International Construction

Contract
 FIDIC
Conditions of Contract
for Construction
 International Standard
Conditions of Contract
 There are different standard conditions of
contract developed by certain institutions
or recommended by International
Financing or Development Institutions;
 Standard Conditions of Contract developed by FIDIC:

• Conditions of Contract for Civil Engineering Works ( Red Book);

• Conditions of Contract for Electrical & Mechanical Works (

Yellow Book);

• Conditions of Sub-Contract for Works of Civil Engineering

Construction;

• Conditions of Contract for Design-Build & Turnkey ( Orange

Book);

• Conditions of Contract for Consultancy Services ( White Book);

• The Sub-Consultancy Agreement;

• Others;
Standard Conditions of Contract developed by other international
institutions:

 By European Union ( through the European Development Fund (EDF);

• General Regulations for Works, Supply & Service Contracts financed by the EDF;

• General Conditions for Works Contracts financed by EDF;

• General Conditions for Supply Contracts financed by EDF;

• General Conditions for Service Contracts financed by EDF;

 By the African Development Bank/Fund ( it applies for the procurement of Works, Goods
& Services);

 By the World Bank. These are Standard Bidding Documents for the procurement works of
civil engineering construction.

 By UNICTRAL to be used for the procurement of Goods, Construction & Services Contract.
It is rather a model, on which basis any country to develop a suitable LAW.

 By other institutions;
 Fourth Edition.
Part I-General Conditions
 Recommended for general use for the
purpose of construction of Civil
Engineering Works where tenders are
invited on an international basis.
 Can be used on domestic contracts, with
minor modifications.
 The version in English is considered as the
official and authentic text for the purpose
of translation.
 Linked to Part II-Conditions of Particular
Application (Contract Specific).
 FIDIC
AN INTRODUCTION
 Founded in 1913
 Expanded in 1945 to include 40 national
associations
 Published first Conditions of Contract in
1957
 In 2007 has 74 member associations and
over 1.0M members
 Headquarters in Switzerland
 Web Site : www.fidic.org
 FIDIC
AN INTRODUCTION

 Pre 1957 – no internationally

recognised contract conditions
 First “red book” based on UK ICE
conditions
 FIDIC has international committees
to improve contracts
 FIDIC Documents
 Old “rainbow books” needed revision
 Changes within International Projects
& Contracting
 Standardisation
 Clauses to meet current practice
 Update “Engineer”
 Introduce “Dispute Board”
 Contract Documents 1999
 Conditions of Contract for
Construction (Red Book)
 Conditions of Contract for Plant &
Design Build (Yellow Book)
 Conditions of Contract for EPC
Turnkey Projects (Silver Book)
 Short Form of Contracts (Green
Book)
 FIDIC Contracts 1999
What Changed?
 Simple Language
• 20 Clauses & 163 Sub Clauses
 Engineer instead of Employer’s
Representative Cl.1.1.2.4
 Employer's Claims Cl.2.5
 Contractor’s Claims Cl.20.1
 Value Engineering Cl.13.2
 QUALITY & PROCEDURES:
• Cl.4.9, 4.18, 6.7, 8.3, 13.2
• Cl.4.21, 6.10, 8.3
 New Contract Documents
2006
 Conditions of Contract for Construction (Red
Book) - MDB Harmonised Version 2005

• African Development Bank

• Asian Development Bank
• Black Sea Trade & Development Bank
• Caribbean Development Bank
• European Bank for Reconstruction & Development
• Inter-American Development Bank
• International Bank for Reconstruction & Development
(The World Bank)
• Islamic Bank for Development Bank
• Nordic Development Fund
 FIDIC MDB Contracts 2006
What’s Changed?
 Simple Language
• 20 Clauses & 177 Sub Clauses
 Part A – Contract Data
 Part B – Specific Provisions
 Bank
 Borrower
 Dispute Board
 Profit – Cl.1.2 : 5%
 Financing Cl.2.4, Cl.14.7 & Cl.16.1
 Engineer’s authority reduced Cl.3.1
 HIV Aids Cl.6.7
 Labour Conditions Cl.6.12 – Cl.6.23
 Contract Price Cl.14.1
• New Cl.14.1(e) & alternative clause
 Payment Cl.14.7
 Corruption Cl.15.6
RISK
 FIDIC RISK DIAGRAM

