a

1. SCHOOL OF ARCHITECTURE, BUILDING AND
DESIGN
BACHELOR OF QUANTITY SURVEYING
(HONOURS)
CONSTRUCTION LAW (QSB 4414)
Group Assignment
NAME : LEE KIM THIAM (0310710)
LIM CHERN YIE (0315688)
THUN SHAO XUN (0315919)
BO YONG KHONG (0316317)
PARVESH FERAG (0320760)
LECTURER : MR WONG CHONG WEI
SUBMISSION DATE : 22nd NOVEMBER 2017

2. Analysis Report of Contractual Standing and
DisputeResolution Based on FIDIC Red Book 1999
Conditions of Contract
Prepared for
MUHIBBAH ENGINEERING (M) BHD.
Prepared by
LCY CONSULTATION SDN.BHD
NAME : LEE KIM THIAM (0310710)
LIM CHERN YIE (0315688)
TUN SHAO XUN (03)
BO YONG KHONG (0316317)
PARVESH FERAG (0320760)
22nd NOVEMBER 2017

3. TABLE OF CONTENT
NO. Title Page
LIST OF FIGURES 5
LIST OF TABLES 6
1.0 Introduction
1.1 Key Issues & Assumptions 7
1.2 Objectives of Report 8
2.0 General Principles of Main Contractor 9
2.1 Comparison between FIDIC Red 11
Book 1999 and PAM Contracts
2006 with Quantities under General
Principles of Main Contractor’s
Responsibility
3.0 Condition Guiding Payment 12
3.1 Comparison with PAM 2006 13
3.2 Procedure for Payment 14

4. 4.0 Contractual Programme 17
4.1 Introduction 17
4.2 Analysis in FIDIC Red Book 1999 17
conditions of contract
4.3 Comparison between FIDIC Red 18
Book 1999 and PAM Contracts
2006 with Quantities
4.4 Advice for Contractual Programme 19
5.0 Testing and Defect in Construction Contracts 20
5.1 Comparison between FIDIC 1999 21
and PAM form 2006
5.2 Advise for Testing and Defect 21
6.0 Dispute Resolution Method in Red 22
FIDIC Book (1999)
6.1 Dispute Adjudication Board 22
6.2 Arbitration 24
6.3 Comparison between FIDIC Red Book 25
and PAM form Contract 2006 on
Dispute resolution
6.4 Advise for Dispute Resolution
i) FIDIC Red Book 1999 26
ii) PAM Form 2006 27
Appendice – Common Issues 28
Bibliography 29

5. 5
List of Figures
Figure No. Title Page
1.0 Interim Payment Clause under FIDIC Red
Book 1999
1.1 Final Payment Clause under FIDIC Red
Book 1999
1.2 Interim Payment Clause under PAM Form
2006
1.3 Final Payment Clause under PAM Form
2006
1.4 Typical sequence of Dispute Events envisaged
in Clause 20

6. 6
List of Tables
Table No. Title Page
1.0 Comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities under General Principles
of Main Contractor’s Responsibility
1.1 Comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities under Condition Guiding
Payment
1.2 Comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities under the Contractual
Programme
1.3 Comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities under Testing and Defect
in Construction Contracts
1.4 Comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities under Dispute Resolution
Method

7. 7
1.0 Introduction
Development projects have generally been deemed as unpredictable compared to
different enterprises as these development projects usually include various partners and
contracts where every partner has their own distinct commitments and tasks. When
construction projects are in progress of being brought up, parties of the trade are required to
follow the conditions of all the stated clauses depicted within their particular projects. Once
an agreement is made within the conditions of the said contract, any dispute from either party
will result in the breach of that contract.
For this project, the contract involves the building of a seven-storey hotel with a class
rating of four stars, with the client being the Ministry of Finance. During the construction of
the project there were some disputes that involved the client delaying the handling over of the
site, late payment, contractors pulling workmen off the site, work schedule delay and late
project administrator’s instruction. Due to these disputes, there needs to be a clarification of
disputes and damages rectified between both parties. Therefore, this report will be the
document of advice for the contractor on his terms of disputes.
1.1 Key Issues and Assumptions:
i) Four week delay regarding work on site due to delay in handing over of site.
ii) After 13th month, several problems arose; exchange of accusations, late
agreed payments and workmen being pulled off site by Contractor.
iii) Project was eventually delayed due to late payment, lack of workmen on site,
work behind schedule and late project administrations’ instructions.
iv) Conflict in determining Contractor’s responsibility, specifically under the
Contractor’s design portion and rules regarding subcontracting.
v) Misunderstanding about testing and defects in terms of inspection,
rectification and uncorrected defects.
vi) Assumption where Contractor has suffered cost incurred from this delay of
payment.
vii) Assuming that said disputes are as ongoing and have yet to be resolved.

