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/ IIQS1INTEGRITY INNOVATION ACCOUNTABILITY

www.iiqsglobal.org

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/ IIQS3

Let me begin with a quote by Dr APJ Abdul Kalam,“You have to dream before

your dreams can come true“. Easy to dream, but its realization requires inspiration.

Our dream has finally come true through IIQS Magazine & Annual Event. Now the

proud moment has come to unveil IIQS Magazine, “IIQS Annual Insight 2013” in

the glorious function “IIQS Annual Regale 2013”

As you all know, the seeds of IIQS were sown in 1998 and now this great move-

ment is celebrating its 15th anniversary. It is hard to believe that IIQS has achieved

so much within this short time. It is time to take stock of the goals we have set for

IIQS and the progress we have made towards them. I am a great believer in the

importance of setting goals that are high but realistic. Success is a journey, not a

destination.

IIQS Annual Insight 2013 has attempted to chronicle the IIQS path to glory, by

glimpse of the CPD events, matrixes, workshops, articles, achievements, pro-

grammes and cultural events .IIQS Magazine is just like opening the window when

it rains. Enjoy the rains of IIQS through this magazine. Read the articles, events and

enjoy the photographs. Hope IIQS Annual Insight 2013 takes a nostalgic look at the

event of the IIQS in the recent years.

IIQS Annual Regale 2013 is going to be a great event, I wish all the best to the event

team members also, I want to say “thank you” for their untiring efforts to the success

of sponsorship journey. We have been greatly supported by advertising and spon-

sorship partners, who were the glue that held the pages, and I am sure our dream

may not have come true without their support.

IIQS Magazine and Annual Event is the outcome of a glorious teamwork and

combined inspiration. I would like to thank from the bottom of my heart to all the

members and friends for their valuable contribution to bring out this publication.

And special thanks to the Editorial Team who have worked creatively with dedica-tion throughout this journey. This Editorial note will not be complete if I do not

thank the Board of Directors for entrusting me with this work and all their encour-

agement.

We truly hope that our readers enjoy our humble effort.

Sinimol Noushad,BTech, MBA, MRICS, MIS

IIQS Magazine Chief Editor & UAE Publications Lead

Indian Institute of Quantity Surveyors

2013 IIQS

Editor's note

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MESSAGES..........................................................................................................................................................(07-13)

VISION / MISSION /MOTTO........................................................................................................ .........................(15)

HISTORY....................................................................................................................................................................(17)

IIQS GLOBAL BOARD OF DIRECTORS..............................................................................................................(19)

IIQS UAE MEMBER COUNCILS................................................................................................................... ........(20)

IIQS MEMBER COUNCILS INDIA AND QATAR.......................................................................................(21-23)

OUR VISION FOR NEXT 5 YEARS......................................................... ..............................................................(25)

CONTINUING PROFESSIONAL DEVELOPMENT (CPD)...................................................... ..................(27-31)

IIQS MATRIX EVENTS................................................................................................................... ..................(33-37)

NETWORKING JOB OPPORTUNITIES........................................................................................................(38-39)

OUTDOOR FAMILY EVENT 2012..................................................................................................................(40-41)

FAMILY DINNER 2012................................................................................ ......................................................(42-43)

IIQS – INDOOR CRICKET 2012.................................................................................................... .................(44-45)

CO, OPERATIVE AGREEMENT WITH AIQS ............................................................................................. ......(47)

ARTICLES............................................................................................................................................................(49-83)

MEMBER'S DIRECTORY.......................................................................................................... ........................(85-89)

GLOBAL RECOGNITION................................................................................................................................. .....(92)

MEMBERS ACHIEVEMENTS ......................................................................................................................... ......(93)

TESTIMONIALS FROM IIQS GLOBAL MEMBERS....................................................................................(96-97)

MAGAZINE AND EVENT COMMITTEE...........................................................................................................(98)

Contents

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Greetings to one and all,

I feel humbled and at the same time take great pride in addressing you through the Indian

Institute of Quantity Surveyors (IIQS) yearly magazine in Year 2013.

Neil Armstrong upon reaching the moon had said One small step by a man, one giant leap

for mankind.

This comes true in the case of IIQS, which was started in 1998 by a small group of 8 mem-

bers to help each other through knowledge sharing. From 1998 to 2006, the association

(IQSA) continued their mission within Dubai and helped many professionals to upgrade

themselves professionally. Years 2007 to 2011 were truly remarkable when the effort of this

group started yielding fantastic results. Many of members got the corporate membershipof prestigious global bodies and also many of our members got into the senior positions

in their profession. Also, many of our members completed their master degree in Quantity

Surveying, Construction management and Construction Law etc.

In the milestone year of 2011, IQSA was renamed as Indian Institute of Quantity Surveyors

(IIQS) and successfully incorporated under section 25 of the Companies Act, 1956 on 14

October 2011 in Mumbai, India. Since 2011 onwards, after successful incorporation under

Companies Act in India, we initiated our CPD activities and formation of Member Councils

in India in various cities, namely, Delhi, Mumbai, Hyderabad, Chennai, and Bangalore etc.

Also, within the Gulf region, CPD and formation of Member Council has been initiated in

Doha.

By engaging in the activities of IIQS, the Indian Quantity Surveyors, slowly but surely, are

becoming world class leaders in the field of Contracts & Commercial Management of majorprojects around the world. This became possible due to motivation and guidance provided

by IIQS to these members to enhance their knowledge in Quantity Surveying by acquiring

higher academic qualification in the field of quantity surveying, construction management

and construction law.

Also, one of the major contributions of IIQS toward members’ professional growth is the

regular CPDs (Continuing Professional Development) that IIQS has been organizing on a

regular basis in UAE as well as in many cities in India, such as Delhi, Mumbai, Chennai,

Hyderabad, Bangalore etc. These CPDs allowed our members to enhance their knowledge

in the various disciplines as well as gave them the opportunity to be part of a large network

and get benefitted thereby.

Dear fellow members, let us march forward together with strong courage and moral

principles for greater success in the years to come.

Good luck!

MR. VARUGHESE MATHEW

FRICS, FCIOB, MCIArb,

IIQS Director & Global President

Neil Armstrong

upon reaching the

moon had said

“One small step by

a man, one giantleap for mankind”

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2013 IIQS

IIQS / 8

Indian engineers and

Quantity Surveyors

have played an

important role in

UAE’s

development. All

major and Iconic pro-

jects in this Country

have some imprints

of their minds and

hands

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2013 IIQS

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Indian Institute of

Quantity surveyors

has been an

important body

providing a platformfor engineers and

quantity

surveyors to share

their

professional

experiences.

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2013 IIQS

IIQS / 10

We are proud to

have a shared

purpose with the

IIQS, given our

objectives for

providing

professional

support and

welfare to our

respective

memberships

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It gives me great pleasure to deliver this message to the Indian Institute of Quantity

Surveyors (“IIQS”) on the occasion of their Annual Celebrations in the UAE.

It was impressive to see the IIQS efforts and continuing success in organizing regular

CPD events in order to keep its membership professionally developed continuously.

The Australian Institute of Quantity Surveyors (“AIQS”) which promotes best practice

and advancement of the Quantity Surveying profession, around the globe, encour-

ages such efforts and therefore would applaud the success of IIQS in this area.

Many members of the IIQS are also members of the Australian Institute of Quantity

Surveyors. As the Middle East Representative of the Institute, I have close contacts

with such members and am aware about their keen interest to continue their edu-

cation further and enhance their knowledge in order to provide a professional and

value added service to the construction industry in the UAE, which too needs to be

applauded. IIQS has once again had a very successful year.

With significant success rates at achieving corporate memberships of other profes-

sional institutions such as RICS and AIQS by IIQS members, you have more than

sufficient reasons to celebrate another year’s success and it is a privilege to convey

in this instance, the Institute’s best wishes to the Committee of the IIQS, and also to

IIQS members, their families and friends who would be joining in these celebrations.

