Check List for One Sided Contracts

For use with“Sample Bidding Documents under JBIC ODA Loans - Procurement of Civil Works”November 1999 Edition

December 2006

Procurement Policy and Supervision Division Project Development Department Japan Bank for International Cooperation (JBIC)
Version 1.0

PREFACE

To realize effective and prompt implementation of projects financed by JBIC ODA Loans, it is essential to set out the rights and obligations of the Borrower and the Consultant in a consultancy contract and those of the Borrower and the Contractor in a construction contract, clearly and properly . (See Section 2.02 of “Guidelines for Employment of Consultant under JBIC ODA Loans” and Section 4.04 of “Guidelines for Procurement under JBIC ODA Loans”). JBIC recommends all the Borrowers to use “The Sample Bidding Documents under JBIC ODA Loans for Procurement of Civil Works” in drafting civil work contracts. These sample documents adopt the 1987 Edition of FIDIC conditions of contract (the FIDIC Red Book) under which the balanced risk allocation between the Employer and the Contractor is maintained. However, it is sometimes observed that contract documents prepared by the Borrower contain one-sided contract provisions, changing a fair allocation of contractual risks between the parties. Such one sided contracts actually affect negatively the smooth implementation of projects and consequently are considered to be disadvantageous to the Borrowers due, amongst other things, to the late completion of the project. With this thought in mind JBIC commissioned the Association of Japanese Consulting Engineers (AJCE) to prepare a check list to encourage to avoid such one sided contract provisions. This check list is based on samples actually observed in JBIC ODA projects. It is intended to be used by the Borrowers in preparation of fair contract conditions. JBIC will also use it when reviewing draft contract documents prepared by the Borrowers. JBIC recognizes that, even contract conditions maintain a balanced risk allocation, if these conditions are not properly applied, smooth project implementation cannot be achieved. However, to set out the proper provisions is essential for the smooth implementation.. JBIC will make a continuous effort to improve project implementation by close discussion and cooperation with Borrowers. JBIC hopes that this check list will contribute to the improvement.

Context of this Document Check List for One Sided Contract A check list is set out in the first part of this document. It can be used during preparation and review of contracts documents for construction works under JBIC ODA . Chapter 1 : Purpose of Check List The purposes of the Check List are described in chapter 1 together with the background behind the necessity of such a check list. Chapter 3 : Factors which create One Sided Contract The factors which create contracts one sided are examined in chapter 3 by categorizing the effects into 3 groups. This check list is prepared to avoid one sided provisions effecting the rights. obligations and risk of contracting parties. are set out in chapter 2. loans. which should be well understood by writers of construction contracts under JBIC ODA loans. Chapter 4 : Commentary on the Check List A commentary on the Check List is set out in chapter 4 as a guide to users. Chapter 2 : Distinctive Features of FIDIC Red Book The general features and basic concepts of the FIDIC Red Book.

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the following problems may occur:(1) (2) (3) (4) (5) (6) (7) (8) (9) Higher bid price Bid failure and disruption of project implementation Non-participation in the bid of conscientious and capable contractors Contract award to a bidder who fails or was not capable of estimating the risks properly Poor construction quality and delay to the progress of the work due to lack of risk contingency Undermining the relationship of mutual trust and respect between the Employer and the Contractor Repetition of groundless claims from the Contractor Frequent disputes between the Employer and the Contractor In an extreme case eventual termination of the contract These situations interfere with the smooth implementation of projects financed by Japanese ODA loans and.1. It is therefore a very important document to be used for smooth implementation of the project by the various stakeholders. It is recommended to the executing agencies of loan recipient countries to utilize this Check List as a reference guide in preparation of bid documents under JBIC Loans in order to 1 Conditions of Contract for Works of Civil Engineering Construction 1 . If modifications for any particular project alter the originally contemplated risk distribution to a large extent and the risks allocated to the Contractor become excessively high. The FIDIC general conditions of contract may be modified in consideration of the actual project circumstances and requirements by adding conditions of particular applications in Part II of the FIDIC Red Book. The Check List is prepared for the purpose of elimination of one sided provisions from the contract. responsibilities and risks to be undertaken by each of the contracting parties. may impose larger financial burdens on the Employer. Purposes of Check List A contract is a document which stipulates rights. 1 These sample bidding documents use the FIDIC FIDIC Red Book provides a well-balanced Red Book 1987 as general conditions of contract. as a result. Japan Bank for International Cooperation (JBIC) recommends that executing agencies of loan recipient countries utilize the "Sample Bidding Documents under JBIC ODA Loans (Procurement of Civil Works)" published by JBIC in 1999 (hereinafter called as “JBIC Sample Bidding Documents”) in preparation of bidding documents for construction works. allocation of risks as between the Employer and the Contractor.

The FIDIC conditions of contract comprise Part 1: General Conditions of Contract and Part 2: Conditions of Particular Application. The Employer designs the The first edition of FIDIC Red Book was issued in 1957 and it was drafted based on ICE conditions of contracts in UK. 2. Part II has the following functions:(1) to supplement and complete Sub-clause 1. FIDIC has a long history in drafting various conditions of contract for construction works.1 14. Distinctive Features of FIDIC Red Book The JBIC Sample Bidding Documents adopt FIDIC Red Book 1987 as general conditions of contract. etc. The basic concepts and framework of the FIDIC Red Book are summarized below:1) Design by Employer FIDIC Red Book is suitable for Design-Bid-Build projects. The Check List is drafted based on actual experience on pervious construction contracts financed by Japanese ODA loans. World Bank and Asian Development Bank3. While JBIC is examining revision of the Sample Bidding Documents incorporating new FIDIC Red Book 1999. Both banks adopted FIDIC Red Book 1987 in their previous versions of Sample Bidding Documents. FIDIC Red Book2 (first published in 1957) is recognized as a de facto standard for civil and building works contracts in international projects.1 5. 3 World Bank and Asian Development Bank issued Harmonized Edition of Sample Bidding Documents based on FIDIC Red Book 1999 in May 2005. supplementations and or modification of Part I alter the basic balance of the FIDIC Red Book the contract may become unfairly advantageous to the drafting party. region and country. 2 2 . project. (3) to add to particular requirements or recommendations of the project financer If the Part II additions.3 68.1 14.2 in Part I FIDIC Red Book is adopted in standard bidding documents for most multilateral development banks including (2) to add particular provision required by local conditions such as characteristics of execution agency. In particular. the Engineer’s roles described hereinafter will remain unchanged in principle except for the matters indicated in foot notes 3 and 4 on Page 4.allocate risks and liabilities fairly between contracting parties as well as to keep fairness of the Engineer .1 2.

