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The rainbow suite The 1999 FIDIC suite part 1
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 1 of 7
This is the first in a series of articles being published in CES1 with the post 1999 editions of the
FIDIC suite of contracts being the overall subject matter.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors,
Paul Battrick2 and Phil Duggan3 of Driver4 will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of
working with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International)
BSc MSc MCIArb
A Brief History
FIDIC is the French acronym for the
International Federation of Consulting
Engineers. It was formed in 1913 by three
national associations of consulting
engineers. From its base in Geneva it now
has members from some 86 member
associations worldwide.
Whilst best known for drafting contracts
between an Employer and a Contractor,
FIDIC also drafts model agreements for
professional services:
Client and Consultant
Client and Architect
Joint Ventures between Consultants
Sub-consultant Agreement
Representatives Agreement
Indeed FIDIC provides many other
publications and is involved in many
initiatives in an attempt to fulfil its stated
mission; “To improve the business climate
and promote the interests of consulting
engineering firms globally and locally,
consistent with the responsibility to provide
quality services for the benefit of society
and the environment”. FIDIC‟s vision is to
be the industries recognised global voice.
FIDIC‟s Employer / Contractor contracts,
first issued in 1957, have a distinctly British
feel to them. These early contracts were
work style based such that the Red Book
was relative to civil engineering works; the
Yellow book was relative to electrical and
mechanical works with erection at site;
and the Orange Book was relative to
turnkey or design and build projects.
The Red Book first issued in 1957, and
having four major revisions, was borrowed
much from the ICE forms of contract whilst
the Yellow book leant upon the forms of
contract drafted by the IMechE / IElecE.
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, indeed the
Orange Book contained Dispute
Adjudication Board (DAB) provisions; the
Red Book had, in 1996, a DAB supplement
published by FIDIC.
The drafting committee of mostly
consulting engineers and its many advisors
began to work and in 1999 the FIDIC 1999
suite of contracts were born.
The FIDIC 1999 Suite of Contracts
At this juncture it is worth noting that the
FIDIC 1999 contracts are not a revision of
previous forms; hence “First Edition” within
their titles.
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Sponsored by perhaps a desire to create
the dominant forms of contract relative to
all forms of construction project coupled
with the changing face of construction a
complete overhaul took place.
The most fundamental change to the new
contracts being the abandonment of the
work based contract; it being replaced by
contracts that recognised which party was
to be responsible for the design of the
Works (or the vast majority of the Works)
and where risk would be allocated.
FIDIC issued three contracts for major
works and one for minor works. It is the
three major work contracts that have
become synonymous with the term “FIDIC
Contract”. Those being:
The Red Book = Conditions of
Contract for Construction for Building
and Engineering Works Design by
the Employer, also known as the
Construction Contract
The Yellow Book = Conditions of
Contract for Plant and Design – Build
for Electrical and Mechanical Plant,
and for Building and Engineering
Works Designed by the Contractor,
also known as the Plant and Design-
Build Contract
The Silver Book = Conditions of
Contract for EPC/Turnkey Projects,
also known as the EPC/Turnkey
Contract
The fourth contract to be issued was the
“Short Form of Contract” to be known as
the Green Book.
To avoid any confusion it may have been
better to avoid the repeated use of “Red
Book” and “Yellow Book” and adopt a
totally new range of colours from the
outset since many contracts are still let
based upon pre-1999 FIDIC contracts.
In 2001 FIDIC published a Contracts Guide
to the three major forms of contract; it has
become known as the Rainbow Book and
FIDIC has perpetuated the rainbow theme
by encouraging all of its subsequently
issued contracts to be known by the
colour of their covers.
The New Red, Yellow and Silver Books
As previously noted a fundamental
change adopted by FIDIC when drafting
these contracts was to move away from a
work style to a contract that reflected
where the responsibility for design would
be allocated.
These contracts were also intended to be
used both on the international market and
domestic markets, although it is suspected
that the vast majority of sales of the
various forms relate to projects where the
nationalities of the contracting parties
differ.
FIDIC not only sought to issue a new suite
of contracts but also, and to its credit,
sought to make the contracts user friendly
and create a best practice manual for
contract administration. The latter being a
topic for a subsequent article.
To aid all users the task group drafting the
contracts were instructed to standardise
the three new major forms. The results
being that, unless differences were
essential, definitions, layout, clause
numbering, and clause wording were
identical.
Accordingly the Red, Yellow and Silver
Books contain only twenty clauses; the last
edition of the old Red Book contained
seventy two clauses whilst the old Yellow
Book fifty one clauses.
An example of standardisation being,
whereas in the old Red Book clause 67 was
headed “Dispute, Engineer‟s Decisions”
and in the old Yellow Book clause 50 was
headed “Disputes and Arbitration” the
1999 suite of contracts, at clause 20,
prescribe the conditions under which the
Contractor, the Engineer and the
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Employer should act through the “Claims,
Disputes and Arbitration” procedure.
First impressions of the 1999 suite maybe off
putting since the purchased document
appears to be much larger than previous
editions, for instance the new Yellow Book
has, in total, over 100 pages whereas the
old Yellow Book has less than 50 pages.
This is all part of the FIDIC‟s desire to
produce a document that is easier to use
than previous FIDIC contracts and also
other contracts from which Employers and
Engineers can choose.
The general layout of the Contracts is as
follows:
General Conditions; including an
Appendix entitled General
Conditions of Dispute Adjudication
Agreement which includes the
Procedural Rule for a DAB
A section giving guidance for the
preparation of any Particular
Conditions; this section also includes
examples of guarantees, securities
and bonds that are commonplace
on international projects
A section entitled Forms; here FIDIC
provide examples of:
Letter of Tender with supporting
Appendix to Tender
Contract Agreement
DAB Agreements (either a one-
person DAB or three person
DAB)
Whilst the above can be considered to be
the most important elements within a
Contract, FIDIC have continued to be
helpful to those using its contracts. Within
the very useful Forward to the Contract
there are three graphics indicating
timelines relative to:
1. Principle events from invitation to
tender to return of the Performance
Security
2. Payment procedures under clause
14 Contract Price and Payment
3. The sequence of events under
clause 20 Claims, Disputes and
Arbitration following either Party
giving notice of its intention to refer a
dispute to a DAB
All in all a very complete document that
should require few amendments however,
as we shall see in a later article the
document is not only used but is abused.
The Engineer
Before noting some specifics regarding the
Red, Yellow and Silver Books it is worth
noting that FIDIC have amended the role
of the Engineer in the Red and Yellow
Books (the Silver Book has an Employer‟s
Representative) from the impartial, quasi
arbitral role of previous editions. The
Engineer is clearly stated to act for the
Employer. He is no longer required to be
impartial but whenever required to make
a determination in respect of value, cost
or time related matter he has to make his
determination fairly, and in accordance
with the Contract, having taken into
consideration all relevant circumstances.
The FIDIC 1999 First Edition Red Book
The main features of this Contract can be
summarised as:
It is suitable for all types of project
where the main responsibility for
design lies with the Employer (or its
Engineer) although provision is made
for the Contractor to design
elements of the Works
The administration of the Contract
and approval of work is carried out
by the Engineer as is certification of
payments and determination of
extensions of time
Payment to the Contractor is based
upon work done and rates as per a
Bill of Quantities (a Standard Method
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of Measurement should be stated);
thus reflecting the likely on site
nature of the Works (a reflection that
the Red Book will most likely be used
for building and civil engineering
projects)
Risk sharing is balanced between
Parties such as the Employer taking
the risks of “adverse physical
conditions” and the “operation of
the forces of nature” that are
considered to be unforeseeable
Claims by both Parties have to follow
procedures, albeit the conditions
imposed upon the Contractor are
harsher with the inclusion of a “fatal”
notice provision
The Contractor has some financial
protection in that it can request
evidence from the Employer that it
has the finances to pay the
estimated Contract Price
Materials can be paid for both on
and off site if strict criteria are
followed, including the listing of
materials for which payment maybe
sought within the Contractor‟s
tender
The FIDIC 1999 First Edition Yellow Book
The main features of this Contract can be
summarised as:
It is suitable for all projects where the
main responsibility for design lies with
the Contractor based upon the
Employer‟s Requirements although
provision is made for the Employer
(or his Engineer) to design elements
of the Works
The administration of the Contract
and approval of work is carried out
by the Engineer as is certification of
payments and determination of
extensions of time
Payment to the Contractor is based
upon a Lump Sum price and
normally against a schedule of
milestones to be achieved by the
Contractor. This reflects that the
Yellow Book will most likely be used
for process plants and the like where
a high degree of offsite
manufacture of plant and
equipment is foreseen and payment
terms can be drafted to recognise
this situation subject to the listing of
such plant and equipment within the
Contractor‟s tender as within the
Red Book
Testing procedures leading to
completion are likely to be more
complicated than within the Red
Book, again reflecting the likely
nature of the project
The Yellow Book shares with the Red
Book the provisions noted above
relative to:
Risk sharing
Claims by both Parties.
Financial protection for the
Contractor
The FIDIC 1999 First Edition Silver Book
The Red and Yellow Books are said to
provide contracts with a balanced view of
risk sharing meaning:
The Employer pays the Contractor
only when specific risks occur
The Contractor does not have to
include within its tender for risks that
are difficult to value
The above means that the Employer has a
great degree of uncertainty in respect of
the final price and the final time for
completion.
The Silver Book reflects a market desire for
certainty of cost and time; perhaps by a
“one off” Employer or a totally risk adverse
Employer willing to “pay the price” or
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potentially by lenders who crave certainty
of price and time, such that the risk
allocation is far from balanced.
The Contractor is asked to allow within its
tender for a wide range of risks relative to
cost and time; such risks will most likely
include all ground conditions (potentially
in a country of which the Contractor will
have little knowledge) and the completion
of the Works will be based upon a strict
but often brief performance related
specification.
The Employer will still bear some risks such
as those related to war, terrorism and
Force Majeure but the unbalanced risk
profile of this Contract will undoubtedly be
a higher price; a factor that Employer‟s
must accept.
The main features of the Silver Book can
be summarised as:
Design liability rests solely with the
Contractor, the Employer will
provide its requirements but these
are often in the form of a brief
performance specification
The Contractor carries out all
engineering, procurement and
construction often including
performance tests after completion;
a “turn-key” project allowing
operation of the facility upon
completion
There is not an Engineer within the
Contract; the Employer may appoint
an Employer‟s Representative
It is lump sum Contract with
payment terms most likely similar to
those envisaged under the Yellow
Book
Given the above circumstances under
which an Employer may select a Silver
Book, Employer‟s should recognise the
significant costs for a Contractor to
produce a tender. Accordingly it is hoped
that Employer‟s recognise this and select
only a small number of Contractors to
tender.
Similarly Employers have chosen a turnkey
style of contract and therefore should
allow the Contractor complete freedom
to carry out the Works in its chosen manner
in order to reach any performance criteria
laid down by the Employer.
If the Employer cannot grasp such factors,
or the tender time is too short to allow the
Contractor to compile an adequate
tender, or considerable amounts of work
are underground, or difficult to inspect the
Employer may be better off using a Yellow
book, accepting some additional risks and
receiving a lower tender price.
The FIDIC 1999 First Edition Green Book
The final contract to be issued in 1999 was
the Green Book or Short Form of Contract.
This Contract recognised a need for a
much simpler and shorter contract to suit
projects with a relatively low Contract
Price and short time duration.
The Contract itself is very flexible, any
reader will however recognise the
Contract as being from the same family
albeit it has only fifteen clauses and a total
of ten pages.
The clauses are short and easily
understood; whilst design can be carried
out by either party an Engineer is not
foreseen, however the Employer may
appoint a Representative. Payment can
be made on either a lump sum or
remeasured basis.
As with the major forms the Contract
includes guidance notes (noted as not
forming part of the Contract) as well as an
Agreement together with its Appendix and
Rules for Adjudication. The noticeable
absentee being the Particular Conditions
section; in this respect FIDIC consider that
the Green Book can work without such
conditions however, a cautionary note is
provided should an Employer deem it
necessary to amend the drafted Contract.
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A final thought
Without doubt FIDIC broadened its appeal
to those selecting contract forms, whether
they be Employer, Engineers providing
advice, project funders such that there
was a contract for every occasion.
Nevertheless FIDIC continued to draft
contracts to recognise the marketplace
and sectors of the construction industry as
will be discussed in a subsequent article.
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and
engineering industries with commercial
and dispute resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver
has developed a range of high quality
FIDIC training courses, workshops and
services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011. The
title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction – quotations,
citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are
properly noted.
The rainbow suite The 1999 FIDIC suite part 1
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 7 of 7
Endnotes
1. CES is an abbreviation of the title „Civil Engineering Surveyor‟ which is the journal of the
Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group‟s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers, turbines,
generators and also ancillaries such as flue gas desulphurisation plants. Paul is a
practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver‟s international business, Phil has over twenty years industry experience
providing quantum, contractual and commercial advise to clients on major projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company‟s international business is administered from Driver‟s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
The rainbow suite The 1999 FIDIC suite part 2
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 1 of 7
This is the second in a series of articles being published in CES1.
In their first article, Paul Battrick2 and Phil Duggan3 of Driver4 discussed the birth of FIDIC‟s
rainbow suite, in this the second article they provide a brief insight into the continued growth
of the rainbow as other contracts have been produced to recognise the demands of the
international construction marketplace
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International)
BSc MSc MCIArb
Introduction
First a brief introduction followed by an
overview of various forms.
The White Book
As previously noted FIDIC also drafts, as
well as contracts between an employer
and contractor, many agreements
between “client and consultant”. The
“Client / Consultant Model Services
Agreement”, now in its fourth edition,
issued in 2006, it has become known as the
White Book.
The Blue Book (or Turquoise Book as it
is sometimes called)
This form is designed specifically for use in
connection with dredging and
reclamation projects. It differs from the
major forms in many ways but perhaps
most importantly that it was drafted in
close collaboration with the International
Association of Dredging Companies
(IADC) and as such has a great input from
contractors from the outset. The current
version of the Form of Contract for
Dredging and Reclamation Works is the
fourth edition issued in 2006.
The Pink Book Whilst funding agencies adopted the
versions of old and new Red Books for
many years it became standard practice
to amend certain clauses. In response to
the Multilateral Development Banks‟
(MDBs) desire to harmonise their bid
documents including a standard form of
contract, FIDIC responded by issuing the
Conditions of Contract for Construction
MDB Harmonised Edition; the latest version
being issued in 2010.
The Gold Book
This form of contract is probably the most
radical of the new colours; it represents a
contract period of over 20 years! It is a
design, build and operate (DBO) contract
that the industry has needed for some
time to reflect the ever growing trend that
contractors no longer construct something
then go away but also maintain and
operate the facility for many years to
come. It has been described as a Yellow
Book with an operate and maintenance
contract bolted on; the First Edition of the
Conditions of Contract for Design, Build
and Operate Projects was issued in 2008.
No colour as yet, but a subcontract…
FIDIC has often issued a new form of
contract as a “test edition” such that the
construction industry can review the
proposed conditions of contract whilst
perhaps using them in a real life situation.
The latest test edition again is a departure
from the engineer driven FIDIC
organisation since it delves into the world
of the contractor and subcontractor,
although it is noted that advice was
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sought from many working for and with
contracting organisations.
The results being the Conditions of
Subcontract for Construction for Building
and Engineering Works designed by the
Employer issued in 2009. As the title of this
form suggests it is for use with the Red Book
and the Pink Book. It is the second
attempt at creating a subcontract since
FIDIC issued one in 1994 relative to the old
Red Book
Overview of the various forms
The White Book
The drafters of the White Book are
predominately engineers who within this
form sought to create conditions of
agreement that would span the life cycle
of an engineer‟s or consultant‟s
involvement.
Accordingly the document is suitable for
use during:
pre-investment and feasibility studies
the design phase
the administration of a contract
As with FIDIC contracts there are both
general and particular conditions of
contract which combined set out the
scope of the consultant‟s work, payment
terms and the like.
The White Book incorporates the same
financial protection as afforded to
contractors in that the consultant too can
ask the Client (as opposed to the
Employer) if it has the ability to pay the
Consultant‟s fees. In a similar vein, and
maybe not surprising to some, the White
Book limits the consultant‟s responsibilities,
and therefore liabilities, to “exercise
reasonable skill, care and allegiance in the
performance of his obligations under the
Agreement”. This limitation is further
qualified since nothing else in the
agreement, or any legal requirement of
the Country or any other jurisdiction can
impose a greater risk upon the consultant.
Thus the consultant/engineer has a limited
risk that, it is suggested, is not in accord
with the thoughts of employers and
contractors alike.
The Blue (Turquoise) Book
The Blue Book is like the Green Book in that
it is abbreviated and flexible. In terms of
being a smaller document the general
conditions are only 16 pages and fifteen
clauses long. The format has also
changed from the major forms with the
agreement and appendix to the contract
being the first section. Perhaps it is the
major forms that have the order incorrect
since it is those particular terms that are
the most important to recognise especially
in such a flexible form as the Blue Book.
Similarities with the major forms are in the
inclusion of standard forms, such as
securities, a section on adjudication (a
one or three person DAB) with rules and
the adjudicator‟s agreement and the all
important guidance section.
