Understanding of FIDIC Documents

Construction Contract Risk Management

 Contents

1 History of FIDIC Documents

2 Major in Milestones
3 Differences in Contents
4 Main Differences

Construction Contract Risk Management 2

1. History of FIDIC Documents

FIDIC Federation Internationale Des Ingerieurs-Conseils [International Federation of Consulting Engineers]

 Founded in 1913 (Belgium, France, Switzerland)  Headquarter in Geneva

One Member Association per country

Construction Contract Risk Management 3

FIDIC Member Association (100 Countries ) December 2017

Africa Asia-Pacific Europe America

Botswana Australia Albania Latvia Brazil
Cote d’Ivorie Bangladesh Austria Lithuania Canada
Egypt China Azerbaijan Luxembourg Chile
Ghana China, Hongkong Belgium Macedonia Colombia
Kenya China, Taiwan Bosnia Moldova Dominican Republic
Mali India Bulgaria Montenegro Ecuador
Mauritius Indonesia Croatia Netherlands Mexico
Morocco Iran Czech Republic Norway Paraguay
Mozambique Japan Cyprus Poland Suriname
Nigeria Korea Denmark Portugal Trinidad Tobago
South Africa Malaysia Estonia Romania USA
Sudan Mongolia Finland Russia Peru
Tanzania Nepal France Serbia
Tunisia New Zealand Germany Slovakia Mid-East
Uganda Pakistan Georgia Slovenia Bahrain
Zambia Philippines Greece Spain Iran
Zimbabwe Singapore Hungary Sweden Jordan
Sri Lanka Iceland Switzerland Kuwait
Thailand Ireland Turkey Lebanon
Vietnam Israel Ukraine Palestine
Italy United Kingdom Saudi Arabia

Kazakhstan United Arab Emirates

Construction Contract Risk Management 4

FIDIC Books for Construction Works and Servises
- Services (White Book, 2017)
- Minor Works (Green Book, 1999)
- Construction (Red Book, 2017)
- MDB Harmonised Edition (Pink Book, 2010)
- Plant and Design-Build (Yellow Book, 2017)
- EPC/Turnkey (Silver Book, 2017)
- Design-Build-Operate (Gold Book, 2008)

Construction Contract Risk Management 5

 History of FIDIC Documents for Construction Works

RED BOOK [Conditions of Contract for Works of Civil Engineering Construction]

1957 : 1st 1969 : 2nd 1977 : 3rd 1987 : 4th 1992, 1996 : Revised 1999 : 1st Edition 2017 : 2nd Edition

Conditions of Contract for CONSTRUCTION

YELLOW BOOK [Conditions of Contract for Electrical and Mechanical Works]

1963 : 1st 1980 : 2nd 1987 : 3rd 1988 : Revised

RED [Conditions of Subcontract for Works of Civil Engineering Construction] 1994, 2010 : 2nd Edition

PINK BOOK [Conditions of Contract for Construction] (MDB Hamonized Edition) 2004, 2006, 2010 (3rd)

BLUE-GREEN BOOK [Form of Contract for Dredging and Reclamation Works) 2006 : 1st Edition 2016 : 2nd Edition

1999 : 1st Edition 2017 : 2nd Edition

Conditions of Contract for PLANT and Design-Build

ORANGE BOOK [Conditions of Contract for Design - Build and Turnkey

1995 : 1st Edition 1999 : 1st Edition 2017 : 2nd Edition

1999 : SHORT FORM of Contract [GREEN BOOK] Conditions of Contract for EPC/TURNKEY Projects

GOLD BOOK [Conditions of Contract for Design, Build and Operate Projects 2008 : 1st Edition

Construction Contract Risk Management 6

Differences between Design-Build, Turnkey and EPC

STRAIGHTFORWARD PROJECT ?
EMPLOYER DESIGN ?
no yes
yes

no

• fixed price - lump sum CONTRACTOR DESIGN

• little employer involvement
• unforeseen risks to Contractor
• Contractor is responsible for the
data and information provided
by the Employer
yes
• fixed price – lump sum
• engineer involvement
• unforeseen risks to employer
no
• Employer is responsible for error’s in the
Employer’s Requirements
yes

Minor works under US 500,000 and not more

than 6 months time
Can be applied US 10,000,000 or more and 12 to
18 months time where appropriate like
repetitive works
Escalation is not allowed

Construction Contract Risk Management 7

Warning !!!

