The rainbow suite

The 1999 FIDIC suite

This is a series of articles being published in CES1 with the post 1999 editions of the
FIDIC suite of contracts being the overall subject matter.

Following an introduction to FIDIC and its 1999 suite of contracts the joint authors,
Paul Battrick2 and Phil Duggan3 of Driver4 will discuss many practical issues of using FIDIC
contracts. Their thoughts and opinions are based upon actual working experiences of
working with many FIDIC contracts both past and present.

Paul Battrick consistent with the responsibility to provide

Managing Director (International) quality services for the benefit of society
FRICS MCIArb CEDR Accredited and the environment”. FIDIC‟s vision is to
Mediator be the industries recognised global voice.

Phil Duggan FIDIC‟s Employer / Contractor contracts,

Director (International) first issued in 1957, have a distinctly British
BSc MSc MCIArb feel to them. These early contracts were
work style based such that the Red Book
was relative to civil engineering works; the
Yellow book was relative to electrical and
A Brief History mechanical works with erection at site;
and the Orange Book was relative to
FIDIC is the French acronym for the
turnkey or design and build projects.
International Federation of Consulting
Engineers. It was formed in 1913 by three
The Red Book first issued in 1957, and
national associations of consulting
having four major revisions, was borrowed
engineers. From its base in Geneva it now
much from the ICE forms of contract whilst
has members from some 86 member
the Yellow book leant upon the forms of
associations worldwide.
contract drafted by the IMechE / IElecE.
Whilst best known for drafting contracts
The Orange book was published in 1995
between an Employer and a Contractor,
due to a growing trend towards design
FIDIC also drafts model agreements for
and build projects and at that time FIDIC
professional services:
recognised that the world of contract
drafting was moving on, indeed the
 Client and Consultant
Orange Book contained Dispute
Adjudication Board (DAB) provisions; the
 Client and Architect
Red Book had, in 1996, a DAB supplement
published by FIDIC.
 Joint Ventures between Consultants
The drafting committee of mostly
 Sub-consultant Agreement
consulting engineers and its many advisors
began to work and in 1999 the FIDIC 1999
 Representatives Agreement
suite of contracts were born.
Indeed FIDIC provides many other
publications and is involved in many The FIDIC 1999 Suite of Contracts
initiatives in an attempt to fulfil its stated
mission; “To improve the business climate At this juncture it is worth noting that the
and promote the interests of consulting FIDIC 1999 contracts are not a revision of
engineering firms globally and locally, previous forms; hence “First Edition” within
their titles.
 become known as the Rainbow Book and
Sponsored by perhaps a desire to create FIDIC has perpetuated the rainbow theme
the dominant forms of contract relative to by encouraging all of its subsequently
all forms of construction project coupled issued contracts to be known by the
with the changing face of construction a colour of their covers.
complete overhaul took place.
The most fundamental change to the new
The New Red, Yellow and Silver Books
contracts being the abandonment of the
work based contract; it being replaced by As previously noted a fundamental
contracts that recognised which party was change adopted by FIDIC when drafting
to be responsible for the design of the these contracts was to move away from a
Works (or the vast majority of the Works) work style to a contract that reflected
and where risk would be allocated. where the responsibility for design would
be allocated.
FIDIC issued three contracts for major
works and one for minor works. It is the These contracts were also intended to be
three major work contracts that have used both on the international market and
become synonymous with the term “FIDIC domestic markets, although it is suspected
Contract”. Those being: that the vast majority of sales of the
various forms relate to projects where the
 The Red Book = Conditions of nationalities of the contracting parties
Contract for Construction for Building differ.
and Engineering Works Design by
the Employer, also known as the FIDIC not only sought to issue a new suite
Construction Contract of contracts but also, and to its credit,
sought to make the contracts user friendly
 The Yellow Book = Conditions of and create a best practice manual for
Contract for Plant and Design – Build contract administration. The latter being a
for Electrical and Mechanical Plant, topic for a subsequent article.
and for Building and Engineering
Works Designed by the Contractor, To aid all users the task group drafting the
also known as the Plant and Design- contracts were instructed to standardise
Build Contract the three new major forms. The results
being that, unless differences were
 The Silver Book = Conditions of essential, definitions, layout, clause
Contract for EPC/Turnkey Projects, numbering, and clause wording were
also known as the EPC/Turnkey identical.
Contract
Accordingly the Red, Yellow and Silver
The fourth contract to be issued was the Books contain only twenty clauses; the last
“Short Form of Contract” to be known as edition of the old Red Book contained
the Green Book. seventy two clauses whilst the old Yellow
Book fifty one clauses.
To avoid any confusion it may have been
better to avoid the repeated use of “Red An example of standardisation being,
Book” and “Yellow Book” and adopt a whereas in the old Red Book clause 67 was
totally new range of colours from the headed “Dispute, Engineer‟s Decisions”
outset since many contracts are still let and in the old Yellow Book clause 50 was
based upon pre-1999 FIDIC contracts. headed “Disputes and Arbitration” the
1999 suite of contracts, at clause 20,
In 2001 FIDIC published a Contracts Guide prescribe the conditions under which the
to the three major forms of contract; it has Contractor, the Engineer and the
Employer should act through the “Claims, 2. Payment procedures under clause
Disputes and Arbitration” procedure. 14 Contract Price and Payment

First impressions of the 1999 suite maybe off 3. The sequence of events under
putting since the purchased document clause 20 Claims, Disputes and
appears to be much larger than previous Arbitration following either Party
editions, for instance the new Yellow Book giving notice of its intention to refer a
has, in total, over 100 pages whereas the dispute to a DAB
old Yellow Book has less than 50 pages.
This is all part of the FIDIC‟s desire to All in all a very complete document that
produce a document that is easier to use should require few amendments however,
than previous FIDIC contracts and also as we shall see in a later article the
other contracts from which Employers and document is not only used but is abused.
Engineers can choose.
The Engineer
The general layout of the Contracts is as
follows: Before noting some specifics regarding the
Red, Yellow and Silver Books it is worth
 General Conditions; including an
noting that FIDIC have amended the role
Appendix entitled General
of the Engineer in the Red and Yellow
Conditions of Dispute Adjudication
Books (the Silver Book has an Employer‟s
Agreement which includes the
Representative) from the impartial, quasi
Procedural Rule for a DAB
arbitral role of previous editions. The
 A section giving guidance for the Engineer is clearly stated to act for the
preparation of any Particular Employer. He is no longer required to be
Conditions; this section also includes impartial but whenever required to make
examples of guarantees, securities a determination in respect of value, cost
and bonds that are commonplace or time related matter he has to make his
on international projects determination fairly, and in accordance
with the Contract, having taken into
 A section entitled Forms; here FIDIC consideration all relevant circumstances.
provide examples of:

 Letter of Tender with supporting The FIDIC 1999 First Edition Red Book
Appendix to Tender
 Contract Agreement The main features of this Contract can be
 DAB Agreements (either a one- summarised as:
person DAB or three person  It is suitable for all types of project
DAB) where the main responsibility for
design lies with the Employer (or its
Whilst the above can be considered to be Engineer) although provision is made
the most important elements within a for the Contractor to design
Contract, FIDIC have continued to be elements of the Works
helpful to those using its contracts. Within  The administration of the Contract
the very useful Forward to the Contract and approval of work is carried out
there are three graphics indicating by the Engineer as is certification of
timelines relative to: payments and determination of
extensions of time
1. Principle events from invitation to
tender to return of the Performance  Payment to the Contractor is based
Security upon work done and rates as per a
Bill of Quantities (a Standard Method
 of Measurement should be stated);  Payment to the Contractor is based
thus reflecting the likely on site upon a Lump Sum price and
nature of the Works (a reflection that normally against a schedule of
the Red Book will most likely be used milestones to be achieved by the
for building and civil engineering Contractor. This reflects that the
projects) Yellow Book will most likely be used
for process plants and the like where
 Risk sharing is balanced between a high degree of offsite
Parties such as the Employer taking manufacture of plant and
the risks of “adverse physical equipment is foreseen and payment
conditions” and the “operation of terms can be drafted to recognise
the forces of nature” that are this situation subject to the listing of
considered to be unforeseeable such plant and equipment within the
Contractor‟s tender as within the
 Claims by both Parties have to follow Red Book
procedures, albeit the conditions
imposed upon the Contractor are  Testing procedures leading to
harsher with the inclusion of a “fatal” completion are likely to be more
notice provision complicated than within the Red
Book, again reflecting the likely
 The Contractor has some financial nature of the project
protection in that it can request
evidence from the Employer that it  The Yellow Book shares with the Red
has the finances to pay the Book the provisions noted above
estimated Contract Price relative to:

 Risk sharing
 Materials can be paid for both on  Claims by both Parties.
and off site if strict criteria are  Financial protection for the
followed, including the listing of Contractor
materials for which payment maybe
sought within the Contractor‟s
tender The FIDIC 1999 First Edition Silver Book

The Red and Yellow Books are said to

The FIDIC 1999 First Edition Yellow Book provide contracts with a balanced view of
risk sharing meaning:
The main features of this Contract can be
summarised as:  The Employer pays the Contractor
only when specific risks occur
 It is suitable for all projects where the
main responsibility for design lies with  The Contractor does not have to
the Contractor based upon the include within its tender for risks that
Employer‟s Requirements although are difficult to value
provision is made for the Employer
(or his Engineer) to design elements The above means that the Employer has a
of the Works great degree of uncertainty in respect of
the final price and the final time for
 The administration of the Contract completion.
and approval of work is carried out The Silver Book reflects a market desire for
by the Engineer as is certification of certainty of cost and time; perhaps by a
payments and determination of “one off” Employer or a totally risk adverse
extensions of time Employer willing to “pay the price” or
potentially by lenders who crave certainty only a small number of Contractors to
of price and time, such that the risk tender.
allocation is far from balanced.
Similarly Employers have chosen a turnkey
The Contractor is asked to allow within its style of contract and therefore should
tender for a wide range of risks relative to allow the Contractor complete freedom
cost and time; such risks will most likely to carry out the Works in its chosen manner
include all ground conditions (potentially in order to reach any performance criteria
in a country of which the Contractor will laid down by the Employer.
have little knowledge) and the completion
of the Works will be based upon a strict If the Employer cannot grasp such factors,
but often brief performance related or the tender time is too short to allow the
specification. Contractor to compile an adequate
tender, or considerable amounts of work
The Employer will still bear some risks such are underground, or difficult to inspect the
as those related to war, terrorism and Employer may be better off using a Yellow
Force Majeure but the unbalanced risk book, accepting some additional risks and
profile of this Contract will undoubtedly be receiving a lower tender price.
a higher price; a factor that Employer‟s
must accept.
The FIDIC 1999 First Edition Green Book
The main features of the Silver Book can
be summarised as: The final contract to be issued in 1999 was
the Green Book or Short Form of Contract.
 Design liability rests solely with the This Contract recognised a need for a
Contractor, the Employer will much simpler and shorter contract to suit
provide its requirements but these projects with a relatively low Contract
are often in the form of a brief Price and short time duration.
performance specification
The Contract itself is very flexible, any
 The Contractor carries out all reader will however recognise the
engineering, procurement and Contract as being from the same family
construction often including albeit it has only fifteen clauses and a total
performance tests after completion; of ten pages.
a “turn-key” project allowing The clauses are short and easily
operation of the facility upon understood; whilst design can be carried
completion out by either party an Engineer is not
foreseen, however the Employer may
 There is not an Engineer within the
appoint a Representative. Payment can
Contract; the Employer may appoint
be made on either a lump sum or
an Employer‟s Representative
remeasured basis.