The engineer is still recognised within the
contract however design responsibility can
rest with either the employer (and its
engineer) or the contractor. Payment
terms are extremely flexible and a list of
options, such as lump sum,
remeasurement and cost plus are all
noted within the appendix.
It is perhaps apparent that a greater input
of a contractor‟s organisation has
influenced some of the general conditions,
as has perhaps the use of other forms
within the industry as a whole:
Notices by the contractor in respect
of a claim must be given within 28
days but there is no fatal provision.
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Claim items are listed as defined risks
which may entitle the contractor to
monetary or time compensation.
The defined risks, recognising the likely
impacts of weather upon the
contractor‟s ability to make progress,
potentially soften the usual clause
wording on one hand, entitling the
contractor to make a claim if “any
operation of the forces of nature
affecting the Site/and or the Works”,
which was unforeseeable or against
which an experienced contractor
could not reasonably have been
expected to take precautions” but
give the employer (and contractor)
less room for debate by also defining
the employer‟s risk to be “climatic
conditions more adverse than those
specified in the Appendix”.
If disputes are not settled amicably
they are to be settled by referral to
adjudication by a DAB and, if
dissatisfied with the DAB‟s decision (or
if no decision is made within the set
timescale) the dispute can be
referred to Arbitration.
The Blue Book is a model of a contract
drafted by those with a particular section
of the industry in mind and with the
knowledge to incorporate the necessary
variations to standard forms that may
have been considered for use in the past.
The Pink Book
As previously noted the Pink Book was
created as a derivative of the Red Book.
This reflecting the usual nature of a project
that would require funding from lending or
aid agencies and would deploy from the
outset an engineer to assist in all phases of
the project, especially design.
Those projects normally being
infrastructure types of projects as opposed
to industrial, power, process plants and the
like where funds would normally be from
the employer‟s own resources and the
contractor would design the facility; in
other words a Yellow or Silver Book project.
The MDBs include in their number such
organisations as:
The World Bank
The European Bank for Reconstruction
and Development
African Development Bank
The MDBs in fact represent lending
agencies that fund projects on a global
basis and as such play a crucial role in the
development of the planet‟s lasting
infrastructure. With this level of
importance in mind it was crucial that
FIDIC participated in amending the Red
Book to provide a contract not only that
adhered to the wishes of the MDBs but
also gave borrowers, engineers and
contractors some consistency in format,
leading to fewer ad-hoc and poorly
thought through amendments.
Those faced with a Pink Book will have
often been used to the Red Book and
therefore will be familiar with the general
layout of the contract, the twenty clauses
are still there but there have been
amendments which some may think are
for the better, and others otherwise.
Examples being when compared to the
Red Book:
Minor amendments have taken place
to definitions of which one is worthy of
being noted:
Cost no longer refers to
reasonable profit but states
profit since at clause 1.2 profit is
fixed at 5% unless stated
otherwise in the contract data.
clause 1.5, is a new clause that allows
the lender‟s representatives to inspect
the site and audit the contractor‟s
accounts and records relative to the
project
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clause 2.1, access to the site must be
given such that the programme can
proceed “without disruption”
clause 2.4, the employer has to
demonstrate its ability to pay the
contract price before “the
commencement date” and also
“punctually”
clause 2.5, the employer must now
give notice of its claims within 28 days
but whilst more onerous there is still no
condition precedent
clause 3.1, the engineer has to gain
the employer‟s approval before
dealing with matters under clauses
dealing with claims in respect of
unforeseeable physical conditions
and the issue of variations
clause 3.5, the engineer now has to
give its determination “within 28 days
from receipt of the corresponding
claim or request…”
clause 6.2, there is an obligation upon
the contractor to inform its personnel
of their liability to pay local income
tax
clause 8.1, the project cannot
commence unless:
the contract agreement has
been signed by both parties
the contractor has reasonable
proof that funding is in place
the advance payment has
been received by the
contractor
clause 8.6, the contractor can be
paid for acceleration measures to
overcome employer delays
clause 13.1, the contractor is not
bound to carry out a variation if it
would “trigger a substantial change in
the sequence or progress of the
works”.
clause 15.5, whilst the employer can
terminate for convenience it cannot
terminate to pre-empt a just
termination by the contractor.
clause 15.6, is a new clause that
attempts to deal with corrupt and/or
fraudulent practices.
clause 16.2, the contractor must now
demonstrate that the employer‟s
failures must “materially and adversely
affect the economic balance of the
contract and/or the ability of the
contractor to perform the contract”
prior to termination. There are
however two further grounds allowing
the contractor to terminate:
Failure of the funder to provide
funds.
The absence of the engineer‟s
instruction to commence work
180 days after the letter of
acceptance.
clause 19.2, in order to claim force
majeure the claiming party must
demonstrate that it has been
prevented from performing “its
substantial obligations”
clause 20.6, arbitration rules may differ
according to the origin of the lending
agency.
The amendments to the Red Book appear
to be a mixed bag providing support to
the contractor in terms of guaranteed
funding but also apparently allowing the
employer influence over the engineer in
respect of claims for unforeseeable
ground condition and variations.
The latter is not considered to be prudent
especially when considering that
borrowing countries may not have the
sophistication necessary to deal with such
matters.
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The Gold Book
The Gold Book without doubt fills one of
the last gaps in FIDIC‟s toolbox of
contracts. Its use is growing especially as
government departments such as water
authorities warm to the idea of having
foreign contractors bring their knowledge
of providing water treatment and supply
at a profit but also having to be
responsible for remedying defects whilst
remaining in the country rather than being
on the side of the globe.
Accordingly FIDIC has not only responded
to employers who crave to outsource but
also the changing face of contractors
who are now operators too. Any potential
disputes between contractors carrying out
a design and build contract to
questionable standards leading to poor
performance, defects and disputes whilst
leaving the employer to struggle through a
20 year life time of a plant have,
potentially, been negated. That is,
provided the whole scheme is fully thought
through and both parties, as with all
contracts, are willing and able to act
responsibly towards each other such that
a balance is struck between the
construction and operating elements of
the contract.
The contract‟s ethos and key features are:
Design, build plus operation and
maintenance for 20 years by the
contractor on a green field site.
Design and build phase risk allocation
similar to the Yellow Book with
exacting completion criteria but also
a cut off date should the contractor
be 182 days late leading to
termination if desired.
Payment on a lump sum basis but a
defined asset replacement fund and
schedule that notes the timing and
cost of the replacement of certain
assets. Costs of replacing plant and
equipment outside of the schedule
will be the responsibility of the
contractor, as is a cost over that
stated on the schedule. Any surplus in
the fund at the end of the twenty
years is divided equally.
The employer is entitled to deduct 5%
from payments during the “operation
service period” (OPS) in case the
contractor does not fulfil its
maintenance obligations. The fund is
to be released, if not spent, within the
final payment to the contractor. The
contractor being responsible for its
own defects arising from design and
construction in this period.
An independent audit body is jointly
appointed for the duration of the OPS
to monitor the performance of the
contractor and employer. Whilst
having no power, the parties are
intended to give “due regard” to
matters raised by the audit body.
A joint inspection is required at least
two years before the end of the OPS;
any works identified must be carried
out by the contractor who will also
face completion tests similar to those
at the end of the design and build
phase. Defaulting contractors risk
losing the 5% maintenance retention
fund.
A standing DAB is established from a
set date for the design and build
phase and a new one every 5 years
during the OPS.
The key to success appears to be with the
contractor who must design and build a
quality plant with low operating and
maintenance costs; fit for purpose and
built to last.
However, like any relationship time gives
rise to change and only time will tell if
FIDIC have considered all factors such as
changes in the deliverables required by
the employer. FIDIC has very recently
issued its guide to this form.
The rainbow suite The 1999 FIDIC suite part 2
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 6 of 7
The Subcontract to the Red and Pink
Books
As noted this form is a test edition with the
first edition arriving sometime later.
The contract seeks to be back to back
with the Red Book, in this respect selected
highlights or lowlights are:
The subcontractor is required to
complete its scope of works such that
no act or omission shall constitute or
cause a breach under the Red Book.
The contractor is entitled to make a
“fair decision” in respect of its claims
towards the subcontractor and
deduct monies accordingly.
Payments are back to back (where
legal to do so) such that
subcontractors may find contractors
using this as a shield to avoid paying
for their own problems
The subcontractor is apparently
responsible for the care of its works
until the main contract works are
taken over. This situation will always
require careful management
whatever the form of contract
Notice provisions are passed through
to the subcontractor but with a
reduction in time to 21 days to allow
the contractor to fulfil its obligations
under the main contract.
A subcontract that allows both fair
payment provisions for the subcontractor
for all liabilities of the contractor whilst
obliging the subcontractor to allow the
contractor to make claims upwards will
always be a tough ask; has FIDIC really got
it right? Perhaps the absence of
subcontractors from the drafting
committee is a clue.
A final thought
FIDIC has continued to broaden its
potential customer base by these further
contracts. The next stop could be a target
price contract but it is understood that we
will see a complete overhaul of the 1999
suite in the not too distant future.
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and
engineering industries with commercial
and dispute resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver
has developed a range of high quality
FIDIC training courses, workshops and
services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) October 2011.
The title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction – quotations,
citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are
properly noted.
The rainbow suite The 1999 FIDIC suite part 2
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 7 of 7
Endnotes
1. CES is an abbreviation of the title „Civil Engineering Surveyor‟ which is the journal of the
Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group‟s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers, turbines,
generators and also ancillaries such as flue gas desulphurisation plants. Paul is a
practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver‟s international business, Phil has over twenty years industry experience
providing quantum, contractual and commercial advise to clients on major projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company‟s international business is administered from Driver‟s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 1 of 8
This is the third in a series of articles being published in CES1. The first introduced the rainbow
suite, the second provided insight into the continued growth of the suite.
In this the third article by joint authors, Paul Battrick2 and Phil Duggan3 of Driver4, commenting
upon the FIDIC forms of contract the programming requirements are considered in
conjunction with the procedures in respect of progress reporting. The Parties to the Contract
and the Engineer, but in particular the Contractor, all have clear obligations in respect of the
programming and reporting functions within the FIDIC forms.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International)
BSc MSc MCIArb
Programming and Reporting A Benefit or Burden for the Contractor
and the Employer and its Engineer?
In this the third article commenting upon
the FIDIC forms of contract the
programming requirements are
considered in conjunction with the
procedures in respect of progress
reporting. The Parties to the Contract and
the Engineer, but in particular the
Contractor, all have clear obligations in
respect of the programming and reporting
functions within the FIDIC forms.
It is considered that these obligations are
intended to be considered in tandem with
the provisions for considering claims
submitted by the Contractor such that any
Contractor who neglects, or is allowed to
neglect, its obligations may face a more
difficult task to establish its entitlements
than a Contractor who has fully complied
with its obligations.
For the purposes of this article all
references to Sub-Clause are taken from
the Yellow Book; in simple terms the
Contract for design and build projects
where the design is carried out by the
Contractor.
The drafters of the FIDIC suite of contracts,
and many commentators, say that the
FIDIC contracts not only provide the
mechanisms for dealing with risks,
responsibilities, payment terms, change
and all the other good things necessary to
allow a project to be completed in a
managed and (hopefully) equitable
fashion but they also act as a best
practice project management handbook.
The project management handbook is
most prevalent within the programming
and reporting provisions and no doubt the
FIDIC drafters consider what they thought
the Contractor and the Engineer should
be aware of in order that control of the
project was to the fore and certainty of
outcome, especially in respect of progress,
was assured.
Many of us, and perhaps some FIDIC
drafters, will have received lectures in
management at some stage of our
careers and many will know the
mnemonic.
Family Planning Often Means Careful
Choice of Contraceptives
Management handbooks quite rightly look
to the perfect world however the real
world is one of harsh commercial realities
and shortcomings in performance in many
respects where, should a Contractor allow
within its bid for every risk and obligation it
would certainly lead to lost tenders. As
with all things compromise is often the
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 2 of 8
solution however, to compromise in
respect of programming and reporting
may not be such a wise course of action.
The FIDIC Yellow Book envisages the
typical procedure to be expected in
establishing a contract for a design and
build project:
Invitation to bid (ITB) with
Employer‟s Requirement included,
no doubt a timescale for the
completion of the project was
stated.
Contractor‟s bid complying or
otherwise with the ITB, including a
timescale which was probably
detailed to some degree noting
any required milestones and/or
those of importance to the
Contractor, such as the provision of
feedstocks.
The coming together of the
Employer and the Contractor to
create a contract detailing without
ambiguity a shared understanding.
It is now that Clause 8, Commencement,
Delays and Suspension takes over, and for
the purpose of this article Sub-Clause 8.3
Programme in particular.
The Contractor, will have agreed or
accepted the Time for Completion noted
within the Appendix to Tender and the
Engineer will have issued a notice of the
Commencement Date. Assuming all other
formalities are in place, such as the
provision of the Performance Security, the
dates for commencement and
completion of the Works, including any
Sections, are now anchored.
Sub-Clause 8.3 Programming
Now Sub-Clause 8.3 takes over!
It is suggested that all programmes in
existence at this point in time should be
cast to one side as from now on only one
programme will matter; the Sub-Clause 8.3
programme and of course the revisions to
it.
This programme will be, or should be, a
baseline against which the performance
of the Contractor and the Employer, if
appropriate, will be monitored, claims for
extensions of Time for Completion will be
based upon and Engineer‟s instructions to
expedite progress will be based. Its
importance cannot be stressed enough.
However, the requirements upon the
Contractor of Sub-Clause 8.3 goes further
than producing a programme; the
Contractor is required, for the first time to
bear its soul before the Engineer for
scrutiny. Whilst the details to accompany
the programme may seem quite normal to
most they are an obligation upon the
Contractor.
The Contractor has to submit, to the
Engineer, its detailed programme within 28
days after receiving the notice of the
Commencement Date. Realising that the
programme will not be perfect and will be
subject to revision not only to take
account of actual progress but also to
take account of other factors such as sub-
suppliers and sub-Contractors
programmes being agreed as orders and
contracts are placed, the FIDIC drafters
placed a further obligation upon the
Contractor to submit a revised
programme whenever the previous
programme becomes, in effect, out of
date and does not reflect the manner in
which the Contractor will achieve its
obligations.
Every time the Contractor submits a
revised programme it must include:
the order in which the Works will be
carried out
the timing of each stage of design,
preparation of Contractor‟s
Documents, procurement,
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 3 of 8
manufacture, inspection, delivery
to site, construction, erection,
testing, commissioning and trial
operation
the periods allowed for the
Engineer to review documents
submitted by the Contractor (Sub-
Clause 5.2) and any similar
submissions, approvals and
consents specified in the
Employer‟s Requirements
the sequence and timing of
inspections and tests specified in
the contract
a supporting report which includes:
a method statement noting
the major stages of
execution of the Works
the Contractor‟s
reasonable estimate of the
numbers of each class of
Contractor‟s Personnel and
each type of Contractor‟s
Equipment required at Site
for each major stage of the
Works
Having received all of this information at
the outset of the project and every time
the programme is updated the Engineer
has 21 days in which to state, by a issuing
notice, that it does not comply with the
contract; note that the Engineer does not
have to approve programme should the
Engineer not issue such a notice the
Contractor must proceed in accordance
with the programme; in doing so the
Contractor should be aware that the
Employer will rely upon that programme in
arranging any feedstocks and other inputs
it has to facilitate the completion of the
Works.
FIDIC is silent as to what should happen if
the Engineer gives notice that the
programme “does not comply with the
contract”; as to what non-compliance
with the contract actually means maybe
left to the Engineer‟s interpretation. It is
considered that it should mean
compliance with dates and periods of
time stated within the contract including
working hours and periods for approvals
etc by the Engineer but should an
investigation take place into the level of
resources and methods the Contractor
intends to use, probably not. Nevertheless
the Contractor has provided to the
Engineer an insight into such things as its
intended resources which, as we all know,
is also often the starting point for many a
claim prepared by a Contractor.
As noted the Sub-Clause 8.3 programme is
the baseline against which the Engineer
will monitor the Contractor‟s progress and
the Contractor‟s ability to meet the Time
for Completion and decide whether or not
to issue instructions to the Contractor to
prepare and issue a revised programme
and supporting report detailing how the
Contractor will accelerate the Works, as its
own cost and potentially with claims from
the Employer to complete with the Time
for Completion.
There is one other obligation of Sub-Clause
8.3 that is worth nothing; the Contractor is
to inform the Engineer of:
specific future events or
circumstances which may diversely
affect the work (note the Works is
not used)
increase the Contract Price
delay the execution of the Works
It is also worth noting that the Employer
does not have a similar obligation.
The Contractor has to submit estimates
relative to these occurrences and/or a
proposal under the Variation Procedure if
applicable.
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 4 of 8
Early warning clauses such as this are now
commonplace and there is no noted
sanction for non-compliance by the
Contractor however, Contractors should
consider this provision in the light of the
fatal notice provisions under Sub-Clause
20.1 (a topic for later discussion).
Sub-Clause 4.21 Progress Reports
Having given the Engineer an insight into
its initial and revised programmes and
resourcing levels the Contractor is obliged
to prepare reports, on a monthly basis,
that reveal yet more of the Contractor‟s
progress towards Completion.
