Public Work Contract Issues

Delay & Compensation

The public works contracts make claims for delay more difficult than in pre-existing and conventional contract.  There are extensive recordkeeping obligations.  There are obligations to update programmes which may disincentivise the contractor in making claims.

The contractor is deemed to have included in the price and in programme for delays and compensation to the extent provided in the schedule.  No compensation is payable for an initial and even substantial period of delay.  Contract notice provisions apply in relation to each item of delay.  Accordingly, there is a disincentive towards claiming for delay unless it is substantial.

The tenderer in the public works contract, must indicate his tender rate in relation to operatives, craftspersons and apprentices and must specify a rate of delay, cost per site working day.  This is to be taken into account in assessment of tenders and accordingly is a disincentive to — is relevant to the tender competition.

If it is provided that if as a result of compensation event, the date for substantial completion of the works has been extended so that there is a period of seven or more consecutive non-working days in the time between the starting date and the date for substantial completion of the works and that would not have occurred without the compensation event happening, then the contractor’s expense (excluding profit and loss of profit) unavoidably incurred because of this delay shall be included in the determination of the addition to the contract sum for delay caused.

The  amount so added shall not exceed an amount stated in the schedule as the contractor’s tendered rate of delay cost multiplied by the number of additional nonworking days.  If there is an amount stated there.  Non-working day means a day that for good reason is not the site working day such as a trade holiday.

Notice must be given of the claim within a period specified.  Otherwise it fail.  It must take specifically that this is being given under the particular clause.  Detail is required in relation to the claim at the outset.  That employer is entitled to continuous updates in relation to programme and progress statements.  The employer may inspect all records in relation to the subject matter of the claim.

Representative’s Instructions & Compensation

The public works contract provides that in the event that the person appointed as engineer under the contract as representative is no longer available, the employer will act as the employer’s representative.

The  public work contracts allows the employer’s representative to give instructions to the contractor in relation to any matter relating to the works.  This may include changes in requirements (variations).  The instruction must be given in writing.

The contract sum is to be adjusted in the event of a compensation event occurring as listed in the schedule.  This includes reference.  First such schedule item includes changes in the work requirement.There are strict conditions applicable as a condition precedent to the contractor being allowed payment for a compensation event including a variation.

If the compensation event requires additional, substituted or omitted work similar to that for which there are rates in the pricing documents, to be executed under similar conditions, the assessment shall use those rates.  If the compensation event requires additional, substituted or omitted work, that is not similar to work for which there are rates in the pricing document, the assessment shall be based on the basis of the rates in the pricing documents.  If the adjustment cannot be determined under the above rules, the employer’s representative shall make a fair valuation.

The employer’s representative may direct that additional or substituted work required as a result of a compensation event be determined on the basis of the cost of performing the additional or substituted work (compared with the contractor’s costs without compensation event) determined as follows:

• the number of hours worked or to be worked by each category of worker stated in the schedule and engaged on the work to which the event relates, on or off-site multiplied by, in each case by the tendered daily rate for that category specified in the schedule;
• the cost of materials used in that work (taking into account discounts, excluding VAT).  Plus the percentage adjustment of that cost tendered by the contract and stated in the schedule;
• the cost of plant reasonably use on the works (whether hire or owned) at the rates specified in the documents in the schedule plus or minus the percentage adjustment on such cost tendered by the contractor included in the schedule.  If the document listed in the scheduled does not give a rate for the plant item, a market rental rate shall be used plus or minus the percentage adjustment.

Claim for Compensation

If the contractor considers that under the contract, there should be an extension of time or an adjustment of the contract sum, or that it has other entitlement under or in relation to the contract, the contractor shall as soon as practicable and in any event within 20 days after it became aware or should have become aware of something that could result in such an entitlement, give notice of this to the employer’s representative.  The notice must prominently state that it is being given under the relevant clause.

If the contractor does not give notice and details as above (except where the contractor has been required to and is given a proposal complying in full with other provisions), then the contractor shall not be entitled to an increase to the contract sum or an extension of time and the employer shall be released from all liability to the contractor in relation to such matter.

The public works contracts provides that if the contractor considers that there should be an extension of time or an adjustment to the contract sum or that it has any other entitlement, under or in relation to the contract, the contractor shall as soon as practicable and in any event, within 20 working days after it becomes aware or should have become aware of something that could result in such entitlement, give notice of this to the employer’s representative.  The notice must prominently state that it is being given under sub-clause 10(3) of the contract.

In a further 20 working days after notice, the contractor shall give the employer’s representative details of the following:

• all relevant facts concerning the claim;
• a detailed calculation and proposal based on that calculation of any adjustment to be made to the contract sum and the amount of any other entitlement claim by the contractor.