1). The design of the civil work structure largely depends on the site conditions including topography and geology. 2) Presence of Engineer One of the distinctive features of FIDIC Red Book is the appointment of "The Engineer". Notice. (1) Employer’s agent The Engineer has three main functions in the administration of FIDIC Red Book based construction contracts:Production of detailed design drawings under Sub-clauses 6 and 7 Issuance of instructions for variation of the works under Sub-clause 51 Review of plans and drawings submitted by the Contractor under Sub-clause 7. Since it is not entirely possible to know the actual geological conditions in the pre-investigation.1 “Variations”. Instruction.4. and the contractor executes the work according to those drawings and specifications provided with the bid documents. Approval.1.1.2 3 . 7.2. design modification is frequently required during construction. The The design work is usually carried out by a consulting refer to engineer appointed by the Employer and the design liability lies with the Employer Engineer is not a contracting party but his duties and authority are stipulated in the contract and Employer (Construction Contract) (Report. Sub-clauses : 6.2. Notice. Determination. 7. 6. Application) (Consultancy Agreement) Contractor Engineer (Supervision. allows such unforeseeable variations to be efficiently achieved without contractual problems. Consent) The roles of the Engineer can be classified into three categories in administration of construction contracts.permanent work except for the works to be designed by Contractor in accordance with Clause 7. the Engineer plays an essential role in the contract administration process. Sub-clauses 51. 8.

to the Engineer if the Contractor encounters events which are unforeseeable at the time of bidding or are deviations from the contract provisions. safety and environmental management under various Sub-clauses especially 36-39.5.Carrying out project management services including time and cost management. the Engineer is required to exercise his discretion by: (a) giving his decision.1 Interim payment certificate under Sub-clause 60.6 Engineer to Act Impartially Wherever. Taking-over certificate under Sub-clause 48.64. under the Contract. 49 and 50 (2) Certifier The Engineer issues various certificates certifying the quality of the Contractor’s performance and payment therefor at the Engineer discretion.2 Defect liability certificate under Sub-clause 62.1 Final payment certificate under Sub-clause 60. a dispute shall be referred to Dispute Adjudication Board (DAB) in accordance with Sub-clause 20. The Engineer therefore has three distinct and different roles:1) As Employer’s agent. If either party is dissatisfied with the Engineer’s decision a dispute arises and such dispute can be referred to the Engineer for his decision under Sub-clause 673. and 3) As decision maker in claim and dispute settlement In carrying out the last two roles the Engineer is obliged to remain independent and to act impartially as described in Sub-clause 2.2. The Engineer’s certificates have a strong binding effect on both the Employer and the Contractor. or 3 Under FIDIC Red Book 1999. quality control. the Engineer shall make his determination fairly in accordance with Sub-clause 3. 2) As certifier.1 Certification of work completion date under Sub-clause 62. 2. 4 Under FIDIC Red Book 1999. The Engineer will evaluate such claims and give his determination to the Employer and Contractor. as set out in the FIDIC Red Book. testing and inspection. opinion or consent. 4 .8 (3) Decision maker in claim and dispute settlement The Contractor is entitled to submit claims.

expression of satisfaction. or determining value. metrological conditions as well as social. in detail. Any such decision. or otherwise taking action which may affect the rights and obligations of the Employer or the Contractor he shall exercise such discretion impartially within the terms of the Contract and having regard to all the circumstances. reviewed or revised as provided in Clause 67. takes such risk. Appendix-1 shows a flowchart of the claims and dispute resolution procedures under FIDIC Red Book 1987. Under FIDIC Red Book. Risks for which neither the Employer nor the Contractor can control. It is usual to appoint consulting engineers as the Engineer under the contract with the Employer in JBIC ODA loan projects. JBIC Guideline for Employment of Consultants stipulates that the nature and the limit to delegation of authority to the consultant. during any lengthy construction period.(b) (c) (d) expressing his satisfaction or approval. is in principle taken by the Employer as the initiator of the project. 5) Unit Price/Re-measurement Contract 5 It is impossible to eliminate all uncertainties from construction work and unforeseen events are likely to occur . consent. The FIDIC Red Book sets out. 4) Balanced Risk Allocation It is said that the FIDIC Red Book is drafted so as to allocate the risk to the contracting parties in a fair manner using the following principles: The party who can best manage the risk. or approval. as well as he scope and the nature of the responsibilities which the consultant is to assume shall be clearly defined in the contract between the Borrower and the consultant. opinion. 3) Claim and Dispute Settlement Procedure Construction work is susceptible to many external influences such as variable subsurface and. a claims and dispute settlement procedure to cope with uncertainties involved in construction works. economic and environmental factors. the Contractor has an entitlement to extensions of time for completion of the work if he suffers delay from specified events and payment of qualifying additional cost he incurs as a result of such events. determination of value or action may be opened up.

2 17. The FIDIC Red Book 1987 allows the Contractor to exercise his entitlement to extensions of time and consequent additional cost arises in the following situations:Add. article of value. dimension. Examining each of these factors in turn:1) Limitation of Contractor’s right The entitlement to claim (if an unforeseeable event occurs.3 27.1 EoT*2 Process*3 A A B B A 6 . Sub-clause 6.The payment to the Contractor is based on the actual quantities of work done at the unit prices set out in the contract Bill of Quantities. Factors which create One sided Contract There are three potential factors which make any contract one sided as follows:(1) (2) (3) the Contractor’s contractual rights are unreasonably limited. The quantities set out in the contract Bill of Quantities are provisional estimates of the work to be done. or when there is a deviation from the contract provision not attributable to the Contractor) is one of the most important contractual rights given to the Contractor. levels.4 12. usually monthly on the basis of the measurement of the work carried out during the relevant period. by the Contractor are increased.1 20. 3. the Contractor’s contractual responsibilities are unreasonably expanded. All three factors can be introduced in the preparation of Conditions of Particular Application and result in an enhanced risk to the Contractor. discretions and or authority are excessively restricted. coins. the Engineer’s powers. and alignment of the works given by the Engineer Loss or damage due to Employer’s risk event Discovery of fossil. The actual work quantities are measured by the Engineer in the presence of the Contractor. Cost *1 If such entitlement is unreasonably restricted then the risk taken Event 1 2 3 4 5 Delay of Drawing and instruction by the Engineer Occurrence of unforeseeable physical obstructions and conditions Error in position. The Engineer certifies interim payment amounts.

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Facilities for other contractors Execution of additional test required by the Engineer Uncovering of the work not attributable to the Contractor Suspension of the work instructed by the Engineer Employer’s failure to give possession of the site Remedying defect not attributable to the Contractor Search not attributable to the Contractor Valuation of Variation Variation exceeding 15% of contract price Delayed payment Damage to the works by Special risk Increased costs arising from Damage to the works by Special risk Contractor’s entitlement to suspension Increase of market price Change to legislation 31.1 52.2 49.2 36.4 70.2 42.etc.1 70.3 65. and C as follows:Type A: To be determined by the Engineer after due consultation with the Employer and the Contractor. To be determined by rules stipulated in the contract Type B: Type C: 2) Expansion of Contractor’s responsibility The Contractor’s contractual responsibility is considered to be increased unreasonably if no maximum amount is set for Liquidated Damages or an excessively long Defects Liability Period is stipulated.10 65.3 60. B.2 A A A A A B A A A C B A A C A Notes: *1 : Additional Cost *2 : Extension of Time *3 : The Engineer is central to the decision making process to determine the Contractor’s entitlement to an extensions time and additional cost. To be determined by the Engineer.5 69. The determination and analysis is carried out in three categories Type A.5 38. The following are typical examples of Employer’s obligations and responsibilities under the FIDIC Red Book 1987:- 7 .3 50.1 52.2 40.

