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-~ ~~;" Cond!tion.s of -~-;I~\:) :i"); Contract and the

l ::f:J; Dispute Adjudication;)~. Procedure

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~- '8

=f. HL1140.~

:=13)

~.~! 5th -6th July, 2001-8} ..68 Regent Street, London ".'

...;;J)

::r> .--:=- .-:; Organised By

::'ot) IBC UK Conferences Limited

~t mc UK Conferences, nor the authors, ~ mponsibility for the accuracy of this information and dis~ all

liability in mpect of such information. Nolhinc in ~ presentation constitutes legal advice. For information on any:it specific legal matter, always consult a qualified lawyer.

J Copyright C> 2000 by mc UK Conf~nces LillRted. All rights reserved. Reproduction in whole or part without:di'> permission of mc or the speaker is prohibited. .

-) ~"j" ~;; ,-J;) ~ ._~~ .~ ISC UK Conf.,.ncM Umi\~

.)

Investing business with knowledge

f;1 :&' Mortimer House T et: +44 (0)20 7637 4383 --

c' ~ 3741 Mortimer Street Fax: +44 (0)20 7453 2090

;,t.,.;,.f London W1T 3JH www.lbc-uk.com

~- ') : + " ~-""-

.,.-~4~)

-) Contents

:=:)1 !)"()i,;";lmll1~ 1\~~n<!;l."

",""';'.,"-'-~ {)vcr';i(~\\' (If" t!I(~ i\'C\\' ]\!:Ijt~r C()Jlt.';I\lo-;

,"'-") Chrisj()pher rVaue.~ Chai,'man

~ I;'IDIC Contracts Committee

~~?~ Tile F.IDIC Contr.1cts Guide

~:') Peter Booen1 Member FIDIC Contracts Committee, Princioal Author of the Guide

~ Examination of Leg~l Concerns~i Christopher Seppala-~ Legal Advisor0 FIDIC Contracts Committee

_eI 11 The Short Form of Contract

--Presentation by:r=I Tony Sanders DEEj .Director of Dispute Managementi

A Moucel Consulting Limited

.Paper by:1=; Edward Corbett.1- Author tt~illIC 4th -A P:-:&~:'i(;.:1: i~gai Guirl~';

:;>

::=a The Dredging FormPresentation by:

-61-~ Tony Sanders DEE i .., Director of Dispute Management :]

oj Moucel Consulting Limited j

:==:a~ Paper by:

Edward Corbett~ Author t'FIDIC 4th -A Practical Legal Guide"

.)

~ Claims Procedures :Christopher Wade i

c:t Chairman

~ FIDIC Contracts Committee-8~' Decisions by Engineer or Dispute Adjudication Board i 0 " l.'

...Peter Booen.:..) Chairman

~ FIDIC Assessment Panel for Adjudicators~J ~~

ti::;j ~ IBC UK Conferences Umlted:.;J .::

~ "... c" -

-~-,

-' ) Intern.11 Arl)ilralion

c::'hristnpher Seppa/(l, ) j ,l'g(l/ Advisor .

) J.'II)IC C()lltr.lt:ts (:()ll1111ittt:c

," l~st~al)lishil1g tilt: I)isputc A().iIIJit:at:()1! I~oard

C;ordo/l L JaY/le~o \ ',:") Me//lher '

~ FIDIC l\sse~;sment Panel f()r !\dj\ldic.ators

...);~ Dispute Adjudi °ation Board Procedures

Peter ChapmanInternational Arbitrator and Atijt1dicator

:)

,~ Appendix 1

'8' Biographiesi" Appendix 2

} Speaker contact details..Appendix 3

--Notes pages~; ....-....,:.)

a...)

aa...'..-8 j

.i~

-;J

';.)

J Ii';J !~~ aRC UK Conferences Umlted--.-~-

! '-

,

~~'1I Programme Agenda -5th July-i

1--'11

,) 0900 Coffee alld /~egi.'ilrali(J11-,..~--~

1 0930 Chair'.\o/'ltroduction Michael Mol1imer-llawkins-:1 Past Chainnan~. FIDIC Contracts Committce \

')

:-=:i 0940 Pre,'ien lal ion Ovcrvicw of the Ncw Major Contracts.,.,) Chri~.topher Wade

-Chairman-:1 --~IC Contracts Committee.

:")

,~::J 1050 Coffee Break:)

-.Q) 1115 Presentation The .~IDIC Contracts Guide~'I Peter Booen

) Member

::=11 FIDIC Contracts Committee, Principal Author, i. of the Guide

i:=,' 1230 Questions & discussion~

9 1300 Lunch

~""" 1430 Presentation Examination of Legal. Concerns~ Christopher Seppala

Legal Advisor~ FIDIC Contracts Committee

1530 Tea break

~ !j~) 1555 Presentatic;-; The Short F'orD"~ of Contract_..J Presentation by:~\ Tony Sanders OBE

Director of Dispute Management~ Moucel Consulting Limited

j Paper by::=:i't Edward Corben'--" Author "FIDIC 4th -A Practical Legal Guide"

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I ~) Overview of the New,., =~ ) Major Contracts

~ .~ ,_.-:~ .!1 .) ~:,.. .

\1 ~) °;/'"t,;)~~) ".,--- Christopher Wade

3 Chainnan

=;It .FIDIC Contracts.~ Coillll'Jttee-t

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~'--J FIDIC Conditi.ons o,f Contract

~ ") .

~:> Overview of. NEW FIDIC CONTRACTS.., I

:) I

~ : 1. Intr°.duction~ )-

.) e'--'- -Conditions of Contract fc:--C~nstrGction -.,. -.'~ :),..- .~ -Designed by Employer: The Construction Contract

~ ..Conditions of Contract for Plant and Design-Build-) .

~ ~ Designed by Contractor: The Plant and Design/Build Contract

~.' .Condit~,ons of Contract for EPCfI'urnkey Projects I

~ -: The EPC/Turnkey Contract I

Short form of Contract: The Short Form. I~.. .~ .First Edition 1999 .I~"

I:>~ -.~ v Replace existing 'Red Book', 'Yellow Book' and 'Orange Book': I~ i., i,.,.. ;. '.' I

;) .for Works of Civil Engineering Construction (1987) ,-18' --" .,... .)

for Electrical and Mechanical Works (1987)8

..I~ ..for Design-Build and Turnkey (1995)..~.

.Contracts Guide for the three major New Books.-.I=- i

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~:) ..." )

,:::I J. PIDK: GCC/1999 FomIS 1

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::::) .clauses applicable to most contracts)

-..,...;...) .alternative clauses r~

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--" ') .clauses often interchangeable) .,

,,_.) .data required by General Conditions in Appendix to Tender~

~~ (EPCT I>arto Conds)c.'

~ ,: .-. I dl .~.Y"t 4- n t n.. + ,~. -";'1 W4£.JPC &.0 '" c..e vi. no.. ..,yoke CI,...tS~S' -'---" ~

~ -_8 forms for guarantees, ~etter of Tender, Contract and

DAB Agreements, etc, Included~~-.-,.

~ But remember:". .=;. :. pi"~pa!ation ~xperi~~ced per~:{)nncl -nvt ~blind' acceptanc~!

;IJ .~ .check~rl for apP!'Or!"!2tC!1~$':;

~~ i -"'~ J"U5-~;~~-"r.~,!.,.-" ~:!':.-o,.;:.o..o- . 0 ~~ ~ a":e :"" """"r + l"-oli Oi-ar Cu -'ldl "' l"- j 11'"' '\~:i:# I -uti -,"-~"_££.~' £4.""",.".",u,...vaw".. IJ~ AAi U -i.IA. 1. d l \.. "" £ l \ '" i

"~i ..use uwdance tor l)reparalioI:' or Particular CondltlorlS I~ I

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~ FlDICGCCll999Fonns 3~-~

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-04:) .New Yellow Book covers all wor~ designed by the Contractor")

~ .for provision of E & M, and for building or engineering wor~

~"} .many will be combination of civil, e & m, and/or building~:) ,,"

.) .'Employer's Requirements' to which Contractor designs==1~

~ .administratio~ of Contract, supervision, approvals, payment~ I -,~ ./

~ certificates.,bY Engine~~- ,~ ---:.-",T' .,-c"

~ .payment- ~n Lump Sum basis, usually Schedule of Paymentsr~

~ ,-- -.testing procedures more complicated)

=~.=~

,8

=:I 6 Features of Construction and Plant and Design-Build i::t '. Books I

"' I I

~~ I . trad)' t)' onal comnpti t",n ten,.1"-:!1C I~- -~--!: ---~. ~ -,"'."-" !l~eJ-

\~_: Q letter of Acceptance " " i

cJ. I

, :1 .risk sharing is balanced "--- ..,., ~

1 -01 Emplo)'er takes risk of~:a

:8 >- 'ad\'erse ph)'sical conditions'~,., I. >- unforeseeable 'operation of the forces of nature'

=&;. » design by Employer -.