RED BOOK - YELLOW BOOK - SILVER BOOK

Increased Employer’s Increased Contractor’s

Risk and Increased Risk and Increased
Design Control Project Price
Design Certainty Time & Cost Certainty
Scope / Cost of Change
 CONTRACTUAL RISKS

 All contracts contain risks

 FIDIC allocates responsibilities
 Key Requirement:
o Understand General Conditions
o Understand Particular Conditions
o Set out responsibilities
 CONTRACTUAL RISKS

 Cl.1.5 Priority of Documents

 Employer’s Documents have priority
 “Contract Agreement” is high priority –
Commencement Date binding under Cl.1.1.3.2 &
8.1
 Cl.3.3 empower Engineer to make Decisions –
EPC no such authority
 CONTRACTUAL RISKS

 Cl.1.9 Drawings  Cl.8.4 Adverse

 Cl.2.1 Site Climatic Conditions
 Cl.4.7 Setting Out  Cl.13.7 Legislation
 Cl.4.12  Cl.13.8 Changes in
Unforeseeable Cost
 Cl.4.24 Fossils  Cl.14.8 Delayed
 Cl.7.4 Testing payments
 Cl.8.4 EoT  Cl.19.4 Force
Majeure
 Contract Selection
Basic Principles – Red Book

 Design by Employer
 Works to be Re-Measured
 Employer appoints Engineer
 Engineer can vary the works – but
not change the Contract
 Engineer’s “Determinations” Cl.3.5
 DB appointed within 21 days
 FIDIC Document Usage
Conditions of Contract for
Construction

 Works designed by Employer or

Engineer
 Contractor Constructs in accordance
with designs provided
 May include some design elements
 Contract Selection
Basic Principles – Red Book

 Additional Documents – Cl.1.5

Priority
 Importance of Particular Conditions
• PCC priority over GC
• PCC provides all relevant conditions and
Law
• Contradictions between documents
 BoQ – re-measured works
 Contract Selection
Basic Principles – Yellow Book

 Employers Requirements
 Contractor Designs & Builds
 ER errors – Employer’s risk
 Fixed sum contract
 Administered by Engineer
 Variations by Engineer
 Cl.5 & 12 differ from Red Book
 FIDIC Document Usage
Conditions of Contract for
Plant & Design Build

 Electrical & Mechanical Plant

 May include building and engineering
 Design & Execution of works
 Contractor designs and constructs in
accordance with Employer’s Requirements
 Engineer Administers
 FIDIC Document Usage
Conditions of Contract for
EPC/Turnkey Projects

 Process or Power Plant

 Infrastructure Projects
 High Degree of Certainty
 Contractor has total responsibility for
Design & Execution
 Administered by Employer
 FIDIC Document Usage
Short Form of Contract

 Small capital value projects

 Simple content
 Contractor constructs to Employer’s
designs
 No “Particular Conditions”
 No “Impartial” Engineer
 FIDIC Relationships

Administers
Employer on behalf of
Employer

Dispute CONTRACT Engineer

Board

Contractor
 FIDIC Document Usage
COMMUNICATIONS
 Cl.1.3:
• Approvals, Certificates, Consents,
Determinations, Notices, Requests
 In Writing
 Delivered
 Not be unreasonably withheld or
delayed
 Copies
 FIDIC
Local Law & Calendar
 Cl.1.1.6.5: Definition of Local Law
 Cl.1.1.3.9: Calendar Day
 Cl.1.3: No Delay with Notices
 Cl.1.13: Compliance with Local Law
 Cl.13.7: Adjustments for Legislation
 Notice Periods: eg. Cl.20.1
 Cl.6.18: Recognised Rest Day
• will affect notice periods
 FIDIC -
THE FIRST 100 DAYS

