From what you’ve told us, I think that’s the right decision.

I would add a 5th lesson:

Make sure you understand your project risks. Price for them in your bid, and once you are awarded the contract then actively manage them from day 1.

Dear Sajid,

Try to make sure that as an Experience Contractor, you did a professional review of the facilities. If you can try to prove that the defects that were found AFTER the due diligence period could not have been found by an experienced Contractor, then you have a ground for a claim.

Best Regards,

Samer

My first instinct is that Due Dilligence should have been performed at the beginning of your contract, and should have taken no longer than 6 months to complete, 12 months absolute max. On this basis, you would be liable for remedial works.

When you say "It was supposed to be done 2.5 years ago when we were employed", is there contract clauses or other documentation which states this is when it should have happened, or is that just your belief?

Depending on the above, Possible escape routes, in order of preference are:
1) The Due Dilligence was performed, and the client informed of the defects in good time
2) Some documentation (MS, philosophy, project excecution plan, schedule, etc) was prepared (and ideally submitted for approval) which at least suggests Due Dilligence would be completed towards the end of the project
3) You argue that the due dilligence is effectively commissioning of the original plant, and hence it is reasonable to do at the same time as commissioning phase of the expansion project (which I’m assuming is not yet complete?)

#3 is a bit dodgy I think -I cringed when I wrote it! But if the contract is silent on when DD should be done, and no other documentation exists which clarifies the situation then it will have to come down to an agreement between the parties, arbitration or a court case. At least #3 will give you a basis for negotiation.

Ultimately if I was the arbitrator and assuming neither option 1 or 2 are valid then I would be ruling against you!

Clearly the first thing you have to do is to find out if the DD was done and if so, when & what defects were identified.

Good luck! -I think you’ll need it!

Dear Samer,

I found no definition in the FIDIC form of Contract. That’s my understanding of the meaning of due diligence period as applied in construction, of which it was also corroborated by our former Contracts Manager.

I scanned some references and found Clause 13.3.2 of the "Fourth Edition of the Red Book - Second Edition" that has the statement "due diligence" and says;

"Construction and completion of the works with due diligence and within the time for completion".

Thanks and regards,
Rommel

Sajid,

As I understood it, Due Diligence Period is the time allowed in the Contract that is related to submission of documents, review and approval process.

For example in Clause 8.3 of FIDIC 99, the Contractor shall submit a detailed schedule within 28 days after receiving the notice for Commencement of Works. The Client can’t oblidge you to submit it ealier most especially if you’re not ready with the document. You have to take advantage of the allowed time and give yourself enogh time to cross-check the documents. The same by the Engineer during review and approval process.

Always take your time as allowed in the Contract.

This is just my view.

Best regards,
R. Catalan

Thank you Andrew for the info.

Best regards,
R. Catalan