FIDIC
Contracts for Construction Works
and
Contents
Introduction FIDIC Documents Risk Procurement Strategy First 100 days Responsibilities Nominated s/c Staff & labour
Plant & Materials Commencement Delays Taking Over Measurement Guarantees Claims Short Form Disputes
FIDIC
AN INTRODUCTION
Founded in 1913 Expanded in 1945 to include 40 national associations Published first Conditions of Contract in 1957 In 2004 has 64 member associations Headquarters in Switzerland Web Site : www.fidic.org
FIDIC
AN INTRODUCTION
Pre 1957 no internationally recognised contract conditions First red book based on UK ICE conditions FIDIC has international committees to improve contracts
FIDIC Documents
Old rainbow books needed revision Changes within International Projects & Contracting Standardisation Clauses to meet current practice Update Engineer Introduce Disputes Adjudication Board
Conditions of Contract for Construction (Red Book) Conditions of Contract for Plant & Design Build (Yellow Book) Conditions of Contract for EPC Turnkey Projects (Silver Book) Short Form of Contracts (Green Book)
Simple Language
20 Clauses & 163 Sub Clauses
Engineer instead of Employers Representative Cl.1.1.2.4 Employer's Claims Cl.2.5 Contractors Claims Cl.20.1 Value Engineering Cl.13.2 QUALITY & PROCEDURES:
Cl.4.9, 4.18, 6.7, 8.3, 13.2 & 13.3
Acknowledgements Foreword & Charts General Conditions DAB Conditions Guidance Notes Forms of Agreement Appendix to Tender
Works designed by Employer or Engineer Contractor Constructs in accordance with designs provided May include some design elements
Electrical & Mechanical Plant May include building and engineering Design & Execution of works Contractor designs and constructs in accordance with Employers Requirements Engineer Administers
General Comments:
Contractor will economise Employer will supervise No good for Employer Variations Good for Lump Sum Design Savings Employer responsible for ER errors Risk Shared
Process or Power Plant Infrastructure Projects High Degree of Certainty Contractor has total responsibility for Design & Execution Administered by Employer
EPC/Turnkey
General Comments
Not suitable when:
No time to tender Much underground works If Employer wishes to supervise If payments need to be administered
Small capital value projects Simple content Contractor constructs to Employers designs No Particular Conditions No Impartial Engineer
Cl.1.3:
Approvals, Certificates, Consents, Determinations, Notices, Requests
RISK
ALLOCATION OF RISK
CONTRACTUAL RISKS
All contracts contain risks FIDIC allocates responsibilities Key Requirement:
o o o
RISK OVERVIEW
Contractual Risk Overview:
o o o o o o o o
Strategy Identify Evaluate Mitigate Plan Response Report Management Close out review
CONTRACTUAL RISKS
Cl.1.5 Priority of Documents Employers Documents have priority Care in Prequalification PDB & EPCT note that Financial Risk for design with Contractor but resolution will be in favour of Employer Contract Agreement is high priority Commencement Date binding under Cl.1.1.3.2 & 8.1 Cl.3.3 PDB & Cons empower Engineer to make Decisions EPC no such authority
FIDIC RELATIONSHIPS
CONTRACTUAL RISKS
Cl.1.9 Drawings Cl.2.1 Site Cl.4.7 Setting Out Cl.4.12 Unforeseeable Cl.4.24 Fossils Cl.7.4 Testing Cl.8.4 EoT
Cl.8.4 Adverse Climatic Conditions Cl.13.7 Legislation Cl.13.8 Changes in Cost Cl.14.8 Delayed payments Cl.19.4 Force Majeure
Design by Employer Works to be Re-Measured ReEmployer appoints Engineer Engineer can vary the works but not change the Contract Engineers Determinations Cl.3.5 DAB appointed within 28 days
Employers Requirements Contractor Designs & Builds ER errors Employers risk Fixed sum contract Administered by Engineer Variations by Engineer Cl.5 & 12 differ from Red Book
PROCUREMENT
PROCUREMENT PROCEDURE
Establish Strategy
Procurement method Form of Tender Time Schedules
Prequalify
Notify
PROCUREMENT PROCEDURE
Prepare tender Documents Issue Site Visit Questions Submission & Opening Adjudication
PROCUREMENT PROCEDURE
Award Contract Issue Letter of Acceptance Performance Security Contract Agreement Notify unsuccessful tenderers
Cl.1.3
Cl.1.9
Delays to drawings (RB) Errors to ER (YB) Confidentiality (SB)
Cl.1.9 Delay to details Cl.2.4 Finance Details Cl.2.5 Employers Claims Cl.3.3 Instructions by Engineer Cl.4.1 Method Statement Cl.4.21 Reporting Cl.8.3 Programme
Right of access & possession Cl 2.1 Ensuring Employers personnel are aware of responsibilities Cl 2.3 Preparing evidence of Employers financial arrangements Cl 2.4 Provision of copies of the Contract and Drawings Cl 1.8 & 1.9
