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Types of Standard Conditions of Contract

FIDIC (Fdration Internationale Des Ingnieurs-

Conseils) JCT (Joint Contracts Tribunal) NEC (New Engineering Contracts) ICE (Institution of Civil Engineers ) ACA (Association of Consultant Architects)
Local SBD (Standard Bidding Document)

New tendency in contracts worldwide

Introduction To The FIDIC Contracts (1999 Edition) FIDIC


FIDIC stands for the Fdration Internationale des IngnieursConseils and is the French acronym for the international federation of national associations of independent consulting engineers. FIDIC was founded in Belgium in 1913. The objectives of forming the federation were (and I believe are today): to promote the professional interests of the member associations and to disseminate information of interest to members of its component national associations.

Introduction To The FIDIC Contracts (1999 Edition)


(Engineer hired, paid by and has contract with Employer Employer Engineers Dual Role: (1) Employers agent in some cases Engineer

(2) Duty to act impartially between Employer and Contractor in other cases
Contractor

What is FIDIC?

The function of Conditions of Contract is of greatest


importance providing the rights, obligation and responsibility for the parties concerned in the Contract execution.

During the past half century, the International

Federation of Consulting Engineers (FIDIC) has devoted itself to the compilation of management documents for all kinds of projects, among which the FIDIC Conditions of Contract are of the highest influence and are the most popular application.

The first edition of FIDIC Conditions of Contract for Works of Civil Engineering Construction (use Red Book in the following) was compiled in 1957,

and later its second, third, and fourth edition were issued in 1963, 1977, and 1987 respectively. documents of the Institution of Civil Engineers

Mostly compiled in the reference of the related

With the investigation of the governments, employers, contractors and consulting engineers all over the world about their application of the Red Book, the FIDIC Contract Committee organized a group of experts to compile the new Contract Condition models to be applied in the

21stcentury.

The new models include :


FIDIC Conditions of Contract for Construction, the (New Red Book) FIDIC Conditions of Contract for Plant and Design/Build, the (New Yellow Book) FIDIC Conditions of Contract for EPC Turnkey Projects, the (Silver Book) FIDIC Short Form of Contract, the (Green Book)

The FIDIC Red Book


In 1957 FIDIC published the first edition of its Conditions of Contract for Works of Civil Engineering Construction, which came to be known as the Red Book.

The Current (1999) Red Book Basic Features


1.

Suitable for all civil works projects where main responsibility for design lies with Employer (or his Engineer). Some design may, of course, be carried out by Contractor. Administration of Contract and supervision by Engineer. Approval of work, payment and claims certified by Engineer. Work done is measured, payment according to Bill of Quantities. Option for payment on lump sum basis. Balanced / fair risk-sharing.

2. 3. 4. 5. 6. 7.

The FIDIC

In 1963, FIDIC published the first edition of its Conditions of Contract for Electrical and Mechanical Works suitable for use in contracts between an employer (owner) and contractor for the supply and erection of plant and machinery. As its covers were yellow, it came to be known as the Yellow Book.

The Current (1999) Yellow Book Basic Features


1. 2. 3. 4. 5. 6. 7. 8. 9. Suitable for all types of projects where main responsibility for design lies with Contractor. Recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. Some design may be carried out by Employer or his Engineer. Employer provides Employers Requirements to which Contractor designs. Administration of Contract and supervision by Engineer. Approval of work, payment and claims certified by Engineer. Lump sum Contract Price with payment usually based on schedule of payments. More extensive testing procedures than for New Red Book, including Tests after Completion. Balanced / fair risk-sharing.

Reasons for a New (1999) Contract for EPC Turnkey Projects (the Silver Book)
1.
2. 3. 4. 5.

Increased use of two-party approach, without Engineer.


Increased sophistication, improved education and experience in developing countries hence reduced need for an intermediary like an Engineer. Increase in privately-financed projects, like BOT, where customary for design and construction to be governed by an EPC Contract. As a result of increase in privately-financed projects, increased emphasis on risk allocation. In privately-financed projects, desire of lenders to place majority of risk on Contractor.

6.
7. 8.

Lump sum Contract Price with payment usually based on schedule of payments.
Extensive testing procedures, including Tests after Completion Contractor takes majority of risks, Employer pays more to cover such risks.

9.

Final price and time of completion are intended to be more certain.

New development of FIDIC conditions of contract Design-Build Operate Contract

It was published on September 2007, Gold Book

Format of a DBO arrangement can be based on green field scenario (D-B-O), or brown field scenario (O-D-B). Either is quite common, however the contractual requirements and procedures are quite different. FIDIC - DBO green field scenario, with a Guide on the changes necessary to cover a brown field arrangement, in which FIDIC Yellow Book for the DB is the basement.