AN INTRODUCTION
The First Hundred Days of a New
FIDIC contract

 Pre Award Phase

 Award to Commencement Date
 Commencement Date to CD + 28
Days
 Executing Agency

 Not considered here  Cl.4.9 agreements

 Local Law Cl.8.3 issues
compatibility Cl.1.4  Cl.14.7 arrangements
 Cl.2  Procedure Compliance
• Land & Zoning • Zoning
• Finance • Environmental
 Cl.3 • IFA
• Selection of Engineer  Guarantees, Bonds &
• Authority Insurances
• Engineer Management  Cl.20 compliance
• Management Consulting • Approvals
• Agency Authority • Contingencies
 First Hundred Days of a
FIDIC Contract
Pre-Award Phase Within Tender
Validity Period
Signature of Contract Agreement

Agreement to CD Less than

42 Days
Commencement Date (CD)

Time for Completion As stated

Access to Site in Appendix/CD
 Pre Award Check List
General

 Document negotiated changes

 Prioritise and sign changes – Cl 1.5
 Agree terms of insurances – Cl 18.2
 Agree DB membership
 Confirm communication and
addresses – Cl 1.3
 Pre Award Checklist
Engineer’s Duties & Authority

 Employer names Engineer

 Employer’s constraints on Engineer’s
Authority – Cl 3.1
 Specific Authority Cl.4.12 & Cl.13
 Delegation of Engineer’s Authority to
Resident Engineer – Cl 3.2
 Engineer’s Determination – Cl 3.5
 Pre Award Checklist
Employer’s Risks

 Right of Access - Cl 2.1

 Provision of Specifications – Cl 1.8
 Supply of Drawings – Cl 1.9
 Award to Commencement Date
 Formal Letter of Acceptance signed –
Cl 1.1.1.3
 Contract Agreement - Cl 1.1.1.2, 1.6
 Date on which the Contract becomes
legally binding
 Instruction of Commencement Date
 Engineer Cl 8.1 – 7 days notice
 Default - 42 days from LA
 Time for Completion – Cl 1.1.3.3
 Award to Commencement Date
Check List
Contractor’s obligations

 Performance Security – Cl 4.2

 Consent for sub-contractors
 Commencement of sub-contract wks
 Compliance with applicable laws, etc
prior to Commencement
 Award to Commencement Date
Check List
Employer’s obligations

 Obtaining planning, zoning etc

permits for the Permanent Works –
Cl 1.13
 Ensuring that the Contractor will
have right of access to and
possession of all parts of the Site
 Commencement Date to + 28
Employer’s Actions

 Right of access & possession – Cl 2.1

 Ensuring Employer’s personnel are
aware of responsibilities – Cl 2.3
 Preparing evidence of Employer’s
financial arrangements – Cl 2.4
 Provision of copies of the Contract
and Drawings Cl 1.8 & 1.9
 Commencement Date to + 28
Engineer’s Responsibilities

 Advising Contractor of Engineer’s

Authority and Delegations – Cl 3.2
 Ensuring assistants are suitably
qualified
 Providing reference survey points,
lines and necessary data – Cl 4.7
 Commencement Date to + 28
Contractor’s Responsibilities

 General obligations – adequacy,

stability & safety – Cl 4.1
 Provide Performance Security prior to
access to Site – Cl 4.2
 Submit name of Contractor’s
Representative for consent – Cl 4.3
 Commencement Date to + 28
Contractor’s Responsibilities

 Give notice of any delegation of CR’s

responsibilities
 Obtain consent for sub-contractors
not named in Contract – Cl 4.4
 Give notice of commencement of
sub-contract work
 Commencement Date to + 28
Contractor’s Responsibilities

