• (+44)7307 863 846
  • info@gcelab.com

What is FIDIC Contract? 8 Important Points

FIDIC Contract 01

FIDIC – A Brief History

FIDIC Contract is a globally acclaimed traditional form of contract, it aims at risk, obligations and duties. The Organization, FIDIC or Fédération Internationale des Ingénieurs Conseils (in French), or what is better known as the International Federation of Consulting Engineers came into being when a number of independent expert consultants met at a World Fair Exhibitions in the year 1913 to deliberate on the possibility of forming a Global Federation. A number of European countries and Australia, Canada, Russia, the UK and the USA were a part of this World Fair.

But FIDIC was formed on 22nd July 1913, by three Francophone Countries, namely, Belgium, France and Switzerland and hence its French name. Later around 1959, several other countries such as Australia, South Africa, Canada, and the USA joined FIDIC and the Federation became truly International.

The FIDIC headquarters are located in Geneva, Switzerland. The aim of FIDIC is to globally represent the consulting engineering field by promoting the interests of companies/engineers and supplying technology-based services for the built and natural environment.

The Term Contract

The term Contract essentially means a Legal Agreement. A legal document between mutually agreeing on parties to undertake something or to refrain from doing something. The most important element in this statement is that it is enforced by law, that, it is legally binding. The framing of a contract necessitates the mutual acceptance of two or more individuals, one of them normally making an agreement and another acknowledging.

What is A FIDIC Contract?

A FIDIC Contract is a standard contract that has been designed for a diversity of construction and mechanism projects, because in essence, constructing any project around the globe will always have the same main principles. The first and foremost function that the Global Federation took upon itself is framing and describing Conditions of Contract for the construction trade universal. They also issue standard modes of contracts for works and contracts to the clients, sub-consultants, joint ventures (JVs), consultants, and representatives. FIDIC also issues various corporate practice papers such as guidelines and training manuals, policy papers, etc.

The first contract was accepted jointly with the International Federation of Building and Public works in 1957 and was published, titled “The Form of contract for works of Civil Engineering construction”, and it became known for its Red cover, and thus, The Red Book was drafted.

It has been Five Decades that FIDIC has striven to produce subsequent editions of these contracts, much more recognised and acceptable across the construction trade. This is a result of broad consultation and endorsements by a spectrum of organizations involved in the construction trade such as Multilateral Development Banks, The Associated General Contractors of USA, The Western Pacific Contractors Association, The International Federation of Asian and the Inter-American Federation of the Construction Trade etc.

blog design and build

FIDIC contracts are the leading contracts in global construction.

FIDIC is best recognized for its variety of contracts that includes the: Dredgers Contract;  Short Form of Contract, Construction Contract; Plant & Design-Build Contract; D&BO Contract; and EPC/Turnkey Contract.

A key aspect of these contracts is that they take into account, in a balanced manner, the interests of both parties involved. The roles and responsibilities of the main parties are well defined and the allocation and management of risks have been well laid out.

General structures of FIDIC contracts

Even Though the FIDIC Contracts are exhaustive and suitable for all types of construction projects, a typical contract has some common features. It is divided into two parts – Part I consist of the GCC (General Conditions of Contract) and Part II pertaining to the conditions of the particular function. Part I comprises the general contract conditions, such matters as rights and responsibilities of each group, process for payment, change, certification and disagreement resolution.

Part II of the contract is the terms of specific application and is to be utilized to initiate project particular clauses, such as the language of the agreement, selection of law, the name of the individual or firm selected to act as Engineer and/or Employer’s representative for the project among other conditions. The Appendix typically includes a sample of papers to be applied for the procurement procedure.

Types of FIDIC Contracts

The first contract that got published by FIDIC back in 1957, was a red coloured document and came to be known as the Red Book. It has since become the custom that FIDIC contracts are recognized in widespread parlance by the colour of their cover.

FIDIC has consistently enhanced over the years and improved its contracts. The administration has included new forms of contract, substituted earlier ones and revised important conditions. The table below presents the chronology of FIDIC Contracts:

 

S. No FIDIC Contract Year of Publication Detail (Suitable for Industry/Sector)
1. The Red Book (Old) Year of Publication – 1957

Fourth Edi. – 1987

Supplement Added – 1996

Civil Engineering Sector
2. The Yellow Book (Old) Year of Publication – 1967

Third Edi. – 1987

Mechanical / Electrical Engineering Sector
3. The Orange Book Year of Publication – 1995

 

This was the first contract document released by FIDIC regarding design and build
4. The Red Book (New) Year of Publication – 1999

 