The monthly reports can be quite a time
consuming exercise to complete since
they require a considerable amount of
detail, let alone six copies to be issued.
Each report must include:
charts and detailed descriptions of
progress including:
each stage of design
(possibly relevant to the
major stages identified
within the Sub-Clause 8.3
programme)
Contractor‟s Documents (a
defined term including
calculations, computer
programmes, drawings and
models)
procurement, manufacture
and delivery to site
erection, commissioning
and trial operations
photographs showing the status of
manufacture and of progress on
the Site
for the manufacture of each main
item of Plant (apparatus,
machinery and vehicles to be
incorporated into the Works) and
Materials (things of all kinds, other
than Plant) to be incorporated into
the Works)
the name of the
manufacturer
the manufacturer‟s location
percentage progress
actual or anticipated dates
of:
commencement of
manufacture
Contractor‟s
inspections
Tests
shipment and arrival
at site
records of the numbers of the
Contractor‟s Personnel (the
Contractor‟s staff, Sub-contractor
staff and anyone else working at
the Site)
records of the Contractor‟s
Equipment (types and details of
plant and vehicles used by the
Contractor, its Sub-contractors and
anyone else working at the Site)
copies of quality assurance
documents, test results and
certificates of Materials
list of Variations, notices given by
the Employer of its intention to
make a claim towards the
Contractor and notices of claim
issued by the Contractor
safety statistics, including details of
hazardous incidents, activities
relating to environmental aspects
and public relations
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 5 of 8
comparisons of actual and
planned progress
details of any events or
circumstances that may jeopardise
the Contractor‟s ability to meet the
Time for Completion or any interim
milestones (it is noted that this is
another opportunity for an early
warning of potential delay by the
Contractor)
measures being adopted or to be
adopted by the Contractor to
overcome delays (it is not certain if
this relates to recovery measures
being adopted as a result of an
Engineer‟s instruction and/or
measures voluntarily adopted; the
latter is most likely given the
required comparison in respect of
progress)
Whilst most Contractors will readily have to
hand, whether allowed for in the bids or
not, the resources and management
structure to comply with the reporting
obligations within Sub-Clause 4.21 it is clear
that those working for the Contractor, Sub-
contractors, Sub-suppliers and specialist
design houses must also provide the
countless pieces of information required to
allow the Contractor to conform.
It is suggested that perhaps Contractors
who are not used to FIDIC, such as those
from Eastern Europe, who may find
themselves working on externally funded
projects may find these obligations outside
of their normal reporting capabilities.
Similarly some Engineer‟s may also find the
administration of this aspect of FIDIC
somewhat difficult to achieve, albeit it
gives the Engineer the perfect platform to
report to the Employer.
Benefit or Burden?
To consider whether or not the
programming and reporting obligations
are a benefit or burden for the Contractor,
a simple question must be asked, what
does the Contractor (and all other parties
involved for that matter) really want from
a project?
After the difficulties of bidding and winning
a project the Contract will desire certainty
and to construct with control. That being,
amongst other things, certainty of:
Contribution to overheads and
profit, the lifeblood of any business
Timely completion, to allow the
planned movement of resources
towards the next project
Completion to the required quality
standards, to enhance reputations
A dispute free project, to avoid the
time consuming and expensive use
of resources
Whilst far easier to say than to achieve; to
obtain certainty it requires all involved with
the Employer‟s, Engineer‟s and
Contractor‟s organised to fulfil their
obligations to the standards required and
at the right time.
The initial Sub-Clause 8.3 programme not
only provides the Engineer with a yardstick
to measure projects against but it also
allows the Contractor to inform the
Employer when critical inputs such as free
issue materials, electricity, gas, water or
feedstocks are required. It is therefore
something for the Contractor to measure
the Employer‟s performance against and
every updated programme and report
should therefore contain a statement
regarding the progress of the Employer‟s
obligations as well as the required
information regarding the Contractor‟s
progress. There should be no hindrance
from either the Employer or the Engineer to
the Contractor taking a proactive stance
in relation to a desire to complete the
Works without delay from the Employer‟s
quarter.
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 6 of 8
It is clear however, that the focus, on the
Sub-Clause 8.3 programme and its
revisions is on the Contractor‟s
performance. Despite this opportunity to
set out a clear statement of intent that is
capable of demonstrating cause and
effect in respect of delay to the Time for
Completion all too often Contractor‟s
produce programmes that are
inadequate at the outset, possibly due to
a lack of information from suppliers etc,
and continue to be inadequate when
revised.
A good programme that is properly
maintained is without doubt, a double
edged sword; it allows the Contractor to
identify its own shortcomings and take
instant remedial action as well as identify
delay that falls under the risk area of the
Employer such that an extension to the
Time for Completion can be instantly
requested and hopefully determined by
the Engineer such that the risks of
completion fall back towards the
Contractor.
The reporting requirements within Sub-
Clause 4.21 are a great motivator for the
Contractor to have at its fingertips all the
data to allow time to be properly
monitored and adjusted to suit deviations
from any intended programme. In doing
so the Contractor can once again feed
into those responsible for preparing the
programme data indicating the rate of
progress of all concerned allowing the
programme to be adjusted to take
account of either work being completed
earlier than scheduled or likely delays such
that resources can be deployed
economically and claims, if appropriate
will have strong foundations based upon
fact.
In a similar fashion the Engineer, by
reviewing the available data and early
warnings given by the Contract, can
foresee areas of work where delays are
likely to occur and take appropriate
action by alerting the Employer, especially
if the Employer is culpable, but more
importantly communicating with the
Contractor to mitigate the impacts of
delay and issue a Variation if desired and
required.
Whilst, with all this data to hand, the
Contractor should be able to construct
with control and take the appropriate
action when and if delay occurs,
Contractors should also never
underestimate that the data; resourcing
levels, duration of work operations etc etc
is also with the Engineer who will use this
against any Contractor that submits a
hasty and ill-prepared claim for what
could be a very just entitlement.
There is doubt that in the minds of the
FIDIC drafters that all involved intended to
fulfil their obligations to the standards
required and in a timeous manner but in
the event that this did not happen and
delay occurred the Engineer and the
Contractor would have a wealth of
information to hand to prepare claims for
just entitlements that could be determined
without question under Clause 20,
although that Clause is a topic for another
day.
Sadly all concerned have frailties either as
individuals and/or organisations however
this should not prevent at least the firm
foundations of good programming from
being achieved.
A final thought
Perhaps the FIDIC drafters did attend the
same lectures as it is not too difficult to see
that with any FIDIC contract there are
elements of; Forecasting, Planning,
Organisation, Motivation, Coordination,
Control and Communication…
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 7 of 8
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and
engineering industries with commercial
and dispute resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver
has developed a range of high quality
FIDIC training courses, workshops and
services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) November
2011. The title is the journal of the
Chartered Institution of Civil Engineering
Surveyors.
Permitted reproduction – quotations,
citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are
properly noted.
The rainbow suite The 1999 FIDIC suite part 3
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 8 of 8
Endnotes
1. CES is an abbreviation of the title „Civil Engineering Surveyor‟ which is the journal of the
Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group‟s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers, turbines,
generators and also ancillaries such as flue gas desulphurisation plants. Paul is a
practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver‟s international business, Phil has over twenty years industry experience
providing quantum, contractual and commercial advise to clients on major projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company‟s international business is administered from Driver‟s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 1 of 8
The rainbow suite
The 1999 FIDIC suite part 4
This is the fourth in a series of articles being published in CES1
with the post 1999 editions of
the FIDIC suite of contracts being the overall subject matter.
The first article discussed the birth of FIDIC’s rainbow suite, the second provided a brief insight
into continued growth of the rainbow, the third article looked at programming and reporting
requirements. In this, the latest article, joint authors Paul Battrick2
and Phil Duggan3
of
Driver4
look at studying project contracts themselves.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
It is easy to tell all involved with the
management of any construction project to
read and fully understand the Contract. No
matter how experienced we are there is
always the potential for an amendment to
a previous form, a new revision or an
Employer removing some well understood
elements that may fundamentally alter any
previous understanding.
Please do not adopt the attitude of “I’ve
seen that form before” or “we always do it
like this” as one particular client did to its
detriment. Whilst not involving a FIDIC
Contract the story highlights a totally
incorrect attitude to adopt; in short:
A specialist Contractor asked for
assistance, the pressure vessel it
had spent 1000s of hours
manufacturing in Europe had been
rejected at site in the Far East.
It had been rejected as it was
constructed using steel and not
stainless steel as required by the
specification.
When asked why an alternative
material was used the reply was
“we always make these vessels
from steel”.
The specialist Contractor was forced
to make a new vessel constructed
out of the specified material
resulting in losses and delay
damages being levied… a true story.
All this could have been avoided had
someone considered the pertinent
documentation.
A clause that is within most contracts that
is similarly misunderstood relates to Force
Majeure. Perceived lists of relevant events
are carried from one project to another
without considering if the events change; if
The rainbow suite The 1999 FIDIC suite part 4
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 2 of 8
the list is exhaustive, since the word
“include” is often within the clause or if the
events carry monetary entitlements as well
as time benefits.
Definitions can vary from contract type to
contract type and, in practical terms, from
work scope to work scope. Consider for
yourselves suitable definitions relative to
remeasurable and lump sum contracts and
also completion requirements for a road as
opposed to a multi phased power plant.
FIDIC conveniently provides definitions
firstly in the body of the Contract in
respect of topics:
The Contract
Parties and Persons
Dates, Tests, Period and Completion
Money and Payments
Works and Goods
Other Definitions
and also in alphabetical order noting the
particular Sub-Clause.
For the purpose of this article one
definition is selected, that of Cost. It often
has differing meanings under various forms
of Contract, especially bespoke forms, and
is often translated when claims are being
prepared to what those preparing the claim
would like it to mean.
In earlier additions of standard forms,
including FIDIC forms, whether or not the
Contractor was entitled to add profit to its
cost claims remained silent. Now in the
FIDIC forms Cost expressly excludes profit
but profit is still an entitlement under
certain circumstances as will be explained.
FIDIC defines Costs as:
“Cost” means all
expenditure reasonably
incurred or to be incurred),
whether on or off the Site,
including overhead and
similar charges, but does not
include profit.
All those dealing with entitlement (a
preferable word to claim) understand that
success depends upon the creation and
maintenance of the appropriate records
and in doing so can fulfil the requirements
of FIDIC in both submitting claim
documents and adjudicating upon those
documents. The definition of Cost provides
a starting point in respect of monetary
entitlements and clause 20 (Claims,
Disputes and Arbitration) provides the end
point; in between there are many clauses
within FIDIC which give rise to a monetary,
and often time, entitlements to the
Contractor.
It pays to understand all of these clauses
which can be classed as “claims under the
Contract” as opposed to “claims under the
governing law of the Contract”.
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Briefly, and in respect of the latter type of
claim, FIDIC does not contain an exclusive
remedies clause and also appears to
foresee such claims, but still governed by
clause 20, by the use of the word
“otherwise” within the opening paragraph
of Sub-Clause 20.1.
Below is a list of the Sub-Clauses which
entitle the Contractor to claim additional
money (and possibly time) noting when the
definition of Cost remains as per the
definition or the Contractor is also entitled
to a “reasonable profit”.
Sub-Clause 1.9 Delayed Drawings or
Instructions (Red Book only)
If delay or disruption is caused or likely to
be caused as a result of late drawings or
instructions the Contractor is entitled to
claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 1.9 Errors in the
Employer’s Requirements (Yellow Book
only)
If delay is caused or Cost is incurred as a
result of errors in the Employer’s
Requirements which were not previously
discoverable the Contractor is entitled to
claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 2.1 Right to Assess to the
Site
If delay is caused or Cost incurred as a
result of the Employer failing to give the
Contractor access to the Site at the
prescribed time the Contractor is entitled
to claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 4.7 Setting Out
If delay is caused or Cost incurred as a
result of errors in the original setting out
points and levels of reference notified by
the Engineer the Contractor is entitled to
claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 4.12 Unforeseeable
Physical Conditions
If delay is caused or Cost incurred as a
result of the Contractor encountering
physical conditions which are
Unforeseeable the Contractor is entitled to
claim:
Cost (only)
Extension of time
It is worth noting that Unforeseeable is a
defined term meaning “not reasonably
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foreseeable by an experienced contractor
by the date for the submission of the
Tender”.
Sub-Clause 4.24 Fossils
If delay is caused or Cost incurred as a
result of the Contractor’s compliance with
instructions issued by the Engineer to deal
with the discovery of fossils and the like
the Contractor is entitled to claim:
Cost (only)
Extension of time
Sub-Clause 7.4 Testing
If delay is caused or Cost incurred as a
result of testing being delayed by the
Employer or on behalf of the Employer the
Contractor is entitled to Claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 8.5 Delays caused by
Authorities
If delay or disruption is caused or Cost
incurred as a result of the actions or non
actions of Authorities the Contractor is
entitled to claim:
Cost, with or without profit, appears
not to have been specifically
considered
Extension of time
Sub-Clause 8.9 Consequences of
Suspension
If delay is caused or is likely to be caused
or Cost incurred as a result of the
Engineer’s instructions to suspend work the
Contractor is entitled to claim:
Cost (only)
Extension of time
Sub-Clause 10.2 – Taking Over of
Parts of the Works
If the Contractor incurs Cost as a result of
the Employer taking over or using a part of
the Works the Contractor is entitled to
claim:
Cost plus a reasonable profit
Sub-Clause 10.3 Interference with
Tests on Completion
If delay is caused or Cost incurred as a
result of tests being delayed by a reason
for which the Employer is responsible the
Contractor, amongst other remedies, is
entitled to claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 11.8 Contractor to Search
If the Contractor incurs Cost as a result of
searching for a defect for which it was not
liable the Contractor is entitled to claim:
Cost plus a reasonable profit
Sub-Clause 12.2 Delayed Tests (Yellow
Book only)
If the Contractor incurs Cost as a result of
carrying out Tests delayed by the Employer
until after Completion the Contractor is
entitled to claim:
Cost plus a reasonable profit
Sub-Clause 12.4 Failure to Pass Tests
after Completion (Yellow Book only)
If the Contractor incurs Cost as a result of
the Employer delaying access to allow
Tests to be carried out the Contractor is
entitled to claim:
Cost plus a reasonable profit
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Sub-Clause 13.7 Adjustments for
Changes in Legislation
If delay is caused or is likely to be caused
or Cost incurred or likely to be incurred as
a result of changes in the Laws of the
Country the Contractor is entitled to claim:
Cost (only)
Extension of time
It is worth noting that Country is a defined
term meaning the Country in which the
Site (or most of it) is located, where the
Permanent Works are to be executed.
Thus this definition is very limited in the
field of international contracting where
Contractors, Suppliers and Sub-Contractors
may all have originated from Countries
other than where the project is being
carried out and may suffer as a result of
changes in legislation.
Sub-Clause 16.1 Contractor’s
Entitlement to Suspend Work
If delay is caused or Cost incurred as a
result of the Contractor properly
suspending work (or reducing the rate of
work) the Contractor is entitled to claim:
Cost plus a reasonable profit
Extension of time
Sub-Clause 19.4 Consequences of
Force Majeure
If delay is caused or Cost incurred as a
result of Force Majeure events the
Contractor is entitled to claim:
Cost (only) in respect of the events
listed at Sub-Clauses 19.1 (ii), 19.1
(iii) and 19.1 (iv)
Extension of time
The above list is not exhaustive as to
where the Contractor can gain payments
and/or entitlements within the FIDIC
contracts; the list refers to Sub-Clauses
specifically referring to Cost as defined.
In terms of monetary entitlements, Sub-
Clauses not referenced include Evaluation
(in respect of the Red Book) and Variations
as well as Payment on Termination where
an alternative set of rules come into being.
The provisions of Sub-Clause 8.4 in respect
of extensions of time should be thoroughly
considered in respect of entitlements to
time extensions.
The subtle differences between the
contents of the listed Sub-Clauses are
interesting if not explainable. The most
interesting of which may be the addition or
not of a “reasonable profit” to the
Contractor’s Cost.
Contractors will argue that they are not
charities and all expenditure properly
incurred as a result of others deserves /
should be required to return a profit.
Similarly many of the claim events, had the
scope been fully understood at the time of
tender by both parties, would have been
included within the Contractor’s bid and the
Contractor would have had the opportunity
to add profit to its foreseen costs.
Contractors and their advisers may wish to
seek an adjustment to the definition of
Cost when negotiating the Contract in the
future.
The influence of whether or not a Cost
attracts profit may also extend to the
preparation of claims for extensions of
time. Whilst many will say that at all times
the causes of delay should be capable of
being clearly identified, this is often not the
case. There is also the propensity for
Contractors to establish claims around
events that appear to have the best chance
of success or line of least resistance from
the Engineer; perhaps even a global style
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claim is submitted to gain relief from the
deduction of Liquidated Damages.
In any event at some juncture the
Contractor and the Engineer, or perhaps a
DAB or Arbitral Tribunal, have to consider
the causes of delay, establish periods of
extension of time against those causes and
lastly establish if there are any monetary
entitlements to accompany those periods
of delay.
