FIDIC Contracts - A Contractors View Ben Edwards

 

FIDIC Contracts in use in International Projects

Contract Management from the Contractors Perspective Ben Edwards Kier Construction

 

FIDIC Contracts in use in International Projects

The “Rainbow Suite”

Red Yellow Silver Green n Gold Blue White

 

FIDIC contracts are internation internationally ally accepted The standard standard form is is a starting starting point point – it is importa important nt to draft the appendix to tender and particular conditions conditions to reflect the full agreement between the parties. • Clau Clause ses s ar are e ge gene nera rall in nat natur ure e • Thi This s all allows ows con contra tracts cts to be be agre agreed ed quic quickl kly y but but part parties ies have to be diligent that all issues are considered in order to avoid potential for disputes • Fro Front nt end inv invest estmen mentt can can avo avoid id back back end di dispu spute te cost costs s • Ge Gett the the righ rightt bala balance nce Emp Emplo loyer yer Bi Bias as v Con Contra tracto ctorr Bi Bias as • Se Sellect th the e App Appro ropr priiate Fo Form rm • Un Unde ders rsta tand nd th the e diff differ eren ence ces s betw betwee een n the the form forms s • Follow th the Co Contract

 

FIDIC Contracts in use in International Projects The Current Suite: A completely new set of contracts was released by FIDIC in 1999: • - The 19 1999 Re Red Bo Book (f (firs rstt edi edittion) • - Th The e 19 1999 Yel Yello low w Boo Book k (fi (firs rstt edi editi tion on)) • - Silver Book • - Green Book

 

FIDIC ha has s redu reduced ced th the e numbe numberr of cla claus uses es in in all all • FIDIC of the recent contracts. The Orange Book contained 20 clauses, as now do the Red, Yellow and Silver Books. Previously, the Red Book had 72 clauses. • FI FIDIC DIC ha has s also also sta stand ndard ardis ised ed the the ter terms ms acr acros oss s same words and definitions have the same meanings and the clauses are now grouped in a logical manner across all the contracts. • Knowl Knowledg edge e of of one one form form of of FIDIC FIDIC co condi nditi tion ons s is therefore of immediate benefit in respect of other forms.

 

The 1999 RED Book (first edition) - “Co “Condit ndition ions s of Contract Contract for for Constr Constructi uction on for Building and Engineering Works Designed by the Employer”  - Tr Tradi aditi tion onal al co contr ntrac actt -

-

 

The 1999 Yellow Book (first edition) - “Co “Condit ndition ions s of Contrac Contractt for Plant Plant and and Design Design Build for Electrical and Mechanical Plant, and For Building and Engineering Works, Designed by the Contractor”  - Des Desig ign n and and Bui Build ld,, Lump Lump sum sum - Sui Suitabl table e for for all all typ types es of of works works - Repl Replace aced d both the the origin original al Yellow Yellow Book Book and and the Orange Book (Design Build & Turnkey)

 

Silver Book 1999  “Conditions of Contract for EPC/Turnkey Projects”  - Desi Design gn and and bu buiild - Lump Sum e  reen oo Short Form of Contract Recommended for engineering and building work of: - sma small ll capi capita tall valu value e and/o and/orr - sim simple ple or repet repetiti itive ve wor work k and and //or or - sh shor ortt dur durat atio ion n

 

Pink Book The “Multilateral Development Bank Construction Contract”  (The “Red Book” For Development Bank financed projects) Features provisions on: - Corruption - Social utility - Loan facility

-

  gin Dred Dr edg ing g and and Re Recl clam amat atio ion n Wo Worrks

White Book -

Consultancy Ag Agreement

Gold Book -

Design, Buil ild d, Operate

 

FIDIC Contracts currently in use by Kier in Jamaica

 

Focus Today: Red, Yellow and Silver Books Red Book is used for tradi tradition tional al procu procureme rement nt

Yellow Silver Books are Lump Sum Design & Build formsand of contract Silver Book was created in response to the needs of

- Little Little or no risk to the Employ Employer er of price price increase increase if there there are unforeseen risks - “Tu “Turn rnk key ey”  ”  - Contr Contractor actor under under much much greater greater design design risk and and burden burden of ground conditions risk under Silver Book

 

Main Differences between Red, Yellow and Silver Books - Structure - Rol ole e of of th the Eng Engiinee eerr / Em Empl plo oye yerr - Desi Design gn Re Resp spon onsi sibi billit itie ies s - Si Site te C Cond onditi itions ons & Adver Adverse se Phy Physic sical al Con Condit ditio ions ns - Ta Taki king ng Ove verr Part Parts s of of the the Wo Work rks s

 