Have a wonderful occasion!

Prof. Indrawansa Samaratunga

AIQS Middle East Representative

It was impressive to

see the IIQS efforts

and continuing

success in

organizing

regular CPD events in

order to keep itsmembership profes-

sionally developed

continuously.

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Message from the Chartered Institution of Civil Engineering Surveyors - UAE Region

It is a source of tremendous satisfaction and pleasure that, on behalf of the CICES

UAE Region, I am able to congratulate the members of the Indian Institute of Quantity

surveyors (IIQS) on the occasion of launching their inaugural IIQS publication, ‘IIQS In-

sight 2013’,. The IIQS has enough reasons to publish such a journal duly documenting

the year’s achievements, due to the sustainability of the membership, the effective and

efficient continuing professional development programme and the record success of

the massive number of IIQS members who gained professional membership with world-

recognized institutions.

We look forward to a continued professional association with the IIQS as one of the lead-

ers among construction professional Institutions in the Arabian Gulf region and once

again we wish you every success on the IIQS journey towards professional excellence.

Dhammika T. Gamage

NDT(Civil Eng.), I Eng., ICIOB, ACIArb, AIQSSL, MRICS, FIIESL, FACostE, FAIQS, FCIn-

stCES

Chairman - Chartered Institution of Civil Engineering Surveyors - UAE Region

IIQS achieved

record successin Contributing in

massive number of

IIQS members who

has gained profes-

sional membership

with world-recog-

nized institutions.

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2013 IIQS

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I am happy to know that the Indian Institute of Quantity Surveyors is celebrating their

15th Anniversary.

IBPC Sharjah is glad to have IIQS under our umbrella and pleased to support IIQS

in all their activities.

I am very impressed with the activities of the IIQS especially the zeal and enthusi-

asm for expanding your wings for the cause of your fraternity, with a vision to share

and develop knowledge among fellow Indian Engineers, Quantity Surveyors, Esti-

mators and Cost Engineers.

On behalf of The Chairman and Board members of IBPC Sharjah, I congratulate

IIQS for their excellent work and on the occasion of the release of their first Annual

Magazine.

I take this opportunity to wish the Management and the esteemed members of IIQS

all the very best and great years ahead.

Sripriyaa

Director General

It was impressive to

see the IIQS efforts

and continuing

success in

organizingregular CPD events in

order to keep its

membership profes-

sionally developed

continuously.

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2013 IIQS

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Vision

To establish and maintain a high standard of professional competence and integrity

by limiting membership to persons who have prescribed by, or acceptable to, the

Institute and who have satisfied the requirements of training, practical knowledge,

experience and integrity prescribed by the Institute.

Mission

The Mission of the Institute is to ensure professional advancement of Engineering

and Quantity Surveying Professionals in the Property Development and Construction

Industry, so that they can contribute more effectively in the ongoing development

in the construction sector worldwide and particularly in India, as well as to share

their knowledge and experience with the fellow professionals.

Motto

Lighted to Learn & Live

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History

Initiated in December 1998, Indian Institute of Quantity Surveyors (IIQS) formerly known as Indian Quantity

Surveyors (IQSA) is a non-profitable professional body registered in India with a vision to share and develop

knowledge among the fellow Indian Engineers, Quantity Surveyors, Estimators, Cost Engineers, Contract Admin-

istrators and other similar professionals.

IIQS was initially started by a few members, however after organizing CPD (Continuing Professional Develop-

ment) events on a monthly basis, the strength started to increase with every meet. IIQS realized that Indian

Engineering degree does not adequately cover the subjects such as Contract Procedure, Finance and Develop-

ment, Project Cost Control, Dispute Resolution, Construction Law, Risk Management etc., which are essentially

required for effective commercial management of the construction contracts at a global level.

Accordingly, a smaller study group was formed with an aim of upgrading skills by enhancing their qualification

by pursuing further studies from internationally accredited universities, as well as arranging regular technical

seminars, wherein industry experts share their knowledge with the members. As a result, over the years, IIQS

has grown and many of its members have been successful in upgrading to post graduate qualification and have

attained professional membership from some of the most respected professional Institutions in India, UK, US,

Australia, etc. Subsequently many members have risen to key positions in their respective fields.

In 2007, IIQS took a giant step by implementing high ethical principles, bylaws and logo. IIQS logo has a burn-

ing candle, which signifies giving light to the world. Our Motto is ’Lighted to Learn and Live’. It is the collec-

tive aim and desire of IIQS that its members become self-motivated and take pride in doing things rightly and

taking decisions based on strong ethical values.

IIQS has monthly seminars, Matrix workshops for young engineers to attain chartered membership with profes-

sional bodies, Annual cricket events with other QS team and RICS teams. In addition, various study groups, CPD

events, mentoring sessions, sports events are actively organized for the benefit of its members. IIQS is closelyassociated with number of International professional bodies such as Royal Institution of Chartered Surveyors,

Australian Institute of Quantity Surveyors, Chartered Institute of Buildings, Chartered Institute of Arbitrators,

AACE International, Institution of Surveyors India etc.

IIQS foresee attaining Chartered status for Quantity Surveyors in India in near future.

History

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IIQS GLOBAL BOARD OF DIRECTORS

MR. PAUL BANKALA Director & GlobalProfessionalDevelopment Vice Chair

MR SYED ASLAMDirector & Global AuditCommittee Chair

MR. RAMARAO KILARIBoard Member

MR. HIREKERDirector & Global AuditCommittee Vice Chair

MR NAVEEN KUMARDirector &GlobalMembership CommitteeChair

MR.GANESHAN GDirector &GlobalGovernance Committee

Vice Chair

The Man with Wise and

Cautioned Ap- proach

THE CAPTAN

The BindaasMan

The Seasoned Man

The Manof Rules Tough at

Work Softat Heart

Loves Cocktail

of Serious

Work and

Fun

No-Nonsense Task Master

MrPerfect

MrSimple

The GreatAdvisor

The Charmerof IIQS

.Mr Smart

The AdorableProfes-sor

MR FRANKLIN JOSEPHDirector & GlobalGeneral Secretary

MR. E.V. JOHNSON NEILDirector & Global

Vice President

MR. BASVARAJ BETHDirector & GlobalEvent Chair

MR. VARUGHESEMATHEWDirector & Global

President

MR SAJEETH SIDHARTHANDirector & Global

Awarding Committee

Chair

MR.RAMESH PALIKILA Director & GlobalProfessional DevelopmentChair

MR.PAWAN KUMARMAMIDIBoard Member

MR KASI VISWANATHANDirector & GlobalGovernance CommitteeChair

MR. JACOB JOBYDirector & Global Execu-tive Director

MR.DHARMENDARPARDASANIDirector & Global

Vice President

Front Row Left to Right

Back Row Left to Right

Not in Picture

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2013 IIQS

IIQS / 20

UAE Member Council 2012

UAE Member Council 2013

MAHESH BUTANI Abudhabi Representative

RITU SUBODH DASNews Letter

SINIMOL NOUSHADPublication Head

PARTHARAJAN PILLE Matrix Support

BINU C NINAN WebCo-ordinator

PAUL BANKALA General Seceratary

SAJEETH SIDHARTHAN Chairman

MATHEW VARGHESEPast Chairman

JOHNSON NEIL Vice Chairman

DHARMENDAR PARDASANI Vice Chairman

PAVAN MAMIDITreasurer

Mr. MAHESH BUTANI Abu Dhabi CPD Event Lead

MR.GANESHAN GDirector &GlobalGovernance Committee Vice Chair

MR. PAUL BANKALA UAE General Seceratry

MR KASI VISWANATHANDirector & GlobalGovernance Committee Chair

MR SAJEETH SIDHARTHANUAE ME Chairman

GOVINDARAJU RATHODUAE Events Support

MR.PAWAN KUMAR MIMIDIUAE Treasurer

REKHA RAMESHMembershipDevelopmentManeger

SINIMOL NOUSHADUAE Publication Lead

AJITHNews Letter

MR SYED ASLAMUAE Finance & Audit Controller

MR. E.V. JOHNSON NEIL UAE Vice Chair

MR FRANKLIN JOSEPHUAE Sports/Events

MR. BASVARAJ BETH Abu Dhabi Head of Professional& Membership Development MR. RAMARAO KILARI

Web & IT ManagerMR.RAMESH PALIKILA UAE & ME Head of Training/Membership Development





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Delhi Member Council

Member CouncilsIndia and QatarIIQS India Member Councils were launched in May

2012 and it received a warm welcome from the

professionals in india. First IIQS Member Council was

formed in New Delhi and followed with several Mem-

bers Councils in various metro cities including Mumbai,

Hyderabad, Chennai and Bangalore etc. These

Member Councils are organizing CPD workshops,

seminars etc. periodically in their respective cities.

