Construction subcontracts management

A. Coladarce

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Foreword

Clients look for and pretend that

Plants are as cheap as possibile And realization time (for E+P+C phases) the most

reduced ones

Subcontractors want to appear the mostcompetent and cheap during the tendering phase,sometime they simply quote “to survive” only.

It’s general opinion (and we agree 100% on thisidea) that it’s only with the contract managementand above all from the claim management that aSubcontractor can gain and not merely executingwhat contract stipulate for him

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Construction subcontracts management

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Work plan for this Session:

My idea is to examine with you Basic Glossary

(Sub)Contracs typologies Applicable Law, Delays, etc.

Roles and responsabilities for the SiteManager

Panoramic review on the most appropriatesystems to manage the Sub(Contracts)

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Basic Glossary

Excusable delays When the failure is beyond the control ofboth the Contractor and Subcontractor(s),and without the fault or negligence ofeither

Compensable delays When the causes and events are beyondthe control of Subcontractor(s) being in thefull control of Contractor

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Basic Glossary (follows)

Contract law:Civil law, Common law, customary law,

religious law, etc.

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Basic Glossary (follows)

Method Description“As planned” vs “Asbuilt”

It’s a retrospective method whichinvolves comparing the baseline (“asplanned”) against the “as built”construction schedules

“impacted asplanned”

Tecnique that forecasts or predicts adelay’s effect on project’s completiondate. It involves the insertion or additionof activities representing delays orchanges into the baseline schedule todetermine the impact

“Collapsed as built” Retrospective tecnique that begins withthe as-built and then subtracts activitiesrepresenting delays or changes

Window analysys ->a)Time Impact and b)“snapshot analysis”

Tecniques that generally utilizecontemporaneous schedule updates inconjunction with the as built facts relatedto a delay or a change

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Roles and responsabilities for Site Manager

Roles and Responsabilities for the Site Manager

In the MAIN CONTRACTTo support the PM in the continuous search of

excusable delays and/or compensable delays.This is obtained following on a spheric angle(more than on a 360°s) with Planner and FieldEngineer the logical sequence of: Listing causes or events originating EX-DE and/ore CO-

DE Identifying the various actors involved responsability Evaluating time and cost impacts Proposing a mitigation plan

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Roles and responsabilities for Site Manager

Roles and Responsabilities for the Site Manager

In the MAIN CONTRACTTo support the PM in the continuous search of

excusable delays and/or compensable delays.This is obtained following on a spheric angle(more than on a 360°s) with Planner and FieldEngineer the logical sequence of: Listing causes or events originating EX-DE and/ore CO-

DE Identifying the various actors involved responsability Evaluating time and cost impacts Proposing a mitigation plan

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Roles and responsabilities for Site Manager (follows)

In the SUBCONTRACTS

3(+1) phases:

0) scouting in the Country (also before issuingthe inquiry for construction and erectionworks).

1) At site Kick Off meeting.2) During the works execution (monthly at

least).3) At subcontract close out.

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Roles and responsabilities for Site Manager (follows)

They are based on simple rules ofthumb:

Maintain good documentation, Index documentation according to the claim

index, Answer all Subcontractor correspondence, Know the Subcontract to avoid undue Variations, Ensure that contractual notice has been given

wherever required, Prepare the monthly progress charts for each

Subcontract, Prepare the subcontracts close out back up

documentation for the Head office, Send, on a monthly basis, to the Head Office

Subcontracts Department Manager theSubcontract Site Monthly Report

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Roles and responsabilities for Site Manager (follows)

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Construction subcontracts management

Subcontracts Management tools – KOM

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Construction subcontracts management

Subcontracts Management tools – “during”

Subcontract documentation. Filing and coding methodology. Correspondence Main Contractor <->Subcontractor. Minute of meetings/teleconferences. Payments againg progress Monitoring advance and down payments Monthly report of eventual SUB-Subcontracts Variations Work orders Field purchase orders Backcharges Construction progress report Daily reporting Deliverables (drawings and documents) monitoring Claims Provisional/partial and final acceptance Release of final payments

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

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Construction subcontracts management

• Subcontracts Management tools –“after”

• Assigning scoring to the SubcontractorTo record for future memory Subcontractor

behaviour:• HSE wise• QUALITY wise

• Supervision & organization• Technical quality of direct personnel• Quality of construction equipment and

facilties• SCHEDULE wise• PRICE wise

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Workable Sample with detailed forms

Refer to Appendix 1 for a sample ofSubcontract Administration Procedure andrelevant detailed forms useful duringsubcontract(s) execution.

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Construction subcontracts management

In conclusion:1. Basic Glossary √

Tipologie di contratti Legge applicabile

2. Roles and Rsponsabilities for the SiteManager √

3. Panoramic review on the most appropriatesystems to manage the Sub(Contracts) √

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Q&A Session

It’squestions time!!

APPENDIX 1

1. Contracts for ServicesOBBLIGATIONS LIABILITIES

Skill of personnel involved Replacement of unskilled personnel

Compliance with standards and goodengineering practice

Re-performance of defectiveservices

Compliance with standards and goodengineering practice

Participation to additional erectioncosts (extra-works)

Timely completion Liquidated damages for delay

Cost of investment Liquidated damages for plant defectiveperformance

Technological performance of plant Incentive plan

2. Contracts for Services and Supply of Materials

OBBLIGATIONS LIABILITIESCompliance with standards and goodengineering practice

Re-performance of defectiveservices

Timely completion of deliveries (FOB,CIF, etc)

Liquidated damages for delay

Technological performance of plant(Performance Guarantee) subject togood construction

Mechanical guarantee for materials

Make-good

Participation to additional erection

costs (extra-works)

Payment of liquidated damages forplant defective performance

Make-good of defective materialsduring defects liability period

3. Turn-key Contracts (EPC)

OBBLIGATIONS LIABILITIESTimely take-over of plant (atMechanical Completion, or at Readyfor Start-up, or after Test Runs,etc.)

Liquidated damages for delay

Compliance with standards and goodengineering practice

Re-performance of defectiveservices (unlimited)

Mechanical guarantee for materialsTechnological performance of plant(Performance Guarantee)

Make-good of defective materialsduring defects liability period

Make-good

Payment of liquidated damages fordefective plant performance

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APPENDIX 1

PROCEDURE For

SUBCONTRACTS ADMINISTRATION AT SITE

1 April 2007 A. Coladarce A. Coladarce L. Brentan For implementation

0 Rev Date

DD/MM/YY WRITTEN BY (name & visa)

CHECKED BY (name & visa)

APPROVED BY (name & visa)

STATUS

REVISIONS

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CONTENTS

1. INTRODUCTION

2. ADMINISTRATION

3. SUBCONTRACTS MAIN WORKS

4. SUBCONTRACTS VARIATIONS

5. OTHER SUBCONTRACT ACTIVITIES

6. SUBCONTRACTS CLOSE-OUT

7. COMPUTERISED SUBCONTRACTS ADMINISTRATION SYSTEM

8. ATTACHMENTS

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1. INTRODUCTION

1.1. PURPOSE The purpose of this document is to provide general guidelines for the administration of construction subcontracts at site on projects managed directly by ABB PA. It addresses the duties and responsibilities of the Subcontracts Administrator(s) on the construction site. It specifies the flow of information between ABB PA Site and Home Office operating centres as well as with the subcontractors and other agencies, approval levels, communication/archiving procedures and interfaces for construction subcontracts administration.

1.2. SCOPE Generally speaking, subcontracts administration is the process of ensuring that the technical, commercial and legal provisions of a subcontract are complied with by all parties. This process begins after the signature of the subcontract between ABB PA and the subcontractor. It starts at the Kick Off Meeting (KOM) with pre-construction activities, continues on a daily basis during the performance of the work including in particular, monthly invoice verification and approval and ends with the final acceptance and the associated activities such as the final payment, close-out and activation of specific warranty provisions.

1.3. HIGHLIGHTS

The keys to successful Subcontracts Administration are highlighted below:

• Maintain good documentation,

• Index documentation according to the claim index,

• Answer all Subcontractor correspondence,

• Know the Subcontract to avoid undue Variations,

• Ensure that contractual notice has been given wherever required,

• Prepare the monthly progress charts for each Subcontract,

• Prepare the subcontracts close out back up documentation for the Head office,

• Send, on a monthly basis, to the Head Office Subcontracts Department Manager the Subcontract Site Monthly Report extracted from the Subcontracts computerised administration system.