Silver Book is not suitable for :

 If there is insufficient time or information for tenderers to scrutinise and check the Employer’s
Requirements or for them to carry out their designs, risk assessment studies and estimating;

 If construction will involve substantial work underground or work in other areas which
tenderers cannot inspect, unless special provisions are provided to account for unforeseen
conditions or

 If the Employer intends to supervise closely or control the Contractor’s work, or to review most
of the construction drawings.

FIDIC recommend to use Yellow Book in above circumstances.

Construction Contract Risk Management 8

 2. Major Milestones

Major Milestones and Events

Taking-Over Certificate (applied
14 days before, certify within 28 Performance
Acceptance, Certificate
Agreement (<35 days after Letter of Acceptance) days after receipt)
< 28 days
Tender Date of Completion
Defects Notification Period
Tender Time for
Evaluation Completion
Period
28 days
Performance Security
< 28 days
Base Date Commencement Date (< 42 days) Delay Damages
Appoint DAAB
Tests on Completion
14 days
Notice for the Commencement Date

Care of the Works (except outstanding work, loss or damage)

Contract Price, adjustment, additions, deductions

Interim Payment
Accepted Contract Amount
Statement at Completion (< 84 days after Final Statement (< 56
the Date of Completion) days after issue of
Performance Certificate)

Retention Money

50% released 50% released

9
Construction Contract Risk Management
3. Differences in Contents

1. General Provisions
1.1 Definitions
1.2 Interpretation
1.3 Notice and other Communications
1.4 Law and Language
1.5 Priority of Documents
1.6 Contract Agreement
1.7 Assignment
1.8 Care and Supply of Documents
1.9 Delayed Drawings and Instructions (Y : Error’s in the Employer’s Requirements. S : deleted)
1.10 Employer’s Use of Contractor’s Documents (S : 1.9)
1.11 Contractor’s Use of Employer’s Documents (S : 1.10)
1.12 Confidentiality (S : 1.11)
1.13 Compliance with Laws (S : 1.12)
1.14 Joint and Several Liability (S : 1.13)
1.15 Limitation of Liability (S : 1.14)
1.16 Contract Termination (S : 1.15)

Construction Contract Risk Management 10

2. The Employer
2.1 Right of Access to the Site
2.2 Assistance
2.3 Employer’s Personnel and Other Contractors
2.4 Employer’s Financial Arrangements
2.5 Site Data and Items of Reference
2.6 Employer-Supplied Materials and Employer’s Equipment

3. The Engineer (S : The Employer’s Administration)

3.1 The Engineer (S: The Employer’s Representative)
3.2 Engineer’s Duties and Authority (S : Other Employer’s Personnel)
3.3 The Engineer’s Representative (S : Delegated Persons)
3.4 Delegation by the Engineer (S : Instructions)
3.5 Engineer’s Instructions (S : Agreement or Determination)
3.6 Replacement of the Engineer (S : Meetings)
3.7 Agreement or Determination (S : not used)
3.8 Meetings (S : not used)

Construction Contract Risk Management 11

4. The Contractor
4.1 Contractor’s General Obligations
4.2 Performance Security
4.3 Contractor’s Representative
4.4 Contractor’s Documents (Y, S : Subcontractors)
4.5 Training (Y, S : Nominated Subcontractors)
4.6 Co-operation
4.7 Setting Out
4.8 Health and Safety Obligations
4.9 Quality Management and Compliance Verification Systems
4.10 Use of Site Data
4.11 Sufficiency of the Accepted Contract Amount
4.12 Unforeseeable Physical Conditions (S : Unforeseeable Difficulties)
4.13 Rights of Way and Facilities
4.14 Avoidance of Interference
4.15 Access Route
4.16 Transport of Goods
4.17 Contractor’s Equipment

Construction Contract Risk Management 12

4.18 Protection of the Environment
4.19 Temporary Utilities
4.20 Progress Report
4.21 Security of the Site
4.22 Contractor’s Operations on Site
4.23 Archaeological and Geological Findings