Quantity surveying profession is still not very well known

in India. However,with passage of time, the industry

has realized the importance of Quantity Surveyors in

construction projects. The construction industry experts

along with some of QS related Professional Institutes

are working together to develop the QS profession in

India.

Member Councils in India are committed to develop

the QS profession and to ensure that members attain

the professional standard of the global standards with

support of IIQS activities.

Mumbai Member Council

IIQS Delhi Member Council Launched In May 2010

under the leadership of Mr. Naveen & successfully

conducted two CPD Events.

Franklin is heading the Mumbai MC with a great sup-

port from the leadership of Mr. Govind Rathod and

Mr .Saleem Merchant and his team from Mumbai.

Mr. Ajith Philips from Dubai presented a CPD topic

on “Bonds, insurance and securities and their impor-

tance in Construction Contracts “in the first CPD. Lat-

er, Mumbai MC conducted two professional CPDs in

2012 and will formalize the MC in 2013.

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Tel : 04 – 298 3206, Fax: 04 – 298 3207. E-mail: [email protected], Website: www.araruty.com

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ous presence in U.A.E since then.

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Hydrabad Member Council

2. Hyderabad Member Council Leads Data :

Ramesh Palikila is heading the Hyderabad MC with a great

support from the leadership of Mr. Karthikeyan , Executive Di-

rector of Langdon and Seah Cost Consultants and his team

from Hyderabad. IIQS has conducted a professional need

analysis in 2011 with NICMAR students and core QS profes-

sionals. With the results of this analysis and feedback from

NICMAR students and QS professionals, IIQS inaugurated first

CPD event in August 2012 with a successful collaboration with

CIOB( UK) and NICMAR. In March 2013 , Hyderabad MC con-

ducted a professional workshop on “ Post Contract Adminis-

tration “ with support from Aparna Constructions Commercial

team. IIQS Hyderabad MC will do some more developments

soon to help QS professionals with our vision with the help of

NICMAR and Hyderabad construction industry professionals.

Mr. Kumaresh Murthy is leading the Chennai MC with a great

support from his team from Chennai under the leadership of

Mr. Kasi Viswanathan and Mr. Johnson Neil from Dubai.

Mr. Sankar from Langdon and Seah presented a CPD topic

on “ Role of a QS profession in India and value addition to

the industry “ in the first CPD. Mr. P.H. Aravindh Pandian

Senior Advocate , Additional Adv. General of Tamilnadu at-

tended this event as a Chief Guest and his valuable guide-

lines added a great value to this CPD event. Later, Chennai

MC conducted two professional CPDs in 2012 and will for-

malize the MC in 2013.

Mr. Jacob Joby is leading the Bangalore MC with a great

support from his team. Mr. Darshan Tededesai from Gleeds

Hooloomann presented a CPD topic on “ Procurement

Strategies “in the first CPD. Mr.A.N.Prakash has attended this

event as a Chief Guest and his valuable guidelines added

a great value to this CPD event. Currently Bangalore MC is

planning to conduct future CPDs and will formalize the MC

in 2013.

IIQS conducted a need analysis of CPD events in Doha in

November 2012 under the leadership of Mr. Dharmendar

Pardasani and Mr. Ramesh Palikila from IIQS Global Board.

Approximately 40 members attended this event. Mr. K.V.R.

Prasad, Mr.Sandeep , Mr. Avinsah and Dr. Binu Varghese are

currently leading this Doha MC. In February 2013, Doha MC

has conducted first CPD event to from IIQS Matrix forum in

Doha with the help of the above lead members and around

45 members got benefit from this professional event.

Qatar Member CouncilBangalore Member Council

Chennai Member Council

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Our vision for next 5 years is: To increase our membership base substantially in India and other Gulf

countries

To create awareness of Quantity Surveying profession in India

To create awareness in Engineering colleges in India that they need to

start the degree courses in Quantity Surveying

To ensure that we continue to organize CPD activities for our members

To ensure that we organize regular social events for our members since

we consider that it is also a core part of our vision to serve our members.

To provide a fully developed website to our members wherein they can ac-cess the CPD notes of all previous seminars and other webinars etc, along

with the full directory of our members.

To certify our members with appropriate membership grades such as MI-

IQS, CIIQS, FIIQS etc.

To ensure that our members follow the ethics of highest standards. This

is being ensured by including ethics as one of the mandatory competencies

for achieving the membership grade.

Most importantly, to give back to the society by engaging in some charity

works

Our vision

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Subject Month

“Coping up with Recession” 28 April 2010

“How to make Target Cost Contracts Work” 30 June 2010

“Personal Development & Presentation” 21 July 2010

“Process of Arbitration between Dispute Establishment and Start ofArbitration”

9 August 2010

“Forensic Delay Analysis of Construction Claims” 20 September 2010

“Important Legal Development in UAE in 2010” 2 November 2010“Variations under FIDIC 1999” 28 February 2011

“Dispute Boards in Today’s Construction Disputes” 29 March 2011

“Excellence is Construction Series” 27 April 2011

“Why and how to use standard forms of Construction Contracts” 25 october 2011

“Various Delay Analysis Approaches” 30 November 2011

Continuing ProfessionalDevelopment (CPD)

CPD Events 2010-2011

IIQS CPD Programme

IIQS CPD events are scheduled on monthly basis and it includes a wide range of

activities such as talks and presentations on subjects of contract and commercial

management, construction law, cost planning and management, business manage-

ment, contract practice, contracts administration, procurement and tendering, risk

management etc. IIQS encourages all members to maintain and develop their profes-

sional in the workplace and CPD is one of the recommended way of enhancing the

professional competence through sharing knowledge with other industry professionals

and networking.

Benifits of CPD

• Helps Members to enhance their knowledge

• Networking opportunities

• Providing competitive environment for members

• Helps members in their day-to-day work.

• Enhances presentation skills by providing opportunitiesfor presenting seminars and workshop.

What isCPD?

CPD stands for

Continuing

Professional

Development’

and is the term

that describes

how profes-

sionals maintain

their own com-

petence in the

workplace. CPD

is about learning

and development

that enhances

effectiveness in

professional life.