3 8. precondition for the exercising of such Engineer’s authority.3 5. to give necessary instructions. 20. to obtain the specific approval of the Employer before exercising any such authority. Excessive use of Employer’s prior approval as a precondition for the exercise of the Engineer’s authority may tend to bias the Engineer’s independent decision making ability and thereby increase the one sided tendency of a contract. …………… Similarly. impediment or prevention by the Employer under Sub-clause 44.1 2. it is possible to impose the Employer’s prior approval as a 8 . 3) Restriction of the Engineer’s authority The Engineer is required to exercise his authority impartially in giving approval. to supply goods or execute specified work when the Employer is responsible therefore 6. provided. under Sub-clause 2. in which the Engineer’s authority is described.3.2 If any of the above items are excluded entirely or partially from the Employer’s obligations or if such responsibilities are in all circumstances or even in certain specified circumstances transferred to the Contractor then the Contractor’s contractual responsibilities would be considered to be increased unreasonably.10. etc. 2. to be responsible for the Employer’s risk items under Sub-clause 20. 7.1 4. consent. to pay the Contractor according to Sub-clause 60. particulars of such requirements shall be set out in Part II of these Conditions. certification and determination as described in Chapter 2.1 Engineer's Duties and Authority (b) The Engineer may exercise the authority specified in or necessarily to be implied from the Contract. approvals and notices to the Contractor under various clauses 3.4 and 21. consents. However. that if the Engineer is required. however.1 of Conditions of Particular Application. to avoid delay. to settle disputes amicably under Sub-clause 67. to be responsible for damage to transportation routes when the Employer is liable for this under Sub-clause 30. under the terms of his appointment by the Employer. to give possession of the site to the Contractor under Sub-clause 42. the Engineer’s authority may be diminished if words such as “subject to prior approval of the Employer” are inserted in the independent clauses as listed in Chapter 3-1.1.

undertaken by the Engineer. This will ensure that the Employer’s views can be deemed to have been considered in the decision making process 9 . the Engineer shall make determinations about alleged claims after due consultation with the Employer and the Contractor.As described in section 3-1) above.

FIDIC Red Book is considered to be a fair balance of risk between the Employer and the Contractor. Part I Conditions of Contract.1999” (the JBIC Sample Bidding Documents). Commentary on Checklist To draft Conditions of Contract in accordance with FIDIC Red Book's fundamental concepts and at the same time to avoid a one sided contract to be unreasonably advantageous to the drafting party as listed above. Check Point 02 Has FIDIC Red Book Part II Conditions of Particular Application been completed and checked by a specialist who has the necessary experience? FIDIC Clause Whole All <Interpretation> FIDIC Red Book consists of two parts. The contract document may not be complete. Part II is prepared: 10 . the following problems have been encountered: Examination of the specially drafted conditions of contract takes a great deal of time as the clause numbers may not be consistent. The provisions may deviate from usual international standard contractual practice. Check Point FIDIC Clause 01 Whole Are the Bidding Documents based on the JBIC Sample Bidding Documents? <Interpretation> JBIC recommends that bidding documents are prepared based on “Sample Bidding Documents under JBIC ODA Loans (Civil Works) Nov. If local standard bidding documents are used instead of the JBIC Sample Bidding Documents.4. It is strongly recommended that bidding documents are prepared in line with the JBIC Sample Bidding Documents. and Part II Conditions of Particular Application. The JBIC Sample Bidding Documents are based on FIDIC Red Book 1987 (FIDIC Red Book) as the de facto standard for international civil construction contracts. the following commentary is provided for to assist in the understanding and intention of the check list.

1.1. English language and drafting skills.2 "Special Risks". The Part I provisions have been improved through use on many projects and its provisions reflect a standard policy that has a high degree of professionalism.1. Some execution agencies in developing countries acting as Employers have a tradition of providing an employee or related organisation to serve as the Engineer. Even in this situation.). Any rewriting may destroy the entire balance of the provisions and introduce referencing errors. Great care is also necessary to coordinate Part I and Part II. 68.2. and To provide information on terms required or recommended by the financing bank (for example JBIC). and for the contract administration (described in Chapter 2) to be undertaken fairly.3. by an independent engineer. and the Engineer then appoints an independent consultant as the Engineer’s Representative. A technical understanding of the scope of construction work to be executed. the Engineer’s Representative may face difficulty in remaining impartial.4 "Employer's Risk" is changed. A knowledge of construction cost estimates and time scheduling. For example when Clause 20. unless a great deal of the power and authority of the Engineer is delegated completely to him. Where it is usual that execution agencies are both the Employer and the Engineer it 11 . Completion and checking the consistency of Part I and Part II should only be undertaken by a specialist with the following necessary experience: (1) (2) (3) (4) (5) A thorough knowledge of the international construction contracts. 2. specific to the region and specific to the country where the project is to be carried out. To provide information specific to the project.To provide the necessary details left blank in Part I (for example clauses: 1. Check Point FIDIC Clause 03 Whole Has an independent engineer been appointed to administer the contract? <Interpretation> One of the main features of the FIDIC Red Book is that it provides for defined decisions. In some other countries the Employer also holds the post of the Engineer.1. 14. it is possible to create inconsistency with Clause 65. 14. An understanding of the basic concepts of FIDIC Red Book. etc. 5.

1). The Employer assumes the liability for defective design (for example under clauses: 6.1.1. and the bidding is done based on that design.1 <Interpretation> Another feature of the FIDIC Red Book is that the Engineer is required to be impartial in administering the contract as described in Clause 2. This encourages the Engineer to make impartial judgments in line with the basic philosophy of the FIDIC Red Book. Clause 2.1(b) specifies that if any Engineer's decision to approve.4. Independence of the Engineer is an integral part of the FIDIC Red Book philosophy. 7. It would be a fundamental deviation from the JBIC Sample Bidding Documents and the FIDIC Red Book to impose liability on the Contractor for defective design and additional cost for construction due to the modified design. 6. Check Point FIDIC Clause 04 Whole Is the design executed by the Employer. prove. and does the Employer have design responsibility? <Interpretation> The Design-Bid-Build method is the assumed method of executing any project under the FIDIC ed Book.6 and Chapter 2. Check Point 05 When the Engineer exercises an authority or power are the circumstances under which he is required to get the Employer's prior approval excessive? Engineer’s Duties and Authority FIDIC Clause 2. Similarly when the text of FIDIC Red Book Part I and II is changed in this fundamental issue then 12 . and 8. If the Design-Bid-Build method is used then such text change should be avoided as it increases the Contractor's risks too greatly.2.is highly recommended that this procedure be changed and that such execution agencies appoint an independent consultant to maintain the Engineer’s impartiality. The Employer designs the permanent works. If there are many matters which need the prior approval of the Employer then there is the possibility that the Employer's view will excessively be reflected when the Engineer's exercises any discretion. determine or decide is subject to the acquisition of specific prior approval from the Employer then such decisions shall be set out in FIDIC Red Book Part II. 7. It is preferable to minimize the number of matters which need the prior approval of the Employer.

