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Sub-Contracts Management and Administration

The FIDIC training course covers the Red Book on construction contract, and compares it to the yellow, orange, and silver books.

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Sub-Contracts Management and Administration

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  1. Sub Sub- -Contracts Management Contracts Management and Administration and Administration – – SEMINAR SEMINAR (Based on FIDIC Standard) PMI, PMP, PMBOK and the PMI Registered Education Provider logo are registered marks of the Project Management Institute, Inc. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  2. FOUNDATIONAL KNOWLEDGE FIDIC – SUBCONTRACTORS “UNDERSTANDING THE RELATIONSHIP BETWEEN MAIN CONSTRUCTION CONTRACTORS AND VARIOUS TYPES OF SUBCONTRACTORS WORKING ON CONSTRUCTON SITES” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  3. FIDIC’S APPROACH TO FIDIC’S APPROACH TO SUBCONTRACTORS SUBCONTRACTORS FIDIC’s Red Book, Sub FIDIC’s Red Book, Sub- -Clause (SC) 4.4, provides Clause (SC) 4.4, provides for the basis of Subcontracting under their for the basis of Subcontracting under their provisions provisions. 1. Unless otherwise agreed the Contractor CANNOT subcontract the whole of the works; 2. The Contractor remains wholly responsible to the employer for the acts of that subcontractor as if those acts had been carried out by him; 3. The prior consent of the Engineer is required for all subcontractors apart from suppliers and subcontractors named in the Contract; 4. The Contractor must give the Engineer 28-days notice of both the intended and actual commencement date of any subcontract’s work; and © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  4. FIDIC’S APPROACH TO FIDIC’S APPROACH TO SUBCONTRACTORS (CON’T) SUBCONTRACTORS (CON’T) 5. The subcontract must contain suitable provisions entitling the employer to require the subcontract to assigned to him in the event of termination. Sub- Clause (SC) 4.4(d) states: – “…each subcontract shall include provisions which would entitle the Employer to require the subcontract to be assigned to the Employer under Sub-Clause 4.5 [Assignment of Benefit of Subcontract] (if or when applicable) or in the event of termination under Sub-Clause Employer]...” 15.2 [Termination by © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  5. FIDIC’S APPROACH TO FIDIC’S APPROACH TO SUBCONTRACTORS (CON’T) SUBCONTRACTORS (CON’T) FIDIC’s Sub FIDIC’s Sub- -Clause 4.4, provides for the basis of Clause 4.4, provides for the basis of Subcontracting under the Red Book Subcontracting under the Red Book. 6. Whereas Sub-Clause (SC) 4.5 (Assignment of Benefit of Subcontract) reads: – “..If a Subcontractor’s obligations extend beyond the expiry date of the relevant Defects Notification Period and the Engineer, prior to this date, instructs the Contractor to assign the benefit of such obligations to the Employer, then the Contractor shall do so. Unless otherwise stated in the assignment, the Contractor shall have no liability to the Employer for the work carried out by the Subcontractor after the assignment takes effect…” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  6. DIFFERENCES ACROSS FIDIC’S DIFFERENCES ACROSS FIDIC’S RAINBOW: SUBCONTRACTORS RAINBOW: SUBCONTRACTORS Under Under the the Silver Book – for example – the has has to to notify notify the the Employer Employer of subcontractor subcontractor, but also providing pertinent details about the subcontractor in question: – Subcontractors past performance and experience – When they intend to begin work on the project; – Other information as required the Contractor Contractor only of the the appointment appointment of only of a a Red and Pink Book, reference the language under 4.4(d) previously stated; Gold Book provisions referencing subcontractors – state: – “…If the Subcontractor is entitled to any relief from risk on broader terms than those specified between Contractor and Employer, then those additional circumstances shall not serve as an excuse for non-performance by the Contractor…” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  7. FIDIC’S RULE: CONTRACTOR FIDIC’S RULE: CONTRACTOR RESPONSIBLE FOR SUBCON ACTIONS RESPONSIBLE FOR SUBCON ACTIONS • REMEMBER REMEMBER: : No matter what version of FIDIC, THE CONTRACTOR WILL ALWAYS BE