CPD

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IIQS Annual GeneralBoard Meeting AGM 2012IIQS Annual General Board Meeting 2012 was held at the API Tower in Dubai on 25 January 2012, wherein the

IIQS Board of Directors were introduced. This well-attended event provided the opportunities for the attendees to

interact in a casual setting. Mr. Varughese Mathew, Director & President of IIQS Global provided a brief overview

of IIQS 2011 accomplishments and discussed IIQS Vision & Mission and some of IIQS new objectives set out for

2012. The event was followed by the Question & Answer Session lead by IIQS Board of Directors.

CPD

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No CPD EVENT2012 & 2013

Speakers Location & Date

1 TOPIC: Question & Answer onTendering, Pre Contract,PostContract, Cost Control

Mr.Varughese Mathew, FRICS, FCIOB, ACIArbMr.Dharmendar Pardasani, M.Sc., FRICS, MCIOB.: Mr. E. V. Johnson Neil, MRICS, MIS, MCIArb.: Mr. Sajeeth Sidharthan, BE, MRICS

API World Tower25th January 2012

2 Session 1: Risk Evaluation

Session 2: Creation of Risk

Mr. Daniel Alcon, BSc, DipArb, FCIArb, MRICS, MACostE

MDRBF, MDBFMr. Gary Beamish Eng.C, C.Eng, C.Env, C.WEM, MICE,MCIWEM, MQSI

API World Tower,

21st February 2012

3 The Paradox of LeanLeadership

Prof: David Bamford, Bsc(Hons),Mphil,Phd,MCMIHonorary senior Research Fellow at Manchester BusinessSchool, University Of Manchester

API World Tower20th March 2012

4 Impact of various Parametersin Costing

Mr. Somnath Mukherjee, Chief Manager Projects- SimplexInfrastructures Limited

API World Tower18th April 2012

5 The Flipside - A Different Wayof Looking at BusinessEnvironments and Strategy

Prof. Christopher Abraham, Head - Dubai Campus, Sr. VicePresident - Institutional Development, S P Jain School ofGlobal Management, Dubai · Singapore · Sydney

Al Futtaim Training Center,22nd May 2012

6 An Overview of ArbitrationProcess from Commence-ment to Enforcement

Mr. Dharmendar Pardasani, MSc, FRICS, MCIOBMr. Kalpesh Sangani, MSc, MRICS, MCIArb

Al Futtaim Training Center,27th June 2012

7 Construction Claims in theGulf

Mr. Guy Elkington, Director – Global Construction Practice,Navigant

Al Futtaim Training Center,19th September 2012

8 Areas of Concern in FIDIC1999

Prof. Indrawansa Samaratunga PhD, DSc.FRICS, FAIQS, FIQS(SL), FCIArb, FCIOB, FCMI, FIAS,FBEng,

Wednesday 7th November2012 at Al Faraa Corporateoffice

9 UAE Constitution-ContractFormation

Mr. Gary Beamish , Eng.C, C.Eng, C.Env, C.WEM, MICE,MCIWEM, MQSI, Joint Managing Partner, M/s. Talos Con-sult FZC

Al Futtaim Training Center,15th January 2013

10 Liquidated Damages – an UAEperspective

Mr. Shah Nawaz CA, Fellow Member of the Institute ofChartered Accountants, Regional Director of Operations –

Johnson Controls International

Al Futtaim Training Center,26th February 2013

11 The secrets behindconstruction contract pricingoptions - understandingwhat›s on the menu”

Mr. Sachin Kerur BEng (Hons) Construction Engineering -The University of Dundee, The College of Law, Guildford andMr. William Marshall from Pinsent Masons: combining theexperience, resources and international reach of McGrigorsand Pinsent Masons

API Tower Auditorium,25th March 2013

CPD EVENTS 2012 & 2013

CPD

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CPD In Dubai & AbuDhabiIIQS , has successfully organized 12 consecutive CPD events in UAE for year 2012-2013 .CPD Sessions providea great opportunity for our members to enhance their knowledge and skills. The 1st CPD event in Abu Dhabi was

launched on 07 Nov 2012.

IIQS Structured CPD events are lead by experts indusrty speakers. IIQS takes this opportunity to thank all the

speakers and guest for their valuable time and effort for IIQS CPD events..

CPD

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CPD In IndiaThe Dubai Region with many member and Members Council support from India provided a wonderful opportunityto deliver successful CPD seesions in various metro cities in India. This was the important milestone for IIQS and it

is planned in 2013 also, all IIQS Member Councils will continue to organize the CPD events and Matrix workshops

for global members.

CPD

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VISION OF IIQS MATRIX EVENTS:To Create a professional environment among all QS community to share the knowledge and experience to enhance

the professional competence as well as to be part of a large professional net work.

IIQS Matrix Events were initiated in 2009 with support of IIQS Board of Directors and lead by IIQS Global Pro-

fessional development Director Mr. Ramesh Palikila. B.Tech, MRICS, ACIArb, MIS. with a basic idea of providing a

knowledge sharing workshops by eminent resource speakers from UAE industry.

Matrix is a one of the IIQS structured training programs to provide a professional platform for Contracts & Com-

mercial Management professionals, Quantity Surveyors & Construction Professionals to plan their professional

development to become Chartered QS of RICS or attain any other professional membership. Since 2009 , through

this Matrix platform, more than 60 QS professionals have attained their Chartered status and have reached to

management positions in Contracts and Commercial fields and are presently working in UAE, Doha,India and other

Countries.

IIQS Matrix EventsStructured Training Programme in Dubai

Matrix

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IIQS / 34

Matrix Events in 2013Matrix 2013 Events Conducted in UAE ( Dubai and Abu Dhabi)

MATRIX EVENT NO.01/2013

Date : Friday, 14th December 2012Topic : Introduction of Matrix Training Workshops and Self planning to Strike perfectly APC

Speaker : Mr .Ramesh Palikila BTech, MRICS, ACIArb, MIS, IIQS Director – Global professional Development Chair


Date : Friday, 24th December 2012

Topic 1 : Matrix Formation, APC Critical Analysis Guidelines and Written Skills


Topic 2 : Business Planning for QS professionals

Speaker : Mr .Franklin Joseph BE,MRICS, MIS - IIQS Director & Global General Secretary

Topic 3 : Contract Practice and Contract Administration

Speaker : Mr .Dharmendar Pardasani MSc, FRICS, MCIArb, MIS,FAIQS - IIQS Director & Global Vice President


Date : Friday, 04th January 2013

Topic 1: Over view on QS Core Competencies, Commercial Management and Study Skills


Topic 2 : Design Economics and Cost Planning

Speaker : Mr. Dinesh Dabasia BSc ( Hons),MRICS Associate – Davis Langdon an AECOM company, Abu Dhabi, UAE.


Date : Friday, 18th January 2013

Topic 1 : Quantification and Costing of Construction Works


Topic 2 : Client Care for QS professionals

Speaker : Mr. Eswar S.B BSc, Dip, CIPM, MRICS, ACIArb –CEO of 3EG Group – Sharjah- UAE.

Topic 3 : Successful deliver of QS service in an International Projects

Speaker : Mr. Chris Webb MRICS , Associate – Davis Langdon an AECOM company.


Date : Friday, 08th February 2013

Topic 1 : Communication and Negotiation Skills


Topic 2 : Conflicts Avoidance and Dispute Resolution

Speaker : Mr. Kasi Viswanathan BE,MRICS, CCE , MCIArb, MIS IIQS- Director-Global Governance Committee Chair,

Topic 3 : Design Economics and Cost Planning

Speaker : Mr. Luay Azzam BSc (Hons), FRICS, FAIQS, ACIArb , Executive Director – NEA Consultants , RICS –UAE National Board Member.

Topic 4 : Contract Practice and Contract Administration

Speaker : Mr. Colm O’Suilleabhain BSc, MSc, MRICS, LLM , FCIArb Director –FTI Consulting , Abu Dhabi, UAE.

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/ IIQS35

Matrix Events in 2013MATRIX EVENT NO.06/2013

Date : Friday, 15th February 2013

Topic 1 : APC- Phase II Guidelines: Presentation Skills for professional Interviews


Topic 2 : Procurement and Tendering

Speaker : Mr. Sajeeth Sidharthan BE,MRICS, ACIArb, MOSE , IIQS- Director-Global Awarding Committee Chair

Topic 3 : Securities, Bonds, Indemnities and Insurances in Construction Contracts

Speaker : Mr. Ajith Philip BE, PGDCM - Contracts Manager – Nakheel Properties Developers


Date : Friday, 01st March 2013

Topic 1: Project Financial Control and Reporting


Topic 2 : Managing Variations in Construction Contracts

Speaker : Mr. E V JOHNSON NEIL, MRICS, MIS, MCIArb - IIQS Director and Global Vice President


Date : Friday, 08th March 2013

Topic 1: Construction Technology and Environmental services

Topic 2: Health and Safety

Topic 3: Over view and need of Mandatory Competencies for a QS professional

Speaker: Mr .Ramesh Palikila BTech, MRICS, ACIArb, MIS, IIQS Director – Global professional Development Chair


Date : Friday, 08th March 2013

Topic 1 : Risk Management – An introductory session for QS professionals

Speaker: Dr. Tamil Selvan Mahalingam MBA,PMP,CCE, PhD, Professional Trainer on Project Management ,Cost Management and Quality Man-

agement – 3Fold Institute , Dubai.

