The contract is signed between Abu Dhabi Water and Electricity Authority (ADWEA) and Construction and Maintenance of Command and Control Centres for Shuweihat and Fujairah. The tenderer should prepare his labour histograms expected for the duration of works and submit it to ADWEA (Abu Dhabi Water and Electricity Authority [ADWEA], 2015). Documents to be filed with the tender include Contractor’s ISO 9001:2000 certificate. In case if Contractor is not certified, he should provide an acceptable internationally recognised Quality Management System Standard consistent with the scope of work predetermined by the contract (ADWEA, 2015). After tender award, Contractor should submit a project quality plan, which shall later be approved by ADWEA Projects Directorate.
Contract Implementation Process
The contract implementation process starts by appointing contract administrators and assigning their principal responsibilities. Further, the payment terms should be discussed, and follow-up procedures should be negotiated. By signing a contract with Contractor, ADWEA expresses its desire to have certain works completed, as specified in the contract. Meanwhile, the Contractor is responsible for possessing the necessary equipment, vehicles, and professional personnel to complete the works in time (ADWEA, 2015). The appointment of contract administrators is carried out by Contractor. It is also Contractor’s responsibility to obtain the licenses needed for the successful and complete implementation of the project.
Other obligations of the Contractor to be settled before starting works are related to personnel, materials, data access, and transportation. For instance, Contractor has to review relevant information provided by ADWEA and inform the organisation about any ambiguities, deficiencies, or contradictions that may hinder the successful implementation of the works (ADWEA, 2015). According to the contract, Contractor has to use the services of local suppliers and transportation means whenever possible. In case if overseas shipment is necessary, the services of “United Arab Shipping Co.” must be used. Contractor chooses personnel, but Contractor is accountable for the skills and competence of employees. If a worker is unable to cope with duties, or if he misbehaves in any way, Contractor should fire such an employee (ADWEA, 2015). Payments and claims approval, as well as follow-up procedures, are also included in the preliminary stage of contract implementation.
Contract Analysis
Offer and Acceptance Phases
The offer and acceptance phases of the contract are manifested through a tender process. Tender requirements are not included in the contract, but in general terms, the company applying for a tender must correspond to ADWEA’s highest expectations, must conform to all requirements and abide by Abu Dhabi and the UAE legislation. Upon winning the tender, Contractor should sign an agreement with ADWEA, in which every detail of their future cooperation is included, such as terms and payments, warranties, termination provisions, dispute resolution settlements, and others.
The Subject of the Contract
The subject of the contract is the performance of construction works by Contractor for ADWEA. Hence, the contract mainly focuses on services rather than equipment purchase. The scope of work includes the construction and maintenance of command and control centres for Shuweihat and Fujairah (ADWEA, 2015). Initial works include the erection and maintenance of a temporary fence around the construction site’s boundary and the excavation of the trial trench (ADWEA, 2015). Further, Contractor has to prepare the road to access the construction site, as well as signboards warning people about the possible dangers or complications. A toilet, electricity, and access to drinking water are other aspects of the preliminary site works. Finally, Contractor has to perform soil analysis and obtain a building permit.
Other types of duties, as outlined by the contract, include earthwork, foundation, reinforced concrete, external and internal wall, heat insulation and waterproofing, roof dewatering, floor, suspending ceiling, indoor and outdoor painting, stairs, climate system, water supply, electricity, and design works. Earthwork involves debris removal, surface preparation, excavation, and surplus material removal (ADWEA, 2015). Reinforced concrete work includes the supply and pouring of structural concrete for various purposes, formwork fabrication and installation, and scaffolding provision. The external and internal wall works deal with plastering, concrete blocks, facades, beams, and columns. Roof dewatering works involve the preparation of rainwater collection units, installation of rainwater pipes, preparation of soakaways, and installation of emergency overflows (ADWEA, 2015). Floor works include creating the raised floor area and installing tiles where necessary, whereas suspended ceiling works require the installation of proper hanging systems. All other types of works, as defined and detailed, are components of the subject of the contract.
The Term of the Contract
The term of the contract includes the time needed to execute and complete all works. Additionally, the term is settled with the consideration of additional time that might be needed for removing any defects detected by ADWEA upon receiving the project (ADWEA, 2015). Due to the contract, all construction and remedy works are to be completed within an “estimated period” of seven months from the effective date (ADWEA, 2015, p. 6). The effective date of the agreement is the date of the drawings’ approval by the municipality. The commencement of mobilisation date settled for temporary works, facilities, and construction will be titled the effective date. The date of works’ completion will be counted based on the effective date.
