FIDIC conditions of contract

P.P.Sengupta
Former CGM(MM) , CIL
Professor, IISWBM
Technical Adviser to Chairman, WBMDTCL, Kolkata
 What does FIDIC mean?
• FIDIC stands for ‘Fédération Internationale des
Ingénieurs - Conseils’, which is best translated
from French as The International Federation of
Consulting Engineers.
• FIDIC represents the consulting engineering
industry both globally and domestically.

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 Role of FIDIC
• FIDIC was founded in 1913 to promote the
professional interests of the member associations
and to disseminate information of interest to
members
• Today FIDIC membership numbers more than 99
countries and represents most of the private practice
consulting engineers in the world.
• Only associations of consulting engineers are eligible
for FIDIC membership. CONSULTING ENGINEERS
ASSOCIATION OF INDIA is the member from India
• FIDIC Conditions of Contract are of the highest
importance and are the most popular application. 3
 History of FIDIC documents
• The first edition of FIDIC Conditions of
Contract for Works of Civil Engineering
Construction (use “Red Book” in the following)
was compiled in 1956,and later its second,
third, and fourth edition were issued in 1963,
1977, and 1987 respectively.

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 History of FIDIC documents
• With the participation of the governments,
employers, contractors and consulting
engineers all over the world about their
application of the “Red Book ( last edited,
1987), 204 findings reports were submitted .
• According to the findings, the FIDIC Contract
Committee organized a group of experts to
compile the new Contract Condition models to
be applied in the 21stcentury.
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 History of FIDIC documents
• High-quality well thought clauses and Logical Clause
Sequencing:
• Compared with the original “Red Book”, the “New
Red Book”, 1999 had 163 clauses, nearly 40% being
freshly compiled. An additional 40% were modified
and given supplements. Only 20% were kept intact.
• In the new edition, the related sub-clauses were put
into one clause when possible, and made
convenient to the users.
• Last edition 2019
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 Principles of FIDIC models
• Fair and balanced approach
– Risk is allocated to the party that is best able to bear and
control that risk
– Compensation and time extension allowed when uncalculated
hindrances occur
• Consistancy
– Consistent wording, with improved clarity; user-
friendly format and layout
– Balance between legal precision and practicability;
compatible with both common and civil law concepts
– ‘Manuals of good engineering practice’
– Prepared by engineers for practical use
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 Balance between legal precision and
practical simplicity
• “Know all the persons by these presents that I hereby give, grant, bargain,
sell, release, convey, transfer, and quitclaim all my right, title, interest,
benefit, and use whatever in, of, and concerning this chattel, known as an
orange, or Citrus orantium, together with all the appurtenances thereto
of skin, pulp, pip, rind, seeds, and juice, to have and to hold the said
orange together with its skin, pulp, pip, rind, seeds, and juice, for his own
use and behoof, to himself and his heirs, in fee simple forever, free from
all liens, encumbrances, easements, limitations, restraints, or conditions
whatsoever, any and all prior deeds, transfers, or other documents
whatsoever, now or a power to bite, cut, suck, or otherwise eat the said
orange or to give away the same, with or without its skin, pulp, pip, rind,
seeds, or juice.anywhere made, to the contrary notwithstanding, with full
power to bite, cut, suck, or otherwise eat the said orange or to give away
the same, with or without its skin, pulp, pip, rind, seeds, or juice.”

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 What FIDIC Suggests

“I am giving away this

orange to you.”

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 Principles of FIDIC models
• Work must continue, regardless of
differences: amicable settlement encouraged
• Strong financial management: detailed
claims procedures must be followed
• Suitable for both ‘international’ and domestic
use
• A framework adaptable to suit local law
• More definitions: harmonised, except for the
Short Form
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 FIDIC approach to risk allocation
• When profiling risk, FIDIC has historically allocated risk based on
which party is best placed to assume the risk; in contrast, The
Silver book adopts a market practice approach, placing the
majority of risk on the contractor, primarily including design and
design co-ordination, along with any employer design.
• With The Red Book and The Yellow Book, the employer takes on
risks such as unforeseeable ground conditions, unforeseeable
operations of the forces of nature, force majeure (such as acts
of war, terrorism and natural disasters) planning and
environmental permits, and changes to the law. The party who
prepares the design takes on the responsibility for its defects.

