 Time

 Cost

 Scope

Manage these or they will

manage you!
 Complete awarded project in
 Minimum possible time
 Minimum possible cost
 At specified cost

 Drafting document
 Consider Risk of all parties
 Reasonable & fair for all the parties
 Types of Standard Contract Documents used in
construction contracts Introduction

 Introduction to FIDIC

 Golden Principals of FIDIC

 Principal differences between clauses of

Red/Yellow/Silver books
 International Federation of Consulting Engineers (FIDIC)
 Construction Industry Development Authority (CIDA), Sri
Lanka
 Standard Contract Documents published by WB
 Joint Contracts Committee (JCC);
 Standard Form of Building Contract (JCT);
 Institute of Civil Engineers (ICE), UK Conditions of Contract
Measurement Version;
 ICE Design and Construct Conditions of Contract, UK ;
 ICE New Engineering Contract, UK
 Founded in 1913
 Expanded in 1945 to include 40 national associations
 Published first Conditions of Contract in 1957
 In 2004 has 64 member associations
 Headquarters in Switzerland
 Web Site : www.fidic.org
 Pre 1957 – no internationally recognised contract
conditions
 First “red book” based on UK ICE conditions
 FIDIC has international committees to improve
contracts
Standard contracts for civil engineering & construction works

•Minor Works
•Construction

•Plant and Design-Build

•EPC/Turnkey

•Design-Build-Operate
Standard contracts for civil engineering & construction works
•Construction
•Plant and Design-Build
•EPC/Turnkey

Picture Source: vbi.de

 THE UNDERLYING BASIS FOR THE FIDIC CONTRACTS
– RISK ALLOCATION
 The 1999 Red Book is globally the most commonly used standard
form contract for construction and engineering works where most or
all the works are designed by, or on behalf of, the employer.

 FIDIC has historically allocated risk based on which party is best

placed to assume that risk.

 So for example in ‘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, and the Contractor who prepares the design takes
on the responsibility for its defects.
• Larger and more complex than minor works projects, traditional
construction projects involve civil engineering and building
works, required by an Employer who, unless he carries out the
design in-house, would normally commission a consulting
engineer to design the Works.

• Traditional construction projects often also include some

elements of contractor-designed work.

• The procurement of construction works has for many years

principally taken place according to a standard pattern (pre-
feasibility and feasibility studies; conceptual or preliminary
designs; final design)
 Electrical and mechanical plant designed by the Contractor

 Larger and more complex than minor works projects, traditional plant projects
involve the design, manufacture, delivery, erection, testing, etc. of plant by a
contractor to an outline or performance specification prepared by the Employer.

 Recommended also for the building of engineering works, if most (or all) of the
Works are to be designed by (or on behalf of) the Contractor.

 Follows the same procedure as for construction works, however with certain
significant differences:
• much of the plant is manufactured off-site;

• detailed design of the plant is the Contractor‘s responsibility;

• Contractor is usually associated with a plant manufacturer or

supplier alone or associated with a civil works contractor;

• payment is mainly on a schedule of payments based on achievement

of predefined measurable progress or milestones; testing and
commissioning are comprehensive and stringent.

• Performance specifications in ‘Employer’s Requirements’.

 Building and engineering works designed by the Contractor

 Design-Build: design should be carried out by the Contractor, who

is responsible for the design and that the completed works will be
fit for purpose.

 Employer provides his Employer’s Requirements and the

Contractor shall design and build/construct the facility in
accordance
As for plant contracts:

•Contractor will design and build/construct the Works according to

outline or performance specifications set by the Employer.

•schedule of payments will usually replace the bill of quantities.