Topic 2 : Think Big about QS profession & How a QS can reach to Lead / Management Position? Speaker : Mr. Varughese Mathew FRICS, MCIArb,

FCIOB, CL , IIQS Director – Global President

Topic 3 : Data Management Principles and Best practice Standards of Cost Management

Speaker : Ms. Julie Christie M. Dela Cruz MBA,FRICS, FAIQS - Founder and Chair of Philippine Institution of Certified Quantity Surveyors ( PICQS)

Topic 4: Ethics, Rules and Regulation of RICS - Mandatory Competency for a Chartered QS Speaker : Mr .Ramesh Palikila BTech, MRICS, ACIArb,

MIS, IIQS Director – Global professional Development Chair


Date : Friday, 05th April 2013

Topic : APC – 1 Hour – Special Guidelines to APC candidates


Mock interviews to APC candidates by IIQS team of Assessors

Lead: Mr.Paul Bankala MSc , BE, ICIOB and Mr. Kasi Viswanathan BE,MRICS, CCE , MCIArb, MIS

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2013 IIQS

IIQS / 36

Matrix members and mentors in theStructured Training Programme in Dubai

Mock APC in Interview

Ramesh Palikila addressingthe matrix event

Matrix

Matrix 2009 Matrix 2012

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Professional Events Conducted forNICMAR Students in Hyderabad

Successfull matrix membersRamesh and Jacob Joby atNICMAR Hyderabad

Matrix

NICMAR - QS PG Students

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2013 IIQS

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NETWORKING AND

IIQS provides a great

platform for networking

opportunities duringthe CPD events as well

as during the social

events. Any relevant

information required

for effectively carrying

out the day to day

works and also for

upgrading professional

qualifications is sharedamong the members.

Any job opportunities

also shared which is

of immense help to

members who have lost

their jobs or are looking

for new opportunities

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2013 IIQS

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JOB OPPORTUNITIES

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OUTDOOR FA

It was an excellentoutdoor event in

Zabeel Park in

Dubai wherein

many of our

members joined

with their familiesand had a great time

socializing and

playing fun games.

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MILY EVENT 2012

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FAMILY DINN

Tis event was attendedby more than 150members. All themembers had amemorable eveningwherein members danced

away to glory, enjoyedfashion show, playedgames, enjoyed lovelyfood. A great evening!

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ER 2012

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IIQS-INDOOR

Te IIQS Cricketteam participated inthe annualRICS Cricketevent and brought

laurels for theIIQS!

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CRICKET 2012

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The most importantindustry recognizedcertification for theproject managementprofession

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T: 971 4 3336427│ F: 971 4 3336428 Email: [email protected]

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Co-operativeAgreement withAustralianInstitute of QuntitySurveyors (AIQS)

A co- operative agreement was signed with

Australian Institute of Quantity Surveyors on

9th April 2013 in Dubai, whereby IIQS and AIQS

have agreed to collaborate for their respective

CPD’s and other knowledge sharing activities in

the Middle East.

Instead of Memorandum of Understanding a co-operative agreement was singed

Affliation

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/ IIQS49

Head Office Overheads” is not an expression that

is ound in FIDIC Forms o contract, resulting

in requent debate as to why a prolongation

cost claim (especially under FIDIC Forms o

contracts) should include a Head Oice Over-

heads element. ypical expressions such as “o the Site over-

head charges” (FIDIC–4th 1.1(g)(i), FIDIC–1999 1.1.4.3)

and “Contractor’s general overhead costs” (FIDIC–4th 52.3)

ound in FIDIC Forms o contract are generally construed

to mean Head Oice Overheads. Whilst in some parts o the

world they are reerred to as “Home Oice Overheads”, an

accountant would use the expression “General and Admin-

istrative (“G & A”) expenses o the company” in reerring to

the Head Oice Overheads.

In the books o accounts o a Contractor’s Head Oice, the

Overheads (G&A expenses) are generally recorded under the

ollowing heads (which vary rom company to company):-

HEAD OFFICE OVERHEADSREVISIED

BY Prof. Indrawansa Samaratunga

Executive and administrative salaries, allowances & recruitment costs etc.

Head Office rent and maintenance. - Insurance.

Utilities, phone/data/fax, postal and bank charges - Travel.Depreciation of company assets. - Bad debts.

Furniture and equipment. - Entertainment.

Stationary and printing. - Pantry expenses.

Professional fees. - Contributions.

Auditing expenses. - Sponsorship fees.

Advertising and marketing (including tendering costs). - Idle resources.

Interest on company borrowings. - Training.

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IIQS / 50

Tough the total o all these expenses (taken as a percentage o

the company revenue) is usually considered as a suitable basis orthe pricing o tenders and building-up new rates / prices, some o

these expenses are inappropriate or inclusion in the prolongation

cost calculations o a delay claim. Tere is no reason, or example,

why the Employer o the delayed project should bear a part o a

bad debt related to another project o the Contractor. Similarly,

the Employer o the delayed project has no liability to bear any

part o a claims consultant’s ees paid or the preparation o a claim

or another project o the Contractor. Tereore, during an audit o

the books o accounts o the Contractor’s Head Office by the En-

gineer or the Employer’s other Contract Administrators (or by the

Contractor’s Contract Administrators in auditing a Subcontrac-

tor’s books o accounts) in order to veriy whether the Contractor

(or the Subcontractor) has calculated the Head Office Overheadselement o a prolongation cost claim in a air and reasonable man-

ner, the ollowing should be given due consideration:

(a) Capital expenditure (building extensions,

new urniture etc) should be appropriately depreciated.

(b) One-off annual/quarterly expenditure (advertising

costs, audit ees etc.) should be distributed over the

year/quarter and the cost o bulk printing etc.

should be distributed over the relevant period.

(c) Insurance costs and financing costs o projects should

not be included in the Head Office Overheads account.

(Tey should be in the project accounts).

(d) Claims consultancy ees should not be included in the

Proessional Fees head.

(e) Any bad debts written-off under the Head Office Over

heads should be completely removed rom the

calculations.

() Cost o idle resources should be in the project accounts

and not in the Head Office Overheads account. (It is

permissible to allow the cost o some idle resources

such as the asphalt plant o a road works contractor to

be in the Head Office Overheads account).

(g) Cost o an employee (such as a Commercial Manager)

whose time is totally dedicated to a project/projects,

should not be in the Head Office Overhead account, despite being stationed at the Head Office.

(h) Sponsorship ee/parent company ee paid as an annual/

monthly sum o money or as a percentage o the rev

enue could be a Head Office Overhead, but not i it is a

portion/percentage o the profit.

Once the Head Office Overheads account is rationalized in the

above manner (let’s call it the “Rationalized” account), it would be

suitable or prolongation cost calculations.

Where a project completion had been delayed, it is not diffi-

cult or a Contractor to demonstrate (using daily records, photo-

graphs, correspondence etc.) that the cost o his Site Overheadsincreased due to the necessity o:-

• supervision staff to stay longer on Site

• site huts to be maintained or a longer period

• tower crane to be retained on Site longer than

previously planned

• perormance security, insurance etc. to be extended

etc.