A supplementary warranty period of twelve months from the successful completion of the project is included in the term of the contract. If Contractor does not complete the works in time and violates the term agreements, Contractor is supposed to pay the penalty to ADWEA, which is titled “delay penalty” for contravening the conditions (ADWEA, 2015, p. 12). Upon the successful completion of the project, Contractor will be issued a provisional acceptance certificate. The effective date, the term of the contract, and the date of completion of the warranty period are all mentioned in the contract and signed by both parties.
Initiation and Approval of Variation Orders
Variation orders shall be initiated by ADWEA based on the description of works omitted or the need for additional works. In response to the initiation, Contractor must evaluate the repercussions of variations in relation to the time lost or gained, savings or additional expenses, and the cost of additional works’ performance (ADWEA, 2015). If ADWEA agrees with the need to carry out variations, it shall give written approval and acceptance to Contractor. Variations must not interfere with the time and price settlements mentioned in the initial agreement. If variations occur due to Contractor’s failure to comply with the contract details, they will not be reimbursed (ADWEA, 2015). If Contractor deems a variation, he should submit a written claim with detailed explanations and justifications to ADWEA. Contractor cannot delay the works on the basis of the need to obtain finalised payment or time extension.
Payment Terms
The full and complete financial compensation for Contractor’s work in correspondence with all conditions and terms of the contract is Dhs. 7,750,000.00 (only seven million, seven hundred fifty thousand UAE Dirham). ADWEA will make an “interest-free advance payment” to Contractor, which does not exceed the amount mentioned in the Appendix to Conditions (ADWEA, 2015, p. 32). In order to receive the advance payment, Contractor should adhere to the following conditions:
- submit the original contract agreement signed by Contractor and ADWEA;
- provide the performance bank guarantee;
- provide an unconditional bank guarantee acceptable to ADWEA (ADWEA, 2015).
Under the contract, payment should be made by ADWEA to Contractor in monthly statements based on the work done. The sole authority to decide how much progress has been gained on the project belongs to ADWEA. After receiving a monthly invoice, ADWEA will review it and approve the payment if it considers that the agreement has not been violated. However, if the invoice is objected either partially or completely by ADWEA, the organisation will return it to Contractor for revision within a fifteen-day period (ADWEA, 2015). In the revision request, ADWEA should provide substantial reasons for criticising the receipt details. In response to ADWEA, Contractor should prepare two invoices: one referring to the unobjected part of the original invoice, and the other one referring to the objected part of the original invoice ADWEA, 2015). In case if the ‘revised invoice’ is objected partially or completely, the procedure will be repeated, upon which, ADWEA will have to compensate the undisputed part of the invoice.
Payments made by the organisation cannot be deduced as a postponement of ADWEA’s rights to disagree with any invoice paid in this way. ADWEA has the right to refuse any of Contractor’s invoices within a six-month period from relevant works’ realisation (ADWEA, 2015). The payment procedure should be applied mutatis mutandis to such amounts of money. Furthermore, ADWEA will be able to deduct any debt from Contractor.
The contract also specifies retention procedures related to the payment terms. According to these, payments to Contractor are subject to the restraining of retention approximating the percentage negotiated in the Appendix to conditions. Upon provisional acceptance of Contractor’s works, 60% of the retained money will be given to Contractor, and 40% will be kept by ADWEA until Contractor has met all obligations. Another condition for releasing the remaining 40% is ADWEA’s provision of Contractor with the final acceptance certificate (ADWEA, 2015). ADWEA should not make any payments until obtaining the receipt from the performance bank guarantee. All invoices are to be paid in UAE Dirhams unless a different negotiation has been reached. The organisation will make payments by direct transfer to the bank that Contractor has nominated. Contractor must provide the bank’s name and account number on every invoice given to ADWEA.
Payment terms defined in the contract also include the regulations on items’ purchasing. Concerning the construction, erection, and installation works, 100% will be allocated in monthly progress payments for site works upon ADWEA’s approval. For the CIF materials and plants involved in the works, 35% of payment should be given to Contractor upon his presentation of “complete shipping documents pro-rata” for each separate assignment (ADWEA, 2015, p. 37). Another 40% will be paid upon Contractor’s provision of “Receiving Cum Damage Reports” for every assignment on condition that the materials are in conformity with the agreement’s conditions and specifications (ADWEA, 2015, p. 37). Finally, the rest 25% will be paid in monthly progress amounts upon competing works as planned.
