2.0 pem p36 contracts management dlp 22.08.14

8/10/2019 2.0 PEM P36 Contracts Management DLP 22.08.14

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CONTRACT MANAGEMENT

Defect Liability Period

Prof. Ashish Goel


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Defect Liability Period (DLP)

DLP:

Meaning

Obligations under this period

Significance

Contracts Management : Prof Ashish Goel,NICMAR

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Also called defect notification period.

Starts immediately after taking over of thework.

It is the period after taking over during whichthe contractor is responsible for correcting

any defectin the said works.


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What should be suitable period for defectliability ??

One year is generally sufficient for civil engg.projects.

In case of EPC jobs, a longer period may be requiredeg. HVAC plant.

Employer may change the figure of 365 daysmentioned in FIDIC forms.


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More involvement of client rather than the

engineer... Why ???

First hand use of completed works.

More aware of any defects

in the works.

Employer need to make arrangement

to identify any defects.

Engineer may be used for this purpose if required.


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Contractors Obligation under DLP

During the DLP the contractor is supposed to:

Quickly address any defects or damages as notified by

the client.

Complete any pending works / rectifications as

mentioned in the TOC before expiry of DLP.

Defects due to clients mishandling & no/improper

maintenance.


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Cost of Remedying Defects

All the cost to this effect shall be borne by the

contractor only if:

Construction is based on contractor's design

Problem in workmanship

Problem in supplied material, P&M


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Cost of Remedying Defects

Following are not covered under DLP :

Normal Wear & tear.

Defects due to clientsdesign.

Defects due to clients mishandling & no/improper

maintenance.


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Extension of DLP

The employer may ask extension of DLP if:

The plant or a part of same cannot be used for itsintended purpose due to the defects.

Notice for extension for DLP is to be given byemployer at the earliest but before expiry of originalDLP.

Generally contractors obligation shall not beapplicable two years after the DLP of plant & materialwould otherwise have expired.


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Failure to Remedy the Defects

In case the contractor doesn't act even after receivingnotices from client, the employer may:

Get the work done himself at the cost of contractor.

In such case the contractor will be under obligation to thereasonablecost of remedying & not for the work as such.

Accept the work with defect but reduce the contract pricein consultation with the engineer for reduction.

Take extreme step of terminating full/part contract &recover total amount paid from contractor for such works(parts) + financing cost + dismantling cost + clearing thesite + returning plant & material to contractor.


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Removal of Defective work

In case the defect is not readily rectified atsite, the contractor may remove such itemfrom site :

The pre-requisite for such action ???.

Employersconsent.

Time for return

Performance guarantee for the new/rectified part.

This situation could result in increase of DLP.


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Right of Access

During DLP (until performance certificate isissued), the contractor has the right of access tothe site but:

Access will be reasonable as may be required to fulfil

the obligation under contract.

Have to be consistent with employers safetymeasures established at work place.

In cases (specially design build/EPC contracts), thecontractor may need additional access during DLP toensure that plant is being operated as per their

guideline. Contracts Management : Prof Ashish Goel,NICMAR 12


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Contractor to Search

If required by the engineer, contractor shallsearch for cause of any defect, 2 possibilities:

If the defect is such that it is to be remedied atthe cost of contractor ?.

If not, then contractor may investigate theproblem & determine a suitable cost + profit forthe remedy in consultation with the engineer.

Most common in case of employer design.

In correct operation/maintenance by employers.

The contractor should treat this as an extra claim &such provisions of the contract should govern.


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Un-fulfilled obligations

Contractors obligation after issuance ofperformance certificate ??.

Site clearance.

Apply for final payment.

Latent defects detected after issuance of

certificate.

Applicable only if the contract has specific provision to

deal with such cases.


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Clearance of Site

After issuance of performance certificate thecontractor is supposed to remove following fromthe site:

Any remaining equipment, material, rubbish &

temporary works if any.If such items are not removed within 28 days after PC

then the employer may

Sell/ Dispose off such items

Employer shall get any cost incurred in such process fromcontractor.

If any balance amount left out after employers expenses,same to be handed over to employer.

In case expenses exceed employer cost, contractor is

supposed to pay the balance outstanding amount.Contracts Management : Prof Ashish Goel,NICMAR 16

2.0 pem p36 contracts management dlp 22.08.14

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