1.4. DEFINITION

1.4.1. Main Contract

It is the contract between ABB PA and the Client that fixes ABB PA's technical and legal responsibilities and obligations towards the Client for the Project. (The administration of the Main Contract is the responsibility of the Project Manager).

The Main Contract generally falls into 2 main categories:

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• Lump Sum Turn Key contracts where construction subcontracts are awarded by ABB PA under its full responsibility.

• Services contracts where construction subcontracts are awarded by the Client or by ABB PA for and on behalf of the Client and where ABB PA is responsible for construction management. Services contracts can be of various type: lump sum for services (including or not supervision) and material, reimbursable of supervision and construction, etc..

1.4.2. Construction Subcontract Usually, the Construction work is divided into several subcontracts depending on the total size of the job, either per trade and/or per geographical area or per multi-discipline packages. The award of construction subcontracts is managed from Head Office under the responsibility of the Procurement Department Manager (Refer to Subcontracting Procedures). Under the Main Contract with the Client, a SUBCONTRACT is an agreement between ABB PA (CONTRACTOR) or the Client and a construction company (SUBCONTRACTOR) which undertakes a single or a group of construction activities including supply of labour and materials, construction equipment and may include some engineering.

1.4.2.1.Lump Sum Turnkey Contract In this case, SUBCONTRACTOR has no contractual relationship with the Client. ABB PA is totally responsible to the Client for the proper performance of the Work including the subcontracted work

1.4.2.2.Service Contract In this case, SUBCONTRACTOR has a contractual relationship with the Client. ABB PA is totally responsible for and on behalf of the Client for the management of SUBCONTRACTOR.

1.4.3. Local Subcontract

This is a short-term subcontract under any of subcontract categories listed above, awarded to local subcontractors at site for performing additional or ad-hoc works.

The award of such subcontracts is managed by the Subcontracts Administrator at site under the responsibility of the Construction Manager.

1.4.4. Work Order

This is a written order given to the SUBCONTRACTOR for performing Variations, i.e. Work not included in the original scope of work of the subcontract. It thus becomes a contractual commitment.

The issue of Work Order(s) is managed by the Subcontracts Administrator with proper internal approvals and in accordance with the General Terms and Conditions of the SUBCONTRACT.

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1.4.5. Approval/Signing Authority Approval as used herein denotes ABB PA management approval for the expenditure of Project funds prior to the execution of the Commitment. The approval may be delegated in accordance with the provisions of management directives.

1.5. REFERENCES

• Subcontracting Procedures.

1.6. FORMS All forms shown in the present document are given for illustration. To assist the Subcontracts Administrator, a set of typical forms is available. These forms must be adapted to suit the requirements of the project e.g. logos, titles, language, …

1.7. ABBREVIATION CO CONTRACTOR

CP Cost Plus Fee

LS Lump Sum

SC SUBCONTRACTOR

ABB ABB PA

UP Unit Price

2. ADMINISTRATION [TOP]

2.1. GENERAL This chapter describes the recommended organisation of the subcontracting group at the construction site in order to strictly follow the Subcontract administration procedure. After a brief description of the subcontracting group, the role and specific responsibilities of the Subcontracts Administrator is described in detail. Communication and archival procedures are also outlined.

2.2. SUBCONTRACTING GROUP Typically, the subcontracting group on a construction site should consist of one or more Subcontracts Administrators reporting to the (site) Subcontracts Administration Manager and a dedicated secretary, depending on the size of the project.

On a small or medium size project, the Subcontracts Administration duties as described herein may be entrusted to the site Manager or the Cost Controller.

2.2.1. Subcontracts Administration Manager He is nominated by the Head Office Subcontracting Department Manager. He reports to the Construction Manager on Site. His job description is given in Construction Guide Document book 4. He will ensure compliance by himself and his team of the provisions of the present document. He will also ensure that ABB PA team on site and the Subcontractors are made aware of and follow the said provisions. He supervises the Subcontracts Administrators and the Quantity Surveyors.

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2.2.2. Subcontracts Administrator

2.2.2.1.Role

The general mission of the Subcontracts Administrator is to:

• Manage the Subcontracts awarded for the performance of the works and prepare the amendments to be issued by ABB PA Head Office.

• Prepare all the correspondences to the Subcontractors and answer each and every correspondence from the Subcontractors.

• Ensure that all contractual obligations stipulated in the Subcontract are complied with by each Party (the Client, ABB PA and the Subcontractors).

• Prepare and release call for bids, evaluate proposals, negotiate and issue site purchase orders for local Subcontracts following the procedures set out herein.

• Negotiate Variations originating either by Subcontractor or by ABB PA and issue the corresponding Work Orders after a thorough evaluation of the contractual scope and financial impact. Ensure the follow-up until the completion of the Work Order in accordance with the procedures outlined in the Construction Guide Documents.

• Formalise resolution of disputes or disagreements and reservations from the Parties in order to ensure contractual protection to ABB PA until the completion of the Work.

• Ensure proper paper and electronic filing of Subcontract documentation.

• Ensure the collection and consolidation of the data required for Subcontract close-outs to avoid disputes after works completion.

• Report to the Construction Manager.

• Inform the Cost Control Manager.

• Through the construction Feed-back procedure (refer to Construction Book 3 – Chapter D2), ensure proper channelling to the Head Office of problems encountered for appropriate action.

As a general rule, the Subcontracts Administrator is the only interlocutor of the Subcontractor on behalf of the Construction Manager for any commercial, legal, financial and administrative matters concerning a Subcontract or a bid for which he is in charge.

2.2.2.2.Specific Tasks

2.2.2.2.1. At the beginning of his assignment

• Organise a meeting with the Construction Manager, the Cost control Manager and the Scheduling Manager to explain the main features of the Subcontracts Administration and particularly:

o Correspondence,

o Payment conditions,

o Variation procedure and required signatures on the Work Orders,

o Claim prevention measures,

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o Pro-rata account principles and operation,

o Responsibilities and obligations of attendees.

2.2.2.2.2. Prior to the beginning of each subcontract work

• Obtain a copy of the present Construction Guide Documents - Book 1 - from the Construction department with all the associated computer files.

• Ensure that the site is equipped with the same IT tools as the home office so as to allow free transportability of files between the site and home office.

• Make sure from home office that he is in possession of a full copy of all documents related to the Subcontract as well as a copy of all correspondence between ABB PA and Subcontractor before Subcontract award.

• Make sure that both the site management and the Subcontractor have the complete file of documents constituting the Subcontract as well as all relevant documents with the correct revision number.

• Organise a meeting with the Construction Manager, the Area Superintendent, the Cost control Manager, the Scheduling Manager and the Supervisor to:

o Present the Subcontractor profile,

o Explain the main features of the Subcontract,

o Detail the scope of work and measurement conventions,

o Highlight specific points raised during the negotiations.

• Organise a meeting with the Supervisor to explain:

o The Variation procedure and required signatures on the Work Orders,

o Claim prevention measures,

o His responsibilities and obligations.

• Transmit, explain and ensure that the contractual obligations included in the Subcontract are complied with by the construction team at site.

• Explain to all concerned individuals the Variation procedure and the required signatures on Work Orders.

• Attend the kick-off meeting.

• Organise a meeting with the Subcontractor in order to discuss the practical aspects of managing the Subcontract if not addressed during the kick-off meeting. This meeting shall be chaired by the Site Manager assisted by the Subcontract Administrator, the Field Engineer, the Safety Manager, the Scheduling Manager and the concerned construction Supervisor(s). The purpose of this meeting is, in particular, to check the availability, understanding and use of forms and procedures by the Subcontractor as envisaged in the Subcontract or as decided by site management (transmission of drawings, manpower and equipment reports, safety plan, preparation for early action items envisaged in the Subcontract such as free access to site, site opening form, construction schedule, insurance policies, Work Permit procedures, security regulations, etc.)

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2.2.2.2.3. During execution of work

• Manage the Subcontract and monitor the application of contractual terms and conditions.

• Assist the Construction Manager in all the disputes with the Subcontractor in order to arbitrate the contractual disagreements.

• Attend the meetings involving contractual commitments and write the minutes of such meetings.

• Follow the evolution of quantity variations and as a general rule, monitor that the Subcontractor always complies with the Scope of Work and the contractual schedule.