The addition, or not as the case may, be of
profit to a Contractor’s elements of a
prolongation claim maybe considerable
amount in these days where mega projects
exist and delays run into years not just
days or weeks. Contractors therefore may
select, if possible, delay events that could
maximise their potential financial returns.
In respect of the Contractor declaring its
required profit, it is suggested that instead
of waiting until such time as a claim exists
and the Employer and its
Engineer/Representative may be seeking to
limit expenditure against claims, the
parties follow the lead given by FIDIC
within the MDB Harmonised Edition (the
Pink Book).
The Pink Book at Sub-Clause 1.2 differs
from the Red Book by the addition of two
paragraphs, in this context the important
one being:
“In these Conditions,
provisions including the
expression “Cost plus profit”
require this profit to be one-
twentieth (5%) of this Cost
unless otherwise indicated in
the Contract Data.”
It will therefore be up to the Contractor to
consider that he may wish to declare a
higher profit than 5% at the pre-contract
stage or accept that 5% profit where
applicable on its entitlements listed with
the Contract. It may be that the
Contractor’s actual bid margin was less
than 5% and so it would gladly accept that
on offer.
A further interesting subtlety is the use or
not of the phrase is “likely to cause”. It
may have been more prudent upon the
part of the FIDIC drafters, when
considering the Employer’s interests to use
this phrase within all entitlement clauses
so as to be consistent with the early
warning obligations upon the Contractor in
terms of time within Sub-Clause 4.21 and
the general notice provisions of Sub-Clause
20.1. This may also aid the early
conclusion of claim issues.
Contractors, when drafting sub-contracts
should take note of the differing provisions
within the entitlement clauses such that
the variants, especially in respect of the
recovery of profit, are incorporated into
Sub-Contracts so as not to cause a
shortfall in recovery or lengthy discussions
concerning the right or otherwise to profit
in respect of claim monies. Although, in
practice it appears that Engineers only
deny profit on the Contractor’s element of
a claim.
It is noted that Sub-Clause 11.8 Contractor
to Search, does not give a specific
entitlement to a time extension albeit
circumstances can be imagined where a
delay to completion may occur. Under
these circumstances the Contractor has
two further options to obtain any
entitlement within Sub-Clause 8.4
Extension of Time for Completion:
Sub-Clause 8.4(b), where an
extension of time may be claimed
as a result of any cause under a
Sub-Clause of the Contract.
Sub-Clause 8.4(e), where an
extension of time may be claimed
as a result of any delay impediment
or prevention caused by or
attributable to the Employer, the
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Employer’s Personnel or the
Employer’s other contractors on the
Site.
FIDIC having been thorough in respect of
the Contractor’s claims towards the
Employer have not carried through this
thoroughness in respect of claims from the
Employer to the Contractor.
There is no definition of cost relative to the
Employer’s claims towards the Contractor
and therefore it must be left to the
Employer’s agent or the Engineer, to
determine if profit should be passed on as
a legitimate claim item.
Finally, a brief reference was made above
to claims made under the governing law as
opposed to under the Contract. This is
obviously an option open to the Contractor
however, it is considered that claims
properly made under the Contract will have
a greater chance of speedy resolution. It
may also be quite a time consuming
exercise for a Contractor to take the
necessary legal advice before commencing
a claim under the governing law. Should
this be the case the initial and fatal notice
provisions of Sub-Clause 20.1 may come
into play – a topic for another article.
Driver is the trading name of Driver
Consult Ltd, a member of Driver Group plc
(AIM: DRV). Driver Consult is the principle
trading subsidiary of the Group and has
been providing the construction and
engineering industries with commercial and
dispute resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver
has developed a range of high quality
FIDIC training courses, workshops and
services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011.
The title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction –
quotations, citations and
references
Permission is granted for short quotations
or reproduction in full provided the
authors, company and link to the source
are properly noted.
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© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2011 8 of 8
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 1 of 9
The rainbow suite
The 1999 FIDIC suite part 5
This is the fifth in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
Risk and Responsibility Clause 17 and
beyond
If the phrase risk and responsibility is
mentioned in respect of the FIDIC suite of
contracts many, possibly new to the FIDIC
forms, would consider clause 17 and
possibly 18 and 19, of the major forms and
close out their thought processes.
This article reflects upon the allocation of
risk and responsibilities within the major
forms introduced in 1999 (the Red, Yellow
and Silver Books) beyond the words
contained within clause 17; but first a
consideration of clause 17 as contained
within the Red, Yellow and Silver Books.
Clause 17 – Risk and Responsibility
This clause is typical of clauses that
allocate risk and responsibility to events
that are generally, but not always,
insurable events; the likeness to clause 18
Insurance can be readily viewed. The
wording within the three major forms is
considered to be clear and not in need of
great explanation saves for the overview
below.
Sub-clause 17.1 provides for the
indemnities that the Employer and the
Contractor must provide to each other in
case injury to people and/or property
occurs as a result of the actions of
personnel or other for which they are
responsible during the “design, execution
and completion of the Works”. Property
excludes the Works itself which is dealt
with separately at Sub-clause 17.2.
Generally unless specifically allocated to
the Employer and those defined as being
under its responsibility, events are the risk
and responsibility of the Contractor.
Sub-clause 17.2 provides for the
Contractor’s care of the Works, for which it
is fully responsible until such time as the
Taking-Over Certificate (or Taking-Over
Certificates in the case of sectional
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completion) is issued or deemed to be
issued in accordance with Sub-clause 10.1,
save for those items listed within Sub-
clause 17.3 which are Employer’s Risks.
Whilst this Sub-clause specifically deals
with the care of the Works until a Taking-
Over Certificate has been issued it does not
mention suspension by either the
Contractor or the Employer possibly
leading to termination. It is suggested that
the obligations of the Contractor to care for
the Works remain throughout a
suspension, irrespective of responsibility
for the events leading to the suspension,
until such time as work recommences and
a Taking-Over Certificate is issued or
Termination takes place and the Contractor
is released from its obligations in this
respect.
This may be considered somewhat unjust if
the Contractor has not been paid, the
Employer cannot demonstrate that it has
the arrangements in place to pay and the
suspension leading to termination is
lengthy thus resulting in a high cost burden
for say the protection of the Works
including materials stored on and off site.
The Contractor that relies upon the
argument that it was not the cause of the
suspension and consequent termination
and therefore had no responsibility to care
for the Works - may find itself unable to
justify its claims for the work completed or
partially completed and materials handed
over to the Employer should termination
take place.
Sub-clause 17.3 is entitled Employer’s
Risks which, in other words, are the risks
that the Contractor has no control over.
The Red and Yellow Books have identical
lists and it is suggested that these are
cross referenced with the list of typical
events that may be classed as a Force
Majeure within clause 19. It is also
suggested that the defined term
Unforeseeable within Sub-clause 17.3(h) is
fully understood as so many have
difficulties in separating what is unforeseen
from what is unforeseeable when making
claims.
The FIDIC guide confirms the definition of
unforeseeable to be “not reasonably
foreseeable by an experienced contractor
by the date for submission of the Tender”.
It goes on to suggest that the frequency of
natural events relative to the duration of
the Time for Completion may provide
guidance as to what should be considered
as unforeseeable. Taking this suggestion
perhaps a five minute discussion and
survey with your colleagues could take
place noting the following:
Two projects adjacent to each other;
same Contractor, Engineer and
Employer.
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Duration of project A is eight years
and project B is two years with
identical commencement dates.
Statistically the natural event
occurs every ten years.
The last event happened nine
years ago and occurred one year
after commencement of the
projects.
Which event falls within the definition of
unforeseeable?
The Silver Book has a shortened list losing
the following:
Use or occupation by the Employer
of any part of the Permanent
Works, except as may be specified
in the Contract - should this occur
it would be a breach by Employer
of Sub-clause 10.2 and therefore
not a risk.
Design of any part of the Works by
the Employer’s Personnel or by
others for which the Employer is
responsible – the Silver Book
foresees the Contractor being
responsible for the total design of
the Works, however this may be
compromised by Sub-clause 5.1
where the Employer retains some
responsibilities for information that
can affect design carried out by
the Contractor.
Any operation of the forces of
nature which is Unforeseeable –
unless such events can be justified
as being a Force Majeure such
events are deemed to be at the
risk of the Contractor.
Sub-clause 17.4 allows the Contractor to
put forward its claims in respect of time
and money in the event that the
Employer’s Risks noted within Sub-clause
17.3 result in loss or damage to the Works,
Goods or Contractor’s Documents.
As with all other claims submitted by the
Contractor in respect of a perceived
entitlement either under the Contract or by
law, the procedure within Sub-clause 20.1
must apply or the Contractor risks losing
any entitlement. The Engineer (or the
Employer in the case of the Silver Book)
must then proceed in accordance with Sub-
clauses 20.1 and 3.5 to determine any
entitlement. In terms of any monetary
entitlement the Contractor is entitled to
Cost or Cost plus a reasonable profit as
detailed.
Sub-clause 17.5 considers intellectual and
industrial property rights and provides
protection to both the Contractor and the
Employer from claims issued by third
parties related to patents, registered
designs, copyright and the like where the
intellectual or industrial property rights
have been allegedly infringed by either
party. Whilst it is suggested that the
claims procedure of Sub-clause 20.1
applies to claims made under this clause
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(line two stating “under any clause…”) the
FIDIC drafters have seen fit to repeat,
albeit in slightly different terms, the fatal
nature of a 28 day notice period should
either party wish to submit a claim.
Sub-clause 17.6 deals with the limits of
certain liabilities under the Contract.
However, it is perhaps the most important
clause that must be considered in the light
of the provision of the governing law
prescribed within the Contract. Various
jurisdictions, either common law or civil
law jurisdictions may affect matters
concerning the length of any period in
respect of defects liability, the
commencement date for such liabilities can
even negate the clause in its entirety in
respect of the limit of financial liability in
the event that gross negligence can be
established to have taken place. This
latter point being reflected within the FIDIC
forms which confirms that there is no limit
of liability “in any case of fraud, deliberate
default or reckless misconduct by the
defaulting Party”. This statement being
particularly relevant during the bid phase
and it is likely that the limit of liability to be
stated within the Particular Conditions will
be the subject of intense negotiations
between the Employer and Contractor prior
to the award of the Contract. If no sum is
agreed and stated the Accepted Contract
Amount will be the limit.
The Sub-clause is intended to limit the
Contractor’s liability towards the Employer
relative to the Contractor’s failed
performance in respect of progress
resulting in delay damages and, in respect
of the Yellow and Silver Books, inadequate
design, workmanship and the failure of
materials etc., resulting in non-
performance damages and non-availability
damages if noted within the Particular
Conditions. It also excludes any liability,
by either party, in respect of loss of use of
any Works, loss of profit, loss of any
Contract or for any indirect or
consequential loss or damage other than in
respect of a termination or indemnities as
per Sub-clause 17.1.
There is no limit of liability upon the
liability of the Employer towards the
Contractor and any limitations by the
Contractor towards the Employer excludes
the supply of utilities (Sub-clause 4.19),
Employer’s equipment and free issue
material whilst in the care of the
Contractor (Sub-clause 4.20), indemnities
(Sub-Clause 17.1) and intellectual and
industrial property rights (Sub-clause
17.4).
Risk and Responsibilities – elsewhere
The opening paragraph of this article
suggested that many people, possibly new
to the FIDIC forms, will limit their thoughts
in respect of risks and responsibilities to
clause 17 and possibly clauses 18 and 19.
Those to whom that statement may apply
are invited to consider that the contract,
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whether Red, Yellow or Silver Book, is in its
entirety a fine balance of risks and
responsibilities allocated between the
Employer (and its Engineer or
Representative) and the Contractor.
Whilst opinions may differ as to the
fairness, and validity in law, of conditions
such as the fatal 28 day notice with Sub-
clause 20.1, the FIDIC drafters will have
considered such a period in the light of
other obligations placed upon the
Contractor within the Contract; such as the
required monitoring of the programme and
related matters (as discussed in the third
article of this series).
A viewpoint being that any Contractor who
is not aware within 28 days that an event,
for which the Employer is culpable, has a
time or money impact does not deserve to
receive any entitlement!
The FIDIC suite of contracts, as with any
other contract, can be considered to be no
more than a rule book detailing the
potential consequences should a defined
event take place.
If in a game of soccer someone is caught
handling the ball the referee will give a free
kick or penalty to the other side. If at the
outset of a contract it is considered that all
of the risks and responsibilities are
allocated and the key elements of scope,
time and price are defined then any event
that may affect those key elements will
cause the applicable rules to be consulted
to establish which party is carrying the risk
of that event.
The FIDIC drafters have taken great care
when dealing with the allocation risk such
that internationally and less likely
nationally Employers and Contractors can
establish working relationships for the first
and perhaps the only time based upon a
considered set of rules.
Those rules provide some certainty at the
outset to both parties and, if triggered and
operated well, can restore certainty in
respect of the various risks and allocation
of those risks following any necessary
adjustments to all or any of the key factors
of scope, time and price.
The most obvious differences in risk
allocation between Red, Yellow and Silver
Books is in respect of design responsibility
and the consequent risks of time and
money impacts should design and
therefore scope be amended at some point
in time after the contract award.
Design can be translated to mean choice;
those with design responsibility have the
ability to choose, affect the scope and
potentially the time required to complete
the project and the price for the project.
Accordingly, and in overall terms, the risks
associated with design responsibility under
the Red Book rests with the Employer,
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whilst the Contractor carries the risks
under the Yellow and Silver Books. In all
contracts for the Contractor to gain any
entitlement it has to comply with at least
the provisions of Sub-clause 20.1 in
respect of the issue of notices and the
subsequent provision of a detailed claim.
The risk of failing to establish contractual
relationships with Sub-Contractors and
others to allow compliance with these
periods rests with the Contractor. In this
respect the periods stated within Sub-
clause 20.1 may be considered short or the
minimum required to gain adequate data
and input from others.
There are many areas that are common to
the Red, Yellow and Silver Books that
provide protection and therefore less risk
to the Contractor.
In the context of perhaps the Contractor
making a bid to perhaps a special purpose
vehicle it is important to know that that
entity cannot change overnight once the
Contract Agreement has been signed. At
Sub-clause 1.7 Assignment it is stated that
neither party shall assign the Contract or
any part of the Contract without the prior
agreement of the other Party; accordingly
the Contractor (perhaps with the most to
lose) is protected from the Employer being
changed to some party it would never have
contemplated to be its contracting partner.
The Contractor’s cash flow may be
protected to some degree by the provision
of an advance payment linked to an
Advance Payment Guarantee. However,
regular and timely payments to the
Contractor remain its lifeblood; should the
Engineer fail to certify a payment (if
appropriate) and/or the Employer fail to
make payments at the prescribed time as
per Sub-clause 14.7 the Contractor can
either reduce the rate of work or suspend
work provided not less than 21 days notice
has been given. This being in accordance
with Sub-clause 16.1. Should the
situation not change within the timescales
prescribed within Sub-clause 16.2 the
Contractor can terminate the Contract.
The option of suspension or reducing the
rate of progress followed by termination
also applies if the Employer cannot provide
“reasonable evidence that financial
arrangements have been made and are
being maintained which will enable the
Employer to pay the Contract Price (as
estimated at the time)…” as stated with
Sub-clause 2.4. It is not confirmed whose
estimated Contract Price should be used as
a reference point; the views of the
Contractor and the Employer may differ
greatly in this respect especially if the
Contractor has the tendency to inflate its
claims to unrealistic values. Nevertheless
the FIDIC drafters have made provisions to
reduce the risk of a Contractor suffering
from an uncertain payment regime.
For the purpose of this article there is one
more major factor to be considered in
The rainbow suite The 1999 FIDIC suite part 5
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 7 of 9
terms of risk allocation; that being the
ability of the Contractor to achieve
completion. It is not uncommon for
Employers to take occupation of a project
and subsequently receive income but find
reasons not to accept that the Contractor
has achieved completion as defined.
Accordingly the Employer gains income and
is possibly continuing to deduct delay
damages whilst the Contractor cannot
obtain any of the financial benefits of
attaining completion, the responsibility for
maintenance, wear and tear and the like
remain with the Contractor whilst any
defects liability period cannot commence.
The FIDIC drafters have considered such
circumstances and provided, within Sub-
clause 10.1, the ability for the Contractor
to attain Completion. Sub-clause 10.1,
states in general terms, that when the
Contractor has completed the Works (or
Sections) in accordance with the Contract
such that no minor outstanding work or
defects prevent the use of the Works for
what they were intended, the Contractor
may apply by notice to the Employer for a
Taking-Over Certificate. The Engineer (or
Employer as appropriate) will respond
within 28 days either by issuing the
Taking-Over Certificate or confirming why
no certificate can be issued. The latter
providing the criteria for the Contractor to
fulfil prior to issuing a further notice for a
Taking-Over Certificate.
Should the Engineer (or Employer as
appropriate) fail to either issue the Taking-
Over Certificate or give reasons for not
issuing the Certificate within the period of
28 days, the Taking-Over Certificate shall
be deemed to have been issued on the
twenty – eighth day.
Sub-clause 10.2 in all forms provides
further support for the Contractor by
confirming that the Employer shall not use
any part of the Works prior to Completion.