Major feature of any international construction contract is the allocation of risks & liabilities Contractor’s General Obligations Clause 4.1 of the Red Book: - Design (to the the extent specified in the the contract), contract), execute & complete complete the Works in accordance with Engineer’s instructions Clause 4.1 of the Yellow and Silver Books (same obligation) obligation):: - Des Design, ign, execute execute & compl complete ete the the Works - Required to comply with with Employer’s Employer’s Requirements Requirements Design Risk purpose”   “Fitness  for purpose”  Under Red Book, the Contractor is responsible for any part he designs being fit for purpose Under Silver Book, risk of the adequacy of the Employer’s Employer’s Requirements as well as the Contractor’s own design is the Contractor’s responsibility Under the Yellow Book, risk of the adequacy of the Employer’s Requirements is only the Contractor’s responsibility to the extent that an experienced contractor would have discovered error

 

FIDIC Contracts in use in International Projects • In al alll FIDI FIDIC C Form Forms s the the givi giving ng of of Noti Notice ces s and and further updates by the Contractor is extremely important • Time-bar issues •

a ms ms s ou no e gnore – nanc a an  /or time • Pr Pres escr crib ibed ed tim time e in Co Cont ntra ract ct for for respo respondi nding ng to claims

 

Express Provisions Provisions for Additional Cost (+ Profit) Heading

Clause

Red

Yellow

Silver

Delayed Drawings or Instructions

1.9

Y+

N

N

Errors in Employers Requirements

1.9

N

Y+

N

Rights of Access

2.1

Y+

Y+

Y+

.   . 4.7

+ Y+

+ Y+

+ N

Unforseeable Physical Conditions

4.12

Y

Y

N

Fossils

4.24

Y

Y

Y

Testing

7.4

Y+

Y+

Y+

13.3

Y

Y+

Y+

o-operat on Setting-Out

Variations

 

Provisions for Additional Cost (+ Profit) Express Provisions Heading Adverse Weather

Clause

Red

Yellow

Silver

8.4 (c )

N

N

N

Unforseeable shortages in personnel or goods due to the Government

8.4 (d)

N

N

N

8.4 (e) r&Y

N

N

N

8.5

N

N

N

8.9

Y

Y

Y

16.1

Y+

Y+

Y+

Delay, prevention due to Employer Delay by Authorities Suspension instructed by CA Suspension by Contractor

 

Express Provisions for Additional Cost (+ Profit) Heading Clause Delayed Tests & Interference due to the Employer 9.2 / 10.2

Red

Yellow

Silver

Y+

Y+

Y+

C anges in Law

13.7

Y

Y

Y

Employers Risks

17.4

Y/Y+

Y/Y+

Y

Force Majeure

19.4

Y

Y

Y

 

Limitations of Liability Clause 17.6 of the Red, Yellow and Silver Books (similar (similar obligations): Joint exclusion of: - Loss of use of any Work Works, s, loss of profi profit, t, loss of any contract or for any indirect or consequential loss or damage (does not apply payments on termination and does not a l to indemnities and liability (does not Contract Sum Cap on Contractor liability apply to indemnities or other listed items, which include intellectual property rights) No limitation in case of: • Fraud • De Delib libera erate te defaul defaultt • Re Reckl ckles ess s miscond misconduct uct

 

Common amendments to Limitations of Liability Employer Bias Removal of standard Clause and replacement with only a full exclusion of liability liability for the Employer for consequential loss Contractor Bias Widening of joint exclusion of loss of profits, consequential loss etc Widening of the Contract Sum cap to include indemnities indemnitie s and a cap on delay damages Introduction of a time limitation limiting the t he number of years after the Taking Over Certificate that the Contractor is liable

 

Time for completion The Contractor is required to complete the Works by “the Time for Completion” which is set out at Clause 8.2 of the Red, Yellow and Silver Books This requires: Passing the Tests on Completion Completing all work stated as being required by the Contract to be complete for the purpose of taking-over the Works under Clause 10.1

 

Extension of time for completion The “Time for Completion” may be extended under Clause 8.4, provided that procedure under Clause 20.1 (claims) is followed. Extensions of time are important to both Contractor and Employer Allows the Contractor more time to complete and avoids the imposition of liquidated damages. Allows the Client to plan proper y a ng ve ver. In general, under English law, where the Employer prevents the works being carried out time must be able to be extended in order to preserve the Employer’s right to liquidated damages All forms place responsibility on the Contractor to issue Notices and regular updates of any events which may impact upon the Time for Completion. Don’t be offended when the Contractor follows the requirements imposed upon him under the Contract!