If any change to the scope or schedule is intended to be made at site, prepare the corresponding draft amendments for ABB PA Head Office action.

• Issue, if necessary, all the bid documents, bid tabulations, recommendations to negotiate the prices and conditions for the execution of additional work not included in the original scope of work and issue corresponding Work orders or site purchase orders.

• Verify and approve Work Orders after making sure that such work is not included within the Scope of Work of the Subcontract, recommend the mode of payment and update the corresponding logbook. In case of disagreement, the verification shall be done with the Work Order Issuer in order to confirm the validity of the request for Variation based on the contractual scope of Work and in order to confirm that it has been properly valuated.

• Maintain a Subcontract paper file for each Subcontract. Ensure all contractual and technical documentation that may have a contractual impact is stored in an electronic format and indexed in a structured manner to facilitate claim prevention and defence.

These files shall be used in case of disputes, application of liquidated damages, back-charges or any other contractual consequences.

• Check, particularly with the supervisors, that every instruction given to the Subcontractor is in writing.

• Manage back-charges to Subcontractor in order to take them into account when issuing amendments.

• Manage the financial progress of the Subcontract (status of main works, completed work orders and work orders in progress)

• Examine regularly the Subcontract clauses and check their correct application by the supervisors.

• Deliver the relevant data required for the monthly construction progress report and the cost control reports.

• Transmit a monthly Subcontracts status report to the Subcontracting Department Manager at ABB PA Head Office.

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2.2.2.2.4. At end of work

• Either have ABB PA Head Office check the final take-off carried out by the Subcontractor or consolidate the take-off made (or checked) by both ABB PA Head Office and the site team and obtain the concurrence of the Subcontractor in both the cases.

• Establish the final closeout account and prepare the closeout amendment for ABB PA Head Office including all relevant documents, with the agreement of the Subcontractor.

• Check that all the contractual conditions have been met in order to issue the formal Provisional Acceptance Certificate.

• Advise the Subcontracting Department Manager in ABB PA-Head Office of the possibility to release the bank guarantees related to remaining payments and the formal punch list items.

• Participate in the evaluation of Subcontractor's performance.

• Participate in the development of final site closing report, particularly with regard to the relationship with the Subcontractors.

• Collect the required cost and man hours statistics and issue than under the required format to ABB PA Subcontracting Department Manager

2.3. FILING SYSTEM REQUIREMENT

2.3.1. General The Subcontracts filing is made by the Subcontracts Administrator. The purpose of a good filing system is to store the information / data in a structured and systematic manner so that it can be retrieved and referred to quickly by anyone. The accurate filing of all the Subcontract documents, correspondences and minutes of meetings cannot be overemphasised considering the large sums of money involved in construction jobs and the potential claims from the Subcontractors for certain inherent additional works deemed to be in the scope of work, loss of time not attributable to ABB PA or the Subcontractor and the non fulfilment of contractual obligations by ABB PA. Each Subcontract administration filing system must have the following features:

• A system integrated with the site project filing system.

• An index showing each subject in the system.

• Security especially after office hours and on holidays.

• Filing cabinets should be fire proof (if practical) and should be locked while not in use.

2.3.2. Electronic Filing In addition to the paper filing, a centralised electronic documentation base will be established on site, except for small projects. This base will contain all the Subcontracts document filing as defined hereafter, either in electronic format or for incoming documentation in scanned format. The Subcontracts Administrator shall ensure that all documents in the base are fully and properly indexed. In particular:

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• Each document shall be indexed according to the claim index (as per § 5.4.2 ).

• Each Subcontractor correspondence shall be linked to each ABB PA correspondence (uplink and downlink)

• Each ABB PA correspondence shall be linked to each Subcontractor correspondence (uplink and downlink)

2.3.3. Paper Filing Requirement

2.3.3.1.Filing Instruction

• Each file folder must be cross-referenced to the Index file.

• Each folder should contain one subject only.

• Each Subcontract file should be maintained separately and headed by a tab, indicating the Subcontract name, number and the subject of the file.

• Logs for all Subcontract files within each particular Subcontract should be maintained in either a separate file or in a binder divided by Subcontract number containing the logs for all Subcontracts.

2.3.3.2.Recommended Filing System The following list of files is recommended within each Subcontract administration filing system:

2.3.3.2.1. Pre-contract award files

a) Copy of the Main contract with the Client / Owner

b) Final bid tabulation, successful bidder's proposal, all correspondences between ABB PA and the bidder during the bidding stage and ABB PA's in-house estimate

c) The letter of intent, signed Subcontract with authorised Subcontractor personnel list and Client / Owner's confirmation of ABB PA's authority for Subcontract administration matters.

2.3.3.2.2. During the execution of the subcontract

a) Executed Subcontract amendments in the established format.

b) Copies of all the bonds for all Subcontractors separated by tabs with the originals kept in safe custody either at Head Office or at site office.

c) Chronological correspondence file - all incoming and outgoing letters, properly serialized, with current logs showing necessary cross indexing and reply dates.

d) Contractual construction schedules (initially approved and all updates).

e) Monthly progress reports.

f) Documents and drawings transmittal notes.

g) Minutes of all the meetings and notes on all telephone conversations.

h) Progress payments including quantity calculations and support verifications.

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i) Variation requests and Work orders (resulting from ABB PA or Subcontractor originated Variations and including claims). Each properly presented and analysed according to established format.

j) Site Subcontracts.

k) Site purchase orders.

l) Back-charges with all required forms and supports.

m) Copies of all Subcontractor licenses, permits, tax certificates, customs documentation and certificates, labour compensation certificates and other such documents as applicable to the Subcontract.

n) Final close outs and Provisional Acceptance Certificates.

2.3.3.3.Recommended Subcontract filing index An expandable decimal system which is compatible with the Project Master File System and the Project correspondence serial system must be established. Example:

Project No. Subcontract No. File No. File Title NNNN X CS NNNN X 00 1700 01 Chrono 1002 2.4 Subcontract Amendments

2.3.3.3.1. Typical Files Typical Subcontract administration files will include: a. General Files

a.1 File Index a.2 Main contract with Client/Owner a.3 Project master schedule a.4 Correspondence with Client relevant to Subcontracts a.5 Standard document distribution a.6 Correspondence with Head Office a.7 Directives and special procedures a.8 Site procedures and instructions a.9 Construction coordination meeting minutes a.10 Subcontracts and cost control coordination minutes a.11 Project applicable procedures a.12 Work orders index a.13 Site orders index a.14 Site orders (by number)

b. Subcontract files As the Subcontract are awarded, individual files are created containing the following major groups: 1 Subcontract

1.1 Successful bidder's proposal and pre-award correspondence 1.2 Letter of Intent and signed Subcontract 1.3 Approved Subcontract amendments 1.4 Insurance certificates and associated correspondence 1.5 Performance bond, bank guarantees and associated correspondence

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1.6 Subcontract change notices (by number) and potential extra costs 1.7 Work orders (by number) 1.8 Potential claim correspondences

2 Communications 2.1 Correspondence log with identification of incoming/outgoing, date &

subject 2.2 Cross reference table between incoming and outgoing correspondence 2.3 General correspondence files: 2.3.1 Incoming letters from Subcontractor 2.3.2 Outgoing letters to Subcontractors 2.3.3 Inter-office memos 2.4 Weekly construction meeting minutes 2.5 Telecon file 2.6 Field instructions / memos 2.7 Transmittal notes (BT)

3 Administration

3.1 Back-charge logbook 3.2 Back-charge notices 3.3 Subcontract schedules

3.3.1 Master schedule 3.3.2 Detailed schedules 3.3.3 Physical progress / "S" progress curve 3.3.4 Manual manpower schedule & histogram 3.3.5 Supervisory manpower list & assignment schedule 3.3.6 Construction equipment list & assignment schedule

3.4 Key personnel (addresses & phone Nos.)

4 Reports 4.1 Daily direct labour reports 4.2 Weekly indirect labour reports 4.3 Progress reports 4.4 Work Interruption reports 4.5 Inspection reports 4.6 Accident Reports 4.7 Photographic reports

5 Procedures and Plans

5.1 Subcontractor' s construction plan / subcontracting plan 5.2 Sub Subcontractors list and approvals by ABB PA 5.3 Coordination procedure 5.4 Quality Management plan 5.5 Health & Safety plan

