International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03
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Rights & Obligations of Contracting Parties in Engineering Contracts in Bangladesh Mohammad Anisur Rahman, Md. Moinul Islam, Mohammad Zoynal Abedin Department of Mechanical Engineering, Dhaka University of Engineering and Technology, Gazipur-1700, Bangladesh Email:
[email protected]
Abstract--
This paper introduces the basics of contracts related to engineering works and services. It also describes the process of contracting works to give an idea how the contract issues are framed out in the process. In addition, it describes the relationship and interfaces of engineering and law, definition and meaning of contract, types of contracts, and prerequisites to the formation of a valid contract, interpretation of contract and performance or breach of contract. Moreover, it analyzes the elements of contract in the light of the guidelines, rules and regulations to formulate sound contracts. It also frames out the model conditions of contract, in which it distinguishes between two types of contract i.e. “General Conditions of Contract” and “Conditions of Particular Application” and describes all issues that are related to the first one. The core objective of this paper is to analyze some special contracting issues, which are vital for both the contractor and the employer. Furthermore, it finds out the rights and obligations of contractor and employer on those contracting issues.
Index Term-- GoB, Issue, Cross-reference, Model Condition, Contractor, Employer, Financier, FIDIC
1. INTRODUCTION In Bangladesh, many development projects are implemented every year. These development projects may be grouped as construction project and engineering project. Most of these projects are implemented by contractors under some agreement called contracts. The terms of these contracts are mostly taken from common law or business law.
guidelines for the terms of contracts. Although the donor agencies have their own guidelines, sometimes they follow the FIDIC guidelines for its versatility. FIDIC guidelines are also followed in the case of supplier’s credit projects. Various organizations and people are involved in project formulation, evaluation, and contract preparation process. In this process various documents are being generated by them. Some of these documents eventually become the parts of contract. General contracts of a work or project consist of the conditions of contract, terms of negotiations, tender documents and specifications, bids of the contractor. In case of confusion or dispute, all these documents are studied for possible explanation or resolution. As mentioned above, there are numbers of guidelines for formulating contracts. The terms of these contracts are written in legal styles. Besides, there are many crossreference clauses. These create complexity in contract issues. Since most of the time, contracts are administered by people without legal background, it often becomes difficult for them to understand the rights and obligations of contract issues. Most of the engineering contracts are administered by the engineers. So the engineers’ knowledge on the basics of the law is important in their work. It helps them recognize situations in which the assistance of a lawyer should be sought, preferably before difficulties actually arise. This interfacing knowledge also helps them to fully cooperate with the attorneys they have to work with. An engineer must have some generalized understanding of the law in the following areas for his/her work.
In Bangladesh contract terms vary from contract to contract depending on the financier of the project. Financiers could be Government of Bangladesh (GoB), multilateral donors like World Bank, ADB and bilateral donors like SIDA, CIDA, US AID, JICA, DANIDA, NORAD etc. If a project is financed by Government’s own money usually the contract terms are guided by the Government’s form no.2911 guideline. On the other hand, if the project is financed by multilateral or bilateral donor agency, the contract terms are guided by their own guidelines. Federation International Des Ingenieurs-Conseils (FIDIC) has formulated general guidelines for construction, engineering procurement contact (EPC) and Turnkey projects, which are widely accepted in Bangladesh. Each of the multilateral and bilateral donor agencies has their own
The preparation of contract documents and specifications. The conduct of contractual relationships and the handling of claims and payments. The interpretation of contract clauses and the settlement of disputes arising there from. The education of attorneys regarding engineering matters and customs The preparation of material for use as trail evidence. The serving as an expert witness on technical points at arbitration hearings and court proceedings. The settlement of disputes out of court. The giving of assistance in tax and valuation problems. The handling of engineering matters connected with purchase and sale of property and goods.
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International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03
The preparation of reports on zoning, environmental, and other matters involving governmental agencies and organizations.
