Cover

Table of Contents

Title page

Preface

The Conditions of Contract prepared by FIDIC have for many years had no rival as the standard form of choice for use in the international construction industry.

Traditionally in the standard FIDIC forms the Engineer was given an authoritative role, enabling him to make informed judgements concerning the conduct and execution of projects with a large measure of independence from the Employer. From time to time FIDIC updated these standard forms, continuing to maintain the traditional role of the Engineer, culminating in the 4th Edition 1987 (reprinted 1992).

However, throughout the 1980s and 1990s discernible changes developed in the international construction industry. Employers increasingly became involved in day-by-day administration of projects, thereby restricting the powers of the Engineer to act independently of the parties. The diminution of the power and authority of the Engineer had the effect of disturbing the allocation of risk between the parties and as many contractors perceived, to their disadvantage.

The same period saw a marked increase in the availability of international funding, particularly for infrastructure projects. As a consequence more and more companies, both engineers and contractors, undertook contracts outside their national borders. The international construction industry came of age.

Disputes have long been endemic to the construction industry. The increased participation of more companies of differing nationalities in projects outside their own borders inevitably increased the number of disputes arising for a number of reasons. Contractors were not always familiar with the operation of a FIDIC-based contract. Equally, Employers, well used to their own national systems of contracting practices and law, were faced with having to deal with contracts based on unfamiliar FIDIC forms. As a consequence the number of disputes increased markedly.

A key feature of the dispute-resolution procedure contained in the FIDIC 4th Edition 1987, Sub-Clause 67.1 – ‘Engineer’s Decision’ was the power and authority of the Engineer to make independent judgements. As the independence of the Engineer diminished as a result of the increasing direct involvement of the Employer, the value of the Engineer’s decision was increasingly challenged by contractors, with the result that more and more disputes were referred to arbitration.

Few in the construction industry regard arbitration as a satisfactory means of resolving disputes. Arbitration is a lengthy and expensive process which may lead to awards that with a more flexible, realistic approach could have been negotiated without arbitration. A contractor also suffers because he is unable to foresee the outcome of the arbitration and his cash flow is uncertain and damaged as a consequence of lengthy arbitration. Regrettably there are instances of employers preferring to refer some disputes to arbitration to avoid having to make decisions which for political or economic reasons they are unwilling to make themselves.

Against this background FIDIC undertook a major review of their standard forms. Following extensive consultations, a new suite of contract forms was issued in 1999:

CONSConditions of Contract for Construction (‘The Red Book’), which FIDIC recommends for use on building or engineering works designed by the Employer or by his representative, the Engineer.
P & DBConditions of Contract for Plant and Design-Build (‘The Yellow Book’), which FIDIC recommends for the provision of electrical and/or mechanical plant and for the design and execution of building or engineering works to be designed by the Contractor in accordance with the Employer’s requirements.
EPCTConditions of Contract for EPC/Turnkey Projects (‘The Silver Book’), which FIDIC recommends for the provision of a process or power plant on a turnkey project.

A fourth contract entitled ‘Short Form of Contract’ (‘The Green Book’), intended for use on contracts involving simple or repetitive work, was also issued by FIDIC. This is not considered further in this book.

In the preparation of the new suite of contracts, FIDIC continued with the use of the English language as the language of interpretation. In retaining the use of the English language, FIDIC took the opportunity to ensure that all of the forms in the new suite were written in modern English and not the ‘legalese’ English of previous editions. Opening an introductory FIDIC seminar in London in early 2000, the chairman, Christopher Wade, remarked that the new suite of contracts ‘had been written by engineers for engineers!’ Nonetheless, engineers with a lesser command of the English language have tended to find it more difficult to assimilate the requirements, obligations and duties contained in the FIDIC forms.

The FIDIC forms are arranged in twenty primary clauses, each covering a major topic. For inexperienced personnel (particularly those whose mother-tongue is not the English language) it is often difficult to draw together all the sub-clauses relating to a particular issue. For example, the presentation of an individual claim may require reference not only to the sub-clause that permits the contractor to claim, but potentially also to Sub-Clauses 3.5, 8.4 and 20.1 which are widely separated in the FIDIC forms. In the text of this book cross-references to other relevant clauses or sub-clauses are provided. Nonetheless, it is appropriate that professional users of the FIDIC forms should familiarise themselves with the general philosophy adopted by the FIDIC committee in preparation of the forms.

This book has the aim of assisting the contractor’s staff to overcome some of the difficulties encountered on a typical international contract using FIDIC forms. Since the majority of FIDIC-based contracts use ‘The Red Book’ (CONS), this book concentrates on the use of those particular forms. Supplementary comments are included in Appendix C in respect of ‘The Yellow Book’ (P & DB), recommended for use where the contractor has a design responsibility. For reasons expressed elsewhere, the third set of forms for turnkey projects, ‘The Silver Book’ (EPCT), has not found favour. Limited comments are included in Appendix D to this book.

The Contractor is represented on site by the Contractor’s Representative who carries the overall responsibility for all the Contractor’s on-site activities.

In order to provide guidance to the Contractor’s Representative and his staff, this book is divided into sections:

1) A general summarised review of ‘The Red Book’ from the Contractor’s perspective.

2) A review of the activities and duties of the Contractor’s Representative in the same clause sequence as they appear in ‘The Red Book’ with particular reference to submittals to the Employer and the Engineer. Additional notes are included in respect of the activities of the estimating office insofar as they impact on the activities of the Contractor’s Representative.

3) A summarised version of the matters referred to in 2), but arranged in order of their likely time sequence on site. This has the added intention of providing the Contractor’s Representative with a means of ensuring that documents are not only properly provided to the Employer and Engineer, but most importantly that they are provided within the time limits specified in the Contract.

4) A number of appendices relating to construction topics are provided. These include an appendix containing a selection of model letters on various issues which require the Contractor to make formal submissions to the Employer or Engineer.

This book is intended to provide on-site guidance to the Contractor’s Representative and his staff. It is not intended to be a review of the legal aspects of FIDIC-based contracts. Legal advice should be obtained as and when necessary, particularly if the Contractor has little or no knowledge of the local law. It is hoped that this book will assist contractors (and hopefully engineers in supervisory roles) to prevent problems arising rather than spend considerable time and energy resolving those problems once they have arisen. This comment has particular reference to the ever-present issue of resolving claims presented by the Contractor in a timely and professional manner. This book contains only brief quotations from the various FIDIC standard forms. It is recommended that the reader gives consideration to the purchase of a copy of ‘The FIDIC Contracts Guide’ published by FIDIC in 2000. The publication provides important guidance on the use and interpretation of the referenced FIDIC forms.

Acknowledgements

The author is grateful to the Fédération Internationale des Ingénieurs-Conseils (FIDIC) for permission to quote extracts from the Conditions of Contract for Construction (‘The Red Book’) and the FIDIC Contracts Guide.All quoted extracts from these publications are given in italics wherever they occur.

In this book, the Employer, the Engineer, the Contractor and Subcontractors are referred to in the masculine gender in conformity with standard FIDIC practice. The author wishes to emphasise that the book is intended to address female readers on an equal basis with their male colleagues and that the use of the masculine gender is for practical reasons only.

Dedication

This book is dedicated to Stewart, Fred, Keith, Fritz and many others who have encouraged me to complete the task of writing this book during its long gestation and to my wife Monika without whose practical help and encouragement nothing would have been achieved.