6 Payments

6.1 Monthly financial status report 6.2 Subcontractor Invoices / Application for Payment 6.3 Quantity verifications/ approved take-offs 6.4 Cash Flow / Subcontract forecasts

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6.5 Subcontract trend reports 6.6 Final closeout account

7 Acceptance and Closed out Reports

7.1 Opening of Jobsite form 7.2 Final inspection and tests records 7.3 Punch list records 7.4 Milestone completion certificates 7.5 Mechanical Completion and Provisional Acceptance Certificate & annexes 7.6 Penalties / liquidated damages application forms 7.7 Final Acceptance

8 Warranties

9 Claims

9.1 Subcontractor's claims 9.2 Claims analysis 9.3 Depositions, reports (personnel concerned) 9.4 Claims correspondence

9.4.1 Client correspondence, minutes of meetings 9.4.2 ABB PA internal correspondence, minutes of meetings 9.4.3 ABB PA / Subcontractor correspondence, minutes of meetings

9.5 Claims report to Management 9.6 Claims Settlement Agreements

10 Contractor performance appraisals / Historical

2.4. GENERAL INSTRUCTION FOR CORRESPONDENCE

2.4.1. Purpose The purpose of this section is to give general instruction for correspondence to and from Subcontractors in order to:

a) Monitor and respond promptly to all correspondences (15 days maximum) b) Identify all communications requiring a reply b) Fast track all correspondence

For technical documents refer to the Construction Book 3 - chapter A1.

2.4.2. Instructions All correspondence from the Subcontractor shall be addressed to the Construction Manager. All correspondence to the Subcontractor shall be signed only by the Construction Manager. All correspondence from the Subcontractor shall bear a sequential number starting with 0001 onwards and shall be logged by the Subcontract Administrator or his secretary in the incoming correspondence cross-reference log as per attachment - FORM_.2A1 Incoming correspondence log.xls. All correspondence to the Subcontractor shall bear a sequential number starting with 0001 onwards and shall be logged by the Subcontract Administrator or his secretary in the outgoing correspondence cross-reference log as per attachment 2 - FORM_.2A2outgoing correspondence log.xls. In addition when the correspondence is an answer to a Subcontractor correspondence, it shall also be logged in the above incoming correspondence cross-reference log. All correspondence to and from the Subcontractor shall cover one subject only.

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All incoming correspondence shall be received by the Secretary, stamped with the date of receipt and forwarded to the Construction Manager. The Construction Manager is responsible for the distribution of all correspondence to relevant personnel for necessary action or for information as the case may be. The Subcontracts Administrator shall systematically and immediately be copied of all incoming and outgoing correspondence. The Subcontract Administrator shall regularly review all correspondence logs and particularly the Subcontractors’ incoming log to make sure that the necessary action has been taken and all the correspondence has been replied to as soon as practical (the target is that all correspondence is addressed within 7 days). All the correspondence from the job site will be initialled by the originator and in this particular case, by the Subcontract Administrator prior to the Construction Manager's signature. All correspondence shall be in the contractual language.

2.5. MEETINGS The purpose of this section is to provide guidelines to maintain records of all meetings and important telephone conversations related to a Subcontract - listing date, participants and synopsis of discussions. The following types of meetings can be held related to each awarded Subcontract:

• Kick-off / Pre-construction Meeting • Progress Review Meetings • Coordination Meeting with Subcontractors • Internal Review and Trends Analysis

2.5.1. Kick-off/pre-construction meeting After the award of Subcontract and prior to mobilisation of Subcontractor personnel to the site, the Head Office Subcontracts Manager shall call for a Kick-Off Meeting in order to set up the ground rules between the Subcontractor and ABB PA for working at the particular construction site and to highlight the main aspects and particularities of the Subcontract. These rules will form the basis of the understanding between the parties of each other's responsibilities and obligations. This meeting shall be chaired by the Construction Manager assisted by the Home Office Subcontract engineer (if required), the subcontract administrator, the safety manager, the Field Engineer, the schedule Engineer, the area supervisor(s) or their delegates. During this meeting all facets of the work shall be addressed: Introduction of key personnel from both sides, brief presentation of Subcontract to all attendees, standard procedures and forms, reports, planning, drawing and contractual documents distribution, labour relations, communication procedures, invoicing methods etc. Also, it is practical that the Planning engineers from both sides set up a separate meeting soon after the Kick-Off Meeting in order to prepare the Subcontract schedule and progress curves (contractual): this progress curves will bind the Parties (refer to the General Terms and Conditions of the Subcontract) and be the basis of further discussion related to time extension / accelerations Variations due to late delivery of CONTRACTOR's deliverables (access, drawings, material,...). See attachment FORM_.2A3 KOM agenda.pdf for the usual agenda for the meeting. Early Action Items Letter: Either before or immediately after the kick-off meeting, an early action letter should be sent to the Subcontractor. This letter will specify the procedures and the contractual requirements that require immediate action by the Subcontractor.

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2.5.2. Progress review Meeting a) The weekly progress review meeting is held between the Subcontractor and construction team. The Subcontracts Administrator shall attend the last weekly progress meeting of each month. During this meeting the following issues shall be discussed:

• Progress of the work since the last meeting and against the schedule. • Manpower and equipment mobilization status, technical matters, QA/QC • Interfaces, critical items, current and potential problems. • Action items / due date / responsible parties

b) Contractual problems, if any, shall be identified but not discussed during this meeting. These have to be discussed and resolved between the subcontracting group and the Subcontractor in a separate meeting. c) This meeting will be conducted by the Construction Superintendent or the Construction Manager. Even though a formal agenda will not be necessary, the minutes of the previous meeting will form the basis for each weekly meeting with new items being added as they arise. d) The Subcontracts Administrator will follow up the meeting by:

• Preparing and distributing the minutes of meetings showing the agreements made and the person responsible for taking appropriate action.

• Expediting resolution to problems according to the required action. • Confirmation of significant agreements / decisions by writing.

2.5.3. Coordination Meeting The coordination meetings between two or more Subcontractors are held as necessary in order to discuss and resolve interface problems and Back-charges. The meeting will be chaired by the Construction Superintendent or the Construction Manager and attended by their counterparts from the Subcontractor side. An agenda will be prepared and provided to the attendees prior to the meeting, if possible. These meetings are held as frequently as required. The Subcontracts Administrator shall attend such meetings.

2.5.4. General Instructions a) Care should be exercised while drafting the minutes of meetings as they have significant

contractual value and will form the basis for discussion at the time of claim or disputes between the parties. It is, therefore, essential that the minutes are drafted by the Subcontracts Administrator and carefully worded bearing in mind ABB PA's interests.

b) All meetings and telephone conversations of substance shall be recorded. No instructions or commitments shall be made to Subcontractors unless confirmed in writing.

c) Construction personnel having day-to-day contacts with the Subcontractors shall record all conversations including telephone conversations of significance and provide a copy to the Subcontracts Administrator.

d) The Subcontracts Administrator shall maintain a permanent file for all minutes of meetings / telephone conversations.

e) Approval of the minutes by all parties represented is mandatory. Unilateral records have no legal status. Preferably this should be done at the end of the meeting. Otherwise, the minutes will later be prepared and routed to the representatives of all the parties concerned for review concurrence / amendment and signature.

f) All the minutes shall be signed by the Construction Manager from ABB PA and the authorised representative of the Subcontractor.

g) All minutes having a cost/schedule impact shall be copied to the Cost/Schedule Manager. h) The standard ABB PA forms shall be used for recording the minutes of meetings.

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2.6. REPORTS

2.6.1. Site Subcontracts Monthly Report

The Site Subcontracts Monthly Report is a monthly financial report issued by the Subcontracts Administrator for all Subcontracts in force including local Subcontracts. It consolidates all the relevant information regarding all Subcontracts giving an estimate of identified exposure to date. From this document the Cost Control Manager can build his cost forecast by adding the required provisions for the financial consequences of future growth or other events. The report is issued after the approval of the Monthly Financial Status Report, but not later than the 15th of each month. The above report is highly confidential in nature. One copy will go to the Cost Control Manager. The report shall also be dispatched to the Subcontracting Department Manager who will take care of the internal distribution at the Head Office. A blank Site Subcontracts Monthly Report form is included in attachment FORM_.2A5 SSMR master.xls

2.6.2. Monthly Subcontracts Status details This is a detailed report for each Subcontract providing information related to: • The general situation and potential risks, • The major events in the month and forecast for the next month, • Financial information (this information should be made available through the computerized

system if implemented see chapter 7 - Subcontracts computerised administration system), • Contractual CONTRACTOR and SUBCONTRACTOR commitments follow-up? • Potential improvement proposals and related expected cost saving, • Site corrective actions • Quality indexes follow-up.

