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TAYLORS UNIVERSITY
FIDIC Workshop
Case Study Assignment
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Perfecto College (Perfecto) drew up ambitious business plans to redevelop their existing premises
into a state-of-the-art city campus. Being first-time property developers, they appointed Halo Projeks
(Halo) as the project manager.
Performance and timely completion of the project are critical to the success of the college which must
be ready for the new academic year starting in September 2017. In this regard, Perfecto impressed
upon Halo that in no circumstances can the estimated cost of RM200 million be exceeded upon which
funding has been obtained and any over-budget will severely impact the viability of the project. There
were also tight deadlines imposed to develop and complete the designs, secure authorities approvals
and produce tender documentation as physical construction needs to start quickly. The project is
made more complex by the adjoining rail station and underground track line. Perfecto would like to
transfer as much risk as possible to the contractor and still retain effective control on the quality of the
end-product which must not be compromised.
On the advice of Halo, expressions of interest were invited from consultancy firms. Perfecto eventually
appointed a project team comprising Zeppelin Perunding (Zeppelin) as the Engineer and Bagus
Arkitek (Bagus) as the Architect. Stylo Konsultants (Stylo) was engaged as the quantity surveyors.
A pre-qualification exercise was also conducted on the recommendation of Halo to select a short-list
of 3 contractors who were invited to submit a lump sum offer. Zorro Bina (Zorro), a contractor who
supposedly had a proven track record with experience, technical capacity and expertise in campus
development was the lowest tenderer. There were several interviews and exchanges of
correspondence and documents between Perfecto and the project team and Zorro.
Following a series of negotiations, the contract was finally awarded to Zorro based on the FIDIC
Conditions of Contract for Construction 1999. Zeppelin was asked by Perfecto to issue a letter of
acceptance to Zorro. For purposes of the contract, Er Zeppy, principal partner of Zeppelin was named
as the Engineer in the Appendix to Tender. It was further agreed that the project would be completed
in three sections, each with different and separate Times for Completion and delay damages.
Not long after the basement excavation works started on site, Zorro encountered old abandoned steel
piles and services cables which were found to be either missing or incorrectly indicated on the existing
as-built drawings supplied for information with the tender documents. Zorro raised the matter at the
site meeting that they would be claiming additional payment and an extension of the Time for
Completion and this was recorded by Zeppelin in the meeting minutes. Details of the amount claimed
for additional payment and the extension of time were submitted to Zeppelin within 45 days of the
event. A claim for the cost of removal of the steel piles and services cables was also submitted to
Zeppelin for their assessment.
By the end of month 6, having received Halos monthly report, Perfecto became concerned at the lack
of progress of the works and expressed to Zeppelin that there was no way Zorro can complete the
various sections of the works within the stipulated Time for Completion. Perfecto emphasised to Halo
and Zeppelin that it was absolutely critical that the campus must be ready to receive the new intake of
FIDIC WORKSHOP | Case Study Assignment
Eugenie Lip, October 2015
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students when the new academic year opens in September 2017, and sought their advice on the
measures that could be taken.
In response to growing demand for new courses and the increasingly large number of applications for
places, Perfecto requested Zeppelin and Bagus to explore various schemes to add more lecture
theatres and tutorial rooms to each of the academic buildings.
As the works progressed, disputes became frequent with a flurry of allegations and counterallegations between the parties. Perfecto asserted that Zorro failed to carry out the works diligently
and with due expedition, and the workmanship was poor and did not meet the contract requirements.
The appointed Contractors Representative was also only on the site 3 days in the week. There was
no proper supervision of the daily work and defects were not made good promptly. Further,
instructions were ignored and not complied with by Zorro.
Zorro was unable to cope with the major variation works to increase the number of lecture theatres
and tutorial rooms and to add to their problems, a key sub-contractor became insolvent leaving
several critical portions of the works partially completed and unsafe. The building authorities were
dissatisfied with the interim measures in place and ordered all construction work to stop until Zorro
provided a new safety plan for approval.
As Zorro struggled to complete the works, Perfecto informed Zeppelin that they would like to use the
completed lecture theatres early so that the direct contractor for fitting-out works could move in and
start work. Zeppelin proceeded to issue an instruction to this effect but Zorro requested that they
should issue a Taking-Over Certificate for the completed lecture theatres used and taken over by
Perfecto instead. Zeppelin, unsure of what they should do, sought advice from Stylo.
Relationships between the parties deteriorated until it reached a point that Zorro simply refused to
comply with any further instructions and suspended work on site. Completion of the project was in
jeopardy and Perfecto sought advice from Zeppelin on their rights if they were to terminate Zorros
employment. If there were valid grounds to do so, they would like to know what they should do next to
proceed with termination and the effects after that. More importantly, Perfecto was concerned with
having an uncompleted project on their hands and asked Zeppelin on the possible arrangements for
completing the remaining works by another contractor and how the extra costs and losses and
damages incurred could be recovered from Zorro.
It did not help that a few months later, Perfecto wrote to Zorro stating With immediate effect, we
would like to inform you that Zeppelin has ceased to be the Engineer under the contract. We have
appointed one of our staff from the Project Management Division, Er Happy, to replace Er Zeppy and
act as the Engineer for purposes of the contract.
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FIDIC WORKSHOP | Case Study Assignment
Eugenie Lip, October 2015
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Instructions
Form groups (maximum 10 in each group).
Appoint any number of representatives to present to the class on Day 2. The question shall be
selected from the list below at the start of presentation of each group.
No
1
Question
Discuss the rules to be considered by Stylo when valuing the variation works relating to the
additional lecture theatres and tutorial rooms.
Taking into consideration the nature and scope of the project, the desired risk apportionment
and requirement for certainty of time and cost, advise Perfecto on the most appropriate
procurement method for their project and justify your choice with reasons.
Advise Zeppelin on the course of action to be taken following Perfectos decision to use and
occupy the completed lecture theatres before completion of the whole works.
Advise Perfecto on the possible valid grounds for termination of Zorros employment and the
procedures for doing so in the event Perfecto decides to proceed with such termination.
Outline the procedure that Zorro must comply with when dealing with the claim for additional
payment arising from the old abandoned steel piles and services cables encountered.
Discuss the contractual implications of Perfecto appointing its own employee, Er Happy, as
the Engineer?
Discuss the respective duties and obligations of Zeppelin and Zorro during the defects
notification period following the issue of the Taking-Over Certificate.
Discuss the arrangements for completing the works after termination of Zorros employment
and advise how the extra costs, losses and damages incurred by Perfecto could be
recovered.
Advise Zeppelin on how it should deal with Zorros claim for an extension of time following
discovery of the old abandoned steel piles and services cables.
FIDIC WORKSHOP | Case Study Assignment
Eugenie Lip, October 2015