Te prolongation o these Site Overheads are maniest and

thereore this part o the claim generally receives ew challeng-

es, but when it comes to the matter o Head Office Overheads,

the impact thereo on the site/project costs is not so obvious andthereore Engineers and Employers ofen have the ollowing ques-

tions, as to:-

• why should there be an increase in the Head Office

Overheads when the project completion is delayed?

• why should any Head Office Overheads be an additional

cost under the contract?

• why should a ormula be used (whereas the Contractor

should demonstrate all costs using records)?

Moreover (unlike or Site Overheads), there are no site records

that can be produced (other than the Head Office books o ac-

counts) to support this part o the claim.

Te answers are ound in the explanation o how the Contractor

sustains his Head Office. Since the Head Office does not have an

individual income/revenue, the cost o sustaining the Head Office

has to be borne by all the projects o the Contractor, by contribut-

ing a proportional sum every month rom their project revenue, in

order to meet the Head Office Overheads. Tereore such contri-

bution is a cost incurred in the execution o the Works (not differ-

ent to paying authority ees, taxes, subcontract/supplier payments,

and any other project expense).

Te resources deployed in the project were expected to generate

revenue and pay to the Contractor’s Head Office a sum o money

(to und the Head Office Overheads) or the duration o the imeor Completion, ollowing which the same resources were expect-

ed to be deployed in other projects to generate revenue in order

to contribute urther money to und the continuing Head Office

Overheads beyond the aoresaid ime or Completion, which was

prevented by the Employer by delaying the project completion,

requiring the said resources to be retained on Site or a prolonged

period o time, resulting in the need to contribute more money

rom the delayed project to sustain the Head Office, which is an

unoreseen additional cost, which is the answer to the second

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/ IIQS51

question.

Te answer to the first question is that, it is not an increase in

the Head Office Overheads but an increase in the contribution re-quired rom the delayed project to und the continuing Head O-

fice Overheads (though such Overheads may not have increased)

or the prolonged period, because the resources were not released

to generate such contribution rom other projects.

Since there are adequate provisions in FIDIC Forms o contract

entitling the Contractor to additional payment in respect o costs

incurred as a result o a delay caused by the Employer or by those

or whom the Employer is responsible or by an event or which

the Employer assumed the monetary risk, and since Head Office

Overheads contribution is part o such cost, the Contractor would

be in a position to successully argue his Head Office Overheads

claim, provided that it is quantified in an appropriate manner.

Where both parties are agreeable to use an existing ormulasuch as Hudson, Emden, Eichleay or Hank Laan (see the Schedule

at the end o this article), quantiying the Head Office Overheads

claim would be quite simple, but where there is disagreement,

such ormulae cannot be used with FIDIC Forms o contract and

most bespoke orms o contract (or with claims or damages or

breach o contract) due to the necessity to deal with the actual (but

air and reasonable) costs incurred or to be incurred, in addition

to other limitations/weaknesses ound in such ormulae.

It is ideal (but may not be convenient) to have a transparent

method to apportion the Rationalized Head Office Overheads o

a Contractor to all his projects and to recover monthly rom each

project, its due contribution, neither based on the revenue (as is

being practised by some contractors) nor based on the overall ex-

penditure (as practiced by the others), but based on the limited

cost o staff, workers and equipment deployed on the projects (or

in other words, based on the cost o those resources that a Con-

tractor moves rom one project to another and rom which he gen-

erates revenue). I this is practised by Contractors, there would

be no need o ormulae to establish the quantum o Head Office

Overheads element o the claim. Te Contractor can simply pro-

duce proo o the contribution made by the delayed project to-

wards the Head Office Overheads, during the delay period. But the

general practice among Contractors (mainly due to administrative

convenience) is to use either the revenue or the overall expendi-

ture as the basis or the apportionment, thus necessitating the useo a ormula to later assess (or the purpose o a claim) what a air

and reasonable Head Office Overheads contribution should have

been, because the actual contribution made was disproportionate

(and thereore not air and reasonable). Moreover, a Contractor is

at liberty to collect rom any o his projects whatever level o con-

tribution that he preers, in order to und the Head Office Over-

heads (which is the contribution that would be recorded in the

project accounts), but an Employer is required to reimburse only

what the project should have contributed airly and reasonably,

and not what was actually contributed. Such air and reasonable

contribution could either be lower or higher than such actual (but

unair and unreasonable) contribution, and can only be assessedby using a ormula, which is the answer to the third and final ques-

tion, and thereore the use o an appropriate ormula in the as-

sessment o the Head Office Overheads element o a claim should

neither be questioned nor rejected.

Where a necessity arises or the use o a ormula, which is ree

o those shortcomings reerred to in the Schedule given at the end

o this article, the ollowing ormula developed by the author is

available, which is currently being used successully by Contrac-

tors and Consultants in the construction industry:-

where:

H = Actual total overhead costs (G&A

expenses) o the Contractor’s Head Office during the pe-

riod o EO o the delayed project (Rationalized).

CP = “Contract Price o the delayed pro-

ject divided by its original ime or Completion, and

multiplied by the period o EO”

SCP = Sum total o “Contract Price o each

concurrent project divided by its original ime or Com-

pletion, and multiplied by the whole or part period o

EO (o the delayed project) through which it was in pro-

gress”, taking into consideration all projects in progress at

the time, including the delayed project.

Te application o the ormula to a project and its claim, would

demonstrate that the Contractor is not attempting to recover

(rom the Employer o the delayed project), all or most o its Head

Office Overheads incurred during the relevant period, but only a

air and reasonable portion o it, which is the transparency that an

Employer would expect. (Such transparency does not exist when

using Hudson or Emden Formulae). It would also be transparent

to the Contractor that he is not under-recovering on the reim-

bursement o the contribution, airly due rom the delayed project.

Since the pace o the project (ast track, slow paced etc.) has been

actorized through the CP component, a ast-track project (whereit is very likely that the Contractor’s highest paid Project Director

and most o the brand new equipment are deployed) would need

to contribute proportionally higher than a slow-paced project,

which is a air distribution o Head Office Overheads that cannot

be criticized. Also a weighting has been introduced (to multiply by

the ull or part period o EO through which a concurrent pro-

ject was in progress) in order to avoid unair apportionment to a

project which was not concurrent through the ull period o EO.

(Such actorization and/or weighting to ensure a air apportion-

H X

CP

Additional Payment dueSCP

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IIQS / 52

HUDSON FORMULA:-

where :

HO/P = the percentage o head office overhead cost

and profit allowed in the ender

Author’s Comments:-

(a) Tis ormula does not comply with the actual cost require-

ment o FIDIC Forms o contract (or o claims or damages

or breach o contract) due to the ollowing reasons:-

Te actual Head Office Overheads percentage could either

be more or less (at the time o delay/EO) than that included

in the ender.

Te average-per-week interim assessment is a departure

rom the actual.

(b) Tere is no transparency as to:-

whether the Contractor is attempting to recover all or most-

o the Head Office Overheads rom the Employer o the de-

layed project.

whether the other concurrent projects o the Contractor are also

sharing the Head Office Overheads in a air and reasonable man-

ner.

whether the Contractor is over-recovering/under-recovering

on the Head Office Overheads contribution o the delayed project.

EMDEN FORMULA:-

where :

h = head office percentage arrived at by dividing the total

overhead cost and profit o the Contractor’s organiza

tion as a whole, by the total turnover.

c = contract sum

cp = contract period in weeks

pd = period o delay in weeks

Author’s Comments:-

ment cannot be ound in Hudson, Emden, Eichleay or Hank Laan

Formulae). Since actual costs are taken into consideration, thisFormula can be used in claims under FIDIC Forms o contract

and since a transparent method o air apportionment is used, this

Formula would be acceptable to both Contractors and Employ-

ers. For the same reasons, this ormula should still be acceptable

as a means o assessment o Head Office Overheads element o a

prolongation cost claim at arbitrations and litigations even where

the Form o contract is not FIDIC, and also where a claim is or

damages or breach o contract.