•Tender dossier will usually only include drawings to show the

outline or conceptual or preliminary design
 Selecting the Type of Contract
Suitable for the provision on a turnkey basis of a process or power
plant, of a factory or similar facility or of an infrastructure project or
other type of development, where

(i) a higher degree of certainty of final time and price is required and

(ii) the Contractor takes total responsibility for the design and
execution of the project, with little involvement of the Employer. Under
the usual arrangements for turnkey projects, the Contractor carries out
all the Engineering design, Procurement and Construction (EPC),
providing a fully equipped facility, ready for operation (at the turn of a
key).
Each of the 2017 FIDIC contract documents includes:
•General Conditions (first part)
•Guidance for the Preparation of the Particular Conditions (second part)
•Forms (third part), e.g. Letter of Tender, Contract Agreement and Dispute
Adjudication Agreements

General Conditions are to be used unchanged. Particular Conditions are

prepared to include any changes or additional clauses to suit the local and
project requirements. Forms are included to give guidance on the form and
content of any ancillary documents necessary for the correct execution of the
Contract.
 Particular Conditions include the Appendix to Tender (Contract Data in the
DBO Contract) giving essential project information some of which must be
completed by the Employer before issuing Tender Documents, together with
some information, which must be added by the Tenderer.

 In any project, it will often be necessary to carry out additional work. Usually,
the Contractor spends money and claims it back from the Employer.

 It is then necessary to decide whether the Employer must pay. The initial
decision will normally be made by the Engineer or, in the case of the Silver
Book, the Employer’s Representative. This may be an interim decision subject
to appeal to the DAB, possibly followed by a formal arbitration procedure or
even the courts.
  FIDIC’s

 GOLDEN PRINCIPLES
Some of the more significant General Considerations underlying the Golden
Principles:

The terms of the Contract are comprehensive and fair to both contracting Parties
The legitimate interests of both contracting Parties are appropriately considered
and balanced.
No Party shall take undue advantage of its bargaining power

The Contractor/Subcontractor is paid adequately and timely in accordance with

the Contract to maintain its cash flow
To the extent possible, co-operation and trust between the contracting Parties is
promoted
Disputes are avoided to the extent achievable, minimised when they do arise, and
resolved efficiently
 The purpose of Lump Sum projects is to reduce the costs of design and contract
administration associated with quantity calculation, verification and
measurement.

 Lump Sum payment methods is used in Yellow/ Silver – FIDIC, OPBRC –

WB, SBD 4 - CIDA

 This contracting technique requires the Contractor to submit a lump sum price
to complete a project as opposed to bidding on individual pay items with
quantities provided.

 The Contractor will be provided a set of bid documents (plans, specifications,

etc.) and will develop a Lump Sum bid for all work specified in the contract
drawings.

 The contingency pay item is recommended on a Lump Sum project. This tool is
used to compensate the Contractor for any additional work requested, which is
not covered in the contract documents.
 Lump Sum contracting should be used on simple projects.
“Simple” is defined by the work activity, not by the project
cost. “Simple” projects are:

a) Projects with a well-defined scope for all parties (Design and

Construction)
b) Projects with low risk of unforeseen conditions (i.e., projects
that do not involve such things as significant underground
utilities, earthwork variations, underground drainage pipes,
bricks under pavement in urban areas, etc.)
c) Projects with low possibility for change during all phases of
work – Design and Construction (i.e., limited possibilities for
added driveways, median modifications due to developments,
changes due to political involvement, etc.)
1. Urban construction/reconstruction
2. Rehabilitation of movable bridges
3. Projects with subsoil earthwork
4. Concrete pavement rehabilitation projects
5. Major bridge rehabilitation/repair projects
where there are many unknown quantities.
 Monthly payments will be made based on a payout schedule mutually
agreed upon by the Department and the Contractor.
 The payout schedule will include only major tasks similar to what has
been used on design-build projects.
 Lump Sum contracts are not fixed price. Changed conditions, extra
work and unforeseen work must be negotiated and resolved with the
Contractor utilizing Supplemental Agreements and/or Work Orders on
Contingency Supplemental Agreements.

 Construction inspection personnel should not be required to document

quantities except for asphalt spread rates and other items subject to
pay adjustments (items with predetermined unit prices).
 Measurement and completion of “Final” quantity
for summary boxes on plan sheets is not required.