I ~ '. -» "'ar (anywhere), terrorism, riot, & ~i~ll~r (in coun~_ry), etc

~~~).)

=d) FIDIC GCC/l999 F<Xms -

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,

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::::t) 7. Need for Book where Final Price is More Certain)

~") ~

~ Old Books only covered part of need.

~.,) .Old 'Red and Yellow Books' recognised for balanced .

::;... risk-sharing,'} ..,

:::;~ .BUT final price and time is uncertain -~ .Iv' '..- --',~ .,... ..'. .

,1 .market requIres more certain final price and time:~

=};r) ,,- -~ privately financed projects (BOT etc) need definition of.) I final price and time

::;~-..Contractor must cover wider range of risks

~ .Employers must realise that:

~ > C"Jrltractv,:'-s ~:;'cn adeq~ate time andopportuility" '

:;~ ~ ...r iro h;,.,hp,," 4-,.. " 0 ."'" "~'4-r ~ r isl,- tak;""'".'-, ,. p --0:. -.0.."'. ~...s... .".. c: -h ..&15

I:}: ':> T:- 1~-. -.~ -:~: "...~ --.' Sl,... ' .-~J ' :::..mp! ,j'£lJ -~""& ~&'J "4J 1!&l.Y~ SOllie n ~.

-."

-FIDIC prcdu~ed t~lis colizpletel.v .\re~' Book for: I.

>- Employers \\'ho \\'ant traditional projects with more certain

final price and less Emplo~'er-risk

~ .:::f8

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'J

.j .J :-.-JC } AD IC GCCIl 999 roms

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I~

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1 ')

i': "- ) .all claims to follow a strict proccdurc

'),~ -') >- Employcr to consult witll Contr~lctor ~

~ : >- if no agreement, Employer makes 'fair determination.. '

" ,

'9 ~ if not accepted, then Dis pute Ad j.udication Boar6 !

i ....Contractor has majority of risks, Employer pays more

::; ~ -

':) .final price and time should-tJe more cert~.in -~-~ ') '-

~C)

'~:I 9. Circumstances Governing Use of EPCT Book

~.I-~ 81 Circumstances different from traditional projects:

"" ..'1,"

~-. ?""'O --;,". ...'~- ..i ..~;llV:a:'~;-':,,: :~Cq';.UL.;i::':;r;,~S ues~llUe prll;'~lple ana baSiC {l.;:;Sign 1

1~ I~ .1 .P rocu rp mppt nr~~n.J"~~r- ..J:l'L" r ~"". Ij: I --~.J "'...'-uu..~.::. UJJJ.\.. t..J&'.

I,,: :(J""; " I:1i~..'~~ I .n ..., .' ..."~~:. al ..-~-';i~d~rcrJ to VCi"iiY ZA.ii iill0Wiauoil anti tiara I

~! I~; > tentl~r~l- inay also have lu ca~ry &ut prt:iiminary design I

II I;;J'

-£ i >- smalillumbcr of tc.t1derers'. 81

I

c.; .! > tendering period has to pernut some discussions..i -\

, .\ .Contractor gi,'en freedom to carry out in his chosen mannert.."j ,

.i >- as long as end results meet specified performance criteria

::2 8-8 ~ Employer should not interfere

~.~: ~ but Employer ",ill want to know certain matters1 !.~ :> I.~

.)

i ~ FIDIC GCC/1999 Frons '~r:L ~-D- .--9 --[:;"-'". ..&..., -"'kc.a ~ ;'

) '~~J

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r 10. Comparison of Salient Features of Plant andI ) ,r

~ Design- Build and EPC/Turnkey ICooks, ')

~-.:.:1I"..J I );) EPCT -all matters t 1at could cause a price chanl;e (incl. time c lange

=I.should be agreed before Contract signature to ensure firm final price.') '.

=1 .~ .c_-. I

~.. "

~ Notable differences -apart from extra risk -include:~

~ .for P&DB best tender accepted by LOA. --:,

=t .EPCT direct to Contract Agreement.~ I .EPC1' Employer administers -Employer's Representative

--'8 I

~ I .EPCT payments without certification .

I=I I .P&DB Engineer may issue necessary instructions

~;" .EPCT Employer may only issue if he can state obligations in Contract.

:f , ' I,

~ I' .both Books re~uire ~fit,~orplllPose' '.V.hiCh ~eans Cont:"a.ctut ni~o;;... :

"'-~ -I !ia ..T~ ~ompIi:te ir.ff,~:::1';!ti':t[i 2n..i 5;.:fficlent time to s~rt.!!ln~Ze, "crIfy1

~ I and evaluate nl! rcle'\'3nt data:

, :~ r .In P&Dll Employer responsible for Ernplo}'el:-'s Requirements, but-.-1G .Tenderer to obtain all information etc 'tv the e.\'teJlt }~'hicll }~'a.\} I~. I -I

:i .practicable' before submitting the Tender

-8 .After signature, scrutiny period to find out a~iY errors, etc.

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~ FmIC GCCll999 ~ 11J .-= --0 "

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~) 11. Conclusion")

-)

=; .3 matching new standard forms for major contracts

::;1\' .'Green Boot' f?r minor works

~ .updated and widened scope ofFIDIC standard forms

~ .suitable for use on eve~ £-f°ject ?'/)'J .-~. c':- I

1 ~ .from ounor, through whole range of traditional, to the large,j ~"\\I yJ

I ~ complex projects, including]QT or similar type.

.)

~..Which Book to select -guidance in the FIDIC Contracts Guide I

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...JBC Umdoll &. Hru~.\e1~2001

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~. )

)

~--) FIDIC Conditions of Contract

~ IBC Conference 2001.=:!-) ~

)

;::I:) Presentation Notes on: '

::) OVERVIEW OF T~E NEW MAJOR CONTRlCTS

::;:)" -.

~:) Speaker: CHRISTOPHER WADE, Chief Engineer, SWECO International, Stockholm,

") Swedenl, and Chairman of FIDIC.CoDtracts Committee -~~':) ~- -_.~"'-,-~~ o'._-~-- -

...;~ 1 I d .( -° ntro uctlon

~'=).)

FillIC -the International Federation of Consulting Engineers -published late in 1999 a suite of four

~ new Standard Forms of Contract2. This new suite comprises 3 Books for major works and 1 for minor:.~ .Conditions ofContra~~'for C~:struction for Building and Engineering Works Designed by the

~ Employer: The ConstructiQn Contract .

.e8 ~ COiiJ;l;('!!~ .jf Cuflu-act fot. P1~r:~ ~nc v(:s;gn-Build for Electrical and M~chanicai Plant, and

=;:. for .BUi~di~~ :nd Engineering .Works, Designed by the Contractor: The Plant and

DeslgnllJulla t.omract

~i.) .Conditions of Contract for EPCffurnkey Projects: The EPCffurnkey Contract:-(.)--, .Shoit fonn of Contract: The Short Fonn.

~T!:; ~ Jr)V~;!!1 th~ ne.w suite are all marked 'Fi:st f..iitiun lYY9', i1l1G lhe rc:ison is th;it they can nol be~ .

=~ reg:lrded. ~f cirect upa:J.tcs ofFIDIC's very well-known and widely used 'Red Book', 'Yellow Book'

.and 'Oran~c Book,3, i.e. respectively:

~~.,. .Cqnditions of Contract for Works of Civii Engineering Construction (1987)

~ .C~nditions of Contract for Electrical and l\lechanical Works including Erection on Site (1987)

..Cdnditions of Contract for De'sign-Build and Turnkey (1995).

~-.The suite has no\V been complemented by the Contracts Guide for the thrce major New Books.

~ ;! o_!iJ I S\\'ECO lnlcmalional. Box 34044, SE 100 26 Stockholm, Swcdcu. (fcl.: +4686956054 E-mail: chri>lO!JlIc:r.wilJc@swccose)~I , .2 Availablc from FID!C Bookshop. POBox 86, CH-l000 l..ausann~ 12, S"itz~rland: http':ilwww.fidic.org.

3Also availabl~ from F!DIC~I ° J Ouistopbcr ~dc -ovcrvicw 1

--SWECO lnternatiooal -,2001-06-12 '

--.oJ .~ .-~C- "'~--o 'f'

..., """.""c" l... -1," JBC London & 'Brussels 200 I

-, "..

::rr 4. Conditions of Contract for Construction ~or Building and Engineering Works Designed by the

.) Employer

~-)) The New Red Book is similar to -and an update of -the Old Red Book, but with new features:

::f -) .Old 'Red Book' dealt only with civil construction work -the New Red Book covers all types,., of work designed by the Employer.