Advising Contractor of Engineers Authority and Delegations Cl 3.2 Ensuring assistants are suitably qualified Providing reference survey points, lines and necessary data Cl 4.7
General obligations adequacy, stability & safety Cl 4.1 Provide Performance Security prior to access to Site Cl 4.2 Submit name of Contractors Representative for consent Cl 4.3
Give notice of any delegation of CRs responsibilities Obtain consent for sub-contractors subnot named in Contract Cl 4.4 Give notice of commencement of subsub-contract work
Provide details of suppliers not named in Contract (see Cl 4.16) Make objections to any Nominated SubSub-contractors who the Contractor does not wish to employ Submit detailed time programme within 28 days of receipt of the notice to commence Cl 8.3
Give notice of probable future events or circumstances which may increase price or delay completion Confirm working hours Cl 6.5 Site health & safety facilities Cl 6.7 Appoint Accident Prevention Officer
RESPONSIBILITIES
Responsibilities Employer
Cl.2
Provides Access to the Site
Notice of Claims
Responsibilities Employer
Responsibilities Engineer
Exercises stated authority Employers Approval PC When he exercises specific authority deemed to have Employers approval Acts for Employer
Cl.3.5 Fair Determination
Responsibilities Engineer
Cl.3
Employer undertakes not to impose further constraints (Breach of Contract) No authority to amend contract Acts for Employer No authority to relieve the parties of duties or obligations etc.
Responsibilities Engineer
Cl.3
Delegation except Cl.3.5 Instructions in writing
Consult agreement fair determination Give notice Give effect unless Cl.20
Responsibilities Engineer
Cl.4.1 Method Statements Cl.8.1 Give Commencement Notice Cl.8.6 Rate of Progress Cl.12.1 Measurement Cl.13.1 Variations Cl.14.6 Interim Payment Certificates Cl.20.1 Records / Determination
Responsibilities Contractor
Cl.4
Execute & Complete the Works
Cl.8.1 due expedition & without delay Adequacy & safety Method Statement Fit for purpose
Performance Bond Engineers Approval of Representative May delegate Fluent in language Sub Contractor approval
Responsibilities Contractor
Responsibilities Contractor
Site data
Costs included Risk Inspections All relevant data obligation Care in Tender failure to provide
Responsibilities Contractor
(see Cl.1.1.4.3 includes off site) (as a general rule not included where risk is not the fault of either party)
No profit
Responsibilities Contractor
Responsibilities Contractor
Responsibilities Contractor
Progress Report:
Charts Photographs Manufacturing report Personnel QA documents Claims Cl.2.5 & 20.1 Safety statistics Progress
Responsibilities Contractor
Tests on Completion Cl.9.1 Value Engineering Cl.13.3 Application for Payment Cl.14.3 Contemporary records Cl.20.1
Nominated Subcontractors
Clause 5 Applies to Subcontractors and suppliers nominated by Employer or as instructed by the Engineer under Cl.13 Payment Cl.5.3
Nominated Subcontractors
Labour Laws (including immigration) Working Hours (days of rest) Facilities (including Employers Personnel) Health & Safety
Medical staff & facilities Accident prevention officer Records
Cl.4.3 Contractors Representative Cl.6.8 Superintendence (Language) Personnel qualified, skilled, experienced Records monthly (cl.4.9 procedures)
Samples
For consent Labelled origin / intended use
Inspection:
Access to locations of natural materials Place of manufacture Provide access, facilities, permissions, safety equipment Give notice and provide opportunity Testing may proceed after notice Delay claim Test Reports & Certificates
Rejection Retest costs Cl.2.5 Remedial works Ownership of Plant & Materials
Local law When delivered When contractor entitled to payment under Cl.8.10 (suspension)
Royalties
Contract becomes effective when Letter of Acceptance has been received by Contractor Cl.8.1 Commencement Date
Engineer SHALL Contractor SHALL
Completion
Programme
Engineer does not approve (21 days) Employer may rely on programme
Programme
Specific, Probable, Future events Revisions to programme Monthly progress charts Engineer may request a revised programme
Extension of Time
Extension of Time
Cl.20.1 & 3.5 give time limits to Engineer to Determine or Cl.13 shall not be unreasonably withheld or delayed Delays by authorities
Rate of Progress
Engineer may instruct submission of revised programme Contractor to proceed with due expedition and without delay Delay Damages
Failure to complete by due date Delay damages Limit of damages
Tests on Completion
Cl.9
Contractor shall give 21 days notice Tests carried out within 14 days of notice Certified report