 Provide details of suppliers not

named in Contract (see Cl 4.16)
 Make objections to any Nominated
Sub-contractors who the Contractor
does not wish to employ
 Submit detailed time programme
within 28 days of receipt of the
notice to commence – Cl 8.3
 Commencement Date to + 28
Contractor’s Responsibilities

 Give notice of specific probable

future events or circumstances which
may increase price or delay
completion
 Confirm working hours – Cl 6.5
 Site health & safety facilities – Cl 6.7
 Appoint Accident Prevention Officer
RESPONSIBILITIES
of PARTICIPANTS
 Responsibilities
Employer
 Cl.2
• Provides Access to the Site
 (not access & other areas –
• Assists Contractor with Permits
 See also Cl.1.13 – planning & zoning
• Financial Arrangements
 See Variations, Payments & Suspension
• Notice of Claims
 Appoints the Engineer Cl.3.1
 Make Payments Cl.14.7
 Appoints DB Cl.20.2
 Responsibilities
Engineer
 Exercises stated authority
 Employer’s Approval
 When he exercises specific authority
deemed to have Employer’s approval
 Acts for Employer
• Cl.3.5 – “Fair Determination”
 Responsibilities
Engineer
 Cl.3
• Employer undertakes not to impose further
constraints (Breach of Contract)
• Specific Authority
• No authority to amend contract
• Acts for Employer
• No authority to relieve the parties of duties or
obligations etc.
 Responsibilities
Engineer
 Cl.3
• Delegation – except Cl.3.5
• Instructions in writing
 Oral – confirmation by contractor – written
• Employer instructions to Engineer
• Determination
 CLAUSE 3.5
DETERMINATIONS

 Engineer makes a Determination

 Makes his own evaluation
 Shall NOT delegate Cl.3.5 authority
CLAUSE 3.5 DETERMINATION
PROCEDURE
 Engineer shall consult both Parties
 Try to reach agreement
 Where no agreement then Engineer
makes a FAIR determination
 Give notice with supporting
particulars
 DISSATISFACTION WITH
Cl.3.5 DETERMINATION
 Dispute : Refer to Dispute Board
 No definition of “Dispute”
o Rejection of Determination
o No agreement with continued discussion
o One party declines to discuss
o No progress in protracted discussion
o Where something needs to be decided
 Subsequent procedure - Clause 20.4
 Responsibilities
Engineer
 Cl.4.1 Method Statements
 Cl.8.1 Give Commencement Notice
 Cl.8.6 Rate of Progress
 Cl.12.1 Measurement
 Cl.13.1 Variations
 Cl.14.6 Interim Payment Certificates
 Cl.20.1 Records / Determination
 Responsibilities
Contractor
 Cl.4
• Execute & Complete the Works
 Origin of Material & Equipment – source country
 Employ Local Labour Cl.6.1
 Cl.8.1 due expedition & without delay
 Adequacy & safety
 Method Statement
 Designs Fit for purpose
• Performance Bond
• Engineer’s Approval of Representative
• May delegate
• Fluent in language / translators
• Sub Contractor approval
 Responsibilities
Contractor
 Unforeseeable Physical Conditions
• Excludes climatic conditions
 Cl.8.4 & 17.3h
• Extension of time
• Payment of cost
 (see Cl.1.1.4.3 includes off site, finance etc)
• No profit
 (as a general rule not included where risk is
not the fault of either party)
 Responsibilities
Contractor
 Transport to site
 Protection of the Environment
• Local Law
• Emissions
• Surface discharges
• Effluent
 Responsibilities
Contractor
 Progress Report: Cl.4.21
 Monthly – 6 copies
• See also (Cl.4.9 procedures) and:
• Cl. 6.7 Accident Records
• Cl. 6.10 Personnel
• Cl.14.3 Application for payment
• Cl.20.1 Contemporary records
 Responsibilities
Contractor
 Security
 Staff & Labour
 Tests on Completion Cl.9.1
 Value Engineering Cl.13.2
 Application for Payment Cl.14.3
 Contemporary records Cl.20.1
MANAGEMENT
of CONTRACT
and Key Clauses
 Staff & Labour
 Cl.6.1: Local Staff & Labour
 Cl.6.2: Liability for Tax etc…
 Cl.6.7: health and safety
• Shall take all reasonable prequations
• Cl.8.3 requirement
 Cl.6.10: Records of contractors
personnel
 Cl.6.18: Rest Days, Festivals etc…
 Staff & Labour