::R c') .suitable for (all projects ~here main responsibilifv for design lies with Employer (or his

'" fEngineer)

~ ~ .some design may, of course, be; carried out by Contractor :

~ ") .basically an update of Old Red Book ~

,. .administratio-nofContractandsupermionbvEngin~e.._~,.._c,... "~ ,,"..:,., " ...;.~, c..c --"",-.c_---~. , --c ~ .~ " .

~ :) .approval of work, payment, etc. certified by Engineer

~ .WO~k done is measured, payment according to Bill of Quantities

~ .option for payment on Lump Sum basis,:').

~ 5. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for..Building and Engineeri~g-Works;Dc3igned by Contractor~.., '-8

-..The New Yellow Book replaces both the Old Yellow Book and the Orange Book: --a ,t ~ ...C.1.'; '.:'eiic';; ~;oo:~' dealt only with electrical and mechanical cons~ruction works (most design

-.being done by Contractor),.'- ..fh~ 'Orangc Dcck' from 1995 dealt with Design-Build and Turnkey for civil and other

-,':) construction where majority of design don.: to') Contractor--' (.)

.the New Yellow Book covers all types of work designed b)' the Contrac/or

;.::.. .it thereIGre updates and replaces both the Old Yel!c a.1.1 ;;:e G!ange Books~ !,.;J

.) A (layout of all the New Books follows closely that of the Orange Book)

: a .New )'ellow Book is thus suitable for all t)'pes of projects where main responsibilit), for

::t design lies with Contractor

: :a .recommended for the provision of electrical and/or mechanical plant. allli tor the design and

:I execution of building or engineering works

: '. .(the majority of such projects m3Y well be electrical and mechanical works. Many \\'ill be a

.combination of civil, e & m, and/or building): 8 .some design may. of course:, be carried out by Employer or his Engineer.

-.Employer prGvidcs 'Employer's Requirements' to which Contractor designs-.i..-'J .administration of Contract and supcr..isioii by Engine.~ri .

..J .approval of work, payment, etc. certified by Engineer~

.)

Christopher wade. overview 3'iJ SWECO tntaaliooal, 2001-06-12 --",.;;;). 0 t'.--s

I

I lBt: wndon & Brussels 2001

I ~ 70 Need for a New Book where Final Price is More Certain

J.; The Old Books only covered part of the international need.

~ .Old 'Red and Yellow Books' recognised for ~~la~ced risk-sharing,.rneaning that:

.-Employer only pays extra when specIfic nsks actually occur

.) -Contractor does not have to estimate for unlikely hard-to-value risksI

~ ." -Bur final price and time is uncertain) .I

.market has shown requirement for more certain final Qrice and time in two ways:

~ -some Employers have -for many years -changed FIDIC Books balance to place more) 0

=J responsibility on Contractor

") development of priv~~~lyJinanced projects (BOT etc) whe~e lende~_w~,~.~fL'1itiQL ~~ ~ ~-~~-~ ,-~ ~. ._-"""" ~' of final priCt aridiime -.

C) .for such projects Contractor is asked to cover a wider range of risks of final cost and time(, . ld .~ d d..~ mc u rng olten groun con Itlons, guaranteed result, etc .) .Employers must, however, realise that:

n -essential that Contractors are given adequate time and opportunity to consider and\ 0 evaluate all information and risks

, -the price for the project will be higher to cover the extra risk-taking

--Employers will anyway have some risks

~ .FJDIC therefore p,:cduced trJs t"ompletei)' flew Book for:

) -those p~ojects where Employers want traditional projects with a more certain final

~ p::~e 'J.I;~ le:.s Empioyer-risl:

.) -Bur as a Book where Parties enter the Contract .with fu!! u!'.d!'.:-staG~ing. and~-~ ) acceptance, of the risks (instead of trying to adapt another risk-s~aring arrangement)

.~ -a$ a c.ur:~on stal1ir.g ~~nt for ~pcrruwke~ _t)'Pe projects, usually with private

financ..lg; In a BOT or s11rular tnVlrOmntill

-..1 .t,he EPCT Book is thus intended to be suitable for the many projects, both larger and sm~lle'::~ .) -particularly E & M and other process plant projects

..~ -all types of employers~,t

-often civil law countries...

1 =f!, -where go...emiTlcllt employer or private developer wants his project on a fixed price; .turnkey basis and with strictly two-Party approach (i.e. no Engineer)

~ -..EPCT Book includes an 'Introductory Note' where these mat:'e.rs are Ui!\cl'~5eci

.-." j

~ 1oj I--.

~ 4EPC = 'coginccring. procurement. coosnuctioo' (US) which is app;ox same as 'Turnkcy' (Europuo)0 I~ Chrislophcr wade -overview 5

~ ,~~~~Ic~liooal ~1111 I"";;'.- O~

--

~ " IBC um~n & Bru~~e!~ ~OOJ

-"'..~ -however Employer will want to know that progress is following time programme,

work is up to quality, third parties are not disturbed, performance tests are met wit.~.)

-~ and other Employer's Requirements are adhered to~-~) .Contractor has to prove reliability and performance of completed project, therefore emphasis

:t on testing, often over considerable period r

") .privately-financed projects subject to more negotiation than public and therefore more likely

~I ..' to c'hange standard conditionr -b,ut a standard fonn is necessary anyway as a starting point.,) .These Conditions are not sui}able in following circumstances:

:='1 -if time or infonnation is insufficient before Contract signature} -if considerable work underground or difficult to inspect

=1 -if Employer intends to supervise closely or control or review') ."- ,~~ ,,'"~" .

::1 -if an intennediary de~enni~es interim payments ." "') -where part of Works IS designed by Employer

=~.a -for public bidding without negotiations ~-

) -for such circumstances P&DB should be used instead

=~ .EPCT. Book has come because of market demand -given free choice FIDIC would

.recommend use of P&DB with its balanced risk sharing

,=~-., 10, Comparison of Salie:nt Features of Plant and Design-Build and EPCffurnkey Books

~~-4 For EPCT th~ .intention is that all matters that could_cause a ~rice change (incl. time ~hang.e~ should -

: as far as possible -be sorted out :J!1d agreed before \.-VIltracT signature t.) e!1sure firm r:ni1l i:iu':c.

~ i'~otable differences between these two Books -apart from the extra risks allocated to the Contractor -

-J"""~ include (inter alia) the following: c.

-"~ .for P&DB usually the best tender is accepted by a LOA. For EPCT typi.:aJly be.;:~~s iegally

, .} effective on signing the Contract Agreement

~ .Employer administers the Contract -unless he appoints an Employer's Representative

.-!a .interim and final payments are made without certification, usually Schedule of Pa~ments

.~p .under P&DB the Engineer rr.ay issue necessary instructions -Cl 3.3. Under EPa the

:)~;B Emi:iloyer ".;.: omy issue an instruction if he can state the obligations in the Contract to \\"hich

it relates -Cl 3.4I;-::=!.! .both Books require the Contractor to design the Works to 'befit/or purpose' -C14.1

_8 -to ~~able the Contractor to acceiJt this requirement he has to have 'completcI ;

:=~ infonnation and sufficient time to scrutinize, verify and evaluate all relevant data.

.) This is allowed for as follows: -' .,°-