 

Extension of Time for Completion Defined Causes at Clause 8.4 There are more defined causes for extension of time under the Red and Yellow Books than under the Silver Book Defined causes under all Books, Clause 8.4: • A Variation • A Cau Cause se of of Del Delay ay gi givi ving ng an en enti titl tlem emen entt to ex exte tens nsio ion n of ti time me under a Sub-Clause of the Conditions (see following table) • An Any y del delay ay,, imp imped edim imen entt or or pr prev even enti tion on ca caus used ed by or attributable to the Employer, the Employer’s Personnel, or the Employer’s other contractors on the Site Additional defined causes under the Red and Yellow Book: • - ex exce cep pti tion onal ally ly adv adver erse se cli clima mati tic c cond condit itio ions ns;; • - unfo unfore rese seea eabl ble e sho short rtag ages es in th the e ava availa ilabil bility ity of pe pers rson onne nell or or Goods caused by epidemic or governmental actions; Contractor Bias amendment: Add the following cause: - “any other other circumstanc circumstance e for which which the Contractor Contractor is not responsible under this Contract.” 

 

EOT Claims Clause 20.1 – EOT clai Clause claims ms by Contr Contractor actor Notice to be given by the Contractor within 28 days of the Contractor becoming aware or when it should have become aware of the event Condition precedent to entitlement to an extension of time:   e on rac or a s o g ve no ce o a c a m w n such period of 28 days, the Time for Completion shall not be extended, and the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim.”  • Co Contr ntract actor or bias bias amendm amendment ent:: - Rem Remove ove cond conditi ition on preced precedent ent

 

Express Provisions for an Extension of Time Heading Errors in Employer's

Clause

Red

Yellow

Silver

Requirements

1.9

-

Y

N

Right of Access

2.1

Y

Y

Y

4.6/8.4(a)

Y

Y

Y

4.7

Y

Y

N

4.12

Y

Y

N

Fossils

4.24

Y

Y

Y

Testing

7.4

Y

Y

Y

Variations

8.4(a)

Y

Y

Y

Adverse Weather

8.4(c )

Y

Y

N

Co-operation Setting Out Physical Conditions

 

 

Express Provisions for an Extension of Time Heading Unforseeable shortages in personnel or goods due to Government Delay, prevention due to Employer Delay by Suspension Delayed tests & Interference due to Employer

Clause

Red

Yellow

Silver

8.4 (d)

Y

Y

N

8.4 (e) r&y 8.4 (c ) s

Y

Y

Y

. 8.9 / 16.1

Y

Y

Y

9.2 / 10.2

Y

Y

Y

Changes in Law Consequences of Employer’s Risks

13.7

Y

Y

Y

17.4

Y

Y

Y

Force Majeure

19.4

Y

Y

Y

 

Li Liqu quid idat ated ed Da Damag mages es Clause 8.7 “Delay Damages”  Amount stated in Contract Particulars / Appendix to Tender Delay Damages apply per day from the Time for Completion (as may be extended) until the date stated in the Taking Over Certificate oss e  or par es o cap e amoun o e ay Damages Exclusive remedy for the Employer for Contractor delay, except: - in the event event of terminati termination, on, where where the Employ Employer er may be able to recover additional costs - where the Contract Contractor or is requir required ed to accelera accelerate te the Works under clause 8.6 for being “too slow” or having failed to comply with the Programme

 

Claims Red and Yellow Books have the same claims provisions. Silver Book is slightly different, with the only real difference being the involvement or not of the Engineer For all claims, notices must follow the required .

• In writing • De Deli live vere red d by by ha hand nd,, se sent nt by ma mail il or co cour urie ierr or or any agreed systems of electronic transmission • Deli Delive vere red d to to ad addr dres ess s se sett ou outt in in the the Co Cont ntra ract ct (unless subsequently advised of a different address)

 

Claims Clause 2.5 Contractor bias amendment:  “If the Employer Employer fails to give give notice of a claim within such period of 15 Business Days after the Employer became aware, or ought reasonably to suspect, or oug t reasona y to ave ecome aware, or s ou have become aware of the event or circumstance giving giving rise to the claim, then the Employer shall not be entitled to any amount, payment or extension whatsoever from the Contractor in respect of such claim and the Contractor shall be discharged from all liabili liability ty in connection with such claim” 

 

Golden Rules - Bewar Beware e – ent enter er in ha hast ste, e, re repen pentt at le leis isur ure…… e…… - Be sure sure you you are are in agre agreemen ementt befor before e you enter the Agreement - The Cont Contract ract requi requires res the the Contra Contracto ctorr to issue issue o ces or me- ars m – on e emo ons clou cl oud d the the need need to to issu issue e or rec recei eive ve No Noti tice ces. s.

 

END OF PRESENTATION