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Bilal R. Alsharif, Water
Authority of Jordan
Importance of Contract
Administration for
Employers
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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.
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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.
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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.
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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
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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)
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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
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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….
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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
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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
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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
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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
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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.
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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
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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”
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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].”
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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”
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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
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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
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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