~~~j Christopher wadc .ovcrvicw 7

~. SWECO lDtcrnational~-~ 200 1 -06- I 2

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"==" -however Employer will want to know that' progress is following time programme,

..work is up to quality, third parties are not disturbed, perfonnance tests are met with,)

:::-t and other Employer's Requirements are adhered to

~ J .Contractor has to prove reliability and performance of completed project, therefore emphasis~~ =I on testing, often over considerable perictd .

i..~ ~ .privately-financed projects subject to more negotiation than public and therefore more likely

,; ~ ~ change st~~dard conditio~s -b~t a sfnd~d f~nn is necessary anyway as a starting point.

.~ .These Conditions are not suitable m fo\towmg circumstances:

~ ='!I -if time or ~nformation is insufficient before Contract signature, ~ -if considerable work underground or difficult .to inspect

, --"--I. -if Employer intends to supervise closely or control or review, ') --.' -.'--~ -~f an intennedialY deierrnines interimpa'Yffients--.:) -where part of Works is designed by Employer

~ -for public bidding without negotiations -

) -for such circumst2.nces P&DB should be used instead

=I .EPCT Book has corne because of market demand -given free choice FIDIC would

..recommend use of P&DB with its balanced risk sharing

:=~..10. Comparison of Salient Features of Plant and Design-Build and EPCffurnkey Books

'~-.~ For EPCT the intention ,is that ail matters that could cause a price change (incl. time change) should-

-.as far as p~ssi?le_- be sorted out and 3greed ref')!"e Coliirac.' ~-jxllutu,e to ensure tirm final price.

~ !.:o~&lble diffecl;nces between these two Books -apart from the extra risks allocated to the Contractor -

~ ~) include (inter alia) the following:

~ .for P&DB usually th~ ~St terl~er is accepted:.by a LOA. For EPCl !ypic~lly bccom~s legall:

-.1. effective on signing the Contract Agreement

=it .Employer administers the Contract -unless he appoints an Employer's Representative

"!i .-.!!I .interim and final payments are made without certification. usually Schedule of Payments

i ~r .under P&DB the Engineer m3Y issue necessary instructions -Cl 3.3. Under EPCT the, ;J

=' Employer n'.ay only iss'.:e an instruction if he can state the obligations in the Contract to \\hich

it relates -Cl3.4..d .both Books require the Contractor to design the Works to .be fit for purpose' -Cl 4.1

-.-to enable the Contractor to accep.t this requirement he has to have complete

,; ::I infonnation and sufficient time: to scrutinize. verify and evaluate all rel~vant data-,

'.o.~ ',) This is allowed for as follows: i I-'-~ ,...

!;~~I ') Christopher wade -overview 7

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The FID I C Contracts.Guide

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,.I .:, Peter BoDenI '~ Member\", FIDIC Contracts

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;

)~ Foreword and Abbreviations .

~ The FIDIC Contracts Guide ("the Guid~") covers the following "New Books" first published in 1999:

'. ."CONS": Conditions of Contract for Construction, wh\ch are recommended for building or

~ engineering works where the Employer provides most of the design. However, the works may.,~ include some Contractor-designed civil, mechanical, electrical and/or construction \"()rks.

.' .:~ ."P&DB": Conditions of Contract for Plant and Design-Build, which are recommended for the.,.

':) ~ provision ofel~tric:al and/or m~~~ical plant, and for the design and ~,,"e:c1!tioT! of buildin£ 0: ---c- ~'"--'",~-,,---

1~ enb1~==:-ing \vcrks.ilowevei,'lhe works may-include some Employer-designed works.

-.? ."EPCT': Conditions of Contract for EPCrrurnkey Projects, which may be suitable for the

~ provision on a turnkey basis ora processor power plant, factory, infrastructure-orother type of~" 6;) project where (i) a high degree of certain!)' of final price and completion time is required, and

~=I (ii) the Contractor takes total responsibility for the design and execution of the project.~

..As soon as it was decided to produce a Guide commenting upon all three New Books, the need for

:.::~ these abbreviations (CONS/P&DB/E'PCT) beca.tne self-evident. Each New Book comprises three

..parts:~=t General Conditions-~ ', Gljid:"!!ct: for lGe Preparation of the Particular Conditions ('.GPPC")

=( Letter of Tender, Contract Agreem.ent a~d Dispute Adjudication AgreemenlS

Th~ GPPC}j;-v-.:i~~~ :.ome oa;:,ic guidance on what (if any) pro,'isions may be appropriate for the

~ contract's Particular Conditions. including some ex2.!!'.~!~t~~~t':. ~1i;;t are not r,;:p~::~eci in ::..c uuiu~.~:>

~ The General Conditions recognise the realit\, that the tender CocuIrI.:nt.<; for a p n:~u12: n.oject

'! t)rpi':21!y h~ve to :nclu,je provisions th:t are .not appropriate for o~~r project:;. Prcpa..::ic-;1'of t};('"~': tender rlocumen!s h?-s bc\:n lacil i talCG b) :

:' .nexibility':(iJDY~ ai1ticipating alternative p.ocurement arrangements, and (ii) by stating in the

.General Conditions \vhich provisions are sub.iect to what is stated in the Particular Conditions

-~. (because they may not be universally applicable); and

., .user-friendliness, (i) by maximising the General Conditions so as to minimise Particular

~. Conditions, and (ii) by identifying one location for essential contract-specific data.

..Ci' The General Conditions were drafted on the principle that users would find it more convenient if any~ pro\.isions which they did not wish to apply could simply be deleted or not invoked, than if additional

,,';o~ text h:!dto be \\Tittcn in the Particular ConJitiollS (bec?l.:~e the Ge.r1cral Conditions did'~not cover theirj .-":1 ~~ requirem.ents). Therefore, some of the provisions contained in the General Conditions may not be.j .-:J considered :oppropriate for an apparently typic:! cc;:::~:-::.;:t. T1il.: ~aiic concept was to provide maximum

,..- -

~J convenience for users of the New Books, particularly those who prepare the tender documents..)

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~'\ Project Procurement

-) Two other FIDIC publications were taken into account, both being second editions published in 1994:~ .~ .Tendenng Procedure, and

)~ .Standard Prequalification Form for Contractors. r~

., Tendering Procedure seemed to constitute an excellent introduction to procurement stratcgy, prequal-

=;t ification, tender proc~?ures, opening and evaluating tenders, and awarding the contract. It contains

'I diagrams illustrating recommended procurement proceduresjandguidance on these procedures, but no

~ specific example Instructions to Tenderers. Also, it only refers to the forms of contract that FIDIC

~ published in the 1980s, and was not upd,ated so as to refer to the Orange Book publishr J in 1995.

~ The Standard Prequalification Form comprises a set of tables to be completed by each applicant for") , prequalification. Although the Form conta1nS no ~id;tnce on thr; ryr("~~~ut~~.. in5U11ctions arcincludcJ ---,"",,-'-

,-,..,",."" ~'-C"---~- .,- -" "' ~._"-' ---,-~'., ',vhich shouid be sufficient foJ: each applicant for prequalification to be able to enter the required data,

~ , and sufficient for each assessor of the applications to understand and evaluate the submitted data.

~ Having decided to publish a substantial Guide incorporating ad~ice. on procureme~t, it seemed likely

that there would no longer be a need for a separate publication on tendenng procedure. By

.~ incorporating all this advice in a Guide, those s~eking advice on tendering procedure would be able to

.~ consult other parts of the Guide at the same tii'i1e, and thus be able to study the wording of particular

~ sub-clauses. The Guide therefore contains procurement advice that is intended to replace that which

~ was previously pu'blished in Tendering Procedure. Since three New Books are covered in the Guide, it" .could conveniently address aspects that logically precede the choice of which Book to use.