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 What are the FIDIC forms of contract?
• FIDIC’s Contracts Committee produces standard
forms of contract for civil engineering projects,
which are used globally.
• The purpose of these standard forms is to define
the contractual relationship between the parties
and to apportion risks between the contractor and
the employer.
• FIDIC states that their contracts allocate risks fairly
to the party that is best able to bear and control
that risk.
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 FIDIC forms of contract
• It is important to remember that the FIDIC
forms represent a starting point for the
preparation of a construction contract.
However, they are routinely amended to
reflect the particular characteristics of each
project and the requirements of the parties.

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 Choice of FIDIC form of contract
• The forms of contract are drafted for use on a
wide range of project types. The main forms
are differentiated by the colour of their
covers. The choice of form depends on the
type of project being contemplated.

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 Parties in a FIDIC contract

Employer

Dispute
Adjudication Engineer
Contract
Board

Contractor

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 Who is the Engineer ?
• The ‘Engineer’ is defined as the person
appointed by the Employer and named in the
Appendix to Tender. The word ‘person’ can
mean a company, so the Engineer may be
named as a firm of Consulting Engineers
rather than an individual.
• If the Engineer is a company, then the
company should designate an individual to
carry out the role of the Engineer.
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 The role of the Engineer

• (a) The Engineer shall carry out the duties specified in

the Contract.
• (b) The Engineer may exercise the authority specified in
or necessarily to be Authority implied from the Contract,
provided, however, that if the Engineer is required,
under, the terms of his appointment by the Employer, to
obtain the specific approval of the Employer before
exercising any such authority,
• Provided further that any requisite approval shall be
deemed to have been given by the Employer for any
such authority exercised by the Engineer
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 The role of the Engineer

• (c) Except as expressly stated in the Contract,

the Engineer shall have no authority to relieve
the Contractor of any of his obligations under
the Contract.
• (d) The Engineer’s Representative shall be
appointed by and be responsible to the
Engineer and shall carry out such duties and
exercise such authority as may be delegated to
him by the Engineer under Sub-Clause 2.3.
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 The role of the Engineer

• Sub-Clause 2-3: The Engineer may from time

to time delegate to the Engineer’s
Representative any of the duties and
authorities vested in the Engineer and he may
at any time revoke such delegation.
• Any such delegation or revocation shall be in
writing and shall not take effect until a copy
thereof has been delivered to the Employer
and the Contractor.
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 The role of the Engineer

• The Engineer shall consult with each Party in

an endeavour (try) to reach agreement. If
agreement is not achieved, the Engineer shall
make a fair determination in accordance with
the Contract.
• The determination must express the rights
and obligations of the Parties in accordance
with the Contract and the applicable law,
regardless of the preference of either Party.
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Dispute Resolution Procedures under FIDIC
contracts
• Disputes can be adjudicated by referral to a Dispute Adjudication
Board (DAB). The DAB will comprise of one of three members, the
default position being three. (Clause 20.2)
• How are the DAB members appointed? The contract may include
a list of potential members, from which the board is selected. If
three members, each party nominates one member for approval
by the other party. Parties and members agree on the
appointment of the third member, who will be chairman. (Clause
20.2)
• The form of the DAB appointment is the General Conditions of
Dispute Adjudication Agreement, as set out in the contract
Appendix, entered into by the parties and the member, a Tri-
Partite Agreement (TPA).
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Dispute Resolution Procedures under FIDIC
contracts
• Can DAB members be replaced? Yes, parties can agree to replace
a member at any time, or if a member declines to act, dies,
resigns, on disability or termination of a member's appointment.
• What is the effect of the DAB decision? The decision is binding,
and must be complied with immediately, until revised by amicable
settlement or arbitration. Parties must give effect to it. If no notice
of dissatisfaction is served, it is final and binding. (Clause 20.4)
• Unless settled amicably, any dispute in respect of which the DAB
decision (if any) has not become final and binding shall be finally
settled by international arbitration. The Rules of Arbitration of the
International Chamber of Commerce (ICC Arbitration) applies,
with the appointment of three arbitrators (clause 20.6).

