FIDIC commentary on the new contractual conditions
On 5 December 2017 the Fédération Internationale Des Ingénieurs-Conseils (FIDIC) new contractual conditions were published. FIDIC recently released the first commentary on the new conditions.
Since the new contract conditions were published, numerous articles have appeared on foreign websites on legislative developments. The articles attempt to present the most important changes to the new versions of the standard forms and to evaluate their implications in practice. A commentary recently published by FIDIC is the first statement of its official position on the changes, and therefore is essential reading.
The commentary presents the main changes made to the second edition of the Red, Yellow, and Silver books and discusses the authors’ aims. The author of the publication is Siobhan Fahey, a consulting engineer and member of the FIDIC Contracts Committee. She is also one of the main architects of the changes.
The author of the commentary stresses that the changes are intended to improve transparency, clarity, and certainty. This should lead to a fall in the number of disputes and an increase in the number of successfully completed projects. The new FIDIC rules emphasise the question of dispute avoidance. Some changes pointed out in the commentary are discussed below.
The new contract conditions define in detail the obligations of the employer, engineer, and contractor in the course of a project, making the FIDIC longer. Each version (Red, Yellow, and Silver books) now contains more than 200 pages and 21 clauses (from the previous 20). The increase in the number of clauses is due to clause 20 [Claims, Disputes, and Arbitration] being split into clause 20 [Employer’s and Contractor’s Claims] and clause 21 [Disputes and Arbitration]. There is a clear distinction between day-to-day claims and disputes between the parties. Claims and disputes also differ in the way they are adjudicated.
The commentary emphasises that the authors wished to use the plainest possible language, as many users of the conditions are not English native speakers. This is also intended to make translation easier and ensure that translations are accurate. Use of clear and intelligible language will presumably mean that new versions of the standard forms will be broadly applied in all legal systems and in any situation.
In the new FIDIC contract conditions, provisions on project management procedures and methods that largely account for success of the former contract conditions have been improved and worded more precisely. For example, to promote more effective communication, a new sub-clause has been inserted providing for project management meetings (sub-clause 3.8 of the Red and Yellow books of 2017 and sub-clause 3.6 of the Silver book of 2017).
To maintain the core principle of the FIDIC standard forms, which is the equal sharing of risk between the parties, many contract condition provisions which formerly were applicable to one party now apply to both parties. New provisions have also been inserted which make obligations applicable to both parties. For example, sub-clause 1.12 [Confidential Details] of the 1999 FIDIC standard forms, which required a contractor to disclose all confidential information that the engineer could reasonably require to verify whether the contractor was acting in accordance with the contract, has been extended. One added paragraph places an obligation on the employer and the engineer to keep confidential information that the contractor marks as “confidential”. Another additional paragraph has been added requiring the contractor to keep documents which are elements of the contract confidential.
Some sub-clauses in the new edition have been moved to other places in the contract conditions and now form part of different clauses. The sub-clause [Employer’s Claims] for example is no longer part of clause 2, as employer’s claims are now adjudicated in the same way as contractor’s claims, and both types of claims are regulated in clause 20 of the new standard forms. Similarly, provisions requiring the employer to disclose details about the construction site and provide equipment for use by the contractor have been moved from clause 4 to the new sub-clauses 2.5 and 2.6.
Being aware that time is a vital factor in construction projects, in certain sub-clauses FIDIC authors have specified time limits for a contractor or engineer (and in one or two cases an employer as well) to perform actions. The authors consider the established time limits to be realistic and feasible. They are intended to ensure the correct balance between the interests of the party required to perform the obligation and the interests of the party whose rights are affected by timely performance. Where a party does not take certain actions within the specified time limits, a deeming provision has been added ensuring achievement of the objective. For example, if a contractor requests consent for subcontractors or appointment / replacement of key personnel, and the engineer (in the case of the Red and Yellow books 2017) does not respond within the specified time limit, consent is deemed to have been given. Similarly, if the engineer (Red and Yellow books) or the employer (Silver) does not issue a performance certificate within the stated time period, the certificate is deemed to have been issued.
The intentions of the authors of the changes to the new conditions, discussed in the commentary, could be achieved. Due to more transparent and extensive provisions, and emphasis on dispute avoidance, the new conditions could lead to a decrease in the number of disputes concerning performance of construction contracts based on FIDIC books. The changes are a long-awaited response to the changing needs of the participants in the investment process. Due to their large volume and importance, the new systems should be analysed in detail, starting with careful reading of the explanatory notes published by FIDIC.
Katarzyna Śliwak, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