~ r\fter the Guide's introductory pages 4 to 8, containing useful information for selecting the General

=;i Conditions of Contract that are most appropriate for a particular cont~ct, the section on Project--' Proc;.ii t..T,.;nr p;mrh:o~i~~~ the !~p~r!~~~c cf first .cvie\\ ;ng ailernative procurem~ni options a~d '

i'::) determining the appropriate procurement strategy before selecting the General Conditions. For any.j ~ '" major works, the Employer and his consultants should revie~-his requirements and prioritise criteria:

~ .ti:-:1.~: th~imrc:1ancc of completing :he projel ~as soorl as possible, ,,' .'~ --.~. .'.:.'.

) ..:os1: the in...;;ort:l:'.cc of completing the project economically, ana

'~ .control: the importance of being able to prescribe all detailed aspects of the \,.orks;

:a and then make appropriate decisions on the follo\\'ing matter~:

..~ .tl1c"works to be executed under each cor.rract (often called "contract packaging");J and, for each contract

~,-J:}~ .the extent of design to be provided to, or to be caITied out by, the contractor, and:I

=!j .lump-sum, measure-and-value, cost-plus or other basis for determining the final contract price;

".8 and then consider whic;h of the New Books is closest to fulfi~ling these requirements. :",s noted ;~t the

:::) foot of page 10, there may be borderline cases where the selection of the appropriate Book is

"- :J provisional at this :;t:lge. i

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~) As noted above, FIDIC's Standard Prequalification Form comprises a set of tables to be completed by

.) each applicant for prequalification, with instructions that should be sufficient for eact: applicant for

:;:1:) prequalification to be able to enter the required data and for each assessor of the applications to

) understand and evaluute the applicant's data. FIDIC's publication of this Form enables the Employer

::I) (in li~u.of preparing a separate prequalification document) to publish a prequalification advertisement

., containing:

~) .information on the prequalification procedure and criteria,

,t .instructions on the form of each application, namely the FIDIC Form, and

~ .information on the contract, and on the project of which it (orms part (if any).

:::::i' Following the above detailed guidance on prequalification, it may seem surprising that the guidance

~ on tender documentation covers less tha.n.J»IO pages. However, the Guide Contains another 298 !1age~ ..-.~~~.,-; "..: :. """'~:C'~"~--'-'" _A-_-' ~--,-_. c.-,---

':=t1 oi--Gcneia1 Londltlons ana commentary th~reon that should constitute useful guidance for those

,.") preparing tender documentation. Also, as noted on page 3, the Guide is not intended to providei

-? Co~Plete train~ng material for the .expertise required for the. preP.aratio~ of tender documents.

~ SuItably qualified personnel \\'Ith the relevant expertise, mcludmg the relevant procurement,

-# contractual and technical aspects, should prepare tender documents. Whilst it would be unwise for

~ them to distort the allocation of risks contained in the General Conditions, these personnel need to

..ensure that all the complete Conditions of Contract, the General and Particular Conditions, are

~ appropriate for the works, the Employer and the jurisdiction.

..In view of the above comment on the Guide replacing FIDIC's publication entitled Tendering=J -Procedure, i~ may ilso seerrl surf,nsingthat gt:idancc-.on-iliiS topic appears-to be limited to pages 15,- i6 -.:

.and 20. The previous FIDIC publication contained general guidance on the procedures, with the resulth " h ' . I . I . T .;: -.,.. ~k .., ..~ ~ p' .,.~:. , ..,.t,-.co tn n~"'~.n- ---t at ~:!.""~..3~r. nau,,~Wrllt: alii ..nec_ssary-C1nCllm/"n~~, I.,...".jt..", ns.ru~..l..r._.v .~ ~..).

;-~ One of the puf!1oses Qf tl1e Tn5tructions is t,-, i~fc!m tende:-e,:s of :?oIl aspec:s of the tCi,.j,:.ri1;g :.o!'::"~cdu,:c,;;,;;;,;) thus defining the rules by which the "game" is to be "played". Many of these rules are not universal,

8: but v~ri acc.ording!G the t)pc of ' orks, Employer. jurisdictiOfi, etc. Nev~rthelcss,.!t scemed 'pre!erable

~:} to pro,'ide ~xamp-i~furms,lor instr.:.:tions and ther~b~! info:m r!::;;ders '~[~~T:;ta! ten~.ering pr6ce(iures, --'

.} rather than to give guidance on such procedures and let them write the Instructions.

=i The sectipn on Procurement Documentation concludes with the suggestion that a person be appointed,t tendering co-ordinator by (or on behalf o~ the Employer, to take sole responsibility for:

=I ~ dc~patchihl! tender documents to eachProspective tend~rer, plus details of the site visit (if any),

=-,t .vetifying that each prospective tenderer coniim1s having received all documents,,.-..mjnaging such a site visit by all tenderers, including the preparation of detailed records,

::=r .receiving and responding to queries from prospective tenderers,-.-:.I .similarly ut:~palching addenda to tenderers and veritying receipt and, possibly,

~ .m~n!lging ..he opening cfTenders, irlcluding-lhe preparation of a r~c(\rd <,f'Tn.. rroceedings.~ '£0..poole Thc FIDIC Conlract'~ ~ 5 ' Guido C Peter L Boocn

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J:f)r c;lch suo-clausc, Ihc Ihrcc texis are displayed sidt:-oy-siJc, undcr thc acronym hcadings ('()NS,

J'&I)U and J:1'(,1'. Wc had 10 vary the layout where thc texts do not rclalc to the same suhjcct-maltcr

=-:D- (cg, I () oullrictl nollo vary ill()O much where similar topics arc ocing addrcsscd (t:g, (:Iausc .1)

Aflcr Itlc Icxt or cach suo-clause, a bo.' is in'icrtcd containin!!: thc numbers of any suo-cla'iscs III thc=-'"'.1

-()Id J~cd, Y cllo\\' and ()rangc Hooks that rt:latc tl) sin1ilar mallt:rs. On many prt:\'IOUS I)CCaSII)nS,

ljut:\til)l1s had occn raiscd on whcrt: Iht: SUnjCCI-111altcr or ont: of thcsc Old Uooks was addrcssl:d In thc

='--:;a ~cw HI)oks, so it sccmcd as though somc rcadcrs might want Ihis typc of infomlation.

Thc commcntary includes a iablc listing the clauses relating to claims on pages 90 to 93; commt:nts on

=-::a f:'1 DIC's c"amplt: f()mlS of security (see annexes to Gf'P(~) on pages 100 to 102; example form~ for

ccrti ficatcs issued lIndcr Sub-Clauses I (J, i, I (J,~ and 11,9; and advicc on resolution of disputes (scc=--:;

later papcrs) by DAIJs on pagcs 336 to 33X. \iost of the Guide thus comprises detailed commt:ntary

that is intended to as5ist all those involved in the procureMent ~nc ex~c~~ion of the \','r,;-I.~:=-~

.the Employer's team selecting the ;'\'c\\' Book and writing tender documents for a Contract;?

~ ~- .tendcrers' teams attempting to foresee the consequences of being awarded the Contract;-~

."Employer's Personnel" and "Contractor's Personnel" managing the Contract; and:=:..:;

.DAB5 and others involved in the a,oida!"!ce and resolution of disputes under the Contract.=-;

G~ossary of Contract Termi"oJog~'

..The Guide concludes with a glossary of words and phrases used in the fields of building, consultanc}',~

~ngineering and- associated acti\"iti~s, D~ubtless, some, may disagree with some of the de~nitil)ns.