5. Subcontracting (Y, S : Design)

5.1 Subcontractors (Y,S : General Design Obligations)
5.2 Nominated Subcontractors (Y,S : Contractor’s Documents)
5.3 (Y, S : Contractor’s Undertaking)
5.4 (Y, S : Technical Standards and Regulations)
5.5 (Y, S : Training)
5.6 (Y, S : As-Built Records)
5.7 (Y, S : Operation and Maintenance Manuals)
5.8 (Y, S : Design Error)

Construction Contract Risk Management 13

6. Staff and Labour
6.1 Engagement of Staff and Labour
6.2 Rates of Wages and Conditions of Labour
6.3 Recruitment of Persons
6.4 Labour Laws
6.5 Working Hours
6.6 Facilities for Staff and Labour
6.7 Health and Safety of Personnel
6.8 Contractor’s Superintendence
6.9 Contractor’s Personnel
6.10 Contractor’s Records
6.11 Disorderly Conduct
6.12 Key Personnel

Construction Contract Risk Management 14

7. Plant, Materials and Workmanship
7.1 Manner of Execution
7.2 Samples
7.3 Inspection
7.4 Testing by the Contractor
7.5 Defects and Rejection
7.6 Remedial Work
7.7 Ownership of Plant and Materials
7.8 Royalties

8. Commencement, Delays and Suspension

8.1 Commencement of Works
8.2 Time for Completion
8.3 Programme
8.4 Advance Warning
8.5 Extension of Time for Completion
8.6 Delays Caused by Authorities
8.7 Rate of Progress
8.8 Delay Damages

Construction Contract Risk Management 15

 8.9 Employer’s Suspension
8.10 Consequences of Employer’s Suspension
8.11 Payment for Plant and Materials after Employer’s Suspension
8.12 Prolonged Suspension
8.13 Resumption of Work

9. Tests on Completion
9.1 Contractor’s Obligations
9.2 Delayed Tests
9.3 Retesting
9.4 Failure to Pass Tests on Completion

10. Employer’s Taking Over

10.1 Taking Over the Works and Sections
10.2 Taking Over Parts (S : Taking Over of Parts of the Works)
10.3 Interference with Tests on Completion
10.4 Surfaces Requiring Reinstatement (S : Deleted)

Construction Contract Risk Management 16

11. Defects after Taking Over
11.1 Completion of Outstanding Work and Remedying Defects
11.2 Cost of Remedying Defects
11.3 Extension of Defects Notification Period
11.4 Failure to Remedy Defects
11.5 Remedying of Defective Work off Site
11.6 Further Tests after Remedying Defects
11.7 Right of Access after Taking Over
11.8 Contractor to Search
11.9 Performance Certificate
11.10 Unfulfilled Obligations
11.11 Clearance of Site

12. Measurement and Valuation (Y,S : Tests after Completion)

12.1 Works to be Measured (Y, S : Procedure for Tests after Completion)
12.2 Method of Measurement (Y, S : Delayed Tests)
12.3 Valuation of the Works (Y, S : Retesting)
12.4 Omissions (Y, S : Failure to Pass Tests after Completion)

Construction Contract Risk Management 17

13. Variations and Adjustments
13.1 Right to vary
13.2 Value Engineering
13.3 Variation Procedure
13.4 Provisional Sums
13.5 Daywork
13.6 Adjustments for Changes in Laws
13.7 Adjustments for Changes in Cost

14. Contract Price and Payment

14.1 The Contract Price
14.2 Advance Payment
14.3 Application for Interim Payment
14.4 Schedule of Payments
14.5 Plant and Materials intended for the Works
14.6 Issue of IPC (S : Interim Payments)
14.7 Payment
14.8 Delayed Payment
14.9 Release of Retention Money

Construction Contract Risk Management 18

 14.10 Statement at Completion
14.11 Final Statement
14.12 Discharge
14.13 Issue of FPC (S : Final Payment)
14.14 Cessation of Employer’s Liability
14.15 Currencies of Payment