Delayed tests
Employer Cl.7.4 or 10.3 apply Contractor to complete 21 days after notice
Failure
Retest Cl.11.4
Cl.10
TO Certificate issued when works completed and ready for intended purpose Minor outstanding work may be completed after issue of TOC
Contractor may apply for TOC within 14 days of Works being complete Sectional Completion Engineer may
Issue TOC Reject application giving reasons
Contractor responsible to carry out repairs before end of Defects Notification Period
Defects Liability
Cl.11
Provides procedures and responsibilities under the Defects Notification Period Works are accepted by Engineer on the issuance of Performance Certificate
Defects Liability
Defects Liability
Failure to Remedy
Reasonable notice Carry out work himself or by others Contractor has no responsibility Reduction in Contract Price Recover all sums paid & costs
Removal
Further Tests Right of access Contractor to search
Performance Certificate
Performance Certificate
Contractors obligations complete Engineer to issue Date Issue within 28 days of DNP expiry After submission of all documentation All tests complete All remedying works complete
This clause only applies to Red Book Yellow Book Cl.12 deals with tests after completion Measurement by Engineer Standard method of measurement as specified in schedules
Qty changed more than 10% Variation Not specified No appropriate rate
Cl.12.4 Compensation
Under Yellow Book no such clauses Cl.13.3 Determinations Means of measurement may be necessary Payment schedule linked to milestones Cl.14.4
Variations
Variation Procedure
Considerations:
Payment schedules Disbursement approval Particular Conditions Budgeting
Advance payment
Design Mobilisation Funding facilitation
Interim payments
56 days
Final Payment
84 days
Cl.14 requires prompt action within time constraints Finance costs will lead to claims Alter Cl.14 by Particular Conditions to suit funding authority
Financial planning:
Check estimates & budgets Prepare draft payment schedules Update estimates & programme Check funding Cl.14.4 estimates each 90 days
Budget Forecast
Advance Payment
Guarantee Application Cl.14.3 Performance Security approved by Employer Commence after when certificates >10% Deductions 25% of each Certificate
Repayment
Interim Payment
Cl.14.3 Application
6 copies In a form approved (Cl.4.9) Cl.4.21 List of items (a) (g) Note : Cl.20 items included
Interim Payment
Interim Payment
Cl.14.7 Payment
IPC paid within 56 days after Engineer receives Statement
Non Payment
Cl.16.1 Suspension
Engineer fails to certify Employer does not provide Cl.2.4 details Non payment 21 days notice
Cl.16.2 Termination
Cl.17.1 Basis for Indemnity Cl.17.2 Full responsibility for Works & Goods until TO Certificate Cl.17.3 Employers Risks Cl.17.4 Compensation & Claims
Insurance
Cl.18
Employer to approve insurers Agreed terms Currency Payments to be used to rectify loss Cl.18.3 Appendix minimum amount
Force Majeure
Basic Principles:
Exceptional event Not reasonably provided against Not reasonable to overcome / avoid Not attributable to either party Beyond control of affected party
Force Majeure
Cl.19.1 Definitions
(i) (iv) man made
Cl.19.4 Consequences
EoT Man made cost Man made in country cost Cl.19.6 Termination
Sets out Contractor procedure Condition Precedent Not later than 28 days Sets out Engineer procedure
Within 28 days Engineer may monitor Engineer may instruct further records Supporting documents Within 42 days of event
Engineer proceeds with Cl.3.5 Contractor can dispute if dissatisfied Engineers determination applied to Certificate of Payment
CONTEMPORARY RECORDS
Crucial for determination of claim Records for any future dispute Contractor obliged to keep records Procedure for this work Employer & Engineer to agree Engineers actions
Claim submission is considered interim Further monthly claims Final claim with 28 days of end of effects
May ask for further details Proceed with Cl.3.5 May certify interim sums
Rejection of Determination No agreement with continued discussion One party declines to discuss No progress in protracted discussion
Taking Over no sectional handover No defined Defects period 12mths Employer may vary - Cl.10
Lump sum Rates Daywork
Dispute resolution
Amicable settlement Adjudication Dissatisfaction 28 days Arbitration
Certificates, Determinations, Instructions, Variations FIDIC encourages resolution by agreement Cl.3.5 No agreement - Dispute
Amicable Settlement
Cl.20.5 no definition
56 days Direct negotiation Conciliation Mediation Do not involve the DAB Consensual No obligation costs ??
