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THE EMPLOYER'S RESPONSE TO THE CONTRACTOR'S REBUTTAL REF. STATEMENT OF CASE NO. 2 |
Prepared by RNCMNR
ITINERA S.p.A
Contractor and Claimant
And
ROMANIAN NATIONAL COMPANY OF MOTORWAYS AND NATIONAL ROADS
Employer and Responding Party
For the Contract 4R14 - Widening to four lanes of NR5
Project ISPA/200/RO/16/P/PT/002/03
Date: 27 February 2008
Contents
The Employer is not liable for this claim 10510u201k
Clarification of certain matters raised by the Contractor
a) The Contractor failed to fulfil the provisions of Addendum 5
b) The Contractor failed to comply with the contractual procedure mentioned in Sub-clause 20.1
c) Notice of Referral without referral, or Referral without Notice of Referral ?
e) No expropriation needed according to the Contract
f) Contestation of the Contractor's Program of Works showing completion on 9 August 2007
h) Mathematical philosophy vs. costs demonstration
Conclusion
Sub-clause 14.10 says:
Statement at Completion
Within 84 days after receiving the Taking-Over Certificate for the Works, the Contractor shall submit to the Engineer six copies of a Statement at completion with supporting documents, in accordance with Sub-Clause 14.3 [Application for Interim Payment Certificates], showing:
(a) the value of all work done in accordance with the Contract up to the date stated in the Taking-Over Certificate for the Works,
(b) any further sums which the Contractor considers to be due, and
(c) an estimate of any other amounts which the Contractor considers will become due to him under the Contract. Estimated amounts shall be shown separately in this Statement at completion.
The Engineer shall then certify in accordance with Sub-Clause 14.6 [Issue of Interim Payment Certificates]."
Sub-clause 14.14 says:
Cessation of Employer's Liability
The Employer shall not be liable to the Contractor for any matter or thing under or in connection with the Contract or execution of the Works, except to the extent that the Contractor shall have included an amount expressly for it:
(a) in the Final Statement and also
(b) (except for matters or things arising after the issue of the Taking-Over Certificate for the Works) in the Statement at completion described in Sub-Clause 14.10 [Statement at Completion].
However, this Sub-Clause shall not limit the Employer's liability under his indemnification obligations, or the Employer's liability in any case of fraud, deliberate default or reckless misconduct by the Employer."
The Employer is not liable for any matter which is not mentioned in the Statement at Completion.
We consider that the Contractor's interpretation of the Contract and of this Sub-clause is wrong and we have checked also with the FIDIC guide where is written:
"This Sub-Clause provides a reasonable constraint on the Contractor's entitlements to initiate claims at a late stage in the Contract.
With the exception of matters arising after the Taking-Over Certificate for the Works, the Statement at completion under Sub-Clause 14.10 must include "an amount expressly for" any matter for which the Contractor wishes to be paid by the Employer. Thus, for a claim to be valid, the Statement at completion must include an amount "expressly" stated to be for the matter or thing covered by the claim, and the Employer is not liable "except to the extent" of such amount."
The Employer's position is bulleted as follows:
Clause 14.14 provides that the Employer is not liable to the Contractor for any matter in connection with the Contract, except to the extent that the Contractor included an amount expressly in the Final Statement and in the Statement at Completion, but does not limit the Employer's liability under his indemnification obligations.
If the Contractor was not satisfied with any valuation, the response to any claim, or anything else whatsoever related to the Contract, than he must ensure that the matter was mentioned in the Statement at Completion together with an amount of money as compensation.
Contractors would ensure that all, even mildly contentious issues or claims which had remained unsettled throughout the course of the Contract, would be wrapped up in the Statement on Completion and Final Statement.
It is essential that all the Contractor's claims are recorded in the Statement at Completion: see sub-clause 14.14 which terminates the Employer's liability for claims that are not recorded in the Statement at Completion as per Sub-clause 14.10.
The Contractor submitted his Statement at Completion on 7 November 2007, and he did not mention this claim, or another one. Therefore in accordance with the provisions of the Contract the Employer can not be liable for this claim.