8. 8
1.2 Objectives of Report
i) To identify general principles governing the main contractor’s
responsibilities.
ii) To propose the conditions guiding payment.
iii) To propose the term of conditions governing the contractual programme.
iv) To identify the principle of testing and defects.
v) To identify the dispute resolution methods that can be used for the problem.
Note: All advice and recommendations are solely for the use of the analysis of this
report only. The decision to admit to these recommendations purely belongs to
the Client himself.

9. 9
2.0 General Principles of Main Contractor
According to sub-clause 4.1 in FIDIC Red Book 1999, it is stated that the Contractor
shall design, execute and complete the Works in accordance with the Contract with the
engineer’s instruction. However, if there is any defect works found, contractor shall remedy
the defect in the Works. Contractor has the obligation to the adequacy, stability and safety of
site operation and the methods of construction exempted from the extent specified in contract.
Contractor shall provide plant and Contractor’ document specified in contract and also all the
necessary item or service required in whether temporary or permanent nature. Contractor
shall provide the details arrangement and adopted methods of construction for the Works to
be executed and submit to engineer. Unless the Engineer is notified previously, alternation to
these documents is not allowed to be made.
Contractor is specified to design in part of permanent work.
 Sub-clause 4.1 defines that Contractor shall submit contractor’s documents with
specification and drawing of part of permanent work to engineer with the procedures
initiated in contract and shall be written in language for communications defined in
sub-clause 1.4 and include the additional information required by Engineer into the
Drawing.
 Contractor to guarantee the completed works for the part be fit to the contract
specification.
 Prior to commencement of test on completion, Contractor shall submit “as-built”
document to engineer together with operation and maintenance manual.
 Sub-clause 4.2 states that contractor shall obtain performance security and deliver to
employer within 28 days after received LOA and C.C to Engineer.

10. 10
In the Pam Contract 2006 (With Quantities), the clause 1.1 held that Contractor has
the obligation to carry out and complete the Works in accordance of contract documents.
Contractor is required to provide goods, material, workmanship and other standard specified
in the contract documents or required by Architect. Contractor has the duty to assure the
adequacy, stability and safety of temporary works and methods of construction other than the
designed by Architect under the definition of clause 1.2.
Clause 1.3 states that contractor has the alternative to propose new design that
specified in the Works. However, there is compulsory for Contractor to ensure such proposals
are fit to the purpose with the designs, specifications or selection of materials, goods and
workmanship. Although the Contract obtains the copyright of alternative design, but
Employer is entitled to use the alternative design for the completion, maintenance, repair and
future extension of works. Anyway, the acceptance of design and alternative design by
architect shall not relieve the contractor’s responsibility under contract.
Clause 1.4 in the PAM contract 2006 stated that contractor shall use the contract
document and other subsequent document issued by architect to plan work prior to execution.
If there is discrepancy and divergence found between contract and other subsequent contract
document issued by architect, contractor shall give written notice in sufficient time before the
commencement of construction of affected works. Such discrepancy and divergence shall not
vitiate the contract.