One would wonder why the Author’s Formula takes into con-

sideration the period o Extension o ime (EO) rather than

the period through which the delaying event continued. (It is not

all the monetary aspects o the delay claim that should be calcu-

lated or the period o actual delay! Cost o prolongation o theSite Overheads or instance, should be calculated or the period

o actual delay whereas financing charges in respect o reduced

revenue should be or the period when the Contractor actually

suffers rom such reduction (i.e. probably afer 2 months o the

occurrence o the actual delay, given 28 days or certification and

28 days or payment. Likewise, financing charges or the late re-

lease o first moiety o Retention Money should be or the periodrom original date or completion to the end o the EO, whereas

in respect o the second moiety it should be a year later. Tus each

kind o prolongation cost is incurred during a different period o

the project time line). Head Office Overheads element should be

calculated or the period when the Contractor was unable to gen-

erate revenue rom other projects using his resources which were

unoreseeably retained in the delayed project, which is the same

period or which EO was determined.

A refined version o the ormula could be developed by using an

S-Curve distribution instead o the linear distribution adopted or

the CP actor but the necessity to use calculus and probable non-

availability and/or unacceptability o the inormation required by

such a version may pose administrative difficulties/impossibilitiesin its application or most projects. For this reason, parties to con-

tracts consider the linear distribution to be adequate in order to

arrive at a air assessment o the Contractor’s Head Office Over-

heads contribution that should be reimbursed as part o a prolon-

gation cost claim .

HO/P

X

ContractSum

XPeriod of Delay(weeks)

100Periodof Delay(weeks)

hX

cX pd

100 cp

Schedule.

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THE THEORY

A lot o standard “build only” construction contracts (e.g. FIDIC

Red Book) are significantly amended to transer an unreasonable

quantum o risk to the Contractor. During my proessional tenure

in Europe, Middle-East, Arica & ar-East I’ve had extensive de-

bates with several proessionals about this issue. Te general view

o the Employer’s representatives is that there is more financial

certainty in terms o the project budget. Te view o the Contrac-

tor’s is that they have to price more risk into the tender and, at the

end o the process.

Tere are logical arguments rom both sides; however, the real-

ity is that a balance should be struck between what risks should

be transerred to the Contractor and what should be retained by

the Employer. Te allocation o risk associated with unoreseeableground conditions is a case in point.

Example

Rock Excavation (Part o Unoreseeable Ground Conditions)

As a result o the various legal/contractual problems arising rom

“ground conditions” claims, the Employers have, around the

world, amended the standard orms o Contract to transer this

risk completely to the Contractor.

Tis is a sample clause rom a “build only” public sector con-

tract that I encountered which defines an unoreseeable event as

ollows:

“A condition, circumstance or occurrence is unoreseeable i an

experienced Contractor tendering or the Works could not have

reasonably oreseen it on the Designated Date, having inspected

the Site and its surroundings and having satisfied itsel, insoar

as practicable and taking into account any inormation in con-

nection with the Site provided by the Employer, as to all matters

concerning the Site, including its orm and nature and its geotech-

nical, hydrological and climatic conditions.”

In the D&B contract, the risk transer or unoreseeable events

appears to be ar more onerous or the Contractor. Having said

that, it remains to be seen how contractually effective the latterwill be taking into account the act that, generally, the Contractor

receives a geotechnical report rom the Employer or D&B pro-

jects as well. It is a generally accepted opinion that a similar clause

in the ICE 5th edition (FIDIC was originally based on the ICE

orm o Contract) is not very effective, contractually/legally, due

to the ollowing reasons:

Pre-ender investigations that the Contractor may want to car-

ry out are limited by the time available.

I the Employer has provided the Contractor with a reasonable

UNREASONABLERISK TRANSFERNOT ALWAYS BENEFICIALFOR THE EMPLOYER

BY N.M.Raj

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/ IIQS55

geotechnical report, it will be impractical or the Contractor to

double check the inormation with his own site investigations.It would also be unreasonable to expect the potential Contrac-

tors to dig boreholes all over the site.

Case Study - Disadvantages o otal Risk transer to the Con-

tractor

Let us consider a practical example to illustrate the disadvan-

tages associated with total risk transer with respect to ground

conditions.

Example:

Te Employer has issued a tender or a D&B project which re-

quires the Contractor to price or the risk associated with unore-

seeable ground conditions. Let us assume that there are our Con-

tractors bidding or the project; three local Contractors that arehighly reputed/financially secure (Contractors 1, 2 and 3) and one

Contractor (Contractor 4) that is new to the market (with limited

financial resources), desperate to tender/win a project. Let us also

assume that the geotechnical report is not very comprehensive

and contains errors which may not be picked up by contractors

that do not have local experience.

Contractors 1, 2 and 3 will study the geotechnical report

supplied by the Employer, utilise their in-house expertise, lo-

cal knowledge o the ground conditions and make a considered

“guesstimate” o the risk associated with ground conditions such

as ingress o groundwater, excavation in rock etc. It is impossible

to make an accurate assessment, so, let us assume that the Con-

tractors have priced the risk as ollows (based on their interpreta-

tion o the geotechnical report and experience):

1) Contractor 1 - € 60 million.

2) Contractor 2 - € 55 million

3) Contractor 3 - € 63 million

Now, let us assume that Contractor 4 has only included an

amount o € 20m or the risk associated with ground conditions.

Now, it does not matter whether the said Contractor under-esti-

mated the risk due to 1) calculations based on errors contained

within the geotechnical report (which could be disputed by the

Client) 2) on purpose or 3) by way o an error. Situations like thisdo happen (quite ofen) in a competitive tendering environment,

especially during a recession.

Te above scenario could have the ollowing outcomes:

1) Scenario 1 - Contractor 1 or 2 or 3 wins the project (Assuming

that the overall price is still lower than Contractor 4’s tender

price) or

2) Scenario 2 - Contractor 4 wins the project as a result o his

lower estimate or the risk item and/or his overall price when

compared to the other Contractors.

LET US ANALYSE THE TWO SCENARIOS:

Scenario 1

Based on this scenario, i the Contractor had to spend say €

30m to overcome ground condition problems, the Employer has

lost circa € 25m - 33m. In the unlikely event that the cost associ-

ated with this risk amounts to more than the winning Contractor’s

tender estimate, the Employer would have benefited rom the risk

transer obligation. However, it is not prudent to assume, beore-

hand, that the commercial outcome would definitely be better or

the Employer i the Contractor carried the entire risk. Tis is due

to the act that the Employer could have, at pre-tendering stage,

hired additional experts to analyse/interpret the tender geotech-nical report and make a “guesstimate” which could, in most cases,

be superior to the Contractor’s tender estimate due to relatively

higher availability o time.

Scenario 2

As mentioned earlier, Contractor 4’s “eagerness” to win the project

and generate turnover may well be reason why he under priced the

risk item and/or the tender in general. Now, as soon as Contractor

4 realises that the cost associated with this particular risk item is

significantly exceeding or will significantly exceed his tender al-

lowance, he is very likely to adopt an adversarial “claims” oriented

stance and walk away rom the project when he realises that Em-

ployer will not “pay up” unless an award is given via arbitration/

litigation. Tis is because Contractor 4 simply does not have the

resources to finance the project by expending his own cash which,

in turn, would become the subject o a claim/dispute and remain

unresolved/unpaid or years.

Te Employer stands to lose a lot in this scenario as well due to

issues related to an incomplete project, legal dispute with Contrac-

tor 4 and the necessity to procure another Contractor to finish

the job.

It is clear rom the above that the Employer does not really ben-

efit rom the above scenarios.

So, what is the best way to manage this risk?

A suggested method to manage this risk whilst optimising theEmployer’s budget is as ollows:

1) Carry out a detailed ground investigation study along with a de-

tailed risk assessment review o the problems associated with

excavation in rock, ground water conditions et al.

