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Contract documents for small
contracts in the road sector
David Stiedl
Technical Brief No. 5
Information Service, Harare, Zimbabwe
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Contract documents for smallcontracts in the road sector
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The Employment-In tensive Investment P rogramm e (EIIP) is a su b-programme within the Recovery and Reconstruction Department
(EMP/RECON) of the ILO. The EIIP is managed by the EmploymentInt ensive Investm ent Br an ch (EMP /INVEST). Its objective, in th e context of
mainstreaming strategies for poverty alleviation, is to promote the use of
local resour ce based techn ologies in infra str uctu re investm ent s in developingcountries a nd to str engthen their capacity to apply such t echnologies.
ASIST is a sub-regional programme under the EIIP, with offices in Harare
an d Na irobi in Africa, and Bangk ok in Asia., providing Advisory Support ,Information Services, and Training to communities, governments, NGOs,projects a nd pr ogram mes.
The aim of ASIST Technical Briefs is to spread kn owledge about labour -based
technology and man agement amongst policy ma kers, plann ers, designers,implementers and t rainers.
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Contract documents
for small contractsin the road sector
This publication is reproduced from a paperprepared for the Seventh Regional Seminarfor Labour-Based Practitioners held inLusaka, Zambia in October 1999.
Written by David Stiedl, an independentconsultant based in the United Kingdom.Editing and layout by David Mason.
International Labour OrganisationAdvisory Support, Information Services, and Training (ASIST)Nairobi, Kenya
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Copyright Intern ational Labour Organ isation 2000
Publications of the International Labour Organisation enjoy copyright under Protocol
2 of the Universal Copyright Convention. Nevertheless, short excerpts from them maybe reproduced without authorisation, on condition that the source is indicated. For
rights of reproduction, ada ptat ion or t ran slation, application should be made t o the
ILO/ASIST In form at ion Service, PO Box 210, Hara re, Zimbabwe, or t o the I LOPublications Branch (Rights and Permissions), International Labour Office, CH-1211
Geneva 22, Switzerland. The International Labour Office welcomes such applications.
Techn ical Brief No. 5: Cont ra ct docum ent s for sm all cont ra cts in t he r oad sector
First published S eptem ber 2000
Pr oduced by the ASIST Informat ion Ser vice with
fina ncial supp ort from t he Swiss Agency forDevelopment an d Coopera tion (SDC)
Set in Arial and Cent ur y Schoolbook t ypefaces onan H ewlett-Packard LaserJ et 4000TN printerus ing Microsoft Word for Windows 8.0
ASIST publicat ions can be obtained d irect from t he ASIST Informat ion S ervice,
PO Box 210, Ha ra re, Zimbabwe, t elephone +263-4-748344/7, facsimile +263-4-759427ema il: asist @ilo.org, websit e: http://www.ilo.org/employment/eiip
The designat ions employed in ILO publicat ions, which ar e in conformit y with Un ited
Nations pra ctice, and the presentat ion of material t herein do not imply th e expressionof an y opinion wha tsoever on t he par t of th e Int erna tional Labour Office concerning
the legal sta tus of any country, ar ea or t erritory or of its au thorities, or concerning t hedelimitat ion of its frontiers. The r esponsibility for opinions expressed in signedart icles, studies an d other contr ibutions r ests solely with their au thors, and
publication does not constitute an endorsement by the International Labour Office ofth e opinions expressed in t hem . Reference to nam es of firm s an d commer cial produ cts
and processes does not imply t heir endorsement by th e Int ernat ional Labour Office,and any failure to mention a particular firm, commercial product or process is not a
sign of disap proval.
This is n ot an official ILO docum ent .
Printed in Kenya DJM
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vi ILO/ASIST Technical Brief No. 5: Contract Documents
List of abbreviations and definitions
CCSJC Conditions of Cont ra ct Sta nding J oint
Committee
ECC En gineerin g an d Const ru ction Cont ra ct
FIDIC Federat ion Intern ationale des Ingenieurs-Conseils
Force accoun t Work done by a directly-hired labour force
IBRD Int ern at iona l Ban k for Reconst ru ction an d
Development
ICB Int ern at iona l Competitive Bidding
ICE Inst itu tion of Civil En gineers (UK)
IDA Int ern at iona l Development Association
ILO Inter nat ional Labour Organisation
Labour-based Labour-based is used to describe a t echn ology in
which labour , supported by light equipment , isus ed as a cost effective meth od of providing or
maintaining infrastructure to a specified
standard
Labour-intensive Labour-intensiveis used as a generic term to
describe all man ner of local r esour ces based, a nd
employmen t-inten sive, activities r elated t o theprovision and maintenance of publicly or
commu na lly owned infra str uctur e
MART Man agement of Appropriat e Road Technology
NCB Na tional Competit ive Bidding
NE C New En gineerin g Cont ra ct
UK Un ited Kingdom
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ILO/ASIST Technical Brief No. 5: Contract Documents 1
1 Background
Increasing the size and scope of operations of private sector
involvement in road const ru ction a nd m aint ena nce is nowacknowledged as a priority in ma ny developing coun tr ies.
