The Mechanism from Notice of Claim to DAAB’s Decision in accordance with 2017 FIDIC Red Book

“Claims are inevitable, especially in major construction projects.”

The Claim process begins with the Claiming Party’s giving the Notice of Claim and submitting the Fully Detailed Claim to the Engineer.

First, the Engineer tries to reach an agreement by consulting with the parties.

If the agreement is not achieved, the Engineer makes a determination.

In the event of dissatisfaction with the Engineer’s determination, the claim becomes a time-consuming, complex and expensive dispute.

Then, this dispute is referred to the DAAB and the decision of the DAAB is obtained.

It is obvious that claims should be resolved and disputes should be settled in a professional manner to reach the required results. 

In this article, you will find the process from Notice of Claim to obtaining DAAB’s decision in accordance with the related Clauses/Sub-Clauses of the 2017 FIDIC Red Book.

1   Notice of Claim 

Sub-Clause 20.2.1 defines and describes the “Notice of Claim” procedure.

28 Days Time Limit for the Claiming Party

1.  The Notice of Claim is to be given within 28 days after the Claiming Party became aware or should have become aware of the claim related event.

2.  If the Notice of Claim is not given within 28 days, the Claiming Party is not to be entitled to any additional payment and the Other Party is to be discharged from any responsibility regarding the claim related event.

2   Engineer’s Initial Response

Sub-Clause 20.2.2 defines and describes “Engineer’s Initial Response” procedure.

If the Claiming Party fails to give the Notice of Claim within 28 days under Sub-Clause 20.2.1 [Notice of Claim];

14 Days Time Limit for the Engineer

1.  After receiving the Notice of Claim, within 14 days, the Engineer is to give a Notice to the Claiming Party with the reasons included. If the Claiming Party disagrees with the Notice or believes the presence of the circumstances which justify late submission of the Notice of the Claim, the Claiming Party is to include these details in its “Fully Detailed Claim” under Sub-Clause 20.2.4 [Fully Detailed Claim].

2.  If the Engineer fails to give a Notice within 14 days, the Notice of Claim is to be deemed to be a valid Notice.

3.  If the other Party disagrees with deemed valid Notice of Claim, a Notice including the details of the disagreement is to be given to the Engineer by the other Party. Then, the Claim is to be reviewed by the Engineer.

3   Fully Detailed Claim

Sub-Clause 20.2.4 defines and describes the procedure regarding the “Fully Detailed Claim”.

84 DAYS TIME LIMIT for the CLAIMING PARTY

14 DAYS TIME LIMIT for the ENGINEER

84 Days Time Limit for the Claiming Party

1.  Within 84 days or other period after the Claiming Party became aware, or should have become aware of the Claim related event, the Claiming Party is to submit the “Fully Detailed Claim” to the Engineer.

2.  If within 84 days the Claiming Party fails to submit the statement under Sub-Paragraph (b) of Sub-Clause 20.2.4 [Fully Detailed Claim], the Notice of Claim is not considered as a valid Notice.

14 Days Time Limit for the Engineer

1.  After the above mentioned time limit has expired, within 14 days the Engineer is to give a Notice to the Claiming Party. If the Claiming Party disagrees with the Notice or believes the presence of the circumstances which justify late submission of the statement under Sub-Paragraph (b) of Sub-Clause 20.2.4 [Fully Detailed Claim], the Claiming Party is to include the details in its “Fully Detailed Claim”.

2.  If the Engineer does not give a Notice within 14 days, the Notice of Claim is to be deemed  to be a valid Notice.

3.  If the Other Party disagrees with the deemed valid Notice of Claim, a Notice including the details of the disagreement is to be given to the Engineer by the Other Party. Then, the Claim is to be reviewed by the Engineer.

Fully Detailed Claim Includes [2];

• A detailed description of the event or circumstances giving rise to the Claim.
• A statement of the contractual and/or other legal basis of the Claim.
• All the contemporary records [3] on which the Claiming Party relies.
• Detailed supporting particulars of the amount of Additional Payment claimed and/or EOT claimed.

4   Interim or Final Fully Detailed Claim

Sub-Clause 20.2.6 defines and describes the relevant procedure. If the Claim related event has a continuing effect;

1.  The Fully Detailed Claim submitted is to be considered as interim.

2.  The Engineer is to respond to the “First Interim Fully Detailed Claim” in accordance with the time limits.

3.  Monthly, the Contractor is to give further “Interim Fully Detailed Claims” with the accumulated Additional Payment claimed and/or Extension of Time claimed.

