Delay in delivery of Mock-up apartment PODs.

Our Ref: xxx

Date:

To

xxx Contracting LLC

P. O. Box xxx

Dubai, U.A.E.

Attention            : Mr. xxx, Group Procurement Manager

Project                 : xxx Phase 2

Subject                 : Delay in delivery of Mock-up apartment PODs.

References

1. BGC letter ref: xxx dated 4^th Aug xxxx
2. M/s xxx (Contractor Name) letter xxx dated 8^th July xxxx
3. M/s xxx (Contractor Name) xxx dated 19^th July xxxx
4. Appendices A1 to A7 attached

Dear Sir,

We are in receipt of your letter Ref. (a) above, and categorically reject your notice of delay in its entirety.

Background

• At the start of February xxxx, during our first meeting in our factory and initial discussions to enter into an agreement we have informed you of the criticality of finalizing the Subcontract Agreement at the earliest possible time to make sure we have enough lead time to procure material which requires at least 3 to 4 months (A1).
• On 05 April xxxx we again informed you that the earliest realistic program we should target from the date of the Subcontract Agreement must allow for the lead time stated above of at least 3 Months (A2).
• On 14 May xxxx, following receipt of the draft LOA, we have provided you with a very tight tentative procurement and delivery schedule (A3) based on available materials to try and target a first delivery of pods after 3 months on 16 August xxxx. We also notified you that to achieve this target the Subcontract Agreement must be in place before 08 June xxxx to allow us to start placing purchase orders.
• At the same time M/s xxx (Contractor Name) started immediately placing orders for most materials at our own risk, with the expectation that the Subcontract Agreement will be in place before 08 June xxxx.
• Our Subcontract Agreement was only released by M/s xxx Gulf on 14 July xxxx (A4), two months after we issued our tentative schedule and after more than six months from our initial discussion when we strongly advised of the criticality of having the Subcontract in place to allow us to deliver PODs.
• Even with an increasingly shrinking window to procure materials, M/s xxx (Contractor Name) has still succeeded to secure all the materials in accordance with our tentative schedule with the exception of the “Ancona Smoke 30 x 60”which we will address in the following paragraphs.

Delivery of PODs for the Mock-up apartment

• Your statement that we have agreed and committed to deliver approved Mockup apartment PODs between 20 July xxxx and 23 July xxxx is incorrect and intentionally misleading.
• In our correspondences dated 20 May xxxx (A5), 27 May xxxx (A6) and 02 June xxxx (A7) we have made it abundantly clear to you that we could be able to provide (4 Nos) pods by the end of July xxxx for your Mockup apartment, ahead of the main scope, under very specific conditions which include having our Subcontract Agreement in place before 08 June xxxx. None of these conditions have been met and you have delayed the Subcontract agreement till 14 July xxxx.
• M/s xxx (Contractor Name) has still succeeded to deliver the (4 Nos) PODs at the end of July xxxx, and your notice of delay is baseless and rejected in its entirety.
• M/s Beaver has chosen to delay entering into a Subcontract Agreement with M/s xxx (Contractor Name) until 14 July xxxx while we have repeatedly urged you to allow for procurement lead times. M/s xxx (Contractor Name) will in no way shape or form be liable for any consequence or impact that this delay may have on the progress of the main works including blockwork or finishing works.

Approval of “Ancona Smoke 30 x 60” wall and floor tile

• In accordance with the terms of our Subcontract Agreement, the specified tile Name/Spec is “Ancona Smoke” and the specified Producer/Supplier is “Home Items”.
• No reference is made in our Subcontract Agreement to any “Control Sample” that has to be matched, or any exact shade or pattern that has to be complied to.
• Our schedule of procurement and material submissions are based on available material from that specified tile Name/Spec and we have so far provided over (10 Nos) samples of the “Ancona Smoke” tile from the specified supplier, including samples from available stock, all of which have been rejected with the statement that they are not matching the “Control Sample”.
• M/s Home items have now confirmed that they do not have any other available additional sample or stock that exactly matches the referenced “Control Sample”.  They also advised us that they require a lead time of at least 8 to 10 weeks from the date of our purchase order to produce and deliver a new batch of tiles to match the “Control Sample”. Consequently, our program of production and deliveries is now substantially affected.
• We have also recommended the use of alternative locally available tiles from “RAK ceramic” to allow us to secure an alternative source of supply, and we had a matching tile produced on demand and delivered to you for consideration, however this also was disregarded.

Moreover,

• In light of the fact that m/s Home Items has provided so many samples of the same tile “Ancona Smoke” and that all have now been rejected, M/s xxx (Contractor Name) cannot give any guarantee that the new batch of porcelain tiles which will be received from India will have a shade/pattern that will be an exact match to the “Control Sample” at the time of delivery.
• M/s xxx (Contractor Name) does not have ability to control production and quality in India to ensure compliance. Consequently, M/s xxx (Contractor Name) shall not bear any liability in the event the “Ancona Smoke” material delivered from India is found to be not matching exactly the Engineer’s specific “Control Sample”.

M/s xxx (Contractor Name) has done all that we can do and have gone over and beyond anything that is reasonable to ensure delivery of PODs in the shortest time possible.

We have maintained in good faith our tentative program of 14 May xxxx in our Subcontract Agreement to avoid going through another round of comments with M/s beaver on the content of the Agreement and delay any further its release, even though we expressly notified you that this tentative program is conditional on receipt of the Subcontract agreement before 08 June xxxx.

We have invested millions and procured material for the project at the same time you were pushing further away the release of the Subcontract agreement. And while we may understand that the Client’s final approval is ultimately required for a sample of these tiles, the time frame you have left us does not allow for sufficient leeway to react to such specific stringent condition.

Moving forward

We are now faced with two options

• Option 1 – We have provided multiple samples from the currently available stock of the specified tile “Ancona Smoke”. We urge you again to approach the Engineer/Client and secure approval of a sample from the available stock.
• Option 2 – If the final decision is to match exactly a specific “Control Sample” then delivery of PODs during the month of August xxxx will no longer be possible. The earliest delivery of PODs will be at the end of September xxxx to allow for the fabrication and shipping of these tiles from India, and POD production in our factory. This is without any guarantee that the new batch produced and delivered will be consistently an exact copy of the Engineer’s “Control Sample”

We have exerted all possible efforts in the most transparent way possible to ensure a smooth start of production and delivery, however we have now been pushed into a deadlock situation that is out of our control and we leave it up to you to advise on which way you would like to proceed.

All rights are reserved,

Yours faithfully,

On behalf of xxx LLC                                                                      

xxx

project Manager