However , th ere is often limited exposur e an d experience withmodern cont ra cting procedures an d pra ctice in th ese coun tr ies.
This applies ma inly to new cont ra ctors ent ering th e sector, butalso to professiona l engineers an d ma na gers in ma ny client
orga nisa tions. As a cont ribut ion t o the pr ivate sector
development process, th is paper looks a t s ome of th e cur ren tlyava ilable cont ra ct documen ta tion for Works of Civil
En gineering Const ru ction, and comm ents on its suita bility for
use by Road Agencies with res pect to local sm all or emer ging
contractors.
Implementation of roadworks
To put th is int o cont ext, the plann ing and implement at ion of
roadworks in developing coun tr ies ha s u nt il very r ecently beenma inly the responsibility of govern men t force accoun t (direct
labour ) opera tions. Contr acting-out of work s h as norma lly been
restr icted to large -scale operat ions, u sua lly involvinginter na tiona l firms a nd oversea s development aid.
However, as in th e developed world, force accoun t opera tions
have proved increasingly difficult to maintain at efficientlevels. Indeed, the African Road Main tena nce Initiat ive1
ident ified th e inefficiency of in-house r oad agency operat ions a sa ma jor cont ribut ing cau se t o Africas curr ent road
ma inten an ce crisis. Road depar tm ents where 95% of th e
recurr ent budget goes t o covering th e wage bill, an d plan t poolswith equ ipmen t a vailabilities of 20%, ar e now commonplace. To
quote from a conn ected st udy Competit ion is s een a s t he
prima ry factor to motivate ma na gers to cut wast e, impr oveopera tiona l efficiency, and allocat e r esources efficient ly2, and
th e tr end n ow is to recomm end comm ercial, cont ra ct orienta ted
implementation.
Private sector capacity
Unfort un at ely, the pr ivat e sector in ma ny of th ese coun tr ies isnot in a mu ch better sh ape tha n t he governm ent r oads
depar tm ent it seeks to replace. Local consu ltan ts a nd
1 World Ban k. 1991. The Road Maintenance Initiative: Building Capacity for
Policy Reform, S ub -Saharan Africa Transp ort Program . Vols. I-III. WorldBank, Economic Development Institute, Washington, D.C.
2
Shirley, Mary. 1989. The R eform of St ate-Owned E nterprises: Lessons fromWorld Bank Len ding. World Ban k Policy and Resea rch Series 4. World Ban k,
Washin gton, D.C.
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2 ILO/ASIST Technical Brief No. 5: Contract Documents
cont ra ctors usu ally lack experience out side th e building sector,
cont ra ctors a re poorly equipped, and t he wh ole sector h aslimited a ccess t o privat e fina nce. In addition th e client, usu ally
a govern ment agency, is often not familiar with m odern
cont ra cting pr ocedur es. As a first priority a new condu cive
environm ent needs t o be crea ted if the pr ivat e sector is to beeffectively developed. This will require substantial investmentin techn ical and ma na gerial tra ining for t he key actors in
governm ent a nd th e private sector, and t he intr oduction of new
and appropriate procedures a nd practices.
In genera l, the int roduction of procedur es for large scale
projects, su ch a s upgrading m ajor h ighwa ys, reconst ru cting
bridges, or overlaying or resu rfacing bitu men roads, is m ore orless in h an d. The cont ra cts a re h igh value, th e work is of
interest to the larger nat ional an d interna tional firms, an d thescale is such th at fina nce inst itut ions a re m ore likely to be
inter ested. However most road agencies ha ve an equa llypressing need to cont ra ct out work s on th eir gravel an d eart hroad n etworks . This type of work is ideal for th e sma ll-scale
cont ra ctor; the na tu re of th e work is often very str aightforwa rd
and t he r isks ar e very low for t he client. (In cont ra st t he r iskscan be high for t he sm all cont ra ctor with only a monopoly client
in th e sector). Unfort un at ely very little at tent ion h as been
given to th is area .