 It is lump sum Contract with As with the major forms the Contract
payment terms most likely similar to includes guidance notes (noted as not
those envisaged under the Yellow forming part of the Contract) as well as an
Book Agreement together with its Appendix and
Rules for Adjudication. The noticeable
Given the above circumstances under absentee being the Particular Conditions
which an Employer may select a Silver section; in this respect FIDIC consider that
Book, Employer‟s should recognise the the Green Book can work without such
significant costs for a Contractor to conditions however, a cautionary note is
produce a tender. Accordingly it is hoped provided should an Employer deem it
that Employer‟s recognise this and select necessary to amend the drafted Contract.
A final thought
Without doubt FIDIC broadened its appeal
to those selecting contract forms, whether
they be Employer, Engineers providing
advice, project funders such that there
was a contract for every occasion.

Nevertheless FIDIC continued to draft

contracts to recognise the marketplace
and sectors of the construction industry as
will be discussed in a subsequent article.
 The Pink Book
Whilst funding agencies adopted the
versions of old and new Red Books for
many years it became standard practice
to amend certain clauses. In response to
the Multilateral Development Banks‟
(MDBs) desire to harmonise their bid
documents including a standard form of
contract, FIDIC responded by issuing the
Conditions of Contract for Construction
MDB Harmonised Edition; the latest version
Introduction being issued in 2010.

First a brief introduction followed by an

overview of various forms. The Gold Book

This form of contract is probably the most

The White Book radical of the new colours; it represents a
contract period of over 20 years! It is a
As previously noted FIDIC also drafts, as design, build and operate (DBO) contract
well as contracts between an employer that the industry has needed for some
and contractor, many agreements time to reflect the ever growing trend that
between “client and consultant”. The contractors no longer construct something
“Client / Consultant Model Services then go away but also maintain and
Agreement”, now in its fourth edition, operate the facility for many years to
issued in 2006, it has become known as the come. It has been described as a Yellow
White Book. Book with an operate and maintenance
contract bolted on; the First Edition of the
The Blue Book (or Turquoise Book as it Conditions of Contract for Design, Build
is sometimes called) and Operate Projects was issued in 2008.

This form is designed specifically for use in

connection with dredging and
No colour as yet, but a subcontract…
reclamation projects. It differs from the FIDIC has often issued a new form of
major forms in many ways but perhaps contract as a “test edition” such that the
most importantly that it was drafted in construction industry can review the
close collaboration with the International proposed conditions of contract whilst
Association of Dredging Companies perhaps using them in a real life situation.
(IADC) and as such has a great input from The latest test edition again is a departure
contractors from the outset. The current from the engineer driven FIDIC
version of the Form of Contract for organisation since it delves into the world
Dredging and Reclamation Works is the of the contractor and subcontractor,
fourth edition issued in 2006. although it is noted that advice was
sought from many working for and with Agreement”. This limitation is further
contracting organisations. qualified since nothing else in the
agreement, or any legal requirement of
The results being the Conditions of the Country or any other jurisdiction can
Subcontract for Construction for Building impose a greater risk upon the consultant.
and Engineering Works designed by the Thus the consultant/engineer has a limited
Employer issued in 2009. As the title of this risk that, it is suggested, is not in accord
form suggests it is for use with the Red Book with the thoughts of employers and
and the Pink Book. It is the second contractors alike.
attempt at creating a subcontract since
FIDIC issued one in 1994 relative to the old
The Blue (Turquoise) Book
Red Book
The Blue Book is like the Green Book in that
it is abbreviated and flexible. In terms of
being a smaller document the general
Overview of the various forms conditions are only 16 pages and fifteen
clauses long. The format has also
changed from the major forms with the
The White Book agreement and appendix to the contract
The drafters of the White Book are being the first section. Perhaps it is the
predominately engineers who within this major forms that have the order incorrect
form sought to create conditions of since it is those particular terms that are
agreement that would span the life cycle the most important to recognise especially
of an engineer‟s or consultant‟s in such a flexible form as the Blue Book.
involvement.
Similarities with the major forms are in the
Accordingly the document is suitable for inclusion of standard forms, such as
use during: securities, a section on adjudication (a
one or three person DAB) with rules and
 pre-investment and feasibility studies the adjudicator‟s agreement and the all
important guidance section.
 the design phase
The engineer is still recognised within the
 the administration of a contract
contract however design responsibility can
rest with either the employer (and its
As with FIDIC contracts there are both
engineer) or the contractor. Payment
general and particular conditions of
terms are extremely flexible and a list of
contract which combined set out the
options, such as lump sum,
scope of the consultant‟s work, payment
remeasurement and cost plus are all
terms and the like.
noted within the appendix.
The White Book incorporates the same
It is perhaps apparent that a greater input
financial protection as afforded to
of a contractor‟s organisation has
contractors in that the consultant too can
influenced some of the general conditions,
ask the Client (as opposed to the
as has perhaps the use of other forms
Employer) if it has the ability to pay the
within the industry as a whole:
Consultant‟s fees. In a similar vein, and
maybe not surprising to some, the White
 Notices by the contractor in respect
Book limits the consultant‟s responsibilities,
of a claim must be given within 28
and therefore liabilities, to “exercise
days but there is no fatal provision.
reasonable skill, care and allegiance in the
performance of his obligations under the
 Claim items are listed as defined risks contractor would design the facility; in
which may entitle the contractor to other words a Yellow or Silver Book project.
monetary or time compensation.
The MDBs include in their number such
 The defined risks, recognising the likely organisations as:
impacts of weather upon the
contractor‟s ability to make progress,  The World Bank
potentially soften the usual clause
wording on one hand, entitling the  The European Bank for Reconstruction
contractor to make a claim if “any and Development
operation of the forces of nature
affecting the Site/and or the Works”,  African Development Bank
which was unforeseeable or against
which an experienced contractor The MDBs in fact represent lending
could not reasonably have been agencies that fund projects on a global
expected to take precautions” but basis and as such play a crucial role in the
give the employer (and contractor) development of the planet‟s lasting
less room for debate by also defining infrastructure. With this level of
the employer‟s risk to be “climatic importance in mind it was crucial that
conditions more adverse than those FIDIC participated in amending the Red
specified in the Appendix”. Book to provide a contract not only that
 If disputes are not settled amicably adhered to the wishes of the MDBs but
they are to be settled by referral to also gave borrowers, engineers and
adjudication by a DAB and, if contractors some consistency in format,
dissatisfied with the DAB‟s decision (or leading to fewer ad-hoc and poorly
if no decision is made within the set thought through amendments.
timescale) the dispute can be
referred to Arbitration. Those faced with a Pink Book will have
often been used to the Red Book and
The Blue Book is a model of a contract therefore will be familiar with the general
drafted by those with a particular section layout of the contract, the twenty clauses
of the industry in mind and with the are still there but there have been
knowledge to incorporate the necessary amendments which some may think are
variations to standard forms that may for the better, and others otherwise.
have been considered for use in the past. Examples being when compared to the
Red Book:

The Pink Book  Minor amendments have taken place

to definitions of which one is worthy of
As previously noted the Pink Book was being noted:
created as a derivative of the Red Book.
This reflecting the usual nature of a project  Cost no longer refers to
that would require funding from lending or reasonable profit but states
aid agencies and would deploy from the profit since at clause 1.2 profit is
outset an engineer to assist in all phases of fixed at 5% unless stated
the project, especially design. otherwise in the contract data.
Those projects normally being  clause 1.5, is a new clause that allows
infrastructure types of projects as opposed the lender‟s representatives to inspect
to industrial, power, process plants and the the site and audit the contractor‟s
like where funds would normally be from accounts and records relative to the
the employer‟s own resources and the project
 the sequence or progress of the
 clause 2.1, access to the site must be works”.
given such that the programme can
proceed “without disruption”  clause 15.5, whilst the employer can
terminate for convenience it cannot
 clause 2.4, the employer has to terminate to pre-empt a just
demonstrate its ability to pay the termination by the contractor.
contract price before “the  clause 15.6, is a new clause that
commencement date” and also attempts to deal with corrupt and/or
“punctually” fraudulent practices.
 clause 2.5, the employer must now  clause 16.2, the contractor must now
give notice of its claims within 28 days demonstrate that the employer‟s
but whilst more onerous there is still no failures must “materially and adversely
condition precedent affect the economic balance of the
contract and/or the ability of the
 clause 3.1, the engineer has to gain contractor to perform the contract”
the employer‟s approval before prior to termination. There are
dealing with matters under clauses however two further grounds allowing
dealing with claims in respect of the contractor to terminate:
unforeseeable physical conditions
and the issue of variations  Failure of the funder to provide
funds.
 clause 3.5, the engineer now has to
give its determination “within 28 days  The absence of the engineer‟s
from receipt of the corresponding instruction to commence work
claim or request…” 180 days after the letter of
acceptance.
 clause 6.2, there is an obligation upon
the contractor to inform its personnel  clause 19.2, in order to claim force
of their liability to pay local income majeure the claiming party must
tax demonstrate that it has been
prevented from performing “its
 clause 8.1, the project cannot substantial obligations”
commence unless:
 clause 20.6, arbitration rules may differ
according to the origin of the lending
 the contract agreement has
agency.
been signed by both parties

 the contractor has reasonable The amendments to the Red Book appear
proof that funding is in place to be a mixed bag providing support to
the contractor in terms of guaranteed
 the advance payment has funding but also apparently allowing the
been received by the employer influence over the engineer in
contractor respect of claims for unforeseeable
ground condition and variations.
 clause 8.6, the contractor can be
paid for acceleration measures to The latter is not considered to be prudent
overcome employer delays especially when considering that
borrowing countries may not have the
 clause 13.1, the contractor is not sophistication necessary to deal with such
bound to carry out a variation if it matters.
would “trigger a substantial change in
The Gold Book will be the responsibility of the
contractor, as is a cost over that
The Gold Book without doubt fills one of stated on the schedule. Any surplus in
the last gaps in FIDIC‟s toolbox of the fund at the end of the twenty
contracts. Its use is growing especially as years is divided equally.
government departments such as water
authorities warm to the idea of having  The employer is entitled to deduct 5%
foreign contractors bring their knowledge from payments during the “operation
of providing water treatment and supply service period” (OPS) in case the
at a profit but also having to be contractor does not fulfil its
responsible for remedying defects whilst maintenance obligations. The fund is
remaining in the country rather than being to be released, if not spent, within the
on the side of the globe. final payment to the contractor. The
contractor being responsible for its
Accordingly FIDIC has not only responded own defects arising from design and
to employers who crave to outsource but construction in this period.
also the changing face of contractors
who are now operators too. Any potential  An independent audit body is jointly
disputes between contractors carrying out appointed for the duration of the OPS
a design and build contract to to monitor the performance of the
questionable standards leading to poor contractor and employer. Whilst
performance, defects and disputes whilst having no power, the parties are
leaving the employer to struggle through a intended to give “due regard” to
20 year life time of a plant have, matters raised by the audit body.
potentially, been negated. That is,  A joint inspection is required at least
provided the whole scheme is fully thought two years before the end of the OPS;
through and both parties, as with all any works identified must be carried
contracts, are willing and able to act out by the contractor who will also
responsibly towards each other such that face completion tests similar to those
a balance is struck between the at the end of the design and build
construction and operating elements of phase. Defaulting contractors risk
the contract. losing the 5% maintenance retention
fund.
The contract‟s ethos and key features are:
 A standing DAB is established from a
 Design, build plus operation and set date for the design and build
maintenance for 20 years by the phase and a new one every 5 years
contractor on a green field site. during the OPS.

