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FORCE MAJEURE..,

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X Planner
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GUYS,

u have heard of course about these terrorist acts in sharm el sheikh_Egypt,
of course u understand that will have a -ve impact on the progress of the construction on site, since all the subcontractors have become underresourced (labors r running away from the area) .
this considered as a force majeure from the legal point of view.

my question here is how do u guys deal with such a situation from the contractor point of view and the owener rep. as well.

Is it fair to keep writing letters for the contractor to increase resources to catch up?? (or just to prove that he is underresourced).

could we expand on this ,

Thanx in advance,

Replies

Andrew Flowerdew
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Raja,

Pretty self explanatory - one point to note, the procedure set out and time limits stated should be strictly followed.
Raja Izat Raja Ib...
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for preview :
http://contracts.onecle.com/concord-efs/atlantic.agency.2002.07.12.shtml

some of the content i cut/paste for further discussion...

3.4. Construction Force Majeure Events. If a Construction Force Majeure Event that results in, or could reasonably be expected to result in, a Force Majeure Loss (including any losses that result from a Construction Force Majeure Event that prevents, or could reasonably be expected to prevent, the Construction Agent from completing Construction prior to the Scheduled Construction Termination Date) occurs, the Construction Agent shall promptly provide the Lessor with written notice thereof within ten (10) Business Days of the Construction Agent’s knowledge of the occurrence thereof (the “Construction Force Majeure Declaration”). Upon receipt of the Construction Force Majeure Declaration, Lessor and the Construction Agent shall consult with each other as to what steps, if any, are to be taken to remediate such Construction Force Majeure Event, including consulting as to the appropriateness of an extension of the Scheduled Construction Termination Date. The Construction Agent shall take all reasonable and practical steps to minimize the disruption of the construction process and all steps reasonably necessary to prevent further damage arising from such Construction Force Majeure Event. The Construction Agent shall be entitled to reimbursement from Lessor for any costs
directly related to minimizing the disruption and to preventing further damage of such Construction Force Majeure Event through the proceeds of Fundings pursuant to, and subject to the terms and conditions of, the Master Agreement. The Construction Agent shall, within thirty (30) days of the delivery of the Construction Force Majeure Declaration, submit to the Lessor a budget detailing the costs that would be incurred in remediating such Construction Force Majeure Event and a schedule for effecting the same. The Construction Agent will commence such remediation only upon receipt of written authorization from the Lessor to do so, which authorization (or denial thereof) shall be given by written notice to Construction Agent not later than fifteen (15) Business Days after Lessor’s receipt of the budget referred to in the preceding sentence. The Lessor in its sole discretion may elect to continue Construction and make Advances for such remediation or terminate this Agreement with respect to the affected Leased Property. If the Lessor elects to terminate this Agreement with respect to the affected Leased Property, subject to Construction Agent’s right to purchase such Leased Property in accordance with Section 5.5 hereof, the Construction Agent shall within thirty (30) days of receipt of written notice of termination return the affected Leased Property to the Lessor in accordance with the procedures set forth in Section 5.6.

In the event the Lessor elects to continue Construction after receipt of a Construction Force Majeure Declaration, the Lessor shall make available to the Construction Agent, so long as no Construction Agency Event of Default shall have occurred and be continuing, all insurance proceeds payable to the Lessor with respect to such event to the extent necessary to remediate such event.
Raja Izat Raja Ib...
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regarding the labour, if i not mistaken there is one clause saying if there is no labour from the country itself to work on that project for certain period, the sub contractor could import labour from outside. I’m not very sure about that...have to check.
Andrew Flowerdew
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Planner,

How long or otherwise the threat of terrorism remains is not important unless you believe that security restrictions will be lifted if the state believes there to be no longer a threat - if the UK is anything to go by, the increased security restrictions to get into the country are here to stay, perceived threat or not.

I can’t think of any paper at the moment about the labor situation, the most important peice of paper you already have - the contract.

So back to the contract, is state intervention or similar mentioned as a FM or in any other clause? Is there a clause (usually is) requiring compliance with state rules and regulations, etc and therefore the compliance is causing the delay whether FM or not?