15. Termination by Employer

15.1 Notice to Correct
15.2 Termination for Contractor’s Default
15.3 Valuation after Termination for Contractor’s Default
15.4 Payment after Termination for Contractor’s Default
15.5 Termination for Employer’s Convenience
15.6 Valuation after Termination for Employer’s Convenience
15.7 Payment after Termination for Employer’s Convenience

Construction Contract Risk Management 19

16. Suspension and Termination by Contractor
16.1 Suspension by Contractor
16.2 Termination by Contractor
16.3 Contractor’s Obligations after Termination
16.4 Payment after Termination by Contractor

17. Care of the Works and Indemnities

17.1 Responsibility for Care of the Works
17.2 Liability for Care of the Works
17.3 Intellectual and Industrial Property Rights
17.4 Indemnities by Contractor
17.6 Indemnities by Employer
17.9 Shared Indemnities

Construction Contract Risk Management 20

18. Exceptional Events
18.1 Exceptional Events
18.2 Notice of an Exceptional Event
18.3 Duty to Minimise Delay
18.4 Consequences of an Exceptional Event
18.5 Optional Termination
18.6 Release from Performance under the Law

19. Insurance
19.1 General Requirements
19.2 Insurance to be provided by the Contractor

20. Employer’s and Contractor’s Claims

20.1 Claims
20.2 Claims for Payment and/or EOT

Construction Contract Risk Management 21

21. Disputes and Arbitration
21.1 Consultation of the DAAB
21.2 Failure to Appoint DAAB Member(s)
21.3 Avoidance of Disputes
21.4 Obtaining DAAB’s Decision
21.5 Amicable Settlement
21.6 Arbitration
21.7 Failure to Comply with DAAB’s Decision
21.8 No DAAB in Place

Construction Contract Risk Management 22

4. Main Differences

Description Pink Book(2010) Red Book(2017) Yellow Book(2017) Silver Book(2017)

Conditions of Contract Conditions of Contract for Plant and D

Conditions of Contract for
for Construction [for esign-Build [for Electrical
Name of Construction [MDB Harmonised Conditions of Contract
Building and Engineering and Mechanical Works and for Buildin
Document Edition] for EPC/Turnkey Projects
Works designed by g and Engineering Works designed
the Employer] by the Contractor]

Design-Build type of Contract, but, in which most of Risks

Application Traditional Design-Bid-Build type of Contract Design-Build type of Contract are to be undertaken
by the Contractor
Contract
Engineer Engineer/Engineer’s Representative Employer/ Employer’s Representative
Administrator

Instruction oral instruction is allowed oral instruction is not allowed

 Contractor’s obligation
 Contractor shall be responsible for the accuracy of
Employer’s Requirements(including design criteria
and calculations)
 Employer’s responsibility is limited to
correctness of followings:-
 Contractor’s obligation - portions, data and information which are
Design  comply with the criteria stated in the Contract as being immutable or the resp
 to the extent specified in the Contract
[Obligation] stated in the Employer’s onsibility of the Employer
Requirements - definition or intended purpose of the
Works or any parts thereof
- criteria for the testing and performance of
the completed Works
- portions, data and information which
cannot be verified by the Contractor except as otherwi
se stated in the Contract

Construction Contract Risk Management 23

 Description Pink Book(2010) Red Book(2017) Yellow Book(2017) Silver Book(2017)

 Contract Agreement
 Contract Agreement
 Letter of Acceptance
 Letter of Acceptance
 Letter of Tender
 Letter of Tender (Letter of Bid)  Contract Agreement
 These Conditions
 These Conditions  These Conditions
 Employer’s Requirements
 Specification  Employer’s Requirements
 Schedules[completed by the Contractor,
Contract  Drawings  Schedules
include Schedule of Payment, data, list
Document  Schedules [completed by the Contractor,  Tender
and schedule of rates/prices]
include Bill of Quantities, Schedule of Payment, data, list and  JV Undertaking (if any)
 Contractor’s Proposal
schedule of rates/prices]  further Documents listed in
 JV Undertaking (if any)
 JV Undertaking (if any) the Contract Agreement
 further Documents listed in the
 further Documents listed in the Contract
Contract Agreement or in the Letter of A
Agreement or in the Letter of Acceptance
cceptance
In the Conditions of Contract, …
the following words and
Definition In the Contract the following words and expression shall have the meaning stated…
expression shall have the
meanings stated.
 Accepted Contract Amount: amount accepted in the Letter of Acceptance