The labour-intensive approach
To complete t his int roduction it should be noted t ha t apar ticular concern in t he development process is t o encour age a
sust aina ble appr oach tha t ut ilises local resources as mu ch aspossible. The low wage level in m ost of the developing world,
an d th e high cost of import ed ma chiner y and th e poor
availability of spares, tends to mean encour aging a labour -intens ive appr oach. Local labour is usu ally supported with
simple or int erm ediate equipment , with relat ively low capita l
costs compa red t o conven tiona l heavy civil engineer ing plan t.This a pproach is of cour se comm onplace in t he bu ilding sector,
but h as been quite a n ovelty in t he r oads a nd wat er sectors,par ticular ly in Africa. Cont ra cts an d cont ra ct docum ent at ion
th us ha ve to reflect th at a pproach, an d often ar e required to
ha ve in-built measu res t o give active encour agement toalterna tive technology meth ods.
Forms of contract
A num ber of forms of cont ra ct ha ve been developed for differen t
agencies an d governmen ts, directed t o small labour -based
contr acts. But what ha s tend ed to happen is tha t either m oreclauses ar e added t o already complex docum ent at ion; or more
worryingly, one -off simplified docum ents a re ta ilor -made; but
th ese may ha ve doubtful legal sta nding or omit import an t keycont ra ctu al clau ses in t heir effort to be simple. A recent su rvey
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ILO/ASIST Technical Brief No. 5: Contract Documents 3
of cont ra cting pra ctice foun d th at special clauses added to
existing docum ents where often ra th er weak an d poorlydrafted3. This is hindering the effective development of the
local privat e sector for sma ller civil engineer ing work s. There is
certa inly a n eed for a new comm on set of docum ent s, an d
especially a set tha t ha s intern at iona l stan ding and credibility.
It m ust be emphasised th at appropriate contr act document salone cann ot solve the pr oblem, which can be broadly defined
as creat ing a conducive environmen t for sm all contr actor
development . However, t hey a re an essent ial component. Therea der is referr ed to an ILO guideline on th e subject4 for a more
compr ehensive treat ment of all the inputs a nd changes
necessar y to ensur e some cert aint y of success.
3 Bentall, Twumasi-Boakye, Watermeyer. 1995. Labour-based Cont racting. A
St udy to Develop Guidelines for Project Formu lation and Im plemen tation.
ILO Geneva
4 Bent all, Beusch & de Veen. 1998. Cont ractor Developmen t for Labour-based
Works, Sum mary Guidelines. ILO Geneva
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4 ILO/ASIST Technical Brief No. 5: Contract Documents
2 The key requirements
This pa per will not give a deta iled an alysis of all available
cont ra ct documen ts . Civil engineer ing work s can be complexan d varied, an d most well esta blished docum ents ha ve evolved
through many editions to cover all eventualities. We willinstea d concentr at e on some genera l aspects as t hey affect both
th e sma ll inexperienced cont ra ctor, an d a road a gency unu sedto administering many sma ll contr acts, and t hen see how the
new shorter cont ra cts h elp (or h inder) the situa tion.
Client interests
The first essential pre-requisite is th at the document must
protect the clients interests. The contr act must ensur e tha t t he
cont ra ctor produces work of the requir ed quality, in t he st at edtime, and a t t he agreed price. This is especially import an t, as
ma ny shorter cont ra cts a re not very rigorous on th erequirem ents for a detailed work pr ogram me, meth od of
work ing, or pr oof of skills of the cont ra ctors em ployees. Therea soning is tha t if th e nat ur e of th e works is rela tively simple,
an d th e cont ra ct per iod short, th e risk for t he client sh ould be
low a nd th us cont ra ct clauses can be safely simplified.However, for labour -based work, pa rt icular ly where new
meth ods a nd pr ocedures ha ve been in tr oduced, it is often
necessary to ha ve the m ethod of workin g clearly spelt out , and
th e cont ra ctors experience gua ra nt eed. These issues will belooked at un der each relevant cont ra ct.
Contractor interests
Secondly the cont ra ctors position mu st be secured . Asprevious ly noted, most of th ese works will be awar ded by one
agency. The cont ra ctor is t hu s in qu ite an exposed position
with possibly only one m ajor client . Makin g claims orcomplaint s in th is situa tion can sp ell comm ercial su icide.
Conversely, if the cont ra ctor is n ot pa id on t ime his or her
finan cial situ at ion is probably sufficiently par lous as to alsoguara ntee ru in. It must be recognised tha t substa ntial delays
in pa yment ar e comm onplace for governmen t cont ra cts in
ma ny developing coun tr ies.
While it is not t he int ention to sh ield th e new cont ra ctor from
th e norma l problems of business, it is essent ial tha t th econt ra ctor h as some cha nce of discussing an d n egotiat ing with
th e client at a m ore equa l level. Modern cont ra ct docum ents
ar e moving away from th e confrontat iona l app roach ofvariat ion orders an d claims, settled by ar bitra tion or the
court s. There is a n ew empha sis on par tner ships and
Compensa tion Event s, which can be referred to a neu tr aladjudicat or. Although th e term s ar e probably un fam iliar t o
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ILO/ASIST Technical Brief No. 5: Contract Documents 5
most r oad agency sta ff in developing coun tr ies, the concepts a re
actua lly quite str aightforwa rd an d provide some hope for amiddle way in client /cont ra ctor relat ionsh ips.