In order to meet the above work requirements, the engineers must be aware of the basics of contracts as well the elements of contract issues in construction, EPC, turnkey. Although engineers deal with this type of projects in different capacity, they are often not aware of the implications of the actions. It is felt that a comprehensive body of knowledge is essential for the engineers managing different kinds of contracts. 2. METHODOLOGY Relevant rules and procedures of the government of Bangladesh have been collected to study the project development and implementation processes. Documents like Bangladesh Form No. 2911, FIDIC guidelines and World Bank guidelines have also been collected and studied to analyze the rights and obligations for both the Employer and the Contractor. There are different guidelines for different types of contracts such as Construction Contracts, Engineering and Procurement Contracts, Turnkey Contracts, etc. Here, only on the contracts related to construction projects are concentrated to study Various types of contracts and prerequisites to the formation of a valid contract have been studied for getting basic concepts of contract. Besides, various project-processing procedures in engineering contract in Bangladesh and the formation process of contract have also been studied. Finally, project-processing flow diagram has been drawn to explain the various steps in the processes. It helps the people to understand how the contract issues are framed in the process. It is also possible to know how some of the documents, which are being generated during the projectprocess, become the part of contract. The guidelines of GoB, FIDIC and World Bank and all the general conditions of contracts have been studied. Some of the general issues have been analyzed, which are common to those guidelines and vital for both the contracting parties and put them in plain words. So the contract-governing people who have no legal background can easily understand the rights and obligations of both the contracting parties.
3. FINDINGS One of the issues, which is put in plain words, is shown bellow:
Design, Materials, Plant and Workmanship depending on the type of contract. In the “construction” contracts the duties and responsibilities are more related to preparation, custody, privities, and communication of drawings and specifications. 4.1 Sample Wording
FIDIC 6.1 through 6.5, 7.1 through 7.3, 8.1 and 8.2, 36.1 through 36.5, 37.1 through 37.5, 38.1, 38.2, 39.1 and 39.2 for “construction” contracts. World Bank Clauses 33.1, 34.1, 35.1, 35.2 and 36.1 for “construction” contracts. Clause 11, 15, 16, 17 and 18 of Bangladesh Form No 2911, Item Rate Tender and Contract for works.
4.2 Contractor’s Obligations
Name of the issue: Designs, Quality, Inspection and Testing 4. SUMMARY In an engineering project design, quality, inspection and testing issues are part and parcel. In a typical contract document these issues are addressed in clauses related to
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The Contractor will not release or communicate the drawings, specifications and other documents to any third party without the consent of the Employer or his representative. (FIDIC6.1) One copy of the drawing shall be kept by the Contractor on the site and shall make it available to Employer or his representatives’ at all reasonable time for inspection. (FIDIC 6.2) The Contractor must notify the Employer of any delay in work for any delay in supplying drawings by the Employer. (FIDIC 6.3) The Contractor must carry out works according to any supplementary drawings or specifications issued by the employer or its representative. (FIDIC 7.1) Any works designed by the Contractor must be submitted to the Employer and get approved before execution (FIDIC7.2a). Such approval shall not relieve the Contractor of any of his responsibilities under the contract (FIDIC7.3) The operation and maintenance manual along with drawings of completed permanent works must be submitted to the Employer for the latter’s approval and use. (FIDIC7.2b) The Contractor shall carry out the works and remedy any defects thereof with utmost care and diligence. (FIDIC 8.1). `The Contractor shall provide all materials, plants and workmanship as specified in the contract and in accordance with the instruction of the Employer’s representative. (FIDIC 36.1 and GoB 11) The Contractor shall supply necessary assistance, labor, electricity, fuels, apparatus and instruments for the purpose of testing as required by the Employer at the place of manufacture, fabrication or preparation, or on the site or at such other places as specified in the contract. (FIDIC 36.1) Cost of samples and cost of tests clearly intended or provided for in the contract shall be borne by the Contractor.