 Contract Price
means the amount stated in the Contract
 Contract Price
 Contract Price  Contract Price Agreement and includes adjustments.
shall be the value of Works
Contract Price shall be agreed and determined unde shall the lump sum Accepted Contract Am
(12.3) and subject to
r Sub-Clause 12.3 [Evaluation] and ount and be subject to adjustments, Payment for the Works shall be made on
adjustments, additions (Cost)
subject to adjustments. additions Cost) and/or deductions. the basis of the lump sum Contract Price
and/or deductions.
(in Contract Agreement) subject to
adjustments, additions(Cost) and/or
deductions.

Construction Contract Risk Management 24

 Description Pink Book(2010) Red Book(2017) Yellow Book(2017) Silver Book(2017)
through Interim Payment Certificate without Certificate
 Payment Procedure  Payment Procedure
1. Payment application by the Contractor 1. Payment application by the Contractor
Payment 2. Payment Certificate by the Engineer 2. Payment by the Employer
3. Payment by the Employer
provisions for correction or modification are newly introduced in which case agreement or determination
procedure under 3.7 (Red, Yellow)/3.5(Silver) shall be applied.
“Cost” means all expenditure reasonably incurred (or to be incurred) by the Contractor in performing the Contract, whether on or off the Site, including taxes,
overhead and similar charges, but does not include profit. It shall be added to the Contract Price.
Cost & Profit
“Cost plus Profit” require this profit to be 5% of this Cost (Pink)/added to the Cost(Red, Yellow, Silver) unless otherwise stated in the Contract Data.

 very detailed procedures are provided for agreement (42 days) or determination (another 42 days)
under Sub-Clause 3.7 (Red, Yellow)/ 3.5 (Silver)
 NOD(Notice of Dissatisfaction) is newly introduced and time-bar shall be applied if a Party fails to
Agreement or Engineer shall give notice of agreement or issue NOD within 28 days
Determination determination within 28 days from the receipt. -> in this case, Engineer’s(Red, Yellow)/Employer’s Representative’s(Silver) determination shall be
final and binding.
 If the Employer/Contractor fails to comply with binding or final and binding determination, then the
other Party shall be entitled to terminate the Contract.

 by Engineer’s instruction when followings are

fulfilled:
- signature of the Contract Agreement
- delivery of Employer’s financial arrangements
Commencement - Effective access to and possession of Site are
Date given by Employer
- receipt by Contactor or Advance Payment
 If Engineer fails to issue instruction with 180
days from the Letter of Acceptance, then
Contractor is entitled to terminate the Contract.
 Engineer’s Notice for commencement date shall be issued not less than 14 days before the
Commencement Date.
 Commencement Date shall be within 42 days after the Letter of Acceptance(Red, Yellow)/Contract
Agreement (Silver).
 If Engineer(Red, Yellow)/Employer(Silver) fails to issue Notice within 84 days, then Contractor is
entitled to terminate the Contract.

Right of
access(possession) xx days after the Commencement Date xx days after the Letter of Acceptance xx days after the Contract Agreement
to(of) the Site

Construction Contract Risk Management 25

 Description Pink Book(2010) Red Book(2017) Yellow Book(2017) Silver Book(2017)

any change to the Works instructed or

any change to the Works instructed
approved
- changes in the quantities of any item of work included in the Contract
- changes to the quality and other characteristics of any item of work
- changes to the levels, positions and/or dimensions of any part of the Works
if the Parties agree to omission which is to be carried out
- omission of any work unless it is to be carried out by others
by others, then Contractor is entitled to any loss of profit
- any additional work, Plant, Materials or services necessary for the - Permanent Works,
and other losses and damages. (Red, Yellow, Silver)
including any associated Tests on Completion, boreholes and other testing and exploratory
work, or
Variation - changes to the sequence or timing of the execution of the Works