 Focus should be on inspection and achieving a

quality final product. For example, the project
engineer will not be concerned with how many
square yards of sod it takes or the number of
miles of final striping.
 FIDIC 2017 Suite


 Yellow / Red / Silver Book

 Principle Differences
• Design responsibility

• Risk allocation

• Contract administration
 Employer  Red book

 Contractor  Yellow and Silver books

 “4.1 The Contractor shall design, execute and complete the
Works in accordance with the contract… When completed,
the works shall be fit for the purposes for which the
Works are intended…” (emphasis added)
Owner Risk Transfer Contractor
Retains risk Assumes risk

Design – Bid - Build Design - Build EPC/Turnkey

 Engineer
  Red and Pink books
  Yellow book
 Sub-Clause 3.1 [Engineer’s Duties and Authority]
 ”…(a) whenever carrying out duties or exercising
authority, specified in or implied by the Contract,
the Engineer shall be deemed to act for the
Employer…”

 Employer’s representative
  Silver book
 Sequential process
 Architect/Consulting Engineer first, then Contractor
• A/CE completes design and prepares tender documents
 Competitive tender after design complete
• Design specifications
 Contractor charged with delivery of the completed construction [Red Book]
• Contractor not responsible for design, but partial contractor design possible
o Fitness for purpose only when contractor designs (SC 4.1(e))
• Contract administration -- Engineer
• Engineer reviews Contractors documents for contractual compliance
and certifies payments
• Engineer is no longer stated to be ‘impartial’
• Deemed to act for the Employer, except when fair determinations
are required (sub-clause 3.7.2),
 DAB to decide disputes
 Only one contract for both design and construction

 Contractor responsible for both design and construction

• Single point of responsibility
 Performance based contract
• Fitness for purpose
 Tendering based on Employer Requirements
• Performance requirements, not design
 Contract administration
• Engineer – Yellow book
• Employer’s Representative – Silver book Note: No Engineer!

 DAB to decide disputes

 Sub-Clause 1.5 [Priority of Documents]

 Scrutiny will show that the “Letter of Acceptance”, ”Letter of Tender”,

“the Schedules” and the “Contractor’s Proposal”, as included in the Red
and Yellow Books:

 do not form part of the documents forming the Contract for the Silver
Book

 The reason is that the SB is typically used for projects where the
tender / proposal (offer) / award process is replaced by a negotiated
contract.
 Sub-Clause 4.12 [Unforeseeable Difficulties]

 RED / Yellow:
 “If and to the extent that the Contractor encounters
physical conditions which are Unforeseeable, …, and
suffers delay and/or incurs Cost due to these conditions, the
Contractor shall be entitled to EoT and additional Costs.”

 Silver:
 “4.12 (c) the Contract Price shall not be adjusted to take
account of any unforeseen difficulties or costs.”
 Under the RB the Design is done by the Employer, even though limited
parts may be given to the Contractor.
 Under the Yellow and Silver Books, the Design is carried out by the
Contractor as follows:
 Yellow Book:
 Upon receiving notice to Commence, the Contractor shall scrutinize the
Employer’s Requirements, and shall give notice to the Engineer of any
error, fault or defect found. He may be entitled to compensation.
 Silver Book:
 The Contractor is deemed to have scrutinized the Employer’s
requirements prior to Base Date, and he is totally responsible for the
accuracy, completeness, etc. The Employer takes no responsibility.
 Sub-Clause 7.5 [Rejection]

 This Sub Clause is almost identical in the 1999 Red, Yellow

and Silver Books. The only difference is that the word
“workmanship” appears in the Red Book and the
expression “workmanship and design” is used in the
Yellow Book.
 Sub-Clause 8.3 [Programme]

• Similar to the provisions of the 1999 Red Book, the

Contractor has the obligation to submit to the Engineer a
detailed Programme of Works within 28 days after the
receipt of the Notice to Commence the Works.