11. 11
2.1 Comparison between FIDIC Red Book 1999 and PAM Contracts 2006 with
Quantities
Contractor FIDIC Red Book Pam Contract 2006
Obligation - To ensure the adequacy, stability
and safety of site operation and the
methods of construction exempted
from the extent specified in contract
- To assure the adequacy, stability and
safety of temporary works and methods
of construction other than the designed by
Architect
Instruction - Engineer’ instruction - Architect’ instruction
Designing - Unless specified to design part of
work
- Can propose new design to specified
work that fit to purpose of contract
Equipment
& Service
- To provide plant and Contractor’s
document specified in contract and
also all the necessary item or service
required in whether temporary or
permanent nature
- To provide goods, material,
workmanship and other standard
specified in the contract documents or
required by Architect
Work
Programme
- Self provide the details
arrangement and adopted methods of
construction for the Works to be
executed
- To use the contract document and other
subsequent document issued by architect
to plan work prior to execution
Table 1.0 : Comparison between FIDIC Red Book 1999 and PAM Contracts 2006 with Quantities
under General Principles of Main Contractor’s Responsibility

12. 12
3.0 Condition Guiding Payment
First and foremost, regarding to issue of non-payment on the 13th month to Contractor,
I will recommend Contractor impose financing charges compounded delay by the Employer
without formal notice or certification because under Sub-Clause 14.8 of FIDIC Red Book
1999, it stated if the Contractor does not receive payment in accordance with Sub-Clause 14.7
(Payment), the Contractor shall be entitled to receive financing charges compounded monthly
on the amount unpaid during the period of delay. Unless otherwise stated in the Particular
Conditions, these financing charges shall be calculated at the annual rate of three percentage
points above the discount rate of the central bank in the country of the currency of payment.
As long as the Contractor is submitted payment application with supporting document on
time to the Engineer, Contractor is entitled to payment review according to Sub-Clause 14.6.
According to the Sub-Clause 16.1, if the Engineer fails to certify in accordance with
Sub-Clause 14.6 or the Employer fails to comply with Sub- Clause 2.4 or Sub-Clause 14.7,
the Contractor may after giving not less than 21 days’ notice to the Employer, suspend work
(or reduce the rate of work) unless and until the Contractor has received the Payment
Certificate. Therefore, I provide my professional advice by suggesting Contractor should not
suspend work immediately but to provide a 21 days’ notice to Employer. After the 21 days
still have not received any payment then only suspend until received such Payment
Certificate then only resume normal working under Sub-Clause 16.1. The advise given will
be following the assumption that the Contractor has suffered cost incurred from this delay of
payment. The Contractor shall give notice to the Engineer and shall be entitled subject to
Sub-Clause 20.1 to an extension of time for any such delay or payment of any such Cost plus
reasonable profit that shall be included in the Contract Price. Contractor can refer to the case
law of Construction Associates Pty. Ltd. v CS Group of Companies Pty. Ltd. (2008).
Lastly, assuming Employer remains with non-payment, I will suggest the Contractor
to terminate the contract by giving 14 days’ notice to the Employer. Under Sub-Clause
16.2(a), where Contractor does not receive the amount due under an Interim Payment
Certificate within 42 days after giving notice under Sub-clause 16.1 in respect of a failure to

13. 13
comply with the Financial Arrangements under Sub-Clause 2.4 and Sub-Clause 16.2(b) the
Engineer fails within 56 days after receiving a Statement and supporting documents to issue
the relevant Payment Certificate. Contractor should give a 14 days’ notice to Employer for
terminate the Contract only in the case Employer becomes bankrupt or insolvent or a
prolonged suspension affects the whole of the Works then contractor are only allow terminate
the Contract immediately.
3.1 Comparison with PAM 2006
Based on PAM Contract 2006, Contractor are not advised to pull off workmen due to
non-payment, as well as not suspend the execution of the works immediately. The Contractor
shall comply with procedures as stated in Clause 26.2, issue a written notice of default to
Employer and Employer shall have 14 days to rectify defaults, provided that Contractor have
submitted the payment application of claim according to procedure stated in Clause 30.1.
According to the contract provision, Employer shall pay Contractor within Period of
Honouring Certificate (normally 21 days if none stated) after issuance of certificate, refers
Clause 30.1. In this case, the agreed payment has not been paid; it can be considered as
breach of contract, refer to case law Kah Seng Construction Sdn. Bhd. v Selsin Development
Sdn. Bhd. (1997). If the Employer continuously does not rectify his defaults within the period
stated in Clause 26.3, then the Contractor have the rights to suspend works until payment is
made by complying with the procedure under Clause 30.7 and/or claim on the unpaid amount
under Clause 30.17, based on bank interest rate.
If Employer keep holding the payment and unable to pay Contractor within 14 days as
stated in Clause 26.1(a), the Contractor may determine the employment in accordance to
Clause 26.2, may within 10 days from the expiry of the said 14 days, provide a further written
notice delivered by hand or by registered post to terminate Contractor’s own employment.