Contractor shall be bound by Variation unless i) varied

Contractor shall be bound by Variation unless i) Contractor shall be bound by Variation unless i) work was Unforeseeable, ii) he cannot readily obtain the
he cannot readily obtain the Goods, or ii) such varied work was Unforeseeable, ii) he cannot Goods, or iii) it will adversely affect the Health and Safety,
variation triggers a substantial change in the readily obtain the Goods, or iii) it will adversely
Environment, or iv) adverse impact on Schedule of
sequence or progress of the Works. affect the Health and Safety, Environment. Performance Guarantee, v) adversely affect Works being
fit for the intended purpose..
detailed procedures for evaluation are newly included. Including application of agreement or determination
evaluated in accordance with Clause 12 procedure (3.7 for Red, Yellow, 3.5 for Silver)
Variation is now clearly separated from Claim procedure.
Errors in the
Employer’s Claim is allowed if there is delayed Drawings or instructions Claim is allowed Claim is not allowed
Requirements
only allowed, if agreed by the
Taking Over of parts
at the sole discretion of the Employer (Taking Over) Parties or stated in the
of the Works
Employer’s Requirements
Entire responsibility of the
Setting Out Employer is responsible for any errors in the specified or notified items of reference
Contractor
Unforeseeable
Contractor shall be entitled to claim. Claim is not allowed
Physical Condition

Construction Contract Risk Management 26

 Description Pink Book(2010) Red Book(2017) Yellow Book(2017) Silver Book(2017)

 a Variation
 a cause of delay giving an  a Variation
entitlement under these Conditions  a cause of delay giving an
 a Variation or other substantial change in the quantity of an item of work
 exceptionally adverse climatic entitlement under these Conditions
included in the Contract (if measured quantity is greater than 10%, Red)
conditions  any delay, impediment or
 a cause of delay giving an entitlement under these Conditions
 Unforeseeable shortages in the prevention caused by or
 exceptionally adverse climatic conditions
availability of personnel or Goods attributable to the Employer, the
 Unforeseeable shortages in the availability of personnel or Goods (or
Extension of Time (or Employer-Supplied Materials, if Employer’s personnel, or the
Employer-Supplied Materials, if any, Red) caused by epidemic or
for Completion any) caused by epidemic or Employer’s other contractors on
government actions
government actions the Site (or any Unforeseeable
 any delay, impediment or prevention caused by or attributable to the
 any delay, impediment or shortages in the availability of
Employer, the Employer’s personnel, or the Employer’s other
prevention caused by or Employer-Supplied Materials (if
contractors(Pink)/on the Site(Red)
attributable to the Employer, the any) caused by epidemic or
Employer’s personnel, or the government actions)
Employer’s other contractors on
the Site
Concurrent Delay not stated stated
 using computer software is required
Programme detailed time programme  initial programme(or revised programme) becomes Programme (if, Notice of No-objection is given)
 more tailed requirements are included
 Insuring Party : Contractor unless otherwise stated  Insuring Party : Contractor
in the Particular Conditions  required Insurance
 required Insurance - Works, Plant, Materials and Contractor’s Documents
- Works, Plant, Materials and Contractor’s - Goods
Insurance
Documents - liability for breach of professional duty
- Contractor’s Equipment - injury to persons and damage to property
- injury to persons and damage to property - Contractor’s Personnel
- Contractor’s Personnel - other insurance required by Laws and by local practice
 separate Sub-Clauses are applied for each  Employer’s Claim and Contractor’s Claim are included in one Clause (20)
Employer’s Claim (2.5) and Contractor’s Claim  for EOT and additional payment and also for other entitlement and relief.
Claim (20.1)  time-bar is applied to both Employer’s and Contractor’s claim
 for EOT and additional Payment  time-bar is also applied to the time limit for submission of detailed particulars.
 time-bar is applied only to Contractor’s claim  another time-bar for NOD is introduced.
 standing DAAB
DAAB  standing DAB  dispute avoidance procedure is introduced
 time-bar is introduced for Arbitration

Construction Contract Risk Management 27

 Thank You
Hak Bong Hyun

CEO of Cplus International Co., Ltd.

Arbitrator of Korea Commercial Arbitration Board
FIDIC Accredited Trainer

www.cplus.or.kr
TEL : 02-565-3920,1
FAX : 02-565-3923
E-mail : ceo@cplus.or.kr

28