WHOLLY RESPONSIBLE for the performance (or NON-performance) of the subcontractor. • This includes time, quality and paying the subcontractor in accordance with (IAW) the contract between the main contractor and subcontractor regardless of any issue between the main contractor and the employer. THIS THIS OBLIGATION OBLIGATION – extends not only to subcontractors appointed by the contractor subcontractors NOMINATED by the employer in accordance with clause 5 of the Red Book. (SC 5.1) • (Domestic), but also to the © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  8. SUBCONTRACTORS, CONTRACTORS & EMPLOYERS BASIC TERMINLOGY GROUNDING SUBCONTRACTOR’S INTO THE INDUSTRY OF THE UAE © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  9. CASE STUDY: SHANKLIN PIER LTD CASE STUDY: SHANKLIN PIER LTD V DETEL PRODUCTS LTD V DETEL PRODUCTS LTD • Shanklin Shanklin Pier Pier Ltd Ltd “Claimant” owned a a pier (have (have it it repainted) repainted); ; • Detel Detel Products Products ( (hereinafter hereinafter called to to Shanklin Shanklin that that their their paint protection protection for for up up to to 10 • Claimant Claimant relied relied upon upon this engaging engaging the the Main Main Contractor Contractor (MC), MC MC to to place place an an order order for • The The paint paint was was judged judged a a total period period of of time!!! time!!! ( (hereinafter hereinafter pier and and intended called called “Shanklin” “Shanklin” to repair repair it it. . or or “Claimant”) ) owned intended to “Detel”), , warranted warranted provide rust called “Detel”) paint would would provide 10 years years; ; this warranty warranty and (MC), instructed for this this paint paint. . total failure failure after rust and when when instructed the the after a a short short © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  10. CASE STUDY: SHANKLIN PIER LTD CASE STUDY: SHANKLIN PIER LTD v DETEL PRODUCTS LTD v DETEL PRODUCTS LTD • Shanklin Shanklin sought sought to to recover from from the the defendant defendant (Detel) CONTRACTOR – – as the MC had not warranted the paint materials used, primarily subcontractor (Detel) that warranted the goods to the employer originally; recover damages damages direct (Detel) – – NOT THE MAIN direct because it had been the • This This despite despite the product product had the the defendant defendant (Detel) the fact fact that had taken taken place (Detel) that the place between between the the sale sale of of the the paint the MC MC and paint and © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  11. CASE STUDY: SHANKLIN PIER LTD CASE STUDY: SHANKLIN PIER LTD v DETEL PRODUCTS LTD v DETEL PRODUCTS LTD Shanklin Shanklin Pier Pier Ltd Ltd v v Detel 2 2 KB KB 854 854 remains a leading judgment on the subject of collateral contracts in English contract law. In In it it the the High High Court Court of of Justice, Division, Division, used used the the principle principle contracts contracts, to create an exception to the rule of privity of contract where a contract may be given consideration by entering into another contract. Judge Judge McNairs McNairs’ ’ Judgement Judgement read Detel Products Products Ltd Ltd [ [1951 1951] ] Justice, King's King's Bench of of collateral collateral Bench read as as follows follows. . © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  12. CASE STUDY: SHANKLIN PIER LTD CASE STUDY: SHANKLIN PIER LTD v DETEL PRODUCTS LTD v DETEL PRODUCTS LTD “This case raises an interesting and comparatively novel question whether or not an enforceable warranty can arise as between parties other than parties to the main contract or the sale of the article in respect of which the warranty is alleged to have been given.... I am satisfied that, if a direct contract of purchase and sale of [the paint] had then been made between the plaintiffs and the defendants, the correct conclusion on the facts would have been that the defendants gave to the plaintiffs the warranties substantially in the form alleged in the statement of claim. In reaching this conclusion, I adopt the principles stated by Holt CJ in Crosse v Gardner and Medina v Staughton that an affirmation at the time of sale is a warranty provided it appear on evidence to have been so intended.” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  13. CASE STUDY: SHANKLIN PIER LTD CASE STUDY: SHANKLIN PIER LTD v DETEL PRODUCTS LTD v DETEL PRODUCTS LTD JUDGE JUDGE McNair McNair concluded concluded precedent precedent setting setting case case as his his remarks remarks on on this this as follows follows: : “…If, as is elementary, the consideration for the warranty in the usual case is the entering into of the main contract in relation to which the warranty is given, I see no reason why there may not be an enforceable warranty between A and B supported by the consideration that B should cause C to enter into a contract with A or that B should do some other act for the benefit of A...”[1] [1]Beale (2002) p.55 © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  14. IDENTIFICATION AND DESCRIPTION OF SUBCONTRACTOR “TYPES” OPERATING AT A WORKS SITE © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  15. RELATIONSHIP BETWEEN RELATIONSHIP BETWEEN MC AND SUBCON MC AND SUBCON - - DEFINATIONS DEFINATIONS • THREE THREE TYPES – Domestic Domestic – Nominated Nominated – Named Named • “…Domestic sub “…Domestic sub- -contractor (SC) and employed by the Main Contractor (MC) for whom the MC is solely and entirely responsible…” [Nick [Nick Gould, Gould, Partner Partner – – Fenwick Fenwick Elliott] Elliott] TYPES OF OF ‘SUB ‘SUB- -CONTRACTORS’ CONTRACTORS’; ; contractor (SC) is one selected © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  16. RELATIONSHIP BETWEEN RELATIONSHIP BETWEEN MC AND SUBCON MC AND SUBCON - - DEFINITIONS DEFINITIONS • “Nominated “Nominated Subcontractor Subcontractor is selected by the Employer but employed by the MC…” ” • “ “Named Named Subcontractor Subcontractor is where the Employer names one or more ‘preferred’ sub-contractors. further potential sub-contractors. The cumulative list is then used for tendering purposes and a sub-contractor is selected by the MC. The sub-contractor is then treated as a domestic sub-contractor of the MC, thus avoiding the employer liability disadvantages of nomination, but still giving the employer some element of involvement in the selection process. • THIS THIS type type of of SC SC derives derives from from JCT To that list the MC may add JCT forms forms of of contract contract © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  17. SUBCONTRACTING TYPES Named Sub- Contractor Domestic Sub-Contractor Nominated Sub- Contractor © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  18. WHY USE ‘NOMINATED SUBCON? WHY USE ‘NOMINATED SUBCON? • ALLOWS ALLOWS ARCHITECT to identify a sub-contractor who is supplying a long lead item or element of the work (example – a ‘lift’ or elevator, or other specialized importantly, secures a manufacturing and delivery slot before the MC has been selected. • Another Another advantage advantage is the selection of ‘specialist’ sub- contractors that is required to carry out some of the initial works on site (Early Works). usually involves foundation works (piling operations). EMPLOYER EMPLOYER and/or Employers selected equipment), and more Examples of this type work © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  19. UAE LAW’S THAT GOVERN “SUBCONTRACTING” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  20. CONTRACTORS ‘LEGAL RIGHT’ TO CONTRACTORS ‘LEGAL RIGHT’ TO SUBCONTRACT UNDER UAE LAW SUBCONTRACT UNDER UAE LAW • EMPLOYERS EMPLOYERS in into into a a contract the the whole whole works separate separate separate separate segments • Main Main Contractors Contractors rarely works works themselves themselves in more more than than portions portions of of the the works in the the UAE with one works – – rather contracts contracts segments of UAE – – typically typically – – prefer one ( (1 1) ) Main Main Contractor rather than than to for for the the of works works. . rarely carry carry out out the in the the UAE, UAE, and and generally sub sub- -contractor contractor works. . prefer to Contractor for to have have several performance performance to enter enter contract with for several of of the whole whole of generally use to to carry carry of use out out one one © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  21. CONTRACTORS ‘LEGAL RIGHT’ TO CONTRACTORS ‘LEGAL RIGHT’ TO SUBCONTRACT UNDER UAE LAW SUBCONTRACT UNDER UAE LAW Main Main Contractors Contractors are granted the right to sub- contract their assigned works as 890 890( (1 1) ) of of the the Federal Federal Law Law No Civil Civil Transactions Transactions Code Code of of the Under Under UAE UAE Law Law – – the Main Contractor is lawfully entitled to entrust the performance of the whole or part of the work to another contractor (sub-contractor) unless unless he doing doing by by a a condition condition of of the the contract FIDIC FIDIC SC SC 4 4. .4 4) ) or or unless unless the requires requires the the MC MC to to do do it it in in person as derived derived under No. . 