• However, in accordance with the 1999 Yellow Book and

Silver Book the programme has to include additional
items, specifically the design, inspection, commissioning
and trial operations.
 Sub-Clause 9.1 [Contractor’s Obligations]

• The Contractor has to submit to the Engineer the as-built documents and the
operation and maintenance manuals in accordance with Sub-Clauses 5.6
and 5.7 before the commencement of the Tests on Completion and all the
other documents mentioned in Sub-Clause 4.1.

• This Sub-Clause is more detailed than the corresponding Sub-Clause

from the 1999 Red Book considering that it specifies the sequence of the
Tests on Completion, particularly it provides for the pre-commissioning
tests, the commissioning tests and the trial operation.

• “Tests on Completion” is a very important feature in the 2017 Yellow

and Silver Book taking into account that the expression is used in several
Sub-Clauses.
 Sub-Clause 11.2 [Cost of Remedying Defects]

• This Sub-Clause is quite similar to its corresponding Sub-Clause

from the 2017 Red Book.

• A new requirement had been introduced in respect of defects caused

by an “improper operation or maintenance which was attributable
to matters for which the Contractor is responsible (under Sub-
Clauses 5.5 to 5.7 or otherwise)”.

• Again, the work for remedying of any defect shall be at the

Contractor’s own risk and cost unless such work is not attributable
to the Contractor’s default in which case the Contractor shall be
notified promptly by the Employer/Engineer and Sub-Clause 13.3
[Variation Procedure] shall apply.
 Sub-Clause 11.6 [Further Tests]

 This Sub-Clause stipulates: “If the work of remedying of

any defect or damage may affect the performance of the
Works, the Engineer (YB) or the Employer (SB) may require
the repetition of any of the tests described in the Contract,
including Tests on Completion and/or Tests after
Completion. The requirement shall be made by notice
within 28 days after the defect or damage is remedied.”
 - an entirely different Clause

 “Tests after Completion” is a very important feature in the

2017 Yellow and Silver Book considering that the
expression is used in several other Sub-Clauses.
 Sub-Clause 12.1 [Procedure for Tests after
Completion] YB
 The Employer shall carry out the Tests after Completion and shall provide the
electricity, fuel, instruments, labour, materials and qualified staff to carry out
such tests.
 This Sub-Clause specifies the procedure that shall be complied with:
• the Employer gives a 21 days’ notice to the Contractor in respect of the date
when it intends to carry out the Tests after Completion;
• the tests will be carried out within 14 days after that date, unless otherwise
agree by the Parties;
• the Engineer may proceed with the tests if the Contractor does not attend and
the tests “shall be deemed to have been made in the Contractor’s presence, and
the Contractor shall accept the readings as accurate.”
• both Parties shall compile and assess the results of the Tests after Completion.
 Sub-Clause 12.1 [Procedure for Tests after Completion] SB

 For the SB this clause is very similar to the corresponding SC

from the YB.

 The main difference is that the Contractor shall supply the

necessary staff and equipment needed for the tests after
Completion.

 And more importantly the tests will be carried out and

evaluated by the Contractor, as opposed to the Employer.
 Sub-Clause 12.2 [Delayed Tests]
• In the event that the Contractor incurs Cost due an Employer’s
unreasonable delay in respect of the Tests after Completion, the Contractor
shall notify the Engineer pursuant to Sub-Clause 20.1 of the Contract and
shall be entitled to receive payment of such Cost plus reasonable profit.
After the receipt of the notice, the Engineer shall proceed in accordance
with Sub-Clause 3.5 [Determinations] to agree or determine the Costs and
the profit.