Sub-clause 10.3 within the Red and Yellow
Books gives further protection to the
Contractor. In the event that the
Contractor is prevented from carrying out
any tests necessary to attain Completion
by a cause for which the Employer is
responsible for a period of 14 days the
Employer will be deemed to have taken
over the Works and the Engineer must
issue a Taking-Over Certificate; the
relevant date being that on which the tests
would have been completed.
The defined timescales of every phase of
the dispute resolution procedure within
Clause 20 seek to offer the Contractor
some certainty and lessen risk in the event
that a DAB and Arbitration are necessary,
but they are the subject of a different
article as is the abuses to the allocation of
risk and responsibility so carefully
considered by the FIDIC drafters.
The rainbow suite The 1999 FIDIC suite part 5
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 8 of 9
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and engineering
industries with commercial and dispute
resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver has
developed a range of high quality FIDIC
training courses, workshops and services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011. The
title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction –
quotations, citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are properly
noted.
The rainbow suite The 1999 FIDIC suite part 5
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 9 of 9
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 1 of 8
The rainbow suite
The 1999 FIDIC suite part 6
This is the sixth in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
A Risk too far for the EPC Contractor
This article considers the step change in
respect of the allocation of risks between
the Yellow and Silver books of the FIDIC
1999 suite of Contracts and poses the
question for a traditional EPC contract are
those risks a step too far.
Traditionally
International contracting possess a vast
number of contractors that use the term
EPC contractor to describe how they
operate and what services they can provide
to their potential Employers; in simple
terms they Engineer or design the works,
Procure all that is necessary to complete
the works and finally Construct the works.
This regime is very similar to that utilised
by a Design and Build contractor and is
applied across the industry, typically in
sectors have some form of black box
technology or proprietary technology.
Accordingly, process plants of all
descriptions and power plants are often
constructed by and EPC contractor with the
Employer proffering a bespoke form of
contract. The Employers relative to process
and power plants are likely to be
“professional” Employers in that they will
construct a number of facilities, probably
have their own in-house as well as external
design engineers and will understand
completely what they expect from the
finished project in terms of quality of
components and production output
whether that be power, fertiliser or
whatever. The quality and maybe
consistent choice of components being
relevant to future operation and
maintenance considerations such as
costings and the length of non-productive
shutdown periods.
It is also not uncommon on mega-projects
for the Employer to commission Front End
Engineering Design or FEED whereby the
conceptual design is completed such that
the traditional EPC contractor can complete
the detailed design probably with the
Employer’s engineer retained throughout
the process.
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 2 of 8
The use of turnkey contracting has been
more associated with either the Employer
who wishes to have no part in the
construction process but wishes to have
delivered a fully operating facility, such as
a hospital with all surgical equipment,
bedding and the like provided and installed
by the Contractor such that the hospital
can function within the shortest possible
time after hand over. Alternatively this
form of procurement has been used by the
“non-professional” Employer that may only
ever require one new facility or so few new
facilities that it will have no internal
resident design functions or no ongoing
relationship with external design
consultants. The Contractor that delivers a
functioning facility to the Employer’s
requirements via a turnkey contract is
ideally suited to this type of Employer.
New Trends
Contractors have to react to the
marketplace to gain workload; similarly
FIDIC has reacted to a requirement in the
marketplace to produce the Silver Book
and provides more certainty of cost and
time and is perfectly suited to the “non-
professional” Employer who may be far
more risk averse, through a lack of
familiarity of the construction process or
the requirements of its funders, than the
“professional” Employer.
With the rise of Special Purpose Vehicles
(SPVs) relative to the renewable energy
sector there is a growing demand for
projects to be administered under the
Silver Book. It is perfectly suited; the
Employer is likely to be a “non
professional” Employer, possibly a SPV that
will only construct one bio-mass power
plant or whatever; the funders backing the
project will most likely demand certainty in
respect of cost and also the time for
completion (the latter to judge when the
income stream will commence and profits
be generated), the Employer may rely
entirely on the Contractor for all design
issues knowing only that it has a
sustainable, deliverable and, in respect of
say a bio-mass power plant, a consistent
fuel source.
Taking a bio-mass power plant as a typical
example and noting that the tradition EPC
contractor may be reacting to the market
place by developing its technology to
accommodate the various fuel sources
there will most likely be the situation
where the traditional EPC faces a Silver
Book for the very first time.
Noting that the front cover used the phrase
EPC/Turnkey Projects the Contractor may
have some pre-conceived ideas regarding
the term EPC which may be more aligned
to the Yellow Book.
The Yellow Book and the Silver Book –
a brief comparison
The notes below are in the context of
highlighting the obligations and risks a
traditional EPC contractor would face when
working under a Silver Book compared to
working under a Yellow Book.
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 3 of 8
It is worth recapping some of the selection
criteria that should be considered by an
Employer (and its advisors) when deciding
which form of contract is to be used
together with the fundamental differences
between the Yellow Book and Silver Book.
Yellow Book
Contract administered by and
Engineer.
Risks are allocated on a fair and
equitable basis.
Tender time is short (or is insufficient
to allow adequate time for the
Contractor to assess the risks it is
obliged to carry out under the Silver
Book) and details of matters such as
hydrological, sub-surface and other
matters affecting the site are not
readily available; risks therefore
remain with the Employer.
The Employer seeks a lower tender
price but accepts certain risks during
the duration of the project.
The Employer via its Engineer
requires a close relationship with the
Contractor throughout the duration of
the project including the more likely
potential to cause change to design.
It is not possible for the tenderers to
properly inspect the site or the
amount of underground work is so
significant or complex that for the
Contractor to price all risks under the
Silver Book would be both inequitable
and cost prohibitive (or a recipe for
disaster...).
Silver Book
Contract administered by the
Employer (possibly an Employer’s
Representative).
Disproportionately more risks are
allocated to the Contractor. As a
consequence the Contractor should
require more detailed data regarding
hydrological, sub-surface and other
conditions affecting the site to assess
risks; more detailed and precise
knowledge of the Employer’s
Requirements.
In order for the Contractor to
properly assess the risks it is obliged
to carry and to provide the Employer
a high degree of cost and time
certainty there should be a longer
period for preparation of a tender and
more discussion with the Employer
during that time.
The Employer accepts a higher tender
price in the knowledge that it has
fewer risks during the duration of the
project.
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 4 of 8
The Employer has no great desire to
be involved on a daily basis with the
project and is content to allow the
Contractor to take full responsibility
for the design and construction of the
project (although the reporting
procedures within both the Yellow
Book and Silver Book at Sub-Clause
4.21 remain identical – perhaps for
claims adjudication purposes as
discussed in a previous article).
From the above and previous articles it is
clear that the most significant differences
between the Yellow Book and the Silver
Book relate to the transfer of risk from the
Employer to the Contractor. The FICIC
drafters use both wholesale amendments
to Sub-clauses and subtle amendments to
phraseology to achieve their goals as
discussed below in the order the Sub-
Clauses appear in the Contracts.
Sub-Clause 1.9 Errors in the
Employer’s Requirement – Yellow
Book only
Within the Yellow Book if the error causing
the Contractor to suffer delay or incur Cost
could not have been discovered by an
experienced contractor exercising due care
when scrutinising the Employer’s
Requirements then, provided the
Contractor fulfils the requirements of Sub-
Clause 20.1, it may receive an extension of
time and Cost plus reasonable profit that it
is entitled to receive.
There is no corresponding Sub-Clause
within the Silver Book as the Contractor
takes responsibility for the accuracy of the
Employer’s Requirements as will be
discussed below.
Sub-Clause 4.7 Setting Out – Yellow
Book and Silver Book
Both Books require the Contractor to be
responsible for the setting out of all parts
of the Works based upon the information
provided within the Contract and as
subsequently provided by the Engineer
(Yellow Book).
The fundamental difference being that
within the Silver Book the Contractor also
takes responsibility for the accuracy of the
setting out data within the Contract
(meaning the Employer’s Requirements).
To carry out the necessary review during
the tender period in order to properly
judge the severity of this risk is one of the
reasons why a longer tender period is
required relative to projects being let under
a Silver Book.
The Yellow Book, since the Employer is
responsible for the accuracy of the setting
out data, allows that data either to be
noted within the Contract or issued by the
Engineer during the course of the project.
If the Contractor suffers delay or incurs
Cost as a result of any error and provided
the Contractor, as an experienced
contractor, could not have reasonably
discovered or avoid the delay or Cost then
the claims procedure of Sub-Clause 20.1 is
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 5 of 8
applied and the Engineer determines the
Contractor’s entitlements in respect of
extensions of time and Cost plus
reasonable profit.
Sub-Clause 4.10 Site Data – Yellow
Book and Silver Book
Sub-Clause 4.10 reaffirms the ethos set
out within Sub-Clause 4.7 noting, within
the Yellow Book, that the Contractor is
responsible for interpreting such data
whereas the Silver Book takes the same
statement a step further noting that “the
Employer shall have no responsibility for
the accuracy, sufficiency or completeness
of such data, except as stated in Sub-
Clause 5.1”.
Sub-Clause 4.12 Unforeseeable
Physical Conditions – Yellow Book
Sub-Clause 4.12 Unforeseeable
Difficulties – Silver Book
It is worth noting that the term
“Unforeseeable” is defined within the
Yellow Book, at Sub-Clause 1.1.6.8, to
mean “not reasonably foreseeable by an
experienced contractor by the date for
submission of the Tender”.
The definition is missing from the Silver
Book which also changes the Sub-Clause
title to be much broader than
Unforeseeable Physical Conditions to
Unforeseeable Difficulties.
Under the Silver Book the intent is clear;
the Contractor is deemed to have obtained
all necessary information to assess all
risks, considered all such information and
accepts total responsibility for having
foreseen all difficulties and has allowed,
within its Tender, sufficient time and funds
to carry out the Works. Sub-Clause 4.12(c)
stating “the Contract Price shall not be
adjusted to take account of any unforeseen
difficulties or costs”.
The only possibility for the Contractor to
perhaps recover Cost (under certain
circumstances) or gain an extension of
time is if the event is of such magnitude
that it can be considered to fall within the
definition of a Force Majeure (Clause 19).
Sub-Clause 5.1 Design – Yellow Book
and Silver Book
The regime, in simple terms, is that the
Contractor is responsible for designing the
Works to meet the needs of the Employer
as stated within the Employer’s
Requirements. Should the Contractor, after
scrutinising those requirements, finds
errors, those errors can be accepted and
remedied by the Engineer in the form of a
Variation. The Contractor would then apply
the appropriate procedures within Clauses
13 and 20 to gain its entitlements in terms
of time and/or money.
The fundamental difference within the
Silver Book is that the Contractor takes
responsibility for the Employer’s
Requirements including design criteria and
calculations with only certain exceptions for
which the Employer is responsible those
being:
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 6 of 8
a) “portions, data and information
which are stated in the Contract as
being immutable or the
responsibility of the Employer,
b) definitions of intended purposes of
the Works or any parts thereof,
c) Criteria for the testing and
performance of the completed
Works, and
d) portions, data and information
which cannot be verified by the
Contractor, except as otherwise
stated in the Contract”.
Accordingly the Contractor is responsible
for the incompleteness, any error, any
inaccuracy or omission of any kind in the
Employer’s Requirements as included in
the Contract (except the reasons noted
above) in addition to its responsibility for
the design of the Works.
Whilst not perhaps relevant to this Sub-
Clause it is worth noting that the Priority of
Documents (Sub-Clause 1.5) ranks the
Employer’s Requirements above the
Contractor’s Tender.
Once again Employer’s must give
Contractors the time to allow a full
investigation and study of the Employer’s
Requirements at the time of tender, not to
do so will or should only lead to bills being
inflated (for good reasons) to cover the
risks that the Employer wishes to pass on.
Conclusions
Employer’s who choose to employ the
Silver Book should do so after careful
consideration and careful selection of
Contractor’s to submit bids.
The Employer should respect the
considerable amount of work that is
necessary for a Contractor to properly price
the risks it is obliged to take on board and
limit the numbers tendering to the
minimum to obtain competitive bids.
Employers must realise that the price they
will pay for risk avoidance will be high
potentially higher than the overall cost of
the same project constructed under a
Yellow Book.
Contractor’s familiar in carrying out works
under EPC Contracts, often bespoke in
nature, must understand the differences
contained within the Silver Book and
educate their sales departments to raise a
red flag when an Employer proffers a
contract under a Silver Book.
Above all both Parties should know the
Contract, recognise and manage the risks
to avoid disputes!
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 7 of 8
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and engineering
industries with commercial and dispute
resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver has
developed a range of high quality FIDIC
training courses, workshops and services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011. The
title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction –
quotations, citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are properly
noted.
The rainbow suite The 1999 FIDIC suite part 6
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 8 of 8
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 1 of 8
The rainbow suite
The 1999 FIDIC suite part 7
This is the seventh in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
The Gold Standard
This article considers elements of the FIDIC
Gold Book relative to the submission of
claims, predominately by the Contractor
but also by the Employer, and compares
the procedures with those contained within
the Red, Yellow and Silver Books.
It has been suggested that since the Gold
Book was issued some nine years later
than the various books issued in 1999 that
its provisions represents current day
thinking within the minds of the FIDIC
drafters and may be the blueprint for
revisions to the First Editions to the 1999
books.
The Gold Book – a brief recap
It should be recalled from a previous article
that the Gold Book is to be used in a
“green field” situation where the Employer
wishes to employ a single Contractor to
design, build and subsequently operate the
completed construction project for a period
of 20 years.
Whilst the Gold Book has been likened to a
Yellow Book (the design and build form)
with an added operate and maintenance
contract blended within, it contains many
differences to the Yellow Book in addition
to the obvious entirely new provisions
which deal with the suggested period of
twenty years for operation and
maintenance.
It has been suggested, in some quarters,
that the form should actually have been a
Yellow Book with an optional annex
containing the operation and maintenance
provisions. This would have provided
familiarity to all parties working with the
contract but FIDIC would have lost the
opportunity to showcase (and receive
industry feedback on) its potential
revisions to the Yellow and other books
within its family of contracts.
The most relevant provision to have in
mind when considering this article is that
the DAB for the construction period is of
the standing variety comprising of three
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 2 of 8
members and that it is obliged to visit the
Site at intervals of not more than 140
days. The provision of a standing DAB no
doubt fuelling the debate as to whether
such a DAB aids dispute avoidance by the
regular visits and discussing at Site an
agenda prepared with the input of itself
and the Employer and the Contractor or
not.
The Gold Book – Clause 20 provisions
When comparing the provisions of Clause
20 within the Gold Book with the Yellow
and other major forms issued in 1999 the
most obvious change is the physical layout.
Sub-Clause 20.1 (Contractor’s Claims) has
a completely new format; the use of
referenced sub-paragraphs makes the
clause much easier to consider than the
alternative style of a series of paragraphs
under the Sub-Clause heading.
Sub-Clause 20.2 (Employer’s Claims) is a
new clause in this location in that within
the other books, Employer’s Claims are
dealt with as Sub-Clause 2.5. Even though
the location has changed the overriding
principles have not. Whilst the Contractor
in all FIDIC forms has strict provisions to
follow with the claims procedure, the
Employer can submit its Notice to the
Contractor “as soon as practicable” after
the Employer becomes aware or should
have become aware of the relevant event.
The particulars of the claimed amount has
neither to be submitted within any stated
timetable nor to any given standard.
In terms of purely layout there is the
introduction of new clauses relevant to
Avoidance of Disputes (Sub-Clause 20.5)
and Disputes Arising during the Operation
Service Period (Sub-Clause 20.10); the
former being relevant to the standing
nature of the DAB and the latter relating to
post issue of the Commissioning Certificate
effectively ending the consortium phase of
the project.
It is however the provisions of Sub-Clause
20.1 (Contractor’s Claims) that have and, if
they form the basis for future editions of
other books, will be the cause of significant
debate for many a while to come.
Whilst not wishing to detract from a future
detailed review of the current provisions of
Sub-Clause 20.1 within the major books
issued in 1999 the provisions are in
essence:
The Contractor has to submit its
Notice of a claim for time and/or
money within the stated period;
failure to do so blocks the
Contractor from pursuing its claim
any further.
The Contractor has to submit its
fully detailed claim within the
stated period, failure to do so may
be taken into account to which the
failure has prevented or prejudiced
the proper investigation leading to
the determination of the claim.
Depending upon which book is
being considered, the Engineer or
Employer’s Representative has a
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 3 of 8
stated period to consider the
Contractor’s fully detailed claim
and respond with approval or
disapproval together with detailed
comments.
A determination in accordance
with Sub-Clause 3.5 to confirm the
approval of the Contractor’s claim
noting the extension of the Time
for Completion and/or any
additional payment which the
Contractor is entitled.
Within the Gold Book, at Sub-Clause
20.1(a), the initial Notice that has to be
provided by the Contractor has to be
submitted within 28 days after the
Contractor became aware, or should have
become aware, of the event that, in the
Contractor’s opinion has led to a situation
where it is entitled to an extension of the
Time for Completion and/or additional
payment.
Failure by the Contractor to issue this
Notice renders the claim time barred; in
the simplest of terms the Contractor loses
its right to make a claim.
There are those within the industry,
notably within the Contracting fraternity,
that consider this fatal notice clause to be
totally unfair and unduly harsh and a
diversion to the smooth running of the
project and relationships between the
contracting parties since such a clause
promotes a Notice being submitted at the
merest hint of a potential claim. It is true
that Contractor’s are required to issue such
protective Notices.