14. 14
3.2 Procedure for Payment
FIDIC Red Book 1999:
Interim Payment
Figure 1.0 : Interim Payment Clause under FIDIC Red Book 1999
Final Payment
Figure 1.1 : Final Payment Clause under FIDIC Red Book 1999

15. 15
PAM 2006:
Interim Payment
Figure 1.2 : Interim Payment Clause under PAM Form 2006
Final Payment
Figure 1.3 : Final Payment Clause under PAM Form 2006

16. 16
FIDIC Red Book 1999
PAM Contract 2006 (with
Quantities)
Engineer Certifier Architect
Sub-Clause 14.6: within 28 days after
Certifying
Period Clause 30.1: within 21 days from the
receipt Statement and supporting date of receipt of application
documents
Sub-Clause 14.7(a): Advance Interim Payment Clause 30.1: within Period of
payment within 42 days after issue of Honouring (21 days) from the date of
LOA or within 21 days after receiving receipt of contractor’s application
the Performance Security
Sub-Clause 14.7(b): Interim Payment
Certificate within 56 days after the
Engineer receives the Statement and
supporting documents
Sub-Clause 14.7(c): Final Payment Final Certificate Cluse 30.14(a): within 21 Days after
Certificate within 56 days after the the Period of Honouring Certificate
Employer receives this Payment for the payment of the Penultimate
Certificate. Certificate; or
Clause 30.14(b): within 28 Days after
the CMGD has been issue, in the
event no Penultimate Certificate.
Table 1.1 : Comparison between FIDIC Red Book 1999 and PAM Contracts 2006
with Quantities under Condition Guiding Payment

17. 17
4.0 CONTRACTUAL PROGRAMME
4.1 Introduction
The access to site by the employer was delayed by 4 week due to delay in handling
over the site to contractor. The duration of the project was agreed to be 24 months. The task
pursued into incredible troubles the thirteenth month, allegations were traded, concurred
instalments not made and the labourers were pulled off site by the temporary worker which
prompted to disputes.
4.2 Analysis in FIDIC RedBook 1999 conditions of contract
 According to clause 2.1, the Employer shall give the Contractor right of access to, and
possession of, the Site within such times as may be required to enable the Contractor to
proceed in accordance with the programme submitted under Sub-Clause 8.3.
 Under clause 4.21, Contractor has to update programme regularly because monthly
progress report shall include the comparison of current programme and actual progress.
 Clause 8.3 stated the Contractor shall submit a detailed time programme to the
Engineer within 28 days after receiving the notice under Sub-Clause 8.1. The
Contractor shall submit a reviewed programme whenever the earlier programme is not
consistent with the actual progress. Within 21 days, the Engineer gives notice to the
Contractor if he does not comply with the programme stating the reasons. The Contractor
has to work according to the contract and the Engineer shall be entitled based on the
programme when planning activities. The Contract shall give notice to the Engineer if the
future events may cause delay or inflation in price. The Engineer may require the
Contractor to submit an estimate of the impacts under sub-clause 13.3.