To consider the circumstances under which restraints may be placed on the Engineer’s authority it would be necessary to take into account the factors specific to the country in which the works are to be carried out.1 "Defects Liability" should be assumed to be the sole discretion of the Engineer. This will ensure that the Employer’s views can be deemed to have been considered in the decision making process undertaken by the Engineer (Refer to Clauses 27. issuing a variation order under Clause 51. and should not be included in the matters requiring Employer's prior approval. The JBIC Sample Bidding Documents recommend that the following five situations should be subject to prior approval from the Employer:(a) (b) (c) (d) approving subletting of any part of the Works under Clause 4. Check Point FIDIC Clause 06 2. except in an emergency situation or if such variation would increase the Contract Price by less than xx %. From a broader point of view when any Engineer follows the FIDIC Red Book requirements faithfully then 13 . 42. The issuance of the certificates under Clauses 48.2 and 60.2). approval. the Engineer shall make hisdeterminations about alleged claims after due consultation with the Employer and the Contractor. 60. and 62. 40.5.2. 36. 69. FIDIC Red Book clause 1. (e) fixing rates or prices under Clause 52.2. certifying additional cost determined under Clause 12.6 Is any restriction on the Engineer's ability to make an impartial decision fair? Engineer to Act Impartially <Interpretation> As stated in Checkpoint 5 the FIDIC Red Book imposes on the Engineer an obligation to make impartial decisions when he has to exercise a discretion.1. As described in section 3-1)) above. If the Employer's prior approval is required then the Contractor may consider such approval procedures represent an unjustifiable delay. determining an extension of time under Clause 44.neutral judgment could be obstructed.4 and 70.1 "Taking-Over". The FIDIC Guidelines for Preparation of Part II clauses do not indicate which discretions should be subject to approval.5. certificate or determination shall not unreasonably be withheld or delayed.5 specifies that any consent.8 "Payments". 65.

Check Point FIDIC Clause 07 5. and the priced Bill of Quantities. 14 . Check Point FIDIC Clause 08 5. and JBIC) can regard English. French. the Contractor. the Engineer. This is advisable as all the stake holders in the Contract (the Employer. French.g.2 Is the priority order of documents forming the contract clearly defined? Priority of Contract Documents <Interpretation> The priority of documents forming the contract recommended in the JBIC Sample Bidding Documents is as follows:(1) (2) (3) (4) (5) (6) (7) (8) the Contract Agreement (if completed). considered an international well understood neutrally regarded language? Language/s and Law <Interpretation> The JBIC Sample Bidding Documents recommend that English be nominated to be a language of the Contract. the Conditions of Contract Part II. the Bid and the Appendix to Bid. the Conditions of Contract Part I. or Spanish plus language of the country where the Works are to be carried out or language of the Employer's country) it is advisable to avoid specifying languages other than English. the Letter of Acceptance. French. If there is a text change that requires the Engineer to get the Employer's prior permission to exercise the Engineer’s authority under this clause.1 Is the specified language of the contract. and Spanish as the ruling language for interpretation in the event of contradictions. Such text change should be avoided. English. the Drawings. and Spanish as neutral.his decisions will in fact be thought of as fair and impartial. then the fairness of the Engineer’s decision may be affected greatly by the Employer’s view. If the Conditions of Contract are made in two languages (e. the Specifications.

to create discrepancies and contradictions in the interpretation of the priority provisions whether the additional provisions are in the Contract Agreement. Such delay and / or incurred cost are risks that the Contractor cannot manage and should not be asked to take responsibility for. create uncertainty.1. Check Point FIDIC Clause 10 8. Check Point 09 Are the Contractor's rights to extension of time. the Engineer has a duty to issue construction drawings at the times set out in the construction time schedule submitted by the Contractor under Clause 14. omission. Additional provisions dealing with the priority of documents should be drafted carefully so as not themselves. The lead time for preparation of those drawings by the Contractor should be agreed at the time of the Contract. As a matter of fairness to the Contractor it is necessary to avoid text changes which restrict the Contractor’s right to claim for extensions of time and the additional cost arising from delayed issue of drawings and instructions. The Contractor suffers delay and / or incurs cost for waiting time in preparation of shop drawings and / or a delay in the Works arises from delay by the Engineer in issuing the construction drawings. The Contractor then prepares detailed drawings based on the construction drawings. the Conditions." should be avoided. fault or 15 .1 Has the Contractor's general obligation been extended so as to impose design responsibility? Contractor’s General Responsibilities <Interpretation> The JBIC Sample Bidding Documents recommend that the provision “the Contractor shall promptly notify the Employer and the Engineer of any error.Contract amendments such as "The document which describes the content in detail shall be given priority over a more general document. or the Letter of Acceptance.4 <Interpretation> Under the FIDIC Red Book. and / or additional cost limited for delay in issuance of drawings and instructions? Delays and Cost of Delay of Drawings FIDIC Clause 6. Such provisions if included regardless of the definition of priority.

2 Has the Contractor's obligation been expanded by extending the performance security's validity period? Period of Validity of Performance Security <Interpretation> FIDIC Red Book Clause 62. Any text change that excessively expands the Contractor's obligation by requesting a performance security to remain valid beyond that date keeps the Contractor’s obligation alive unfairly.other defect in the design….1 provides for the validity of the performance security to expire on the issuance of the Defects Liability Certificate. a claim can be submitted by the Contractor under Clause 12.2. If such a claim develops into arbitration.1. FIDIC Red Book Clause 61. In case of inaccuracy of the site data. and are extensions of time and additional cost for the presence of unforeseeable site conditions limited? Inspection of Site FIDIC Clause 11. Even if there is a text change attempting to limit this right the Employer may still be held responsible as the drafter of the tender / contract documents. An arbitration 16 . Any text change which makes the Contractor assume the responsibility for the design carried out by the Employer excessively expands the Contractor's obligations. an award could go against the Employer. Check Point FIDIC Clause 11 10. Such text changes should not be made and the Contractor should not be responsible for any design which he has not prepared. The Contractor’s contractual obligations are at an end upon the issuance of this Certificate. Check Point 12 Is the Contractor made to bear responsibility for the site conditions. The performance security document shall be returned to the Contractor within 14 days of the issuance of the Defects Liability Certificate.1 <Interpretation> Any text change or additional provision which makes the Contractor assume all the responsibilities for the inaccuracy and / or insufficiency in information given by the Employer deviates from the FIDIC Red Book and imposes an excessive and unfair responsibility on the Contractor.1 provides that the Contract shall only be regarded as complete upon issuance of the Defects Liability Certificate in accordance with Clause 62.” is added.