Worker interests
Last ly, there is th e issue of th e worker s. In th e ICE (Inst itut ion
of Civil En gineer s) Cond itions of Contr act u p to th e 5t h Editionth ere was a clause for fair wages r esolution; an d th e protection
of labour is covered by FIDIC (Federa tion Int ern at iona le des
Ingenieurs-Conseils) 4t h edition under clause 34. However, eventh is clause is open to abus e an d ma ny projects h ave included
additional requirem ents based on guidance given by th e ILO.
Similar ly, th ere is n o explicit men tion of health an d sa fetyunder most modern contr acts.
Workers in Europe are well covered by existing legislation, so
pre sum ably it wa s no longer felt n ecessar y to include t ha tprovision in recent editions of the ICE an d FIDIC cont ra cts.
This is not t he case in t he developing world, where laws ar eoften a rcane an d poorly applied. Child labour for insta nce is
commonplace, an d healt h an d sa fety inspectors would seldom
visit a ru ra l road cont ra ct. Work ers often su ffer from poor oreven dangerous work ing conditions, an d Tra de Unions a re r ar e
for casu al workers. Govern ment employees u sua lly ha ve some
protection, bu t th e employees of small-scale cont ra ctors ar epotent ially very exposed t o abuse. Suita ble clauses ar e very
necessary for wage rates and conditions of labour for use in
developing countries.
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6 ILO/ASIST Technical Brief No. 5: Contract Documents
3 The Contracts
3.1 FIDIC CONDITIONS OF
CONTRACT FOR
WORKS OF
CIVIL
CONSTRUCTION, PARTS I AND II, 4THEDITION, 1987
These conditions a re probably the definitive set for cont ra ctstender ed intern at iona lly. As such th ey are un iversa lly accepted
by Roads Agencies, an d ha ve become the model set for ma nydeveloping coun tr ies. They ha ve been a dopted a nd ada pted for
nu merous labour -based road program mes in Africa and Asia.
Advantages
The str ong point of th ese conditions is tha t, togeth er with t he
options in Pa rt II, th ey can be assembled to cover almost a nycont ingency with well designed an d t ested claus es. These
conditions ha ve to be the ones against which a ll oth ers a re
compared.
There ar e par ticularly str ong clau ses (70.1 and 70.2) to cover
variat ion in pr ice linked t o labour an d ma ter ial rat es. There iseven a clau se t o cover subsequen t legisla tion for pr ice changes
cau sed by governm ent edicts a fter th e cont ra ct is signed.
On t he labour side, as well as specific reference to insu ra nce
aga inst accident to work men (24.1 an d 24.2), clause 34 coverseverything from rates of wages and conditions, to supply of
water , buria l of the dead , and observan ce of festivals an dreligious customs.
Disadvantages
On th e down side, the cont ra ct h as 145 clau ses an d over 200
sub-clauses. Th is is not a problem for an experienced cont ra ctsdepar tm ent, but in less experienced han ds such a docum ent
can be misunderstood, wrongly applied, or often simply
ignored. Newer form s of cont ra ct, pa rt icular ly the sh ort er
form s, are being writt en in simpler langua ge using shortersent ences in a st yle more accessible to the n on-legal r ead er.
In the same spirit of accessibility, the concept of the engineerwho acts both as t he employers agent a nd a s an impa rt ial
decision-maker is being r eplaced by th e concept of a neut ra l
adjudicat or. The client will still have his or h er r epresent at iveto administer th e cont ra ct, but th e adjudicat or exists t o resolve
disputes between t he client a nd t he cont ra ctor. FIDIC 4t hEdit ion is st ill firm ly in t he engineer as decision ma ker mould.
The cont ra ctors only recour se in dispu tes is t hr ough th e
arbitr at ion process. This is n ot condu cive t o amicablesett lements in t he set ting of roadwork s in developing coun tr ies.
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ILO/ASIST Technical Brief No. 5: Contract Documents 7
Any r ecour se to ar bitra tion will inevita bly be seen a s a
challenge t o th e au th ority of Road Agency sta ff, even if th eissue is fairly minor. In th e au th ors experience th ere h as been
no recorded inst an ce of a s ma ll labour-based cont ra ctor t aking
a governm ent a gency to ar bitra tion.
3.2 THE WORLD BANK PROCUREMENT OF WORKS,SMALLER CONTRACTS, 1995
This set of docum ent s is pr imar ily designed for procurement
un der pr ojects fina nced by the IBRD and t he IDA. Specifically,th ey are inten ded for works valued at less tha n $10 million t o
be procured by International Competitive Bidding (ICB).
