The flowchart provides a detailed overview of the process and conditions under which an employer can take over works from the contractor, as per the FIDIC Yellow Book 2017. This process primarily hinges on the completion and success of the Tests on Completion, the issuance of Taking-Over Certificates, and provisions for dealing with parts of the works. Let’s delve into the specifics:
Start: Taking Over Process
The process begins once the works or sections are nearing completion and are ready for the employer’s taking over.
Have Tests on Completion been conducted? (Reference Clause 9)
- Yes: Proceed to review the contractor’s test program.
- No: The contractor must conduct the Tests on Completion as outlined in Clause 9.1, ensuring all necessary tests are completed as per contract specifications.
Review Contractor’s Test Program
The engineer reviews the proposed test program submitted by the contractor (Clause 9.1). The program must be submitted at least 42 days before the intended start date of the tests.
Did Tests Succeed?
- Yes: If the tests are successful, move towards issuing a Taking-Over Certificate for the works or sections involved (Clause 9.1 and 10.1).
- No: If the tests do not succeed, determine if this is the first test failure.
Is this the First Test Failure?
- Yes: Retesting is required under the same terms and conditions (Clause 9.3).
- No: Consider further retesting or reject the works/sections based on the severity of the failure and its impact on the contract’s fulfillment (Clause 9.4).
Issue Taking-Over Certificate with Conditions
Upon successful completion of tests or satisfactory resolution of failures, a Taking-Over Certificate is issued, outlining any minor outstanding work and defects that do not substantially affect the safe use of the works or section for their intended purpose (Clause 10.1).
Are there Parts to be Taken Over Separately? (Clause 10.2)
- Yes: Issue a Taking-Over Certificate for parts, addressing any specific conditions or outstanding works.
- No: The process is deemed complete once the entire works or sections have met the contractual requirements and a Taking-Over Certificate has been issued.
Any Interference with Tests? (Clause 10.3)
- Yes: If the contractor is prevented from carrying out the Tests on Completion due to the employer’s personnel or other causes for which the employer is responsible, the employer is deemed to have taken over the works or section on the date when the tests would have otherwise been completed.
- No: If no interference occurred, or after addressing any interference, continue to follow Clause 9.1 for the contractor’s obligations regarding the tests.
Adjust Delay Damages Accordingly (Clause 10.2)
If a part of the works is taken over before the entire works or section, delay damages for the completion of the remainder are reduced proportionally to the value of the part taken over compared to the total value of the works or section.
Throughout this process, the durations specified in the relevant clauses play a critical role in ensuring timely and orderly completion and taking over of the works. For example, the contractor must submit the test program at least 42 days before the intended commencement of the Tests on Completion, and if the Tests on Completion are unsuccessful, retesting or further actions must be initiated promptly as per the stipulated timelines in the clauses.
This detailed walkthrough of the taking over process, based on the FIDIC Yellow Book 2017, emphasizes the procedural rigor and the interplay between the contractor’s obligations, the engineer’s review and decisions, and the employer’s rights and protections under the contract.
The taking over of works by an employer from a contractor under the FIDIC Yellow Book 2017 is a critical milestone in construction projects. This process is meticulously detailed, ensuring clarity and fairness to both parties involved. Below is an in-depth explanation of the conditions and procedures required for an employer to officially take over the works, based on the relevant clauses from the FIDIC Yellow Book 2017.
Tests on Completion (Clause 9)
Before the taking over of the works, the contractor is obliged to carry out the Tests on Completion. This is a multi-stage process, starting with the contractor submitting detailed test programs and as-built records in accordance with Clause 9.1. These tests include pre-commissioning tests, commissioning tests, and trial operation, ensuring the works meet the specified performance criteria. The contractor must notify the engineer at least 42 days before the intended start date of these tests and cannot commence until receiving a Notice of No-objection.
If tests are delayed due to the employer’s personnel or other causes under the employer’s responsibility, Clause 10.3 outlines the contractor’s entitlement to an extension of time or compensation. Conversely, if the delay is on the contractor’s part, they are required to carry out the tests within 21 days after receiving notice from the engineer.
Retesting and Failure to Pass Tests on Completion (Clauses 9.3 and 9.4)
Should the works or a section fail the Tests on Completion, the contractor may be required to repeat these tests as detailed in Clause 9.3. If repeated tests also fail, under Clause 9.4, the engineer may order further retesting, reject the works, or in certain cases, issue a Taking-Over Certificate if the employer requests it, considering the degree of failure and its impact on the project.
Taking Over the Works and Sections (Clause 10.1)
For the employer to officially take over the works, several conditions must be met:
- The works must be completed according to the contract, including successful Tests on Completion.
- As-built records and provisional Operation & Maintenance Manuals must be approved.
- Any required training specified in the contract must have been conducted.