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Dispute Resolution Procedures under FIDIC
contracts
• Adjudication precedes arbitration
• Dispute resolution procedure is:
adjudication (DAB)>>>amicable
settlement >>>arbitration

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 Types of FIDIC books
1. The Green Book – Simple, quick or cheap
project
2. The Red Book–Employer design (traditional
project)
3. The Pink Book– Employer design (Multilateral
Development Banks providing finance)
4. The Yellow Book – Contractor design
(traditional project)
5. The Silver Book – EPC/Turnkey project
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 Types of FIDIC books
6. The Gold Book–Design, build, operate project
7. The Orange Book-Design Build and Turnkey
8. The Green Book - ’Short Form of Contract’
9. The Blue Book - ’Form of Contract for
Dredging and Reclamation Works
10.The White Book - ’FIDIC Client/Consultant
Model Services Agreement’

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Applicability under Various Project Delivery
and Contracting System
1. The “New Red Book” can be used in any kind of Engineering
Construction Contract.
2. The “New Yellow Book” applies to the lump sum contract project where
the Contractor takes participation in the design work.
3. The “Silver Book” applies to the turnkey projects of infrastructures or
large-scale factories, where the Contractor takes on more work and risk
while the Employer’s participation is small (private financing or
government financing), but it is strictly defined upon the investment and
construction period.
4. The “Green Book” can be used in all kinds of small-scale projects.
5. To summarise these four Contract Conditions can be applied to nearly
every kind of project

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 GREEN SILVER
BOOK BOOK
RISK TRANSFER TO CONTRACTOR

YELLOW
BOOK

RED BOOK

0% AMMOUNT OF DESIGN BY CONTRACTOR 100%

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 Green Book
• This is FIDIC’s recommended form of contract
for use on engineering and building works of
relatively small capital value or where the
construction time is short. FIDIC has provided
guidance that this would probably apply to
contracts with a value of less than US $500,000
or a construction time of less than six months.
• However, the Green Book may also be suitable
for simple or repetitive work.
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 Red Book
• The Red Book - ’Conditions of Contract for Construction
for Building and Engineer-ing Works Designed by the
Employer’ (the construction contract)
• In 1956 the first edition of the original form of Red Book
was published. This was updated and amended over four
editions.
• Then in 1999 FIDIC released a totally new set of standard
forms of contract, including a brand new version of the
Red Book, which superseded the original version of the
Red Book.

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 Red Book
• The Red Book is the FIDIC recommended form
of contract for building or engineering works
where the employer has been re-sponsible for
nearly all the design.
• In fact FIDIC claim that the Red Book is the
most widely used international construction
contract where most of the works have been
designed by the employer.

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 Red Book

• A key feature of the Red Book is that payment is made

according to bills of quantities (ie a document in which
materials, plant, and labour (and their costs) are
itemised), although payment can also be made on the
basis of agreed lump sums for items of work. The Red
Book is administered by the engineer (a third party)
rather than the contractor or the employer. The
engineer will also be responsible for monitoring the
construction work (but still keeping the employer fully
informed so that he may make variations) and certifying
payments.
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 Pink Book
• The Pink Book - ’MDB Harmonised Edition’ This is a variant of the
Red Book.
• It is drafted for use on projects that are funded by certain
Multilateral Development Banks (‘MDBs’), which are supranational
institutions such as the World Bank, where the Red Book would
otherwise have been applicable.
• Where the project is funded by an MDB but the employer is not
responsible for the design, the parties should not use the Pink
Book, but use and amend one of the other FIDIC forms of contract.
• Prior to the publication of the Red Book, where the MDBs had
originally adopted the Red Book for the pro-jects they were
funding, they amended the FIDIC General Conditions