If the contractor considers the program contingency should be used or there should be an extension of time, the information required and insofar as practicable a proposal based on the information for use of the programme contingency or any extension to the date of substantial works or any section thereof.  The contractor shall provide any further information requested by the employer’s representative in relation to the event or circumstances.  If the information is not given, the employer has no liability.  The information is to be updated on a monthly basis and the employer is to keep contemporary records to substantiate any aspect of an event or circumstances.

As mentioned separately, in relation to the public works contract, the contractor is deemed to have provided in his price for the effect of delay and cost caused by the employer to the extent of the period provided for in the contract.

The contractor is not necessarily entitled to additional time.  If he is entitled to an additional time or money, he must keep the necessary date etc.  set out above.

Concurrent Delay

The public works contract deal specifically with concurrent delay.  This arises when there is delay for more than one reason, reasons which are the employer and reason which are the contractor’s fault.

If public works contract provides that if works are concurrently delayed by more than one cause and one or more of those causes is not a compensation event, there shall be no increase to the contract sum for delay caused for the period of concurrent delay.  It is not clear if the contractor’s event has to be the predominant event, cause of the delay.

If a delay has more than one cause, and one or more causes is not a compensation event, there is to be no increase in the contract sum for delay caused or the period of concurrent delay.

Payments

Interim payments under the public works contract.  The employer is entitled to deduct from any payment 15%, pending receipt of any collateral warranty not get furnished but due.  The employer may deduct 15% of the sum due if the contractor has not submitted a programme or provided a progress report required under the contract, the contractor has not paid wages in accordance with his obligations.

The employer may make deductions for the shortfall, unless the contractor issues a certificate with each interim application for payment to the effect that he has complied in his requirements in this regard.  No payment is due until the certificate is given. The employer may deduct from any amount due to the contractor:

any amount determined by the employer’s representative to be due or likely to be due from the contractor to the employer under the contract and any amount due from the contractor to the employer under any contract.

The public work contracts requires in relation to the final account that the contractor is to submit his final statement of account within two months of work being substantially completed.  The employer’s representative must within a further three-month certify what he considers due in the penultimate payment certificate.  Contractor fails to submit a final certificate, the employer’s representative must issue the final payment certificate within five months of substantial completion.

The purpose is that the penultimate certificate is to cover all amounts due. The final payment certificate, which is to be issued within three months of the defect certificate, issuing (which is at the expiry of the maintenance period) is to cover the same amount as the penultimate payment with the exception of the final release or retention;

adjustment to the contract sum because of compensation events which have happened after the substantial completion of the work;

amounts owed by the contractor that were not included in the penultimate certificate;

The final certificate is to be delivered by the contractor within two months.  It is provided that the employer shall have no liability to the contractor under or in relation to the contract for any amount that are not detailing the final statement except under the indemnities in the contract or compensation events occurring after substantial completion of the works have been certified.

Subcontracts

Under the public works contract, the main contractor is responsible in every respect for a specialist subcontractor’s default.  It is provided:

the contractor is liable for the acts and omissions of the contractor’s personnel including specialists and any design they do as if they were the contractor’s acts and omissions.

The contractor must ensure that works executed by him meet the requirements of the contract, that materials are fit for purpose and work item selected or designed by the contractor including any specialist are fit for their intended purpose.  In effect, the risk associated with the contractors chosen by the employer is placed on the contractor.

The public works contract refers to specialist rather than nominated subcontractors.  The employer is to select specialist in advance of the main contract.  The employer’s representative may not instruct the contractor to enter into a contract without particular specialist selected by the employer’s representative unless it is named in the contract.

There is provision for novation of specialist contracts already made within employer to the contractor.  There is no option for the contractor to reject the subcontractor.  It is pre-chosen and if he does not wish then he may choose not to tender.

Arbitration & Concilliation

The public works and services contracts use the fast-track arbitration procedure by which proceedings will be conducted expeditiously according to a strict 100-day timetable.  All arbitral proceedings are required to be conducted on the fast track unless the parties otherwise agree or the tribunal, the issue is too complex to be dealt with in a short timeframe.

The public works contracts in as with the Engineers Ireland and RIAI contract have procedural rules for the conduct of conciliation in relation to dispute.  Each conciliation process is commenced by one party giving notice and a description of the issue and a conciliator is appointed by agreement or on default of agreement by the president of the relevant institution.  Under the public works contracts, parties to nominate an appointing body in the schedule.

Position statements are required of each and parties are to allow them and send them to the conciliator an advance statement of their intentions in the dispute.  This may include facts, observations and legal argument.  The conciliation hearing contemplated under EI and RIAI procedures, confidentiality is to be maintained.

The contract unlike the RIAI and EI procedures do not expressly provide that privilege for disclosures in the conciliation, disclosure from use in subsequent arbitration and litigation.

Each procedure requires the conciliator to issue a recommendation.  They are final and binding if not rejected within a certain period.

See also the section on the Construction Contracts Act 2013.