Risk Allocation In Ccag.docx

ANALYSIS OF THE GENERAL CONDITIONS OF CONTRACT UNDER THE CCAG FORM OF CONTRACT

Contents 1. CCAG BACKGROUND ............................................................................................................................. 3 2.

THE STRUCTURE OF THE CCAG FORMS................................................................................................. 3

3.

PARTIES TO CONTRACT ......................................................................................................................... 3

4.

ANALYSIS OF SELECTED CLAUSES IN THE JICA CCAG FORM OF CONTRACT ......................................... 6 i.

Clause 1: Scope of Application .......................................................................................................... 6

ii.

Clause 2: Definitions, Interpretation................................................................................................. 6

iii.

Clause 3: Contract Parties ................................................................................................................. 6

iv.

Clause 4: Contract Documents .......................................................................................................... 7

v.

Clause 5: General Obligations ........................................................................................................... 7

vi.

Clause 6: Performance Security Outstanding Completion of Works - Retention – .......................... 8

vii.

Clause 7: Periods Countdown - Types of Notification .................................................................. 8

viii.

Clause 10: Contents and Nature of Price ...................................................................................... 9

ix.

Clauses 10.4 & 11.6: Adjustment of Prices. ...................................................................................... 9

x.

Clause 11.7: Default Interests (Delayed Payment) ......................................................................... 10

xi.

Clause 14: Settlement of Price of Unforeseen Works .................................................................... 10

xii.

Clause 15: Increase in the Volume of the Works ........................................................................ 10

xiii.

Clause 16: Decrease in the Volume of the Works....................................................................... 11

xiv.

Clause 17: Change in the Importance of the Various Types of Works........................................ 11

xv.

Clause 19.2: Extension of Completion Periods ........................................................................... 11

xvi.

Clause 18: Loss and Damage-Force Majeure .............................................................................. 12

xvii.

Clause 29: Construction Drawings-Calculation Notes-Detailed Studies ..................................... 12

xviii.

Clause 30: Changes Made to Technical Provisions ..................................................................... 13

xix.

Clause 46: Termination of Contract ............................................................................................ 13

1. CCAG BACKGROUND The Cahier des Clauses Administratives Générales [CCAG] General Terms and Conditions for Contracts financed by Japan ODA Loans is the Standard General Administrative Clauses (Standard CCAG) of the Standard Tender Documents for Works Procurement published by JICA in October 2012.

2. THE STRUCTURE OF THE CCAG FORMS  The CCAG comprises 52 distinct clauses which are clustered into 7 sections (A to G). o A. General o B. Prices and Settlement of Accounts. o C. Periods o D. Execution of the Works o E. Acceptance and Guarantees. o F. Termination of Contract o G. Coercive Measures - Settlement of Disputes - Entry into Force 

These notes will give a general over view of several key clauses among these, and describe the Contractor’s Obligation and the Contractor’s Risk under each clause. Particular focus will be given to Clauses which relate to Payment, Force Majeure, Variations, Additional Works and Time for Completion.

3. PARTIES TO CONTRACT Employer

Employer's Rep

Engineer

Bureau de Controle

CONTRACTOR

SUB CONTRACTORS

SUPPLIERS

Figure 1: Standard Structure of the CCAG Contract

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a. Employer (Maître d’ouvrage) Has the right of possession; is the Owner of the works Links with the Bank and approves Payment Takes over the works b. Employer’s Representative (Maître d’ouvrage délégué) This is the person to whom the Employer has delegated his powers by a delegation agreement which lays down the conditions thereof. c. Engineer (Maître d’œuvre) The Engineer is a service provider, a natural or legal person, public or private entity engaged for purposes of designing the project (if applicable), He is tasked with ensuring compliance with architectural, technical and economic requirements of the execution of the Contract, Directs and control execution of works and to propose their taking over and payment, He assists the Employer during the Defects Liability Period Carries out the preliminary design, conceptual summary, and prepares the contract documents. d. Technical Controler (Bureau de contrôle/contrôleur technique) This party is only mandatory for buildings that will host the public (and for high-rise buildings) or if the Employer has expressly provided for in the contract. The Technical Controller/Supervision Office acts under a contract with the owner. If instructions are given directly to the Contractor, they should equally be transmitted the Engineer with a copy, if necessary, to the Employer. Especially on matters touching on time and / or construction costs. His role is to provide advice to the Employer on technical issues that may be encountered in the execution of the work: o by controlling the execution on the building site, o by drawing up a report before the work starts and by checking before the handing over, o intervening at the request of the Employer during the Defects Liability Period. The technical controller is subject to the decennial responsibility within the limits of his obligations. e. Technical Design Office (Bureau d’études techniques) His role depends on what is entrusted to him by the Employer for: o Design of a specific element of the project, o Provide concrete solutions on a specific problem. f. Contractor (Entrepreneur) CCAG only deals with construction roles. In case of design-build contracts, the roles and responsibilities of the Contractor are more extended. a) Traditional Construction Contracts o He performs the work provided for in the contract and assumes his duty to advise. o He chooses the materials and assembles them.

