Understanding FIDIC
eBook - ePub

Understanding FIDIC

The Rainbow Suite

Kelvin Hughes

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eBook - ePub

Understanding FIDIC

The Rainbow Suite

Kelvin Hughes

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Understanding FIDIC explains in simple and practical terms what is often seen as a very complex range of international engineering and construction contracts.

Covering the FIDIC 2017 Red, Yellow and Silver Books (referred to as "The Rainbow Suite"), the book gives an overview of all three contracts, including coverage of changes between the 1999 contracts and the present 2017 suite. FIDIC contracts are widely used as far afield as Europe, the Middle East, Asia and Australia, and this book provides a practical yet thorough guide to the key elements that practitioners preparing and administering these contracts would need to be aware of.

In his approachable and readable style, Kelvin Hughes covers:

  • The obligations and responsibilities of the Employer, the Employer's Representative, the Engineer and the Contractor
  • Quality and Defects Liability
  • Design Responsibility and Liability
  • Variations, Measurement and Payment Procedures
  • Progress, Delays, Extensions of Time and Completion
  • Suspension and Termination
  • Insurances
  • Employer's and Contractor's Claims
  • The Dispute Avoidance/Adjudication Board and the Resolution of Disputes
  • Tendering

Anyone working with FIDIC contracts whether as the Employer, Employer's Representative, Engineer or Contractor will benefit greatly from this easy-to-read guide to the Rainbow Suite. Students on professional courses or researching the contracts for project work will also find this book extremely useful.

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1 Overview of FIDIC and its contracts

This chapter provides an overview of FIDIC, and some of the various contracts that have been published more recently, prior to the FIDIC 2017 Contracts, which are the subject of this book.

What is FIDIC?

“FIDIC” is the acronym for “Federation Internationale des Ingenieurs-Conseils” (in English “The International Federation of Consulting Engineers”), which is the leading body for developing forms of contract for use in the international construction industry between Employers and Contractors, Contractors and Subcontractors, and Employers and Consultants and Consultants and Subconsultants.
Of all the contracts in use today, FIDIC is the nearest to a truly “international” form of contract and is the contract mostly recognised by international funders such as the World Bank.
The International Federation of Consulting Engineers was founded on 22 July 1913, following a search for independent consultants for the World Fair Exhibition.
There were 59 participants at the inaugural meeting, with delegates from Austria, Belgium, Canada, Denmark, France, Germany, Hungary, the Netherlands, Russia, Switzerland, the United Kingdom and the USA.
Three countries such as Belgium, France and Switzerland decided to found the Federation, the other countries maintained provisional links during the initial years. However, due to the World Wars and other major political disturbances, FIDIC development was slow until the late 1940s. The number of member countries changed constantly, and all came from Europe.
In 1959, they were joined by Australia, Canada, South Africa and the USA.
The Federation developed gradually over the years into a truly global organisation with Member Associations representing countries from all regions of the world.
FIDIC also formed a partnership with the World Bank and other Multinational Development Banks working in the different geographical regions to support the financial requirements and international standards to deliver the infrastructure projects worldwide.
It was later referred to as the “International Federation of Consulting Engineers” and now has over 100 member countries.
FIDIC publishes various standard contracts to be used for infrastructure projects, construction works, consultancy services, major plant supplies, etc.
The aim is to have a standard form for international use which tries to achieve a balance between a comprehensive coverage of the circumstances, problems and obligations which are likely, but does not try to cover every conceivable problem, an impossible task which would result in an unmanageable document.
Written contracts are all about allocating risk and obligations and providing the appropriate machinery for resolving issues likely to be encountered.
Each of the FIDIC contracts applies to a specific type of work and/or procurement method and is characterised by an individual colour label e.g. Red Book, Yellow Book and Silver Book (referred to as “The Rainbow Suite), which form the subject area for this book, though other FIDIC contracts will be briefly reviewed.

The development of the FIDIC contracts

It is not proposed within this book to provide a full history, and to review all of the FIDIC contracts since its inception, but the more recent contracts, particularly the ones with which the author is familiar, are covered.
Note that the FIDIC contracts were originally modelled on the Institution of Civil Engineers (ICE) Contracts, which were in turn modelled on the Association of Consulting Engineers Contracts. The current day FIDIC contracts were modelled on the various contracts below.