2.6.3. Daily man-hour reports

2.6.3.1.Purpose

The purpose of daily man-hour reports from Subcontracts administration point of view is two-fold:

• Measurement of Subcontractor's productivity on various activities. • Record and assessment of exceptional situations that may have a cost impact, leading to

future claims.

2.6.3.2.Reporting Procedures All Subcontractors involved on the jobsite shall prepare a daily man-hour construction report (mandatory).

contractors involved on the jobsite shall prepare a daily man-hour construction report (mandatory).

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It is reviewed by the corresponding ABB PA supervisor and approved by the Construction Superintendent. Since this report is a significant record in the evaluation and settlement of claims, care should be taken to ensure the accuracy and completeness of the report.

The supervisors in charge will ensure that the Subcontractor issues the reports promptly during the life of the Subcontract.

The original, after despatch to the Scheduling group for productivity measurement purpose, shall be retained by the Subcontracts Administrator.

The Subcontracts Administrator shall review all reports for items that have potential cost impact on Subcontracts, for problems to be discussed with the Subcontractor or brought to the attention of the Construction Manager.

The report is prepared and numbered sequentially for every working day, including Saturdays, Sundays and holidays, if applicable.

2.6.4. Weekly construction equipment report

2.6.4.1.Purpose The purpose of weekly construction equipment reports from Subcontracts administration point of view is essentially to maintain a record of duration of assignment of construction equipment on site in case of future claims.

2.6.4.2.Reporting Procedure All Subcontractors involved in the jobsite shall prepare a weekly construction equipment report (mandatory). It is reviewed by the ABB PA supervisor in charge and approved by the Construction Superintendent. Since this report is a significant record in the evaluation and settlement of claims, care should be taken to ensure the accuracy and completeness of the report. The supervisors will ensure that the reports are issued promptly by the Subcontractor during the life of the Subcontract. The original shall be retained by the Subcontracts Administrator.

2.7. CHECKLIST FOR SUBCONTRACT ADMINISTRATION

2.7.1. Purpose The scope of Subcontract Administration is to ensure that the technical, commercial and legal provisions of all the Construction Subcontracts are complied with by all the concerned parties. This process begins as soon as a Subcontract is signed between the parties and continues on a daily basis during all the pre-construction activities and construction until work completion, provisional / final acceptance, Subcontract closeout / final payment and activation of specific warranty provisions. It is, therefore, very important that all the records related to every Subcontract are kept meticulously and it is ensured that the work is completed in total compliance with the scope and specifications. Further, any potential claim from a Subcontractor should be recognised and resolved promptly, all changes to scope processed in time. ABB PA Head Office should be informed of the Subcontracts status regularly on a monthly basis. In order to help the Subcontracts Administrator on site in effectively meeting the above requirements, a checklist has been developed on all aspects of Subcontract administration (see attachment - FORM_.241 SC admin checklist.pdf). It is a tool to be used at the start of each Subcontract to ensure that all required administration items are in place and continue to be used till the end to assure quality of services.

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2.7.2. Scope The Subcontract administration checklist covers the following major areas :

• Subcontract documents • Filing System • Correspondence control • Meetings and Telecon notes • Progress payments • Retention monitoring • Monthly Subcontract status report • Variations / changes • Work orders • Site Purchase orders / Site Subcontracts • Back-charges • Construction progress control • Daily construction reports • Drawings and documents control • Claims • Provisional / Final Acceptance • Release of lien / Final payment

3. SUBCONTRACTS MAIN WORKS [TOP]

3.1. PRINCIPLE The main work is considered as being:

• Within the geographical definition of the Subcontract and • Within the scope of works as defined in the commercial and technical documents of the

Subcontract and • Reflected by the technical documentation given to the Subcontractor.

3.1.1. Commercial documents

• The letter of Order. • The Particular Conditions of Subcontracts. • The General Conditions of Subcontracts. The Subcontract Exhibits: 1. CSA: Scope of works 2. CSB: Price schedules 3. CSC: Time schedule 4. CSD: Free issued drawing 5. CSE: Free issued specification 6. CSF: Free issued material 7. CSG: Construction procedure 8. CSH: Quality requirement

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9. CSI: HSE requirement 10. CSJ: Coordination procedure

3.1.2. Technical Documents

• The Approved For Construction drawings. • The Approved For Construction Standard Drawings. • The Particular Specifications. • The Job Specifications.

3.2. FOLLOW UP OF THE MAIN WORK The follow up of the main work for unit rates or lump sum price Subcontracts requires the knowledge of:

a) THE WORK TO BE DONE - As per initial Subcontract quantities. b) THE WORK ACTUALLY DONE - Physical progress calculation.

3.3. MEASUREMENT OF WORK

3.3.1. Work to be compensated with unit rates price schedule

3.3.1.1.Initial Estimate subcontract price The Initial Estimated Subcontract Price is given in the Initial Subcontract. It is based on:

• The contractual drawings and documents listed in the Subcontract, with mandatory indication of the revision index of each of these drawings and documents.

• The estimated quantities given as indicative.

• The main work Price Schedule.

A Price Schedule for additional works (per operation, controlled expenses) is used for compensation of works for which the main work price schedule is not applicable.

3.3.1.2.Material Takeoff The material take off is the document allowing the final calculation of quantities and price of the main work. An intermediate reassessment of the quantities and price of the main work should be made at the Head Office in case of a significant change in the volume of work under the Subcontract. This take off is based on the main work Price Schedule items. It generally reflects the quantities and values per:

• Type of work • Work item • Price schedule item

3.3.1.3.Quantity Calculations The quantities are calculated from the last issue of "Issued For Construction" drawings: ies are calculated from the last issue of "Issued For Construction" drawings:

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• Mainly at ABB PA Head Office, • Or at Site for items that cannot be taken off from drawings.

From the indications and dimensions shown on these drawings, as per the main work Price Schedule items and as per the theoretical measurement conventions defined in the Subcontract.

3.3.1.4.Pricing of quantities The calculated quantities are recorded on the Material Take Off sheets and multiplied by corresponding unit prices.

3.3.1.5.Modifications The design development may lead to drawing and/or contractual document modifications. These modifications may result in material take off revisions.

3.3.1.6.Approvals

• Supervisor • Site Manager • Client (depending upon Main Contract type) • Subcontractor

3.3.1.7.Distribution (for reference in Subcontract amendment) to:

Head Office Subcontracting department Project Control group Subcontractor

3.3.1.8.Subcontract Price adjustment The Material Take Off shall be used as basis for calculation and issued by ABB PA Head Office, in case of significant change of the volume of work under the Subcontract, of the Subcontract Price adjustment amendment.

In case such a significant change in the volume of work under the Subcontract is identified on Site, the Subcontracts Administrator shall inform without delay the Head Office Subcontracts Manager of any such change.

3.3.2. Work to be compensated with lump sum price

3.3.2.1.Initial lump sum price The Initial Subcontract Price is given in the Initial Subcontract. It is based on:

• The contractual drawings and documents listed in the Subcontract, with mandatory indication of the revision index of each of these drawings and documents.

• The main work Price Schedule.

• Possibly a Price Schedule for additional works (per operation, controlled expenses) will be used for compensation of works for which the main work price schedule is not applicable.

The Subcontractor takes the risk of quantity and of work constraints.

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3.3.2.2.Modifications The design development may lead to drawing and/or contractual document modifications. These modifications, when resulting in an increase or decrease of the lump sum price, will be taken off and priced with the main work Price Schedule.

3.3.2.3.Material takeoff The material take off is the document allowing the calculation of quantities and the price increase or decrease due to modifications. It is calculated per drawing and per main work Price Schedule item.

3.3.2.4.Approvals

• Supervisor • Site Manager • Client (depending on Main Contract type) • Subcontractor

3.3.2.5.Distribution (for reference in Subcontract amendment) to:

Head Office Subcontracting department Project Control group Subcontractor

3.3.2.6.Subcontract Price adjustment The Material Take Off shall be used as basis for calculation, in case of significant modifications, of the Subcontract Price adjustment amendment.