The JBIC Sample Bidding Documents recommend adding a new Clause 11. In these circumstances there is a high possibility of spoiling another very suitable bidder who has properly reflected the risk in his tender price. Check Point 13 Are the Contractor's right to claim for an extension of time and additional cost for unforeseeable physical obstructions or the conditions limited? Further.2. This provision is helpful as it permits the bidders to understand site conditions in more detail. Imposing a risk on a Contractor which he cannot manage may lead the bid evaluator to select a bidder without the maturity and / or experience to reflect such a risk in the price. Check Point FIDIC Clause 14 14. The critical factor is to select a proper contractor at an appropriate price by providing a thorough understanding of the site situation at the time of the tender.3 Has the right to receive progress payments for work carried out been limited by the Employer's capital plan? Cash Flow Estimate to be Submitted 17 . is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on such extension of time and additional cost? Not Foreseeable Physical Obstructions or Conditions FIDIC Clause 12. Any such text change should be avoided as being against FIDIC Red Book principles and unfair.tribunal could decide that a bidder had insufficient time to investigate and verify the site data provided by the Employer and it would have been necessary and reasonable for the Contractor to have relied on the accuracy of the site data to calculate the tender price. Any text change which restricts or limits the Contractor’s right to claim for extension of time and additional cost shall be avoided to prevent from disadvantage for both the Employer and the Contractor. This new clause allows the bidders to access data provided elsewhere in the Contract. the Engineer’s fair decision may be affected greatly by the Employer's views. If there is a text change to the effect that the Engineer requires the Employer's prior permission to exercise his discretion in relation to extension of time and additional cost.2 <Interpretation> No Contractor can manage risks arising from physical obstructions or conditions which an experienced contractor could not reasonably have foreseen.

However.2 provides that insurance shall be in the joint names of the Contractor and the Employer. shall be borne by the Employer or the Contractor in accordance with their respective responsibility set out under the FIDIC Red Book or at law. A cash flow plan is established referring to this construction time schedule. Any text change by which the Employer limits the Contractor’s cash flow plan should not be made.<Interpretation> FIDIC Red Book Clause 60 sets out the payment procedure which is invariably to be payment according to work progress. Check Point 15 Have the Contractor's obligations expanded to include responsibility for the original points. lines and levels given to the Contractor by the Engineer changes the procedure stipulated in FIDIC Red Book Clause 17. The construction time schedule is prepared by the Contractor in accordance with their own construction methods. Check Point 16 Has any of the Employer's risk been imposed on the Contractor and consequently has the Contractor's obligation been expanded? FIDIC Clause 20.1 <Interpretation> Any text change to make the Contractor assume responsibility for the accuracy of the original points.3 & Loss or Damage Due to Employer’ Risks and other related others issues <Interpretation> FIDIC Red Book Clause 21. Any loss or damage not insured or not recovered from the insurers.1. pursuant to Clause 21. Such a change imposes too much risk on the Contractor and any such text changes should be avoided as being unfair and against FIDIC Red Book principles. Any amount not recovered from the insurers is described 18 .3. This limit is stipulated in the Contract. Such insurance shall include all the Employer’s risks except the Special Risks stipulated in Clause 65. payment by some executing agencies / Employers is limited by an annual government budget. In such cases payment can only be made within the limit of the budget regardless of the amount due according to the FIDIC Red Book work progress procedures. lines and levels given by the Engineer? Setting-out FIDIC Clause 17.

Any such text changes should be avoided as being against FIDIC Red Book principles and unfair.3 which imposes the Employer’s liability to compensate for damage to roads and bridges on the Contractor regardless of the law and the regulations. 19 . forces the Contractor to bear a risk that he cannot manage. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. If a text change is made to delete an exclusion from FIDIC Red Book Clause 21. Check Point 17 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision regarding obstruction to the Contractor during construction of the Works for which he is not responsible? Fossils FIDIC Clause 27. the Engineer’s ability to make a fair decision may be affected by the Employer's views. Any text changes which transfers the Employer’s risks to the Contractor increases the Contractor’s obligation and would mean that the Contractor is required to bear any loss and or damage not recovered from the insurer. Any insurable event not covered by the policy for any reasons is described as an "Exclusion”. It is necessary to avoid such text changes that move those normally excluded risks to the Contractor.3 <Interpretation> Any text change to FIDIC Clause 30. Check Point 18 Has the responsibility for compensation for damaged road and bridges that the Employer should assume been imposed to the Contractor? Transport of Materials or Plant FIDIC Clause 30.as ”Excess” and/or "Deductibles”.1 <Interpretation> If there is a text change which requires the Engineer to get the Employer's prior permission to exercise Engineer's discretion in relation to extension of time and additional cost caused by removal of obstruction by fossils. Those risks cannot be managed and are not insurable at normal premiums.4 and such event occurs then the Contractor’s responsibility will have been unreasonably enlarged.

Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision for such extension of time and additional cost? Engineer’s Determination where Tests not Provided for FIDIC Clause 36. Further. If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to extension of time and additional cost. Check Point 21 Is there any restriction on the Contractor’s right to Claim for additional cost for uncovering and making openings? Further. the Engineer’s fair decision may be affected greatly by the Employer's views. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. the Engineer’s fair decision may be affected greatly by the Employer's views. Check Point 20 Is there any restriction on the Contractor’s right to claim for extension of time and additional cost for testing not provided for? Further. is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision for such additional cost? Uncovering and Making Openings 20 FIDIC Clause 38.2 <Interpretation> If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to additional cost. It is necessary to avoid any such text change that imputes such risk that cannot be managed.5 <Interpretation> Any text change to FIDIC Red Book which removes the Contractor’s entitlement to a claim for extension of time and additional cost for the tests not provided for in the Contract may lead to restriction on the Contractor’s rights.2 . Such tests are unplanned work and an extension of time would be unavoidable if this work is on the critical path.Check Point 19 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision with regard to the Contractor’s additional cost for facilities for other contractors? Facilities for Other Contractors FIDIC Clause 31. such cost could not have been included in the Contract Price.

Both such text changes should be avoided as being against FIDIC Red Book principles and unfair. If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to additional cost. the Engineer’s fair decision may be affected greatly by the Employer's intention.2 <Interpretation> If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to extension of time and additional cost.1.1.1 <Interpretation> The issuance date of the Notice to Proceed marks the commencement of the contractual construction period.3 within the number of days stipulated in Part II such period counting from the date of the Letter of Acceptance. The FIDIC Red Book requires the Contractor to submit a programme under Clause 14. and Cash Flow forecast under Clause 14. the Engineer’s fair decision may be affected greatly by the Employer's views.<Interpretation> Any text change to FIDIC Red Book Clause 38. The Contractor is also required to submit the Performance Security under Clause 10. A time limit for the issuance of the Notice to Proceed is usually stipulated in the 21 .2. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. Check Point 23 Is there a possibility of delay and idling time for the Contractor before the Contractor can start work even though the Letter of Acceptance had been issued? Commencement of Works FIDIC Clause 41. and a breakdown of the Lump Sum prices under Clause 57.2 which deletes the Contractor’s right to an additional cost for making openings of any part of the Works covered up in proper manner would impose an unmanageable risk to the Contractor. Check Point 22 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision with regard to the Contractor’s additional cost and extension of time arising from work suspension ordered by the Engineer? Engineer’s Determination following Suspension FIDIC Clause 40.