The above elements represent the basis of the Employer's position; however, in order to clarify certain matters raised by the Contractor, we will address them point by point:
The extension of time up to 30 June 2007 was given by the Employer, and agreed by the Contractor by signing the addendum 5, "without associated costs". The first intention of the Employer was, as stated in its letter 93/17213 dated 18 October 2006 (Attachment 14 to the SOC), to take over the works at the completion date of 15 November 2006, and that the works remained uncompleted because of the lack of the land to be finalized in the Defects Notification Period.
On 15 November 2006 more works that those affected by the late access to the Site were not completed.
Therefore, on 15 November 2006, the Employer stated, in its letter 93/18922 (Attachment 16 to SOC) "considering the situation developed as a result of the land acquisition process, the Beneficiary agrees to the Taking Over of the Parts of the works, in accordance with Clause 10.2 (GCC) for the sections from km 23+300 to km 28+900 and km 35+400 to km 59+100 and grants an extension of time without associated costs up to 30 of June 2007, for the Outstanding works section only from km 23+200 to km 23+300 and km 28+900 to km 35+400."
"The situation developed as a result of the land acquisition process" was that the Employer was not in the position of applying delay damages for the works not being completed on those 2 sections, because a small part of them were, still, affected by late access to the site (June-July 2006, as shown in RSOC, item 6.2).
The reasons of giving extension of time without associated costs for all the works not completed by 15 November 2008 (because both Employer's and Contractor's fault) was that the costs incurred to the Contractor by the late site access (i.e. the Employer's fault) compensates the damages to the Employer by the Contractor's fault, by not finishing the rest of the works in the mentioned road sections, not affected by the late access to the site.
Not listing the claim 12 among the other redrawn claims is not important as the addendum stipulating extension of time up to 30 June 2007 "without associated costs" was agreed, by Parties' signatures, and both the time and the financial parts of the claim 12 were addressed in the agreed addendum 5, and, therefore claim 12 was included de facto in this bipartite written agreement.
By asking costs for the extended period, the Contractor did not fulfil its obligations, part of this agreement, and, therefore, denied the addendum 5. Consequently, the provisions of the Addendum no. 5 should be re-considered, accordingly.
As per the Sub-clause 20.1 of the Contract, for an ongoing claim, once notified in the contractual 28 days, the following steps are to be fulfilled by the Contractor:
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Step |
Status |
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the Contractor shall keep contemporary records, |
Not done |
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and the Engineer shall be permitted to inspect and have copies of them. |
Not applicable (because no contemporary records done by the Contractor) |
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Further on, in the 42 days as described in the Sub-clause 20.1, the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed. |
Not done |
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This fully detailed claim shall be considered as interim, and the Contractor shall send further interim claims at monthly intervals, giving the accumulated delay and/or amount claimed, |
Not done |
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and such further particulars as the Engineer may reasonably require. |
Not done |
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The Contractor shall send a final claim within 28 days after the end of the effects resulting from the event or circumstances, as described in the Sub-clause 20.1 |
Not done |
As it can be seen the Contractor failed to comply with the contractual procedure as mentioned in the Sub-clause 20.1.
Through its letter ACG/1785/SD/FG/fg dated 5th of November 2007, the Contractor brought to the DAB attention a dispute alleged to be arisen between the Contactor and the Employer because some postponed and prolonged negotiations for a claim assessment, "after any fair reasonable period of time", and promised that, in 14 days, "will illustrate its case in the Statement of Case (SOC) with all the details which will better explain all the above".
The illustration has been never sent. Instead of the illustration, a document entitled "Statement of Case No. 2 (SOC2) Claim 12 Possession of Site" was submitted by the Contractor to the DAB and to the Employer. This document is about a so called dispute arisen between the Contractor and the Engineer (as stated in the Contractor's letter no. AGC/1792/GS/FG/fg dated 13 December 2007, to Employer and DAB), because of the way of calculation of the amount of money the Contractor considered entitled to. This is a failure of the DAB procedure for the referral of disputes to the DAB, since the written notice does not reflect the Contactor's Statement of Case (see Dispute Adjudication Board Additional Procedural Rules, item D: Procedure for the referral of disputes to the DAB, included in the Road 5 First Report revised July 2004, agreed by the Parties, herewith attached). The whole submission was even more unclear by numbering and referring chaotically the various attachments.