Conditions of Contract for Works of Civil Engineering Construction: The Red Book (1987)

This contract is in two parts:
  • Part I contains General Conditions, a Form of Tender with Appendix and a Form of Agreement. The Appendix is a part of the Form of Tender and makes specific provision for the insertion of details, which are essential and yet unique to each project.
    There are 72 clauses within the General Conditions.
  • Part II contains Conditions of Particular Application with Guidelines for Preparation of Part II Clauses.
The Form of Tender and the Agreement provide that the Agreement should comprise the Letter of Acceptance, the Conditions of Contract, the Specification, the Drawings and the priced Bill of Quantities. If another document is to be given the same status this should be clearly stated in the Agreement.
The Priority of Documents is in the following order:
  1. The Contract Agreement
  2. The Letter of Acceptance
  3. The Tender
  4. Part II of the Conditions (The Particular Conditions)
  5. Part I of the Conditions (The General Conditions)
  6. Any other document forming part of the Contract
The Form of Tender provides for the undertaking to provide a Performance Security within 28 days of the Letter of Acceptance. However, the final decision as to whether to have a Performance Security is optional.
  • The Contractor’s obligation is to construct the Works according to the Employer’s Consultant’s design, although some design responsibility may be reallocated to the Contractor.
  • “Necessary” levels of supervision must be provided by the Contractor, they should be suitably conversant with the nature of the works to be undertaken.
  • The Contractor or a competent agent approved by the Engineer should be constantly kept on the works to receive directions and instructions on behalf of the Contractor.
  • The Contractor is responsible for setting out and for the correctness of positioning levels, etc.
  • The submission of a programme is an express requirement of the FIDIC Conditions (Clause 14).
  • The Contractor becomes responsible for the care of the Works from the Works Commencement Date to the date of issue of a Taking-Over Certificate.
  • An Engineer is needed who can act impartially between the parties in order to interpret obligations and responsibilities as circumstances change.
  • The Engineer will normally appoint the Resident Engineer or Clerk of Works to be the Engineer’s Representative.
  • Contracts made under the FIDIC Conditions are remeasure and value contracts based on a Bill of Quantities. None of the documents state what the work will eventually cost. This is not a lump sum contract but one where the price is calculated on completion and remeasurement.
  • The Contractor is deemed to have inspected and examined the site and its surroundings.
  • Also, the Contractor is deemed to have satisfied himself as to the nature of the ground and sub-soil but only so far as is “practicable”.
  • Adverse Physical Conditions and Artificial Obstructions require the value of the Contract works to be ascertained and determined by the Engineer, and except as otherwise stated, to do so by a measurement.
  • Variations are required to be valued by the Engineer in accordance with principles stated and after consultation with the Contractor, which require:
    • Works similar to that in the Bill of Quantities are priced at the same rates.
    • So far as reasonable Bill rates are to be used as the basis for pricing work.
    • Where neither of the above methods can be used, then a fair valuation shall be made.
    • Valuation on a daywork basis where the work is so ordered.
  • Clause 60 sets out the scheme for payment which depends on the submission by the Contractor of monthly statements. The Contractor is required to set out the amounts under heads (a) to (e) of Clause 60.1. Other than for unfixed materials, it envisages that the amounts are estimated.
  • The Contractor’s rights to claim additional payment pursuant to the FIDIC Conditions are set out in various clauses. The categories for such payment include:
    • Cost-based claims (Cost only);
    • Value-based claims (Cost plus Profit);
    • Other claims as defined in the Conditions.
  • If the Employer wishes the Contractor to complete certain parts of the works before the whole and to recover liquidated and ascertain damages for failure to achieve the same, then the Sectional Completion provision in the Appendix should be used. If it is used, then the Extension of Time mechanism in Clause 44 should be applied to each Section.
  • Clause 44 deals with Extensions of Time applies to the Works and Sections and deals with time only, not money.
    • Variations;
    • Any cause of delay referred to in the Conditions;
    • Exceptionally adverse climactic conditions;
    • Any delay, impediment or prevention by Employer;
    • Special circumstances.
  • There are provisions for liquidated damages for delay in Completion.
  • There are also provisions for Resolution of Disputes and Arbitration.

The Orange Book: Conditions of Contract for Design-Build and Turnkey (1st Ed 1995)

The Conditions of Contract for Design-Build and Turnkey (The “Orange Book”) is recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or Employer’s Representative works. The Contractor designs and provides in accordance with the Employer’s Requirements.
Note that the FIDIC 1999 Contracts were structured on the same basis as the FIDIC 1995 Conditions of Contract for Design-Build and Turnkey (The “Orange Book”), so it is worth considering this Contract in a little detail and readers will see how the FIDIC 1999 Yellow Book developed.
The Orange Book was published in 1995 due to a growing trend towards design and build projects, and at that time FIDIC recognised that the world of contract drafting was moving on.
The Orange Book contained Dispute Adjudication Board (DAB) provisions, whilst the Red Book had, in 1996, a DAB supplement published by FIDIC.

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