conditions of contract - 19.11.2011

7/27/2019 Conditions of Contract - 19.11.2011

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Types of Standard Conditions of

Contract FIDIC (Fdration Internationale Des Ingnieurs-

Conseils)

JCT (Joint Contracts Tribunal) NEC (New Engineering Contracts)

ICE (Institution of Civil Engineers )

ACA (Association of Consultant Architects)

Local

SBD (Standard Bidding Document)


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New tendency in contracts worldwide


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FIDIC stands for the Fdration Internationale des Ingnieurs-

Conseils and is the French acronym for the international

federation of national associations of independent consulting

engineers. FIDIC was founded in Belgium in 1913. Theobjectives of forming the federation were (and I believe are

today):

to promote

the professional interests of the memberassociations and to disseminate information of interest

to members of its component national associations.

Introduction To The FIDIC Contracts (1999 Edition)

FIDIC


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(Engineer hired, paid by and has

contract with Employer

Introduction To The FIDIC Contracts (1999 Edition)

EngineerEmployer

Contractor

Engineers Dual Role:

(1) Employers agent in some cases

(2) Duty to act impartially between

Employer and Contractor in other

cases


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What is FIDIC?

The function of Conditions of Contract is of greatest

importance providing the rights, obligation andresponsibility for the parties concerned in theContract execution.

During the past half century, the InternationalFederation of Consulting Engineers (FIDIC) hasdevoted itself to the compilation of managementdocuments for all kinds of projects, among which theFIDIC Conditions of Contract are of the highest

influence and are the most popular application.


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The first edition of FIDIC Conditions of Contract

for Works of Civil Engineering Construction (useRed Book in the following) was compiled in 1957,and later its second, third, and fourth edition wereissued in 1963, 1977, and 1987 respectively.

Mostly compiled in the reference of the relateddocuments of the Institution of Civil Engineers

With the investigation of the governments,

employers, contractors and consulting engineersall over the world about their application of theRed Book, the FIDIC Contract Committeeorganized a group of experts to compile the newContract Condition models to be applied in the21stcentury.


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The new models include :FIDIC Conditions of Contract for Construction, the (New Red Book)

FIDIC Conditions of Contract for Plant and Design/Build, the

(New Yellow Book)

FIDIC Conditions of Contract for EPC Turnkey Projects, the

(Silver Book)

FIDIC Short Form of Contract, the (Green Book)


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The FIDIC Red Book

In 1957 FIDIC published the first edition of itsConditions of Contract for Works of CivilEngineering Construction, which came to be

known as the Red Book.


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The Current (1999) Red Book

Basic Features

1. Suitable for all civil works projects where mainresponsibility for design lies with Employer (or his

Engineer).2. Some design may, of course, be carried out by Contractor.

3. Administration of Contract and supervision by Engineer.

4. Approval of work, payment and claims certified by Engineer.

5. Work done is measured, payment according to Bill ofQuantities.

6. Option for payment on lump sum basis.

7. Balanced / fair risk-sharing.


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The FIDIC

In 1963, FIDIC published the first edition of its

Conditions of Contract for Electrical and

Mechanical Works suitable for use in contracts

between an employer (owner) and contractor forthe supply and erection of plant and machinery.

As its covers were yellow, it came to be known

as the Yellow Book.


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The Current (1999) Yellow Book

Basic Features

1. Suitable for all types of projects where main responsibility for design lies with

Contractor.

2. Recommended for the provision of electrical and/or mechanical plant, and for thedesign and execution of building or engineering works.

3. Some design may be carried out by Employer or his Engineer.

4. Employer provides Employers Requirements to which Contractor designs.

5. Administration of Contract and supervision by Engineer.

6. Approval of work, payment and claims certified by Engineer.

7. Lump sum Contract Price with payment usually based on schedule of payments.

8. More extensive testing procedures than for New Red Book, including Tests after

Completion.

9. Balanced / fair risk-sharing.


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Reasons for a New (1999) Contract for EPC Turnkey

Projects

(the Silver Book)

1. Increased use of two-party approach, without Engineer.

2. Increased sophistication, improved education and experience in developing

countries hence reduced need for an intermediary like an Engineer.

3. Increase in privately-financed projects, like BOT, where customary for design andconstruction to be governed by an EPC Contract.

4. As a result of increase in privately-financed projects, increased emphasis on risk

allocation.

5. In privately-financed projects, desire of lenders to place majority of risk on

Contractor.

6. Lump sum Contract Price with payment usually based on schedule of

payments.

7. Extensive testing procedures, including Tests after Completion

8. Contractor takes majority of risks, Employer pays more to cover such risks.

9. Final price and time of completion are intended to be more certain.


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New development of FIDIC conditions of contractDesign-Build Operate Contract

It was published on

September 2007,

Gold Book


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Format of a DBO arrangement can be based ongreen field scenario (D-B-O), or

brown field scenario (O-D-B). Either is quite common, however the contractual requirements

and procedures are quite different.

FIDIC - DBO green field scenario, with a Guide on the changesnecessary to cover a brown field arrangement, in which FIDICYellow Book for the DB is the basement.