 Cl.6.20: Forced Labour (slavery)

 Cl.6.21: Child Labour
• Economic exploitation
• Social development
 Cl.6.22: Records
 Cl.6.23: Workers Organisations
 Commencement & Delays
 Contract becomes effective when
Letter of Acceptance has been
received by Contractor
 Engineer determines the date or 42
days after the LA
 Cl.8.1 Commencement Date
• Engineer SHALL
• Contractor SHALL
 Financial Arrangement
 Advance Payment Received
 Completion

 Cl.8.2 Fundamental obligation to

complete within Time for Completion
• Includes all of Works
• Includes all tests
• See Cl.10.1
 Programme
 Programme of Works Cl.8.3
• Within 28 days
• Specific requirements of programme
• Methods of execution
• Details of personnel & equipment
 Engineer does not approve (21 days)
 Employer may rely on programme
 Programme
 Specific, Probable, Future events
 Revisions to programme
 Monthly progress charts
 Engineer may request a revised
programme
 Extension of Time
 CL.8.4
 Contractor SHALL be entitled
• Not dependant upon further decision
• If no extension then “time at large”
• Variation
• Sub Clause giving delay
• Exceptionally adverse climatic conditions
• Unforeseeable shortages personnel & goods
• Employer’s delay
 Delays by authorities
• Cl.8.5 – no costs – EoT only
 Rate of Progress
 CL 8.8
 Engineer may instruct submission of
revised programme
 Contractor to proceed with due expedition
and without delay
 Delay Damages
• Failure to complete by due date
• Delay damages
• Limit of damages
 Suspension – Engineer may instruct-cl.8.8
 Termination by Employer Cl.15.1 & 15.2
 Extension of Time

 Cl.20.1 & 3.5 give time limits to

Engineer to Determine
• shall not be unreasonably withheld or
delayed
 Time at Large – no Delay Damages
 Measurement, Evaluation
& Variations

 This clause only applies to Red Book

 Yellow Book Cl.12 deals with tests
after completion
 Measurement by Engineer
 Standard method of measurement as
specified in schedules
 Measurement, Evaluation
& Variations
 Cl.12.3 Basis of evaluation
• Rates in contract will apply
• New rates may be determined
 Qty changed more than 25%
 Variation
 Not specified
 No appropriate rate
• Reasonable Cost & Profit
 Cl.12.4 Compensation
 Variations

 Cl.13.1 Engineer has the right to

vary
• Prior to issue of TO certificate
• List of variation inclusions
 Value Engineering Cl.13.2
• Development risk with Contractor
• Savings 50/50
 Variation Procedure

 Engineer requests proposal from

Contractor
• Contractor responds with:
 Description
 Programme
 Evaluation
• Work proceeds without delay
Variation due to Legislation

 Local law at Base Date-CL 13.7

 Cl.20.1 claim
• Extension of time
• Payment of cost
 Contract Price
& Payment
 Cl.14 Contract Price
• Measured and will vary – Red Book
• Fixed Lump Sum – Yellow Book
• Fixed Lump Sum – Silver Book
• Lump Sum or Remeasure – Green Book
 New Cl.14.1(e) & alternative option
• Import duty
• Residual valuation tax liability
 Advance Payment