It is also stated that in some jurisdictions
such a fatal Notice clause may be contrary
to the intent of the relevant Law. Such a
statement reinforces the necessity to
consult a lawyer totally familiar with the
Law governing the Contract before entering
into any Contract. In principle the
enforceability of a fatal notice clause has
had support with some courts since it
contradicted the prevention principle; as
noted above when matters stray into the
influence and interpretation of law a lawyer
should be consulted to obtain the most
relevant advice to the situation being
encountered.
The FIDIC drafters, within the Gold Book,
have perhaps had half an ear leaning
towards those who consider that fatal
notices are unjust since they have
introduced a potential opportunity for the
Contractor to be able to proceed with its
claims despite not having submitted a
Notice within the required time period.
The solution being a referral to the DAB
should the Contractor consider that there
were circumstances to justify the late
submission of the Notice. The DAB has the
authority to override the 28 day time limit
if it considers it fair and reasonable to do
so.
In this respect it should be remembered
that, under the Gold Book, the DAB is of
the standing variety and accordingly it will
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 4 of 8
have had the benefit of regular site visits,
possible discussions with the Parties and
the Employer’s Representative concerning
the event and potentially an early sight of
relevant documentation such that a swift
decision can be made one way or the
other.
It remains to be seen whether or not a
standing DAB will actually encourage
disputes of this (or any) nature. Some of
those who consider that the fatal Notice
provisions are unjust would avoid this
second bite of the cherry as not being the
solution, stating that the most equitable
way forward is to remove the fatal nature
of the Notice and replace it with sanctions
against the Contractor should late
submission prejudice the Employer. The
FIDIC drafters have compromised, to an
extent, but firmly believe that the
professional Contractor should be aware of
the impacts of any event within 28 days.
The debate will no doubt continue.
Following submission of the Notice the
Contractor must keep, at site unless
otherwise agreed, such contemporaneous
records as may be necessary to
substantiate its claim as required by Sub-
Clause 20.1(b). It is suggested that the
professional Contractor will have the
majority of such records in place in any
event and may only need to focus those
records upon the relevant event. The
Employer’s Representation may also
instruct the Contractor to keep specific
records and monitor those being kept by
the Contractor; these actions do not count
as an admission of liability. Clearly at this
juncture there should be dialogue between
the Contractor and the Employer’s
Representative and it is suggested that the
Contractor, since it wants or needs
something, takes a pro-active stance and
actually asks if the records being
maintained are adequate such that a
determination can be made or is there any
other type of record that would assist the
determination to be made in accordance
with Sub-Clause 3.5. Such an action may
aid the swift resolution of the quantum of a
Contractor’s claim should there be an
entitlement.
The Gold Book goes on within Sub-Clause
20.1(c) where it again differs from the
major books issued in 1999. Within 42
days after the Contractor became aware
(or should have become aware) of the
event or circumstance giving rise to a claim
for an entitlement the Contractor must
send to the Employer’s Representative a
fully detailed claim which includes all
supporting particulars of the contractual
basis for the claim plus any delay analysis
or quantum evidence as appropriate.
There are relaxations to the 42 days if
allowed by the DAB pursuant to an
extension of the original 28 day Notice or if
agreed between the Contractor and the
Employer Representative who may also ask
for further supporting particulars.
Accordingly a Contractor may have as little
as 14 days (42-28) after it became aware
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 5 of 8
of an event to submit its fully particularised
claim. If the event continues the first fully
detailed claim must still be submitted
within the stated period but it will be
considered as an interim claim. The
Contractor must submit further claims at
28 day intervals until such time as the
event has finished giving rise to a claim.
A further new concept is also introduced by
the FIDIC drafters at this point in the
timeline in respect of claims submission
and determination. If the Contractor fails
to submit a fully particularised claim that
establishes the contractual or other basis
of the claim within the 42 day limit (or
extended limit) then the original 28 day
Notice as per Sub-Clause 20.1(a) shall be
deemed to have lapsed, and the claim will
not be accepted or considered since the
Notice will no longer be considered valid.
As with the original Notice, the Contractor
can apply to the DAB if it considers there
are circumstances which warrant an
extension to the 42 day period and the
Employer’s Representative has rejected the
Contractor’s request for the said period to
be extended.
Within the FIDIC guide to the Gold Book it
is recognised that the provision of “a fully
detailed claim which includes fully
supporting particulars of the contractual or
other basis of the claim and of the
extension of time and/or additional
payment claimed” within a 42 day period
“is a far-reaching requirement” and “it is
therefore not sufficient to simply make a
brief reference to the Clause under which
the claim is being made”.
No matter how professional a Contractor
maybe it may often prove difficult to
gather all relevant information within the
42 day period, especially if the Contractor
has to rely upon a chain of third parties,
such as Sub-Contractors and their
suppliers, to provide basic information and
potentially involve lawyers to advise upon
the contractual or other basis of the claim.
The debate regarding the fundamental
right of a Contractor to make a claim being
negated by a time bar clause will no doubt
again rise and this second time bar may
also give rise to an element of subjectivity,
since the Employer’s Representative
appears to have the power to decide if the
Contractor has established its contractual
basis of the claim in deciding whether or
not the original notice has lapsed.
It is hoped that FIDIC intend the deemed
lapse of the original notice only to apply to
the Contractor establishing its contractual
or other basis of its claim and not, having
established such a basis, to the value of
the supporting documentation to establish
the quantum of the claim in terms of time
and/or money.
The late submission of details being met
with the same sanction as within the 1999
major books.
In this respect however the writer has
viewed an amendment to the standard
form that adds the phrase “to the
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 6 of 8
satisfaction of the Employer’s
Representative in respect of the
contractual or other basis and particulars
of claim” within the Sub-Clause to abuse
the apparent power of the Employer’s
Representative.
Sub-Clause 20.1(a) details the time period
that the Employer’s Representative has to
respond to the Contractor’s claim both
establishing the contractual or other basis
and particularising the claim. There is a
mandatory 42 day period for the
Employer’s Representative to respond to
the contractual or other basis of the claim
however, by requesting further particulars
it is suggested that the same 42 day period
for replying to the quantum of the claim
may be extended. In giving its decisions
the Employer’s Representative must use
the provisions of Sub-Clause 3.5
(Determinations).
However, if the Employer’s Representative
fails to adhere to the timetable and fails to
respond to at least whether or not the
Contractor has established a contractual or
other basis of its claim either the
Contractor or the Employer may consider
the claim has been rejected by the
Employer’s Representative.
Whilst the Gold Book allows either Party to
refer the matter to the DAB it is more likely
to be the Contractor after its claim has
been rejected on the basis of the
Employer’s Representative failing to
respond in due time. The FIDIC drafters
apparently see the instant submission of a
claim by the Contractor to the DAB as a
more beneficial situation for the Contractor
than waiting and waiting for a
determination from the Employer’s
Representative.
Whilst on the face of it the default of the
Employer’s Representative and the other
provisions of Sub-Clause 20.1 may lead to
more issues ending up with the DAB it
would appear that the FIDIC drafters have
attempted to provide an overall timetable
(adequately noted within the Flow Charts
at page 9 of the book) for the resolution of
Contractor’s claims. Certainly to succeed
the Contractor has to be able to establish
its claims swiftly and with all
particularisation!
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 7 of 8
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and engineering
industries with commercial and dispute
resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver has
developed a range of high quality FIDIC
training courses, workshops and services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011. The
title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction –
quotations, citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are properly
noted.
The rainbow suite The 1999 FIDIC suite part 7
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 8 of 8
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 1 of 8
The rainbow suite
The 1999 FIDIC suite part 8
This is the eighth in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
Contract Administration
Some background thoughts
In this article the administration of a
contract is considered; firstly in very
organic terms and secondly placing that
role into the framework of some of the
FIDIC books.
For ease and convenience, and at least for
the first part of this article, the term
Engineer is used to mean the entity that
assists the Employer with whatever tasks
are required. It is recognised that some
“professional Employers” will have such in
house resources.
It is considered that any project has two
distinct phases that represent pre and post
contract; these phases could be called the
procurement and construction phases.
An Engineer is likely to be involved during
the procurement phase assisting the
Employer with the many tasks that have to
be fulfilled prior to forwarding the invitation
to tender to any number of would be
Contractors.
Perhaps the first of those tasks can be
called establishing what is to be procured
and may include:
Identifying the exact scope of the
project and carrying out feasibility
studies.
Establishing a suitable location and
liaising with local authorities to gain the
necessary approvals and consents.
Organising any investigations that are
necessary such as tests relative to
ground conditions.
Provide advice in respect of a
procurement strategy and selection of a
suitable form(s) of contract to match
that strategy whether it be a single
contractor, multiple package contractors
or other procurement routes always
considering which party will be
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responsible for the design of the project
and where other risks will fall.
Preparing design documents to
whatever level is required; perhaps full
design or outline design on a basis for
the preparation of the Employer’s
Requirements.
Providing advice regarding the likely
time span of the construction phase
together with costing advice such that
the Employer may create an overall
budget for the project and any other
associated costs to ensure completion of
a functioning project.
Liaison with those providing the funds
for the project whether from internal or
external sources including the provision
of cash flow forecasts.
Provide advice in respect of suitable
Contractors to be sent invitations to bid.
Preparation of documents forming the
invitation to bid in both technical and
commercial/contractual terms. The
latter after having providing advice as to
the most suitable form of Contract to be
used to meet the overall procurement
strategy.
Review the bids received from the
numerous Contractors, take part in
negotiations to arrive in the selection of
the most appropriate Contract.
Preparation of the documentation to
form the Contract.
The above selection of tasks is not
unremarkable and is typical of the tasks
carried out by an Engineer relative to any
project whether it be ultimately procured
using designs created by the Engineer or
whether the Contractor designs the project
based upon the Employer’s Requirements.
It is clear that during this procurement
phase that the entity that provides the
Employer with such assistance will have
gleaned a tremendous amount of
knowledge relative to the project and in
most circumstances (especially if that
entity was an external firm) the Employer
will want to retain that knowledge and
have the entity administer the Contract.
Indeed the Employer may have always
considered using the same Engineer for
both the procurement and construction
phases of the project and used the FIDIC
White Book as the form of contract
between these two parties. The White Book
recognises such an appointment within its
foreword where it is noted that the White
Book is suggested for use in respect of pre-
investment and feasibility studies, design
and administration of construction and
project management, both for Employer-
led design teams and for Contractor-led
design teams under Design and Build
procurement.
It is clear therefore that FIDIC foresaw the
use of the White Book in respect of the Red
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 3 of 8
and Yellow Books of the first issued major
forms but perhaps not the Silver Book. It is
also clear that the Red and Yellow Books
have an Engineer within their provisions
whereas the Silver Book utilises, for good
reasons, the term Employer’s
Representative.
The function within the Red and
Yellow Books
This article continues by discussing the
Engineer’s role relative to the Red and
Yellow Books but in doing so merely notes
that the role within Red Book contracts is
also to design the Works on behalf of the
Employer whereas in both the Red and
Yellow Books the Engineer is to administer
the Contract on behalf of the Employer.
As noted in a previous article the 1999
suite of Contracts amended the traditional
and sometime controversial role of the
Engineer being the pre-arbitral decision
maker in respect of disputes between the
Parties by installing the Dispute
Adjudication Board as the pre-arbitral
decision making body should either Party
dispute any determination made by the
Engineer, who now acts officially as the
agent of the Employer.
It is an anathema in the eyes of many that
the FIDIC drafters can suggest that the
Engineer can also act as the DAB and
review its own decisions made whilst acting
as the Employer’s agent. That is perhaps a
topic to be considered in a later article.
The Engineer is defined in the Red and
Yellow Books at Sub-Clause 1.1.2.4 as the
person appointed by the Employer to act as
the Engineer for the purposes of the
Contract and named in the Appendix to
Tender, or other person appointed from
time to time by the Employer and notified
to the Contractor under Sub-Clause 3.4
[Replacement of the Engineer]
From this definition it is important to note
that the Engineer should be appointed
during the procurement or pre-contract
phase such that full details can be provided
to the Contractor within the Appendix to
Tender.
Contractors need to know which firm
and/or individual will administer the
Contract since the choice of Engineer may
influence the Contractor’s pricing strategy
or at least be taken into account when
considering the risks associated with the
Construction phase.
Engineers, just like Contractors, have
reputations in respect of the quality and
manner they carry out their obligations.
For instance to work with an Engineer who
has a reputation of being difficult to
convince that a Contractor has an
entitlement to an extension to the Time for
Completion may lead a Contractor to price
the risk of Delay Damages being deducted.
It is an obligation upon the Employer to
appoint an Engineer as noted within Sub-
Clause 3.1 and therefore it is also an
obligation for the Employer to maintain an
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 4 of 8
Engineer throughout the course of the
project, including the appointment of a
replacement if necessary, for not to do so
would make the Contract unworkable since
there is no provision for any body
(especially the Employer) to take over the
duties of the Engineer.
Constraints upon the Engineer’s
Powers
However, the Employer may restrict the
powers of the Engineer by requiring the
Engineer to seek the Employer’s approval
prior to making certain determinations.
Any such constraints are to be noted within
the Particular Conditions such that once
again the Contractor has the opportunity to
consider the matter when calculating its
bid.
The FIDIC guide also notes words of
caution for the Employer when considering
what constraints, if any, to place upon the
Engineer noting that “When deciding which
constraints to list in the Particular
Conditions, the Employer should take
account of the likelihood of the Contractor
being entitled to recover the additional
costs he incurs whilst the Engineer awaits
the Employer’s written approval”.
It is suggested that the FIDIC guide should
have mentioned time implications in
addition to cost implications caused by the
Employer causing the Engineer to fail in
responding to the Contractor within a
prescribed time or reasonable time.
It should also be noted that should the
Engineer issue a reply or determination in
respect of a matter where the Employer’s
approval is required such approval is
deemed to have been obtained. If it has
not been obtained the Engineer may be in
breach of the terms of its agreement with
the Employer.
It is not uncommon to see lengthy lists of
constraints placed upon the Engineer
relative to the Sub-Clauses most likely to
give reason for the Engineer to determine
that the Contractor is entitled to additional
Costs and/or extensions to the Time for
Completion. The controlling nature of the
Employer should be thoroughly considered
when deciding if the project is actually
going to conclude successfully and without
recourse to formal dispute resolution.
Constraints - maybe influenced by the
Pink Book
It is understood that, at the request of
banks and funding agencies the FIDIC
drafters within the Multilateral
Development Bank version of the Red Book
(the Pink Book) have actually including
constraints within the General Conditions
where the Engineer is required to obtain
the Employer’s prior approval before taking
actions:
Sub-Clause 4.12 – agreeing or
determining an extension of time or
additional cost relative to unforeseeable
physical condition.
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 5 of 8
Instructing a Variation under Sub-Clause
13.1 except when an emergency exists
in the opinion of the Engineer or when
the value of the Variation is less than
the percentage specified in the Contract
Data.
Approving a Variation proposed by the
Contractor in accordance with Sub-
Clause 13.2
Specify the amounts to be paid in the
applicable currencies in accordance with
Sub-Clause 13.4.
It is hoped that future editions of the FIDIC
books do not follow the desires of funders
and that Employers also choose not to
constrain their chosen Engineers and
perhaps take note of the suitable warning
within the FIDIC Guide which states:
“When examining the tender documents
and considering the role of the Engineer,
tenderers may take account of such
matters as:
the Engineer’s technical competence and
reputation, particularly in relation to
reviewing Contractor’s Documents.
the degree of independence indicated by
the status of the appointed Engineer,
namely whether he is an independent
consulting engineer, and
the practical consequences of any
constraints on the Engineer’s authority”.
The FIDIC Guide also clarifies that
independent means independent from the
Employer. Clearly whilst acting as the
Employer’s agent the FIDIC drafters expect
the Engineer to act at least fairly in
carrying out its wide range of duties.
Fair play required
For Contractors it is most important that
the Engineer acts fairly when considering
matters that have an impact upon the
Contractors ability to proceed in a manner
the Contractor foresaw when pricing its
tender and recognising that when this
“economic path” is affected by matters
outside of the Contractor’s risk area that
the Engineer recognises in a timely fashion
the entitlements properly demonstrated by
the Contractor.
The FIDIC Books do not write a job
specification for the Engineer; at Sub-
Clause 3.1 it is confirmed that the Engineer
“shall carry out duties assigned to him in
the Contract,” and further, “The Engineer’s
staff shall include suitably qualified
engineers and other professionals who are
competent to carry out these duties.”
Since the Engineer is not a party to the
Contract it has no authority to amend the
Contract, also as confirmed within Sub-
Clause 3.1 however, the authority (unless
constrained) to issue Variations does give
the Engineer the authority to amend the
scope of the Works. It perhaps goes
without saying that only the Employer can
terminate the Contract under Sub-Clause
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 6 of 8
15.2 although the Engineer may well be
instrumental in that event taking place.
In essence the Engineer under the Red and
Yellow Books is likely to be an independent
consulting engineering practice that has
been involved in the project since its
inception and will be involved until the
close out of all technical and financial
matters.