Such matters cannot be managed by any Contractor. The Contractor is not able to schedule the Works when the Notice to Proceed and Letter of Acceptance are delayed.2 in order to submit these within 28 days from the date of the Letter of Acceptance. However. Text changes to impose responsibility for these activities on the Contractor therefore should be avoided. Check Point 24 Is there a restriction on the Contractor’s right to claim for extension of time and additional cost for delay in possession and or access to the Site? Further.2 <Interpretation> Any delay in giving possession of. managing these various procedures is not the Contractors problem but is the Employer's responsibility. the site is necessarily the responsibility of the Employer. The Contractor would also be forced to start contractual activities. This would be so even if the Notice to Proceed had not been issued by the Engineer after 28 days from the Letter of Acceptance. the Engineer’s fair decision may be affected greatly by the Employer's views.Appendix to Tender in relation to the date of issuance of the Letter of Acceptance by the Employer. It may be difficult to predict how long these tasks will take to solve and that may be the reason to make a text change so as not to stipulate a time limit in the Appendix. such as the preparation of the Performance security under Clause 10. Managing these procedures is a prerequisite for the smooth execution of construction works. and preparation of the Lump Sum prices breakdown of under Clause 57. Any such text 22 . An Employer may have many internal problems to overcome to commence the project such as land compensation. Therefore if there is a text change which deletes the time limit for issue of the Notice to Proceed from the date of the Letter of Acceptance the Contractor may be forced to stand in readiness for a long time. Such a text change creates a risk that cannot be managed by the Contractor and should not be incorporated. and access to. arrangement of budget and staff arrangement. If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to extension of time and additional cost. If a delay to either of these activities actually affects the critical path of the Works. is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the Contractor’s right to an extension of time and additional cost for such events? Failure to Give Possession FIDIC Clause 42.1. an extension of time is unavoidable.

There is also the possibility that capable contractors will be deterred from bidding as described in Checkpoint 12. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. or deletes entirely. 23 .1 Are amounts and limits of liquidated damages which may be imposed on the Contractor appropriate? Liquidated Damages for Delay <Interpretation> The Guidelines for Procurement under JBIC ODA Loans published January 2005 recommend liquidated damage at a rate of 0.1 Are there any restrictions on the Contractor’s right to claim for extension of time for Completion? Extension of Time for Completion <Interpretation> Any amendment which changes the conditions for. Such text changes have no advantage for the Employer or the Contractor. Any decision that liquidated damages are a penalty causes there to be a doubt on the effectiveness of the whole liquidated damages provision. Contractors may include a contingency in their bid price to cover the risk of extremely large amounts of liquidated damages set out in the bid documents. Such an amendment attempts to impose on the Contractor risks that he cannot manage. Any text change which deletes the upper limit of liquidated damages and has the possibility of deducting extremely large amounts of money may be judged as a penalty if a dispute proceeds to arbitration.1% per day of the Contract price or 0. If the Works are not delayed then the contingency is an unnecessary expense for the Employer. Check Point FIDIC Clause 25 44.changes should be avoided as being against FIDIC Red Book principles and unfair. It also recommends an upper limit in the range of between 5% and 10% of the Contract Price. any of the five reasons for extensions of time and of the Contractor’s right to claim for extension of time should be avoided. Check Point FIDIC Clause 26 47.5 % per week of the Contract Price.

the Engineer’s fair decision may be affected greatly by the Employer's intention.2 Has the Contractor’s scope of the responsibility for defects liability been expanded excessively? Completion of Outstanding Work and Remedying Defects <Interpretation> The Contractor cannot control natural wear and tear caused by operation of facilities during the Defects Liability Period. Any text change which imposes an excessive risk on the Contractor by unreasonably extending the defects liability period may increase the bid price and make the project more expensive for the Employer. To impose such responsibility on the Contractor is an unfair expansion of the Contractor’s obligations and may increase the bid price and expense to the Employer. Such text changes have no advantage for the Employer or the Contractor. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair.Check Point 27 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision to issue the Taking-Over Certificate? Taking-Over Certificate FIDIC Clause 48. Wear and tear of facilities and structures is natural when they are put into use under normal operating conditions. There is also the possibility that capable contractors would be deterred from bidding as described in Checkpoint 12. 24 . Check Point FIDIC Clause 29 49.1 <Interpretation> If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to issue of a Taking-Over Certificate. There is also an implication that the Engineer's monitoring of the Works as a third party during the construction process functions to ensure that the economic life of the civil works and structure will generally be durable in the range of between 30 and 50 years.1 Is the defects liability period excessive? Defects Liability Period <Interpretation> The Defects Liability Period set out in the FIDIC Red Book Appendix to Tender is usually one year for civil works. even if such a text change is made to impose such a responsibility on the Contractor. Check Point FIDIC Clause 28 49.

Check Point 30 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the additional cost to be paid to the Contractor for rectification of defects? Contractor to Search FIDIC Clause 50. It is necessary to avoid any text change which deletes such provision because this is a violation of the right of the Contractor to carry out the contractual work. Check Point 31 Is there an infringement on the rights of the Contractor such as the Employer reserving the unconditional right to omit parts of the Works? Variations FIDIC Clause 51. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. Such text changes have no advantage for the Employer or the Contractor.3 25 . Check Point 32 Is the percentage applied in this clause reasonable? Is the formula by which the Contractor's right is calculated provided for? Further. the Engineer’s fair decision may be affected greatly by the Employer's view. the right of the Employer is conditional on the fact that such omission shall not be for the purpose of having that work carried out by the Employer or by another contractor.1(b) provides that "to omit any such work" is a part of a variation.There is also the possibility that capable contractors will be deterred from bidding as described in Checkpoint 12. is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the amount of addition or deduction to the Contract Price? Variations Exceeding 15 percent FIDIC Clause <Interpretation> 52.1 <Interpretation> If there is a text change which requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to additional cost. However.1 <Interpretation> FIDIC Red Book Clause 51.

to identify which contemporary records will be required to substantiate the claim and to take any action that may be appropriate. Check Point FIDIC Clause 33 53. To accomplish this balance of risk it is necessary to allow for the adjustment of the Effective Contract Price if such increase or decrease of variations adversely the affects the proportion and therefore recovery of indirect construction costs.The basis of this clause is to balance the Employer's and the Contractor's risk for increases or decreases of the Effective Contract Price. If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to increase or decrease amount of the Effective Contract Price. the assessed value of the claim will be paid to the Contractor when the Engineer has determined that the amount claimed was reasonable in the light of the facts and rights under the Contract. The FIDIC Red Book Clause 53.1 Is there an unfair limitation in the period of time during which the Contractor has a right to claim? Notice of Claims <Interpretation> The basic philosophy behind a claim notice period being set as 28 days is that the Employer and the Contractor are able. According to the Contract. The Effective Contract Price shall be adjusted in relation to the amount of contract variations. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. the Engineer’s fair decision may be affected greatly by the Employer's intention.3 requires the Contractor to send to the Engineer. with an account giving detailed particulars of the amount claimed. There is also a common sense view that a 28 days period is appropriate for the Contractor to recognize that an event may developed into a claim. Clearly memory alone is not a good basis as it becomes fainter as time goes by. A text change to shorten this 28 days period should be avoided because of possible unfair restriction of the Contractor’s rights. Any text change which specifies an unreasonably high percentage for variations before adjustment is made should be avoided. in good time. 26 . with an explanation of the grounds upon which the claim is based.