5 5 of of 1985 the UAE UAE. . under article article 1985, , under under the the he is contract (such the nature nature of person. . is prevented prevented from (such as of the from so as per the work work so per © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  22. SUB SUB- -CONTRACTORS ‘RIGHTS’ UNDER CONTRACTORS ‘RIGHTS’ UNDER UAE SUBCONTRACTING LAWS UAE SUBCONTRACTING LAWS Claims Claims for for Payment Payment contractor contractor for performance rendered under a subcontract lies solely with the Main Contractor ( (Privity Privity of of Contract Contract rule Sub Sub- -contractor contractor has has no institute a claim against an employer for payment due from the MC for performance rendered under a subcontract. – – by by the the sub sub- - rule) ); ; no legal legal basis basis to © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  23. SUB SUB- -CONTRACTORS ‘RIGHTS’ UNDER CONTRACTORS ‘RIGHTS’ UNDER UAE SUBCONTRACTING LAWS UAE SUBCONTRACTING LAWS “ “… …Article Article 891 prohibits prohibits a a subcontractor subcontractor from claim claim against against an an employer are are claimable claimable from from the given given the the subcontractor subcontractor an its its rights rights against against the 891, , UAE UAE Civil Civil Transaction Transaction Code from instituting instituting a a employer for for any any amounts the MC unless the an assignment assignment of the employer employer… Code amounts that the MC MC has that has of MC unless …” ” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  24. SUB SUB- -CONTRACTORS ‘RIGHTS’ UNDER CONTRACTORS ‘RIGHTS’ UNDER UAE SUBCONTRACTING LAWS UAE SUBCONTRACTING LAWS • NOTE NOTE: : “ “… …Article Article 891 891, , UAE UAE Civil prohibits prohibits a a subcontractor subcontractor from claim claim against against an an employer employer for are are claimable claimable from from the the MC given given the the subcontractor subcontractor an its its rights rights against against the the employer Civil Transaction Transaction Code from instituting instituting a a for any any amounts amounts that MC unless unless the the MC an assignment assignment of employer… …” ” Code that has of MC has © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  25. UAE CIVIL TRANSACTION CODE(a.k.a., “Civil Code” REGARDING SUBCONTRACTING – SPECIFICALLY “Article 891” NOTE: Online Access to Official UAE website for legal information: http://www.elaws.gov.ae © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  26. Full Full Text Text © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  27. UAE GOVERNING UAE GOVERNING SUBCONTRACTING LAWS SUBCONTRACTING LAWS • Article Article 1109 provide provide terms consent of the assignor, assignee, and the party in whose favor the assignment is made. • Unless Unless expressly expressly provided provided for contract Employer would only be entitled to make a lawful direct payment to a sub sub- -contractor due under a subcontract in the event that all three parties (Employer, Employer, Contractor Contractor and and Sub consented thereto. 1109( (1 1) ) of terms for validity of an assignment of rights is the of the the UAE UAE Civil Civil Transaction Transaction Code Code for under under the the main main contract – – an Employer contractor for payment Sub- -Contractor Contractor) have © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  28. Article 1109 “legalese wording” describing direct payments to a Subcontractor by the Employer © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  29. Article 1109 1 – “The validity of a transfer is conditioned upon the acceptance of he transferor, the transferee and the third party beneficiary.” 