 Design and build phase risk allocation

similar to the Yellow Book with The key to success appears to be with the
exacting completion criteria but also contractor who must design and build a
a cut off date should the contractor quality plant with low operating and
be 182 days late leading to maintenance costs; fit for purpose and
termination if desired. built to last.

 Payment on a lump sum basis but a However, like any relationship time gives
defined asset replacement fund and rise to change and only time will tell if
schedule that notes the timing and FIDIC have considered all factors such as
cost of the replacement of certain changes in the deliverables required by
assets. Costs of replacing plant and the employer. FIDIC has very recently
equipment outside of the schedule issued its guide to this form.
The Subcontract to the Red and Pink
A final thought
Books
FIDIC has continued to broaden its
As noted this form is a test edition with the potential customer base by these further
first edition arriving sometime later. contracts. The next stop could be a target
price contract but it is understood that we
The contract seeks to be back to back will see a complete overhaul of the 1999
with the Red Book, in this respect selected suite in the not too distant future.
highlights or lowlights are:

 The subcontractor is required to

complete its scope of works such that
no act or omission shall constitute or
cause a breach under the Red Book.

 The contractor is entitled to make a

“fair decision” in respect of its claims
towards the subcontractor and
deduct monies accordingly.

 Payments are back to back (where

legal to do so) such that
subcontractors may find contractors
using this as a shield to avoid paying
for their own problems

 The subcontractor is apparently

responsible for the care of its works
until the main contract works are
taken over. This situation will always
require careful management
whatever the form of contract

 Notice provisions are passed through

to the subcontractor but with a
reduction in time to 21 days to allow
the contractor to fulfil its obligations
under the main contract.

A subcontract that allows both fair

payment provisions for the subcontractor
for all liabilities of the contractor whilst
obliging the subcontractor to allow the
contractor to make claims upwards will
always be a tough ask; has FIDIC really got
it right? Perhaps the absence of
subcontractors from the drafting
committee is a clue.
This is the third in a series of articles being published in CES1. The first introduced the rainbow
suite, the second provided insight into the continued growth of the suite.

In this the third article by joint authors, Paul Battrick2 and Phil Duggan3 of Driver4, commenting
upon the FIDIC forms of contract the programming requirements are considered in
conjunction with the procedures in respect of progress reporting. The Parties to the Contract
and the Engineer, but in particular the Contractor, all have clear obligations in respect of the
programming and reporting functions within the FIDIC forms.

where the design is carried out by the

Contractor.

The drafters of the FIDIC suite of contracts,

and many commentators, say that the
FIDIC contracts not only provide the
mechanisms for dealing with risks,
responsibilities, payment terms, change
and all the other good things necessary to
allow a project to be completed in a
managed and (hopefully) equitable
fashion but they also act as a best
Programming and Reporting practice project management handbook.
A Benefit or Burden for the Contractor
and the Employer and its Engineer? The project management handbook is
most prevalent within the programming
In this the third article commenting upon and reporting provisions and no doubt the
the FIDIC forms of contract the FIDIC drafters consider what they thought
programming requirements are the Contractor and the Engineer should
considered in conjunction with the be aware of in order that control of the
procedures in respect of progress project was to the fore and certainty of
reporting. The Parties to the Contract and outcome, especially in respect of progress,
the Engineer, but in particular the was assured.
Contractor, all have clear obligations in
respect of the programming and reporting Many of us, and perhaps some FIDIC
functions within the FIDIC forms. drafters, will have received lectures in
management at some stage of our
It is considered that these obligations are careers and many will know the
intended to be considered in tandem with mnemonic.
the provisions for considering claims
submitted by the Contractor such that any Family Planning Often Means Careful
Contractor who neglects, or is allowed to Choice of Contraceptives
neglect, its obligations may face a more
difficult task to establish its entitlements Management handbooks quite rightly look
than a Contractor who has fully complied to the perfect world however the real
with its obligations. world is one of harsh commercial realities
and shortcomings in performance in many
For the purposes of this article all respects where, should a Contractor allow
references to Sub-Clause are taken from within its bid for every risk and obligation it
the Yellow Book; in simple terms the would certainly lead to lost tenders. As
Contract for design and build projects with all things compromise is often the
solution however, to compromise in cast to one side as from now on only one
respect of programming and reporting programme will matter; the Sub-Clause 8.3
may not be such a wise course of action. programme and of course the revisions to
it.
The FIDIC Yellow Book envisages the
typical procedure to be expected in This programme will be, or should be, a
establishing a contract for a design and baseline against which the performance
build project: of the Contractor and the Employer, if
appropriate, will be monitored, claims for
 Invitation to bid (ITB) with extensions of Time for Completion will be
Employer‟s Requirement included, based upon and Engineer‟s instructions to
no doubt a timescale for the expedite progress will be based. Its
completion of the project was importance cannot be stressed enough.
stated.
However, the requirements upon the
 Contractor‟s bid complying or Contractor of Sub-Clause 8.3 goes further
otherwise with the ITB, including a than producing a programme; the
timescale which was probably Contractor is required, for the first time to
detailed to some degree noting bear its soul before the Engineer for
any required milestones and/or scrutiny. Whilst the details to accompany
those of importance to the the programme may seem quite normal to
Contractor, such as the provision of most they are an obligation upon the
feedstocks. Contractor.

 The coming together of the The Contractor has to submit, to the

Employer and the Contractor to Engineer, its detailed programme within 28
create a contract detailing without days after receiving the notice of the
ambiguity a shared understanding. Commencement Date. Realising that the
programme will not be perfect and will be
It is now that Clause 8, Commencement, subject to revision not only to take
Delays and Suspension takes over, and for account of actual progress but also to
the purpose of this article Sub-Clause 8.3 take account of other factors such as sub-
Programme in particular. suppliers and sub-Contractors
programmes being agreed as orders and
The Contractor, will have agreed or contracts are placed, the FIDIC drafters
accepted the Time for Completion noted placed a further obligation upon the
within the Appendix to Tender and the Contractor to submit a revised
Engineer will have issued a notice of the programme whenever the previous
Commencement Date. Assuming all other programme becomes, in effect, out of
formalities are in place, such as the date and does not reflect the manner in
provision of the Performance Security, the which the Contractor will achieve its
dates for commencement and obligations.
completion of the Works, including any
Sections, are now anchored. Every time the Contractor submits a
revised programme it must include:

Sub-Clause 8.3 Programming  the order in which the Works will be

carried out
Now Sub-Clause 8.3 takes over!
 the timing of each stage of design,
It is suggested that all programmes in preparation of Contractor‟s
existence at this point in time should be Documents, procurement,
 manufacture, inspection, delivery with the contract actually means maybe
to site, construction, erection, left to the Engineer‟s interpretation. It is
testing, commissioning and trial considered that it should mean
operation compliance with dates and periods of
time stated within the contract including
 the periods allowed for the working hours and periods for approvals
Engineer to review documents etc by the Engineer but should an
submitted by the Contractor (Sub- investigation take place into the level of
Clause 5.2) and any similar resources and methods the Contractor
submissions, approvals and intends to use, probably not. Nevertheless
consents specified in the the Contractor has provided to the
Employer‟s Requirements Engineer an insight into such things as its
intended resources which, as we all know,
 the sequence and timing of is also often the starting point for many a
inspections and tests specified in claim prepared by a Contractor.
the contract
As noted the Sub-Clause 8.3 programme is
 a supporting report which includes: the baseline against which the Engineer
will monitor the Contractor‟s progress and
 a method statement noting the Contractor‟s ability to meet the Time
the major stages of for Completion and decide whether or not
execution of the Works to issue instructions to the Contractor to
prepare and issue a revised programme
 the Contractor‟s and supporting report detailing how the
reasonable estimate of the Contractor will accelerate the Works, as its
numbers of each class of own cost and potentially with claims from
Contractor‟s Personnel and the Employer to complete with the Time
each type of Contractor‟s for Completion.
Equipment required at Site
for each major stage of the There is one other obligation of Sub-Clause
Works 8.3 that is worth nothing; the Contractor is
to inform the Engineer of:
Having received all of this information at
the outset of the project and every time  specific future events or
the programme is updated the Engineer circumstances which may diversely
has 21 days in which to state, by a issuing affect the work (note the Works is
notice, that it does not comply with the not used)
contract; note that the Engineer does not
have to approve programme should the  increase the Contract Price
Engineer not issue such a notice the
Contractor must proceed in accordance  delay the execution of the Works
with the programme; in doing so the
Contractor should be aware that the
Employer will rely upon that programme in It is also worth noting that the Employer
arranging any feedstocks and other inputs does not have a similar obligation.
it has to facilitate the completion of the
Works. The Contractor has to submit estimates
relative to these occurrences and/or a
FIDIC is silent as to what should happen if proposal under the Variation Procedure if
the Engineer gives notice that the applicable.
programme “does not comply with the
contract”; as to what non-compliance
Early warning clauses such as this are now incorporated into the Works) and
commonplace and there is no noted Materials (things of all kinds, other
sanction for non-compliance by the than Plant) to be incorporated into
Contractor however, Contractors should the Works)
consider this provision in the light of the
fatal notice provisions under Sub-Clause  the name of the
20.1 (a topic for later discussion). manufacturer

 the manufacturer‟s location

Sub-Clause 4.21 Progress Reports
 percentage progress
Having given the Engineer an insight into
its initial and revised programmes and  actual or anticipated dates
resourcing levels the Contractor is obliged of:
to prepare reports, on a monthly basis,
that reveal yet more of the Contractor‟s  commencement of
progress towards Completion. manufacture