o o o

He carries out the construction in accordance with the directives received and to technical norms. Is to adhere to all timelines. He assumes the legal guarantees and contractual responsibilities (including warranty period and decennial liability).

b) Special Design-Build Contracts In this arrangement, the design role in the Contract is entrusted to the company and can be organized according to several contractual schemes: BASIC SCHEME

JV GROUP SCHEME

SUB CONTRACTING SCHEME

EMPLOYER

EMPLOYER

EMPLOYER

CONTRACTOR: Designer and Builder

Group of Companies Designer and Builder

CONTRACTOR:

One sole entity carries out the role of design and build

The design is subcontracted to a design office.

4. ANALYSIS OF SELECTED CLAUSES IN THE JICA CCAG FORM OF CONTRACT This section offers a brief analysis of the key clauses of the CCAG contract relating to time, payments, variations and cost. i.

Clause 1: Scope of Application Overview

This clause gives the scope of the application of the CCAG with regards to the works financed by the Bank as defined in Article 2.1 of CCAG. The clause also prohibits the amendment of any clause save for the mentioned deletions or amendments in the CCAG. ii.

Clause 2: Definitions, Interpretation Overview

This Clause gives the definitions of the Standard terms, Contract, Contract Amount, Parties to the Contract, and the Site. It also defines what constitutes an Instruction. The mode of interpretation of the clauses and the words used is stated briefly. iii.

Clause 3: Contract Parties Overview

This Clause refers to the Particular Conditions [CCAP] for definition and designation of the various parties to the Contract. Contractor’s Risks   

The CCAG does not go to great lengths to elaborate the roles of the Parties to the Contract. There are no specific provisions for the duties expected of the different parties and presumably this should be taken from Civil Code precedent or industrial practice. In the case of sub-contracted works, the Contractor remains fully responsible for his acts, defaults, failures as well as those of his representatives, employees and staff. Contractor’s Obligations

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The Contractor ought to present information in the bid that fully identifies him and his legal representatives. Joint Venture Contractors should undertake a JV Agreement to be considered as a JV. The JV is considered as a unit and each should mitigate the failures of the other party. The Clause also states that The Contractor cannot sub-contract the entire Contract. All parts of the Contract require prior agreement of the Employer, when sub-contracting is greater than ten (10) percent of the Contract Amount The Subcontractors designated in the Contract are deemed to have been approved ab initio.

iv.

Clause 4: Contract Documents Overview

This clause designates the language of the contract and hierarchy of contract documents. The Particular Conditions (CCAP) are to give further detail on these aspects. The Clause gives conditions for submission of documents in two (2) copies from the Employer or the Engineer. The Contractor will make copies at his own cost. Contractors Obligations  

The Contractor should provide three (3) copies of all the drawings and other documents under his responsibility under the contract. Upon delayed issuance of documents, the Contractor should give notice indicating the characteristics of the required documents and the date required of these submissions. Contractors Risks

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v.

In case of errors or inaccuracies in Employer-issued documents, the Contractor is likely to suffer delay. In case of delays in issuance of documents necessary for the implementation of the works, the contractor may suffer delay to progress. The period for the Employer is given to respond to the Contractor’s request for information as “reasonable” which is an open window of risk. The Contractor is entitled to compensation if the delays by the Engineer/Employer bears risk on the part of the Contractor. However, this will not apply in cases where the Contractor is himself at default.

Clause 5: General Obligations

The Contractor is deemed to have submitted a “complete” offer based on information given to him. The offer should be adequate for completion of works, repair of defects as described in Clause 10.1 of the CCAG. The Contractor is expected to have inspected the site and its environs for o o o o

Topographic conditions, Hydrological and climatic Scope of Works Access to site.

The clause also provides for conditions on execution in accordance to Contract, Respect of Laws, Confidentiality, Site meetings and construction method. Contractor’s Obligations

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The Contractor is responsible for security of site, security of personnel and security of the works during execution. The Contractor is responsible for environmental management.

Contractor’s Risks 

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This Clause assigns the responsibility to confirm the adequacy of the site information upon the Contractor. It is often impractical to obtain all topographic and hydrological conditions before the commencement of works. The Contractor is expected to have obtained all information relative to all potential risks.

Clause 6: Performance Security Outstanding Completion of Works - Retention – Responsibility and Insurances

vi.