The plot thickens!!!!!
X Planner
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Andrew,

i think we are getting more close to the point,
It is the state intervention , but nobody can confirm that the (((effect)))of these acts of terrorism has ended to date, or even when it will vanish.

regarding the supply of labors , can u please refer to any paper that will help resolving this issue??

cheers
Andrew Flowerdew
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Planner,

The further information is interesting and possibly very important - was it the actual act of terrorism or the subsequent security restrictions (which I assume is state intervention) that has caused the problem?

From what you stated it would appear to be the state intervention - which may be in the FM clause.

Also, there may be other clauses relating specifically to the supply of labour which may be of interest - I saw one recently from the Middle East in which the contractor warranted to have sufficient labour, staff, etc to do the job. If so, there may be other contractual considerations that strenghten / weaken the arguement.
X Planner
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Andrew,
In reply to your questions:

1- The case in Egypt (in this project particularly) was not more than a security restrictions in response to terrorist threats which is partially preventing the sub-contractor from importing labors on site which may excuse the performance of the contract.

2- With regards to the contract, Terrorist Threats are not stated in the list of items identifying the F.M. (does not exist), but we still believe that it is beyond the control of anyone and it is not holding completely the work on site as well.

So, from the legal point of view it is not a F.M. and it is deemed a sub-contractor’s risk, he has to accept it (it should be covered somehow in his estimation), correct me if I’m wrong.

Cheers,
Andrew Flowerdew
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All,

In English law, terrorism may be a cause of FM, the questions in this thread that need answering are:

1. Is it also the case in Egypt?
2. If the contract expressly states a list of events that are FM, is this list the only allowable causes of FM or can any event ’beyond the control of the parties’ also qualify under Egyptian law.

For an answer I suggest you go and ask an Egyptian lawyer.

If you were in the UK and the areas abit grey, you can ask the courts for a ’summary judgement’ on a point of law. This process is usually quite quick and would give you an undisputable answer.
Raja Izat Raja Ib...
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Maybe in my mind that state law will make a decision....until one letter from court will be made to enforce "Force MaJeure", but for how long it takes, the decision have to be made as soon disaster came.
Charleston-Joseph...
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Hi Bill,

That is a simplistic view of FM.

And because it is simplistic, it may not be applicable because it could be subject to abuse or conspiracy. Take note that while contract involve parties signatory to the contract, the operability of the contract is still subject to the law of the state.

I just have this instinct that the paarticular event that started the thread does not qualify for FM

Best regards,
Charleston-Joseph...
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Hello PP,

No one can confirm or be held responsible for anything since this forum is an exercise of our freedom to express our opinion of which everyone of us will depend each others right and freedom to express his or her opinion.

If you tracked down the development of the thread, it started with a unique event in your project site. The information we got of what really happen at your site is not sufficient to come up with particular application considering the uniqueness of your project.

As a result, the exchange of ideas goes to general principle of Act of Terrorism constitute Force Majeure. It may or it may not have relevance to your project site.

I changed my perspective in consideration that a lot of countries I worked follow English Law. There are also some countries that don’t follow English Law. Look at the reconstruction in Iraq. Did the contractors cry "FORCE MAJEURE just because bombs explode here and there. And I don’t think the US of A follow the English Law or the CIS of former USSR.
Bill Guthrie
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Shahzad point i was trying to make is that the actual cause, not relative to the reason is fm. some pp members were getting off to the tangent if man made or act of god, etc etc. no matter what the cause, as long as its out of the control of both parties qualifies it as a fm issue
bill
X Planner
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Again, can u guys confirm or hold the responsibility of re-identifying or explaining any of the contract terms if it is kind of blurred or dubious ????
Shahzad Munawar
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Bill, not only you mostly others members of this forum are of the same opinion that is "beyond control of the parties = fm"
Bill Guthrie
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ah ha Sukumaran , thank you , i was correct in my statements yesterday, beyond control of the parties = fm
Sukumaran Subaram...
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Guys,

Black’s Law Dictionary defined Force Majeure as "that part of a contract which cannot be performed due to causes which are outside the control of the parties and could not be avoided by the exercise of due care."

This includes an "act of God" which is defined as "an act, event, happening, or occurrence, due to natural causes and inevitable accident, or disaster; a natural and inevitable necessity which implies entire exclusion of all human agency which operates without interference or aid from man and which results from natural causes and is in no sense attributable to human agency."

This clause states that the parties shall not be liable for failure to perform its obligations under the agreement due to causes out of their control and is based on the concept that parties to an agreement desire to protect themselves from risks posed by unpredictable events.