The monthly reports can be quite a time  Contractor‟s

consuming exercise to complete since inspections
they require a considerable amount of
detail, let alone six copies to be issued.  Tests
Each report must include:
 shipment and arrival
 charts and detailed descriptions of at site
progress including:
 records of the numbers of the
 each stage of design Contractor‟s Personnel (the
(possibly relevant to the Contractor‟s staff, Sub-contractor
major stages identified staff and anyone else working at
within the Sub-Clause 8.3 the Site)
programme)
 records of the Contractor‟s
 Contractor‟s Documents (a Equipment (types and details of
defined term including plant and vehicles used by the
calculations, computer Contractor, its Sub-contractors and
programmes, drawings and anyone else working at the Site)
models)
 copies of quality assurance
 procurement, manufacture documents, test results and
and delivery to site certificates of Materials

 erection, commissioning  list of Variations, notices given by

and trial operations the Employer of its intention to
make a claim towards the
 photographs showing the status of Contractor and notices of claim
manufacture and of progress on issued by the Contractor
the Site
 safety statistics, including details of
 for the manufacture of each main hazardous incidents, activities
item of Plant (apparatus, relating to environmental aspects
machinery and vehicles to be and public relations
 are a benefit or burden for the Contractor,
 comparisons of actual and a simple question must be asked, what
planned progress does the Contractor (and all other parties
involved for that matter) really want from
 details of any events or a project?
circumstances that may jeopardise
the Contractor‟s ability to meet the After the difficulties of bidding and winning
Time for Completion or any interim a project the Contract will desire certainty
milestones (it is noted that this is and to construct with control. That being,
another opportunity for an early amongst other things, certainty of:
warning of potential delay by the
Contractor)  Contribution to overheads and
profit, the lifeblood of any business
 measures being adopted or to be
adopted by the Contractor to  Timely completion, to allow the
overcome delays (it is not certain if planned movement of resources
this relates to recovery measures towards the next project
being adopted as a result of an
Engineer‟s instruction and/or  Completion to the required quality
measures voluntarily adopted; the standards, to enhance reputations
latter is most likely given the
required comparison in respect of  A dispute free project, to avoid the
progress) time consuming and expensive use
of resources
Whilst most Contractors will readily have to
hand, whether allowed for in the bids or Whilst far easier to say than to achieve; to
not, the resources and management obtain certainty it requires all involved with
structure to comply with the reporting the Employer‟s, Engineer‟s and
obligations within Sub-Clause 4.21 it is clear Contractor‟s organised to fulfil their
that those working for the Contractor, Sub- obligations to the standards required and
contractors, Sub-suppliers and specialist at the right time.
design houses must also provide the
countless pieces of information required to The initial Sub-Clause 8.3 programme not
allow the Contractor to conform. only provides the Engineer with a yardstick
to measure projects against but it also
It is suggested that perhaps Contractors allows the Contractor to inform the
who are not used to FIDIC, such as those Employer when critical inputs such as free
from Eastern Europe, who may find issue materials, electricity, gas, water or
themselves working on externally funded feedstocks are required. It is therefore
projects may find these obligations outside something for the Contractor to measure
of their normal reporting capabilities. the Employer‟s performance against and
Similarly some Engineer‟s may also find the every updated programme and report
administration of this aspect of FIDIC should therefore contain a statement
somewhat difficult to achieve, albeit it regarding the progress of the Employer‟s
gives the Engineer the perfect platform to obligations as well as the required
report to the Employer. information regarding the Contractor‟s
progress. There should be no hindrance
from either the Employer or the Engineer to
Benefit or Burden? the Contractor taking a proactive stance
in relation to a desire to complete the
To consider whether or not the Works without delay from the Employer‟s
programming and reporting obligations quarter.
 if the Employer is culpable, but more
It is clear however, that the focus, on the importantly communicating with the
Sub-Clause 8.3 programme and its Contractor to mitigate the impacts of
revisions is on the Contractor‟s delay and issue a Variation if desired and
performance. Despite this opportunity to required.
set out a clear statement of intent that is
capable of demonstrating cause and Whilst, with all this data to hand, the
effect in respect of delay to the Time for Contractor should be able to construct
Completion all too often Contractor‟s with control and take the appropriate
produce programmes that are action when and if delay occurs,
inadequate at the outset, possibly due to Contractors should also never
a lack of information from suppliers etc, underestimate that the data; resourcing
and continue to be inadequate when levels, duration of work operations etc etc
revised. is also with the Engineer who will use this
against any Contractor that submits a
A good programme that is properly hasty and ill-prepared claim for what
maintained is without doubt, a double could be a very just entitlement.
edged sword; it allows the Contractor to
identify its own shortcomings and take There is doubt that in the minds of the
instant remedial action as well as identify FIDIC drafters that all involved intended to
delay that falls under the risk area of the fulfil their obligations to the standards
Employer such that an extension to the required and in a timeous manner but in
Time for Completion can be instantly the event that this did not happen and
requested and hopefully determined by delay occurred the Engineer and the
the Engineer such that the risks of Contractor would have a wealth of
completion fall back towards the information to hand to prepare claims for
Contractor. just entitlements that could be determined
without question under Clause 20,
The reporting requirements within Sub- although that Clause is a topic for another
Clause 4.21 are a great motivator for the day.
Contractor to have at its fingertips all the
data to allow time to be properly Sadly all concerned have frailties either as
monitored and adjusted to suit deviations individuals and/or organisations however
from any intended programme. In doing this should not prevent at least the firm
so the Contractor can once again feed foundations of good programming from
into those responsible for preparing the being achieved.
programme data indicating the rate of
progress of all concerned allowing the
programme to be adjusted to take
A final thought
account of either work being completed
earlier than scheduled or likely delays such Perhaps the FIDIC drafters did attend the
that resources can be deployed same lectures as it is not too difficult to see
economically and claims, if appropriate that with any FIDIC contract there are
will have strong foundations based upon elements of; Forecasting, Planning,
fact. Organisation, Motivation, Coordination,
Control and Communication…
In a similar fashion the Engineer, by
reviewing the available data and early
warnings given by the Contract, can
foresee areas of work where delays are
likely to occur and take appropriate
action by alerting the Employer, especially
This is the fourth in a series of articles being published in CES with the post 1999 editions of
1

the FIDIC suite of contracts being the overall subject matter.

The first article discussed the birth of FIDIC’s rainbow suite, the second provided a brief insight
into continued growth of the rainbow, the third article looked at programming and reporting
requirements. In this, the latest article, joint authors Paul Battrick and Phil Duggan of
2 3

Driver look at studying project contracts themselves.

4

manufacturing in Europe had been

rejected at site in the Far East.

 It had been rejected as it was

constructed using steel and not
stainless steel as required by the
specification.

It is easy to tell all involved with the  When asked why an alternative
management of any construction project to material was used the reply was
read and fully understand the Contract. No “we always make these vessels
matter how experienced we are there is from steel”.
always the potential for an amendment to
a previous form, a new revision or an  The specialist Contractor was forced
Employer removing some well understood to make a new vessel constructed
elements that may fundamentally alter any out of the specified material
previous understanding. resulting in losses and delay
damages being levied… a true story.
Please do not adopt the attitude of “I’ve
seen that form before” or “we always do it All this could have been avoided had
like this” as one particular client did to its someone considered the pertinent
detriment. Whilst not involving a FIDIC documentation.
Contract the story highlights a totally
incorrect attitude to adopt; in short: A clause that is within most contracts that
is similarly misunderstood relates to Force
 A specialist Contractor asked for Majeure. Perceived lists of relevant events
assistance, the pressure vessel it are carried from one project to another
had spent 1000s of hours without considering if the events change; if
the list is exhaustive, since the word Contractor was entitled to add profit to its
“include” is often within the clause or if the cost claims remained silent. Now in the
events carry monetary entitlements as well FIDIC forms Cost expressly excludes profit
as time benefits. but profit is still an entitlement under
certain circumstances as will be explained.
Definitions can vary from contract type to
contract type and, in practical terms, from FIDIC defines Costs as:
work scope to work scope. Consider for
yourselves suitable definitions relative to “Cost” means all
remeasurable and lump sum contracts and expenditure reasonably
also completion requirements for a road as incurred or to be incurred),
opposed to a multi phased power plant. whether on or off the Site,
including overhead and
FIDIC conveniently provides definitions similar charges, but does not
firstly in the body of the Contract in include profit.
respect of topics:
All those dealing with entitlement (a
 The Contract preferable word to claim) understand that
 Parties and Persons success depends upon the creation and
 Dates, Tests, Period and Completion maintenance of the appropriate records
 Money and Payments and in doing so can fulfil the requirements
 Works and Goods of FIDIC in both submitting claim
 Other Definitions documents and adjudicating upon those
documents. The definition of Cost provides
and also in alphabetical order noting the a starting point in respect of monetary
particular Sub-Clause. entitlements and clause 20 (Claims,
Disputes and Arbitration) provides the end
For the purpose of this article one point; in between there are many clauses
definition is selected, that of Cost. It often within FIDIC which give rise to a monetary,
has differing meanings under various forms and often time, entitlements to the
of Contract, especially bespoke forms, and Contractor.
is often translated when claims are being
prepared to what those preparing the claim It pays to understand all of these clauses
would like it to mean. which can be classed as “claims under the
Contract” as opposed to “claims under the
In earlier additions of standard forms, governing law of the Contract”.
including FIDIC forms, whether or not the
Briefly, and in respect of the latter type of  Extension of time
claim, FIDIC does not contain an exclusive
remedies clause and also appears to Sub-Clause 2.1 Right to Assess to the
foresee such claims, but still governed by Site
clause 20, by the use of the word
“otherwise” within the opening paragraph If delay is caused or Cost incurred as a
of Sub-Clause 20.1. result of the Employer failing to give the
Contractor access to the Site at the
Below is a list of the Sub-Clauses which prescribed time the Contractor is entitled
entitle the Contractor to claim additional to claim:
money (and possibly time) noting when the
definition of Cost remains as per the  Cost plus a reasonable profit
definition or the Contractor is also entitled  Extension of time
to a “reasonable profit”.
Sub-Clause 4.7 Setting Out
Sub-Clause 1.9 Delayed Drawings or
Instructions (Red Book only) If delay is caused or Cost incurred as a
result of errors in the original setting out
If delay or disruption is caused or likely to points and levels of reference notified by
be caused as a result of late drawings or the Engineer the Contractor is entitled to
instructions the Contractor is entitled to claim:
claim:
 Cost plus a reasonable profit
 Cost plus a reasonable profit  Extension of time
 Extension of time
Sub-Clause 4.12 Unforeseeable
Sub-Clause 1.9 Errors in the Physical Conditions
Employer’s Requirements (Yellow Book
only)
If delay is caused or Cost incurred as a
result of the Contractor encountering
If delay is caused or Cost is incurred as a physical conditions which are
Unforeseeable the Contractor is entitled to
result of errors in the Employer’s
claim:
Requirements which were not previously
 Cost (only)
discoverable the Contractor is entitled to
claim:  Extension of time

It is worth noting that Unforeseeable is a

 Cost plus a reasonable profit defined term meaning “not reasonably
foreseeable by an experienced contractor Sub-Clause 10.2 – Taking Over of
by the date for the submission of the Parts of the Works
Tender”.
If the Contractor incurs Cost as a result of
Sub-Clause 4.24 Fossils the Employer taking over or using a part of
the Works the Contractor is entitled to
If delay is caused or Cost incurred as a claim:
result of the Contractor’s compliance with
instructions issued by the Engineer to deal  Cost plus a reasonable profit
with the discovery of fossils and the like
the Contractor is entitled to claim: Sub-Clause 10.3 Interference with
Tests on Completion
 Cost (only)
If delay is caused or Cost incurred as a
 Extension of time result of tests being delayed by a reason
for which the Employer is responsible the
Sub-Clause 7.4 Testing Contractor, amongst other remedies, is
entitled to claim:
If delay is caused or Cost incurred as a
result of testing being delayed by the  Cost plus a reasonable profit
Employer or on behalf of the Employer the
Contractor is entitled to Claim:  Extension of time