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International Journal of Mechanical & Mechatronics Engineering IJMME-IJENS Vol: 11 No: 03
The Contractor shall agree to timing and place of test provided Employer has notified at least 24 hours before such test(s). Also the Contractor shall obtain necessary permission for the employer or its representative’s access to places other than Contractor’s to carry out such tests. The Contractor shall not cover up or put out of view any works without giving notice to the employer for inspection and subsequent approval of the Employer’s representative. In breach of this responsibility, the Contractor shall, at his cost, open up the works as demanded by the Employer.
4.3 Contractor’s Rights
To obtain 2 copies of the drawings and specification. (FIDIC 6.1) To extension of time or provision of cost if any delay in delivery of drawing or instruction from the employer due to employer’s negligence. (FIDIC 6.4) If the Employer or its representative instructs the Contractor to carry out any test without their presence, then the results of such test must be accepted by the Employer. (FIDIC 37.3). To obtain notice of any delegation of testing and inspection to any third parties by the Employer. (FIDIC 37.5).
4.4 Employer’s Obligations
To supply 2 copies of the drawings and specification to the Contractor. (FIDIC 6.1). To agree to test results if instructed the Contractor to carry out any test without his presence. (FIDIC 37.3). To give notice of any delegation of testing and inspection to any third parties. (FIDIC 37.5) To respond to notices by the Contractor of any delay or disruption due to some drawing or instruction from the Employer and determine time extension or cost provision for any delay in providing necessary drawing or instruction. (FIDIC 6.3 and 6.4). To inspect and measure works once the Contractor gives notice of readiness of the work or part of it for inspection and measurement. The Employer cannot delay such inspection unreasonably. (FIDIC 38.1).
The Employer has the right to reject any work or material if found defective after testing .However, he must give reasons for such rejection. (FIDIC 37.4) The Employer has the right to delegate inspection and testing to any third party. (FIDIC 37.5). The Employer has the right to issue instruction to remove, replace materials or plants or workmanship if he thinks they are not in accordance with the contract. The Employer has the right to employ and pay other persons to carry out the above if the Contractor is in default to obey the instructions. (FIDIC 39.1 and 39.2)
5. CONCLUSIONS This paper explores most of the people dynamically in the field of contracts, which is not utterly unknown to them. In addition, it provides information in boosting up the people to complete an engineering contract fruitfully. Most of the time people who guide the contract usually do not want to comprehend carefully the contract issues because of cross-reference clauses. This paper eliminates a few vital cross-reference clauses as much as possible for easy realization of the contract issues. This realization will assist the people of various government organizations who guide the contract to make a sound contract. Not only the Employer but also the Contractor should read the contract issues before the signing of the contract to refrain from making a huge amount of losses or from counting compensation. ACKNOWLEDGEMENTS The authors are very much grateful to Late Dr. Mahiuddin Ahmed, Ex-Professor & Head, Department of Industrial and Production Engineering, Bangladesh University of Engineering and Technology (BUET), Bangladesh, for his constant guidance, valuable suggestions and moral supports throughout the study. REFERENCES [1] [2] [3] [4] [5]
4.5 Employer’s Rights
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“Conditions of Contract for Works of Civil Engineering Construction”, FIDIC, Fourth Edition 1987. “Standard Bidding Documents”, The World Bank, September 5, 2000. “Item Rate Tender and Contract For Works”, Bangladesh Form No.-2911. “Managing Project In Bangladesh”- Dr. Skylark Ishwaran S. Chadha, Second revised edition 1989 “General Instruction and Guidelines On Planning, Programming, Processing and Implementation Of Technical Assistance (TA)”- Economic Relations Division , Ministry of Finance, GoB, May,1992
The employer has the right to get notice of any delay or disruption of work. (FIDIC 7.1). The employer has the right to decide on any additional tests other than the ones provided in the contract. The Employer has the right to decide whether such tests would warrant time extension of cost provision. (FIDIC 36.4, 37.5). The Employer has the right to access and inspect works any time with a 24- hour notice to the contractor. (FIDIC 37.1,37.2,AND 37.3)
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