The following sample clause specifically mentions the possibilities of mechanical, electronic, or communications failure, which are particularly important in the electronic age:-
No party shall be liable for any failure to perform its obligations in connection with any action described in this Agreement, if such failure results from any act of God, riot, war, civil unrest, flood, earthquake, or other cause beyond such party’s reasonable control (including any mechanical, electronic, or communications failure, but excluding failure caused by a party’s financial condition or negligence).

Regards.
X Planner
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First of all,
i would like to thank all of u guys for ur valued contributions and i hope to keep going on ...

Andrew,

Could u please Highlight these websites so we can take a close look at the subject?

charlestone,

the case is not defined or confirmed by the contract, therefore , the contract terms will be preserved and the contractor will be responsible ( i would not like to say that)to recover or accelerate with some form of compensation which is under discussion (it’s a director’s level decision ).

At the end, can u guys confirm or hold the responsibility of re-identifying or explaining any of the contract terms if it is kind of blurred or dubious ???? that is the point

Cheers,
Raja Izat Raja Ib...
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Hi Guys,
I was thinking, is it to enforce "Force Majeure" as simple as that...? Who will make a decision(Goverment, Court or Client for the project) for that situation is "Force Majeure or what?
Andrew Flowerdew
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Charleston,

It appears to be a cause, whether your contract says it is maybe another matter. It could be one of 3 possibilities:

1. the contract states it is, therefore, it is! - but I doubt yours does otherwise we wouldn’t have been having this discussion.

2. the contract does not state it is and it is deemed that only those stated are acceptable causes of FM and nothing else - ie strict interpretation in line with Bill and Stuart’s thoughts.

3. the contract does not state it but the list stated is not taken as exhaustive and therefore other events "beyond the control etc" may qualify as well.

Certainly a courts starting point would be the contractual definition as per point 2. If it would then go further to imply other events I guess would depend on the facts of the case.
Charleston-Joseph...
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Hello Andrew,

Thanks a lot. I changed my perspective.

A lot of country follow the English Law.

So this answer the question: Act of Terrorism constitute :Force Majeure.

Wish you all the best.
Andrew Flowerdew
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All,

Also found a few more web sites that cite terrorism as a cause of ’force majeure’ (under English law) so I have to conclude, at least in the UK and similar, terrorism can constitute FM.

Andrew Flowerdew
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All,

And another one just found: Advice on UK based law but again it will depend on the exact wording of the contract:

FORCE MAJEURE......

In considering force majeure provisions the Parties may wish to be more specific than simply referring to "circumstances beyond the control" of a Party to avoid debate as to what circumstances are in fact beyond the control of the party claiming relief; the usual matters which the Parties might define as being events of force majeure are:
(i) Act of God including tempest, fire, or natural disaster;
(ii) War, civil war, sabotage or act of terrorism;
Andrew Flowerdew
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All

If you wish to be enlightened or possibly further confused:

Try

http://www.hbp.usm.my/aziz/FORCE%20MAJEURE.htm target=_blank>HBP Force Majeure

or

http://www.mallesons.com/publications/Asian_Projects_and_Construction_Up... target=_blank>www.mallesons.com Asian_Projects_and_Construction_Update
Bill Guthrie
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Stewart, not splitting hairs, agree, tis the contract that defines FM, however WHO WRITES THE TENDER PACKAGE THAT LATER BECOMES THE CONTRACT PACKAGE, THE COMPANY, OWNER CLIENT WHATEVER title you give it. Thus the company inserts its own defination of FM.

And really what does it mean ???? To me most times used is for a act, beyond the control of the party of both parts, act of god, man, monkeys snow, whatever, if the parties have no control over it, then you are in a Force majeure Area.

Cheers Bill
Charleston-Joseph...
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Andrew

That was what im trying to say in my previous post. Terrorism is not a force majeure because it is act by men. Terrorism should never intimidate us to change our life, give up our freedom or our democratic way of life.

Readng at government pronouncement it was obvious that the government doing all it can to eliminate the impact of terrorism in our democratic way of life.

I still believe that terrorism is not a cause of "force majeure". If I think otherwise, I can’t imagine where the construction industry will be heading.