2) Based on the same, establish a “Medium” and “worst” case sce-

nario in terms o monetary risk associated with ground con-

ditions. Tis ground investigation exercise should be more

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IIQS / 56

detailed than the normal tender geotechnical reports in that a

detailed technical and commercial assessment should also beprocured by the Employer.

3) Based on the “Medium” case scenario, insert various types o

Ground condition risk as items in the tender bill o quanti-

ty e.g. rock as remeasurable items in the bill o quantity or

the Contractor to price, rates or resources associated with

ground water risk etc. Te Employer’s representative should

also be contractually obliged to provide adequate supervi-

sion/management o these items by using an independent

geotechnical expert (more inormation below).

4) Te aorementioned items in the bill o quantity should orm an

integral part o the overall tender sum; otherwise, the Contrac-tor may “load” the rates and recover, at the Employer’s expense,

disproportionate sums i the quantity increases significantly.

Te most important question the Employer should ask himsel

is this: “I the Contractor can price the unoreseeable risk, whycan’t I do it with the help proessional expertise? Why should I be

at the mercy o the Contractor’s guesstimate?”

Case Study - Conclusion

Te Employer could allow an internal budgetary contingency o

say € 65 million and ensure that the costs associated with the rock

excavation (i required) is managed and recorded properly. Te

additional costs associated with the same could be unded rom

the aorementioned contingency. In all likelihood, the additional

costs associated with this risk would be lower than the internal

contingency. Tereore, the Employer would have saved money

and as the old saying goes “a penny saved is a penny earned”.

N.M.Raj Is The Managing Partner Of Prime Consulting And An Internation-

ally Renowned Claims/Contracts Specialist (FIDIC & Other Contracts) With

More Than 20 Years Of Commercial/Claims Management Experience

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RESPONDEN’S PROFILES

Survey respondents were invited rom various sectors o the con-

struction industry, including clients, consultants, contractors,

suppliers, subcontractors and legal firm. Majority o the respond-ents wererom contracting companies, they contributed to 38%

o the response. 29.0% o the respondents were rom client’s side

and another 29% wererom consultants. 2% o the response was

romeach legal and subcontractor firm.

In terms o total experience in UAE, majority o respondents

(40%) were well experienced and areworking in UAE or more

than 15 years. 24% o the respondents have experience o about

10 to 15 years. 26% o the respondents have experience o about

5 to 10 years.

KEY RISKS ASSOCIAED WIH HE APPLICAION OF HE

BESPOKE CONRAC

Nearly 50% o the respondents are using FIDIC based bespokecontracts showing the wide implementation o bespoke orm o

contracts by clients in the UAE. 29 % o the respondents are us-

ing FIDIC 1987 Redbook and 17 % o the respondents are using

FIDIC 1999 Red book.

Article 246 o the UAE ederal Law No. 5 o 1985 (the Civil

Code) states that the contract must be perormed in accordance

with its contents and in a manner consistent with the require-

ments o good aith. But most o the bespoke orms o contract

incorporatestrict application o time bar clauses and condition

HOW TO AVOID RISK

ASSOCIATED WITH USE OF

BESPOKE CONTRACTS IN UAE

BY Mathew Varughese

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IIQS / 58

precedent clauses,which is identified as one o the main cause o

disputes in construction contracts.From the survey it wasound that there are majorrisks associated

with the application o the bespoke contracts, some o them are

as ollows.

75% o the respondents believed that client uses bespoke orms o

contract to transer unrealistic risk to the contractors

59% o the respondents agreed that strict application o time bar

clauses and condition-precedent clausesisone o the major causes

o dispute in bespoke contracts

From the above, this act is established that the substantial risks

are transerred to Contractors through bespoke orms in UAE and

thereore it is essential to assess such risks at the tender stage to

price /manage them efficiently by listing the risks and getting it

reviewed by qualified proessionals, so that these can be managedeffectively throughout the contract duration.

CONRACUAL AND LEGAL KNOWLEDGE

OF PROFESSIONALS

Te UAE legal system is based on the civil law system and as such

the primary source o law is a statutory code.

An attempt was made to know how much the respondents are

amiliar withthe civil code pertaining toconstruction matters.

About 75% o the respondents were amiliar with UAE civil code

It is reasonable to expect that industry practitioners have basic

legal knowledge. However,by increasing the use o bespoke orm

o contract, wherein the client is transerring additionalrisks to

the Contractor, the contractor’s staff should have adequate legal

knowledge to oresee such situations and manage the risk prop-

erly. 55% o the respondents believed that court system in UAE

doesn’t have sufficient capacity to manage major construction dis-

putes. Tis was in line with the finding o Stephen (2010) who

stated that, “the court system o Abu Dhabi has little real capacity

to manage major, complex, construction disputes. Presently the

only real alternative to litigation in the UAE is via commercial ar-

bitration whether pre agreed or via an ad - hoc reerence”.

Majority o the proessionals involved in projects in UAE are

mainly rom common law background and not rom civil law

background. ime is o the essence” and “ime at large” adopted

by FIDIC is not a civil law concept and also “Penalty clauses are valid and subject to judicial control o the court”. About 60% re-

sponse shows that they are amiliar with this concept.

A common law lawyer would first rely on the terms o the con-

tract and then on the implied terms and will ask question “to what

the parties did agree”, whereas a civil law lawyer would rely on the

terms o the contract itsel and then on the corresponding rules

provided by the civil code. About 84% response shows that they

are amiliar with this concept as well.

However, about 65% o the participants o the survey stated that

lack o legally qualified staff is one o the main causes o dispute in

UAE construction industry and the staff needs to have more legal

knowledge to administer the contract properly.

CREAE A BEER UNDERSANDING OF HE VARIOUS

BESPOKE FORMS OF CONRACS USED IN UAE.

A question was asked to the participant that why Contractors ac-

cept bespoke orms o contract instead o standard orms o con-

tract? Majority o the respondents believed that the ollowing are

the possible reason or the contractors to accept bespoke orms.

1. It is dictated by the Client, no choice but to accept

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2. Imposed on them otherwise excluded rom the

tender process3. Nothing wrong with the bespoke Contract as the

Contractor can price or his risks in any orm o contract

4. Tere is also huge competition in the market or works

5. Most o the clients are either government

departments or organizations controlled

by government who have their own standard

bespoke contracts.

95% o the survey respondents were o the opinion that use o be-

spoke orms o contract is a common practice in UAE. About 65%

o the respondents o the survey believe that it is not air or clients

to change the standard orm o contracts to protect their own in-

terest. About 51% o the proessionals participated in the surveydo not believe that the clients legal team make sure that all o the

intended bespoke provisions are enorceable under UAE civil law.

About 67% o the proessionals participated in the survey con-

sider that the high competition in the market or works is the rea-

son why contractors accept bespoke contract instead o standard

orms o contract.

GENERAE DISCUSSION AMONG PROFESSIONAL FOR A

BEER LEGAL FRAMEWORK

Te disputes in construction sector o UAE are increasing in terms

o number and amount. Even though there are number o ways to

settle the disputes such as negotiation, mediation, arbitration, liti-

gation etc. most o the parties go or negotiation / amicable settle-

ment, ew o the companies only enter into arbitration or litigation

due to uncertainty o the outcome.

About 65% o the respondents believed that UAE civil code pro-

vision related to construction law is inadequate to settle all dis-

putes in UAE and thereore about 84% think that there is a urther

need to develop construction law in UAE to make clarity on vari-

ous issues such as delayed or non-payment, set-off, settlement o

disputes etc.

About 50% o the respondents believe that some action has to

be taken to prevent the disputes recurring time and again in UAE

construction Industry. Tese actions are,

1. A specific body o construction related law has to be

developed, similar to construction Act in UK, which

would bevery effective

2. More clarity is required or the law position on

Condition Precedent / Prevention issues.

3. Appointment o legally qualified persons to ensure

that any amendments to FIDIC contracts

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