 Cl.14.2 Advance payment

• Interest free loan for mobilisation
 Guarantee
 Application for payment Cl.14.3
 Performance Security – approved by Employer
• Repayment
 Commence after when certificates >30%
 Deductions agreed % of each Certificate
 All repaid prior to 80% of Contract Amount
 Interim Payment

 Cl.14.3 Application
• 6 copies
• In a form approved (Cl.4.9)
• Cl.4.21 incl. Cl.6.10 etc…
• List of items (a) – (g)
• Note : Cl.20 items included
 Interim Payment

 Cl.14.4 Schedule of payments:

• Payment dates not recommended
• Engineer determination Cl.3.5
• Cross guarantees
• Milestones preferred
 Interim Payment
 Cl.14.6 Issue of IPC
• Engineer determines FAIRLY
• IPC SHALL not be withheld
 Cl.14.7 Payment
• IPC paid within 56 days after Engineer receives
Statement
 Cl.14.8 Interest on late payments
• No Cl.20 notice required
Suspension & Termination

 Cl.15.6: Corruption
 Cl.16.1: Suspension
 Special conditions for funding
suspension
 Cl.16.2: Termination
 Force Majeure

 Basic Principles in Law:

• Exceptional event
• Not reasonably provided against
• Not reasonable to overcome / avoid
• Not attributable to either party
• Beyond control of affected party
 Force Majeure

 Cl.19.1 Definitions
• (i) – (iv) man made
 Cl.19.4 Consequences
• EoT
• Man made – cost
• Man made in country – cost
• Cl.19.6 Termination
 CLAIMS &
CONTRACTUAL
PROCEDURES
 CAUSES OF CLAIMS FOR
CONTRACTORS

 Unforeseeable ground conditions

 Delayed drawings
 Delayed payment
 Lack of possession of site
 Consequence of risk
 Suspension
 Force Majeure
 CONTRACTOR’S CLAIM
PROCEDURE

 Clause 20.1
o Sets out Contractor procedure
o Condition Precedent
o Not later than 28 days
o Sets out Engineer procedure
 Typical Problem Notices

 S.Cl.1.9: Delayed Drawings or

Instructions
 S.Cl.8.5: Delays by Authorities
 S.Cl.8.7: Delay Damages
 S.Cl.16.2: Termination
 S.Cl.20.1: Event OR Circumstance
 CONTRACTOR’S CLAIM
PROCEDURE

 Contractor gives notice

o Within 28 days
 Contractor keeps contemporary records
o Engineer may monitor
o Engineer may instruct further records
 Fully detailed claim
o Supporting documents
o Within 42 days of event
 CAUSES OF CLAIMS FOR
EMPLOYERS

 Quality below Specification

 Delay in Completion Date
 Slow Rate of Progress
 Defective Materials
 Failures of Tests
 EMPLOYER’S CLAIM
PROCEDURE

 Employer gives notice cl. 2.5

o As soon as practicable
 Contractor Receives Notice
o No obligation to respond
 Engineer proceeds with Cl.3.5
 Contractor can dispute if dissatisfied
 Engineer’s determination applied to
Certificate of Payment
 CONTEMPOARY RECORDS

 Crucial for determination of claim

 Records for any future dispute
 Contractor obliged to keep records
 Procedure for work
 Employer & Engineer to agree
Engineer’s actions
 CONTRACTOR’S CLAIM
PROCEDURE
 Cl.20.1 event has continuing effect,
procedure
 After 42 days:
o Claim submission is considered interim
o Further monthly claims
o Final claim with 28 days of end of
effects
 CONTRACTOR’S CLAIM
PROCEDURE

 Engineer’s Response:
o Within 42 days of receiving claim
o Approval / Disapproval
o Detailed comments
 May ask for further details
 Proceed with Cl.3.5
 May certify interim sums
CLAUSE 3.5 DETERMINATIONS

