contract docs[1]

8/3/2019 Contract Docs[1]

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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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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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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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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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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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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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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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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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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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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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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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14 ILO/ASIST Technical Brief No 5: Contract Documents

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.