.~":-':~:lse ~~tiy c: ~Ii.:;se lem1S do no! nil..'e ,Ii':: s~me meanings throughout the world and for all time,=;

, For example, conciliation and mediation are given the ~ame definitiop Some ~eoplr' -:':.~~i~

':';):-:':::!:::.~:v:-; ~S '."t; ~.-vcedur~ under which a conciliator is more pro-active in terms of expressing his~

o\\'n \"ie\,s and (if the conciliation taIls) in tt'rms of issuing reco~-:mcndat;vl1~ CI: $e~:::OI1eilt (Roich,

-under some rules of conciliation, can becomt" binding); and regard mediation as the procedure under

,a \\hi.:o a l!i~di::if)! ~t:...~~ t,1 avoid :,,\pr':ssin,g his OW/1 vi\O;;,,; and does not issut: .ecorrJl1endations Other::::-'-"~ pr'!:';,!e 'l~C !:'i'S': \\'!);ds dit-tcre~'I~. 50 it set:mt:d preterabl.. to apply the saI1.~ uetiliitivii to ~'\.Ith u~-

th~se \\'ords,~-..Hl)\\e\I:'r.

diispu!c aojudic:'llion,:rt:\'ie\, o\-'Jrds art: gi\'~n different definitions, based upun their original

, COIlC\.'pl:, No\\'. 2 CO!1!rJ\." !1~:!~ ':':!';"': !l~ ~ disj1utc board issuing recommendations that arc bil1ding~ un!;:.'s and ~!!1til it is r~\'i~::d in 311 ;1;-:1;;:;1[11.: st:ttlement, arbitration or litigation, \\nether the Board is

tl' ,1\.'li\'er :I Idecision or recI'mm\.'nd;1t:\'tn. and \,hetht:r (if notice is given) it is binding unless and until~

rl.'\'I-,t:J in ;; -,::ttleml:nt or :.Irbitr;ltll)11: tn::-,t' mattl:rs Jl.'pend upon thl: pro\'isions in the Contract. :.Ind no!, up,)n \\'h\.'!JJl.'r th.:. I3o3rd i~ rt:rl'nl,d tl) as ;1 Ji~putl: ao_iudic;ltion bo:lrd or a dispute rc,ie\, board,~~

1-11': rllll)O~1: of thc glo~~ary i~ tl' inllil.';lle 1:1 J)I("~ illtcfj)rctatio/1 or thl: \'i.)rd~ and phrasl:s, TI;I:

Jl,t-'T1ition~ art: not int\.'llllc:J t" !'t' 1:'~,i;ly ~)rl:cisc:. or 10 1,-: c{)mpar;loll: in ;.;iy \1thl.'r \\'a~ !O !hl:~

d.:t-lllitiolIS spl:cified in Sub-Clallsc: 1.1, \\'e hop~ thaI, as ~'ith the othl:r parts or the Guide. realll."rs \\'ill

-li,~d tIle glossary hclpfulln tll\.'ll'I:I\";'_": r'l:'.!!"':~ 111;1! 0111:/1 fom1 pan ofthl: pr{)curcmr:nt and C:\l.'cution

=:oj {If bllildin~ and cngincerillg worl..s usltlg the FI OIC 1999 suitc of Cunditi{)ns of- <'~ontr.lct,

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'to~

Examination of Legal-Concerns

~ ,--~-

18~

Christopher SeppalaLegal Advisor-~~.

FIDIC Contracts.--., -Colnmittee~.

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'O( ,. .Volump 17, Part 2, April 2000

~I .I'~IDIC'S NEW STANDARD FORMS OF CONTRAC1'-

:1":1- 1'~OI{CE MAJEURE, CLAIMS, DISPUTES AND OTHEI{I1- C:LAUSES

~.-J-- CHRISTOPHER ii. SEPPALA~, ...

Legal Adviser, FIDIC Task Group for uPdating the HDIC International Conditions:"':J of Contract, partner, White & Case llY, Paris

--.This article is diVided into two parts, Part I discusses fJDIC's three new Books--.for major works) in relauon to:

. ] C ' .1. '"' " E I 'n: 1 ,,2.nntr'lctor ~ nsl'. ari- mo over s !'-JS¥. ;~ 2. indemniues; .I

3. limitation of liability;~ 4. the new force majeure Clause; and

5. grounds and procedure for tenninauon of the contract by the-Employer and the Contractor.~ Part II looks at:

=.~ ] , the ne"..' procedures for c]aims of the Contractor and the Employer;-D 2. the procedure for the settlement of disputes by the Dispute

Adjudication Board (DAB); andz.~ 3. very briefly, intemationa] arbitraUon.

=~ ' Pari I: Risks, Force Majeure and Tennination

CONTRACTOR'S RISK AND "EMPLOYER'S RISK"=~ (AJ~LOCA Tj ON OF RESPONSIBILIT\Y FOR DAMAGE TO THE

WORKS) (Sub-Clauses 17.2 to 17.4)

~ The basic a]!ocatlon Ol :is!: ~.::rtVepn '_~e Contract.or and the Employtr fut.,~. -damage to the Works before takeover is dealt with in Sub-Clauses 17.2 to 17.4=-~ o[the rJew Books. The principles are essenual]y unchanged from those in the

old Red and Orange Books. These principles (it will be recal]ed) are as=~ follows:

1. The Contractor is required to take fu]1 responsibiliryfor the care of the==-~ Works, materials and Plant from the Commencement Date unti] the-Taking-Over Ceruficate is issued for the Works.

~ ::B I nlC ncw ConslnJclion Conlnct (Condiuons of Contract for Conslruction). Planl Contraci

-(Condilions of Conlncl for PI:lnl and Dcsign.Build) and EPC Conlnci (Condiuons of Conlr4iCl for

EPC/Tumkcy Projccls)..~ :-. f l'hc Icrms llsed with inilial c3pj~ls in .his aruclc rclcr 10 defincd lcnns in lhc ncw Books for major~ ~ works.~..M

.~

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1'1 2] FlmC '" 1\"711 ,\I,/'/"}""! f'117n,~ (if Contract 237

.l'tlc list of tile I~mploy('r's Risks in the EPC Contract is more limited, )t only, .inclu(Jcs par..lgrap}ls (a) througll (e), Thus, use or occupation of ,he Works

I)y tllC I~JnJ)lo)'er (p~lragraph (f)), design of the Works by the Employer'",.Pcrsonnel (p..lragrapll (g)) and "Unforeseeable" operations of the forces of-nature

(paragraph (II)), are not recognised as Employer's Risks in the EPCContract, in keeping wllh the risk allocation philosophy of that Book, under~ which more risk is allocated to the Contractor,

As was the case under the Old Red and Orange Books, if the Works suffer.loss or damage due to an Emplcryer's Risk, the Contractor must rectify this loss or...damage

to the extent required by the Employer or the Engineer. Where the, Employer or the Engineer requires rectification and the Contractor suffers~

delay and/or incurs additional cost, the Contractor may be entitled to an-extension of time and to the cost of rectification (Sub-Clause 17 .~).

c;- \/'/h.::re the Contractor rectifies Works which have been lost or damaged as..the result of an Employer's Risk, is the Contractor entitled to recover profit in

(-) addition to the cost of rectification? In the past, FJDIC has taken different.,,- positions on this:

1. Under the old Red Book (Sub-Clause 20.3), the Contractor was;. entitled in all cases of Employer's Risks to "an addition to the ContractPrice in accordance with Clause 52", implying he is entitled to profit.

~ '. 2. Ho,,'le\'er, under the Orange Book (Sub-Clause 17.4), the contractor"!S was entitled in all cases only to cost, implying he is not entitled to profit.