Nat iona l Competit ive Bidding (where work s a re onlyadver tised within th e employers coun tr y) appa ren tly require
subst an tive cha nges to these Conditions. It is also
recomm ended th at more complex works such as ma rine worksor water tr eatment plant s use the Stan dard Bidding
Document.
Comparison with FIDIC
The cont ra ct cont ai ns severa l innovat ions over FIDIC 4 t hEdition. The Pr oject Man ager r eplaces the E ngineer, alth ough
th e role and function is subst an tially th e same. However, the
concept of an adjudicat or is intr oduced as a n independentperson to resolve disput es, before r esort ing to the a rbitr at ion
process. The Adjudicat or d oes not ha ve to be na med in t heproject docum ent , just th e Appointing Auth ority5, which is u sedto appoint an adjudicat or if the employer a nd t he cont ra ctor
cann ot agree on a choice.
Compr ehensive clau ses a re included for cur ren cies, price
var iat ion, adva nces, and a ppr oval of cont ra ctors sta ff.
Genera lly, th e interest s of th e client an d cont ra ctor ar e cat eredfor a s well as un der F IDIC. However no clauses ar e included
for work er conditions, an d even t he insur an ce clau se is less
specific (alth ough just as legally bindin g).
Conclusion
To sum ma rise, this docum ent is st ill a large docum ent with 63ma in clau ses a nd 117 sub-clauses. It is specifically aimed a t
ICB a nd would n eed to be modified for NCB, which would bemore in line with th e na tu re of works in developing coun tr ies.
Although it is up -to-date on some of th e ma na gement concepts,
it would appea r t o offer no substa nt ial advant ages over FIDICfor th e specific purpose of developing t he local contr acting
industr y in t he r oad sector.
5 an independent professional inst itution or a represent ative of that
institution)
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8 ILO/ASIST Technical Brief No. 5: Contract Documents
3.3 ICE CONDITIONS OF CONTRACT, M INOR WORKS, 2NDEDITION, 1995
This cont ra ct is essent ially a sh ort ened form of the ICE
Condit ions of Contr act 6 t h Edition, and follows the concepts and
definitions of th e 6t h Edition, the FIDIC 4t h Edition6 andprevious editions. The Minor Works Guidelines sum ma rise th elimita tions for u se as follows:
th e poten tial risks a re judged to be small
the works ar e simple an d str aightforwar d
th e cont ra ctor h as no responsibility for t he design of th e
permanent works
nominat ed sub-cont ra ctors ar e not used
th e cont ra ct value does not exceed 250,000
th e per iod of complet ion does not exceed six mont hs .
Main provisions
This resu lts in a docum ent of 13 main clauses a nd 69 sub-clau ses, which would seem idea l for th e type of work en visaged
for sma ll-scale cont ra ctors. The cont ra ct a llows th e engineer t oinstr uct for var iations, and t o suspen d th e progress of work s if
necessar y. Clauses ar e included for a pr ogram me of works ,
cont ra ctors per form an ce an d insu ra nces, retent ion m oney,liquidated damages for late completion, and a defects correction
period. The contractor is covered by clauses for adversephysical conditions, int erest on overdu e paymen ts, a nd aprocedure for sett lement of disput es. Although t here is a
pr ovision for va lua tion of additional work, t her e is no excesslimita tion on th e value of such work.
Limitations
However, there a re a nu mber of import an t omissions. There is
no provision for provisional sums, price fluctuations or advance
payment s. There is n o obligation for t he cont ra ctor t o have afull-time su pervisor on sit e. There is no specific reference to
work er conditions. Special risks such a s outbr eak of war
(FIDIC clause 65.5) are n ot explicitly dealt with , alth ough th eydo appear as an exception for contractors liability under
excepted r isks. Perh aps m ost import an tly ther e ar e nopar ticular clauses for defau lt of th e cont ra ctor or t he em ployer
(as with clau ses 63.1 an d 69.1 of FIDIC). The cont ra ctors only
rem edy for non-payment is compounded intere st on t heoutst anding am ount at 2% above the bank lending rat e.
6
The FIDIC Conditions u p t o the 4th
edition a re virtu ally identical to the ICEConditions of Contr act, with ad ditional clauses to cover risks a nd pr ice issues
peculiar to intern ational contr acting
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ILO/ASIST Technical Brief No. 5: Contract Documents 9
Fina lly, th e guidelines note t ha t th ere is no provision for
am endmen t or addition t o th e Conditions of Cont ra ct a nd th isshould be avoided. As su ch, these condit ions ar e probably too
limited an d rest rictive for our par ticular applicat ion n eeds.