4.  After the end of the effects of the claim related event, the Contractor is to give a “Final Fully Detailed Claim” within 28 days.

5   Agreement or Determination of the Claim 

The Engineer is to proceed under Sub-Clause 3.7 [Agreement or Determination] to agree or determine the Additional Payment and Extension of Time.

1.  The Engineer is to give a Notice to the Contractor regarding the requirement of additional details with the reasons for it.

2.  The Engineer is to respond regarding the contractual basis of the Claim in accordance with the Sub-Clause 3.7.3 [Time Limits].

3.  The date which the additional details are received from the Contractor is the “Commencement Date” of the Time Limit.

6   Notice of Engineer’s Determination 

Within the Time Limits under Sub-Clause 3.7.3 [Time Limits];

The Engineer is to give a Notice to the both Parties regarding the determination.

Stating that it is the “Notice of Engineer’s Determination”.

The Notice is to describe the reasons of the determination with detailed supporting particulars.

7  Notice of Dissatisfaction (NOD)

In case of a dissatisfaction with a determination of the Engineer;

The dissatisfied Party may give a NOD to the other Party.

The NOD states the concept of “Notice of Dissatisfaction with the Engineer’s Determination”.

The NOD is to identify the reasons for dissatisfaction in detail.

Any Party may proceed under Sub-Clause 21.4 [Obtaining DAAB’s Decision].

The NOD is to be given within 28 days after;

Receiving the Engineer’s Notice of Determination, or,

The Engineer’s Notice of corrected determination.

If the dissatisfied Party fails to give the NOD within the above mentioned time period the determination of the Engineer is to be considered to have been accepted by both Parties.

8   Constitution of the DAAB

8.1 Selecting the Members of the DAAB

Sub-Clause 21.1 defines and describes the relevant procedure.

The suitably qualified sole member or three members for the DAAB shall be selected from the list in the Contract Data.

In case of DAAB’s comprising three members, each party selects one member for the agreement of the other Party and both Parties consult for the third one for the chairperson position.

The member(s) shall be appointed within the time period stated in the Contract Data (if not stated 28 days after the date the Contractor receives the Letter of Acceptance).

8.2 Signing the DAAB Agreement

The DAAB is to be deemed to be constituted when the Parties and the sole member/the three members have signed the DAAB Agreement.

9   DAAB’s Decision Regarding the Dispute

The Dispute may be referred to the DAAB for its decision.

9.1 Referring a Dispute to the DAAB

The Reference of a Dispute to the DAAB (the “reference” in this Sub-Clause 21.4) shall [4];

(a) If Sub-Clause 3.7 [Agreement or Determination] applied to the subject matter of the Dispute, be made within 42 days of giving or receiving (as the case may be) a NOD under Sub-Clause 3.7.5 [Dissatisfaction with Engineer’s Determination]. If the Dispute is not referred to the DAAB within this period of 42 days, such NOD shall be deemed to have lapsed and no longer be valid;

(b) state that it is given under this Sub-Clause.

(c)  set out the referring Party’s case relating to the Dispute.

(d)  be in writing, with copies to the other Party and the Engineer; and

(e)   for a DAAB of three persons, be deemed to have been received by the DAAB on the date it is received by the chairperson of the DAAB.

9.2 Decision of the DAAB

The DAAB is to decide within 84 days after receiving the reference (if not any other period proposed by the DAAB and agreed by the Parties).

The DAAB’s decision is to be given in writing to both Parties with a copy to the Engineer.

FOOTNOTES

1. Period which is proposed by the Contractor and agreed by the Engineer.

2. The same Sub-Paragraph letters are used as in Sub-Clause 20.2.4 of the FIDIC Red Book.

3. Contemporary Records means; Records that are prepared or generated at the same time or immediately after the event or circumstance giving rise to the Claim. (The same Sub-Paragraph letters are used as in Sub-Clause 20.2.3 of the 2017 FIDIC Red Book.)

4. The same Sub-Paragraph letters are used as in Sub-Clause 21.4 [Obtaining DAAB’s Decision] of the 2017 FIDIC Red Book.

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

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