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Project management of construction claims under FIDIC conditions of contract / by Chen Tongqing.

by Tongqing, Chen.

Construction contracts

Liability (Law)

Industrial project management

International business enterprises -- Management

vii, 168 leaves : ill. ; 29 cm.

Advisor: Cecil Head.

Committee members: Dr. Bruce Thompson, Joseph Papp.

General principles of the FIDIC Contract -- Types of construction claims -- Contractual basis of claim -- The project management process of claims -- Damage evaluation on actual records -- Damage evaluation on tender price level -- Conclusions and recommendations -- Appendix I - FIDIC conditions of contract part I & II.

With the globalization of today's construction industry and the dynamics of the rapidly growing international construction market, the domestic centric marketing strategy is no longer appropriate for a player in this industry to maintain its long term profitablility. However, international construction projects are an extremely risky undertaking, especially in a turbulent business enviornment of the Third World countries. A thorough comprehension of its inherent risks and the management thereof is therefore vital and often the single most challenging task for an active contractor in this market. The International Federation of Consulting Engineers Standard Form of Contract and Conditions of Contract for Civil Engineering Work, or FIDIC Conditions of Contract, is the de facto standard for regulating the majority of these projects and is endorsed by all international development institutions and financial agencies. By covering the FIDIC contractual allocation of the risks and the project management process thereof, this paper attempts to provide guildlines and various tools for the project management of claims for any potential risks with an international construction project under the FIDIC Conditions of Contract.

This paper discusses various categories of the claims commonly encountered by an international contractor and their general ruling principles, including justification of a claim, extra costs and prolongation claim, compensation and concurrance of a prolongation, and critical vs float path delays. It discusses further the detailed FIDIC allocation of various risks and the contractual relationships of parties involved. The management of these risks are then incorporated into the project management proccess to provide effective strategies, monitor risk and remedy the system. Various guidelines are provided, including the FIDIC notification and submission procedures of claims for risks, the system for data collection and documentation, negotiation strategies, and the roles of Critical Path Method Network (CPM network). The impacts of any eventuated risks are evaluated in terms of claims for extension of time and financial losses.

These include damage evaluation based on the actual records and the contractor's tender strategies. Various guidelines for financial evaluation are provided in terms of the prolongation and disruption time-related costs, uncovered escalation costs, its exchange rate fluctuation risk, and net present value analysis (NPVA) of financial investment and cost. Some useful strategies and tools are discussed and recommended for efficient and effective management of claims, including resolution through the FIDIC project management process, variation orders, settlement financing, claim/interest tradeoffs and project cost control cycle (PCCC) for monitoring, managing and most important of all, preventing the potential risks. As an introduction, this paper provides a background of the FIDIC Conditions of Contract and discusses the roles of the parties involved and the general legal ruling principles.

Most of the examples in this paper are extracted from actual construction claim cases and condensed and simplified for the purpose of illustration.

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