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General Structure and Organization of

the Red, Yellow and Silver Books

1. General Conditions, comprising clauses that are believed

will apply generally to most contracts (previously

called Part I),

2. Guidance for the Preparation of Particular Conditions,

which will supplement or modify the General

Conditions (they also include as annexes seven forms of

security or guarantee) (previously called Part II), and

3. Form of Letter of Tender, Contract Agreement and

Dispute Adjudication Agreement (the Red and

Yellow Books also contain an Appendix to Tender

form to be attached to the Letter of Tender).


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18

Issue of

the Tender

Documents

Submission

of the

Tender

Issue of the Letter

of Acceptance

8.1 Com-

mencement

Date

Tender Period

8.2 Time For Completion1

28d 28d

4.2 Issue of the

Performance

Security

BaseDate

9.1 Tests on2Completion . . .

Delay attributable to

the Contractor

10.1 Issue of

Taking-OverCertificate

Defects Notification Period3

11.9 Issue of

PerformanceCertificate


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Characteristics of FIDIC Conditions of

Contract Unification of Terms and Clause

Not influenced by the former ICE framework, which was included

in all 20 clauses. So if the clauses content could be unified, it would be under the

same titles and expressions.

In these three books, more than 80% of the content wasconsistent, and 85% of the definitions and expressions were the

same.


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Wider Application

Conditions could be applied under not only the Customary Law , but also Civil Law.

An attorney present to review the clauses. More flexibility and adaptability.

E.g.In the old edition, the conditional performance guarantee was necessary, which the WorldBank had different opinions of. While in the new edition, the guarantee forms were set byParticular Conditions which can be applied giving the employers better flexibility.

Applicability under Various Project Delivery and Contracting System

1. The New Red Book can be used in any kind of Engineering Construction Contract.

2. The New Yellow Book applies to the lump sum contract project where the Contractor takesparticipation in the design work.

3. The Silver Book applies to the turnkey projects of infrastructures or large-scale factories,where the Contractor takes on more work and risk while the Employers participation is small(private financing or government financing), but it is strictly defined upon the investment andconstruction period.

4. The Green Book can be used in all kinds of small-scale projects.

5. Altogether, these four Contract Conditions can be applied to nearly every kind of project,expect for that of managing contracting or simply consulting or designing


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High-quality Provisions and Logical Clause

Sequencing

Compared with the original Red Book, the New Red Book has

163 clauses, nearly 40% being freshly compiled.

An additional 40% were modified and given supplements. Only 20% were kept intact.

The old edition adopted ICEs disorderly style bit in the clause

sequence, while in the new edition, the related sub-clauses are put

into one clause when possible, and convenient to the users.

More Specific Provisions concerning the Rights

and Obligations of the Contract Parties


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Changes in the Preparing Style

General Conditions in the former edition were fairly concise;some recommendable clauses were given Particular Conditions.

While in the new edition, there is a way around the regulationsbeing that the General Conditions are relatively comprehensiveand detailed. An example would be advanced payment andadjustment formula.

The new edition writers believe that it is more convenient for theusers to delete the clauses they do not need than to write them inthe Particular Conditions by themselves.

Concise Language

The language and sentence structures in the new edition arerather easy to understand, and a great help to the people whose

native language is not English.


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Application Prospect of FIDIC Conditions of

Contract

The traditional project management mode, which isuniversal in the world, has been applied in most of the

engineering project management cases in the world.

The new edition has many advanced ideas andregulations such as standardizing of the Contract

words and expressions, clearer and stricter claimprocedure, and emphasis on the protection ofintellectual property rights


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Since the problems of the Employers financial vacancy or

Contractor financing are originating worldwide, therelative clauses and regulations are added into FIDICConditions of Contract.

To Carry out the General Contracting Mode ofDesign/Build and EPC Turnkey Enthusiastically

FIDIC makes out the New Yellow Book andSilver

Book independently in addition to meet thedevelopment tendency of international projectmanagement mode.


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To Make Clear the Position of the Construction

Supervising Engineer, Raise Their WorkingResponsibility, and Open up New Regions of Work

In the New Red Book, it needs the Engineer to be timelier, and

more explicit in solving the problems than before. It pays more respect to the position and the authority of the Engineer,

such as, without the consent of the Contractor, the Employer shallnot be entitled to exchange the Engineer or impose further restrictionon the Engineers authority which has been specified in the contract.

To Prepare the MODEL of Short Form Contract

FIDIC Green Book


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To Improve the Mediation Methods for Dispute

DAB to mediate the dispute.

The most outstanding merit of DAB is that it iscomposed of three experts who are chosen, approved

and paid for by both parties. These experts go to site to solve the dispute occurring

between the two parties after commencingconstruction work.

While in the FIDIC Red Book, the Engineer is

required to mediate the problem which he can nothandle.

It is hard to be impartial because the Engineer is theEmployers employee, so very often the contradictionwill still be unsolved after a long time.


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FIDIC Latest!!!

FOR BUILDING ANDENGINEERING WORKSDESIGNED BY THEEMPLOYER

MDB Harmonised Edition,June 2010 Version

Amended Version publishedJune 2010

Amended Version publishedMarch 2006

FOR USE UNDER LICENCEON PROJECTS FUNDED BYPARTICIPATINGMULTILATERALDEVELOPMENT BANKS(MDB)


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