Overview This clause covers the performances and securities expected of the Contractor. Contractor’s Obligations   

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vii.

The Contractor is expected to furnish the Employer with a bank guarantee for proper performance of the contract. The Contractor is expected to furnish the employer with an Advance Payment Guarantee The Contractor is expected to furnish the Employer with several Insurance policies, namely: o Third Party Insurance o All-Risk Insurance o Work Accident Insurance o Site Risks Insurance o “Decennial Responsibility” Insurance All these insurances ought to be subscribed and furnished to the Employer before the commencement of works.

Clause 7: Periods Countdown - Types of Notification Overview

This clause specifies that all periods prescribed in the Contract are regarded to commence from the day after the event that serves as a starting point for these events. It outlines the nature of counting months and what happens when days fall on public holidays. It prescribes that days are counted as calendar days, and months are counted from day-of-the-month to day-of-the-month. It further states that for days which fall on public holidays, the period shall be extended to the next working day. Contractor’s Obligations 

The Contractor shall ensure that the documents received are acknowledged against receipt in order to designate the official starting date of a period.

viii.

Clause 10: Contents and Nature of Price

Overview The clause is divided into five sub-clauses which tackle the contents of price, describes the unitprice and lumpsum prices, elaborates on breakdown of prices, price adjustment and taxes and duties. Prices shall be deemed to include all expenses resulting from the execution of the Works, including overhead costs and all taxes, duties and charges except as otherwise specified in the Particular Conditions. The prices of the Contract shall be settled in the currency or currencies in which the amount of the Contractor's bid was expressed. Prices are assumed to provide the Contractor with a margin for risks and profits.

Contractor’s Risks 

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ix.

The Clause considers the following as risks which are “normally foreseeable by a competent Contractor”: a) natural phenomena, b) operation of public services, c) pipes, ducts and cables of any kind, and the Works required for moving or altering these Works, d) simultaneous works under execution by other Contractors, e) the enforcement of tax and customs regulations, f) exchange rate risks The computation of these risks into the Contractor’s estimates at tender has to be intricate.

Clauses 10.4 & 11.6: Adjustment of Prices.

Overview These Clauses provides the procedure and requirements for adjustment of the amounts payable to the Contractor. The adjustment is to be carried out by applying the “REV” coefficient calculated in accordance with the formula and method stated under Clause 10.4. In the event that the indices and foreign currencies of payment are from different countries of origin, a correction coefficient shall be specified in the Particular Conditions of the Contract. Clause 10.4 states that if the identification of official indices for price adjustment is delayed, a provisional adjustment shall be calculated on the basis of the latest known values of the said indices and when the indices are available the adjustment shall be recalculated accordingly.

If there is delay in completion of the works attributed to the Contractor, the services performed after the Contract Completion Period shall be paid on the basis of the adjusted prices on the day of expiry of the Contract Period. Contractor’s Risk(s) 

x.

The possibility of high indices at base date, leading to consequent negative price adjustments.

Clause 11.7: Default Interests (Delayed Payment)

This Clause stipulates the Contractor’s entitlement in the event of delayed payments. The Contractor shall be entitled to receiving interest at the rate provided for in the Particular Conditions of Contract, unless the Contractor has failed to provide the advance payment guarantee or the documents relating to the breakdown of prices. Contractor’s Obligations 

xi.

Submission of a breakdown of prices i.e. lump sums & unit prices

Clause 14: Settlement of Price of Unforeseen Works

Overview The Clause addresses works that are not priced in the Contract, and whose execution is requested by the Employer. Such works are to be requested through an Engineer’s service order, and the Contractor shall be required to execute them provided the Final Contract Amount shall not be changed by more than 10%. New prices for these works shall either be unit prices or fixed prices. Contractor Risk(s) 

The Contractor is exposed to the risk of additional costs arising from unforeseen works that fail to change the Final Contract Amount by the required threshold of more than 10%.

Contractor’s Obligations 

xii.

Submitting his comments on provisional prices determined by the Engineer, within 30 days after the issuance of the Engineer’s service order notifying the Contractor of the prices. Clause 15: Increase in the Volume of the Works

Overview The Clause outlines the requirements and procedures to be followed in the event that there is an increase in the volume of works beyond that envisioned in the Contract. The Contractor is required to complete the works under the Contract regardless of the increase in volumes.

If the volume increase is greater than 25% of the initial volume, the Contractor shall be entitled to compensation. The Contractor is required to notify the Engineer in advance, of the probable date the volume of the works will reach the initial volume. Works beyond the initial volume shall only be carried out after issuance of an Engineer’s instruction. Contractor Risk(s) 

The Contractor is exposed to the risk of additional costs arising from increase in the volume of works that fail to cause an increase greater than 25% to the initial volume.

