The Parties

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

! The Employer

Denes the Works and pays the Contractor Regularly and diligently Provides the Works Uses the FIDIC Red Book contract to administer construction. Makes decisions to signify events.

! The Contractor ! The Engineer

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Dening the cost of the Works

! Core FIDIC Red Book payment-related denitions: ! The Contract Price
The price charged by the Contractor to construct the Works.!

Dening the Contract Price

! The Contract Price is the amount charged by the
Contractor to construct the Works.

! The Costs are important on large projects where

input costs can change during their completion. the Works (i.e. Contract Price - prot).
!

! The Gross Valuation

The cumulative price of the Works completed to date.!

! The Costs are the Contractors costs in constructing ! If a uctuations clause is present, the Costs can be
recalculated, which will change the Contract Price.

! Interim Payment Certicates ! Final Payment Certicate

Certicates issued by the Engineer at regular intervals to prompt payments from the Employer to the Contractor.! !

The nal, denitive statement of the Contract Price after the Works have been completed.! ! ! ! ! ! ! !

!
D31PZ: Contracts and Procurement Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Adjustment of the Contract Price

! The Engineer can determine a change in the
Contract Price and include it in the next Payment Certicate!! ! ! ! ! ! ! ! ! ! ! ! ! ! 3.5 4.11

Valuing instructions and Variations

! The Employer can vary the contract documents by
! !
The Engineer issues an instruction to the Contractor to implement the Variation! ! ! ! ! ! ! ! ! An instruction may also instruct the Contractor to record the Cost of complying with it (if no rates available).!

issuing new Drawings, Specications, Schedules, etc.

! 13.1 13.3

! The Accepted Contract Amount is the Contractors

tender price incorporated into the contract.! Variations, etc.

! The Contract Price is the live price including

! The adjustment of the Contract Price resulting from

the Variation is evaluated using equations given in the contract! ! ! ! ! ! ! ! ! ! ! ! ! 12.3

! The Contractor and Engineer can negotiate

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Valuing instructions and Variations

! The Engineer can instruct the Contractor to submit
a quotation for implementing a proposed variation.

Making interim payments

! The Contractor submits a Statement of what it
thinks it should be paid for each months work.! ! ! 14.3

! The Contractors proposal must include:! ! ! ! ! ! method statement and revised programme; ! any required extension of Time for Completion; and ! proposed cost of implementing the change. ! The Engineer must accept, reject or comment as soon
as possible.

13.3

! The Statement must dene:

! ! ! ! ! ! !
the current estimate value of the partially completed Works" any changes to the Contract Price caused by uctuations ! or changes in legislation deductions of Retention Money"" " " " " " " " " " " " " " " " " " " " " " " " " " " " Advanced Payment by the Employer" " assembly of Plant or Materials off site" " claims for additional payment" " amount previously certied" " " " " " " 14.3(a) 14.3(b) 14.3(c) 14.3(d) 14.3(e) 14.3(f) 14.3(g)

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Making interim payments

! The Engineer has 28 days from receipt of the
Contractors Statement to conrm or alter the content and issue the corresponding Interim Payment Certicate! ! ! ! ! ! !

Retention Money
! The % of Retention is agreed in the Contract Data" " ! Retention Money is calculated using this % and

10

14.3(c) 14.3(c)

14.6

deducted from interim payments due! !

! The Employer can withhold payment for: ! work not in accordance with the contract" " " " ! Contractors failure to full an element of the
agreement! ! ! ! ! ! ! ! ! ! ! ! !

! The total amount of Retention can, if agreed, be

14.6(a) 14.6(b) limited by dening a Limit of Retention Money in the Contract Data.

! The rst half of the Retention Money is released to the ! The remaining Retention Money is released in the

! Plant and/or Materials assembled off site can only

be included in payments if they are listed in the Contract Data! ! ! ! ! ! ! ! ! ! ! ! ! 14.5!

Contractor when the Taking-Over Certicate is issued.! Final Payment Certicate !! ! ! ! ! ! ! ! !

14.9 14.9

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Payment by the Employer

! The Employer has 56 days from the Engineers
receipt of the Contractors statement to pay the amount on each Payment Certicate! ! ! ! !

11

The Final Payment Certicate

! After issue of the Taking-Over Certicate, the
Contractor has 84 days to submit a Statement of its assessment of the nal costs to the Engineer.!! ! !

12

14.7

14.10

! Note: this period starts before each Payment

Certicate is issued.

! If the Employer does not pay, the Contractor can

suspend the Works.

! The Statement must dene:" " " " " ! the value of all work done to the date of the
2.4 16.1!
2.4

Taking-Over Certicate in accordance with the contract documents, including Variations.! ! !

14.10(a) 14.10(b) 14.10(c)

! But only when the Employers source of nance! !

has ceased to be available.!! ! ! ! ! ! !

The Contractor can ask the Employer for evidence of its funding for the project! !

! any other sums the Contractor believes are due" " ! estimates of any other sums that the Contractor
believes will become due to it! ! ! ! ! ! !

! Is this fair to the Contractor?

D31PZ: Contracts and Procurement Unit 9: Managing Payment: FIDIC Red Book practice D31PZ: Contracts and Procurement Unit 9: Managing Payment: FIDIC Red Book practice

The Final Payment Certicate

! On receipt, the Engineer evaluates this information
and issues a further Interim Payment Certicate containing the Engineers denition of the nal sum due to the Contractor. Engineer for certication of the nal payment.!! ! !

13

The Final Payment Certicate

! The Engineer reviews the Contractors draft
Final Statement and certies accordingly. information to support its Statement.

14

! The Engineer can ask the Contractor for more

14.11

! The Contractor then has 56 days to apply to the ! In this second application the Contractor states: ! the value of the work completed to date; ! any other sums due to the Contractor.

! The Engineer issues the Final Payment Certicate

within 28 days.

! The Final Payment Certicate contains the

Final Statement!! ! ! ! ! ! ! !

14.11

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

The Final Payment Certicate

! If the Employer and Contractor cannot agree the ! The Employer must pay the Final Payment
Certicate within 56 days of receipt.!! ! Final Statement, dispute resolution must commence. ! ! ! ! !

15

Terminology
! ! ! ! ! ! !
Contract Price Contractors Statement Retention Money Limit of Retention Money Interim Payment Certicates Payment Certicates Final Payment Certicate

16

20.4 14.7!

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

D31PZ: Contracts and Procurement

Unit 9: Managing Payment: FIDIC Red Book practice

Remember to read the full Unit notes and Appendices, and complete your independent study