3.4 FIDIC SHORT FORM OF CONTRACT, 1998
This sh ort form of cont ra ct was only released as a Test Edition
in Sept ember 1998. It is recomm ended for work s of a rela tivelysmall capital value, and is considered most suitable for fairly
simple or repet itive work of small du ra tion. However, t he
docum ent ma y be used for all types of engineering work with avariety of administrative arrangements, and all essential
commercial provisions are included. Most importantly, usersar e able to int roduce Part icular Conditions t o cat er for sp ecial
cases or circum sta nces.
Main provisions
The docum ent consists of 15 main clauses an d 55 su b-clau ses.
For th e employer, all the key clau ses exist a s noted for t he ICEMinor Works contract, with the addition of more specific
inform at ion on th e cont ra ctors obligat ions, t he par ticulars of
th e cont ra ctors repr esent at ive, and m ore deta iledrequir ement s for th e cont ra ctors Pr ogram me. Most
import an tly, there is also a compr ehensive section on defaultsby the em ployer or th e cont ra ctor, with det ails of paymen t on
termina tion by either part y.
The defects section is very brief, an d th e employer will need t oensu re t ha t r out ine test ing of work s is properly covered in th e
specificat ion. The problem of langua ges is a ddressed un der
clau se 1.5 (Comm un icat ions ), with t he pr ovision for a ru linglangua ge in t he Appendix.
There is no provision for advan ce paymen ts to the cont ra ctor,but th e Notes for Gu idance recomm end t ha t t he pr ovision in
th e full conditions of cont ra ct can be included as a par ticular
cond ition. Similar ly, alt hough th ere is n o specific clau se for
inflat ion, t he N otes for Guidance suggest t he ins ert ion of aclause 11.1 for th e r ise or fall in th e cost of labour , ma ter ials,
et c., for works of a longer dur at ion. Th e employersresponsibilities under Force Majeur ar e clear ly spelled out in
clauses 6.1 and 13.2.
Settlement of disputes
The Sett lement of Disputes int roduces th e concept of a neut ra ladjudicat or, as with th e World Ban k document . Rules for
Adjudication and an Adjudicators Agreement are included in
th e Short F orm of Cont ra ct. The Adjudicat or only has to beappointed once a dispu te n eeds to be settled. However, th e
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10 ILO/ASIST Technical Brief No. 5: Contract Documents
Notes for Gu idance recomm end t ha t t he E mployer proposes an
Adjudicat or at tender sta ge to avoid delays. This would alsoensu re th at th e Adjudicat or becomes pa rt of norma l practice
ra th er th an a special circumst an ce. Arbitr at ion can only be
resorted to after adjudicat ion fails. Arbitr at ion is covered by
essent ially the sam e provisions a s in the F IDIC 4t h
edition.
Workers rights
Workers conditions are not included, but it should be
str aightforwa rd t o import clauses from the F IDIC 4t h Editionas r equired. Insu ra nces for t he workers ar e specifically
included a s an item in t he Appendix.
Late payments
The only item t hat appears at variance with t he needs for
sma ll cont ra ctors is th e provision for lat e payment by theemployer. The contractor is not covered by a compound interest
clause, his only recour se is to suspend or term inat e the works.
This appear s to be too dra stic for our circum sta nces, an d ma ynot be a very viable option for a cont ra ctor with a large labour
force to pay. It would be useful if th e provision for in ter est wa sincluded as in clau se 60.10 of th e FIDIC 4t h edition.
Conclusion
To conclude, taking into account the few points mentioned
above, this cont ra ct docum ent would seem to be th e ideal
sta rt ing point for futu re sm all work s cont ra cts. The docum entis obviously new an d un test ed, but given t he u nder lying
experience with FIDIC conditions t here ar e un likely to be any
problems with individua l clauses.
3.5 THE NEC ENGINEERING AND CONSTRUCTION SHORTCONTRACT (DRAFT 1998)
To give some h istory, th e NEC En gineering a nd Constr uction
Cont ra ct is a r adical depart ur e from the CCSJCs7 ser ies of ICE
Conditions of Cont ra ct. In r esponse t o a comm ission in th e UKinto the workings of th e const ru ction indu str y8, the NEC
cont ra ct was designed to foster a more par tn ersh ip and lessconfronta tiona l approach, with a n em pha sis on Compensat ion
Event s to cover all th e usu al a rea s for claims resu lting from
variat ion order s, delays, ground conditions et c. In fact clau se10.1 of the core clauses r equires t he E mployer a nd Contr actor
to act in a spirit of mu tu al tr ust an d coopera tion.