If you may recall, one big construction company (doing wembly stadium) was treathen with shooting their crane operators unless they gave in to demand by XXXX (same as terrorist acts). But the contractor did not give in (terrorist demand or threat).
Andrew Flowerdew
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Charleston,

You could well be right but terrorism is not new - here in the UK terrorism struck recently, but only ashort while ago the IRA was bombing mainland UK on a fairly regular basis for the best part of 20 years. Spain - ETA, ongoing although recently quite, etc, etc all over the world.

Terrorism is not therefore a recent thing, it’s been with us now for many many years but not in a strategic global scale now encountered.
Charleston-Joseph...
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What are the precedent? Maybe none since this is new. Terrorist impact in construction is a new phenomenon.

What did the court say? Maybe none yet.

It seems parties bound with contract documents did not agreed on "force majeure" within these context (impact of terrorist in construction)

In this case, the party that can best present his case in the proper forum will will.
Raja Izat Raja Ib...
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I agreed with andrew,
Sometimes Client and Contractors do "Butter Trades" to solve the problem.
Andrew Flowerdew
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Stuart,

I always thought so but many seem to think the contract can be totally or in part ignored and hence the problems.

I’m tempted to start a thread on partnering and it’s effect on the use of the contract but I’ll save that for another day.
Stuart Ness
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Agreed, Andrew.

Isn’t that why we have Contracts in the first place? ;-)

Stuart

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Andrew Flowerdew
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All,

Hence when it crops up, one should go with that agreed definition and the risk apportionment accordingly.
Stuart Ness
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Bill,

I would not suggest that it is a case of "Every firm has [its] own [definition] of FM."

It is the Contract that defines Force Majeure, and this is a reflection and confirmation of the Parties’ mutual agreement to such definition, whatever it may be. ;-)

Stuart

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Bill Guthrie
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Ha ha Stewart, concur

have never seen a contract that did not define Force Majeure as used within the specific contract.

Differient strokes for differient folks,

Every firm has their own defination of FM.Agree

Cheers Bill
Stuart Ness
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Philip,

The definition of Force Majeure is very simple: it is what the Contract says it is!! Nothing more; nothing less.

Stuart

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Andrew Flowerdew
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Philip,

FM is defined as "events affecting the contract that are completely outside the parties control. Such envents are usually listed in full to ensure thier enforceability: They may include acts of God, fires, failure of suppliers or sub contractors to supply the supplier under the agreement, and strikes and other labour disputes that interfere with the suppliers performance of an agreement..."

The above is copied straight out of the Oxford dictionary of law.
Philip Jonker
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Hi guys,

I have just briefly read the postings, but have found no actual references to a case of force majeure, and find difficulty with understanding what the discussion is about? "Force Majuere" is circumstances beyond your control, and should not be confused with "Acts of God".
What is force majeure? and an Act of God?
FM is an act within human control, such as a strike, and AoG something like an earthquake or simular.
Andrew Flowerdew
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Planner,

Your’e running a business not a charity and these things happen sometimes. Without seeing the contract in detail I am surprised that a terrorist act is not covered, if not expressly then implied through another term. However, assuming the sub contractor is responsible either for time and or cost then telling him to get on with it and standing by the contract is as you correctly state going to lead to one very unhappy sub contractor, - result - big headache for all parties, a sub contractor who will probably claim for anything and everything in an attempt to recover his costs, under perform as he will not want to pay the extra premium required to get labour on site, the project will undoubtedly suffer on various fronts, etc, etc. Not a good situation to get into but you have to ask yourself the following question:

1. Why should the client pay for something that was also not his fault?
2. Why should the main contractor pay for something that is also not his fault?

Contracting is about risk taking and those risks are divided up and allocated by the contract - if one of those risks lands on your doorstep then you’ve got to pay for it because thats the agreement you signed up to.

Ok, that is the hard ball approach - and the correct one without further agreement. However you could try putting together a REALISTIC and ACHIEVABLE plan, get all the parties round the table and discuss the situation, available options, likely effects and liabilities openly and honestly. You may be able to get some form of agreement that is more favourable to your sub contractor and as long as all parties agree and sign up to it then it could be made into a contract ammendment.

