An Employer's and Engineer's Guide to the FIDIC Conditions of Contract

Michael D. Robinson

• Publisher: Wiley-Blackwell
• Year: 2013
• ISBN:
  9781118385760
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• Index: Law

When all parties involved in the construction process fully understand their roles and are able to anticipate potential points of conflict, disputes and delays will be minimised.

The Employer's and Engineer's Guide to the FIDIC Conditions of Contract sets out the essential administrative requirements of a FIDIC based contract by reference to the FIDIC 1999 Red Book.

The obligations and duties of the Employer and the Engineer are identified and discussed. Potential pitfalls are highlighted and likely consequences pointed out.

The importance of the Employer's role in the preparation of tenders, which fully reflect his requirements and duties and obligations arising in the execution of the works, is emphasised. The key role of the Engineer in the effective administration of contracts after award is examined and commentary provided.

Included in the guide are a number of appendices, including model letters which will be of value to less experienced staff (particularly those whose mother-tongue is not the English language).

Engineers, quantity surveyors and project managers engaged in the contractual administration of international projects using FIDIC forms of contract will find the concise guidance in simple and jargon-free language provided here invaluable.

This, together with the author's earlier book, Contractor's Guide to the FIDIC Conditions of Contract - which describes the duties, rights and responsibilities of the Contractor – represents the totality of supervision, design and execution of construction projects executed under the FIDIC Conditions of Contract.

This book's companion website offers invaluable resources to freely download, adapt and use:

• Model letters for use by the Employer
• Model letters for use by the Contractor
• Sample Interim Payment Certificate
• Model Form for Submissions to the Engineer
• Model Form of Engineer's Order for Varied Works
• Model Form of Daywork/Daily Record Sheets

Chapter 1

The Employer and the FIDIC Conditions of Contract for Construction (CONS) – ‘The Red Book’

Clause 1 General Provisions

1.0

Much of the primary planning and organisation of a project is necessarily defined and arranged by the Employer in the pre-tender stage. Consequently the quality of this work will have a significant effect on the execution of the project. The FIDIC Contracts Guide, under the headings of Procurement and Project Documentation, provides valuable guidance to the Employer in respect of this primary planning and organisation.

The FIDIC Conditions of Contract consequently reflects the decisions reached by the Employer in the pre-tender stage and proceeds to define the duties and responsibilities of the Parties and the allocation of risk between them.

The Conditions of Contract incorporated in the tender documents and in the Contract Agreement include a significant number of Clauses and Sub-Clauses the contents of which refer to matters which have (or should have) been addressed by the Employer in the preparation of the tender documents.

The number of issues to be addressed by the Employer during the construction period are somewhat less than might be apparent from a first reading of the Conditions of Contract. These issues are identified and discussed in this chapter.

1.1 Definitions

This sub-clause provides definitions of approximately 65 words and expressions that are used in the Conditions of Contract. With the exception of the words ‘day’ and ‘year’, these defined words and expressions are identifiable by the use of capital initial letters.

Consequently, in any submission or correspondence it is important to use the capitalised form of the words and expressions if that is what is precisely intended by the writer.

The FIDIC Contracts Guide (p. 339–346) provides a glossary (dictionary) of words and phrases which are in common use in the civil engineering and building industry. This glossary does not amplify or replace the definitions given in this Sub-Clause 1.1, but the consistent use of the definitions contained in this glossary is useful to ensure clarity on a given topic.

The Employer has the responsibility for the correctness and consistency of the Contract Documents and may find it necessary to introduce additional expressions or words into the text which require appropriate definitions to be added. There are a significant number of words which are loosely used in the construction industry, such as ‘variation order’, ‘working drawings’, which are not defined in these Conditions of Contract and consequently should not be used if other more appropriate definitions are already available.

Sub-Clause 1.1.1 Contract

In the preparation of the tender documents the Employer or the Employer’s personnel will need to identify any further documents (in addition to those already indicated) for eventual inclusion in the Contract Agreement.

Sub-Clause 1.1.1.3 Letter of Acceptance

In many jurisdictions the Employer who is a government department or agency may be prohibited by law from entering into a contract by means of a Letter of Acceptance. In such circumstances, to conclude a binding contract will require a complete contract document to be prepared and signed by the Parties.

Sub-Clause 1.1.1.6 Drawings

The Employer is required to provide the Drawings of the Works to the Contractor for execution. The Contractor is required to provide his own workshop or working drawings which will provide detail of how he will execute the Works. Unless specifically stated, the Contractor does not have a duty to modify or correct drawings provided by the Employer. Indeed he may be prohibited from doing so by the applicable law and by the terms of the project insurances.

Sub-Clause 1.1.1.9 Appendix to Tender

Omissions and errors may occur in the preparation of the Appendix to Tender. The Contractor may identify some of these omissions and errors in the preparation of his Tender, but a detailed check of this document is highly recommended before issuing the same to tenderers.