General Structure and Organization of the Red, Yellow and Silver Books
1. General Conditions, comprising clauses that are believed will apply generally to most contracts (previously called Part I),

2. Guidance for the Preparation of Particular Conditions, which will supplement or modify the General Conditions (they also include as annexes seven forms of security or guarantee) (previously called Part II), and
3. Form of Letter of Tender, Contract Agreement and Dispute Adjudication Agreement (the Red and Yellow Books also contain an Appendix to Tender form to be attached to the Letter of Tender).

Typical Sequence of Principal Events During Contract for Construction


Issue of the Tender Documents Submission of the Tender Issue of the Letter of Acceptance 8.1 Commencement Date 8.2 Time For Completion1 10.1 Issue of Taking-Over Certificate Defects Notification Period3 11.9 Issue of Performance Certificate

Base Date

Delay attributable to the Contractor 28d 28d 11 Notifying of defects 9.1 Tests on2 Completion . . .

<21d

Tender Period 4.2 Issue of the Performance Security

Remedying of defects

4.2 Return of the Performance Security

1. The Time for Completion is to be stated (in the Appendix to Tender) as a number of days, to which is added any extensions of time under Sub-Clause 8.4.

2. In order to indicate the sequence of events, the above diagram is based upon the example of the Contractor failing to comply with Sub-Clause 8.2.
3. The Defects Notification Period is to be stated (in the Appendix to Tender) as a number of days, to which is added any extensions under Sub-Clause 11.3.

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Characteristics of FIDIC Conditions of Contract


Unification of Terms and Clause
Not influenced by the former ICE framework, which was included

in all 20 clauses. So if the clauses content could be unified, it would be under the same titles and expressions. In these three books, more than 80% of the content was consistent, and 85% of the definitions and expressions were the same.

Wider Application
Conditions could be applied under not only the Customary Law , but also Civil Law. An attorney present to review the clauses. More flexibility and adaptability. E.g.In the old edition, the conditional performance guarantee was necessary, which the World Bank had different opinions of. While in the new edition, the guarantee forms were set by Particular Conditions which can be applied giving the employers better flexibility.

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 Employers 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. Altogether, these four Contract Conditions can be applied to nearly every kind of project, expect for that of managing contracting or simply consulting or designing

High-quality Provisions and Logical Clause Sequencing


Compared with the original Red Book, the New Red Book has

163 clauses, nearly 40% being freshly compiled.


An additional 40% were modified and given supplements. Only 20% were kept intact. The old edition adopted ICEs disorderly style bit in the clause

sequence, while in the new edition, the related sub-clauses are put into one clause when possible, and convenient to the users.

More Specific Provisions concerning the Rights and Obligations of the Contract Parties

Changes in the Preparing Style


General Conditions in the former edition were fairly concise;

some recommendable clauses were given Particular Conditions. While in the new edition, there is a way around the regulations being that the General Conditions are relatively comprehensive and detailed. An example would be advanced payment and adjustment formula. The new edition writers believe that it is more convenient for the users to delete the clauses they do not need than to write them in the Particular Conditions by themselves.

Concise Language
The language and sentence structures in the new edition are

rather easy to understand, and a great help to the people whose native language is not English.

Application Prospect of FIDIC Conditions of Contract


The traditional project management mode, which is

universal in the world, has been applied in most of the engineering project management cases in the world.
The new edition has many advanced ideas and

regulations such as standardizing of the Contract words and expressions, clearer and stricter claim procedure, and emphasis on the protection of intellectual property rights

Since the problems of the Employers financial vacancy or

Contractor financing are originating worldwide, the relative clauses and regulations are added into FIDIC Conditions of Contract.

To Carry out the General Contracting Mode of

Design/Build and EPC Turnkey Enthusiastically


FIDIC makes out the New Yellow Book and Silver

Book independently in addition to meet the development tendency of international project management mode.

To Make Clear the Position of the Construction Supervising Engineer, Raise Their Working

Responsibility, and Open up New Regions of Work


In the New Red Book, it needs the Engineer to be timelier, and

more explicit in solving the problems than before. It pays more respect to the position and the authority of the Engineer, such as, without the consent of the Contractor, the Employer shall not be entitled to exchange the Engineer or impose further restriction on the Engineers authority which has been specified in the contract.

To Prepare the MODEL of Short Form Contract


FIDIC Green Book

To Improve the Mediation Methods for Dispute


DAB to mediate the dispute. The most outstanding merit of DAB is that it is

composed of three experts who are chosen, approved and paid for by both parties. These experts go to site to solve the dispute occurring between the two parties after commencing construction work. While in the FIDIC Red Book, the Engineer is required to mediate the problem which he can not handle. It is hard to be impartial because the Engineer is the Employers employee, so very often the contradiction will still be unsolved after a long time.

FIDIC Latest!!!
FOR BUILDING AND ENGINEERING WORKS DESIGNED BY THE EMPLOYER MDB Harmonised Edition, June 2010 Version Amended Version published June 2010 Amended Version published March 2006 FOR USE UNDER LICENCE ON PROJECTS FUNDED BY PARTICIPATING MULTILATERAL DEVELOPMENT BANKS (MDB)