Suitable for Projects where the Design Obligation lies with the Employer
5. The Yellow Book (New) Year of Publication – 1999

 

Suitable for Projects where the Design Responsibility lies with the Contractor
6. The Silver Book Year of Publication – 1999

 

Suitable for turnkey projects. This contract positions significant risks on the contractor. The contractor is also accountable for the bulk of the design.
7. The Pink Book Year of Publication – 2005

IInd Edi. – 2006

IIIrd and Final Edi. – 2010

The Red Book adapted to suit the MDBs (Multilateral Development Banks)
8. The Gold Book Year of Publication – 2008

 

FIDIC’s first Design-Build and Operate Contract

 

The other contracts consist of the FIDIC sub-contract, “The Blue Book”, which is apprehensive with dredging and/or reclamation works, and “The White Book”, which is for the engagement of consultants by Employers.

FIDIC and NEC Contracts – A Comparative Note

This section analyses the primary difference between the traditional FIDIC Contracts and the upcoming and vastly popular NEC Contracts. Both are standard forms of contracts, yet one is classic and standard and the other is flexible, innovative and popular, but both of the contracts are the most widely used by the Construction Trade worldwide.

The New Engineering Contract (NEC) is a standard form of contracts developed by the Institution of Civil Engineers of the United Kingdom in 1993. The NECs were designed to be an advancement over the traditional FIDIC Contracts and had a more Project Management Approach to them.

Although, internationally the choice of forms of the contract remains largely with FIDIC as it is endorsed by various Multilateral Development Banks (World Bank, Asian Development Bank, the European Commission, different UN Bodies, etc.) NEC has steadily gained ground in many countries, especially Hong Kong, South Africa, New Zealand, Netherlands, Australia and India. Essentially, any standard contracts should be analysed by their capacity to prevent disputes from arising and effective risk management.  The table[1] below gives very briefly a comparative analysis of both FIDIC and NEC:

 

Parameter FIDIC NEC
Language – Clarity and Ease of Interpretation The language of FIDIC Contracts is reported to be obscure, complicated, inscrutable and too legal; some of the phrases can be tracked back to contracts of the19th era in England-

Hard to Interpret

The underlying objective of NEC Contracts was to minimise the problem of legal interpretation. NEC applies non–legalistic, common language, straightforward, simple English;

A bulleted arrangement and avoidance of confusing cross-notes were incorporated.

Easy to Interpret for Site Managers, thereby better Project Management

Risk Distribution and Management A Balanced risk distribution Method –

The risk of the employer is curtailed as he bears only the risk of unexpected negative conditions that are not offset by unexpected positive conditions.

Difficult to implement practically, these conditions potentially increase disputes because it offers the parties with more things to claim about, which could be expensive and impossible to resolve.

More proactive risk management and mitigation approach by including various practical communicative tools such as risk registers, risk deterrence meetings
Force Majeure FIDIC Contracts defines FM event as any event which is beyond the control of any parties. NEC Contracts have a wider approach to an FM Event as it encompasses a prevention clause where the employer allows the time and cost risks for any event which stops the contractor from finalizing the works on time.
Variation FIDIC limits disparities of items to 10% by the amount and other criteria which require new rates to be approved. A contractor has to submit an offer and the engineer regulates suitable prices turns out to be a laborious and tough procedure that inevitably will lead to difference and dispute. NEC is flexible and it does

not limit the variations, but it does require pre-pricing and quotations that set the prices before instigation the variation.

Project Organization Engineer

Essentially the Employer’s Agent for design and supervision, execution of works and contract management.

 

The Engineer is a more powerful entity and has much more grasp over the Project day to day actions

Project Manager

The engineer’s role is split into four entities – the

project manager, designer, supervisor, and arbitrator.

 

 

Although the roles are split into four, not one person has total control and therefore may result in not so emphatic execution of the Project.

 

The Spectrum of FIDIC Contracts[2] /FIDIC Family

Very briefly, the various FIDIC Contracts are as follows:

FIDIC Family

Summary

The NEC is a modern contract, takes on a much more collective method to construction, project administration and risk management. Although it is rapidly gaining ground, FIDIC will always have the advantage of being the older and more globally known traditional form of contract.

 

I hope the blog provides you with adequate knowledge of the Fidic Contract and its associated features. Please feel free to like, share and comment.

Ritu Srivastava Maitrey
LinkedIn Profile 
Please see our Pillar Post.

 

[1] Paper on “A comparison of the suitability of FIDIC and NEC Conditions of Contract in Palestine”, 2016, Toronto

[2] FIDIC Suite of Contracts

 

Read More:

 

Leave a Reply