Penalty For Delay In Government Construction Contracts

• Published date: 08 February 2023
• Subject Matter: Government, Public Sector, Real Estate and Construction, Government Contracts, Procurement & PPP, Construction & Planning
• Law Firm: Sariya Al Hadi & Ali Al Rashdi & Co.
• Author: Mr Ali Al Rashdi

Government contracts contain more stringent provisions than other contracts, whether in the stage of tendering, execution, or termination of the contract. These provisions include the delay damages imposed by the administrative body on the contractor who delays the execution. In this article, we will discuss the most important aspects of the delay damages in government contracts as well as cases of exemption and forfeiture of these delay damages.

The administrative body imposes delay damages on its own without the need to prove the harm or issue a court ruling.

The administrative body has the right to impose the delay damages provided for in the contract on its own without the need to resort to the court, merely on the occurrence of the violation even if there is no damage. Furthermore, the administrative body is not obliged to prove such harm and the contractor cannot dispute the administrative body's entitlement to all or part of the delay damages on the grounds that the harm has not occurred or that the delay damages provided for in the contract are overestimated to an extent that they are not appropriate with the value of the actual damage. That is because the delay damages provided for in the administrative construction contracts differ in their nature from the penalty clause in civil contracts, as the delay damages aim to secure that the party contracting with the administrative body performs his obligation on the agreed date to ensure that the facility proceeds regularly and steadily.

In appeal No. 45, the Administrative Judiciary Court ruled that the delay damages shall be imposed on the contractor according to the decision of the Engineer merely because of the delay of execution of work without the need to prove the resulting damage. The Court stated that the purpose for enacting such procedures and rules was to secure public facilities and ensure their proper functioning regularly and steadily.

Delay damages must be stated in the construction contract.

Delay damages must be stated in the construction contract in order to be imposed on the contractor who delays the execution of work because the Omani Law does not contain any provision allowing the government body to impose delay damages in government construction contracts, unlike the legislation of some countries such as the Tenders Law in the United Arab Emirates. Although the Standard Form of Agreement and General Conditions of Engagement for Building and Civil Works, which is adopted by the...