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 Yellow Book
• 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’ (the plant and design/ build contract)
• This form of contract is drafted for use on projects
where the contractor carries out the majority of the
design (ie the contractor carries out the detailed
design of the project so that it meets the outline or
performance specification prepared by the
employer).

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 Yellow Book
• The Yellow Book is therefore traditionally used for
the provision of plant and for building or
engineering works on a design/build basis. The
Yellow Book is a lump sum price contract with
payments made according to achieved milestones
on the basis of certification by the engineer (like
the Red Book, the engineer administers the
contract). The contrac-tor is also subject to a
fitness-for-purpose obligation in respect of the
completed project.
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 Silver Book
• The Silver Book - Conditions of Contract for
EPC/Turnkey Projects (the EPC turnkey
contract)
• The Silver Book is drafted for use on EPC
(Engineer, Procure, Construct) projects.
• These are projects that require the contractor
to provide a completed facility to the
employer that is ready to be operated at ‘the
turn of a key’.
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 Silver Book
• These contracts therefore place the overall
responsibility for the design and construction
of the pro-ject on the contractor. The Silver
Book is used where the certainty of price and
completion date is important. The Silver Book
allows the employer to have greater certainty
as to a project’s cost as the contractor
assumes greater time and cost risks than
under the Yellow Book.
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 Silver Book
• The Silver Book may also be used for privately financed
BOT (Build, Operate, Transfer) projects.
• These are projects where the employer takes total
responsibility for the design, construction, maintenance
and opera-tion of a project and wishes to pass the
responsibility in respect of construction to the contractor.
• There is no engineer under the Silver Book as his
responsibilities are assumed by the employer.
• Similar to the Yellow Book, the contractor is also subject to
a fitness-for-purpose obligation in respect of the
completed project.
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 Gold Book
• The Gold Book - ’Conditions of Contract for Design, Build and Operate
Projects’ (the design build operate contract) FIDIC state that the Gold
Book is drafted to minimise the risk of rapid deterioration after the
handover of a project due to poor design, workmanship or materials.

• The Gold Book is therefore suitable where a long-term operation and

maintenance commitment is required along with design and build
obligations.

• The contractor must operate and maintain the completed project on

behalf of the employer for a period of typically 20 years from the date
of the Commissioning Certificate, which is issued at completion of
construction of the project.

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 Gold Book
• During this 20 year period the contractor must
meet certain targets and at the end of this
period the project must be returned to the
employer in an agreed condition. Throughout
the 20 year period the employer owns the
plant but the contractor operates it at the
contractor’s own risk. However, the contractor
has no responsibility for financing the project
or ensuring its long-term success.
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 Blue Book
• . The Blue Book - ’Form of Contract for Dredging and
Reclamation Works’
• FIDIC state that the Blue Book is suitable for all types of
reclamation and dredging works as well as ancillary
construction works.
• Typically, under such form of contract the contractor
constructs the works in accordance with the employer’s
design.
• However, this form of contract can also be adapted for
contracts that include or consist entirely of contractor-
designed works.
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 White Book
• The White Book - ’FIDIC Client/Consultant Model Services
Agreement’
• This form of contract is not for the provision of construction
and engineering works despite it also being re-ferred to by the
colour of its cover.
• This form of contract is used to appoint consultants to provide
services to the employer such as feasibility studies, design,
contract administration and project management.
• The White Book typically forms the basis of the agreement
between the consultant and the employer where the con-
struction and engineering works are being undertaken
pursuant to a FIDIC contract.
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 What are the most popular Clauses ?
• General provisions (Clause 1)
• The Employer, Employer's Administration or Engineer, Contractor,
Nominated Subcontractors OR Design (Clauses 2-5)
• Staff and labour, Plant, materials and workmanship (Clauses 6-7)
• Commencement, delays and suspension, Tests on completion, Employer's
taking over, Defects Liability, Tests after completion (Clauses 8-11/12)
• Measurement and Evaluation OR Variations and Adjustments, Contract Price
and Payment (Clauses 12-14)
• Termination by Employer, Suspension and Termination by Contractor
(Clauses 15-16)
• Risk and Responsibility (Clause 17)
• Insurance (Clause 18)
• Force Majeure (Clause 19)
• Claims, Disputes and Arbitration (Clause 20 )
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 The Conditions of Subcontract for
Construction
• Conditions of Subcontract for Construction for
Building and Engineering Works Designed by
the Employer
• Unlike the above forms of FIDIC contract, no
colour is given to this form of contract.
• This is the FIDIC recommended form of
subcontract for use with the Red, Yellow, Silver
and Gold books referred to.

