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Chapter one

Payment System & Regulation of Final payment under the MDB-FIDIC & PPA conditions of contract & the Applicable Law. Chapter one. Payment System. 1 . INTRIDUCTION Definitions

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Chapter one

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  1. Payment System & Regulation of Final payment under the MDB-FIDIC & PPA conditions of contract & the Applicable Law

  2. Chapter one

  3. Payment System 1. INTRIDUCTION Definitions Construction industry: all civil works such as buildings, roads, water works, etc…, can be grouped under the industry termed as construction industry. Stakeholders: can be defined as either individuals or units or the organization itself for which they claim a stake in the project such that they benefit or affected by the whole processes of the project and its deliverables.

  4. Contractor payment System 1.Tendering documents Employer 2. Tender Engineer 3. Contract

  5. payment System Employer: means the party named in the tender proposal who has called for tenders to build or construct erect or deliver the works and who will employ the contractor and the legal successors in title to the employer but not (except with the consent of the contractor) any assignee of the employer.

  6. payment System Contractor: means the person or persons, firm or company whose tender has been accepted by the Employer and includes the contractor’s personal representatives, successors and permitted assigns. Engineers:the engineer is natural or juridical person designated as engineer in writing by the ministry of works and urban development (MOWUD) Addis Ababa Ethiopia.

  7. payment System • Stakeholders role in construction industry • Client/Employer • Demand recognition • Project scope definition • Administration (limited) • Organization and • Risk allocation

  8. payment System • Stakeholders role in construction industry • Consultants/ Engineers • Market promotion and study • Demand articulation • Project reformations • Design implementation

  9. payment System • Stakeholdersrole in constructionindustry • Contractors • Market promotion and study • Demand articulation • Project construction works implementation and • Contact administration

  10. payment System • 1.2 Objective • General objectives • To identify the major payment system often used in construction contracts. • To examine and point out the regulation of final payment under the MDB-FIDIC and PPA condition of contact and Applicable law.

  11. payment System • Specific objectives: • To point out methods of payment under different types of contract • To point out all possible types of payment in construction contracts. • To explain the procedures should be followed in preparation, submission, correction, approval and disapproval of both final payment and final account. • To list out possible disputes related to both final payment and final account. • To describe the effect of delayed and non-effected final payment and final account. • To point out the contractual payment regulation that had been in use in the event of termination.

  12. payment System

  13. payment System 1.4 Methodology

  14. payment System 1.5 Limitation of the study • non responsiveness or not willingness of • concerned bodies to the interview • time limitation

  15. payment System • Chapter Two • Theoretical Back ground • Method of Payment under different types of contract • Contact Price • Modality of Payment • Time of Payment • Effects of certificate

  16. payment System THEORTICAL BACKGROUND DEFINTION PAYMENT According to OXFORD dictionary “Payment” is defined as “the action of paying or the process of being paid or an amount paid or payable.” As per the FIDIC definition, payment is an “Accepted Contract Amount” means the amount accepted in the Letter of Acceptance for the execution and completion of the Works and the remedying of any defects (clause 1.1.4.1).

  17. payment System • According to Ethiopian Civil Code Payment is performance or only part of it. While generally it is indicative of the conclusive performance of the contract sometimes, at times like this, payment is only the performance. • Under contract of public works, the civil code defined the same under Art.3244 making reference to “price”. Contract of public works is a contract in “consideration of a price.” Specifically the contractor binds himself in favor of administrative authorities so that the latter will pay him a price

  18. payment System • Therefore accordingly, Payment is defined as the obligation to be discharged by the Employer (Client) for private case, or any institution authorized to do so for public case. • it is to be made to the contractor for the amount of work executed (contract price and other payment) as agreed under the contract. • It also includes Payments for additional work other than that agreed under the contract, such as in case of Variation

  19. payment System 2. Methods of payment under different types of contract • Design and Build Contract • Lump Sum Contract • Bill of Quantity Contract • Schedule of Rate contract • Reimbursable cost contract • Target Contract • All-in-contract

  20. payment System Before any payment has done the following conditions must be well clearly and specified. • Contract price • Modality of payments • Time of payment • Effect of certificates

  21. payment System 2.3 Contract Price • conditions of contracts, with bills of quantity, the bid by the contractor is based upon the work described and quantified in the contract bills. • re-measurement’ contract The price to be paid for the works will not be fully established until the works are complete.

  22. payment System 2.4 Modality of payments Provision of Ethiopian Applicable law • Different types of payment are recognized. contract with a fixed price under which contractors will get their payment in a lump sum. (3261) • with series of prices. (3262) Here without determining the extent of the work, price is fixed based on the different types of work that the contract envisages • The type of contractsdetermines the form of payment that a system follows.

  23. payment System 2.5 Time of Payment • The price of the work is payable periodically usually on a monthly basis.

  24. payment System • 2.6 Effect of certificates Some conditions of contracts are based on a contract administrator’s valuation of work done each month whereas; others are based on a contractor’s claim for payment, which is evaluated by the engineer.

  25. payment System • The only obligation arising from an interim certificate is an obligation on the employer to make a payment within the stated time. Failure to do so is a serious breach of contract.

  26. THANK YOU

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