18. 18
 In any event, the Engineer shall notify the Contractor that a programme fails to
comply with the contract or to be consistent with actual progress and the Contractor
shall resubmit an updated programme to the Employer’s Personnel under Sub-Clause 8.3.
 According to Clause 13.3, if Engineer requested a proposal before instructing any
variation, Contractor has to list down the execution of works and a revised programme of
the proposed work.
4.3 Comparison between FIDIC Red Book 1999 and PAM Contracts 2006 with
Quantities
The table 5.1 shows the comparison between FIDIC Red Book 1999 and PAM
Contracts 2006 with Quantities in contractual Programme.
No. FIDIC Red Book 1999 PAM Contract 2006 with Quantities
1
The Engineer is in charge of the
submission of the programme.
The Architect is in charge of the
submission of the programme.
2
The submission shall be within 28 days
from the receipt of notice of
Commencement Date requested by
Engineer.
The submission shall be within 21 days
from the receipt of Letter of Award and
shall be in writing form requested by
Architect.
3
FIDIC Contract does not state if the
programme is formed part of the
contract.
PAM Form clearly states that the
Works Programme shall not constitute
part of the Contract under clause 3.6
4
The Engineer will ask for revised
programme if the previous programme
is not in line with the actual progress or
a proposal for any modifications to the
programme.
The Architect will ask for revised
Works Programme if any part of the
Work is delayed for whatever reason.
Table 1.2 : Comparison between FIDIC Red Book 1999 and PAM Contracts 2006
with Quantities under the Contractual Programme

19. 19
4.4 Advice
The advice given to the Contractor, as the Employer caused the delay in giving access
to the site to Contractor. First, the Contractor shall give notice to Engineer and shall be
entitled to Contractor’s Claims under sub clause 20.1 to both extension of time for such delay
under sub clause 8.4 and payment of such Cost plus reasonable profit.
The Contractor shall notify the Engineer stating the event giving rise to the claim. The
notice shall be given within 28 days after the Contractor became aware of the event. Failure
by the Contractor to submit particulars within 28 days, the time for completion shall not
extend and Contractor shall not entitled for additional payment suffered. Contractor to keep
contemporaneous records to substantial all its claims for additional expenses.
After been aware of the delay, within 42 days, the Contractor shall submit fully
particulars in order to claim extension of time or additional payment. The particulars shall
include completely detailed claims, further interim claims at monthly intervals and final
claim within 28 days after the end of the effect of the delay. The Engineer shall approve or
disapprove the claims with reasons. The options by the Engineer either to proceed with sub
clause 3.5 which is determinations or extension of time under sub clause 8.4 or additional
payment which the Contractor has the right under the contract.

20. 20
5.0 Testing and Defect in Construction Contracts
 According to the sub clause 7.4, contractor has to provide all necessary thing, labour and
experienced staff for testing. The Contractor shall agree, with the Engineer, the time and
place for the specified testing of any Plant, Materials and other parts of the works. The
Contractor shall agree, with the Engineer, the time and place for the specified testing of
any Plant, Materials and other parts of the works.
 Under clause 9.1, the contractor must carry out the Test on completion in accordance with
this clause and sub clause 7.4. Then the contractor shall give notice to engineer not less
than 21days. Otherwise the test on completion shall be carried out within 14 days, on
such day or days as the engineer shall instruct. If the test is passed, the contractor shall
submit a certified report of the result to the engineer.
 Under clause 9.2, if the test is unduly delayed by the employer. Sub clause 7.4 (Testing)
or sub clause 10.3 (Interference with Tests on completion) shall be applicable. Example,
employer delay or interfere during the stage of testing which delay the project. So
contractor can sue employer through clause 9.2 and the sub clause of 10.3 where
contractor eligible to claim extension of time for any such of delay which is under sub
clause of 8.4. If the test on completion is being unduly delayed by the contractor, the
engineer may by notice require the contractor to carry out the tests within 21 days after
receiving the notice. The contractor shall carry out the test on such days or within a
period as the contractor may fix and of which he shall give notice to the engineer. If
contractor fail to pass the test on completion within 21 days, under sub- clause 7.4 shall
apply and the engineer or the contractor may require the failed tests and tests on
completion on any related work to be repeated under the same terms and conditions.
 In clause 9.4, if the test on completion still fails, the engineer shall be entitled to order
further repetition of testing under sub clause 9.3. If the failure deprives the employer of
substantially the whole benefit of the works or section, reject the works or section in
which event the employer shall have the same remedies as are provided in sub paragraph
of sub clause 11.4. Employer also can issue a taking over certificate if it delays too much
time.

