the parties properly execute their duties, there will be surely no disputes.

14

4. The different interpretation of the contract is not the problem faced only by the non English

speaking countries but also by the English speaking people due to the inadequate capability in

interpreting contract and/or legal terms. The success in handling construction contract using

certain standard conditions of contract depends on the experience in using the similar conditions.

5. The improvement of FIDIC GCC from time to time enables both contractor and employer to

protect their interest, providing that the parties strictly follow the contract’s requirement.

6. Since the FIDIC GCC clauses varied from time to time, we require the sustainable trainings to

improve the user’s knowledge and capability in interpreting the conditions those are very

essential in handling the construction project.

REFERENCES

1. American Institute of Architect, “ General Conditions of the Contract for Construction, A201”, Washington

D.C., 1997

2. Building and Construction Authority of Singapore, “Public Sector Standard Conditions of Contract for

Construction Works”, 5th Edition, Singapore, 2006

3. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 2nd Edition,

4. Chow, Kok Fong, ”Construction Contracts Dictionary”, Sweet & Maxwell Asia, 1st Edition, Singapore, 2006

5. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 3rd Edition,

6. FIDIC, “General Conditions of Contract for Civil Engineering Works”, 4th Edition, Geneva, 1987, amended 1992

7. FIDIC, “General Conditions of Contract for Construction”, 1st Edition, Geneva, 1999

8. FIDIC, “General Conditions of Contract forEPC/Turnkey Project, 1st Edition, Geneva, 1999

9. FIDIC, “General Conditions of Contract for Construction, MDB Harmonised Edition, 1st Edition, Geneva, 2006

10. Garner, Bryan A., “Black’s Law Dictionary”, Thomson West, St. Paul , 2004

11. Hardjomuljadi, Sarwono, “Pre Contract Strategy for Minimizing Construction Claims Impact on Hydro Electric

Power Plant Projects in Indonesia” , Dissertation, Jakarta, 2009

12. Hardjomuljadi, Sarwono; Siregar, Parasman and Sarwono, Susan, “Renewable Energy: Hydro Power and

Notes on Its Development in Indonesia, ISBN: 979-99900-8-4, PT PLN (Persero), Jakarta, 2008

13. Hardjomuljadi, Sarwono, “Tunneling, From Construction Method till Construction Claim Cases”, ISBN: 978-

979-1203-08-1, Polagrade, Jakarta, 2007

14. Hardjomuljadi, Sarwono; Abdulkadir, Ariono and Takei, Masaru, “Construction Claim Strategy based on

FIDIC Conditions of Contract”, ISBN:979-97749-2-6, Polagrade, Jakarta, 2006.

15. Hardjomuljadi, Sarwono, “The Importance of Management Decision in the Application of FIDIC Conditions of

Contract for Civil Engineering Works 4th edition”, Pikitring Sumut & Aceh, 1999

16. Henkin, Henry, “Drafting Engineering Contracts”, Elsevier Applied Science, 2005

17. Jaeger, Axel V and Hok, Gotz S, “FIDIC-Guide for Practitioners”, Springer, 2010

18. Martin, Elizabeth A. and Law, Jonathan, “Dictionary of Law”, Oxford University Press, New York, 2007

19. Soekarsono Malangjoedo, “Algemene Voorwarden Voor De Uitvoering Bij Aaneming Van Openbare Werken”,

Badan Penerbit Pekerjaan Umum, Jakarta, 1978

20. Standards Australia, “General Conditions of Contract AS 4000-1997”, Amendment 3, Sydney, 2005

21. State Electricity Corporation of Indonesia (1988): “Completion Report of Saguling HEPP”, The

New Japan Engineering Consultant Inc.

22. State Electricity Corporation of Indonesia (1990): “Completion Report of Cirata HEPP”, The

New Japan Engineering Consultant Inc.

23. State Electricity Corporation of Indonesia (2005): “Completion Report of Renun HEPP”, Nippon

Koei Co.Ltd.

The Author

Dr. Sarwono Hardjomuljadi, graduated in Civil Engineering from University of Parahyangan, Bandung, got the Doctor degree from Tarumanagara University, Jakarta, now the Special Advisor to the Minister of Public Works, Republic of Indonesia, Vice Chairman of

National Construction Services Development Board of Indonesia, the Director for General Affair and HRD of Geo Dipa Energi - the

joint venture company of Pertamina PLN-,. Formerly worked for Indonesia State Electricity Corporation (PLN) up to the position of Deputy Director and then Vice President. He was involved in the construction of Saguling HEPP, Cirata HEPP and Renun HEPP as

the project manager. He is the Asean Chartered Professional Engineer (ACPE), Principal Professional Engineer in Water Resources

Development (PU-SDA) and Associate Member of Chartered Institution of Arbitrator (ACIArb). He is also the Dispute Adjudication Board and expert witness of some construction projects. In the education field, he is the lecturer at the Post Graduate Program at

Tarumanagara University, Jakarta and Parahyangan University, Bandung.