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| Technologies | : FIDIC Contracts | Events | St. Petersburg | Regions

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Georgy Borisov Associate, Head of Real Estate Practice, Moscow Baker Botts LLP .......................

FIDIC Contracts
FIDIC based construction contracts are becoming increasingly popular in the Russian construction industry. This article attempts to clarify what FIDIC standard forms are, the principles upon which the forms are based, the structure of the standard forms and the ways in which each standard form differs from the other standard forms.
duration, and for projects with no need for specialists (sub-contractor) or an Engineer as all the design is done by the Contractor. Construction Form of Contract (or Red Book) is used where the design is done by (or on behalf of) the Employer; the project may require the Contractor to supply plant design and/or execute some design, and the project is administered by an Engineer hired by the Employer. In the Plant and Design-Build Contract (Yellow Book) the Contractor is responsible for Plant, Building and Engineering Works, though the Employer may have executed some design. EPC Turn-Key form of contract (Silver Book) provides for engineering, procurement and construction by the Contractor who is to deliver a fully equipped facility to the Employer with tests on completion. The design is performed by the Contractor in accordance with the Employer’s requirement. All these different forms, in essence, are about risk allocation between two parties (Employer and Contractor), and are based on one fundamental issue – who is responsible for the design of the project. The issue is not who is doing design, but who is responsible for it. STRAIGHTFORWARD PROJECT/ НЕСЛОЖНЫЙ ПРОЕКТ нет/no да/yes
Short Form of Contract / Сокращенный контракт

What is FIDIC?
Given the vast number of various forms of contracts in the construction industry worldwide, the community has always struggled to create certain uniform sets of documentation that would simplify the bidding process, be more “user friendly”, and could be repetitively used for different types of construction projects. FIDIC is one of many professional associations that has been trying to achieve these goals in the last several decades. FIDIC is the Federation Internationale des Ingenieurs-Counseils (International Federation of Consulting Engineers), established in 1913 by a group of French and Swiss engineers, with its headquarters in Geneva, Switzerland. It is an internationally recognized organization representing over 1 million professionals in 75 countries. In the past couple of years, we have experienced significant growth in interest from our clients, Russian and international developers, project sponsors and construction contractors, in using FIDIC standard forms for construction projects in Russia. We see the reason for that in acknowledgement by the industry that FIDIC forms are clear and coherent, all clauses are essential, the definitions are detailed and the structure of every standard contract is consistent with the other FIDIC standard contracts. More important, in our view, is that FIDIC forms are fair and equitable – risk is allocated to the party which is best able to control, bear and deal with such risk. Every FIDIC standard form is complete and flexible – the standard forms cover most needs and are readily adaptable to fit any requirement of the parties to it. And last, but not least, FIDIC standard forms are recognized by the industry – they have been tested for an extensive period of time in many jurisdictions all over the world.

EMPLOYER DESIGN/ да/yes ПРОЕКТ ЗАКАЗЧИКА

Fixed price – lump sum нет/no Little employer involvement No major unforeseen risks/ CONTRACTOR DESIGN/ Фиксированная цена – ПРОЕКТ ПОДРЯДЧИКА единовременная выплата. Plant and/or high unforeseen risks/ Минимальная вовлеченность заказчика. Отсутствие существенных Производственные и/или высокие непредвидимые риски непредвидимых рисков

Conditions of Contract for Construction / Условия договора строительного подряда

no
DISCUSS IN DETAIL/ ПОДРОБНОЕ ОБСУЖДЕНИЕ Employer’s requirements with the Contractor, and negotiate a modified FIDIC contract/ Обязательства заказчика перед подрядчиком и заключение договора FIDIC в новой редакции

нет/no

да/yes
EPC Turn-Key Projects / Проектирование, материальнотехническое обслуживание и строительство «под ключ»

да/yes
Plant and Design-Build / Производственное проектирование/ строительство

payment can start only after certified interim payments exceed 30% of the Accepted Contract Amount and the advance payment must be repaid before 80% of such Accepted Contract Amount is certified. In other words, the Employer (and the lender) is better protected under the MDB Harmonized Edition as compared to the regular form of the Red Book.

Risks and Price
As you can see from the above diagram, the formula is simple – the contract price is directly dependent on the risks (mostly, foreseen) taken by the Contractor, with the Red Book on the lower end of the risk spectrum for the Contractor for the lesser consideration, and the Silver Book requiring the Contractor to accept all the project’s risks.

Composition of the Contract
The FIDIC contract, being a full agreement between the Employer and the Contractor for a given project, is a compilation of several components, which, taken together, form the contractual arrangement of the parties. A FIDIC contract consists of: I Contract Agreement I Letter of Tender I Letter of Acceptance I Conditions of Contract I Specification I Drawings I Schedules I Dispute Adjudication Agreement As utilization of a FIDIC form is very often the result of a FIDIC based tender process,

The FIDIC “Rainbow”
There are several types of FIDIC contracts (or books), most bearing a dedicated color to allow for easier identification and operation of each form: I Short Form of Contract (Green Book), I Construction (Red Book), I Plant and Design-Build (Yellow Book), I EPC Turn-Key Projects (Silver Book), I Employer-Consultant form of contract (White Book), I Dredging and Reclamation Work (no color) and Tendering Procedure (Blue Book). Below we will briefly speak about the first four forms, i.e. Green, Red, Yellow and Silver Books, as these are of most relevance to a general construction project. In addition to the logic shown in the diagram shown here, the factors influencing the choice of form of the contract are: Value/Complexity; Design Responsibility; Need for Variations; Risk Allocation; Work Type; Payment; Administration; and Involvement of the Engineer.

MDB Harmonized Edition of Red Book
FIDIC has been successful in introducing its standards to international lenders. A group of international banks (MDBs, or multilateral development banks) led by The World Bank and which also includes the EBRD, Nordic Bank of Development, Inter-American Development Bank, Black Sea Trade and Development Bank, Asian Development Bank, African Development Bank and Islamic Bank for Development), have made the special edition of the FIDIC Red Book a part of their standard bidding document. In other words, international lenders prefer (and sometimes insist) that the construction projects they finance utilize the Red Book Harmonized Edition. The special features of this edition of the Red Book are: an Engineer has less authority; and deduction of the advance

FIDIC suggests that the Letter of Tender and Letter of Acceptance, documents that are part of the tender documentation, are made a part of the contract. A special feature of any FIDIC contract is that its terms and conditions consist of both General Conditions and Particular Conditions. The General Conditions are a standard combination of contract provisions, while the Particular Conditions are the result of negotiation between the parties and are designed to modify or delete some of the General Conditions. FIDIC’s tender process suggests that the Employer include the chosen standard FIDIC contract and the proposed Particular Conditions in the tender documentation package with or without the possibility for the Contractor to negotiate the terms of the Particular Conditions, depending on the terms of the tender. In either event, it is the Particular Conditions which reflect the specificity of the project on the contractual level. Accordingly, contractors should exercise maximum care when reviewing and negotiating the Particular Conditions.

What are the basic differences?
Short Form Contract (Green Book) is used for simple or repetitive work or for works of short

Risk / Риск

Рынок/ market

Red Book / Красная Книга

Yellow Book / Желтая книга

Silver Book / Серебряная книга

Price / Цена

119

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