 Cost plus a reasonable profit Sub-Clause 11.8 Contractor to Search

 Extension of time If the Contractor incurs Cost as a result of

searching for a defect for which it was not
Sub-Clause 8.5 Delays caused by liable the Contractor is entitled to claim:
Authorities
 Cost plus a reasonable profit
If delay or disruption is caused or Cost
incurred as a result of the actions or non Sub-Clause 12.2 Delayed Tests (Yellow
actions of Authorities the Contractor is Book only)
entitled to claim:
If the Contractor incurs Cost as a result of
 Cost, with or without profit, appears carrying out Tests delayed by the Employer
not to have been specifically until after Completion the Contractor is
considered entitled to claim:

 Extension of time  Cost plus a reasonable profit

Sub-Clause 8.9 Consequences of Sub-Clause 12.4 Failure to Pass Tests

Suspension after Completion (Yellow Book only)

If delay is caused or is likely to be caused If the Contractor incurs Cost as a result of

or Cost incurred as a result of the the Employer delaying access to allow
Engineer’s instructions to suspend work the Tests to be carried out the Contractor is
Contractor is entitled to claim: entitled to claim:

 Cost (only)  Cost plus a reasonable profit

 Extension of time
Sub-Clause 13.7 Adjustments for The above list is not exhaustive as to
Changes in Legislation where the Contractor can gain payments
and/or entitlements within the FIDIC
If delay is caused or is likely to be caused contracts; the list refers to Sub-Clauses
or Cost incurred or likely to be incurred as specifically referring to Cost as defined.
a result of changes in the Laws of the
Country the Contractor is entitled to claim: In terms of monetary entitlements, Sub-
Clauses not referenced include Evaluation
 Cost (only) (in respect of the Red Book) and Variations
as well as Payment on Termination where
 Extension of time
an alternative set of rules come into being.
It is worth noting that Country is a defined The provisions of Sub-Clause 8.4 in respect
term meaning the Country in which the of extensions of time should be thoroughly
Site (or most of it) is located, where the considered in respect of entitlements to
Permanent Works are to be executed. time extensions.
Thus this definition is very limited in the
The subtle differences between the
field of international contracting where
contents of the listed Sub-Clauses are
Contractors, Suppliers and Sub-Contractors
interesting if not explainable. The most
may all have originated from Countries
interesting of which may be the addition or
other than where the project is being
not of a “reasonable profit” to the
carried out and may suffer as a result of
Contractor’s Cost.
changes in legislation.
Contractors will argue that they are not
Sub-Clause 16.1 Contractor’s
charities and all expenditure properly
Entitlement to Suspend Work
incurred as a result of others deserves /
If delay is caused or Cost incurred as a should be required to return a profit.
result of the Contractor properly Similarly many of the claim events, had the
suspending work (or reducing the rate of scope been fully understood at the time of
work) the Contractor is entitled to claim: tender by both parties, would have been
included within the Contractor’s bid and the
 Cost plus a reasonable profit Contractor would have had the opportunity
to add profit to its foreseen costs.
 Extension of time
Contractors and their advisers may wish to
Sub-Clause 19.4 Consequences of
seek an adjustment to the definition of
Force Majeure
Cost when negotiating the Contract in the
If delay is caused or Cost incurred as a future.
result of Force Majeure events the
The influence of whether or not a Cost
Contractor is entitled to claim:
attracts profit may also extend to the
 Cost (only) in respect of the events preparation of claims for extensions of
listed at Sub-Clauses 19.1 (ii), 19.1 time. Whilst many will say that at all times
(iii) and 19.1 (iv) the causes of delay should be capable of
being clearly identified, this is often not the
 Extension of time case. There is also the propensity for
Contractors to establish claims around
events that appear to have the best chance
of success or line of least resistance from
the Engineer; perhaps even a global style
claim is submitted to gain relief from the Contractor’s actual bid margin was less
deduction of Liquidated Damages. than 5% and so it would gladly accept that
on offer.
In any event at some juncture the
Contractor and the Engineer, or perhaps a A further interesting subtlety is the use or
DAB or Arbitral Tribunal, have to consider not of the phrase is “likely to cause”. It
the causes of delay, establish periods of may have been more prudent upon the
extension of time against those causes and part of the FIDIC drafters, when
lastly establish if there are any monetary considering the Employer’s interests to use
entitlements to accompany those periods this phrase within all entitlement clauses
of delay. so as to be consistent with the early
warning obligations upon the Contractor in
The addition, or not as the case may, be of terms of time within Sub-Clause 4.21 and
profit to a Contractor’s elements of a the general notice provisions of Sub-Clause
prolongation claim maybe considerable 20.1. This may also aid the early
amount in these days where mega projects conclusion of claim issues.
exist and delays run into years not just
days or weeks. Contractors therefore may Contractors, when drafting sub-contracts
select, if possible, delay events that could should take note of the differing provisions
maximise their potential financial returns. within the entitlement clauses such that
the variants, especially in respect of the
In respect of the Contractor declaring its recovery of profit, are incorporated into
required profit, it is suggested that instead Sub-Contracts so as not to cause a
of waiting until such time as a claim exists shortfall in recovery or lengthy discussions
and the Employer and its concerning the right or otherwise to profit
Engineer/Representative may be seeking to in respect of claim monies. Although, in
limit expenditure against claims, the practice it appears that Engineers only
parties follow the lead given by FIDIC deny profit on the Contractor’s element of
within the MDB Harmonised Edition (the a claim.
Pink Book).
It is noted that Sub-Clause 11.8 Contractor
The Pink Book at Sub-Clause 1.2 differs to Search, does not give a specific
from the Red Book by the addition of two entitlement to a time extension albeit
paragraphs, in this context the important circumstances can be imagined where a
one being: delay to completion may occur. Under
these circumstances the Contractor has
“In these Conditions,
two further options to obtain any
provisions including the
entitlement within Sub-Clause 8.4
expression “Cost plus profit”
Extension of Time for Completion:
require this profit to be one-
twentieth (5%) of this Cost  Sub-Clause 8.4(b), where an
unless otherwise indicated in extension of time may be claimed
the Contract Data.” as a result of any cause under a
Sub-Clause of the Contract.
It will therefore be up to the Contractor to
consider that he may wish to declare a  Sub-Clause 8.4(e), where an
higher profit than 5% at the pre-contract extension of time may be claimed
stage or accept that 5% profit where as a result of any delay impediment
applicable on its entitlements listed with or prevention caused by or
the Contract. It may be that the attributable to the Employer, the
 Employer’s Personnel or the
Employer’s other contractors on the
Site.

FIDIC having been thorough in respect of

the Contractor’s claims towards the
Employer have not carried through this
thoroughness in respect of claims from the
Employer to the Contractor.

There is no definition of cost relative to the

Employer’s claims towards the Contractor
and therefore it must be left to the
Employer’s agent or the Engineer, to
determine if profit should be passed on as
a legitimate claim item.

Finally, a brief reference was made above

to claims made under the governing law as
opposed to under the Contract. This is
obviously an option open to the Contractor
however, it is considered that claims
properly made under the Contract will have
a greater chance of speedy resolution. It
may also be quite a time consuming
exercise for a Contractor to take the
necessary legal advice before commencing
a claim under the governing law. Should
this be the case the initial and fatal notice
provisions of Sub-Clause 20.1 may come
into play – a topic for another article.
This is the fifth in a series of articles being published in CES .
1

Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick and Phil Duggan of Driver will discuss many practical issues of using FIDIC
2 3 4

contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.

that are generally, but not always,

insurable events; the likeness to clause 18
Insurance can be readily viewed. The
wording within the three major forms is
considered to be clear and not in need of
great explanation saves for the overview
below.