Regulations regarding locally purchased materials involved in the works are as follows. Sixty per cent will be paid upon Contractor’s presentation of “Receiving Cum Damage Reports” for each assignment. A delivery note from the local supplier should be attached, along with the proof that the material conforms to the contract’s conditions (ADWEA, 2015). Forty per cent will be paid in monthly progress payment after the materials are installed, or the plants erected.
Payments regarding spare parts are to be divided in the following way:
- 20% will be paid upon Contractor’s presentation of all necessary documents pro-rata for every assignment;
- 60% is to be paid upon presenting “Receiving Cum Damage Reports” for each assignment;
- 20% will be paid upon Contractor’s “complete delivery of the acceptable spares” to ADWEA’s stores (ADWEA, 2015, p. 37).
Payment terms in regard to locally purchased spare parts are as follows:
- 80% is to be paid upon Contractor’s presentation of “Receiving Cum Damage Reports” for each assignment with local suppliers’ delivery notes, on condition that spare parts conform to the agreement’s conditions;
- 20% is to be paid upon the complete delivery of spare parts to ADWEA’s stores (ADWEA, 2015).
Warranties and Conditions
The contract does not contain any conditions, so two warranties will be discussed instead of one warranty and one condition. Both warranties are aimed at the protection of the injured party’s rights through financial compensation in case of any violations. According to the construction warranty, the works performed by Contractor must be free from any defects and must correspond to requirements and specifications settled by the parties (ADWEA, 2015). According to the provisional acceptance certificate, Contractor should replace or repair the materials or equipment which are deemed as defective by ADWEA. If Contractor does not comply with this requirement, ADWEA will arrange the repair or replacement with the cost recovery from Contractor. The equipment and materials, which shall be repaired or replaced by Contractor, must be given a guarantee by Contractor for a certain period of time specified in the appendix to conditions. If Contractor violates the warranty, ADWEA will receive compensation upon giving written notice to Contractor and not receiving appropriate repairs or replacement within ten days.
The second warranty is the supply one, and it incorporates Contractor’s guarantee of high quality of all the equipment and materials intended to be utilised. Contractor must secure that all supplies, tools, materials, and equipment, which have been specified or designed by him and used in the project, correspond to the agreement’s specifications (ADWEA, 2015). Also, Contractor guarantees that these materials will be obtained from reliable suppliers and available in Abu Dhabi. Thus, in case if any of the tools or materials turns out to be defective, Contractor will be able to replace it as soon as possible. All such replacements, if needed, shall be made at Contractor’s cost. Contractor should also obtain all the necessary warranties from suppliers for ADWEA’s benefit (ADWEA, 2015).
The warranties shall remain in force until the release of the provisional acceptance certificate or until the necessary replacements are made. Should Contractor fail to obtain such warranties, it will be his responsibility and obligation to deal with the aftermath. Contractor will keep ADWEA aware of all actions, changes, and replacements (ADWEA, 2015). When Contractor violates any warranty, he will deal with the outcomes of violations at his cost.
Termination Provisions
ADWEA is entitled to the right to terminate the contract. To do so, the organisation has to issue a thirty-day notice by a registered letter to Contractor, sent to the address included in the agreement (PO Box No. 5277, Abu Dhabi) (AWDEA, 2015). In this case, the organisation will not have to resort to court. The following conditions may serve as a basis for terminating the contract:
- if Contractor withholds the works or delays their progress in a way that is likely to prevent him from completing the project on time, according to ADWEA’s opinion;
- if Contractor pauses or postpones the works partially or entirely for a fifteen-day period without the reasons deemed by ADWEA as substantial;
- if Contractor abandons or holds back the works;
- if Contractor infringes the agreement, does not execute his obligations, and does not fix the issues within a fifteen-day notification from ADWEA;
- if Contractor attempts to deceive the organisation or tries to rob ADWEA;
- if Contractor suggests to corrupt any public officer involved in the works by offering some gifts or donations, which may result in adverse outcomes for ADWEA;
- if Contractor becomes insolvent or bankrupt or performs anything that leads to bankruptcy or insolvency;
- if Contractor’s firm is liquidated;
- if Contractor ignores the instructions given by ADWEA without substantial reasons;
- if Contractor assigns the agreement without discussing it with ADWEA;
- if Contractor violates any provisions of the Israel Boycott (ADWEA, 2015).
