Session 1

Introduction to FIDIC, Background to

FIDIC Contracts, Major Features

Session 1

The Training Outline (Occasions/Sessions)

1. Introduction to FIDIC, background to FIDIC contracts, major features
2. Start-up (The Engineer, commencement, the initial steps)
3. Start-up (QMS & CVS, drawings, reporting, subcontracting, safety)
4. Financial control (payments, BoQ, measurement, Variations, value engineering)
5. Financial control (statements and certification, progress)
6. Ongoing supervision (instructions, samples and testing, suspension)
7. Ongoing supervision (Claims, delays & EOT, delay damages)
8. Taking over, defects, completion
9. Disputes and Dispute prevention and resolution, termination

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The Contents of Session 1

v Brief introduction to FIDIC
v Background to FIDIC Contracts
v Major Features of the 1987, 1999 & 2017 editions
v The Project Preparatory Phase – Preparation of the Particular Conditions
v The Project Preparatory Phase – The Key Focus Areas & Pitfalls to Avoid
v Questions and Answers
v Introduction of Case Work 1

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Session 1

1. Introduction to FIDIC
International Federation of Consulting Engineers
Founded in 1913

National Member Associations

MA MA MA MA MA MA typically 1 each country
(currently ∼ 100 +)

PC PC
PRIVATE CONSULTING
PC PC PC
EF
EF EF EF EF ENGINEERING FIRMS

Encompassing most of the private practice consulting engineers.

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1. Introduction to FIDIC
Members endorse FIDIC’s statutes
and policy statements and comply
with FIDIC’s Code of Ethics.

Promotes and implements

the consulting engineering
industry’s strategic goals.

Develops and promotes business practice:

» Business Integrity Management;
» Project Sustainability Management;
» Quality Management;
» Risk Management.
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1. Introduction to FIDIC
Organises:
- Extensive programme of seminars and conferences
- International Training Programmes (courses; workshops)
- Capacity Development Programmes (accredited trainers;
training suppliers; programmes and events).

Publishes
- Business practice guides
- Works contracts and guides
- Professional services agreements and guides.

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Groups of Member Associations

African Union
GAMA Group of Africa Member Associations
http://fidic.org/node/827

ASPAC Asia-Pacific group

http://fidic.org/node/830
Regional Federations

NAFTA
FEPAC Panamerican Federation of Consultants

European Union
EFCA European Federation of Engineering
Consultancy Associations
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Keep the industry’s strategies on the agenda

- Regular meetings as the industry’s voice
The World Bank IBRD
Asian Development Bank ADB
European Bank for Reconstruction and Development EBRD
Inter-American Development Bank IADB
African Development Bank ADB
Islamic Development Bank IDB
- Strategic partnerships
International Standards Organization ISO
International Labour Organization ILO
World Federation of Engineering Organizations WFEO
United Nations Environment Program UNEP
Confederation of International Construction Associations CICA
Transparency International TI
Federation of Consultants from Islamic Countries FCIC
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International Federation of Consulting Engineers

President Anthony Barry, Australia

Secretariat World Trade Center II

Geneva Airport
Box 311
CH-1215 Geneva 15
Switzerland
Tel: +41 22 799 49 00
Fax: +41 22 799 49 01
fidic@fidic.org
👆

www.fidic.org

Chief Executive Officer Nelson Ogunshakin

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2. Background to FIDIC Contracts

FIDIC provides the industry including all stakeholders related to construction with
various standard documents, including standard forms of contracts representing the
best of actually available international practices – in full accordance with its policies.
These FIDIC standard contracts forms are

drafted by third parties (construction fair and equitable

contract experts recognised internationally)
clear and coherent
complete and flexible

recognised

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3. The Evolution of FIDIC Rainbow Suite - Red & Yellow

1987 1999 2017
Construction / Building

E&M Works

n
tio
isa
rm
ifo
Un
Core principle for differentiation: No change in basic concepts
Drafted Differently Which Party is responsible for BUT:
providing of the designs for the » more project management;
Different even in details Works. » more procedures;
having the same contractual
Employer’s Contractor’s » more time limits;
function / feature
Design, Design, Lump- » more certainty
Distinguished mainly by the Measure & Sum Payment
nature of the Works Value Payment

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4. Features Appearing since the 1987 Editions (» 1999 »» 2017)

» Harmonisation of terms and clauses
» Wide applicability:
– under common law / civil law,
– under various project delivery and contracting systems »» maintained in the
» More specific provisions regarding the 2017 updates.
obligations of the parties and their rights
» Tackle the problem of late payment
» Improved management procedures »» Even more details / procedures!
» Role of the Engineer updated »» Further strengthened!
» Dispute resolution made more effective »» New function added [DAAB]!