Sub-Clause 1.1.2.4 Engineer

It is intended that the Engineer is named in the Appendix to Tender (for further commentary see Clause 3).

Sub-Clause 1.1.2.6 Employer’s Personnel

It is to be noted that this term includes the Engineer and his assistants. The use of the term ‘Personnel’ does not imply that the concerned people are necessarily employees of the Employer.

Sub-Clause 1.1.2.9 DAB (Dispute Adjudication Board)

The Employer is required to decide the composition of the DAB within the tender documents, as part of the cost thereof has to be included in the Contractor’s tender offer. (It is to be noted that the MDB Harmonised Edition, the ‘Pink Book’, uses the term ‘Dispute Board’ [DB], in substitution for ‘Dispute Adjudication Board’ [DAB].)

1.2 Interpretation

This sub-clause contains legal statements confirming (except where the context requires otherwise)

(a) words indicating one gender include all genders

(b) words indicating the singular also include the plural and vice-versa

(c) ‘Agreements’ are to be recorded in writing. Verbal agreements made by the Parties should be recorded in writing. A failure to record verbal agreements can cause difficulties at a later stage particularly if there are changes in personnel

(d) where something is stated to be ‘written’ or ‘in writing’ this shall result in a permanent record. Reference may be made to the authorised means of communication identified in Sub-Clause 1.3.

1.3 Communications

In the preparation of the tender documents the Employer is required to identify the authorised means of communication between the Parties.

Sub-paragraph 1.3(a) provides for the following means of communication:

• in writing and delivered by hand. This remains an important means of communication where the Parties are normally in close physical proximity or where the communication is bulky or of a physical nature or where the document is of sufficient value or importance that warrants a personal delivery. The use of a formal mail transmission book is highly recommended
• by electronic transmission using any of the agreed systems of electronic transmission. In particular if e-mail communications are not permitted or are restricted, this needs to be clarified.

Both Parties should ensure that only authorised staff members are allowed to formally communicate and that the other Party is informed in writing of the limitations of any delegated authority.

1.4 Law and Language

The Employer is required to define both the applicable law and the language of communication in the Appendix to Tender. Invariably the applicable law will be that of the country where the contract is to be executed. For all contracts, where the Employer is a state organisation or other public body, the use of local law is likely to be mandatory.

Exceptionally and particularly, where both the Employer and the Contractor are non-resident in the country of execution and where the commercial laws of the country of execution are not well developed, the Parties may elect to specify the use of the laws of a more developed country.

Where the Employer is a state organisation or other public body, the Employer is likely to require that all communications from the Engineer or the Contractor are provided in the official language of the country of execution. It has become a standard practice for the Engineer and the Contractor, when writing to the Employer in the official language of the country of execution, to also provide a simultaneous translation into the language of the Contract.

1.5 Priority of Documents

A listing of standard documents and their priorities is given in the Conditions of Contract. The Employer has the responsibility to ensure that this model listing is suitably upgraded in the final Contract document to reflect the titles and content of the actual documents included in the tender package together with any relevant documentation provided by the Contractor with his tender offer.

Further, the conclusions of any post-tender negotiations between the Employer and the prospective Contractor need to be formally agreed and included in the Contract as a separate document of the highest priority.

1.6 Contract Agreement

The standard FIDIC Conditions of Contract provides that a Letter of Agreement shall be provided by the Employer and within a period of 28 days a Contract Agreement shall be drawn up and finalised between the Parties. The Employer is responsible for all taxes and other charges which may arise in the preparation of the Contract Agreement. If a Letter of Agreement is not required, the time interval between tender date and the date of signing a Contract Agreement is to be stated in the Instructions to Tenderers.

1.7 Assignment

Neither Party (Employer or Contractor) is permitted to assign or transfer the whole or any part of the Contract without the prior agreement of the other Party.

Should the Employer receive a request for assignment from the Contractor, legal advice should be sought particularly with reference to key contract ­documents such as the Performance Security, Advance Payment Guarantees, and Insurances.

1.8 Care and Supply of Documents

The Employer (not the Engineer) is required to provide to the Contractor two copies of the Contract which typically includes all those documents (including Drawings) which are identified in Sub-Clause 1.5. In addition two copies of any subsequent drawings are to be provided by the Employer to the Contractor. Since these subsequent drawings are most likely to be produced by the Engineer, the Employer may also delegate responsibility for their ­distribution to the Engineer.

This sub-clause makes no mention of the need for Drawings to be provided in a reproducible format which would not only facilitate general distribution, but would also be of considerable benefit in the anticipated eventual preparation of so-called ‘as-built’ drawings.

The Contractor is required to provide to the Engineer (not the Employer) six copies of each of the Contractor’s Documents. The Contractor’s Documents would importantly include submittals requiring the Engineer’s consent. The Contractor should seek clarification from the Engineer if a full submittal of all six copies is required at the submittal for approval stage. It is possible that only a full submittal is required once the documents are approved.

It may be mutually convenient if documentation, particularly drawings, can be passed electronically between the Parties. This should be di...