Contractor’s Obligations 

xiii.

Notifying the Engineer at least 30 days in advance, of the probable date the volume of works will reach the initial Contract volume. Clause 16: Decrease in the Volume of the Works

Overview The Clause provides that, in the event there is a decrease in the volume of the works that’s greater than 25% of the initial volume, the Contractor shall be entitled to compensation. Contractor Risk(s) 

xiv.

The Contractor bears the risk of losses likely to be incurred due to decrease in the volume of Works less than 25% of the initial volume.

Clause 17: Change in the Importance of the Various Types of Works

Overview The Clause addresses the steps to be taken when there is change in the items of works settled on unit prices, resulting from a service order or circumstances not caused by the Contractor. The Clause provides that, if there are modifications to such types of works, resulting to changes in quantities in the BOQ of either an increment of 30% or a decrease of 25% of the Contract amounts, the Contractor shall be entitled to compensation. These provisions however do not apply to types of works whose amounts in the Contract BOQ and the Final Statement of Works, are lower than 5% of the Contract Amount. Contractor Risk(s) 

xv.

The Contractor shoulders the risk of losses and expenses likely to be incurred as a result of increased or decreased quantities of works that do not meet the percentages threshold set out. Clause 19.2: Extension of Completion Periods

Overview This Clause outlines events entitling the Contractor to the extension of the completion period of the Works, arising from actions of the Employer, extremely bad weather conditions and force majeure. Contractor Risk(s) 

xvi.

The Contractor bears the risk of delays arising from bad weather conditions determined to be foreseeable as per the threshold set out in the Particular Conditions of Contract.

Clause 18: Loss and Damage-Force Majeure Overview

Clause 18 provides a guideline for dealing with loss and damage. This Clause determines circumstances under which the Contractor is entitled or not entitled to compensation for loss and damage. The Contractor shall not be awarded compensation for loss and damage caused by his negligence or mishandling. Compensation shall be awarded in the event of “Force Majeure” (unforeseeable events or circumstances which are beyond the control of the Parties and which makes the execution of the works under the Contract impossible). The Particular Conditions of Contract shall define the threshold for weather and other natural phenomena which are deemed to constitute an event of force majeure. Contractor Risks 

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The Contractor shall at its own expense and risk, mitigate against loss and damage to supplies, equipment and facilities at site as well as works under construction that may be caused by storms, floods, swells and other natural catastrophes associated with the work environment that are foreseeable. No compensation for total or partial loss of Contractor’s floating equipment in the event of occurrence of an event of force majeure, as such is deemed to be covered by insurance. The duty to minimize delay solely lies with the Contractor. Contractor’s Obligations

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xvii.

Issuance of notice to the Employer after the occurrence of a case of force majeure, within a period of 14 days. Issuance of notice of termination to the Employer in the event he opts to terminate due to extended delays exceeding the period of 60 days

Clause 29: Construction Drawings-Calculation Notes-Detailed Studies Overview

This Clause outlines the provisions for Construction Drawings, Calculation Notes and Detailed Studies. It stipulates that unless otherwise provided in the Contract, the Contractor shall draw up the documents required for the execution of the works e.g. Construction Drawings, Calculation Notes and Detailed Studies on the basis of the Contractual documents. The Clause specifies that the documents shall conform to the Technical Specifications in the Contract and shall be subject to the approval of the Engineer. Contractor Risks 

The Contractor shall be liable for the consequences of any measurement errors. Contractor’s Obligations

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xviii.

Notify the Engineer of any errors, omissions or contradictions in the Contractual documents or other documents provided by the Engineer.

Clause 30: Changes Made to Technical Provisions Overview

This Clause prohibits the Contractor from making changes to the Technical Provisions of the Contract by himself. The Contractor is only allowed to make changes upon issuance of an Engineer’s instruction, these changes are to be executed at the Contractor’s expense. Contractor Risks 

The Contractor is required to rebuild at his own expense, Works that do not comply with the Contractual Provisions. Contractor’s Obligations

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xix.

Rebuilding works that do not comply with the Contractual Provisions, upon instructions from the Engineer.

Clause 46: Termination of Contract Overview

This Clause stipulates the grounds for termination of Contract by the Employer. It articulates the measures to be taken by both parties, while further highlighting the terms and conditions of compensation in the event of termination. Contractor’s Obligations

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Submission of a duly justified written request [construed to be a claim], within 45 days counted from the notification of the general statement. Repayment of the portion of fixed advance payment that has not been repaid, in the event that termination is under Clause 47[Death, Disability, Judicial Settlement or Liquidation of Contractor’s Property] or Clause 49[Coercive Measures]. Implementing measures to be taken prior to the closure of site, as shall be determined by the Project Manager.