.'if!" C The new Books take an intermediate position. In general, the Contractor is~

only entitled to recov_er his COST, but in ~he c=::;e of p~,ragraph (f) (use G.occupat1on by the Employer), and parag,raph (g) (design by the Employer),~ the Contractor is entitled to "reasonable profit" as well. The theory here islh ?' Tn"""" ~-,. ,~o.. ,..hJ "rp l' J" C ~ JrlD 'lo v(-- I- I.~ ""' off e '" ; ~_~__h V;"S'll. -U- j-".u ' tc'~ -:-- -:- -:--"'~.)"',J .YJ -, -, ~ , J ~, -'. ~~~ ~~, '" "'&A"'" , u...and, therefore, the Contractor should be entitled to recover his profit,~ \.;herp~ !!1 the other cases the Err:ployer is not at fault and, therefore, thereshould be some sharing of risk by the Contractor, by his giving up an~

c~} enljIJe~~nt to pr'-Jfil, (--- ':. ':~. -~-"" ", .As P?r3gry,?h~ (f) a!1d ,,?;) 3,... not contaIned Jf1 the ,.~'- oj! 1'...rnp~oyer s Rj~ks

in the EPC Contract, the issue of entitlement to profit does not arise at all in~ relation to that Book.~

INDEMNITIES (Sub-C]ause 17.1)~

Under the old Red Book, not only \\'as the Contrac~or responsible for the care-oftlle Works, from the Commencement Date until takeover, but he was also

to a certain extent responsible for things that arose OUt of or as a~ consequence of his execution of the Works or remedying of an)' defects...(Ilerein.

Thus, if the Employer were subject to losses or claims for:

.:..I' (a) death OJ ~njury to ..ltlY person; or

.-(b) loss or damage to an)' properry (other than the "'orks);.~~

---~ -~-

c(- '

1)1. ~l r]DJC~ .'\ll'W .~l{l1ldf1Td J'()nn,\ oj (;()1llTf1C{ ~:~~j

11)1 II ISS ()f tIS(~. loss of prof]t and indirect or consequeJltial d.IJJla.{!;e, ~lJI~jt:ct t()

«"I;till (~Xc(~J)tions,~ In addition, like ttle Yellow l~o()k, lh(, Oran.{!;(' l~o()K

1)1(\('(1 ;1 SI)(~(ifJC monetary limit on th(~ Contractor's total liahility t() tll('

1'~"'I)IIIyt". SlJ(:ll liabilitywas said to be limited to tile Contract })rice, sul~j('ct I()

111(: S.llllt' t:xccptionsf) (Sub-Clause ]7,6),J lowcvcr, like thc Rcd l\ook and unlike the Yellow l\ook, the Orange I\O()K~

(lid not exclude the Contractor's liability for defects and other things after~

.th~ expiry of tl1c Defects Liability Period (after u1e "Contracl P,=riod" in the

Orange Book), Consequently, the Contractor would remain liable for defecLo;:"'I

until expiry of the relevant statute of limitations-=-1

What has changed now in the new Books for major works?

First, there is now a provision (Sub-C]ause ] 7 _6) limiting L~e 'Con~IQ.":tor's=-';

liabi1ity in ail the new boob, including the new Construction Contract. Liket the Orange Book Clause, the new Clause:;:i--

]. excludes the Contractor's (and Employer's) liability for, among other~ things, Joss of use of the Works, loss of profit, loss of any contract and

for indirect or consequential damage which may be suffered by the=1

other party; and.2. p]aces a monetaI")' limit on the Contractor's total ]iabi]ity subject to=-

~ certain exceptions.

.The second change is that, unlike the Orange Book, the new C]ause does~ not specify, propose or recommend any particular monetary ]imit on theConL~ct~r-'.s 1iability ir: :.~~~ G~;a~ra] Cond~\.iQns. It was nat deemed to be-desirable

to put a ]imit in the Genera] Conditions, as the limit which might be=.;q

appropriate would vary,\1idely depending, among o~er thiT!gs,?n th~n3'.,~;-cnri -TT'T\""Y"~~"""'.~ ~.. ~ -, &r -1 'ue .0Tl ' stru- C' l -ed--- t;-t e~ rl. sk-'sl '

nvolved and the-~--- !'--r~"""""'-"- v. tIlL "\JI"~ LV C , lJJ~

extent of the Contractor's obligations, e.g. whether he is designing the Works

-on a tUrnkey basis or not. According]}', the Genera] Conditions now provide,

like the o]d Ye] I 0\\' Book, that onl)' if nothing is said in the Particular=~

Cond~tions about thc amount of this limit wi]] the limit be effect!'!e!y the

.~. "COntr1Cl Price" Of, )n the ne\\' Plant and ~EPC Cc,niractS, the ..Accepted

Contract Amount".--W The third change (from Ole Orange Book) is that ]iquidated. damages for~

!I Scc: Sub-Clausc: ] 7,6, Thesc: c:xccpLions (0 Lhc cxclusion of thc: Contractor.s liability includc:d:

-(a) c:lcctricif)', watc:r, gas and othcr scnices purchascd from thc: Employcr (Sub-Clausc 4,]9);(0) coargcs for machinery and equipmc:nt supplicd by thc: Employc:r (Sub-Clause 4,20);-..u (c) the Con(ractor's indemnificauoll of the Employc:r for infringcment of industrial propriC:f)' right5~

(Sub-Clausc: 5.9);(d) liquidatt:d damagt:s for delay (Sub-Clausc 8.6); and

, (c) liquidated damagt:s for failurc 10 pass test5 after complction (Sub-Clau~e ] 1.4),~ In addition, tllc Contractor'sliabilif)' "";I~ said not to be cxcluded in tilt: cast: of fraud, "ilful mi~condllct orillegal or lIIllawfulact5, nor ill c(-rlail) oIlier cases (wllcrc the contract -impo~e(~) ~ grcater liabilif)'" or in(;tsrs of ;t(LS .C{)lltfdr)' to the m()~! Clel)!CIll.lrv rulc~ of diligcncc ..,-).--.U"

U Sce foo(l)ote 8-

-~

=:.:J-

=:.]

, ,

c,( '. ..I .

~- 1'1 '.:1 I'JI)j(:.\Nl'iII,~/(lnri(frrll.(llm\()/(;fmlr(Lfi :.!/jjL".

1)(. ('1111(.' 11111)f)~"iJ)It' (Jr illc~tll, 111(')"(' tir(' V(~I~ It"" (Ir(llrJI\laIIC (., illl~

.-WIIIC II 111('/f/lff: 1JI(~/fJureCI;IIISl' III 1111' ()r;lrl~(' I)()()k Ctill ,lrJr)l\

III::» ()III\' il')lll' illtcrprcts tllc w()ro "iITlIJO~sil)ll'" illlll(' ()rJrl~<.ol~()()k

'1 IJr(J;lclly If) 1('lcOr II) ~/llat is rnmmerrzall.yimpossi!)I{' (c.g. C()S(~\(\\"l('r(' 111('~

(C)SI of OC)lllg Illt~ ~\'()rk litis Illcrea.'it'(IIJY d 'J1lll~lpll~.()f I () or It! or \VlllOI:'

.lao()llr or malerlals I)(tvc become cxtraordJJ1arll)' scarce) tllal thl~

1 (:lallSt' can rcCllly provide practical relief, Bllt as Clallsc ] 9 of tilt:

: ()rangc I~ook does not refer to what is commercially impossible but only~

to what is "impossible", this may imply soo)ething absolutely

I impossible,~. A related problem is that Sub-Clauses 19,3 and 19.4 of the OrangeJ

...Book provide that where an event occurs which either the Contractor

or the, Employer ~~ns,iders to constitutefarc: majt'1LT/!; the Employ~r .or

~ ~ the COllifdCtOf snaIl endeavour to continue to perfonn [theIr],1obligations as far as reasonably practical". Howevel-, as performance of

( their obligauons had (under the Orange Book) to be "illegal or

impossible" to constitute farce majeure, it was not clear how the

Employer and the Contractor could be expected to continue to;..I

perform their obligations ''as far as reasonably practical" when,

i obviously, they could not be expected to do something illegal or~

: impossible.=-I Sub-Clauses J9.3 and 19.4 of the Orange Book only appear to be

.understandable in this respect in cases of partial illegality or:;;t

impossibility, that is, where a party can perform some, but not all, of

1-; S r-.1..1:_~ -.' J ,.' o..~ ...,._~-o ~.~

' In the force majeure Clause in the new Books (Clause] 9), a solution has

..i)('('n I;liiJgro- '_J c"!e':came ~he::;:::; di';f.culties. T1lt: lit:W Ciause may b-e broken='1

o()\vn into the following parts:

i. a relatively broad definition of "force ma;jeure" (Sub-Clause 19.1);'=-i-

ii. j:;)T(f 11Icj~J.?:-e ~'ust "prevent" a part:,," from perl-()rmil)g "ail)' 01~' itS-()bligations