As main contractor you could also come to an agreement just between yourselves and your sub contractor, ie ammend the sub contract but I would ensure that any agreement is made at director level in your company and not at site level. I think your directors will probably look at the situation in more commercial terms than anyone closely involved on site.
X Planner
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Andrew,

from the legal point of view , i agree, it is the subcontractor responsibility,as long as it is not defined as a force majuere.

but to be practical, there is no way to bring labors on site these days because of the security restriction,
which is out of his control, but the work is not officially on hold.

and there are a few number of labors on site,
so , the delay will occur,

now,are u going to simply tell the subcontractor "these delays deemed to be ur responsibility and u r requested to recover or accelerate without any EOT or additional cost or even any form of compensation" ???????
Andrew Flowerdew
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Planner,

I would of thought that a terrorist act would come under one of the following - an act of war (whether war be declared or not), riot, foreign enemies hostillities, civil war, rebellion, revolution or insurrection? These are usually the events that form the employers accepted risks - which is something to check on as there may be seperate clauses for ’force majeure’ and ’excepted risks’.

If terrorist act or similar is not expressly mentioned in the contract then alittle reseach is required into past cases to see how the courts have interpreted the above. Without checking I would think it is covered by one of the terms.

The other side is of course that if it is not covered expressly or by any of the above terms being included in the contract, then it is deemed a contractors risk and therefore his problem to overcome without compensation.
X Planner
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the cause is the terrorist acts, and it is not covered by the contract, ...

so what do u think contractually?

on the other side , we do beleive it’s force majuere as the contractor is unable to get resources to site, but i thik that we must stick to the contract.

but how to compensate the contractor?

it is confusing ...
Andrew Flowerdew
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Planner,

If the project was initially behind before the incident and it was the contractors fault then I think we all know that it’s up to the contractor to sort out that proportion of the delay. As for any delay caused by the ’force majeure’, eot but not money should be given to the contractor for it’s effect.

However, if as seems the case the ’force majeure’ is stopping the contractor from recovering the initial delay and causing further delay then the whole effect whilst it lasts is still due to the ’force majeure’ and treated accordingly.

Cannot emphasise enough though to read the contract - ’force majeure’ events are usually expressly defined in the clause so check that your event is covered. If so, the clause often excuses both delay and a total failure to perform the contract - worth a close read
X Planner
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Sukumaran,

yes,that is what i expected to hear from the begining.
it does make sense.

things go that way and of course further delays are expected thats why i did not want to go into the grace period thing.

i’m trying to solve it all possible ways but not thinking of the grace period at least for the time being as i understand that for a reason or another the subcontractor will not have the enough resources again or it will take him much time than the time he is going to propose.

Regards,
Sukumaran Subaram...
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Planer2,

The client shall allow for grace period i.e. from final target completion date to Operator move in date. Say 4 to 6 months. Well any loss time occurs during the construction period can be recovered during the grace period. Thus the operation of the building is not hindered and Operator has enough time to train the staff, do marketing and etc.

In this case where the project is under resources, if the contractor couldn’t arrange the workers on time definitely the project will be delayed. At this point of time client can utilize the grace period to recover the loss time. Also they must ensure that contractor is committed to deliver the project without any further delay from the grace period.

And for being honest:
HONESTY IS NOT THE BEST POLICY. IT IS ALWAYS BACKFIRED IF YOU ARE NOT WELL PREPARED.

Regards.
Raja Izat Raja Ib...
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Hi Guys,
I got some question here,
1.If the situation is critical ...maybe at that time the vendor / supplier / transpotation and the contractor will raise the cost rate, in terms of budget its out of range. Who will bare the cost.

X Planner
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I agree with Charleston-Joseph’s thoughts ,especially about being honest and realistic , of course that will make u feel better to be fair which is at the same time not what ur managers want, actually that is puzzling and i think most of u guys went through similar situations before.

To keep pressing on the subcontractor in terms of the contract which means a recovery plan without acceleration cost (which I believe is not fair as the contractor will be held responsible for all this out of control delay) or to understand the overall situation which means E.O.T with or without cost impact?
And If E.O.T is applicable, what about the cost impact? (From the legal point of view)
And how to deal with the operator in case of E.O.T is granted?

But I disagree with sukumoran’s statement "under resources is not a client/consultants worry", the term "under resources" will put the project on delay and we should not forget that the owner has a lot of commitments as well as the contractor.
in our case, I consider that the real owner is the operator but he is behind the scene and he has his own plan for (marketing, Staff training,..etc) which will make the situation more complicated.

