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Construction and Engineering Disputes in Bangladesh

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Disputes in Bangladesh that are related to Construction and Engineering are happening more often than in the past. According to the results of a recent poll, consumers, contractors, and consultants found out that thirty percent of the signed construction contracts had ended in disputes in the previous twelve months.

This information was obtained by the survey’s researchers. More than eight out of ten of the disagreements that arose between the customer (the owner) and the main contractor centered on the customer’s judgment of the delay, the extension of time, and amendments to the contract. These three factors were cited as the primary causes of the conflict.

Disputes that arise in the realm of construction and engineering may be divided into two distinct groups:

(i) those that pertain to public projects

(ii) those that are associated with private businesses.

Because there is a finite amount of public money available for expenditure, contracts for publicly financed projects are not awarded until after an exhaustive and cutthroat bidding process has been completed. On the other hand, the method of soliciting competitive bids could not be used in commercial building projects.

Informally selecting a contractor via the process of negotiation is also a possibility. There is always a main contract between the owner and the contractor, and this is the case for both kinds of projects. This contract establishes the terms of the relationship between the parties.

In addition, it is possible or not that there are a number of supplementary contracts in existence with various parties such as insurance companies, financial institutions, architects, engineers, subcontractors, and other similar parties. In substantial Construction and Engineering contracts, the Contractor may designate an Construction and Engineering Company for engineering, procurement, and commission (EPC) for the completion of actual Construction and Engineering work; nevertheless, the Contractor is still accountable for the success or failure of the whole project, regardless of whether or not the Engineering Company was responsible for EPC.

In a similar vein, after the project has been commissioned, the principal contractor or owner may sign a sub-contract with another Construction and Engineering company for the operation and maintenance (O & M) of the project. This sub-contract would be for the duration of the project’s lifetime. To reiterate, the principal contractor or owner is ultimately responsible for the accomplishment’s success or failure, regardless of the context.

The following is a summary of some of the variables that might be contributing to the increasing amount of disagreements that are occurring:

It is quite common for the parties to a deal to have the propensity to avoid conducting their due diligence, especially their legal due diligence, before signing the contract. This is due to the fact that the parties engaged in the project have a tendency to save time and money during the early stages of the project, both of which are relatively low in proportion to the entire cost of the project.

The reason for this is that the parties participating in the project have a propensity to save time and money during the early phases of the project. Legal due diligence is a procedure that helps the parties concerned evaluate the risk, cost, and other aspects that are linked with the situation.

Either the preparation of a contract without the help of a legal counsel or the use of bespoke contracts, both of which run the risk of not being acceptable for the project from a legal aspect, are options that may be considered risky. These kinds of contracts have the potential to give birth to a multitude of misunderstandings, confusions, and results that are in contradiction with one another; all of these things could finally end up in disputes between the parties engaged in the transaction.

It is conceivable that the parties engaged in the contract lack the necessary experience and are uneducated, and as a result, the contract does not have a sufficient dispute resolution clause. It is conceivable that the most suitable course of action will be litigation, but other viable courses of action include international arbitration, local arbitration, institutional arbitration, mediation, mutual consultation, and local arbitration.

This will be determined by the nature of the contracts, the parties who are engaged, any transactions that transcend international borders, the location of the parties, and other factors. As a consequence of this, it is very necessary for the parties to reach a consensus on an appropriate Dispute Resolution provision.

There may be more than one agreement, such as a Power Purchasing Agreement (PPA), Gas Supply Agreement (GSA), Land Lease Agreement (LLA), etc., that is written in standard form and may be found in the bidding documents for big Construction and Engineering projects like the Power Project.

These agreements may also be referred to as PPAs, GSAs, and LLAs, respectively. On the other hand, bespoke terms that are pertinent to the project have to be included into the contract at all times. During the conversations that take place before bids are filed, it is possible for this to be achieved and further discussed.

In a similar vein, when it comes to contracts for ship building, the parties are frequently required to come to intricate agreements that include performance guarantees, refund guarantees, and even payment by installment, all of which undoubtedly have repercussions for both the domestic and international legal systems.

As a consequence of this, the owner, contractor, subcontractor of Construction and Engineering, EPC and O&M businesses, architects, and engineers, among others, may choose to invest time and money in Legal Due Diligence for the purpose of protecting their own interests and preventing disagreements that might result in challenging and drawn-out litigations, etc.


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