 Engineer makes a Determination

 Makes his own evaluation
 Shall NOT delegate Cl.3.5 authority
 CLAUSE 3.5 DETERMINATION
PROCEDURE

 Engineer shall consult both Parties

 Try to reach agreement
 Give notice with supporting
particulars
 Where no agreement then Engineer
makes a FAIR determination
 DISSATISFACTION WITH
Cl.3.5 DETERMINATION

 Dispute : Refer to Dispute Board

 No definition of “Dispute”
o Rejection of Determination
o No agreement with continued discussion
o One party declines to discuss
o No progress in protracted discussion
 Subsequent procedure - Clause 20.4
Alternative Dispute
Resolution
ADR - Overview
 Alternative Dispute Resolution
ADR - Overview

 Confrontational
 Litigation
 Win – Win methods
 ADR Methods:
-compromise, Mediation, - Conciliation,
statutory adjudication.
- - Arbitration
- - Litigation
 DISPUTE RESOLUTION
under FIDIC
 “Dispute” not defined by FIDIC
o Where 2 parties can not agree
o Where something needs to be decided
 Certificates, Determinations,
Instructions, Variations
 FIDIC encourages resolution by
agreement – Cl.3.5
 No agreement - Dispute
 Amicable Settlement
 Cl.20.5 – no definition
• 56 days
• Direct negotiation
• Conciliation
• Mediation
• Do not involve the DB
• No obligation – costs ??
 ADJUDICATION
 Encourage the resolution of disputes
 Statutory / non statutory
 Provides a decision in a short time
 Binding
• Give effect
• May be changed by amicable settlement
• May be changed by arbitration
 Contractually enforceable
 ARBITRATION
 Clause 20.6
 Final settlement – ICC
 3 arbitrators
 Language
 Open up & review
 No limits to evidence
 DB Decision shall be admitted
 ICC ARBITRATION
 Place to be agreed in Particular
Conditions
 Each party nominates 1 arbitrator
and chairman selected or agreed
 ICC court will formally appoint
 ICC fee scales & administration costs
 ICC rules govern initial referral then
arbitrators set the procedure
 ARBITRATOR’S AWARD

 Final & Binding

 New York Convention for
Enforcement of Arbitral Awards 1958
 Dispute Board
 Rules set out in Red and Yellow
books
 Ad hoc – rules apply to the resolution
of a referred dispute only
 1 or 3 person board
 Independent & Impartial
 Decisions or advice & opinion
 ADVANTAGES OF THE DB
 Resolves disputes in 84 days
 Lower costs than Arbitration or Litigation
 Impartiality
 Real time assessment
 Improves standards
 Provides clarity
 Diffuses problems (win – win)
 Encourages competitiveness in tenders
 DISPUTE BOARD
 Functions:
o Become Familiar
o Visit the site
o Keep up to date
o Encourage resolution of issues
o When a dispute is referred:
o Act Fairly & Impartially
o Convene a hearing
o Deliberate
o Prepare a Decision
o Avoid unnecessary delay or expense
FORMATION OF
DISPUTE BOARD
 FORMATION OF DB
RELEVANT DOCUMENTATION

 Cl. 20.2 & 20.3

 General Conditions
o Red Book - full term
o Interchangeable
 Dispute Board Agreement
 Tripartite Agreement
 General Conditions

 Employer decides (at tender stage)

o What type of DB
o How many members
o Period to agree selection
o Third party nominator
 List of candidates in tender ??
 Employer to be ready to nominate
 Formation of DB
 Cl.20.2 Formation
• 1 or 3 members
• Each party nominates one member
• Parties consult members and agree a
chairman
• List of potential members in tender
 No Agreement
• FIDIC President will nominate
• Due consultation with parties
 DB OBLIGATIONS
 Act Fairly
 Act Impartially
 Give parties a reasonable
opportunity to pout their case &
respond
 Adopt procedures:
o Avoid unnecessary delay
o Avoid unnecessary expense
 DB MEMBERS’