Contract Administration under the
Silver Book
The Silver Book (Conditions of Contract for
EPC/Turnkey Projects) foresees a different
regime that, in reality, and in practical
terms may not be so different during the
construction phase.
During the procurement phase it is highly
likely that the Employer will employ an
independent consulting engineering
practice to assist in the matters noted
above leading to the issue of the tender
documents to the various Contractors
expected to make a bid.
The same entity would most likely assist
with the lengthy negotiations expected
under a Silver Book to arrive at a Contract
of mutual understanding. However, once
the contract has been awarded that same
entity may disappear completely since
unlike the Red and Yellow Books the
administration of the Contract is
undertaken by the Employer and not the
third party Engineer.
The Silver Book gives the Employer the
ability to appoint, at any time, an
Employer’s Representative to act on the
Employer’s behalf as prescribe within Sub-
Clause 3.1. It is suggested by this Sub-
Clause that it is the standard or norm that
“the Employer’s Representative” shall be
deemed to have the full authority of the
Employer under the Contract, except in
respect of Clause 15 [Termination by the
Employer].
In simple terms, with the exception of
Clause 15, whenever the Silver Book states
“Employer” this can be replaced by
“Employer’s Representative.”
Some final thoughts:
The FIDIC drafters have standardised
many of the clauses within the 1999
suite such that the wording is identical
save for Engineer versus Employer (read
also Employer’s Representative).
An Employer who has used the services
of an independent consulting
engineering practice throughout the
procurement phase is likely to appoint
the same entity to administer the
Contract under a Red, Yellow or Silver
Book.
Independent consulting engineering
practices will use the same staff whether
they are acting as Engineer or
Employer’s Representative such that the
differences between the administration
of a Yellow Book and a Silver Book
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 7 of 8
become blurred until the differing risk
allocations enter the fray.
Using the term Employer’s
Representative within the Gold Book for
an entity with a different profile from
the Employer’s Representative within
the Silver Book may lead to
misunderstandings.
Driver is the trading name of Driver Consult
Ltd, a member of Driver Group plc (AIM:
DRV). Driver Consult is the principle trading
subsidiary of the Group and has been
providing the construction and engineering
industries with commercial and dispute
resolution services since 1978.
During the last year over 2000 engineers,
surveyors and commercial managers have
attended Driver breakfast seminars in the
UK alone. In response to demand Driver has
developed a range of high quality FIDIC
training courses, workshops and services.
For details please contact us at
or call +44 (0) 20 7247 4989
This article was first published in ‘Civil
Engineering Surveyor’ (CES) Sept 2011. The
title is the journal of the Chartered
Institution of Civil Engineering Surveyors.
Permitted reproduction –
quotations, citations and references
Permission is granted for short quotations or
reproduction in full provided the authors,
company and link to the source are properly
noted.
The rainbow suite The 1999 FIDIC suite part 8
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 8 of 8
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 1 of 8
The rainbow suite
The 1999 FIDIC suite part 9
This is the ninth in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
Cash flow is lifeblood
Lord Denning is quoted as saying “There
must be cash flow in the building trade. It
is the very life blood of the enterprise”.
There has probably never been a more
relevant statement within any industry in
today’s troubled times.
The statement was made in the 1970s and
referred to the cash flow of a Contractor.
It is suggested that the cash flow of all the
parties (and advisers’) is equally important
recognising however that it is the
Contractor’s cash flow that is at the
greatest risk since it takes on the role of
funder when carrying out work that may or
may not be claimable but is required to
complete the Works.
However, it should be considered and
understood that cash flow is important,
albeit in different ways perhaps, to both
the Employer and the Engineer (and any
other adviser to the Employer).
The Employer may have to fund the project
and only be able to commence repaying
the debt it is incurring when the Works are
completed and revenue starts to flow. This
being typical of toll roads, power-plants
and many petro-chemical facilities. In
respect of these types of projects the
Employer has a desire to see completion
attained at the prescribed time and the
final account settled swiftly such that it can
complete its financial accounts timeously
and comprehend just how and when actual
profits will be made.
The Engineer too will have an incentive to
see the final account settled as soon as
possible after the completion of the Works
since it will wish to re-allocate its personnel
to other projects having completed its
tasks with the minimum use of resources;
especially, as still happens, if the
Engineer’s fees were a percentage of the
amount paid to the Contractor.
It can be seen therefore that all those
involved have an incentive to conclude all
issues swiftly to maximum cash flow and
more importantly for the future of any
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business; generate profit. Indeed all those
involved crave certainty of financial
outcome of any project by, in the perfect
world, having the final account completed
and agreed on the day the Works are
completed.
There is very rarely the perfect world
scenario; instead Contractor’s often face an
uphill battle to have work valued and
claims determined. Engineers expend
countless man-hours rebutting claims
possibly because, if certified, they will have
recognised payments to the Contractor
beyond the amount stated to the Employer
within budgets; the budgets upon which
the Employer obtained its funding. The
Employer can perhaps do no more than
watch from the side-lines and wait for its
project to be completed whilst paying the
bills and wonder when income will be
generated.
A culture of helping others to help you,
actioned by all involved to provide more
certainty of financial outcome and
enhanced cash flow, at least for some,
along the way may seem fanciful but it is a
philosophy that Contractors should adopt
towards Engineers (and the Employers
where appropriate) and in fact is probably
a requirement within the FIDIC Books; the
adage that any Contractor should keep
records, records and more records is never
far from the truth…
Utilising The Red Book…
The Red Book is commonly thought of as a
remeasurement Contract in that the
majority of the Contract Price consists of
work described with a Bill of Quantities or
some other form of schedule that when
executed has to be measured to ascertain
the exact quantities of work undertaken.
Provided the circumstances under which
the work was undertaken remains largely
as intended, the rates within the Bill of
Quantities or schedules will be applied to
the actual, and hopefully easily agreed
quantities. For this latter reason some call
this form of Contract a unit rates Contract.
Sub-Clause 12.1 prescribes what should
happen to the Works that have to be
remeasured:
Whenever the Engineer requires
any part of the Works to be
measured, reasonable notice shall
be given to the Contractor’s
Representative, who shall:
a) promptly either attend or
send another qualified
representative to assist the
Engineer in making the
measurement, and
b) supply any particulars
requested by the Engineer.
The gist of these provisions is that the
Engineer takes the lead in respect of the
remeasurement; should the Contractor not
send a representative to assist the
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© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 3 of 8
Engineer’s measurements must be
accepted as accurate.
Further, if the part of the Works to be
remeasured is to be remeasured from
records (assumed to be drawings in the
main, but also the records such as piling
logs) then these records “shall” be
prepared by the Engineer. The Contractor,
when requested, shall attend to examine
and agree the records with the Engineer,
signing the records when agreed. Failure
to attend renders the Engineer’s
measurements as being accurate.
Should the Contractor disagree with the
records/measurements it must give notice
noted in what respects the records are
considered to be inaccurate. The Engineer
subsequently must review the records and
either confirm or vary them. The
Contractor has 14 days after being
requested to examine the records to give
such a notice.
Failure to do so and the records are
deemed to be accurate and incapable of
being challenged at a later date.
The final Contract Price is accordingly built
up month by month in accordance with the
measurement procedures above and other
elements that where the Contractor has an
entitlement.
In respect of measured works it may be
that the circumstances under which the
project was priced may have changed or
the work was not foreseen. Sub-Clause
12.3 of the Red Book notes such
circumstances:
(a) (i) the measured quantity of
the item is changed by
more than 10% from the
quantity,
(ii) this change in quantity
multiplied by such
specified rate for this item
exceeds 0.01% of the
Accepted Contract
Amount,
(iii) this change in quantity
directly changes the Cost
per unit quantity of this
item by more than 1%,
and
(iv) this item is not specified in
the Contract as a “fixed
rate item”;
or
(b) (i) the work is instructed
under Clause 13
[Variations and
Adjustments],
(ii) no rate or price is
specified in the Contract
for this item, and
(iii) no specified rate or price
is appropriate because the
item of work is not of
similar character, or is not
executed under similar
conditions, as any item in
the Contract.
The rainbow suite The 1999 FIDIC suite part 9
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 4 of 8
Each new rate has to be derived from any
relevant rates and prices in the Contract
with reasonable adjustments to take
account of the circumstances giving rise to
the change. If there are no suitable rates
to be adjusted then a new rate or price
must be determined. The new rate or price
“shall be derived” from the reasonable Cost
of carrying out the work plus profit taking
into account all relevant matters.
The valuation of Variations contains
identical provisions. Whether the Variation
is the direct result of an instruction issued
by the Engineer (possibly following a
request for a proposal from the Contractor)
or following a request by the Contractor to
submit a proposal to benefit the Employer
which results in a Variation being
instructed, new rates or prices may have to
be determined by the Engineer. Any such
Variation must be valued under the
provisions of Clause 12 as previously
discussed.
As previously noted measured work,
Variations and other entitlement all add
into monthly payment applications which
finally derive from the Contract Price. The
rules in respect of the issue of Interim
Payment Certificate are prescribed within
Clause 14; Sub-Clauses 14.3 and 14.5 are
of particular interest.
Sub-Clause 14.3 notes that “The
Contractor shall submit a Statement in six
copies to the Engineer after the end of
each month, in a form approved by the
Engineer, showing in detail the amounts to
which the Contractor considers himself to
be entitled, together with supporting
documents which shall include the report
on the progress during this month in
accordance with Sub-Clause 4.21 [Progress
Reports].”
Further the Statement has to include, as
applicable, in the sequence listed:
(a) the estimated Contract value of
the Works executed and the
Contractor’s Documents produced
up to the end of the month
(including Variations but excluding
items described in sub-paragraphs
(b) to (g) below);
(b) any amounts to be added and
deducted for changes in legislation
and changes in cost, in accordance
with Sub-Clause 13.7
[Adjustments for Changes in
Legislation] and Sub-Clause 13.8
[Adjustments for Changes in
Cost];
(c) any amount to be deducted for
retention, calculated by applying
the percentage of retention stated
in the Appendix to Tender to the
total of the above amounts, until
the amount so retained by the
Employer reaches the limit of
Retention Money (if any) stated in
the Appendix to Tender;
(d) any amounts to be added and
deducted for the advance payment
and repayments in accordance
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© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 5 of 8
with Sub-Clause 14.2 [Advance
Payment];
(e) any amounts to be added and
deducted for Plant and Materials in
accordance with Sub-Clause 14.5
[Plant and Materials intended for
the Works];
(f) any other additions or deductions
which may have become due
under the Contract or otherwise,
including those under Clause 20
[Claims, Disputes and Arbitration];
and
(g) the deduction of amounts certified
in all previous Payment
Certificates.
It is noted that these provisions are very
prescriptive.
Sub-Clause 14.5 deals with what is
commonly known as materials off-site or
as the FIDIC drafters put it “Plant and
Materials intended for the Works”.
Again it is worth noting the prescriptive
nature of the requirements placed upon the
Contractor; for the Engineer to certify any
amount the following conditions must be
satisfied:
(a) the Contractor has:
(i) kept satisfactory records
(including the orders,
receipts, Costs and use of
Plant and Materials) which
are available for inspection,
and
(ii) submitted a statement of the
Cost of acquiring and
delivering the Plant and
Materials to the Site,
supported by satisfactory
evidence;
and either:
(b) the relevant Plant and Materials:
(i) are those listed in the
Appendix to Tender for
payment when shipped,
(ii) have been shipped to the
Country, en route to the Site,
in accordance with the
Contract; and
(iii) are described in a clean
shipped bill of lading or other
evidence of shipment, which
has been submitted to the
Engineer together with
evidence of payment of
freight and insurance, any
other documents reasonably
required, and a bank
guarantee in a form and
issued by an entity approved
by the Employer in amounts
and currencies equal to the
amount due under this Sub-
Clause; this guarantee may
be in a similar form to the
form referred to in Sub-
Clause 14.2 [Advance
Payment] and shall be valid
until the Plant and Materials
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are properly stored on Site
and protected against loss,
damage or deterioration;
or
(c) the relevant Plant and Materials:
(i) are those listed in the
Appendix to Tender for
payment when delivered to
the Site, and
(ii) have been delivered to and
are properly stored on the
Site, are protected against
loss, damage or
deterioration, and appear to
be in accordance with the
Contract.
Satisfaction of the above will permit the
Engineer to include 80% of the cost of the
Plant and Materials (including delivery to
site) within an Interim Payment.
Contractors often fail to make a
comprehensive list of Plant and Materials
within tenders (see Sub-Clause 14.5(b) (i)
and 14.5 (c) (i)) and are denied the
opportunity to successfully claim such
goods, usually after allowing payment to
Sub-Contractors or Sub-Suppliers therefore
damaging cash flow.
Whilst not covered by this article it is worth
noting that the Sub-Clause 20.1
procedures in respect of Claim include the
Engineer requesting certain records to be
kept by the Contractor in order to value
any claim by the Contractor.
The above may appear to be recital of
various provisions, some extremely
prescriptive, extracted from the Red Book
relative to the payment for the Works to
the Contractor by the Employer as certified
by the Engineer. It was meant to be!
Early passages of this article talked about
cash flow and helping others to help you.
The FIDIC drafters have attempted to help
the Contractor by being extremely
prescriptive in what the Contractor has to
do to preserve its cash flow; Sub-Clause
14.3 being a prime example.
It is considered that Contractors should not
simply comply with the Contract and sit
back for it as Contractors that carry out the
Work accordingly have every opportunity
to compile records at the time the work
was carried out. Contractors looking to
benefit cas flow can also help themselves.
It is Contractors that will (or should) know
if the work is being carried out under
circumstances that require new rates to be
applied or something more that triggers
the provisions of Clause 20.
In the perfect world Engineers should
welcome a Contractor being proactive and
taking the lead when it comes to making
records whether they be simple
remeasurements or details to support
claims.
The provisions of FIDIC do not prevent a
Contractor from asking an Engineer,
following the submission of a Sub-Clause
20.1 notice, “what records would you like
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to be kept to assist you with your
determination”.
Similarly there is nothing to stop a
Contractor asking the Engineer if there are
any further measurements, photographs,
records or whatever prior to work being
covered over.
Cash flow can be enhanced by Contractors
that invest in their commercial resource
and seek to help the Engineer to carry out
its functions, after all to fulfil its role with
the latest expenditure is a positive result.
Cash flow can be enhanced by Contractors
who invest in the resources to fulfil the
obligations of the prescriptive elements of
the FIDIC Books, after all this is only
making the Engineer’s role a little easier.
Positive actions such as the above may not
only enhance cash flow but also reduce
disputes and foster good working
relationships.
Alternatively that may happen only in a
perfect world…
Driver is the trading name of Driver Consult Ltd, a member of Driver Group plc (AIM: DRV).
Driver Consult is the principle trading subsidiary of the Group and has been providing the
construction and engineering industries with commercial and dispute resolution services since
1978.
During the last year over 2000 engineers, surveyors and commercial managers have attended
Driver breakfast seminars in the UK alone. In response to demand Driver has developed a
range of high quality FIDIC training courses, workshops and services.
For details please contact us at
[email protected] or call +44 (0) 20 7247 4989
This article was first published in ‘Civil Engineering Surveyor’ (CES) Sept 2011. The title is the
journal of the Chartered Institution of Civil Engineering Surveyors.
Permitted reproduction – quotations, citations and references
Permission is granted for short quotations or reproduction in full provided the authors,
company and link to the source are properly noted.
The rainbow suite The 1999 FIDIC suite part 9
© Paul Battrick, Phil Duggan and Driver Consult Ltd. 2012 8 of 8
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver
Driver have excelled at providing construction and engineering focused services since
1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Trett 2012 1 of 5
The rainbow suite
The 1999 FIDIC suite part 10
This is the tenth in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver Trett4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
Determinations by the Engineer
There is often a common misunderstanding
in respect of the matters upon which the
Engineer is authorised (or even obliged) to
make a determination in accordance with
the principles of the FIDIC suite of
Contracts. The Engineer simply does not
have authority and / or an obligation to
determine any matter that may be put to
them. Indeed, Sub-clause 3.5 states:
“Whenever these Conditions provide that
the Engineer shall proceed in accordance
with this Sub-Clause 3.5 to agree or
determine any matter, the Engineer shall
consult with each Party in an endeavour to
reach agreement…”
In other words, the Engineer’s duties (in
respect of determinations) only apply
whenever the Contract Conditions provide.