• The last paragraph of this Sub-Clause stipulates: “If, for reasons not
attributable to the Contractor, a Test after Completion on the Works or any
Section cannot be completed during the Defects Notification Period (or any
other period agreed upon by both Parties), then the Works or Section shall
be deemed to have passed this Test after Completion”.
 Sub-Clause 12.3 [Retesting]

 In the event that the Works or a Section fails

to pass the Tests after Completion, any Party
may require for the Test to be repeated under
the same terms and conditions.
 Sub-Clause 12.4 [Failure to Pass Tests after Completion]

 Within the first paragraph it is provided that the Works or a

Section which failed the Tests after Completion shall be deemed
to have passed such Tests if the following cumulative and
mandatory conditions are fulfilled, specifically:
• Works or a Section fails to pass any/all the Tests after
Completion,
• The Contract provisions stipulate the relevant sum or its method
of calculation payable as a non-performance damages for this
failure, and
• The Contractor pays the relevant amount to the Employer during
the Defects Notification Period.
 Sub-Clause 12.4 [Failure to Pass Tests after Completion]
 cont’d
 The second paragraph states that in the event the Works or a
Section fails to pass a Test after Completion and the Contractor
proposes to make modifications to the Works/Section, the Engineer
(RB & YB) or Employer (SB) may instruct the Contractor that the
right of access to the Works/Section cannot be granted until a time
that is suitable to the Employer. In that event, the Contractor
shall remain responsible to carry out the
modifications/adjustments to the Works/Section. Nevertheless, if
the Contractor does not receive the access to those Works/Sections
during the Defects Notification Period, he will be relieved of his
obligation and the Works/Section shall be considered to have
passed the Tests after Completion.
 Sub-Clause 12.4 [Failure to Pass Tests
after Completion]
 cont’d
 In the event that the Contractor incurs additional Cost due an
Employer’s unreasonable delay in permitting access to the Works
or Plant to the Contractor to study the cause of a failure to pass a
Test after Completion or to perform any adjustments or
modifications, the Contractor shall notify the Engineer pursuant
to Sub-Clause 20.1 of the Contract and shall be entitled to receive
payment of such Cost plus reasonable profit. After the receipt of
the notice, the Engineer shall proceed in accordance with Sub-
Clause 3.5 [Determinations] to agree or determine the Cost and
the profit.
 Sub-Clause 13.1 [Right to Vary]

 Variations may be initiated by the Engineer (RB & YB) or

Employer (SB) before the issuance of the Taking-Over
Certificate, by an instruction or by a request for the
Contractor to submit a proposal. Unlike the 2017 Red
Book, this Sub-Clause does not specify the list of
variations.
 Furthermore, it is stated that “a Variation shall not
comprise the omission of any work which is to be carried
out by others”.
 Sub-Clause 13.1 [Right to Vary] – cont’d
 The Contractor is bound by each Variation, except
when it notifies without delay, with supporting
particulars, that:
• “(i) the Contractor cannot readily obtain the Goods
required for the Variation,
• (ii) it will reduce the safety or suitability of the
Works, or
• (iii) it will have an adverse impact on the
achievement of the Schedules of Guarantees.”
 After the receipt of such notice, the Engineer (RB &
YB) or Employer (SB) shall cancel, confirm or vary
the instruction.
 Sub-Clause 13.2 [Value Engineering]

 This Sub-Clause is quite similar to the 2017 Red Book with

the exception that it does not state how the Contractor shall
develop the proposal for the Value Engineering considering
that the Contractor is the one responsible for the design.
 Sub-Clause 13.3 [Variation Procedure]
 This Sub-Cause sets up the procedure that has to be followed when a
variation is made to a Contract:
• the Engineer (RB & YB) or Employer (SB) requests the Contractor to
submit a proposal;
• the Contractor shall respond in writing either by giving detailed reasons
why he cannot comply or “by submitting:
• a description of the proposed design and/or work to be performed
and a programme for its execution;
• the Contractor’s proposal for any necessary modifications to the
programme according to Sub-Clause 8.3 [Programme] and to the
Time for Completion, and
• the Contractor’s proposal for adjustment to the Contract Price”.
 Sub-Clause 13.3 [Variation Procedure] –
cont’d
• The Engineer (RB & YB) or Employer (SB) shall respond with approval,
disapproval or comments as soon as practicable after the receipt of the
Contractor’s proposal.