But I still agree with the other procedures in Sukumoran’s reply.
Sukumaran Subaram...
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Basically, under resources is not a client/consultants worry. It is contractor’s sole responsibilities. Contractor shall plan ahead and met the target completion date. What the contractor must do is arrange for additional resources and mobilize them to site as soon as possible.

Calculate the loss time and prepare a schedule for EOT. However, it is subject to client/consultants approval. If EOT not approved contractor shall prepare a recovery schedule to meet the target completion date together with acceleration cost. Again the acceleration cost is subject to client/consultants approval and the contractor must justify it with all the supporting documents.

Regards.
Charleston-Joseph...
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Hi,

The site condition experience insufficient resource (manpower) due to the event that transpired. The recovery schedule requires more than the present manpower. Question: Are there sufficient resources to support the the recovery schedule? How long to mobilized additional resources (manpower) to support the recovery schedule? Are the expected resources (manpower) have the necessary skills to match the plan productivity that was assumed during the development of recovery schedule?

I know it is very hard to present to the client including the operator that existed in a state of fantasy. The best the project management team can do is to pretend that it can be manage here and there, look for ready made alibi and that the recovery plan is realistic. Why worry for tomorrow? Just brace for the time to come when head start to roll.

Or be honest, explain the situation, present alternatives, be realistic, do the best as a planner and face the consequence.

Either which way, the project cannot be completed as originally plan.
N Curgus PSP
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Check the contract first. Force Majeure delays are excusable but non-compensable and are sometimes defined as the delays beyond the Contractor’s control, either weather, fire, labor disputes, etc. The Contractor should get a time extension for that part, but no extended overhead.

Since the project was behind the schedule prior to the event that part should be treated differently. Total delay after the event should be divided into two portions, first one is the delay before the event and whoever is responsible for that should pay for the recovery.
I would make a presentation to the owner, request for time extension, for the Force Majeure part include all details, contract requirements, CPM schedule files, projected impact on the available labor force, etc. When you quantify the delay then you can make a next step and make a proposal for “acceleration”/recovery schedule one or more options. The owner will have the enough information to grant you a time extension (or deny it if he disagrees) and also the price tag to keep the original Substantial Completion date.
X Planner
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thanx guys for ur fast replies ( as i always expect )

but what if the project finish date is fixed and cannot be shifted or delayed (from the owner point of view) based on other commitments with the operator for example.

History:

we were working on a recovery program before these acts took place, which was prepared by the subcontractor( as they were underresourced which caused the elastic effect for the original program)therefore, they have submitted a recovery program.)

is it possible to propose their recovery plan again?
Charleston-Joseph...
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Hello,
Just my idea.

I dont think this is force majeure since generally, force majeure is an act of nature whereas this is an act by men. The best to do is to tighten security and to give assurance that nothing of this sort will happen. Within the jobsite, additional security measure must be in place to project confidence that this will not happen in the worksite.

Regards,
Bill Guthrie
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I am referring to a lump sum contract. and Force Majeure addresses the issue of time, not money.

Bill
Bill Guthrie
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To no name in egypt.

OK SO NOW a situation exist whereas party of the first part has claimed FORCE MAJEURE. This identifies a sit rep whereas he feels entitled to a extension of time as a direct result of something that has impacted his project that was beyond his control. Now to deal with it.

The job must proceed, and the contactor should submit a recovery schedule on how he proposes to catch up,or the client should extend the time for completion. One of the other.
It goes without saying, if the contractor submits a recovery program, it will have a price tag on it. (example to work a night shift).
And now that the schedule issue is known, its only a matter of agreeing on the price for this recovery or not.

hope this helps, bill

Shahzad Munawar
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The situation you define come under "Force Majeure" Clause, no doubt.

For your case, an article is being referred which totally relates to your situation:

http://www.klng.com/files/tbl_s48News/PDFUpload307/8432/kla_2003-mar.pdf... Majeure Clause when invoke contracts’

The Contractors may raise EOT and additional claims in this respect as this condition is totally beyond the Contractor’s control. Furthermore the Employer will also fulfill his obligation to overcome the situation and try to compensate the Contractor but within his contractual limitations.
Raja Izat Raja Ib...
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its quiet intresting, i also like to know about it. may be i can add additional question ...is there a clause in the contract like this situation(very critical condition).