The calculation will be done with:

• The initial lump sum,

• The known or expected take offs of modifications that will be established from the revised drawings and contractual documents,

• The committed extra Work Orders,

• A provisional sum for extra Work Orders to be issued.

The addition of the above amounts leads to a provisional account that allows the preparation by the Subcontracts Administrator of a SUBCONTRACT Price adjustment amendment that will be issued by ABB PA Head Office.

3.4. PROGRESS OF WORK

3.4.1. Monthly Financial status

3.4.1.1.Physical progress calculation

The physical progress calculation allows the measurement of the amount of work completed at any tim COMPLETED WORK It is the ratio: -------------------------------------- TOTAL VOLUME OF WORK

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The follow up and the calculation of the physical progress shall be performed by means of CPMS ("Construction progress Measurement System") software.

3.4.1.2.Work progress sheets (see attachment - FORM_.3A1 work progress.pdf) The "Work Progress" is the detailed document that allows the recording and the follow up of the different work phases of one work item and/or type of work items.

The build-up of such "work progress" sheet depends upon both:

• The schedule follow up split (geographical) • The Subcontract follow up split (per type of work item)

The document is a computer print out issued by the Scheduling group to the Supervisor, filled by the Supervisor or by the Subcontractor and checked by the supervisor and entered into the CPMS system.

The filled document is distributed to the supervisor and filed by the Scheduling group.

3.4.1.3.Physical progress calculation – for subcontract administration (see attachment - FORM_.3A2 physical prog. - productivity.pdf) Two steps have to be considered for progress follow up:

• Data input: The data input is calculated from the information given by the Supervisors and the "work progress" sheets

• Progress calculation: The overall physical progress is calculated by the Scheduling group using CPMS software (refer to Construction Book 4 – Chapter 2).

The Monthly Progress report is generated by CPMS and distributed by the Scheduling group to the Subcontracts Administrator, the Supervisor and filed by the Scheduling group.

3.4.1.4.Monthly financial status report (see attachment - FORM_.3A3 monthly financial status.tachment - FORM_.3A3 monthly financial status.pdf) This document shows the value of works performed during the month, including Variations, the calculation of the invoiceable amount of the works performed during a month including escalation if applicable. It is established from the "Monthly Progress Report, Progress of Works (Subcontract)" sheet.

The "Monthly Financial Status Report" is approved and signed as follows:

• The issuer • The Subcontractor • The Cost Controller • The Site Manager • The Client (if required by the main contract)

The document is hand filled on a paper wad and distributed after approval to:

• The Subcontractor • The Cost Controller • The Client (if applicable) • The head office Accounting department

and filed by the Subcontracts administrator.

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3.4.2. Invoicing The invoicing is made in accordance with the Subcontract provisions.

The invoice is issued and distributed by the Subcontractor as per the Subcontract provisions and in compliance with the "Monthly Financial Status Report" figures. The invoicing shall be followed up by ABB PA head office accounting department who shall check conformity with the Monthly Financial Status Report.

3.4.3. Subcontracting close-out The close-out of the Subcontract is prepared upon completion of the works by way of amendment by the Head Office Subcontracts manager. The Subcontracts Administrator will request Subcontractor to submit its Project of Final Financial Statement (see attachment - FORM_.3A4 final financial statement.pdf) and will prepare all back-up documentation allowing the Head Office Subcontracts manager to negotiate the closeout.

The closeout amendment is drafted by the Site Subcontracts Administrator and negotiated and issued by the Head Office Subcontracts manager.

4. SUBCONTRACTS VARIATIONS [TOP]

4.1. PURPOSE This procedure covers the basic requirements for handling Variations in the Work that occur during the execution of a Subcontractor's Work as per the Article "Variations" of the General Conditions of Subcontract and as may be amended in the Special Conditions of Subcontract and subsequently the Variation Procedure which is to be distributed to each Subcontractor and to be strictly adhered to.

A Variation to a Subcontract is a change in the form, quality or quantity of the Work or any part thereof as defined in the Subcontract. In principle the work should be of the same nature as that of the Main Work or fall within the area of expertise of the Subcontractor, failing which the work should be directed to another Subcontractor. A Variation request may be initiated by ABB PA (or the Client in the case where ABB PA acts for and on behalf of the Client) or by a Subcontractor.

Implementation of a Variation requires the issue of a Variation request, followed by the issue of a Work Order prior to execution of the related works. The Variation will be subsequently incorporated into a Subcontract amendment. Each of these stages shall be subject to the relevant approvals as described hereafter.

4.2. INITIATION OF A VARIATION REQUEST

4.2.1. By ABB PA (or Client) All requests for Variations to the scope of Work of the Subcontract by ABB PA (or the Client) will be prepared by the ABB PA Supervisor on a Variation Request form as per attachment - FORM_.4A1 Variation request by ABB.pdf).

The Variation Request will be handed over to the Subcontracts Administrator who shall check the Subcontractor's contractual entitlement to a Variation.

If the contractual entitlement to a Variation is established, the Subcontracts Administrator shall log the Variation request in a sequential log for ABB PA initiated Variations commencing with

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1001 onwards. This sequential log is incorporated into the Computerised Subcontracts Administration system described in Chapter 7.

The Variation Request shall be signed by the Supervisor, the Subcontracts Administrator, the Cost Control Manager, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client) prior to issue to the Subcontractor.

The Subcontractor shall be required to submit a cost and schedule proposal for the said works by the stipulated date (normally within 8 days) on a unit rates, a lump sum or a reimbursable basis as directed by ABB PA.

After discussion and agreement on the Subcontractor's proposal, a Work Order will be prepared as per attachment - FORM_.4A3 work order.pdf by the Subcontracts Administrator, stating the charge code as per table 1 and a clear description of the works.

The Work Order shall be signed by the Supervisor, the Subcontracts Administrator, the Cost Control Manager, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client) prior to issue to the Subcontractor for signature and implementation of the works.

No Variations shall be started before having been approved by the Site Manager (and the Client in the case where ABB PA acts for and on behalf of the Client).

If the Work Order amount exceeds the Site Manager delegation, authorisation will also be requested from the Project Director.

4.2.2. By the Subcontractor All requests for Variations to the scope of Work of the Subcontract by Subcontractor will be prepared by the Subcontractor on a Variation Request form numbered sequentially and commencing with 001 onwards as per attachment - FORM_.4A2 variation request by SC.pdf.

The Variation Request will be handed over to the Subcontracts Administrator together with the cost and schedule proposal, all necessary details and supporting documentation. The Subcontracts Administrator shall check the Subcontractor's contractual entitlement to a Variation and his compliance with the foreclosure time for Variation Request submittal set out in the Article "Variations" of the General Terms and Conditions of Subcontract (normally 21 days).

The Subcontracts Administrator shall log the Variation request in a sequential log for Subcontractor initiated Variations. This sequential log is incorporated into the Computerised Subcontracts Administration system described in Construction Book 4.

After discussion and agreement on the Subcontractor's proposal with the Supervisor, the Subcontracts Administrator, the Cost Control Manager, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client), the Subcontracts Administrator shall either send the Subcontractor a motivated refusal or discuss the proposal and prepare a Work Order as per attachment - FORM_.4A3 work order.pdf, stating the charge code as per table 1 and a clear description of the works.

The Work Order shall be signed by the Supervisor, the Subcontracts Administrator, the Cost Control Manager, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client) prior to issue to the Subcontractor for signature and implementation of the works.

If the Work Order amount exceeds the Site Manager delegation, authorisation will also be requested from the Project Director.

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4.2.3. Work orders log The Computerised Subcontracts Administration system described in Construction Book 4 will allow sorting of Variation Requests:

• by Subcontract • by charge code.

4.3. EXECUTION OF WORK ORDER No Variation work should be commenced by a Subcontractor prior to signature of the Work Order in compliance with the Variation procedure.

No Variation work resulting from works to be back-charged to another Subcontractor or Supplier should be commenced prior to authorisation by the said Subcontractor or Supplier according to the Back-charge procedure (refer also to Chapter 5.1).

It is recalled that commencement of execution of any work by a Subcontractor without a Work Order signed in compliance with the Variation Procedure will be construed as acceptance by the Subcontractor that such work does not constitute a Variation.

In order to track works performed under a Work Order and to calculate the final amount of the Work Order, Attachments to the Work Order will be established as described hereafter.