The following list of provisions is taken
from the Red Book (which is in the main,
identical to those of Yellow Book1)
1.9 Delayed Drawings or Instructions;
2.1 Right of Access to the Site;
2.5 Employer’s Claims;
4.7 Setting Out;
4.12 Unforeseeable Physical Conditions;
4.19 Electricity, Water and Gas;
4.20 Employer’s Equipment and Free-Issue
Material
4.24 Fossils
7.4 Testing;
8.9 Consequence of Suspension;
9.4 Failure to Pass Tests on Completion;
10.2 Taking Over of Part of the Works;
10.3 Interference with Tests on
Completion;
11.4 Failure to Remedy Defects;
1 The provisions that differ are in respect of Sub-
clauses 12.2 (Delayed Tests); 12.3 (Evaluation); 13.2 (Value Engineering) and 13.3 (Variation Procedure)
The rainbow suite The 1999 FIDIC suite part 10
© Paul Battrick, Phil Duggan and Driver Trett 2012 2 of 5
11.8 Contractor to Search;
12.3 Evaluation;
12.4 Omissions;
13.2 Value Engineering;
13.7 Adjustments for Changes in
Legislation;
14.4 Schedule of Payments;
15.3 Valuation at Date of Termination;
16.1 Contractor’s Entitlement to Suspend
Work;
17.4 Consequences of Employer’s Risks;
19.4 Consequences of Force Majeure; and
20.1 Contractor’s Claims
Perhaps, the confusion surrounding the
role of the Engineer in issuing
determinations under the “new”
Conditions, arises from the role of the
Engineer under the previous ones. In a
similar vein to the role of the Engineer
under the older ICE Conditions of Contract
(in particular the 5th and 6th Editions) under
the previous FIDIC Conditions (4th Edition),
the Engineer was authorised to issue an
“Engineer’s Decision” on any matter so
referred to them. Essentially therefore, the
Engineer was a key player within the
Disputes procedures.
In a way, under the 1999 Edition, the
Engineer can also be a key player in the
dispute process, although moreover in the
avoidance of disputes. This is largely
because the drafters of the Conditions have
deliberately placed an emphasis upon
collaboration and enhancing working
relationships when looking at the
requirements for the Engineer to proceed
to determine any of the listed matters.
In proceeding to make any determination,
the Engineer ought to consult with both the
Contractor and Employer with a view to
seeing if an agreement can be reached.
The Guide Notes state that:
“Complying with these procedures and
maintaining a co-operative approach to the
determination of all adjustments should
enhance the likelihood of achieving a
successful project”
There is no stipulation as to how the
consultation process should be conducted
and so it is pretty much left to the
Engineer to dictate how this is done.
However, perhaps one of the most
common complaints that we hear are that
the Engineer does not consult with the
parties prior to issuing a determination,
and the question then is what status does
such a determination have?
The process is intended to work so that
there is collaboration (by way of
consultation) with the aim of concluding an
agreement. In the event that agreement is
not reached, then the Engineer is obliged
to issue a fair determination (that means
fair according to the requirements of the
The rainbow suite The 1999 FIDIC suite part 10
© Paul Battrick, Phil Duggan and Driver Trett 2012 3 of 5
Contract). A failure by the Engineer to
strictly follow this procedure does not
however necessarily mean that the
determination is somehow invalid. The
whole intent of the provisions of Sub-
clause 3.5 is to arrive at a determination
(decision on a matter permissible) that is
binding upon the Parties and there is no
provision within the Sub-clause for any
such decision reached to be invalidated by
any failure to follow any procedure. It must
therefore be assumed that in the event
that the Engineer has failed to consult with
the Parties before issuing a determination
that this has not detracted from what the
Engineer intends that determination to be,
which can only be interpreted as that the
Engineer has made a decision and that he
intends such to be binding upon the
Parties.
There is no express timescale included
within Sub-clause 3.5 for the Engineer to
issue a determination, although it is noted
that Sub-clause 1.3 provides that
“Approvals, certificates, consents and
determinations shall not be unreasonably
withheld or delayed.”
Where one of the Parties are dis-satisfied
with any determination issued by the
Engineer, then their primary recourse of
action is normally to refer the matter as a
dispute to the Dispute Adjudication Board
for resolution. Herein, perhaps lies the
route whereby the Employer in particular
may apply pressure towards the Engineer
to strictly follow the contractual procedure
in future (and to consult with the Parties).
Can you imagine a scenario where an
Employer has to expend considerable sums
of money in dealing with a dispute referred
to DAB when perhaps he ultimately feels
that proper dialogue (i.e. consultation)
would have led to a better understanding
of the issues at hand in the first place and
which would have meant that an
agreement was likely in the first place? In
such a case, you could be sure that the
Employer would want to remind the
Engineer of his duties as laid out within his
service agreement (which no doubt would
include for the administration of the
Contract in accordance with the Contract
Conditions) in order to prevent such an
occurrence repeating itself!
The rainbow suite The 1999 FIDIC suite part 10
© Paul Battrick, Phil Duggan and Driver Trett 2012 4 of 5
Driver Trett is the trading name and a member of Driver Group plc (AIM: DRV). Driver Trett is
the principle trading subsidiary of the Group and has been providing the construction and
engineering industries with commercial and dispute resolution services since 1978.
During the last year over 2000 engineers, surveyors and commercial managers have attended
Driver Trett breakfast seminars in the UK alone. In response to demand Driver Trett has
developed a range of high quality FIDIC training courses, workshops and services.
For details please contact us at
[email protected] or call +44 (0) 20 7247 4989
This article was first published in ‘Civil Engineering Surveyor’ (CES) Sept 2011. The title is the
journal of the Chartered Institution of Civil Engineering Surveyors.
Permitted reproduction – quotations, citations and references
Permission is granted for short quotations or reproduction in full provided the authors,
company and link to the source are properly noted.
The rainbow suite The 1999 FIDIC suite part 10
© Paul Battrick, Phil Duggan and Driver Trett 2012 5 of 5
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver Trett’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver Trett
Driver Trett have excelled at providing construction and engineering focused services
since 1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver Trett’s London office.
1 Norton Folgate
London
E1 6DB
Telephone +44 (0) 20 7247 4989 Facsimile +44 (0) 20 7247 4959
© Paul Battrick, Phil Duggan and Driver Trett 2012 1 of 7
The rainbow suite
The 1999 FIDIC suite part 11
This is the eleventh in a series of articles being published in CES1
.
Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick2
and Phil Duggan3
of Driver Trett4
will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.
Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited
Mediator
Phil Duggan
Director (International) BSc
MSc MCIArb
Uses (or Miss-Uses) and Abuses of
FIDIC Contracts
The drafting committees of the various
FIDIC Books took a considerable amount of
time to arrive at the published editions,
whatever the colour of the Book and
whichever year the Book was finally
published. In doing so consultation took
place with industry leaders although
predominantly from the Employer’s side via
Employer’s, their Engineers and
Funders.
The results of the deliberations are a suite
of Contracts that, whilst many will say
have a bias towards the Employer and their
associates (Funders, Insurers, Engineers
and the like), are accepted by Contractors
and more or less understood in their pure
and un- amended forms.
Contractors have their opinions regarding
the various Books, as noted within
publications such as those issued by
European International Contractors.
Similarly, leading practitioners have taken
considerable efforts to draft, and have
published, their thoughts and guidance on
how to understand and operate the FIDIC
suite; a fine example being FIDIC
Contracts - Law and Practice by Ellis Baker,
Ben Mellors, Scott Chalmers and Anthony
Lavers.
Equally FIDIC have issued their own guides
books, firstly in respect of the Red, Yellow
and Silver Books and latterly in respect of
the Gold Book.
Guidance does not stop at the written
word; firms such as Driver offer numerous
training courses to develop an
understanding of the FIDIC suite.
With all of this understanding and
promoting of the FIDIC contracts by FIDIC
itself it is a triumph that so many tenders
are issued based upon a FIDIC Book,
whether it be Red, Yellow, or whatever
The rainbow suite The 1999 FIDIC suite part 11
© Paul Battrick, Phil Duggan and Driver Trett 2012 2 of 7
colour. Many of these tenders adopt a
FIDIC Book upon the insistence of those
funding the project whether it be an aid
agency, a development bank or a
speculative investor.
Contractors register to receive sets of
tender documentation, often having to
provide bid bonds, based upon the
invitation containing the information that
the contract will be a FIDIC Book of one
colour or another.
However, upon receipt of the tender
package and upon considering the FIDIC
based Contract, Contractors very often
discover that the form of contract bears
little or no resemblance to a FIDIC Book,
the issued form often bears little
resemblance to an amended form based
upon the suggestions for operation
produced by FIDIC themselves within their
guidance notes and books.
In simple words; what is inside the
Contract conditions is very different from
that stated on the FIDIC tin!
The hours spent drafting the standard
Books, guidance notes, text books,
delivering seminars and the like has to
some extent been put to one side.
Contractors have to perform risk analysis
in respect of contracts that have become a
bespoke forms of contract.
There are endless reasons why the
admirable FIDIC Books are put to one side,
these reasons include:
previous working practices;
a desire to shift all risk to the
Contractor in the quest for
certainty of time and price;
a hard line towards the Contractor
enshrined with a culture or
previous governmental style
and/or;
inexperienced speculative
investors who do not understand
either the construction process or
the concepts of risk
sharing/allocation.
Whatever the reason Employers and the
Engineers should realise that to prepare a
bid is a considerable investment on the
part of a Contractor and face the
uncertainty surrounding conditions of
contract is yet another threat in an
uncertain world. For instance, Contractors
working within the international arena are
facing competition from new Contractors
on the block often forced into the
international marketplace due to the
collapse of their own domestic
marketplace. The new kids on the block
are often desperate to maintain workload
(and their skilled workforce) and in doing
so often price projects sub-economically.
To add to the tendering Contractor’
challenges, a “bespoke FIDIC” contract
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that if priced properly in terms of making
allowances for risk allocation would add a
considerable amount to a tender bid is not
the most welcomed of challenges. As
everyone (the Employer, the Funder, the
Engineer and all others involved) knows to
price risk costs money and will inevitably
lead to a higher tender and consequently a
higher Contract Price.
Whilst it is understood that we are in times
of harsh commercial reality and the
passing on of risk and creation of “bespoke
FIDIC” contracts are commonplace,
Employers may do well to consider that an
unsuccessful project with an almost
unworkable contract suffering delay and
claims leading to disputes is not was
intended (and often promised by advisers)
at the outset. In such circumstances the
failure to meet the completion date(s) and
budget overrun via formal dispute
resolution proceedings has effectively
passed the problems that it sought to avoid
back to the Employer and, as appropriate,
its Funders.
It is not possible to catalogue all the
abuses and miss–uses to the FIDIC suite
that have been viewed but here are just a
few.
Clause 20.2: It is commonplace to see the
removal of all provisions relating to the
appointment of a Dispute Adjudication
Board. Whether or not Employers and
their Engineers believe this will result in
claims being settled equitably or fewer
disputes arising it is unsure but this
amendment is often seen in locations
where a culture of Employer supremacy
over Contractors is considered the only
method of working.
Clause 20.1: The shortening of the initial
and fatal notice period of 28 days that a
Contractor has to give should it consider
itself entitled to an extension of time
and/or additional payment is
commonplace. Periods as short as 5 days
are common (Readers do not need to send
notice of shorter periods…). This
amendment leaves Contractors in an
unworkable situation when considering that
it has to create contracts with it Sub-
Contractors (leading to sub-sub-contracts)
and Suppliers that should reflect this notice
period or take on risk itself of recognising
claims when it cannot have the same
claims considered by the Engineer or
Employer. The motive is again often said
to be to avoid the submission of claims and
therefore disputes.
Clause 20.1: The failure to provide details
of a claim within the initial period of 42
days and the final claim details within 28
days after the end of the effects of the
event(s) have often be turned into fatal
events; meaning that the Contractor loses
its right to claim by not meeting these
deadlines. A further twist has been
viewed; even when the Contractor has
provided its details, in the event the
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Engineer’s (or certifying party) often
subjective judgement results in a belief
that the details provided do not rise give to
an entitlement the Contractor loses all
rights to a claim. The motive is again said
to be to avoid submission of claims and
therefore disputes.
Various clauses including “Profit”: As
previously noted many clauses within the
FIDIC suite entitle the Contractor to either
Cost or Cost plus reasonable profit.
Contractors are not charities and should be
entitled to a profit upon its turnover yet
many Employers and their Engineers take
an opposite view and delete the profit
element from all of the Contractor’s
additional monetary entitlements. The
motive being perhaps to reduce costs with
a view to achieving budget certainty.
Clause 2.4: It is only equitable that a
Contractor enters into a contract with an
Employer capable of paying for the work it
receives and to their credit FIDIC have
recognised this with the insertion of Clause
2.4. However, often prompted by
speculative investors funding projects this
clause is being removed possibly with the
knowledge that such Funders often are
Special Purpose Vehicles (SPVs) that rise
and fall as quickly as the ocean tides.
Clause 1.7: The requirement for the
Contractor to give its consent prior to the
Employer being permitted to assign the
whole or part of the contract has often
been deleted. Again often when SPVs are
involved and they wish to retain the right
to leave the project at an early stage
possibly to obtain their profit through sale
and move on to another investment.
Clause 8.3: Whilst the Engineer only has
to inform the Contractor where the
Programme does not comply with the
Contract, amendments to the standard
forms often require the approval of the
Contractor’s Programme by the Engineer.
Prior to giving approval, Engineer’s require
Contractors to provide even more details
than required by the FIDIC suite.
Clause 14.3: A recent development to be
submitted by the Contractor alongside its
application for payment is a statement
detailing the profitability of the project.
One such requirement was accompanied by
an obligation placed upon the Contractor to
open up its accounts to the Employer’s
“Cost Consultant”. This Cost Consultant
also being a new player to the Contract
and taking over some of the duties of the
Engineer. Not surprisingly the Cost
Consultant drafted all the proposed
amendments to the pure FIDIC Contract
and in doing so created a role for itself.
Clause 20.1: Perhaps mirroring other
forms amendments in respect of
entitlements to an extension of time which
are sometimes only claimable if a
prescribed method of time impact analysis
is used. Perhaps this is not a bad thing to
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ease through and encourage time issues to
be dealt with prospectively and/or as the
work proceeds as intended by the FIDIC
drafters.
Clause 13.7: The deletion of this clause in
its entirety is commonplace thus leaving
Contractors facing uncertainty in countries
perhaps that need to increase revenues in
these hard times and may do so by
increasing the costs of employment by tax
raising measures. The motive of increasing
certainty of price is considered not to be
equitable.
Clause 14.4: Payment milestones should
produce a regime whereby Contractors
have adequate funds to carry out the
intended scope of works within the
intended timeframe. Perhaps seen as a
carrot to entice Contractors to achieve
completion at a date earlier than stated
and accelerate (at their own cost) progress
payments relate to milestones that can be
achieved at later stages of the project.
The Contractor has no option at the time of
bidding but to factor in additional financing
costs, if it considers that the competition
will allow such a luxury.
Clause 1.1.3.7: A Defects Notification
Period of 365 days is considered to be
normal and one that Contractors expect
and can cope. However, as Employer’s
seek to minimise costs it is not uncommon
for a further year to be added. Thus
attempting to lower costs of operation and
maintenance, maybe of a production
facility, for the Employer.
The above are just some examples
relevant to specific clauses within any of
the FIDIC Books. It is hoped that the
above does not provide too much food for
thought for Employer’s and their advisers!
A Contractor recently commented that it
answered an invitation to bid based upon a
Yellow Book but when the tender
documents arrived virtually the whole
contract had been amended such that the
conditions were more onerous towards the
Contractor than the Silver Book! This state
of affairs is becoming commonplace and
renders the time spent drafting standard
forms of Contract that are understood and
can be priced economically a waste.
It is said that a Contract is a coming
together of Parties of equal bargaining
power. In the light of the above, is that
really true?
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Driver Trett is the trading name and a member of Driver Group plc (AIM: DRV). Driver Trett is
the principle trading subsidiary of the Group and has been providing the construction and
engineering industries with commercial and dispute resolution services since 1978.
During the last year over 2000 engineers, surveyors and commercial managers have attended
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developed a range of high quality FIDIC training courses, workshops and services.
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This article was first published in ‘Civil Engineering Surveyor’ (CES) Sept 2011. The title is the
journal of the Chartered Institution of Civil Engineering Surveyors.
Permitted reproduction – quotations, citations and references
Permission is granted for short quotations or reproduction in full provided the authors,
company and link to the source are properly noted.
The rainbow suite The 1999 FIDIC suite part 11
© Paul Battrick, Phil Duggan and Driver Trett 2012 7 of 7
Endnotes
1. CES is an abbreviation of the title “Civil Engineering Surveyor‟ which is the journal of
the Chartered Institution of Civil Engineering Surveyors.
2. Paul Battrick
Managing Director (International)
FRICS MCIArb CEDR Accredited Mediator
A chartered quantity surveyor, Paul heads Driver Group’s London based international
business, with the exception of the Middle East and Africa.
He supports international clients by acting as either a Mediator or Expert Witness in the
event of Litigation and/or Arbitration. He has extensive experience in the Energy sector
advising clients in respect of EPC power plants, constituent parts such as boilers,
turbines, generators and also ancillaries such as flue gas desulphurisation plants. Paul is
a practising CEDR Mediator.
3. Phil Duggan
Director (International)
BSc MSc MCIArb
A director of Driver Trett’s international business, Phil has over twenty years industry
experience providing quantum, contractual and commercial advise to clients on major
projects.
His experience includes over twelve years in the water & waste water, power generation
and oil, gas and petrochemical sectors with clients depending on his high level of
technical understanding of the mechanical, electrical and process elements.
4. Driver Trett
Driver Trett have excelled at providing construction and engineering focused services
since 1978.Our Project Management, Programming, Commercial Management, Quantity
Surveying, Contracts and Dispute expertise supports the delivery of major projects
worldwide and bridges the gaps between the construction, legal and financial sectors.
For more information please visit www.driver-group.com
The company’s international business is administered from Driver Trett’s London office.
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