The contractor can apply for a Taking-Over Certificate 14 days before the works are expected to be ready for taking over. The engineer then has 28 days to issue the certificate, state reasons for rejection, or be deemed to have issued the certificate if no action is taken.
Taking Over Parts of the Works (Clause 10.2)
The engineer may issue a Taking-Over Certificate for parts of the permanent works at the employer’s discretion. If the employer uses any part of the works before issuance of this certificate, it’s deemed taken over from the date of use. This transfer of responsibility is crucial as it also involves adjustments in delay damages and the contractor’s liabilities.
Interference with Tests on Completion (Clause 10.3)
Should the contractor be prevented from carrying out the Tests on Completion due to the employer’s personnel or other causes for which the employer is responsible, the employer is deemed to have taken over the works or section on the supposed completion date of these tests.
Surfaces Requiring Reinstatement (Clause 10.4)
It’s important to note that a Taking-Over Certificate does not certify completion of surfaces requiring reinstatement, except as stated in the certificate. This ensures that specific conditions for the physical completion of the project are clearly defined and agreed upon.
This detailed process underscores the importance of compliance, documentation, and communication between the contractor and the employer, ensuring that the transition of the works from construction to operation phase is smooth and undisputed. The FIDIC Yellow Book 2017 provides a comprehensive framework to navigate this critical phase, balancing the interests of both parties and facilitating a clear path towards project completion and handover.
Process of applying for a Taking Over Certificate (TOC)
The process of applying for a Taking Over Certificate (TOC) as outlined in the FIDIC Yellow Book 2017 is designed to ensure a clear, fair, and orderly transition of the work from the Contractor to the Employer. This procedure not only signifies the nearing completion of the physical works but also triggers various contractual mechanisms facilitating this transition. Below is a detailed explanation of these procedural aspects, emphasizing the contractual mechanisms in place.
Introduction to Taking Over Certificate (TOC)
A Taking Over Certificate represents a pivotal moment in a construction project, marking the point at which the Employer formally accepts the work, or a section of the work, as complete. This certificate significantly impacts the contractual rights and obligations of both parties, including liability for care of the work, insurance responsibilities, and the start of the Defects Notification Period.
Pre-Conditions for Application
Completion of Works
- The Contractor must complete the works in accordance with the contract specifications, including all contractual and technical requirements.
Tests on Completion
- Prior to applying for the TOC, the Contractor is required to carry out the Tests on Completion as detailed in Clause 9. This includes a series of pre-commissioning, commissioning, and trial operations tests to ensure the works meet the defined performance criteria.
Submission of Documents
- The Contractor must submit all necessary documentation, including as-built records and provisional Operation & Maintenance Manuals, as stipulated in the contract.
Training
- Any required training specified in the contract must be completed. This ensures that the Employer’s personnel are adequately prepared to take over the operation of the works.
Application for Taking Over Certificate
Notice by Contractor
- The Contractor may apply for the TOC by giving a Notice to the Engineer. This notice should be given no more than 14 days before the works, or a section of the works, are expected to be complete and ready for taking over.
Engineer’s Response
- Upon receiving the Contractor’s application, the Engineer has 28 days to issue the TOC, reject the application with reasons, or be deemed to have issued the TOC if no action is taken.
Issuance of the Taking Over Certificate
Criteria for Issuance
- The Engineer will issue the TOC when the aforementioned pre-conditions are satisfied. The certificate will state the date on which the works or section were completed in accordance with the contract.
Deemed Issuance
- If the Engineer does not act within 28 days of receiving the application and the conditions for taking over have been fulfilled, the works or section are deemed to have been taken over on the fourteenth day after the application.
Mechanisms Facilitating Transition
Transition of Responsibility
- Upon issuance of the TOC, responsibility for the care of the works transitions from the Contractor to the Employer. This includes insurance responsibilities and liability for any subsequent damage to the works.
Start of Defects Notification Period
- The issuance of the TOC marks the beginning of the Defects Notification Period, during which the Contractor is obligated to rectify any notified defects.
Adjustments and Claims
- The Contractor may be entitled to adjustments in the contract price or claims for extension of time (EOT) based on the Employer’s use of the works prior to the issuance of the TOC or other relevant contractual conditions.
Conclusion
The procedural aspects for applying for a Taking Over Certificate under the FIDIC Yellow Book 2017 are critical for the successful closure of the construction phase and transition into the operation phase of the project. These steps ensure that both the Contractor and the Employer fulfill their contractual obligations, facilitating a smooth and undisputed handover of the works.
Decision-Making process of the Engineer
The decision-making process of the Engineer following the Contractor’s application for the Taking Over Certificate (TOC) under the FIDIC Yellow Book 2017 is a critical phase in the construction project lifecycle. It involves a structured approach, leading to two primary outcomes: approval or rejection of the TOC application. This process is governed by specific sub-clauses within the FIDIC Yellow Book 2017, ensuring a transparent and fair evaluation based on the contract’s stipulated conditions.