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5. Contract Documents
In general, the contract documents include (as appropriate):
Ø Signed Agreement
Ø Letter of Acceptance
Ø Contractor’s Letter of Tender (including the Appendix! «– 1999!)
Ø Contract Data (2017 Updates, including Silver Book + Mind S-Cl 1.5!)
Ø Particular Conditions
Ø General Conditions
Ø Clarifications of the Tender documents
(issued during the Tender Period)
and/or pre-Contract negotiated amendments
+ Technical Documents, as appropriate.
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5. Contract Documents Further in this training frequently referred as: E

ngineer

► For the success of a project the Engineer shall:

- become fully familiar with all the documents of the Works Contract;
- assist / advise the Employer before launching the tender process
for selection of the Contractor but not later than the Contract Award
stage.

The E shall be selected and engaged at a sufficiently early

ngineer

stage of the Project!

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5. Contract Documents (2017) – Preparation of the Particular Conditions

(a) the Contract Agreement;
(b) the Letter of Acceptance;
► This document is an essential part
(c) the Letter of Tender; of a FIDIC contract!
(d) the Particular Conditions Part A – Contract Data; ► It is necessary to provide for the
(e) the Particular Conditions Part B – Special Provisions; Particular Conditions, because the
‘General Conditions’ is not
(f) the General Conditions; applicable without adjustments to
(g) the Employer’s Requirements; the specific project requirements
and the local legislation.
(h) the Schedules;
► The Particular Conditions (Part A and B)
(i) the Contractor’s Proposal; are always stand-alone documents
(j) the JV Undertaking (if the Contractor is a JV); and (shall not be incorporated into the
General Conditions).
(k) any other documents forming part of the Contract.
In case of ambiguity or discrepancy, the Party discovering it, shall give a Notice
to the Engineer, who shall issue any necessary clarification or instruction.
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5. Contract Documents – Preparation of the Particular Conditions

The Particular Conditions Part A – Contract Data & Part B – Special Provisions
... should be drafted by experienced consulting engineers
AND checked by lawyers with experience in construction law.
... shall be drafted with due care by taking into consideration of
ular ALL project specific technical and legal circumstances.
Partic ions
Condit ... shall be harmonised with all the other contract documents.

Part B – Special Provisions

... shall clearly state the new wording differing from the text of
the General Conditions.
... shall always include clear instructions regarding the
differences compared with the General Conditions e.g.:
„Delete the first paragraph of Sub-Clause X and replace with the following:”
„Add the following new Sub-Clause:” Etc.
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5. Contract Documents – Preparation of the Particular Conditions

The Particular Conditions of Contract shall always be drafted with
taking due regard to FIDIC’s so called “Golden Principles”:
GP 1: The duties, rights, obligations, roles and responsibilities of all the Contract
Participants must be generally as implied in the General Conditions, and
appropriate to the requirements of the project.
GP 2: The Particular Conditions must be drafted clearly and unambiguously.
GP 3: The Particular Conditions must not change the balance of
risk/reward allocation provided for in the General Conditions.
GP 4: All time periods specified in the Contract for Contract Participants
to perform their obligations must be of reasonable duration.
GP 5: Unless there is a conflict with the governing law of the Contract, all formal
disputes must be referred to a Dispute Avoidance/Adjudication Board (or a
Dispute Adjudication Board, if applicable) for a provisionally binding decision
as a condition precedent to arbitration.
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5. Contract Documents – Preparation of the Particular Conditions

When drafting a FIDIC contract, adhering to FIDIC’s “Golden Principles”
means to take due consideration to all the following aspects:
» Comprehensive and fair conditions of contract;
» Parties’ legitimate interests are appropriately considered and balanced;
» Best practice principles of fair and balanced risk/reward allocation;
» No undue advantage (of bargaining power) for either Party;
» The Contractor/Subcontractor is paid adequately;
» Best value for money for the Employer;
» Co-operation and trust between the contracting Parties;
» Contract provisions are NOT onerous and can be practically put into effect;
» Dispute avoidance – to the extent possible.