21. 21
5.1 Comparison between FIDIC 1999 and PAM form 2006
FIDIC 1999 Testing and defects PAM 2006
Engineer Issuance of certificate Architect
21 Days to give written
notice to the engineer
Days to submit written
notice for before testing
7 Days to give written
notice to architect
Contractor may claim
extension of time under
clause 8.4, cost and
reasonable profit if testing
is delayed by the
employer under sub
clause of 7.4 and sub-
clause 10.3 interference
with tests on completion
shall be applicable.
Claim if delay of testing
by employer
Contractor may claim
extension of time under
clause 23.8m if any act of
prevention or breach of
contract by the employer.
Table 1.3 : Comparison between FIDIC Red Book 1999 and PAM Contracts 2006
with Quantities under Testing and Defect in Construction Contracts
5.2 Advice
By follow the principle guide of testing and defect, contractor can minimize the
dispute matter and misunderstanding between the clients. First the contractor shall prepare
necessary stuff for testing purposes. Then, the contractor will have agreement with the
engineer for the time and place for the specified testing of any plant, material and other parts
of the worksIf the contractor suffer delay and incur cost due to employer default, the
contractor can send notice to the engineer and shall be entitled to subject to sub clause 20.1
contractor’s claim for extension of time under sub clause 8.4 and also payment of any such
cost plus reasonable profit, which shall be included in the contract price.
The contractor also needs to forward any necessary report regarding the tests to
engineer. This is to allow the engineer to check and certify the test has been passed. Beside
that if the employer misunderstand about the testing and defect, contractor can bring this up
to employer to minimize the issue. This also allows the project to proceed smoothly and
complete on time.

22. 22
6.0 Dispute Resolution Method in Red FIDIC Book (1999)
Following the assumption that the expressed disputes are as ongoing and have yet to
be resolved, causing a setback in the project due to the likes of late payment, lack of
workmen on-site, existing work behind schedule and late project administrator’s instructions.
Due to these deferrals and coinciding question, the contractor will require guidance on which
premise of clarification of the dispute resolution method ought to be actualized to guarantee
that the contractor does not take the full force of the punishment from the dispute.
6.1 Dispute Adjudication Board
Adjudication is a process which an impartial third party selected by parties to provide
a decision on a dispute (“Adjudication in construction contracts - Designing Buildings Wiki,”
2017). In most cases, adjudication decisions are contract binding unless or if not challenged
by the arbitration or litigation. Under Sub-Clause 20.4, adjudicated by a Dispute Adjudication
Board (D.A.B), the parties shall mutually assign a D.A.B by the date stated in the Appendix
to Tender. Additionally, under Sub-Clause 20.2, the D.A.B shall comprise either one or three
suitably qualified persons. If the D.A.B is to comprise three people, each party shall nominate
one member for the approval of the other Party. The parties then shall consult both these
members and shall agree upon the third member, who shall act as a chairman. According to
Sub-Clause 20.3, if there is failure to agree on the appointment, each party shall be
responsible for paying one-half of the remuneration of the appointing entity or official.
Generally adjudication is suitable for dealing with claims related to:
 Interim Payments
 Extension of time for completion of works
 Delay and destruction of works
 The Final Account sum

23. 23
The advantage to this method is that firstly is less in cost compared to court
proceedings. As stated in clause 20.4, if a dispute arises between the parties in relation with
or arising out of the contract, either party may refer the dispute in writing to the D.A.B for its
decision with copies to the other party and the Engineer. Then within 84 days after receiving
such notice the D.A.B shall give its decision. The decision shall be binding on both Parties,
who shall promptly give effect to it unless and until it shall be revised in an amicable
settlement. Amicable Settlement, as stated under Sub-Clause 20.5, if either party has sent a
N.O.D within the 28 days, the parties can commence the arbitration which is subjected to
whether there was an attempt to settle the said dispute amicably or/and the period has
reached 56 days after the N.O.D was provided.
Secondly, where a D.A.B makes a decision the contract provides that both Parties
shall promptly give effect to it, but if a party is aggrieved it may serve on the other a Notice
of Dissatisfaction (NOD) within 28 days. If no such NOD is served, the D.A.B decision
becomes final and binding. In Addition, Sub-Clause 20.7 provides that any failure to comply,
where neither party has not served a valid N.O.D shall itself be referred to the arbitration
tribunal. Furthermore, adjudication is relatively a quick process, to ensure that cash flow is
maintained during the process. The downside to this is adjudicator’s power may be limited,
and disputes needs to be noted between parties before adjudication can commenced.