Introduction to the Engineer’s Decision-Making Process
Upon receiving an application for a TOC from the Contractor, the Engineer must carefully evaluate whether the works, or a specific section of the works, have been completed in accordance with the contract requirements. This decision-making process is vital for progressing towards the project’s conclusion and transitioning the work from the Contractor to the Employer.
Review Process
Evaluation of Completion
- Sub-Clause 10.1: This sub-clause outlines the conditions under which the works are considered for taking over. The Engineer assesses if the works have been completed according to the contract, including the successful passing of Tests on Completion, submission and approval of as-built records, and completion of any required training.
Notice of Application
- The Contractor must notify the Engineer of the application for the TOC, typically 14 days before the anticipated completion. This allows the Engineer time to review and organize any necessary inspections or reviews.
Approval Path
Issuance of the Taking Over Certificate
- Sub-Clause 10.1: If the Engineer is satisfied that the works or section meets all contractual requirements, they will issue the TOC, specifying the date on which the works were completed in accordance with the contract.
Deemed Issuance
- If the Engineer does not respond within 28 days of the application and all conditions for taking over have been met, the works or section is deemed to have been taken over, as outlined in Sub-Clause 10.1.
Rejection Path
Grounds for Rejection
- Sub-Clause 10.1: The Engineer may reject the TOC application if the works do not comply with the contract requirements. This includes incomplete works, failure to pass the Tests on Completion, or inadequate submission of required documents.
Notification and Reasons
- The Engineer must provide a notice to the Contractor specifying the grounds for rejection, including the work required to be done, defects to be remedied, or documents to be submitted for the TOC to be issued.
Opportunity for Rectification
- The Contractor is then obligated to complete the specified work, remedy the identified defects, or submit the required documents. Following rectification, the Contractor may reapply for the TOC.
Conclusion
The Engineer’s decision-making process regarding the TOC application is a pivotal point in the project, guiding the transition of the works from the Contractor to the Employer. Whether the application is approved or rejected, the process ensures that the works meet the contractually agreed standards, safeguarding the interests of both parties. The structured evaluation, governed by specific sub-clauses, provides a clear framework for this essential phase, promoting transparency, fairness, and the successful completion of the project.
If the Engineer does not respond to the Contractor’s application for the Taking Over Certificate (TOC) within the stipulated time frame, the FIDIC Yellow Book 2017 has specific provisions that automatically come into effect to address this scenario. This mechanism ensures the project’s progress is not unduly hindered by inaction. The relevant provisions are primarily found in Sub-Clause 10.1 of the FIDIC Yellow Book 2017, which details the procedure and implications of such inaction.
Automatic Deemed Issuance of the TOC
Sub-Clause 10.1 makes provisions for an automatic deemed issuance of the TOC if the Engineer does not issue the TOC or reject the Contractor’s application within 28 days after receiving the application. This clause ensures that the process moves forward even in the absence of a direct response from the Engineer, preventing unnecessary delays in the project’s progression.
Conditions for Deemed Issuance
For the deemed issuance to occur, several conditions must be met, including the Contractor having completed the works in accordance with the contract, and having submitted all necessary documents like as-built records and operation and maintenance manuals. The provision for deemed issuance acts as a safeguard to ensure fairness and to maintain the project timeline.
Implications of Deemed Issuance
- Transfer of Responsibility: Upon the deemed issuance of the TOC, responsibility for the care of the work transitions from the Contractor to the Employer. This includes aspects such as insurance and security, signifying a significant shift in liability.
- Start of Defects Notification Period: The deemed issuance also marks the beginning of the Defects Notification Period. During this period, the Contractor is obligated to rectify notified defects, further ensuring that the works meet the contractual standards.
- Financial Implications: The issuance of the TOC, including a deemed issuance, may trigger financial settlements such as the release of retention monies, adjustment of insurance cover, and initiation of penalty clauses for any remaining defects or incomplete works.
Ensuring Compliance with the Contract
The automatic deemed issuance provision serves as a crucial check within the FIDIC framework, ensuring that the project does not stall due to administrative inaction. It obligates both the Contractor and the Engineer to adhere closely to the contract terms and timelines, promoting diligence and responsiveness in the project’s administrative aspects.
Conclusion
The FIDIC Yellow Book 2017’s provision for the automatic deemed issuance of the TOC if the Engineer does not respond within 28 days is an essential contractual mechanism. It ensures that the project transitions smoothly to the next phase, protecting the interests of both the Employer and the Contractor. This provision underscores the importance of adherence to contractual timelines, encouraging prompt and efficient decision-making within the project management framework.
