Claims and Disputes under FIDIC Contracts in Bulgaria Eng ...

Claims and Disputes underFIDIC Contracts in BulgariaEng. Adriana SpassovaAdriana Spassova, Partner & Managing Director EQE Control OOD, Company of ABS GroupHead of Commission for International Cooperation in BACEA, member of FIDIC and EFCA1

Introduction• During socialism the Designer, Contractorand Employer were the parties in theinvestment process, all state ownedcompanies.• In 1989 socialism collapsed andprivatisation started. State ownedcompanies could not survive in the newmarket• Private property required new rules in theinvestment process, but in the first 15 yearsmore was ruined, less improved• Bulgaria is EU Member from 2007Claims and Disputes under FIDIC Contracts in Bulgaria 2

First FIDIC contracts in BulgariaStarting with “Old Red Book” - EC financing• 1994 in the road sector• 1997 in the Nuclear Safety ProgrammeSeismic Upgradingof Wet Spent Fuel Storage,KNPP, PHARE BG 9608Seismic Upgrading of Units 3&4, KNPP,PHARE BG 9809Low Level Radwaste Treatment Facility,KNPP, PHARE BG 9512Adriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria5

Main Problems Applying FIDIC• Particular Conditions not solving discrepanciesbetween FIDIC, EC regulations and Bulgarian law• Bureaucratic procedures for approval ofAddendum for change of any unit rate or contractprice (“Contract Price shall not be changed” –condition in the Contract Agreement imposed byEC Delegation, prohibited new unit rates)• EC financing approved before Employer executedobligatory procedures (e.g. EIA, property, changeof land use, DZP, Construction Permit)• World Bank rarely used FIDIC before MBDHarmonised Edition was published• EC Delegation officers were afraid to use theYellow Book, not to speak about the Silver BookAdriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria6

Claims under FIDIC Contracts• In the small EC funded Works Contractsthe Contractors were Bulgarian companiesused to agree with the Bulgarian Employerthe additional costs and Time Extensionfollowing the principle: “If you claim, I shallnever order you any work in future”• When the bigger infrastructure projectsstarted, the Ministries were not preparedfor claims management and they did notknow how to mitigate the risks, besidesbeing frustrated with FIDIC. Even at thebeginning they considered FIDIC as lawgoverning national legislation…Adriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 7

Usual Reasons for Claims• Late Access to Site – usually somenational procedures are not fulfilled intime• Unforeseeable Physical Conditions –geology and hydrogeology conditions inmost cases differ from those in TS• Delay in the design and /or designerrors• Additional financing for variationsimplicating cost increase cannot beprovidedAdriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 8

DAB in Bulgaria• DAB is new in Bulgaria but has futuresince already there are a lot of FIDICprojects in arbitration and the Parties startto understand DAB merits• World Bank projects have adjudicators• In 2010 BACEA registered a NationalDispute Adjudicator List• Examples of 1 person DAB decisionssatisfying the parties:• EUROPEAID 113434/D/W/BG: Sozopol Solid WasteLandfill – 2006• Private project : Hermes Park Sofia – 2009Adriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 9

Vidin – Calafat Danube Bridgehttp://www.danubebridge2.com/• Important TEN-T Project• 20 years meetings and feasibility studies• 29.04.2002, BBC News: Bridge ready by 2006!• Preliminary studies 2001-2003• EIA approved 2004• Design Built Contractor selected in 2007• Deadline postponed from 2010 to 2012• 3 member standing DAB appointed 2010Adriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 10

Vidin – Calafat Danube BridgeBulgarian Side:Contract 1 (C1): Design and construction of acombined (road and railway) bridge with four roadlanes, one single railway track, bicycle lane and twopavements for pedestrians and services.Contract 2 (C2): Construction of the adjoining roadand railway infrastructure which covers: new railwayfreight station and 7 km of new railway line,reconstruction of the existing passenger station andconstruction of 7 new two-level road junctions.Romanian side:Contract 3 (C3): 5 km of new railway line, 5 km firstclass road and a terminal station for joint bordercontrol and automobile transport toll charging.Adriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 11

Vidin – Calafat Danube BridgeBudget: 274 mln EURLength: 1971 m226 mln EUR Bulgarian side, 48 mln EUR Rumanian sideFinancing: ISPA grants, EIB loan, AFD grant, KfW grant and loan,state budgetsContractor C1&C3: Spanish company FCCEngineer C1: French-British consortium Ingerop/High-Point RendelEQE Control OOD, Licensed Bulgarian ICS Company of ABS Group, Member of FIDIC & EFCA 12

Vidin – Calafat Danube BridgeProblems originating delay and costincrease:• Different lenders with different complicatedrequirements• Complex geotech conditions onshore and offshore• Delay in expropriation and unexpected high costs• C1: Concession required for 1 mln cub m earthfilling material• C2: Site Access C2 delayed due to 6 illegalbuildings in the railway easement• C3: Site Access delayed with 1 year• Dispute on the payment of Romanian River TrafficAdministration expensesEQE Control OOD, Licensed Bulgarian ICS Company of ABS Group, Member of FIDIC & EFCA 13

Other Present FIDIC Projects• Red Book: EC financed Roads, WaterSupply and Sewerage, etc.; Privateprojects for hotels, office buildings• Yellow Book: EC financed Waste WaterTreatment Plants, Sofia Metro, WasteTreatment Plants, Private projects forindustrial installations• Silver Book: Fraport Varna & BurgasAirport Terminals, Solar, Thermal PowerPlants with EBRD and other financingAdriana Spassova: Claims and Disputes under FIDIC Contracts in Bulgaria 14