QUALITIES
o Experience o Qualifications
o Contract Knowledge o Availability
o Language o Impartiality
o DR Experience o Independence
o Procedural Knowledge o Lawyers
 WARRANTIES & OBLIGATIONS
 General Conditions Cl.3 & 4
 Warranties:
o Experienced in Work
o Experienced in Documentation
o Fluent in Language of communications
 Obligations:
o Independent
o Confidential
o Available
 PAYMENT OF MEMBERS
 General Conditions Cl.6
 Retainer per calendar month
 Daily Fee
 Reasonable expenses
 Taxes in country of contract
 Retainer reduced by 50% after
taking over
 Ad hoc DB – no retainer
 PAYMENT OF MEMBERS

 Payment method:
o Retainer & airfares - quarterly in
advance
o Other fees after site visits / hearing
 Contractor pays in full within 56 days
 Employer reimburses Contractor
 ANNEX : PROCEDURAL RULES
 Monitor progress reports against project
documents
 Site visits
o Timing
o Agenda / scheduling / travel arrangements
o Keep up to date
o Progress
o Problems
o Claims
ANNEX : PROCEDURAL RULES

 Site visits with Parties : co-ordinated

by Employer
 DB shall prepare a report
 Contract & Project documents
 Monthly report
 DISPUTE REFERRAL
 Clause 20.4 – read together with
Procedural Rules
 Referred in writing stating Clause
 Sent to chairman
 84 days to Decide
 Reasoned Decision
DB DECISION PROCEDURES
 Referral of Dispute
 Preliminary Issues
 Claimant’s position paper
 Respondent’s Response
 Claimant’s Reply to Response
 Copies to the other party
 DB to set time table
DB DECISION PROCEDURES
 Parties empower the DB to:
o Establish procedure
o Decide jurisdiction
o Conduct a hearing
o Take initiative facts & other matters
o Specialist knowledge
o Decide payment of finance charges
o Decide Relief
DB OBLIGATIONS IN MAKING A
DECISION
 Act Fairly
 Act Impartially
 Give parties a reasonable
opportunity to pout their case &
respond
 Adopt procedures:
o Avoid unnecessary delay
o Avoid unnecessary expense
 DB HEARING

 Adopt inquisitorial procedure

 Refuse admission to hearings
 Proceed in absence of any party
 Not formal (no oaths)
 Evidence
 Written summaries
 DB HEARING
 Typical hearing:
o Procedural issues
o Preliminary issues
o Jurisdictional issues
o Oral presentation by Claimant
o Witness submissions
o Respondent questions
o Oral presentation by Respondent
o Witness submissions
o Respondent questions
o Respondent’s summing up
o Claimant’s summing up
 Chairman does not end meeting until parties
have confirmed they have nothing further to add
 DB DECISION

 DB meets in private
 Endeavour to reach a unanimous
decision
 Failure of a member to attend
 Decision issued in writing and signed
with reasons
 FORMAT OF DB DECISION
 Preambles
 State given under clause 20.4
 Confidential document – state circulation
 Short document
 Details of parties and contract
 Summary of dispute
 Procedure
 Reasoning : contract clauses
 Decision
 Signed & dated
 POST DECISION
 Shall be binding … promptly give
effect
 May be reversed by amicable
settlement or arbitration
 Dissatisfaction – 28 days
 Otherwise after 28 days - binding
 Failure to comply – arbitration
 Compliance is a contractual
obligation
 ENFORCEMENT
(non statutory)
 Contractual obligation
 Cl.20.4 Notice of dissatisfaction
 Breach of contract
• Cl.14.3 – application for IPC
• Cl.14.6 – Issue of IPC
• Cl.14.7 – Payment
• Cl.16.1 – Suspension
• Cl.16.2 - Termination