24. 24
6.2 Arbitration
The arbitration process is governed by the Arbitration Act 2005 and also PAM Arbitration
Rules. Based on the chosen FIDIC form of contract, under Clause 2 D.A.B 0.6, unless settled
amicably, any disputes in respect of which the Dispute Adjudication Boards’ (D.A.B)
decision has not become final and binding shall be finally settled by international arbitration.
The parties are free to agree on rules and procedures, however if they accept the provisions of
Clause 20.6 which are:
 Arbitration shall be according to the ICC (International Chamber of Commerce) rules
and procedures.
 There will be 3 arbitrators appointed according to ICC Rules
 The arbitration will be conducted in the language for communications (Sub-Clause
1.4)
Figure 1.4: Typical sequence of Dispute Events envisaged in Clause 20

25. 25
6.3 Comparison between FIDIC RedBook and PAM form Contract 2006 on Dispute
resolution
FIDIC RED BOOK 1999 PAM Contract 2006
General Summary
Submitted to Engineer Submitted to Architect
Initiates in accordance to “General of
Dispute Adjudication Agreement” and
“Procedural Rules”
Initiated in accordance to Clause 34.3, to
“PAM Adjudication Rules” or any
modification to such rules.
Failure to agree on appointment after 42
days, the appointing official named in
Appendix to Tender shall be the
member of D.A.B under Clause 20.3
Failure to agree after expiration of 21
days from the date of appointment,
President of PAM shall appoint an
adjudicator under Clause 34.2
Either party can give notice of
dissatisfaction to the other. If no N.O.D
is provided within 28 days, after the day
on which the party receives the
decision, D.A.B shall become final and
binding.
If either party disputes the decision, shall
nevertheless be bound by the
adjudicators’ decision until Practical
Completion but shall give a written notice
to the other party within a given period of
6 weeks
Table 1.4 : Comparison between FIDIC Red Book 1999 and PAM Contracts 2006
with Quantities under Dispute Resolution Method
To further add on, according to Gould (2004), an arbitrator is a private judge that is
chosen between the parties by their mutual consent to determine the disputes between them.
The disputes between parties is settled or resolved on the basis of materials facts, documents
and relevant principles of law. As compared to other dispute resolution method like
mediation, arbitration method is a private and confidential process. Furthermore, comparing
to other formal methods like court proceedings such as litigation, the dispute resolution
process would be comparatively much quicker and the cost would be much cheaper as lesser
process, documents and bindings is involved (“Different methods of dispute resolution in
construction disputes - Lexology,” 2017). It is also highly flexible compared to the mentioned
court proceedings.

26. 26
6.4 ADVICE
i) FIDIC Red Book 1999
With the stated clauses within the FIDIC red book 1999 form of contract, the most
suitable dispute resolution method to be applied would be the appointment of the Dispute
Adjudication Board (D.A.B) and prevent any means of going for arbitration by any cost. The
process of D.A.B is to first become familiar with the ongoing activities of the project and
secondly to resolve efficiently and cost-effectively any disputes arising during that time.
Therefore, with the given in depth knowledge regarding the project scope of work,
disputes such as late payment, lack of workmen on site, work behind schedule and late
project administrator’s instructions can be settled quickly avoiding long delays during which
working relationships between personnel executing the project can deteriorate and worsen the
issues. This is because after the D.A.B has considered the case of both parties, they can
present to both parties a well-organized and reasonable decision showing that all applicable
rules and procedures have been followed. Well-argued decisions with rational explanations
can help speed up the resolution of the claim, thus persuading the contractor that the D.A.B
has considered all aspects and come to sensible conclusion to give the best advice to the
Contractor.
If the Engineer cannot achieve an agreement between said parties within a reasonable
period of time, he/she shall make a just final determination in accordance with the contract.
After the Engineer has made his/her fair final decision, he/she shall advise the Client as
accordingly. If the Client disagrees with the suggested final determination, he/she may refer
to the dispute adjudication board (D.A.B) under Sub-Clause 20.4. If no settlement and
dissatisfaction arises between said parties, then the dispute shall be settled by arbitration
under Sub-clause 20.6 under rules of Arbitration of the International Chamber of Commerce
(ICC).