Risk and Responsibility Clause 17 and Sub-clause 17.1 provides for the
beyond
indemnities that the Employer and the
Contractor must provide to each other in
If the phrase risk and responsibility is
case injury to people and/or property
mentioned in respect of the FIDIC suite of
occurs as a result of the actions of
contracts many, possibly new to the FIDIC
personnel or other for which they are
forms, would consider clause 17 and
responsible during the “design, execution
possibly 18 and 19, of the major forms and
and completion of the Works”. Property
close out their thought processes.
excludes the Works itself which is dealt
with separately at Sub-clause 17.2.
This article reflects upon the allocation of
risk and responsibilities within the major
Generally unless specifically allocated to
forms introduced in 1999 (the Red, Yellow
the Employer and those defined as being
and Silver Books) beyond the words
under its responsibility, events are the risk
contained within clause 17; but first a
and responsibility of the Contractor.
consideration of clause 17 as contained
within the Red, Yellow and Silver Books.
Sub-clause 17.2 provides for the
Contractor’s care of the Works, for which it
Clause 17 – Risk and Responsibility
is fully responsible until such time as the
Taking-Over Certificate (or Taking-Over
This clause is typical of clauses that
Certificates in the case of sectional
allocate risk and responsibility to events
completion) is issued or deemed to be over to the Employer should termination
issued in accordance with Sub-clause 10.1, take place.
save for those items listed within Sub-
clause 17.3 which are Employer’s Risks. Sub-clause 17.3 is entitled Employer’s
Risks which, in other words, are the risks
Whilst this Sub-clause specifically deals that the Contractor has no control over.
with the care of the Works until a Taking-
Over Certificate has been issued it does not The Red and Yellow Books have identical
mention suspension by either the lists and it is suggested that these are
Contractor or the Employer possibly cross referenced with the list of typical
leading to termination. It is suggested that events that may be classed as a Force
the obligations of the Contractor to care for Majeure within clause 19. It is also
the Works remain throughout a suggested that the defined term
suspension, irrespective of responsibility Unforeseeable within Sub-clause 17.3(h) is
for the events leading to the suspension, fully understood as so many have
until such time as work recommences and difficulties in separating what is unforeseen
a Taking-Over Certificate is issued or from what is unforeseeable when making
Termination takes place and the Contractor claims.
is released from its obligations in this
respect. The FIDIC guide confirms the definition of
unforeseeable to be “not reasonably
This may be considered somewhat unjust if foreseeable by an experienced contractor
the Contractor has not been paid, the by the date for submission of the Tender”.
Employer cannot demonstrate that it has It goes on to suggest that the frequency of
the arrangements in place to pay and the natural events relative to the duration of
suspension leading to termination is the Time for Completion may provide
lengthy thus resulting in a high cost burden guidance as to what should be considered
for say the protection of the Works as unforeseeable. Taking this suggestion
including materials stored on and off site. perhaps a five minute discussion and
The Contractor that relies upon the survey with your colleagues could take
argument that it was not the cause of the place noting the following:
suspension and consequent termination
and therefore had no responsibility to care  Two projects adjacent to each other;
for the Works - may find itself unable to same Contractor, Engineer and
justify its claims for the work completed or Employer.
partially completed and materials handed
 Duration of project A is eight years unless such events can be justified
and project B is two years with as being a Force Majeure such
identical commencement dates. events are deemed to be at the
 Statistically the natural event risk of the Contractor.
occurs every ten years.
 The last event happened nine Sub-clause 17.4 allows the Contractor to
years ago and occurred one year put forward its claims in respect of time
after commencement of the and money in the event that the
projects. Employer’s Risks noted within Sub-clause
17.3 result in loss or damage to the Works,
Which event falls within the definition of Goods or Contractor’s Documents.
unforeseeable?
As with all other claims submitted by the
The Silver Book has a shortened list losing Contractor in respect of a perceived
the following: entitlement either under the Contract or by
law, the procedure within Sub-clause 20.1
 Use or occupation by the Employer must apply or the Contractor risks losing
of any part of the Permanent any entitlement. The Engineer (or the
Works, except as may be specified Employer in the case of the Silver Book)
in the Contract - should this occur must then proceed in accordance with Sub-
it would be a breach by Employer clauses 20.1 and 3.5 to determine any
of Sub-clause 10.2 and therefore entitlement. In terms of any monetary
not a risk. entitlement the Contractor is entitled to
 Design of any part of the Works by Cost or Cost plus a reasonable profit as
the Employer’s Personnel or by detailed.
others for which the Employer is
responsible – the Silver Book Sub-clause 17.5 considers intellectual and
foresees the Contractor being industrial property rights and provides
responsible for the total design of protection to both the Contractor and the
the Works, however this may be Employer from claims issued by third
compromised by Sub-clause 5.1 parties related to patents, registered
where the Employer retains some designs, copyright and the like where the
responsibilities for information that intellectual or industrial property rights
can affect design carried out by have been allegedly infringed by either
the Contractor. party. Whilst it is suggested that the
 Any operation of the forces of claims procedure of Sub-clause 20.1
nature which is Unforeseeable – applies to claims made under this clause
(line two stating “under any clause…”) the relative to the Contractor’s failed
FIDIC drafters have seen fit to repeat, performance in respect of progress
albeit in slightly different terms, the fatal resulting in delay damages and, in respect
nature of a 28 day notice period should of the Yellow and Silver Books, inadequate
either party wish to submit a claim. design, workmanship and the failure of
materials etc., resulting in non-
Sub-clause 17.6 deals with the limits of performance damages and non-availability
certain liabilities under the Contract. damages if noted within the Particular
However, it is perhaps the most important Conditions. It also excludes any liability,
clause that must be considered in the light by either party, in respect of loss of use of
of the provision of the governing law any Works, loss of profit, loss of any
prescribed within the Contract. Various Contract or for any indirect or
jurisdictions, either common law or civil consequential loss or damage other than in
law jurisdictions may affect matters respect of a termination or indemnities as
concerning the length of any period in per Sub-clause 17.1.
respect of defects liability, the
commencement date for such liabilities can There is no limit of liability upon the
even negate the clause in its entirety in liability of the Employer towards the
respect of the limit of financial liability in Contractor and any limitations by the
the event that gross negligence can be Contractor towards the Employer excludes
established to have taken place. This the supply of utilities (Sub-clause 4.19),
latter point being reflected within the FIDIC Employer’s equipment and free issue
forms which confirms that there is no limit material whilst in the care of the
of liability “in any case of fraud, deliberate Contractor (Sub-clause 4.20), indemnities
default or reckless misconduct by the (Sub-Clause 17.1) and intellectual and
defaulting Party”. This statement being industrial property rights (Sub-clause
particularly relevant during the bid phase 17.4).
and it is likely that the limit of liability to be
stated within the Particular Conditions will Risk and Responsibilities – elsewhere
be the subject of intense negotiations
between the Employer and Contractor prior The opening paragraph of this article
to the award of the Contract. If no sum is suggested that many people, possibly new
agreed and stated the Accepted Contract to the FIDIC forms, will limit their thoughts
Amount will be the limit. in respect of risks and responsibilities to
clause 17 and possibly clauses 18 and 19.
The Sub-clause is intended to limit the Those to whom that statement may apply
Contractor’s liability towards the Employer are invited to consider that the contract,
whether Red, Yellow or Silver Book, is in its cause the applicable rules to be consulted
entirety a fine balance of risks and to establish which party is carrying the risk
responsibilities allocated between the of that event.
Employer (and its Engineer or
Representative) and the Contractor. The FIDIC drafters have taken great care
when dealing with the allocation risk such
Whilst opinions may differ as to the that internationally and less likely
fairness, and validity in law, of conditions nationally Employers and Contractors can
such as the fatal 28 day notice with Sub- establish working relationships for the first
clause 20.1, the FIDIC drafters will have and perhaps the only time based upon a
considered such a period in the light of considered set of rules.
other obligations placed upon the
Contractor within the Contract; such as the Those rules provide some certainty at the
required monitoring of the programme and outset to both parties and, if triggered and
related matters (as discussed in the third operated well, can restore certainty in
article of this series). respect of the various risks and allocation
of those risks following any necessary
A viewpoint being that any Contractor who adjustments to all or any of the key factors
is not aware within 28 days that an event, of scope, time and price.
for which the Employer is culpable, has a
time or money impact does not deserve to The most obvious differences in risk
receive any entitlement! allocation between Red, Yellow and Silver
Books is in respect of design responsibility
The FIDIC suite of contracts, as with any and the consequent risks of time and
other contract, can be considered to be no money impacts should design and
more than a rule book detailing the therefore scope be amended at some point
potential consequences should a defined in time after the contract award.
event take place.
Design can be translated to mean choice;
If in a game of soccer someone is caught those with design responsibility have the
handling the ball the referee will give a free ability to choose, affect the scope and
kick or penalty to the other side. If at the potentially the time required to complete
outset of a contract it is considered that all the project and the price for the project.
of the risks and responsibilities are
allocated and the key elements of scope, Accordingly, and in overall terms, the risks
time and price are defined then any event associated with design responsibility under
that may affect those key elements will the Red Book rests with the Employer,
whilst the Contractor carries the risks of an advance payment linked to an
under the Yellow and Silver Books. In all Advance Payment Guarantee. However,
contracts for the Contractor to gain any regular and timely payments to the
entitlement it has to comply with at least Contractor remain its lifeblood; should the
the provisions of Sub-clause 20.1 in Engineer fail to certify a payment (if
respect of the issue of notices and the appropriate) and/or the Employer fail to
subsequent provision of a detailed claim. make payments at the prescribed time as
The risk of failing to establish contractual per Sub-clause 14.7 the Contractor can
relationships with Sub-Contractors and either reduce the rate of work or suspend
others to allow compliance with these work provided not less than 21 days notice
periods rests with the Contractor. In this has been given. This being in accordance
respect the periods stated within Sub- with Sub-clause 16.1. Should the
clause 20.1 may be considered short or the situation not change within the timescales
minimum required to gain adequate data prescribed within Sub-clause 16.2 the
and input from others. Contractor can terminate the Contract.

There are many areas that are common to The option of suspension or reducing the
the Red, Yellow and Silver Books that rate of progress followed by termination
provide protection and therefore less risk also applies if the Employer cannot provide
to the Contractor. “reasonable evidence that financial
arrangements have been made and are
In the context of perhaps the Contractor being maintained which will enable the
making a bid to perhaps a special purpose Employer to pay the Contract Price (as
vehicle it is important to know that that estimated at the time)…” as stated with
entity cannot change overnight once the Sub-clause 2.4. It is not confirmed whose
Contract Agreement has been signed. At estimated Contract Price should be used as
Sub-clause 1.7 Assignment it is stated that a reference point; the views of the
neither party shall assign the Contract or Contractor and the Employer may differ
any part of the Contract without the prior greatly in this respect especially if the
agreement of the other Party; accordingly Contractor has the tendency to inflate its
the Contractor (perhaps with the most to claims to unrealistic values. Nevertheless
lose) is protected from the Employer being the FIDIC drafters have made provisions to
changed to some party it would never have reduce the risk of a Contractor suffering
contemplated to be its contracting partner. from an uncertain payment regime.

The Contractor’s cash flow may be For the purpose of this article there is one
protected to some degree by the provision more major factor to be considered in
terms of risk allocation; that being the Should the Engineer (or Employer as
ability of the Contractor to achieve appropriate) fail to either issue the Taking-
completion. It is not uncommon for Over Certificate or give reasons for not
Employers to take occupation of a project issuing the Certificate within the period of
and subsequently receive income but find 28 days, the Taking-Over Certificate shall
reasons not to accept that the Contractor be deemed to have been issued on the
has achieved completion as defined. twenty – eighth day.
Accordingly the Employer gains income and
is possibly continuing to deduct delay Sub-clause 10.2 in all forms provides
damages whilst the Contractor cannot further support for the Contractor by
obtain any of the financial benefits of confirming that the Employer shall not use
attaining completion, the responsibility for any part of the Works prior to Completion.
maintenance, wear and tear and the like
remain with the Contractor whilst any Sub-clause 10.3 within the Red and Yellow
defects liability period cannot commence. Books gives further protection to the
Contractor. In the event that the
The FIDIC drafters have considered such Contractor is prevented from carrying out
circumstances and provided, within Sub- any tests necessary to attain Completion
clause 10.1, the ability for the Contractor by a cause for which the Employer is
to attain Completion. Sub-clause 10.1, responsible for a period of 14 days the
states in general terms, that when the Employer will be deemed to have taken
Contractor has completed the Works (or over the Works and the Engineer must
Sections) in accordance with the Contract issue a Taking-Over Certificate; the
such that no minor outstanding work or relevant date being that on which the tests
defects prevent the use of the Works for would have been completed.
what they were intended, the Contractor
may apply by notice to the Employer for a The defined timescales of every phase of
Taking-Over Certificate. The Engineer (or the dispute resolution procedure within
Employer as appropriate) will respond Clause 20 seek to offer the Contractor
within 28 days either by issuing the some certainty and lessen risk in the event
Taking-Over Certificate or confirming why that a DAB and Arbitration are necessary,
no certificate can be issued. The latter but they are the subject of a different
providing the criteria for the Contractor to article as is the abuses to the allocation of
fulfil prior to issuing a further notice for a risk and responsibility so carefully
Taking-Over Certificate. considered by the FIDIC drafters.
This is the sixth in a series of articles being published in CES .
1

Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick and Phil Duggan of Driver will discuss many practical issues of using FIDIC
2 3 4

contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.

technology or proprietary technology.