7 Conditions of Contr act Stan ding J oint Committ ee, representing t he UK
Institution of Civil Engineers, Federation of Civil Engineering Contractors
an d th e Association of Consultin g Engineer s
8 Sir Michael Lat ham , 1994. Constructing th e Team . HMSO
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Scope
The En gineering a nd Constr uction Contr act (ECC) is not a
single cont ra ct, but a s uite of cont ra cts which s ha re a core body
of definitions an d int er -relationsh ips. The 2nd Edition wa spublished in November 19959. The NEC Pa nel has
subsequen tly been developing a sh ort form known as th e ShortCont ra ct. Un fort un at ely, this cont ra ct is n ot yet finalised,
alth ough publicat ion was an ticipated in J an ua ry 1999.
The inten tion of th e short cont ra ct is to provide an a ltern at iveto th e En gineering an d Const ru ction Contr act for works wh ich:
do not require sophisticat ed man agement techniques
compr ise str aightforwa rd work
impose low risks on both t he em ployer an d th e cont ra ctor.
The resultan t document is still under scrutiny by the pan el andextern al experts. Cur rent ly the 15t h Dra ft is just about t o be
fina lised. As a n a side, it is a salut ar y experience to observe th e
am oun t of expert at tent ion t ha t is necessar y to produce asound docum ent. It br ings home th e point t ha t ad hoc clauses
dra fted for individual project r equiremen ts a re n ot t he best
approach for developing a local construction industry, nomat ter how wort hy the intentions.
Main provisions
Curr ently, the Short Contr act has nine Clauses a nd 88 Sub-Clauses. In terms of depth of coverage it falls somewherebetween th e Minor Works Contr act and t he FIDIC Short F orm
of Cont ra ct. The docum ent was st udied by a nu mber of experts
involved in s ma ll cont ra ctor development to assess itsrelevance out side the UK mar ket10. Their conclusion wa s t ha t
th ere would be considera ble benefit in a dopting t his cont ra ct
because of its simplified form, and the opportunity fordeveloping a better an d more har monious r elationsh ip between
th e cont ra ctors a nd t he employers. However, as with th e MinorWorks Contr act, there were a nu mber of items th at would need
to be included to make t he cont ra ct viable for int ern at iona l use.Unfort un at ely, as with th e Minor Work s Cont ra ct, it was notstr aightforwa rd t o simply include extr a clauses without
distorting its int ention. The proposals a re st ill being considered
by th e drafting comm ittee.
9 The first edition pu blished in 1993 was k nown as t he New En gineering
Contr act (NEC)
10 St iedl et al, 1997.Note on the consultat ion d raft ICE S hort Contract.
MART Work ing Pa per No 11
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12 ILO/ASIST Technical Brief No. 5: Contract Documents
Possible improvements
Area s of the cont ra ct t ha t n eed reinforcement a re very similar
to those under the Minor Works Contract. The following points
ar e extra cted from MART Workin g Paper No 11.
To ensu re compliance with a labour-based a pproach wher eth is is governm ent or road a ut hority policy, it would help to
specify the k ey represen ta tive of the cont ra ctor on site a ndhis or her experience, as well as deta ils of int ended
equipment a nd labour components of the works . Ideal ly, we
suggest something as compr ehensive as F IDIC 4t h editionclau se 14 which allows proper monitoring of the pr oposed
meth od of work ing. This is one of th e prima ry instr um ents
for ensu ring tha t th e labour -int ensive aspects ar e beingadher ed to by the contra ctor.
A Clause similar to 18.1 of the ECC on hea lth a nd sa fety
would h elp considerably to protect worker s righ ts . Somecoun tr ies do not even h ave sat isfactory guidelines in th is
ar ea a nd it m ight be necessar y to specify them . It would
also be necessar y to include a clause similar to the F IDIC4t h edition clause 34 to cover gen era l conditions of labour .
Ther e is also need for a provision sim ilar t o opt ion N of th e
ECC for price adjustm ent for inflat ion. Even th ough typicalcont ra cts will not exceed a year, inflat ion even ts of 100%
mid-cont ra ct a re n ot u ncomm on. For exam ple, a
government may impose increases in official minimumwage rat es by more tha n th is amount with n o consu ltat ion
or notice.
Ther e is need for in clus ion of a pr ovision for a n a dvan ced
paym ent, a s with option J of the ECC. This is not so muchto provide for mobilisat ion, but to ensu re sufficient cash
flow so that sma ll-scale cont ra ctors can pay t heir labourwages, which a re t ypically 40% to 60% of th eir expend itu re.
These cont ra ctors will have very limited liquidity an d
usu ally be faced with prohibitive bank cha rges11.
Cur ren tly, it seems th at th ese provisions can only be allowed
for in th e Work s In form at ion section. The dra fters would not
approve the addition or modification of the actual Conditions.