Under any of the mentioned circumstances, ADWEA will complete the works at the expense of Contractor. ADWEA also has the right to terminate the agreement for any other reason that has not been listed above. On such an occasion. The organisation will compensate Contractor’s work already done and issue a reasonable compensation due to termination. In case works are terminated, ADWEA should make an inventory within a fifteen-day period from the day of the termination notice. Contractor must receive a letter informing him about the inventory, during which all completed works will be checked, including constructional plants, materials, equipment, and supplies (ADWEA, 2015). Inventory must be performed in the presence of Contractor and the organisation. If Contractor does not sign the inventory, a letter must be sent to his address mentioned in the contract. Contractor has seven days to give his comments on the inventory. If no comments are issued, ADWEA can use the inventory to make further decisions about termination. Delay penalty shall be determined according to the agreement between the organisation and Contractor.
Additional termination provisions state that the works that have not been completed by Contractor should be finished by ADWEA at Contractor’s expense. Contractor should also compensate administration costs that may arise from termination-related procedures, which are estimated at 10% of the cost of uncompleted works (ADWEA, 2015). The organisation has the right to evict Contractor from the site and appropriate all structures, materials, equipment, and buildings to utilise them for work completion without having to compensate Contractor for any loss or damage. The organisation is eligible to retain such materials and equipment even after completing the works (ADWEA, 2015). ADWEA may also withdraw the performance bank guarantee until Contractor’s account has been finally settled. The organisation may act on Contractor’s behalf in questions regarding material supply or work execution. Finally, ADWEA can delete Contractor’s name from the terminated works or suspend collaboration with Contractor for the time period established by the organisation.
The Applicable Law
The validity, performance, and construction of the agreement should conform to the laws of Abu Dhabi and the UAE. Such regulations comprise rules, ordinances, regulations, decrees, and orders of any Abu Dhabi or UAE agency or governmental authority, including local, municipal, national, and state ones (ADWEA, 2015). Contractor must protect ADWEA and compensate any losses that occur due to penalty or liability imposed on Contractor by the UAE or Abu Dhabi governmental authorities because of violations or omissions that occur during the process of works. Contractor must conform to all the laws, regulations, and rules in respect of Al-Dhafra and tariff committees.
The Mechanism of Resolving Disputes
The mechanism of resolving disputes between parties, according to the contract, is arbitration. Any claim or dispute that may arise out of the agreement or is related to it must be initially pointed out to the other party. ADWEA and Contractor should try to resolve a dispute peacefully first (ADWEA, 2015). If no such solution is achieved, the final settlement of a conflict should be sought for at Abu Dhabi arbitration with conformity to Abu Dhabi laws. The arbitration decision will be final and will be adhered to by both parties. The arbitration’s judgment upon the financial award shall not be argued by any of the parties. The arbitration award will be “in lieu of any other remedy” (ADWEA, 2015, p. 29).
Other Contractor’s Commitments
Contractor’s general obligations include taking care of employees’ rights and providing them with sufficient conditions of work. Upon selecting highly-skilled employees for the works, Contractor shall arrange their mobilisation, including visas, work permits, licences, security passes, residence permits, and emigration or immigration licences if needed (ADWEA, 2015). Contractor should also provide transportation for workers, both to and from and within the site. At the site, Contractor must arrange suitable accommodation and sanitary conditions. In case if Contractor wishes to build temporary housing on the site, he should obtain ADWEA’s approval ahead of time (ADWEA, 2015). Above all, Contractor must take care of workers’ security and safety, which presupposes compliance with the relevant regulations of Abu Dhabi, the UAE, and ADWEA. Medical services and work accidents should also be carried about by Contractor. If any of such services are provided by ADWEA, Contractor must reimburse their cost.
The Extent to Which the Contract Protects the Organisation’s Interests
The contract protects the organisation’s interests to the greatest extent possible. ADWEA has all the rights for settling regulations, approving equipment and materials, and terminating the contract. ADWEA also can change requirements in the process of work if it deems them necessary without having to reimburse costs to Contractor. The organisation is protected by the contract in the majority of points. The only exception is force majeure, in case of which both parties have equal rights to delay any of the obligations (ADWEA, 2015). In general, however, ADWEA is highly protected by the contract, its special conditions, warranties, and annexes.
Conclusion
The contract between Abu Dhabi Water and Electricity Authority and Construction and Maintenance of Command and Control Centres for Shuweihat and Fujairah is a document containing all the details of parties’ collaboration on the project settled in the agreement. Both parties’ obligations and rights are settled in the contract. Financial obligations, safety regulations, and warranties are some of the most important elements of the contract. Force majeure and variation orders are discussed appropriately. The contract serves as a solid basis for initiating business cooperation between the two partners.
Reference
Abu Dhabi Water and Electricity Authority. (2015). Construction and maintenance of command & control centres (C&C) for Shuweihat and Fujairah.