Accordingly, process plants of all
descriptions and power plants are often
constructed by and EPC contractor with the
Employer proffering a bespoke form of
contract. The Employers relative to process
and power plants are likely to be
“professional” Employers in that they will
A Risk too far for the EPC Contractor construct a number of facilities, probably
have their own in-house as well as external
This article considers the step change in
design engineers and will understand
respect of the allocation of risks between
completely what they expect from the
the Yellow and Silver books of the FIDIC
finished project in terms of quality of
1999 suite of Contracts and poses the
components and production output
question for a traditional EPC contract are
whether that be power, fertiliser or
those risks a step too far.
whatever. The quality and maybe
Traditionally consistent choice of components being
relevant to future operation and
International contracting possess a vast
maintenance considerations such as
number of contractors that use the term
costings and the length of non-productive
EPC contractor to describe how they
shutdown periods.
operate and what services they can provide
to their potential Employers; in simple It is also not uncommon on mega-projects
terms they Engineer or design the works, for the Employer to commission Front End
Procure all that is necessary to complete Engineering Design or FEED whereby the
the works and finally Construct the works. conceptual design is completed such that
This regime is very similar to that utilised the traditional EPC contractor can complete
by a Design and Build contractor and is the detailed design probably with the
applied across the industry, typically in Employer’s engineer retained throughout
sectors have some form of black box the process.
The use of turnkey contracting has been Silver Book. It is perfectly suited; the
more associated with either the Employer Employer is likely to be a “non
who wishes to have no part in the professional” Employer, possibly a SPV that
construction process but wishes to have will only construct one bio-mass power
delivered a fully operating facility, such as plant or whatever; the funders backing the
a hospital with all surgical equipment, project will most likely demand certainty in
bedding and the like provided and installed respect of cost and also the time for
by the Contractor such that the hospital completion (the latter to judge when the
can function within the shortest possible income stream will commence and profits
time after hand over. Alternatively this be generated), the Employer may rely
form of procurement has been used by the entirely on the Contractor for all design
“non-professional” Employer that may only issues knowing only that it has a
ever require one new facility or so few new sustainable, deliverable and, in respect of
facilities that it will have no internal say a bio-mass power plant, a consistent
resident design functions or no ongoing fuel source.
relationship with external design
Taking a bio-mass power plant as a typical
consultants. The Contractor that delivers a
example and noting that the tradition EPC
functioning facility to the Employer’s
contractor may be reacting to the market
requirements via a turnkey contract is
place by developing its technology to
ideally suited to this type of Employer.
accommodate the various fuel sources
New Trends there will most likely be the situation
where the traditional EPC faces a Silver
Contractors have to react to the
Book for the very first time.
marketplace to gain workload; similarly
FIDIC has reacted to a requirement in the Noting that the front cover used the phrase
marketplace to produce the Silver Book EPC/Turnkey Projects the Contractor may
and provides more certainty of cost and have some pre-conceived ideas regarding
time and is perfectly suited to the “non- the term EPC which may be more aligned
professional” Employer who may be far to the Yellow Book.
more risk averse, through a lack of
The Yellow Book and the Silver Book –
familiarity of the construction process or
a brief comparison
the requirements of its funders, than the
“professional” Employer. The notes below are in the context of
highlighting the obligations and risks a
With the rise of Special Purpose Vehicles
traditional EPC contractor would face when
(SPVs) relative to the renewable energy
working under a Silver Book compared to
sector there is a growing demand for
working under a Yellow Book.
projects to be administered under the
It is worth recapping some of the selection significant or complex that for the
criteria that should be considered by an Contractor to price all risks under the
Employer (and its advisors) when deciding Silver Book would be both inequitable
which form of contract is to be used and cost prohibitive (or a recipe for
together with the fundamental differences disaster...).
between the Yellow Book and Silver Book.
Silver Book
Yellow Book

 Contract administered by and  Contract administered by the

Engineer. Employer (possibly an Employer’s

Representative).
 Risks are allocated on a fair and
equitable basis.  Disproportionately more risks are
allocated to the Contractor. As a

 Tender time is short (or is insufficient consequence the Contractor should

to allow adequate time for the require more detailed data regarding

Contractor to assess the risks it is hydrological, sub-surface and other

obliged to carry out under the Silver conditions affecting the site to assess

Book) and details of matters such as risks; more detailed and precise

hydrological, sub-surface and other knowledge of the Employer’s

matters affecting the site are not Requirements.

readily available; risks therefore

remain with the Employer.  In order for the Contractor to
properly assess the risks it is obliged
 The Employer seeks a lower tender to carry and to provide the Employer
price but accepts certain risks during a high degree of cost and time

the duration of the project. certainty there should be a longer

period for preparation of a tender and

 The Employer via its Engineer more discussion with the Employer

requires a close relationship with the during that time.

Contractor throughout the duration of

the project including the more likely  The Employer accepts a higher tender

potential to cause change to design. price in the knowledge that it has

fewer risks during the duration of the
 It is not possible for the tenderers to project.
properly inspect the site or the
amount of underground work is so
 The Employer has no great desire to There is no corresponding Sub-Clause
be involved on a daily basis with the within the Silver Book as the Contractor
project and is content to allow the takes responsibility for the accuracy of the
Contractor to take full responsibility Employer’s Requirements as will be
for the design and construction of the discussed below.
project (although the reporting
Sub-Clause 4.7 Setting Out – Yellow
procedures within both the Yellow
Book and Silver Book
Book and Silver Book at Sub-Clause
4.21 remain identical – perhaps for Both Books require the Contractor to be
claims adjudication purposes as responsible for the setting out of all parts
discussed in a previous article). of the Works based upon the information
provided within the Contract and as
From the above and previous articles it is subsequently provided by the Engineer
clear that the most significant differences (Yellow Book).
between the Yellow Book and the Silver
The fundamental difference being that
Book relate to the transfer of risk from the
within the Silver Book the Contractor also
Employer to the Contractor. The FICIC
takes responsibility for the accuracy of the
drafters use both wholesale amendments
setting out data within the Contract
to Sub-clauses and subtle amendments to
(meaning the Employer’s Requirements).
phraseology to achieve their goals as
To carry out the necessary review during
discussed below in the order the Sub-
the tender period in order to properly
Clauses appear in the Contracts.
judge the severity of this risk is one of the
Sub-Clause 1.9 Errors in the reasons why a longer tender period is
Employer’s Requirement – Yellow required relative to projects being let under
Book only a Silver Book.

Within the Yellow Book if the error causing The Yellow Book, since the Employer is
the Contractor to suffer delay or incur Cost responsible for the accuracy of the setting
could not have been discovered by an out data, allows that data either to be
experienced contractor exercising due care noted within the Contract or issued by the
when scrutinising the Employer’s Engineer during the course of the project.
Requirements then, provided the
If the Contractor suffers delay or incurs
Contractor fulfils the requirements of Sub-
Cost as a result of any error and provided
Clause 20.1, it may receive an extension of
the Contractor, as an experienced
time and Cost plus reasonable profit that it
contractor, could not have reasonably
is entitled to receive.
discovered or avoid the delay or Cost then
the claims procedure of Sub-Clause 20.1 is
applied and the Engineer determines the risks, considered all such information and
Contractor’s entitlements in respect of accepts total responsibility for having
extensions of time and Cost plus foreseen all difficulties and has allowed,
reasonable profit. within its Tender, sufficient time and funds
to carry out the Works. Sub-Clause 4.12(c)
Sub-Clause 4.10 Site Data – Yellow
stating “the Contract Price shall not be
Book and Silver Book
adjusted to take account of any unforeseen

Sub-Clause 4.10 reaffirms the ethos set difficulties or costs”.

out within Sub-Clause 4.7 noting, within
The only possibility for the Contractor to
the Yellow Book, that the Contractor is
perhaps recover Cost (under certain
responsible for interpreting such data
circumstances) or gain an extension of
whereas the Silver Book takes the same
time is if the event is of such magnitude
statement a step further noting that “the
that it can be considered to fall within the
Employer shall have no responsibility for
definition of a Force Majeure (Clause 19).
the accuracy, sufficiency or completeness
of such data, except as stated in Sub- Sub-Clause 5.1 Design – Yellow Book
Clause 5.1”. and Silver Book

Sub-Clause 4.12 Unforeseeable The regime, in simple terms, is that the

Physical Conditions – Yellow Book
Contractor is responsible for designing the
Sub-Clause 4.12 Unforeseeable Works to meet the needs of the Employer
Difficulties – Silver Book as stated within the Employer’s
Requirements. Should the Contractor, after
It is worth noting that the term
scrutinising those requirements, finds
“Unforeseeable” is defined within the
errors, those errors can be accepted and
Yellow Book, at Sub-Clause 1.1.6.8, to
remedied by the Engineer in the form of a
mean “not reasonably foreseeable by an
Variation. The Contractor would then apply
experienced contractor by the date for
the appropriate procedures within Clauses
submission of the Tender”.
13 and 20 to gain its entitlements in terms
The definition is missing from the Silver of time and/or money.
Book which also changes the Sub-Clause
The fundamental difference within the
title to be much broader than
Silver Book is that the Contractor takes
Unforeseeable Physical Conditions to
responsibility for the Employer’s
Unforeseeable Difficulties.
Requirements including design criteria and
Under the Silver Book the intent is clear; calculations with only certain exceptions for
the Contractor is deemed to have obtained which the Employer is responsible those
all necessary information to assess all being:
a) “portions, data and information inflated (for good reasons) to cover the
which are stated in the Contract as risks that the Employer wishes to pass on.
being immutable or the
Conclusions
responsibility of the Employer,

Employer’s who choose to employ the

b) definitions of intended purposes of Silver Book should do so after careful
the Works or any parts thereof, consideration and careful selection of
Contractor’s to submit bids.
c) Criteria for the testing and
The Employer should respect the
performance of the completed
considerable amount of work that is
Works, and
necessary for a Contractor to properly price
the risks it is obliged to take on board and
d) portions, data and information
limit the numbers tendering to the
which cannot be verified by the
minimum to obtain competitive bids.
Contractor, except as otherwise
stated in the Contract”. Employers must realise that the price they
will pay for risk avoidance will be high
Accordingly the Contractor is responsible potentially higher than the overall cost of
for the incompleteness, any error, any the same project constructed under a
inaccuracy or omission of any kind in the Yellow Book.
Employer’s Requirements as included in
the Contract (except the reasons noted Contractor’s familiar in carrying out works

above) in addition to its responsibility for under EPC Contracts, often bespoke in

the design of the Works. nature, must understand the differences

contained within the Silver Book and
Whilst not perhaps relevant to this Sub- educate their sales departments to raise a
Clause it is worth noting that the Priority of red flag when an Employer proffers a
Documents (Sub-Clause 1.5) ranks the contract under a Silver Book.
Employer’s Requirements above the
Contractor’s Tender. Above all both Parties should know the
Contract, recognise and manage the risks
Once again Employer’s must give to avoid disputes!
Contractors the time to allow a full
investigation and study of the Employer’s
Requirements at the time of tender, not to
do so will or should only lead to bills being
This is the seventh in a series of articles being published in CES .
1

Following an introduction to FIDIC and its 1999 suite of contracts the joint authors, Paul
Battrick and Phil Duggan of Driver will discuss many practical issues of using FIDIC
2 3 4

contracts. Their thoughts and opinions are based upon actual working experiences of working
with many FIDIC contracts both past and present.

wishes to employ a single Contractor to

design, build and subsequently operate the
completed construction project for a period
of 20 years.

