Master: Contract, claim and delay management in construction works
Author: Daniel Nistorescu
Tutor: Eng. Giovanni Franchi
Various disputes have arisen between the Claimant (the Contractor) and the Respondent (the Employer) in connection with the contract between them for a construction project in the Sultanate of Oman. In accordance with the provisions of the Contract, the disputes have been referred to local arbitration.
The thesis explores the main body of the Statement of Claim submitted by a contractor in arbitration proceedings. Additionally, it highlights key claims made by the contractor, offering a detailed examination of the most relevant issues.
The Contractor considers that has been unfairly treated by the Engineer and Employer and had no other option other than resorting to the remedies prescribed by Contract. As such, matters under dispute have been referred to arbitration. The main disputes are related to (i) extensions of time and consequently the completion time of the project and (ii) valuation of the variation orders and other cost claims for which the Contractor considers to be entitled.
The Engineer and the Employer generally disregarded the formal processes laid down in the Contract, and the timescales within which they were required to respond (or ought fairly to have responded) to requests for information and/or claims submitted by the Contractor.
This behaviour is by no means uncommon on major infrastructure projects in Middle East and Oman, but it has the effect of ‘breaking’ the contract mechanisms for the notification and processing of claims. The main conclusions of the thesis can be summarized as follows:
1. The Engineer and the Employer failed to adhere to the formal procedures outlined in the contract, particularly regarding the management of claims, variations, and time extensions. This resulted in a breakdown of the mechanisms of the contract for dispute resolution and claim notifications.
2. The Contractor was subjected to unfair delays and under-evaluations of its claims. Both the Engineer and the Employer failed to respond within the stipulated timeframes and did not properly assess the Contractor’s entitlement to compensation for variations and delays. This led to significant financial and operational challenges for the Contractor.
3. The extended duration of the project due to delays and redesigns caused considerable financial strain on the Contractor. The thesis highlights that the Contractor incurred substantial prolongation costs, which were not properly compensated by the Employer. The unjustified imposition of delay damages further compounded the Contractor’s financial difficulties.
4. Based on the provisions of the contract, the Contractor is entitled to recover payments for variations, prolongation costs, and retention moneys that were wrongfully withheld. The thesis illustrates that the Contractor followed the required processes to seek compensation and that the Engineer and Employer failed to fulfil their obligations.
5. The Engineer plays a central role in administering contracts fairly and impartially. This case demonstrates that when the Engineer fails to act in a timely or unbiased manner, it can significantly affect the progress of the project and fairness in claim assessments. Engineers must ensure they fulfil their duties objectively and within the timelines established by the contract.
6. Given the Employer’s and Engineer’s failure to fairly assess the Contractor’s claims and the significant financial implications, the Contractor had no option but to pursue arbitration. The thesis concludes that arbitration is the appropriate mechanism to resolve these disputes and secure the Contractor’s rightful entitlements under the contract.
7. Thorough and accurate documentation of claims, changes, delays, and communications is vital for defending positions in disputes or arbitration. In this project, the ability of the Contractor to document delays, claims for variations, and financial impacts played a key role in justifying their case. Maintaining meticulous records throughout the life of a project is a valuable lesson for all parties in the construction industry.
8. The project revealed the need for construction contracts to have flexibility, particularly concerning unforeseen changes (such as design modifications, site conditions, or changes in legislation). Contracts should allow for realistic adjustments in pricing, time extensions, and compensation mechanisms to prevent disputes when significant changes occur.
The thesis recommends improvements in the way major infrastructure contracts in Oman are managed, particularly in ensuring that contract processes are adhered to and that both Contractors and Employers act in good faith. The consistent delays in responding to claims and the failure to follow contractual provisions are identified as areas requiring improvement to avoid similar disputes in future projects. When disputes arise, arbitration provides an effective solution, but it is always preferable to prevent disputes through clear procedures, good faith actions, and timely responses from all parties.
In summary, the thesis concludes that the Contractor was unfairly treated due to the Employer’s and Engineer’s disregard for contract procedures, resulting in significant delays and financial losses. Arbitration is positioned as the necessary path for resolving these disputes and ensuring the Contractor is compensated in accordance with the contract.
Figure 1. Storage concrete platform with high mast lighting, storm water drainage and fire fighting system.