• The final paragraph of this Sub-Clause states that after the Engineer (RB &
YB) or Employer (SB) instructs/approves a Variation, he shall proceed in
accordance with the provisions of Sub-Clause 3.5 to agree or determine
“adjustments to the Contract Price and the Schedule of Payments”,
adjustments which shall include reasonable profit and shall consider the
Contractor’s proposals made pursuant to Sub-Clause 13.2 [Value
Engineering], if applicable.
 Sub-Clause 14.1 [The Contract Price]
 Unless otherwise stated in the Particular Conditions of the Contract:
• The Contract Price is a lump sum accepted by the Employer at Tender
stage;
• The quantities which may be comprised in a Schedule are only
estimated quantities and shall not be considered the actual and final
quantities of the Works.
• “Any quantities or price data which may be set out in a Schedule shall
be used for the purposes stated in the Schedule any may be inapplicable
for other purposes”.
 If payment for part of the works is to be determined based on the
quantities supplied or work performed, the provisions for measurement
and evaluation shall be provided in the Particular Conditions of the
Contract. ”The Contract Price shall be determined accordingly, subject
to adjustments in accordance with the Contract”.
 Sub-Clause 14.3 [Application for Interim Payment
Certificates]

 The only difference between the 2017 Red Book and

Yellow Book & Silver Book is in respect of the timing of
the Contractor’s application for Interim Payment
Certificates, which in the Yellow Book shall be submitted
by the Contractor “after the end of the period of payment
stated in the Contract (if not stated, after the end of each
month).”
 An Issue
 Is it reasonable and contractual for an
Engineer or Employer to withhold the
issuance of an Interim Payment Certificate
due to the Contractor’s failure to provide
several supporting documents ?

 Raise your hands for replying

 Sub-Clause 14.9 [Payment of Retention Money]

 The 2017 Red Book, the Yellow Book and the Silver Book contain
provisions in respect of how to pay to the Contractor the Retention
Money.

 Under the Yellow & Silver Book, the first half of the Retention Money
shall be certified by the Engineer for payment only after the Taking-
over Certificate has been issued for the Works and the Works passed all
the required tests, including the Tests after Completion. The Red book
only requires that the Taking-over Certificate has been issued for the
Works.

 Moreover, “if a Taking-Over Certificate is issued for a Section, the

relevant percentages of the first half of the Retention Money shall be
certified and paid when the Section passes all the tests”.
 Sub-Clause 14.9 [Payment of Retention
Money] – cont’d
 After the expiry of the Defects Notification Periods, the Engineer (RB & YB)
or the Employer (SB) shall certify the outstanding amount of the Retention
Money. If a Taking-Over Certificate was issued for a Section, “the relevant
percentage of the second half of the Retention Money shall be certified and paid
promptly after the expiry date of the Defects Notification Period for the
Section”.

 In the event that any works remain to be executed pursuant to Clause 11

[Defects after Taking Over] or Clause 12 [Tests after Completion], the Engineer
shall be entitled to withhold certification of the estimated cost until the
remaining work has been performed.

 Within the Appendix to Tender it shall be stated the relevant percentage for
each Section. If there is no percentage stated in the Appendix to Tender, “no
percentage of either half of the Retention Money shall be released under this
Sub-Clause in respect of such Section”
 Sub-Clause 17.3 [Intellectual and Industrial Property Rights]
 In both 2017 Red, Yellow & Silver Books, this Sub-Clause deals with the
protection of the intellectual and industrial property rights of the Parties.
 The difference between the Yellow & Silver books and the Red Book is
the following new wording:
• The Employer shall indemnify and hold the Contractor harmless against
and from any claim “alleging an infringement which is or was (…) an
unavoidable result of the Contractor’s compliance with the Employer’s
Requirements”.
• The Contractor shall indemnify and hold the Employer harmless against
and from any claim “alleging an infringement which is or was (…)
• (i) the Contractor’s design, manufacture, construction or execution
of the Works,
• (ii) the use of Contractor’s Equipment, or
• (iii) the proper use of the Works”.
Thank you