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 Case Study 1
• A contract has been awarded to build a new project
with associated services and external works.
• Contract Details are as follow:
• Employer: ABC Development Co.
• Contractor: Buildit Construction Co
• Commencement Date: 15January 2017
• Time for Completion: 104 Weeks
• Form of Contract: FIDIC 1995 Conditions of Contract
for Design Build and Turnkey (Orange Book)
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 Case Study 1
• Inconsistency between the Employer’s
requirements and the Contractor’s Proposal
becomes apparent after the way through the
works.
• Which takes precedence? How is this dealt with
under the contract?
• Answer: Clause 1.6 lists the priority of documents,
the Employer’s requirements being third in the list,
the contractor’s proposal being eighth; therefore
Employer’s requirements take precedence.
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 Case Study 2
• Which of the contractor’s claim clauses allow the contractor
to claim cost and which allow cost plus reasonable profit?
• Answer: Clauses giving the contractor the right to recover
Cost:
• Clause 4.11- Unforeseeable physical conditions
• Clause 4.24- Fossils
• Clause 8.8- Suspension
• Clause 13.16- Changes in legislation
• Clause 17.4- Employer’s Risks
• Clause 19.5- Force Majeure

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 Case Study 3
• Clauses giving the Contractor the right to
recover the cost plus reasonable profit:
• Clause 2.2- Employers failure to give access
• Clause 11.4- Employer not permitting access for
testing
• Clause 12.8- Contractor instructed to search
• Clause 16.1- Default by Employer
Reasonable profit is whatever profit the parties
agree between themselves as “reasonable”.
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 Case Study 4
The Employer’s representative has issued a verbal instruction to
carry out additional work
• I. Does the contractor have to comply with the instruction?
• II. How does the contract deal with verbal instruction?
Answer:
• I. No, under clause 1.8, wherever provision is made for the giving
of notice, instruction, etc. unless otherwise specified such
communication shall be in writing.
• II. The Contract does not provide for the giving of verbal
instructions (Note that in some other contracts provide for the
contractor issue a written confirmation of verbal instruction,
which if not rejected, becomes an instruction)
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 Case Study 5
ABC Development Co. is late in paying a certified amount due to
Buildit construction.
What are Buildit Construction’s rights regarding this situation?

Answer:
Under clause 13.8, if payment is delayed, the contractor is entitled to
receive financing changes compounded monthly on the amount
unpaid during the delay.
Unless part II states otherwise, this is 3% above the discount rate of
the central bank in the country of the currency of the payment.
The contractor is not required to give notice in order to receive this
payment.

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 Case Study 6
Buildit Construction wishes to be paid for the
precast concrete flooring units held at their
subcontractor’s works 20km from the site
awaiting delivery to six weeks later.
Answer:
FIDIC 1995 conditions of contract for Design-
Build and Turnkey (Orange Book) does not
provide for payment for materials held off site.

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