Whilst the Gold Book has been likened to a

Yellow Book (the design and build form)
with an added operate and maintenance

The Gold Standard contract blended within, it contains many

differences to the Yellow Book in addition
This article considers elements of the FIDIC to the obvious entirely new provisions
Gold Book relative to the submission of which deal with the suggested period of
claims, predominately by the Contractor twenty years for operation and
but also by the Employer, and compares maintenance.
the procedures with those contained within
the Red, Yellow and Silver Books. It has been suggested, in some quarters,
that the form should actually have been a
It has been suggested that since the Gold Yellow Book with an optional annex
Book was issued some nine years later containing the operation and maintenance
than the various books issued in 1999 that provisions. This would have provided
its provisions represents current day familiarity to all parties working with the
thinking within the minds of the FIDIC contract but FIDIC would have lost the
drafters and may be the blueprint for opportunity to showcase (and receive
revisions to the First Editions to the 1999 industry feedback on) its potential
books. revisions to the Yellow and other books
within its family of contracts.
The Gold Book – a brief recap

The most relevant provision to have in

It should be recalled from a previous article
mind when considering this article is that
that the Gold Book is to be used in a
the DAB for the construction period is of
“green field” situation where the Employer
the standing variety comprising of three
members and that it is obliged to visit the In terms of purely layout there is the
Site at intervals of not more than 140 introduction of new clauses relevant to
days. The provision of a standing DAB no Avoidance of Disputes (Sub-Clause 20.5)
doubt fuelling the debate as to whether and Disputes Arising during the Operation
such a DAB aids dispute avoidance by the Service Period (Sub-Clause 20.10); the
regular visits and discussing at Site an former being relevant to the standing
agenda prepared with the input of itself nature of the DAB and the latter relating to
and the Employer and the Contractor or post issue of the Commissioning Certificate
not. effectively ending the consortium phase of
the project.
The Gold Book – Clause 20 provisions
It is however the provisions of Sub-Clause
When comparing the provisions of Clause
20.1 (Contractor’s Claims) that have and, if
20 within the Gold Book with the Yellow
they form the basis for future editions of
and other major forms issued in 1999 the
other books, will be the cause of significant
most obvious change is the physical layout.
debate for many a while to come.
Sub-Clause 20.1 (Contractor’s Claims) has
Whilst not wishing to detract from a future
a completely new format; the use of
detailed review of the current provisions of
referenced sub-paragraphs makes the
Sub-Clause 20.1 within the major books
clause much easier to consider than the
issued in 1999 the provisions are in
alternative style of a series of paragraphs
essence:
under the Sub-Clause heading.
 The Contractor has to submit its
Sub-Clause 20.2 (Employer’s Claims) is a
Notice of a claim for time and/or
new clause in this location in that within
money within the stated period;
the other books, Employer’s Claims are
failure to do so blocks the
dealt with as Sub-Clause 2.5. Even though
Contractor from pursuing its claim
the location has changed the overriding
any further.
principles have not. Whilst the Contractor
 The Contractor has to submit its
in all FIDIC forms has strict provisions to
fully detailed claim within the
follow with the claims procedure, the
stated period, failure to do so may
Employer can submit its Notice to the
be taken into account to which the
Contractor “as soon as practicable” after
failure has prevented or prejudiced
the Employer becomes aware or should
the proper investigation leading to
have become aware of the relevant event.
the determination of the claim.
The particulars of the claimed amount has
 Depending upon which book is
neither to be submitted within any stated
being considered, the Engineer or
timetable nor to any given standard.
Employer’s Representative has a
 stated period to consider the that Contractor’s are required to issue such
Contractor’s fully detailed claim protective Notices.
and respond with approval or
It is also stated that in some jurisdictions
disapproval together with detailed
such a fatal Notice clause may be contrary
comments.
to the intent of the relevant Law. Such a
 A determination in accordance
statement reinforces the necessity to
with Sub-Clause 3.5 to confirm the
consult a lawyer totally familiar with the
approval of the Contractor’s claim
Law governing the Contract before entering
noting the extension of the Time
into any Contract. In principle the
for Completion and/or any
enforceability of a fatal notice clause has
additional payment which the
had support with some courts since it
Contractor is entitled.
contradicted the prevention principle; as
noted above when matters stray into the
Within the Gold Book, at Sub-Clause
influence and interpretation of law a lawyer
20.1(a), the initial Notice that has to be
should be consulted to obtain the most
provided by the Contractor has to be
relevant advice to the situation being
submitted within 28 days after the
encountered.
Contractor became aware, or should have
become aware, of the event that, in the The FIDIC drafters, within the Gold Book,
Contractor’s opinion has led to a situation have perhaps had half an ear leaning
where it is entitled to an extension of the towards those who consider that fatal
Time for Completion and/or additional notices are unjust since they have
payment. introduced a potential opportunity for the
Contractor to be able to proceed with its
Failure by the Contractor to issue this
claims despite not having submitted a
Notice renders the claim time barred; in
Notice within the required time period.
the simplest of terms the Contractor loses
its right to make a claim. The solution being a referral to the DAB
should the Contractor consider that there
There are those within the industry,
were circumstances to justify the late
notably within the Contracting fraternity,
submission of the Notice. The DAB has the
that consider this fatal notice clause to be
authority to override the 28 day time limit
totally unfair and unduly harsh and a
if it considers it fair and reasonable to do
diversion to the smooth running of the
so.
project and relationships between the
contracting parties since such a clause In this respect it should be remembered
promotes a Notice being submitted at the that, under the Gold Book, the DAB is of
merest hint of a potential claim. It is true the standing variety and accordingly it will
have had the benefit of regular site visits, the Contractor; these actions do not count
possible discussions with the Parties and as an admission of liability. Clearly at this
the Employer’s Representative concerning juncture there should be dialogue between
the event and potentially an early sight of the Contractor and the Employer’s
relevant documentation such that a swift Representative and it is suggested that the
decision can be made one way or the Contractor, since it wants or needs
other. something, takes a pro-active stance and
actually asks if the records being
It remains to be seen whether or not a
maintained are adequate such that a
standing DAB will actually encourage
determination can be made or is there any
disputes of this (or any) nature. Some of
other type of record that would assist the
those who consider that the fatal Notice
determination to be made in accordance
provisions are unjust would avoid this
with Sub-Clause 3.5. Such an action may
second bite of the cherry as not being the
aid the swift resolution of the quantum of a
solution, stating that the most equitable
Contractor’s claim should there be an
way forward is to remove the fatal nature
entitlement.
of the Notice and replace it with sanctions
against the Contractor should late The Gold Book goes on within Sub-Clause
submission prejudice the Employer. The 20.1(c) where it again differs from the
FIDIC drafters have compromised, to an major books issued in 1999. Within 42
extent, but firmly believe that the days after the Contractor became aware
professional Contractor should be aware of (or should have become aware) of the
the impacts of any event within 28 days. event or circumstance giving rise to a claim
The debate will no doubt continue. for an entitlement the Contractor must
send to the Employer’s Representative a
Following submission of the Notice the
fully detailed claim which includes all
Contractor must keep, at site unless
supporting particulars of the contractual
otherwise agreed, such contemporaneous
basis for the claim plus any delay analysis
records as may be necessary to
or quantum evidence as appropriate.
substantiate its claim as required by Sub-
Clause 20.1(b). It is suggested that the There are relaxations to the 42 days if
professional Contractor will have the allowed by the DAB pursuant to an
majority of such records in place in any extension of the original 28 day Notice or if
event and may only need to focus those agreed between the Contractor and the
records upon the relevant event. The Employer Representative who may also ask
Employer’s Representation may also for further supporting particulars.
instruct the Contractor to keep specific
Accordingly a Contractor may have as little
records and monitor those being kept by
as 14 days (42-28) after it became aware
of an event to submit its fully particularised brief reference to the Clause under which
claim. If the event continues the first fully the claim is being made”.
detailed claim must still be submitted
No matter how professional a Contractor
within the stated period but it will be
maybe it may often prove difficult to
considered as an interim claim. The
gather all relevant information within the
Contractor must submit further claims at
42 day period, especially if the Contractor
28 day intervals until such time as the
has to rely upon a chain of third parties,
event has finished giving rise to a claim.
such as Sub-Contractors and their
A further new concept is also introduced by suppliers, to provide basic information and
the FIDIC drafters at this point in the potentially involve lawyers to advise upon
timeline in respect of claims submission the contractual or other basis of the claim.
and determination. If the Contractor fails
The debate regarding the fundamental
to submit a fully particularised claim that
right of a Contractor to make a claim being
establishes the contractual or other basis
negated by a time bar clause will no doubt
of the claim within the 42 day limit (or
again rise and this second time bar may
extended limit) then the original 28 day
also give rise to an element of subjectivity,
Notice as per Sub-Clause 20.1(a) shall be
since the Employer’s Representative
deemed to have lapsed, and the claim will
appears to have the power to decide if the
not be accepted or considered since the
Contractor has established its contractual
Notice will no longer be considered valid.
basis of the claim in deciding whether or
As with the original Notice, the Contractor
not the original notice has lapsed.
can apply to the DAB if it considers there
are circumstances which warrant an It is hoped that FIDIC intend the deemed
extension to the 42 day period and the lapse of the original notice only to apply to
Employer’s Representative has rejected the the Contractor establishing its contractual
Contractor’s request for the said period to or other basis of its claim and not, having
be extended. established such a basis, to the value of
the supporting documentation to establish
Within the FIDIC guide to the Gold Book it
the quantum of the claim in terms of time
is recognised that the provision of “a fully
and/or money.
detailed claim which includes fully
supporting particulars of the contractual or The late submission of details being met
other basis of the claim and of the with the same sanction as within the 1999
extension of time and/or additional major books.
payment claimed” within a 42 day period
In this respect however the writer has
“is a far-reaching requirement” and “it is
viewed an amendment to the standard
therefore not sufficient to simply make a
form that adds the phrase “to the
satisfaction of the Employer’s been rejected on the basis of the
Representative in respect of the Employer’s Representative failing to
contractual or other basis and particulars respond in due time. The FIDIC drafters
of claim” within the Sub-Clause to abuse apparently see the instant submission of a
the apparent power of the Employer’s claim by the Contractor to the DAB as a
Representative. more beneficial situation for the Contractor
than waiting and waiting for a
Sub-Clause 20.1(a) details the time period
determination from the Employer’s
that the Employer’s Representative has to
Representative.
respond to the Contractor’s claim both
establishing the contractual or other basis Whilst on the face of it the default of the
and particularising the claim. There is a Employer’s Representative and the other
mandatory 42 day period for the provisions of Sub-Clause 20.1 may lead to
Employer’s Representative to respond to more issues ending up with the DAB it
the contractual or other basis of the claim would appear that the FIDIC drafters have
however, by requesting further particulars attempted to provide an overall timetable
it is suggested that the same 42 day period (adequately noted within the Flow Charts
for replying to the quantum of the claim at page 9 of the book) for the resolution of
may be extended. In giving its decisions Contractor’s claims. Certainly to succeed
the Employer’s Representative must use the Contractor has to be able to establish
the provisions of Sub-Clause 3.5 its claims swiftly and with all
(Determinations). particularisation!

However, if the Employer’s Representative

fails to adhere to the timetable and fails to
respond to at least whether or not the
Contractor has established a contractual or
other basis of its claim either the
Contractor or the Employer may consider
the claim has been rejected by the
Employer’s Representative.

Whilst the Gold Book allows either Party to

refer the matter to the DAB it is more likely
to be the Contractor after its claim has