What support the Employer provides actually varies in different countries and projects. the details of the Employer's support. applications for approval of construction materials. The Employer must therefore describe in Part II of the Conditions of Contract. Objection to Nomination FIDIC Clause 59. Check Point FIDIC Clause 36 59.Check Point FIDIC Clause 34 54.2 <Interpretation> Under FIDIC Red Book Clause 59. Check Point 35 Is the Contractor's right to reasonable objection to the Employer's selection of nominated subcontractor been limited or deleted? Nominated Subcontractors. The clause does not clearly specify the details of such support. Customs departments usually require endorsement by the Employer for re-export of the Contractor’s construction equipment after the construction in accordance with FIDIC Red Book Clauses 33.1.2(a) all nominated subcontractors should undertake towards the Contractor such obligations and liability that will enable the Contractor to discharge his own obligations and liabilities towards the Employer.3 Have the provisions on the Employer’s assistance to the Contractor been deleted or reduced? Customs Clearance <Interpretation> FIDIC Red Book Clause 54. and selection of subcontractors.4 Does the Contractor have the right to set out in the Contract his attendances and profit on Nominated Subcontractors? Payments to Nominated Subcontractors <Interpretation> The Contractor shall submit his method statement. Any text change which deletes such support from the Employer may not only expand the Contractor’s obligation but also obstruct execution of the Project.1 and 54.3 sets out the range of support to be offered by the Employer to the Contractor regarding customs clearance. Any text change which prevents the Contractor from rejecting any subcontractor selected by the Employer who will not undertake such responsibility shall be avoided because it prejudices the Contractor's chance of keeping the quality of work and time period stipulated in the Contract. It is a right of the Contractor to 27 .

This format sheet shall provide separate columns for the rates for his own work and subcontracted work as the Contractor’s management input is different in each case.4(c) should have no text change to fix the rates to a single rate to avoid violation of the Contractor’s right. Check Point FIDIC Clause 37 60. There is also the possibility of deterring capable contractors from bidding as stipulated in Checkpoint 28 . Check Point 38 Is the Contractor's right limited by extending the time limit for the Employer to honour a payment certificate issued by the Engineer? Monthly Payments FIDIC Clause 60. The rate of profit and payment for charges must be at the Contractor’s discretion.2 <Interpretation> Both the FIDIC Red Book and the JBIC Sample Bidding Documents specify the time limit for the Employer to honour an Engineer’s certificate for payment as 28 days. clearly defined in the contract? Monthly Statements <Interpretation> The JBIC Sample Bidding Document recommends a clause for Certificates and Payment. The numbering system of this recommended clause is different from FIDIC Red Book but the effect of the clause is the same. Therefore FIDIC Red Book Clause 59.1 Is the party to pay for the bank commissions and fees etc. making remittance and other bank charges including those incurred by the Contractor then it is necessary to clearly specify this in the Contract.1(e) and include them as “any other sum to which the Contractor may be entitled under the Contract” in both the FIDIC Red Book and the JBIC Sample Bidding Documents. The Contractor can request payment for these bank fees under Clause 60.receive profit and payment for services which he provides to the subcontractors. Any text change to extend the 28 day honouring period will extend the time limit for payment by the Employer and will probably increase the Contract Price. If the Employer intends to pay the bank for opening letters of credit. The Tender document must include a format sheet to include the appropriate rate of profit and payment for charges in the build up of the Contract Price.

Any text change to request the Contractor to submit a bank bond in exchange for the return of the first half of the retention money may impose on the Contractor an excessive obligation beyond the FIDIC Red Book model.3 Has an excessive obligation been imposed on the Contractor in respect of amount or timing of release of retention money? Payment of Retention Money <Interpretation> FIDIC Red Book Clause 60.12. This recognises the fact that the Employer’s risk from the default by the Contractor is reduced at this time. Check Point FIDIC Clause 39 - Has an excessive obligation been forced on the Contractor with regard to amortisation of the Advanced Payment? Advance Payment <Interpretation> The provision of an advance payment allows the Contractor to pay for preparation of the site and temporary works until receipt of the first interim payment. Any text change to make the Contractor repay the advance payment much before interim payments have reached 80% of the Contract Price should be avoided as they may undermine the original purpose of the advance payment. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. The advance is amortised by the Employer deducting a defined amount from an otherwise due interim payment. The second half of the retention money is still held by the Employer to cope with the risk of the Contractor not remedying defects in workmanship. Therefore such text changes should be avoided from the perspective of economic rationality. The JBIC Sample Bidding Document recommends that repayment should be calculated so as to obtain full recovery of the advance payment by the time 80% of the Contract Price has been certified for payment. Check Point FIDIC Clause 40 60.3 provides that the first half of the retention money shall be returned to the Contractor upon the issue of the Taking-Over Certificate with respect to the whole of the Works. 29 . For this reason the second half of the retention money is released only at the end of the defects liability period at the same time as the performance security is also returned to the Contractor.

Such a text change could deter capable contractors from submitting a bid as stipulated in Checkpoint 12 and should be avoided from the point of view of economic rationale.. The actual time of payment by the Employer could vary according to the particular contract definition. Check Point 42 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the amount to be reimbursed for the Contractor to rectify or replace any Works damaged by Special Risks? Damage to Works by Special Risks FIDIC Clause 65. Any text change which allows the Employer to delay payment beyond the standard time limit of 56 days and / or deletes the obligation to pay interest for delayed payment may push up the Contract Price.Check Point FIDIC Clause 41 60.10 should clearly specify the time of payment to define the starting date for calculation of interest. or delivery to JBIC. the Engineer’s fair decision may be affected greatly by the Employer's intention. The FIDIC Red Book Clause 60. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. or at the time of actual payment into the Contractor’s bank account.8.10. It is important that the payment obligation of the Employer should be clearly specified in FIDIC Red Book Clause 60.3 <Interpretation> If there is a text change that the Engineer requires the Employer's prior permission to exercise his discretion on cost related to damage caused by Special Risks. or is he denied interest for delayed payment? Time for Payment <Interpretation> The JBIC Sample Bidding Documents recommend 56 days as the time for payment in FIDIC Red Book Clause 60.10 Is the Contractor's right to payment in a specified period prolonged. Payment could be the time of delivery by the Employer of necessary documents to the Contractor. Check Point 43 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the amount of increased cost arising from Special Risks? 30 .