2 – “The transfer is formed between the transferor and the transferee provided it is accepted by the concerned creditor” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  30. UAE GOVERNING UAE GOVERNING SUBCONTRACTING LAWS SUBCONTRACTING LAWS • Employers Employers typically the the main main contract to to pay pay a a sub deduct deduct the the sums the the MC, MC, subcontractor subcontractor contractor contractor by typically expressly expressly provide contract with with its sub- -contractor contractor directly sums so so paid paid from particularly particularly is is a a “nominated” “nominated” by the the Employer Employer. . provide in MC, the the right directly and from money money due where where in its MC, right and to due to the the sub sub- - © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  31. UAE GOVERNING UAE GOVERNING SUBCONTRACTING LAWS SUBCONTRACTING LAWS • BUYER BUYER BEWARE!!! BEWARE!!! “ “… …In In the the event event that any any way way determined determined unlawful, would would then then remain remain Contractor Contractor for for the the same pursue pursue the the sub sub- -contractor contractor in of of action action for for the the recovery made made… …” ” that such such direct unlawful, the liable liable same work work and direct payment payment is the Employer to to pay pay and would would have in a a separate separate cause recovery of of the the direct is in in Employer the the Main Main have to cause payment to direct payment © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  32. FIDIC SUBCONTRACT 2011: “CONDITIONS OF SUBCONTRACT FOR CONSTRUCTION OF BUILDING AND ENGINEERING” © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  33. UNDERSTANDING SUB UNDERSTANDING SUB- -CONTRACTORS RIGHTS UNDER CLAUSE 20 RIGHTS UNDER CLAUSE 20 (2011 Subcontract) Introduction: Introduction: Two Two FIDIC FIDIC Documents Documents Examined 1. 1. “Subcontract “Subcontract for for Construction Construction Engineering Engineering Works Works designed designed by Edition, Edition, 2011 2011 (known (known as CONTRACTORS (2011 Subcontract) Examined: : of of the Employer, Employer, 1 1st 2011 Subcontract’)” Subcontract’)”[ [1 1] ] Building Building and and by the st as the the ‘ ‘2011 2. 2. “The “The Guidance Guidance for Conditions Conditions of the Preparation Preparation of of Subcontract for the Subcontract (the of the the Particular Particular ‘Guidance’)”[ [2 2] ] (the ‘Guidance’)” [ [1 1] ]Lexology, November 2012 [ [2 2] ]Ibid © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  34. jjj © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  35. “Guidance for the Preparation of Particular Conditions of Subcontract”. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  36. UNDERSTANDING SUB UNDERSTANDING SUB- -CONTRACTORS RIGHTS UNDER CLAUSE 20 RIGHTS UNDER CLAUSE 20 (2011 Subcontract) Direct Direct application application of of “Clause Subcontract’ Subcontract’ provides provides: : • An An Alternative Alternative Dispute Dispute procedures procedures similar similar to to the Book Book relief relief remedies, remedies, mainly –Disputes arising under a subcontract are first referred to the Subcontracts DAB DAB (Dispute Dispute Adjudication and thereafter (if desired), dispute escalates to an arbitration panel for final determination. CONTRACTORS (2011 Subcontract) “Clause 20 20” ” of of the the ‘ ‘2011 2011 Resolution Resolution Main Contract Contract FIDIC mainly: : (ADR) (ADR) Red the Main FIDIC Red Adjudication Board Board) © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  37. UNDERSTANDING SUB UNDERSTANDING SUB- -CONTRACTORS RIGHTS UNDER CLAUSE 20 RIGHTS UNDER CLAUSE 20 (2011 Subcontract) Under Under item item number number two two ( (2 2) ) above the the Preparation Preparation of of the the Particular Subcontracts) Subcontracts) - - there there are provisions provisions; ; CONTRACTORS (2011 Subcontract) above (Guidance (Guidance for Particular Conditions Conditions of are two two ( (2 2) ) optional optional ADR for of ADR 1. Simple Dispute Resolution Procedures involving only Arbitration; 2. 2. Complex Complex mechanism mechanism intended Subcontractor Subcontractor bound bound by decisions decisions and and Arbitration Arbitration awards related related to to those those under under the intended to by Main Main Contractor Contractor DAB awards on the Main Main Contract Contract. . to make make the the DAB on disputes disputes © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  38. UNDERSTANDING SUB UNDERSTANDING SUB- -CONTRACTORS RIGHTS UNDER CLAUSE 20 RIGHTS UNDER CLAUSE 20 (2011 Subcontract) COURSE COURSE GOAL GOAL - - FORWARD FORWARD: : CONTRACTORS (2011 Subcontract) • Provide a “High Level” overview to course participants regarding the second alternative clause 20 provisions and and highlight highlight particular particular contractors contractors and and subcontractors subcontractors should be be concerned concerned with with. . areas areas which which should © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  39. THE “SECOND ALTERNATIVE CLAUSE 20” as described in “THE GUIDANCE FOR THE PREPARATION OF THE PARTICULAR CONDITIONS OF SUBCONTRACTS” (known as the “Guidance”) © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  40. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: IMPORTANT IMPORTANT POINTS POINTS: : • The The Clause Clause is the the Subcontractor’s Subcontractor’s claims and/or and/or additional additional payment clauses clauses 20 20. .1 1 – – 20 20 20. .8 8) ); ; • For For claims claims for for extensions payment, payment, the the Subcontractor within within 21 21 days days of aware aware of of the the event claim claim (sub (sub- -clause clause 20 is separated separated into claims for payment under 20. .5 5) ) and and disputes into sub for extension extension of under the the Subcontract Subcontract (sub disputes (sub (sub- -clauses clauses 20 sub- -clauses clauses dealing dealing with of time time (EOT) with (EOT) (sub- - 20. .6 6 to to extensions of Subcontractor is of it it becomes becomes (or event or or circumstance circumstance giving 20. .1 1) ) of time time and/or is required required to (or should should have and/or additional additional to give give notice have become) giving rise rise to notice become) to the the © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  41. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: IMPORTANT IMPORTANT POINTS • Such Such claims claims CLAIMS” CLAIMS” (claims (claims that may may also also give give rise otherwise otherwise concern the the Main Main Contract) Contract) and • “UNRELATED “UNRELATED CLAIMS” between between the the parties “Unrelated” “Unrelated” will arbitral arbitral referee referee procedure POINTS continued continued: : are are then then that arise arise from rise to to a a claim claim under concern existing existing claims and; ; CLAIMS” – – which parties on on whether will ultimately ultimately be procedure (sub separated separated from circumstances circumstances which under the the Main Main Contract claims or or disputes disputes under into into “RELATED “RELATED which Contract or or under which is whether a a claim be referred referred to (sub- -clause clause 20 is any any disagreement disagreement claim is is “Related” “Related” or to the the ICC 20. .2 2) ) or ICC pre pre- - © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  42. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: • For For Unrelated Unrelated Claims puts forward its detailed claim to the Contractor. agreement agreement cannot cannot be be reached the the claim, claim, the the Contractor Contractor is make make a a “fair “fair determination” determination” 20 20. .3 3) ) Claims – – the Subcontractor If If of to reached in in respect respect of is required required to (sub (sub- -clause clause © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  43. CLAUSE 20, Related Claims CLAUSE 20, Related Claims Under sub-clause 20.4, Contractor obligated to submit Related the the Engineer Engineer and and Main Main Contractor Contractor endeavors” endeavors” to to secure secure claim claim from from the is is entitled entitled to to be be involved involved in in any any meetings concerns concerns the the Related Related Claim, Claim, although there is no requirement in Red Book that obligates the Engineer to allow the Subcontractors to be present. Related Claims use use “all “all Employer. . The The Sub meetings with with the the Engineer Claims to reasonable reasonable Sub- -contractor contractor Engineer which to must must the Employer which © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  44. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: “Unless the Subcontractor is “Unless the Subcontractor is present in those meetings, or present in those meetings, or refuses to attend where refuses to attend where permitted to do so, Contractor is not allowed to Contractor is not allowed to reach an agreement reach an agreement with the Engineer on the Related Claim(s) Engineer on the Related Claim(s) without ‘prior consultation’ with without ‘prior consultation’ with the Subcontractor.” the Subcontractor.” permitted to do so, the the with the Given that the sub-clause goes on to state that Subcontractors could be bound by that agreement if they do not serve a notice notice of period, Subcontractors would no doubt want this wording to do further and prohibit the Contractor form reaching any agreement with the Engineer without its prior, written, approval. of dissatisfaction dissatisfaction within a prescribed © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  45. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: • Sub Sub- -clause clause 20 the Engineer and Contractor reach agreement on the Related Claim(s), or the Engineer issues a determination, such that the Contractor is entitled to an extension of time (EOT) and/or additional costs under the Main Contract – the Contractor is required to pass the share of benefit(s) applicable to the Related Claim to the Subcontractor. 20. .4 4 continues continues to to state state that, that, where • HOWEVER HOWEVER; the Contractor is only liable to pass on monetary benefits if it first receives payment from the Employer, which, is likely to be controversial. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  46. SECOND ALTERNATIVE CLAUSE 20 SECOND ALTERNATIVE CLAUSE 20 An Overview: An Overview: • If If the what what benefit(s) benefit(s) will “fair “fair determination”, determination”, which will will be be bound bound by dissatisfaction dissatisfaction on • IF IF HOWEVER HOWEVER - - the Engineer and Contractor agree, or the Engineer determines, that no additional payment and/or extension of time (EOT) is due the Contractor under the Main Contract, then the Subcontractor will be bound by this unless it serves a notice of dissatisfaction with the prescribed period. the Contractor Contractor and the the will be, and Subcontractor Subcontractor disagree Subcontractor’s Subcontractor’s be, the the Contractor Contractor will which the the Subcontractor by if if it it does does not not issue on time time. . disagree of of will make make a a Subcontractor issue a a notice notice of share share the the of © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  47. SUBCONTRACT DISPUTES Sub-Clause 20.6 – 20.8 © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  48. CLAUSE 20 “Disputes” CLAUSE 20 “Disputes” An Overview: An Overview: Similar Similar to to Claims section section – – • Subcontract Subcontract into into two two categorizes categorizes: : 1. 1. Unrelated Unrelated Disputes Claims discussed discussed in in the the last last Disputes Disputes are are categorized categorized Disputes 2. 2. Related Related Disputes Disputes © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  49. CLAUSE 20 “Disputes” CLAUSE 20 “Disputes” An Overview: Sub An Overview: Sub- -clause 20.7 clause 20.7 NOTE NOTE: : “Disputes” “Disputes” arising and and “related “related “Unrelated “Unrelated Disputes” Disputes” Accordingly Accordingly; ; • Sub Sub- -clause clause 20 referred by either the Contractor or the Subcontractor for adjudication by the Subcontract DAB. • If either party issues a notice of dissatisfaction in relation to the Subcontract DAB’s decision the parties shall attempt to amicably settle the dispute or proceed directly to the ICC Arbitration. arising from claims” claims” from “unrelated “unrelated claims” AUTOMATICALY AUTOMATICALY and and “Related “Related claims” constitute constitute Disputes” Disputes”. . 20. .7 7 – “Unrelated Unrelated Disputes Disputes” – can be © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

  50. CLAUSE 20 “Disputes” CLAUSE 20 “Disputes” An Overview: Sub An Overview: Sub- -clause 20.8 clause 20.8 • Sub Sub- -clause clause 20 referred by the Contractor to the Main Contract DAB and the Contractor is required to “use all reasonable endeavors” to pursue the claim on the Contractor’s and Subcontractor’s behalf and for both their benefit(s). • The Subcontractor is required to provide information to the Contractor to pursue the Related Dispute and is to be provided a reasonable opportunity to be involved in (amongst other things) preparing written submissions an making oral submissions to the Main Contract DAB 20. .8 8 – “Related Related Disputes Disputes” – are initially © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

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