Through its submissions, the Contractor asks the DAB, in fact, to analyze and evaluate the Contractor's claim 12, i.e. to do the Engineer's job, in the conditions that the Engineer was prevented, by the Contactor, to do it, by not providing the necessary details and clarifications, as the Engineer asked in 26 January 2007 (Annex 19 to the RSOC).
As stated by DAB in several occasions, the value of a DAB is in assisting the parties to avoid disputes or to decide issues of principle as they arise during the course of the project. To require the DAB to undertake the Engineer's duties and responsibilities is not the best utilisation of a DAB. Parties were advised that the DAB process is better able to assist a project if short, discrete issues of principle or interpretation are put to a DAB as and when they first cause concerns on site.
In no part of the Contract are mentioned the words "expropriation" or "land acquisition", so the Contractor can not and does not demonstrate any entitlement by mentioning these words. In the Contract it is about access to the Site.
In its submission to the DAB and to the Contractor (RSOC - item 6.2), the Employer showed what small portions of the total area for which the extension of time was granted up to 30 June 2007 without associated costs were affected by late access to the Site.
Both the Employer and the Contractor made efforts in order to solve the problems related to the access to the site. The Employer managed to obtain written agreements from the land owners, as shown in the SOC (Annexes 4, 5, 6 and 7), and promptly informed the Contractor accordingly. The Contractor managed to have signed, on 24 May 2006, a legal written agreement (transaction - RSOC, Annex 3) with Mr. Toma Gica, through which Mr. Toma Gica stated that the Contractor has "the right to use the land free and undisturbed for the execution of all the NR5 construction works during the entire period necessary for these works".
Even this seems to be forgotten by the Contractor when stating that "the Engineer never contested this new program", the Engineer severally asked the revision of Contractor's program of works showing completion on 9 August 2007 (see, for example, the Annexes 20, 21, 22 and 23 of the RSOC - the minutes of monthly meeting no 47, 48, 49, 50, items 47.2.4, 48.2.4, 49.2.4, and 50.2.4 respectively) in order to reflect the actual situation on site
Acceleration of the works means working with increased resources/mobilisation. In December 2006 up to June 2007, when the works were finalized, no increase in Contractor's resources/mobilisation was shown, on the contrary, it demobilised its equipment and personnel (see the Annexes 20, 21, 22 and 23 of the RSOC - the minutes of monthly meeting no 47, 48, 49 and 50, items 47.4, 48.4, 49.4, and 50.4 respectively. It can be seen that on 26 April 2006, i.e. at the beginning of the working season, "much of the equipment has left the site" (Annex 23, page 5 of 9).
The good whether in the winter 2006-2007 was the Contractor's luck and made him, even with reduced resources, to finish the works on 30 June 2007, and the Employer was not in the position to apply delay damages to the Contractor.
The Sub-clause 2.1 Right of Access to the Site requires that, "if the Contractor suffers delay and/or incurs Cost as a result of a failure by the Employer to give any such right or possession within such time, the Contractor. shall be entitled. to:
(b) Payment of any such Cost plus reasonable profit.
where "Cost" means, according to the Sub-clause 1.1.4.3, "all expenditure reasonably incurred (or to be incurred) by the Contractor, whether on or off the Site, including overhead and similar charges, but does not include profit".
The Contractor did not demonstrate the costs incurred. In case the Contractor would have demonstrated its costs to the Engineer and to the Employer, these would have been analyzed by the Engineer and the Employer. But these costs were not demonstrated neither to the Engineer, nor to the Employer, and nor did the Contractor to the DAB in these documents from 5 November 2007 up to now.
Instead of basing its evaluation on proven costs which may have been caused to the Contractor, the Contractor chooses to use for the evaluation of its alleged entitlements monthly rates established in other circumstances than the Contract reality of December 2006 - June 2007 (Contractor's resources/mobilisation, etc.).
The Contractor's case is denied:
The Employer is not liable for this clam. According to Sub-clauses 14.10 and 14.14, the Contractor renounced at claim 12 by not including it in the Statement of Completion;
Through addendum 5 to the Contract, the extension of time was given and accepted by the Contractor by signing the addendum, up to 30 June 2007 without associated costs;
The claim procedure for ongoing events was not fulfilled by the Contractor;
The amount should have been demonstrated (costs incurred, if any), not arithmetical calculations, based on wrong premises;
The addendum 5 being denied by the Contractor, its provisions should be re-considered.
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