4.3.1. Lump sum or unit rates work order Upon completion of the Work Order, the Supervisor will prepare a close out Attachment to the Work Order as per attachment - FORM_.4A4 unit or LS work.pdf .

This document will be signed by the Subcontractor, the Cost Control Manager, The Subcontracts Administrator, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client).

The Subcontracts Administrator shall check the quantities shown on the Attachment.

Each Attachment will be logged on the Work Order by the Subcontracts Administrator.

4.3.2. Reimbursable Work Order

The Supervisor will prepare a daily Attachment to the Work Order as per attachment - FORM_.4A5 daily time sheet.pdf. He shall check the information shown on these daily attachments.

Upon completion of the Work Order, the Subcontracts Administrator will prepare a close out Attachment to the Work Order as per attachment - FORM_.4A6 summary time sheet.pdf .

These documents will be signed by the Subcontractor, the Cost Control Manager, The Subcontracts Administrator, the Site Manager and the Client (in the case where ABB PA acts for and on behalf of the Client).

Each Attachment will be logged on the Work Order by the Subcontracts Administrator.

4.4. DOCUMENTS DISTRIBUTION

The Variation Requests shall be distributed to the signatories.

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The Work Orders and Attachments shall be distributed as follows:

• Subcontractor • Client (in the case where ABB PA acts for and on behalf of the Client) • Cost Control/Subcontracts • Supervisor • Accounting

TABLE 1: CHARGE CODES

ORIGIN DESCRIPTION CODE

CLIENT Variations requested by the Client whether or not giving entitlement for a change order to the Client.

C

ENGINEERING

Revised documents, new documents, errors or inaccuracies leading to extra supplies or works. Delays in drawing delivery.

E

SUPPLIERS SUBCONTRACTORS

Non conformity in supplies or works. F

START UP Modifications or damage to the plant O SUPERVISION Poor quality of supervision S

SUBCONTRACTS Take-off errors or unforeseen works. Inaccurate subcontract documents leading to incorrect interpretations.

M

PROCUREMENT Supplies delivered late against the Site requirements

A

MISCELLANEOUS Other causes D

5. OTHER SUBCONTRACT ACTIVITIES [TOP]

5.1. BACK-CHARGES

During the progression of a Subcontract, occasions may arise when work will be required to be performed for the Subcontractor or the Subcontractor incurs some liability that results in a Back-charge.

A Back-charge is a cost sustained by ABB PA or the Client for the account of a Subcontractor or Supplier and charged to that Subcontractor or Supplier. This results from work that is the contractual responsibility of the Subcontractor or Supplier but is performed by others.

A back-charge may result from:

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• A request from a Subcontractor to have work performed which is within the scope of its Subcontract.

• Costs sustained by ABB PA or the Client resulting from a Subcontractor's or Supplier's operations or deficiency.

• Costs sustained by ABB PA or the Client to correct defective or non-conforming Work, which a Subcontractor or a Supplier has stated or by its actions has indicated that it was unable or unwilling to correct.

Prior to execution of any Work which is to be back-charged to a Subcontractor or a Supplier (Work Order charge code F or local Subcontract), a back-charge notice as per attachment - B1C2.7A1 backchar ge notice.pdf is to be issued by the Cost Control Manager to the Subcontractor or Supplier (through the Head office Procurement or Project Manager if required) as per Construction Book 1 - Chapter 2.7 giving him the opportunity to execute the Work directly.

5.2. QUANTITY CONTROL Large changes in the volume of the Work impact the conditions of execution of the Work. The General Terms and Conditions of Subcontract allow a Subcontractor to request for a Variation if the change in the Subcontract volume of the Main Work exceeds 35 %. It is in fact Subcontractor's duty to make such a request for a Variation within 14 days of becoming aware of the change failing which it forfeits the right to a Variation.

It is anyway advisable for ABB PA to promptly inform a Subcontractor of any such large change so as to mitigate any adverse impact.

Quantity growth is monitored from the Head office as per Protocole Général book 1 - chapter 8 (Material Quantity Control). The Subcontracts Administrator will be informed of any unusual changes in the volume of Work by the concerned Head office Engineering departments and will promptly take adequate action towards the Subcontractor.

5.3. PRORATA ACCOUNT

The implementation shall be decided by the Project Management and the Head Office Construction Management.

5.4. CLAIMS

5.4.1. Claim Prevention A claim is a dispute between ABB PA or the Client and a Subcontractor in the form of a written request by the Subcontractor for additional compensation and/or time extension resulting from the conditions of execution of the Subcontract that the Subcontractor will try to demonstrate as being different from the Subcontract conditions.

Under the General Terms and Conditions of Subcontract, a claim has to be submitted by the Subcontractor just as any other request for additional compensation and/or time extension under the form of a request for a Variation according to the Variation Procedure and is subjected to the same conditions in particular those of forfeiture for late submittal.

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The outcome of the claim in particular if it goes to litigation will primarily depend on substantiation of the facts. Good record keeping is therefore essential to enhance the chances of success. In order to prepare for a successful defence, it is also essential to recognise claims situations early. Three good indicators of a claim situation building up are:

• Poor Subcontractor performance

• Higher than expected resource requirements: construction equipment or direct labour due to low productivities

• Time delays due to drawing or material late deliveries or work fronts availability

• Changes in the sequence of works

The Subcontract administration check-list as per attachment - FORM_.2A4 SC admin checklist.pdf provides guidelines in the main areas of claim prevention.

It should also be noted that total or partial protection against a number of traditional claims conditions is provided for in the General Terms and Conditions of Subcontract as hereafter detailed. It is essential for the Subcontracts Administrator to acquire a thorough knowledge of the said conditions.

5.4.1.1.Total Protection

The Subcontracts Administrator should adopt a firm stance on the following points:

• Differences in complexity between the Subcontract drawings and the actual project drawings

• Strikes • Weather • Interferences • Factors out of ABB PA's or the Client's control • Force majeure

5.4.1.2.Partial Protection

• Differing site conditions • Disruption • Out of sequence work • Delay • Acceleration

5.4.1.3.Delays and acceleration Claims are generally submitted as a result of either lower than expected gains or of losses on a project. These usually result from a combination of late delivery of ABB PA or Client supplies and services and poor performance by the Subcontractor. It will only be necessary for ABB PA or the Client to be responsible for minor deficiencies to give the Subcontractor some justification to its claim and for the Subcontractor to endeavour to mask its own deficiencies. It will then come down to which party is the most convincing in its demonstration of the sequence of events and documentation of the facts.

The Subcontract offers ABB PA or the Client some protection in this respect and particularly in stating that:

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• The milestones stated in the Time Schedule Exhibit under the responsibility of ABB PA or the Client represent their entire schedule commitment under the Subcontract

• The Subcontractor must demonstrate that the delays of ABB PA or of the Client have impacted his work front. As far as the work front available to the Subcontractor is sufficient and allows the achievement of the contractual progress curves, the Subcontractor can not claim for time extension or acceleration

• Contractual cycles per work item are generally defined in the Subcontract (e.g. 4 weeks between the issue of an IFC drawing for a foundation and foundation pouring)

• ABB PA may ask at its discretion for a 10% acceleration based on the contractual curves at no charge.

For this purpose, a "Subcontract progress chart" will be established monthly for each Subcontract and issued to the Subcontractor showing:

• The "SUBCONTRACT SCHEDULE" progress curve as defined in the General Terms and Conditions of Subcontract

• The "Work in hand" progress curve

• The actual progress curve

The "SUBCONTRACT SCHEDULE" progress curve is submitted by the Subcontractor within a number of days - as defined in the Subcontract – from Subcontract signature as part of its Working Plan and shall be approved by ABB PA. This curve becomes the contractual progress curve and is the only reference for any time extension or acceleration claims. The correct definition of this progress curve is a major issue to ensure the good execution of the Subcontract. This curve should include floats in order to take in account usual construction constraint and/or delay. It should be considered as the latest curves. Particular attention should be taken in the interface with the other Subcontractors in particular if the construction works have been subcontracted per trade to several Subcontractors.

The "Work in hand" progress curve is established by the Scheduling Manager on a monthly basis and for the 2 following months. This is in fact the "early progress curve".

The actual progress curve is established through the CPMS software and is the contractual basis of the Subcontractor's monthly payment.

The last update of the "Subcontract progress chart" produced at project completion will allow a precise allocation of responsibilities between ABB PA and the Subcontractor in project delays and will also materialise whether or not acceleration has actually taken place.