27. 27
ii) PAM Form 2006
Referring to the said dispute of the Contractor, the payment has been delayed by three
months under the stated claims; No.10, No.11 and No.12. The total of these interim payment
claims sums up to RM21 million in losses incurred. This is also followed by the four week
delay caused by the late site handover from the commencement date. According to the PAM
Contract 2006, dispute resolutions are available in four types; Mediation, Adjudication,
Arbitration and Litigation.
We would strongly advise the Client to go through with Adjudication under Clause
34.0 PAM Contract 2006. While adjudication through PAM Contract 2006 remains a sensible
alternative option, it is very much advisable for the Client to refer to the CIPAA 2012 due to
the jurisdiction it offers over the Contractual Adjudication. To compensate for the stated loss,
the Client is required to abide to the KLRCA Adjudication Rules and Procedure within
Section 32 and Section 33. The Client will automatically be provided security and will be
immune to any proceedings related to any payment disputes as stated or included under
Section 41. Following the claim of the huge sum amounting to RM21 million, the dispute of
the four weeks delay from handover of site can be resolved by submission of Extension of
Time certificate according to Schedule 9, page 82 of CIPAA 2012.

28. 28
Appendix – Common Issues during Construction
Scenario – Delay / Non-payment
After completion of certain work and had undergone interim valuation, the
Contractor submitted his claim for interim payment. Yet the Contractor did not receive any
payment from the Employer despite interim certificate has been issued.
Remedies for the Contractor:
According to Sub-clause 14.6, the Engineer shall within 28 days after receiving a
Statement and supporting documents, issue to the Employer an Interim Payment Certificate
which shall state the amount which the Engineer fairly determines to be due, with supporting
particulars. Following that, Sub-clause 14.7 states that the Employer shall pay the Contractor
the amount certified in each Interim Payment Certificate within 56 days after the Engineer
receives the Statement and supporting documents.
In the scenario mentioned above, if the Contractor does not receive the interim
payment within the stated specified period, the Contractor shall be entitled to receive
financing charges (Sub-clause 14.8) compounded monthly on the amount unpaid during the
period of delay. The Contractor shall be entitled to this payment without formal notice or
certification, and without prejudice to any other right or remedy.

29. 29
REFRENCES
Andrew, T. (2015). FIDIC’s Sub-Clause 20.5 – A Condition Precedent to Arbitration. Retrieved from
http://corbett.co.uk/wp-content/uploads/KH-article-FIDIC-Sub-clause-20.5-PDF.pdf
Jeremy, G. (n.d.). FIDIC Dispute Adjudication Boards. Retrieved from
https://www.fenwickelliott.com//sites/default/files/jg_fidic_dispute_adjudication_boards.pdf
Knutson, R., & Abraham, W. (2005). FIDIC : an analysis of international construction contracts (1st
ed.). The Hague [etc.]:Kluwer Law International [etc.]
MALCONLAW. (n.d.). Procurement through Design and Build. Retrieved from
https://simplymalaysia.wordpress.com/articles/choice-of-contract/procurement-through-
design-and-build/
MALCONLAW. (2011). Amicable Settlement – A vital Tool | Malaysian Construction and Contract
Law. Retrieved June 15, 2017, from https://simplymalaysia.wordpress.com/articles/amicable-
settlement/amicable-settlement-–-a-vital-tool/
Mediation Sophilex. (2008). What are the differences between a mediation and an amicable settlement
conference? Retrieved from http://www.mediationsophilex.ca/pdf/mediation_faq5_en.pdf
Sembcorp. (n.d.). NUS Student’s Housing. Retrieved from http://www.sembcorpdc.com/past-
projects/building-projects/20-nus-students-housing