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6. The basic (typical)

contract layout Settlement of disputes:
DAAB Dispute Avoidance and
Adjudication Board!
Tripartite agreement
»» DAB in the 1999 editions

Employer Contractor

Engineer*
Contractual relation
* ”Employer’s Representative” in certain
FIDIC contracts
Administrative relation
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7. Reviewing the Contract Documents

Typical items to check BEFORE tendering:
Formats of Performance Security Funding Agreement and/or
and Advance Payment Security Financing Memorandum
Standard Guidelines of the Funding Institution «–» Employer
Client or Funding Institution

Further documents to check as per type of the contract:

- Technical Specifications - Employer’s Requirements
- Drawings - Schedule of Lump Sum Prices
- Priced Bills of Quantities and their breakdown
- Method of Measurement - Contractor’s Proposal (before
signing the Contract Agreement)
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8. Identifying Sufficiency and Discrepancies

The Engineer should Check:
- the priority of documents stated appropriately in the conditions;
- for need to include (parts of) the Funding Agreement in the Contract;
- consistency between the various documents (e.g. Conditions of
Contract vs. Funding Agreement);
- consistency of clauses of the Particular Conditions (PCs) against the
clauses of the General Conditions (GCs).

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8. Identifying Sufficiency and Discrepancies

Employer = Contracting Authority ?
» May be different ! «
It is important to define in the Contract the roles to be performed by
the parties:

Include in the PCs clauses that define the dual identity of the Employer
and identify which has jurisdiction for each of the other clauses.
If the Contract has been signed and identities and jurisdiction is
insufficiently defined «––– the Engineer to clarify.

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9. Acquiring Conditions of Contract and Interpretation

Engineer’s
Headquarters Site Office

Contract

Proper understanding
and interpretation!

S-Cl 3.7 Agreement or

Engineer’s Team Determination!
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10. Reviewing the Contract Award & Tender Security

Tender Security (To be provided by each tenderer)
The PURPOSE:
Employer’s compensation if the successful tenderer:
- withdraws his tender before its period of expiry;
- refuses to accept the correction of errors in his tender in
accordance with the tender conditions;
- fails to sign the Contract within the time specified in the Tender
Documents;
- fails to submit a Performance Security within the period specified.

» The Engineer
has a number of related functions!

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10. Reviewing the Contract Award & Tender Security

Tender Security
…monitors the post-tender activities and
…advises the Employer of need to request tenderers to extend
Engineer the period of validity of their tenders and tender securities.
…advise and assist the Employer when the Performance
Security has been received in an acceptable form by:
-» informing unsuccessful tenderers;
-» returning to the Contractor and the unsuccessful
tenderers their tender securities.

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10. Reviewing the Contract Award & Tender Security

Contract Award
1
Letter of Tender
CONTRACTOR EMPLOYER
Letter of Acceptance
2
These two documents together constitute a legally binding
agreement between the Parties!
► The Works Contract comes into force when signed by the Parties
(date of the last signature).
[Note: this is not the date on which the Time for Completion starts!]

► The E
shall give a Notice stating the Commencement Date to the Contractor
ngineer

(fixing the date from which the Time for Completion runs). [S-Cl 8.1]
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11. Engineer’s Instructions [S-Cl 3.5]

...shall only take instructions from

E ngineer
Instructions
Contractor
- as may be necessary for the
- the Engineer, or
- the Engineer’s representative, or
- an assistant «- with proper delegation!
execution of the Works,
- in accordance with the Contract.

Contractor shall comply!

? Variation?
Not in compliance with applicable Laws?
Will it reduce the safety of the Works?
Notice
+
reasons E ngineer

Is it technically impossible? Immediately and BEFORE

commencing implementation
- Confirming
- Revising BUT: No response within 7 days = revoking!
Engineer’s response - Varying
Contractor be bound!
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11. Engineer’s Instructions [S-Cl 3.5]

►Usually, the following Contract documents cannot be amended
without formal Contract Addenda / Amendments signed by the
Parties to the Contract:
- Contract Agreement and Contract Data (»» Appendix to Tender «– 1999)
- Conditions of Contract
- Specifications
- Employer’s Requirements (design/build contract)
- Unit rates and lump sum prices.

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12. Typical Project Phases Timeline

Selection of
Consultant, Studies,
Designer designs, Tender
estimates procedure Award,
tender- and finalising and Implementation of
contract docs signing of the Works
Contract

Project preparation phase Implementation phase

EMPLOYER (Engineer, designer, consultant) CONTRACTOR (Employer)

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12. Typical Project Phases Timeline (continued)

Implementation of Defects
the Works Tests on Notification Performance
completion Period Certificate,
Taking-Over Close of
Contract

Implementation phase DNP + Operation

CONTRACTOR (Employer) CONTRACTOR + EMPLOYER

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13. Typical Basic Mistakes

►Late selection of Consultant / Engineer

►Wrong choice of contract form
►Unclear design responsibilities Refer to FIDIC’s
“Golden Principles”!
►Employer’s excessive interference
►Ineffective management / late decisions
►Onerous interpretation of Contract Conditions
►Lack of co-operative attitude
►Etc.

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Questions – Answers

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