Mediation
No facility in FIDIC contracts Consensual procedure Confidential Very successful Short time frame Low cost Involve decision makers
ENGINEERS DECISION
Red & Yellow Books provide for an alternative to the DAB Engineers Decision Delete Cl.20.2 & 20.3 make substitute wording Impartiality, Independence ??
ADJUDICATION
Encourage the resolution of disputes Statutory / non statutory Provides a decision in a short time Binding
Give effect May be changed by amicable settlement May be changed by arbitration
Contractually enforceable
ARBITRATION
Clause 20.6 Final settlement ICC 3 arbitrators Language Open up & review No limits to evidence DAB Decision shall be admitted
ICC ARBITRATION
Place to be agreed in Particular Conditions Each party nominates 1 arbitrator and chairman selected or agreed ICC court will formally appoint ICC fee scales & administration costs ICC rules govern initial referral then arbitrators set the procedure
ARBITRATORS AWARD
Final & Binding 1958 New York Convention for enforcement of awards
Become Familiar Visit the site Keep up to date Encourage resolution of issues When a dispute is referred:
o o o o o
Act Fairly & Impartially Convene a hearing Deliberate Prepare a Decision Avoid unnecessary delay or expense
FORMATION OF DAB
What type of DAB How many members Period to agree selection Third party nominator
Formation of DAB
Cl.20.2 Formation
1 or 3 members Each party nominates one member Parties consult members and agree a chairman List of potential members in tender
No Agreement
FIDIC President will nominate Due consultation with parties
DAB OBLIGATIONS
Act Fairly Act Impartially Give parties a reasonable opportunity to pout their case & respond Adopt procedures:
o o
DAB MEMBERS
QUALITIES
o o o o o
o o o o o
Experienced in Work Experienced in Documentation Fluent in Language of communications Independent Confidential Available
Obligations:
o o o
PAYMENT OF MEMBERS
General Conditions Cl.6 Retainer per calendar month Daily Fee Reasonable expenses Taxes in country of contract Retainer reduced by 50% after taking over Ad hoc DAB no retainer
PAYMENT OF MEMBERS
Payment method:
o
Retainer & airfares - quarterly in advance Other fees after site visits / hearing
Timing Agenda / scheduling / travel arrangements Keep up to date Progress Problems Claims
DISPUTE REFERRAL
Clause 20.4 read together with Procedural Rules Referred in writing stating Clause Sent to chairman 84 days to Decide Reasoned Decision Unanimous
Establish procedure Decide jurisdiction Conduct a hearing Take initiative facts & other matters Specialist knowledge Decide payment of finance charges Decide Relief
DAB HEARING
Adopt inquisitorial procedure Refuse admission to hearings Proceed in absence of any party Not formal (no oaths) Evidence Written summaries
DAB HEARING
Typical hearing:
o o o o
o o
Chairman does not end meeting until parties have confirmed they have nothing further to add
DAB DECISION
DAB meets in private Endeavour to reach a unanimous decision Failure of a member to attend Decision issued in writing and signed with reasons
POST DECISION
Shall be binding promptly give effect May be reversed by amicable settlement or arbitration Dissatisfaction 28 days Otherwise after 28 days - binding Failure to comply arbitration Compliance is a contractual obligation