When an Employer uses the works before the official issuance of the Taking Over Certificate (TOC) under the FIDIC Yellow Book 2017, it triggers specific contractual mechanisms and can introduce various liability and contractual issues. This situation is particularly addressed in Sub-Clause 10.2 (Taking Over Parts), providing a structured response to the potential complexities that may arise from such premature use.
Premature Use of the Works
The FIDIC Yellow Book allows for the Employer’s early use of parts of the permanent works under certain conditions. However, it sets out specific implications for doing so, primarily to ensure that the rights and responsibilities of both parties are clearly defined and protected.
Contractual Implications
1. Deemed Taking Over:
- When the Employer uses any part of the works before the TOC is issued, that part is deemed to have been taken over by the Employer from the date of such use. This means the Employer assumes responsibility for that part of the works, including care, maintenance, and security.
2. Transfer of Responsibility:
- The Contractor’s liability for the care of such deemed taken over parts ceases from the date the Employer starts using them. This transfer of responsibility is significant because it affects insurance and liability for damages or loss.
3. Issuance of Taking Over Certificate for the Part:
- The Engineer is required to issue a Taking Over Certificate for the part being used by the Employer, even if the official TOC for the entire works is not yet issued. This certificate should list any outstanding work to be completed or defects to be remedied.
Liability Issues
1. Risk and Insurance:
- The transfer of risk for the deemed taken over parts shifts to the Employer. The Employer must ensure that appropriate insurance coverage is maintained for these parts of the works, reflecting their new role in assuming responsibility.
2. Defects and Corrections:
- If defects arise in the parts of the works taken over by the Employer, the Contractor’s obligations to correct these defects remain, subject to the terms of the contract. However, the dynamics of access and coordination for remedial works may be complicated by the Employer’s use.
3. Financial Adjustments:
- The Employer’s use of parts of the works before the issuance of the TOC might entail financial adjustments. The Contractor may be entitled to claims for additional costs incurred due to the early use, including costs related to acceleration of works or provision of temporary facilities.
4. Reduction in Delay Damages:
- If the Employer takes over parts of the works early, the daily rate of delay damages for the completion of the remainder of the works may be reduced proportionately. This reduction considers the value of the part taken over relative to the whole project.
Conclusion
The premature use of the works by the Employer before the official issuance of the TOC under the FIDIC Yellow Book 2017 introduces a complex set of contractual and liability issues. While the contract provides mechanisms to manage such scenarios, it underscores the need for clear communication and cooperation between the Employer and the Contractor. Properly managing these situations is crucial to maintaining project integrity, ensuring fair compensation, and adjusting responsibilities and risks appropriately.
Clause 14.9 of the FIDIC Yellow Book 2017, “Release of Retention Money,” outlines a structured approach for releasing the retention money held back from payments to the Contractor during the execution of the works. Retention money is a financial safeguard used to ensure the Contractor fulfills their obligations, especially concerning defect rectification. This clause specifies the conditions under which this money is released, reflecting the project’s progress towards completion and satisfactory performance.
Overview of Retention Money Release Process
The process for the release of retention money is linked to significant project milestones, namely the issuance of the Taking Over Certificate (TOC) and the expiry of the Defects Notification Periods (DNP).
Release Conditions
1. After Issuance of TOC:
- For the Works: Upon issuance of the TOC for the entire project, the Contractor is entitled to include the first half of the retention money in the next Statement.
- For a Section: If the project is divided into sections with separate TOCs, the Contractor can claim the corresponding percentage of the first half of the retention money for each section after its TOC is issued.
2. After Expiry of DNP:
- The second half of the retention money is to be included in a Statement by the Contractor promptly after the latest expiry date of the DNPs for the entire works or for a specific section. This ensures that all potential defects have been addressed before the full release of the retention money.
Engineer’s Certification for Release
- The Engineer, upon receiving the Statement from the Contractor that includes a claim for the release of retention money, is responsible for certifying this release in the next Interim Payment Certificate (IPC). This certification is contingent upon there being no outstanding work required under Clauses 11 (Defects after Taking Over) and 12 (Tests after Completion). The Engineer has the authority to withhold certification of the estimated cost of any remaining work until it has been executed.
Provisions for Withholding
- This clause also provides the Engineer with a mechanism to withhold a portion of the retention money if necessary to cover the estimated costs of any unexecuted work related to defects or tests after completion, ensuring that the Contractor fulfills all contractual obligations.
Relevant Percentage for Sections
- For projects divided into sections, the release of retention money for each section is calculated based on the percentage value of the section as stated in the Contract Data. If no percentage value for a section is provided in the Contract Data, no retention money will be released for that section under this clause.
Conclusion
Clause 14.9 establishes a clear framework for the phased release of retention money, directly tying the release to the project’s progression and satisfactory rectification of defects. This approach balances the need to ensure the Contractor’s performance with the practicalities of project financing, providing a fair and transparent process for both parties.