Provisions for disputes
The m ost import an t a spect of this docum ent for th ose involvedin small contractor development is probably the provisions
un der section n ine for disput es an d term inat ion. In mu ch of th edeveloping world theEmployeris still usu ally the governmen t
in one form or other , and th e cont ra ctor is in a very weak
11MART Working Pa per No 2 found tha t ban k interest r ates were
between 15 and 48 % per an nu m in seven African an d Asian
countr ies sur veyed with labour -based roadworks projects.
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ILO/ASIST Technical Brief No. 5: Contract Documents 13
position regarding any form of negotiation. TheEm ployers
representative will also tend to be a govern men t em ployeera ther t han a n independent consultan t, and thu s have vested
inter ests. To compound t he situ at ion t he governm ent em ployee
is probably very poorly paid an d ma y seek mean s to
supplement his salar y. Thu s he may view even a smallcont ra ctor a s r elatively affluent an d a suita ble sour ce ofpotent ial revenue. The cont ra ctor can of cour se res ort t o th e
cour ts, but with t he govern ment ha ving a monopoly on
cont ra cts (an d probably undue influence in t he cour ts) th iswould not always be a wise move.
The role of independent adjudicator, to be nomina ted in th e
cont ract documen t, could be one way out of th is impasse. Itshould be much ea sier for a cont ra ctor t o seek h elp with out
resorting t o law, an d it might help to encour age cont ra ctorsth at some form of two-sided dialogue (oth er t ha n bribes)12 is
possible. However, it will not be easy to int roduce withoutcons idera ble cha nges t o existin g pra ctice. The key will be to getth is process accepted by governm ent agencies, and to agree th e
procedure for ident ifying an d rem un era ting th e adjudicat or. In
ma ny coun tr ies the consu lting sector is only sta rt ing todevelop, but sma ll firms ar e beginn ing to emerge, often sta ffed
by retired government officials who, while not equipped to
un dert ak e large scale supervision works, would be ideal toprovide adjudicator input s.
The a bove comm ent s also apply to the a djudicat or in t he F IDIC
Short F orm of Cont ra ct. However, in t he ECC Short F orm th eadjudicat or h as a mu ch higher pr ofile, an d mus t be appoint ed
at the st ar t of the contr act. In addition, ther e is no automaticrefer ral t o Arbitr at ion. If the adjudicators decision is not
accepted, the disput e is referred t o a Tr ibunal. The nat ur e of
th e Tribuna l must be specified in t he Works Inform at ion, an dma y be Arbitr at ion or a Binding Expert Decision or Disput ed
Review Pa nel. If there is no Tribun al specified, the m at ter willbe dealt with in th e law cour ts.
12 If this seems a little extreme it sh ould be noted th at FIDIC 4 th Edition
includes a specific optiona l clause covering bribes
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4 Conclusions
Both the FIDIC Short Form of Contr act and the N EC Short
Cont ra ct offer a tt ra ctive altern at ives to full FIDIC Conditionsof Cont ra ct for th e development of small an d labour -bas ed
cont r actors in t he r oad sector. The World Ban k Pr ocur ement ofWork s for Sm aller Cont ra cts is not significant ly less complex
tha n FIDIC, and is mainly geared to Intern ational CompetitiveBidding pr ocedures. The ICE Minor Works cont ra ct is rea lly
too limit ed in s cope for th e type of work en visaged.
The choice is thu s between th e FIDIC an d NEC cont ra cts, an drea lly comes down t o att itude a nd acceptan ce. Most engineers
actively involved in the developing world ar e more fam iliar
with t he FIDIC 4
t h
edition cont ra ct docum ent, which isessent ially th e 5t h Edition of the ICE Conditions of Contr act in
cont ent an d st yle. Most existing cont ra ct docum enta tion,especially in anglophone count ries, a lso reflects t he 4 t h Edition.
Many of th e term s alrea dy accepted as pa rt of the NEC fam ily
of cont ra cts will be un familiar out side th e UK. This is n ot tosay th at they ar e inappropriate, but just to recognise the need
for extens ive supporting guideline docum enta tion a nd t ra ining
to accompa ny an d encour age th eir intr oduction.
Fr om th is perspective the most cost effective appr oach m ay be
to concentr at e on t he F IDIC Short F orm of Cont ra ct, including
a set of Par ticular Conditions t ha t would be appropriate forsma ll cont ra ctor developmen t a s outlined in sections 3.4 and
3.5. It should a lso be feasible to ta ke a ccount of some of th ecomments from the MART Working Paper No 1113, and from
th e ILOs guidelines14, to agree on one addit iona l Condition to
ensure tha t labour -based techniques ar e adopted by thecont ra ctor where employment crea tion is a governm ent
priority.
13 Stiedl et a l, 1997. Op. Cit.
14 Bent all, Beusch & de Veen. 1998. Op. Cit.
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