5 Increased Costs arising from Special Risks <Interpretation> If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion on the amount of increased cost arising from Special Risks. Check Point FIDIC Clause 45 67.8 <Interpretation> If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to additional cost. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair.FIDIC Clause 65. The DAB comprises three (3) members in the case of a project in which the contract price exceeds 42 million US$ (equivalent to 5. Check Point 44 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on the additional cost at the termination of the Contract arising from Special Risks? Payment if Contract Terminated FI DIC Clause 65.0 billion Japanese Yen) as the optional method for the settlement of disputes. The Employer should have understood that such expenses are inevitable when the DAB procedure was selected.1 When the DAB procedure is used. the Engineer’s fair decision may be affected greatly by the Employer's view. 31 . the Engineer’s fair decision may be affected greatly by the Employer's view. has the cost been examined sufficiently? Engineer’s Decision <Interpretation> Chapter 11 of the JBIC Sample Bidding Documents provides for the use of a Dispute Adjudication Board (DAB). Under the FIDIC Red Book Clause 67. Even if the sharing of such cost was stipulated in the FIDIC Red Book the cost of a DAB can be exceptionally high especially if the adjudicators come from third countries.1 this option is included at the discretion of the Employer as a method of resolving differences over any Engineer’s decision. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. There have been projects where the establishment of a DAB was suspended because of the large sums of money to be paid for the DAB by both the Employer and the Contractor.

The specification of these time limits shall be subject to sufficient investigation especially when the executing agency has no authority to make a decision on the issue related to this clause and is required to consult with other government authorities.3 Is the selection of the arbitration procedure and the method of selection of arbitrators properly international? Arbitration <Interpretation> There should be proper consideration given to the selection of the dispute settlement procedure incorporated in an international contract especially in the case of the nomination of an arbitration rules / organization which is based in the country of the Employer and (usually) the country where the Works are to be carried out. The general rule should be to appoint a truly international and neutral rules / organization such as International Chamber of Commerce (ICC). Check Point 47 Are the Contractor’s rights limited by shortening the notice period.1 <Interpretation> The FIDIC Red Book Clause 60. Check Point 48 Is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision on extensions of time and additional cost at the termination of the Contract or suspension of the Works caused by Employer’s default? 32 .10 (a) provides a period of 28 days within which payment should be made by the Employer for interim certificates and 56 days for the Final Certificate. Proper consideration should be give to these periods taking into account the implementation method and the context of the country where the Works are to be carried out.1 also provides a period of 14 days for the effectiveness of a notice of termination for Employer's failure to pay as required. or providing for a prolonged grace period for the effectiveness of termination of the Contract by reason of an Employer’s default? Default of Employer FIDIC Clause 69.Check Point FIDIC Clause 46 67. The FIDIC Red Book Clause 69. It is necessary to investigate all the circumstances surrounding the executing agency at the same time as considering the rights of Contractor stated and implied in the Contract.

1 above.1 is required in a particular project. or automatically cuts a certain percentage of price escalation.1 can be ambiguous as described in the Commentary on Clause 70.2 <Interpretation> The FIDIC Red Book Contract stipulates that the Contractor is entitled to additional costs incurred due to changes in legislation and any text changes that limits the Contractor's right to price adjustment only in circumstance when the additional amount would exceed a certain limit are unfair.1 <Interpretation> The JBIC Sample Bidding Documents recommend alternative provisions to FIDIC Red Book Clauses 70. is there any possibility of the Engineer being unfairly influenced by the Employer when making a decision for the amount of increase or decrease cost due to changes in legislation? Subsequent Legislation FIDIC Clause 70.FIDIC Clause 69. Check Point 49 Is the Contractor’s right to price adjustment limited by the Employer selecting an unreasonable adjustment formula or providing a very large non-adjustable range? Increase or Decrease of Cost FIDIC Clause 70. or limits adjustment to the cases of drastic movement in price. If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion on increase or decrease cost caused by changes in legislation. Check Point 50 Is the Contractor’s right to claim for additional cost for changes in legislation limited? Further.7 in Part II of the Conditions of the Contract. the Engineer’s fair decision may be affected greatly by the Employer's intention. A description which clarifies adjustment to be made under Clause 70. 33 .4 Contractor’s Entitlement to Suspend Work <Interpretation> If there is a text change that requires the Engineer to get the Employer's prior permission to exercise his discretion in relation to extension of time and additional cost. or specifies unreasonable formula. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. It is necessary to avoid any text change to restrict the Contractor’s right which deletes this clause. The limits of price adjustment under Clause 70.1 to 70.

Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. There is also the possibility that the bid price will be increased by the contractor making provisions for this exchange risk and the restriction on the recovery for Clause 70.1 price adjustment.2 <Interpretation> When the Employer specifies his obligation to pay. does it unfairly restrict the Contractor’s right and does it avoid conflict with any other clause? Currency Proportion FIDIC Clause 72.the Engineer’s fair decision may be affected greatly by the Employer's view. Any such text changes should be avoided as being against FIDIC Red Book principles and unfair. Check Point 51 Is the provision of ratio of currencies of payment reasonable. in more than one currency. 34 . an unbridgeable gap in the Contractor's actual cash flow may be caused if the text changes fix that ratio.

Appendices .

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1 67.2 Time Yes Agreement to Engineer’s or DAB’s Decision Settlement of Dispute Engineer’s Determination after consultation with parties 53. Final Settlement of Dispute 67.2 Occurrence of Dispute Within 56 days Yes Amicable Settlement Settlement of Dispute No Arbitration (under ICC Rule ) Note 1* If a Dispute Adjudication Board (DAB) has been appointed by the modification of Part II Conditions of Particular Application.1 Cost 44.5 52.2 Notice to Engineer of Intention to Claim Within 28 days 53.1 67.3 Cost 44.2 Reference of dispute to Engineer Reference of dispute to DAB*1 67.2 Time 67.1 67.Appendix -1 Procedure of Claim and Dispute Settlement FIDIC RedBook -1987 Occurrence of Claimable Event 67.2 Cost 44.1 Time No Notice to commence Arbitration 67.1 Engineer’s Decision Within 84 days DAB’s Decision*1 Within 84 days Notice of ground and details of Claim Within 28 days 53.3 AP-1 .1 Agreement to the Determination Yes Settlement of Claim Within 70 days No Attempt at Amicable Settlement 67.

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go.J BI C JAPAN BANK FOR INTERN ATIONAL COOPERATION Japan Bank for International Cooperation Head Office 4-1 Ohtemachi 1-chome. Japan Telephone : Tokyo 81.9 6 4 0 URL: http://www.jbic.3 .jp E-mail: pdds@jbic.3 . Chiyoda-ku.5 2 1 8 . Tokyo 100-8144.9 6 1 1 Facsimile: Tokyo 81 .5 2 1 8 .jp .go.

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