5.4.2. Claim Index The following index will be used as a basis to classify all Subcontracts filing documents as defined in chapter 2, for future ease of reference. The Subcontracts Administrator will index each document in the electronic document base according to this index. This index may be completed during the project lifetime, although due consideration should be given in that case to the requirement to revisit already indexed documents.

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This index allows retrieving documents according to the subjects covered. Classification by the Subcontracts Administrator according to this index does not presuppose that ABB PA accepts in any way the accuracy or veracity of the document contents. It merely indicates that allegations have been made in the said document by a party relating to the index subject.

One document may be indexed against several subjects.

INDEX ALLEGED CAUSE

ABB PA DEFICIENCY • Late delivery of drawings • Late delivery of materials & equipment • Late delivery of specifications • Late availability of accesses • Late approval of Subcontractor submittals • Management • Revised drawings • Revised specifications • Deficient materials & equipment • Deficient design

SUBCONTRACTOR DEFICIENCY • Organisation • Management • Sub-subcontractors management • Staff resources and skills • Labour resources and skills • Tools & equipment resources • Quality • Safety

SUBCONTRACT INTERPRETATION • Scope of work • Price schedule • General conditions • Others

OTHERS • Differing conditions • Outside events

ALLEGED EFFECT

Additional time Additional cost Additional time and cost Change in sequence Acceleration

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6. SUBCONTRACTS CLOSE-OUT [TOP]

6.1. PURPOSE All Subcontracts must be closed-out in order to ensure that the contractual link between ABB PA or the Client is severed, save for the Subcontractors obligations of guarantee or at law.

No discussion on a Subcontract closeout will be initiated prior to submittal by the Subcontractor of its proposed Financial Statement as per the contractual format forfeiting the right to make any further requests.

6.2. SPECIFIC TASKS The Subcontract closeout is processed through the completion of the check-list as per attachment - FORM_.6A1 close-out checklist.pdf. Such completion is governed as follows:

• The checklist is originated by the Subcontracts Administrator when the Subcontract is near completion. Therefore on receipt of the Subcontractor's "proposed Final Financial Statement" in full compliance with the Subcontract requirements and format, the checking of Subcontractor's obligations can be quickly implemented.

• The checklist shall be adjusted for each Project to reflect its particulars and items added or deleted as applicable.

• The checklist is circulated under the Subcontracts Administrator control to each site discipline/group for verification of satisfactory compliance with all applicable Subcontract requirements. If all requirements have been met, the discipline/group representative signs off for its portion the checklist that is then routed to the next discipline/group.

• When all portions of the checklist have been signed off, it returns to the Subcontracts Administrator.

• In case the Subcontractor is exposed to liquidated damages for delay, low progress, or any other contractual reason, the liquidated damages application form is produced as per paragraph 6.3.3, the Subcontracts Administrator being in charge of getting all the necessary signatures.

• Get the Subcontractor PERFORMANCE EVALUATION SHEET as per attachment - FORM_.6A2 SC evaluation sheet.pdf completed and signed off by the Construction Manager.

• The Subcontract close out will be prepared at site by the Subcontracts Administrator and discussed with the Subcontractor (with the Client approval if the contract is for and on behalf of the Client) in view of reaching an agreement if there are no major problems and positions are reasonably close.

• If that is not the case, the Subcontracts Administrator will prepare a commented table showing item by item the respective positions of ABB PA and the Subcontractor. The Subcontract close out will be negotiated at the ABB PA Head office.

• In all cases, the Subcontracts close out amendment will be signed by the ABB PA Head office.

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6.3. DOCUMENTATION

6.3.1. Close out basic documentation Before site demobilisation, the following minimum documentation shall be assembled for each Subcontract:

• Copy of the Subcontract and of all amendments.

• Copies of all Work Orders, back-charges.

• Correspondence to and from Subcontractor

• Minutes of meetings

• Milestones achievement certificates and completion certificates.

• Bank guarantees.

• The completed liquidated damages application form if applicable

6.3.2. Subcontracts with unsettled claims In addition to the documentation listed in the previous chapters:

• Provide all back up documentation that could be helpful in the claim resolution such as daily labour reports, weekly staff reports, schedules, photographs, statements from staff and any other similar evidence.

• Upon instruction by the Site Manager, forward the whole package to the Project Manager at Head office.

6.3.3. Liquidated damages application Should the Subcontractor have failed to meet its obligation in terms of performance time or progress as set out in the Particular Terms and Conditions of Subcontract and as defined in the Article "Performance time and work schedule" of the General Terms and Conditions of Subcontract, the Subcontracts Administrator shall upon Work completion and prior to the last payment(s) prepare a memo indicating fairly the reasons for which the Subcontractor has been delayed, and its portion of responsibility. He shall circulate the memo together with a "Request for application of liquidated damages" as per attachment - FORM_.6A3 LD application.pdf.

This request shall be completed and signed by the Subcontracts Administrator and the Construction Manager and included in the close out file.

The request will be circulated at ABB PA Head office by the Subcontracting Department Manager to:

• The Construction Department Manager • The Subcontracting Department Manager • The Project Manager.

Each of these persons shall give his position in the light of the memo from the Subcontracts Administrator and from other criteria such as:

• Financial situation of the Subcontractor, • Possible consequences on the time schedule for other Subcontracts under progress for

the Project or for other projects,

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• Rendered services or special efforts made for previous projects for ABB PA, • ABB PA 's policy vis-à-vis the Subcontractor.

The decision to apply or not liquidated damages is finally made by the Project Manager after discussion and final advice of the Subcontracting Department, and, when applicable, the Client.

The Subcontractor is notified of that decision and the corresponding deduction is made from the ABB PA position for the Final Financial Statement of the Subcontract.

7. COMPUTERISED SUBCONTRACTS ADMINISTRATION SYSTEM [TOP]

7.1. PURPOSE The purpose of the computerised subcontracts administration system is to allow proper control of actual and expected expenditures of Subcontract activities on site as well as invoiced amounts.

It is updated permanently and the Monthly Subcontracts Status Summary is sent on a monthly basis to the Head office Subcontracts Department Manager.

The system is developed on Microsoft Access database.

Refer to the operation manual of the application for details on how to use the tool.

The database is available as an attachment in the Construction Book 4 – Computerized Procedures.

8. ATTACHMENTS [TOP]

Attachment Description Name

§ 2 - Att. 1 Incoming correspondence cross-reference log

FORM_.2A1 Incoming correspondence log.xls

§ 2 - Att. 2 Outgoing correspondence cross-reference log

FORM_.2A2 Outgoing correspondence log.xls

§ 2 - Att. 3 Kick off meeting agenda

FORM_.2A3 KOM agenda.pdf

§ 2 - Att. 4 Subcontract administration checklist

FORM_.2A4 SC admin checklist.pdf

§ 2 - Att. 5 Monthly Subcontracts Status Summary FORM_.2A5 SSMR master.xls

§ 3 - Att. 1 Work progress sheet typical

FORM_.3A1 work progress.pdf

§ 3 - Att. 2 Physical progress & Productive manpower tables

FORM_.3A2 physical prog. - productivity.pdf

§ 3 - Att. 3 Monthly Financial Status Report

FORM_.3A3 monthly financial status.pdf

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§ 3 - Att. 4 Final financial statement

FORM_.3A4 final financial statement.pdf

§ 4 - Att. 1 Variation request initiated by ABB PA

FORM_.4A1 Variation request by ABB.pdf

§ 4 - Att. 2 Variation request initiated by Subcontractor

FORM_.4A2 variation request by SC.pdf

§ 4 - Att. 3 Work order

FORM_.4A3 work order.pdf

§ 4 - Att. 4 Unit price or lump sum work

FORM_.4A4 unit or LS work.pdf

§ 4 - Att. 5 Daily time sheet

FORM_.4A5 daily time sheet.pdf

§ 4 - Att. 6 Summary daywork time sheet

FORM_.4A6 summary time sheet..pdf

§ 5 - Att. 1 Back-charge notice

B1C2.7A1 backcharge notice.pdf

§ 6 - Att. 1 Subcontract close-out check-list

FORM_.6A1 close-out checklist.pdf

§ 6 - Att. 2 Subcontractor performance evaluation sheet

FORM_.6A2 SC evaluation sheet.pdf

§ 6 - Att. 3 Liquidated damages application

FORM_.6A3 LD application.pdf

Xxxx not attached