(thereb:,' ~xDrcs51y ackrl,::,""!~dgillg the possibi1;!_,:, ~_-.r part ill I

force ma;-eure) (Sub-Clause J 9.2);rl

iii. when this happens. the party affected must give Ilot-ice within 14 days

after the parry became aware, or should have become (l\...are, of the=-i

event or circumstance said to constitute force mctjeure (othef\vise, the-part:'

ma)' have no right to claim farce majeure) (Sub-Clause 19.2);

i\.. \\'here all)' force maji'UreClausc in a sub-contract gives relief on broader:i

grounds than tl1ose pl-ovidcd for under Clause 19,' these broader

grounds \vill rIot ~uTord the Conti-actor I-elief tInder ~l~use 19d

(Sub-Clause 19.5);

-\\11c", f,"", 'l/l'}11Irr (;,\ d,.tilICU il~ Sllt~f~I;JII:.t 1'.11) dr!t'l~ ,15I1ocolllr;IC!(11 of 111l" <':Olllr;I(lor. II:I~:..J

\"'.:II.! II' Illll;,llv Ot: illierprcico ;~~ ;I'icClil1~ lilt: (~Ol'II.;I(I?r ;1:. '"cll, ~Ct: OIII\C;JII \\;1~I;Jc.~. r.lm'I~-"(/,'O'1(_".!I/II/' 1'11"1,/,11:\ a111! !'OJ,i.I,.\ ", 1.,,/ 11111! LU11/'lllf (1~)~tJ), S\':t't:1 .~. M:tx','cll, LOIIOOO. \01_. rr .J'2=--4!.~':.J~

...

--,-~.

~t( \~

1'1 21 FIDIC',S Nf."U1 Slarldard r()m/..\ VJ (;()nlr(1r{ '24~';

.Tcrminclti()n by tnc Employcr (ClalLsc 15)~ -

J~()tll Ill(~ (:I(j J~('O I~()ok (Cldus(~ 63) and tll(' old Yellow I~()ok ((~Idus(~ 4:))iii «()fllaifl (>r()visi()fls allowing [lIe I:mpl(~:er to t(~rmina[(: tll(~ con~rac[ ( or, ~,JI~.

t IIC case of [llC Rco Book, to [ermlnate [he (:mployment of the (Jontractor )if I tlle case of specif](~d defaulLc; by the Contractor, e,g, aCLc; of bankruptcy,~ Jepudiation or where tile Contractor without reasonable excuse fails t()proceed with the works (Clause 63 of the Red Book). But in the Orange Book,tin additional ground for termination was introduced. Sub-Clause 2.4 of the~ Orange I~ook provided that the Employer could terminate the contract al any

time for the Employer's convenience upon 56 days prior notice to the~ Conu-actor. If the Employer did so, the Contractor would be paid for workdone under Sub-Clause 19.6. The Conlractorwould not be paid the profit of

...whir:h he would be G~priVLG cr. tht:. balance oftne contract which he c.ould no~ longer complete.

In order to ensure that this Clause was not abused by Employers, who~ might otherwise terminate a contract early merely in order to arrange for thework to be done by someone else at less cost, Sub-Clause 2.4 in the Orange~ Book provided that, after termination, the Works could not be~ recommended for a period of six years without the Contractor's consent,

..Like the earlier Books, the three new Books for major works provide that~ .the Employer may "terminale the Contract" for specified defaults by the

Contractor (Sub-Clause 15,2). Unlike the old Red Book (Sub-Clause 63.]).~ .and Orange Book (Sub-Clause] 5.2), the Employer no longer tcrrninates the

."em plovrnent of the Contr;1c::;r" bl:it ten::iflates the conirac.~.I

As \\;11 be recal1ed, under the old Red Book, where the Contractor had= committed an event of default, the Employer had to, ~ive ]4 d'l)'s nOelt':'

.~C[(.'I~ ~li c"mJid "le";;;o;j,:;::'.!.~ ~h::. COnlr.'-LiOr'~ t:.lnpioyment" (Sub-Clause~ 63.]). While the same notice period generaUyapplies under the new Books, il~..

is a1sc provided there thai the Employer may terminate the contract"immediately" in a case where the Contrac_torbecomes bankrupt ot::~ommjf';;-:..~

8 ~ri~(.ry (Sub-C~LJtI~t 1~.:?). !'"]o prior ootice is required.--41rl auti;uun, d "t~r.! ;jnation for con.vcnience" C:ause nas JIO\\' been

introduced into all the new Books for major works, except that now, more:= logicall)', it is to be found at the end of the contract, near the othertermination provisions, in Su~Clause ]5.5, and not in Sub-Clause 2.4, as in

~ the Orange Book.-This termination for convenience Clause is basically the same as the

, Orange Book Clause, cxcept that instead of barring the Emp10~'er from~ cngaging another contJ~actor from doing the work for six years, il simplystales that the Emplo)!er shall not terminate the contract:~

Min order (0 exccult' lilt' \,o()rks himsell~ or 10 arrdnge for the Works 10 bt' execuled by~ ~

anoulcr Col1(rac(or.--~

I\.~ witil lilt:. OraJIgc i)ook Clausc, in the case of a tCJ,nillation for~ <'~()Jl\'('nicncc, lllC C()Jl'-tr;\CIOr is ()Jllv t'lltilled to bc paid fQJ- '.':a:-k oonc cIllO is

a~

.:j

~

(it ~9

1'1 ~ I 1-11)IC'\ ",;"" .\/'11"/'1,,1 /-'l11fl5 oj Contract ~4:,

..Jllt II(~W l},()()ks also tld(1 III(.~(. 1\\'(1 poillts as furtller groullds for~'- I(.rrnirl;ili(}rl ()f 1/1(' conlr,lCI I») 1/1(. (:()lllr,lctor. -J't1US, SlJo-CI,lUS<: I r,.~

J)I()vi(I(~s Illalltl(. (:()nlr,lCI()r 1'ltI) 1(:rIIliI1,IIC thc contract:~

I. wtler<: th<.' (:()ntractor does 110t rcc('iv~ rl~asonat)lc ('vidence of tilt.I~rnploy(~r's finarlci;ll arrangements within 42 days ,tfter giving a noti(.~

I() sllsJ>end on this account; and~ 2. in the case of the new Construction Contract, wt1ere the Engineer

~ fails, within 56 days after receiving a payment application and,. supporting documents, to issue the relevant payment certificate.

FIUJC has been criticised in the past for not acknowledging, in its~ contracts, the situation where the Engineer himself fails to perfonn his dutyand, therefore, for not providin~ the Contr2ctor with a remedy in this~

situation.In Clause 16, flDIC has, to its credit, gone some way to redress this

~ 8 situation. .Under the old Red Book, where the Employer had commItted an event of

default, the Contractor had always to give ]4 days' notice before he could:;. terminate his '"emp~oyment" (Sub-Clause 69.1). While the same noticeperiod continues generally to apply under the new Books, nevertheless the-" Con tractor may now tenninate the con tract immediately, in the case of an act

.II'~ of bankruptcy of the Emplo)'er or a prolonged suspensIon ordered by thei .Employer (Sub-Clause 16.2). There is no reason why the Contractor should=..

.have to wai~ for a nouce period to expire before being able to terminate inthe ~'" rw r-, - 1--"T"Y\~'~r., "" ",-' '- ! '-UJ"'u~"~-~':.

, ?nri if: Clai'!l'..!:, !<-Esolu!:cn of Disputes and Ule Dispuie Adjudication=' Board

THE NE\\7 PROCEDURES FOR CLA]MSOF THE="@ CONTRACTOR .A.ND THE EMPLOYER (Sub-Clauses 20.1 and 2.5)~

Both the old Red Book (Clause 53) and the Orange Book (Clause 20.])--contain special Clauses dealing with the procedure for claims by the

Contractor .12~ ln the new Books for major works, the Sub-Clause dealing "'rJth

Contractor's claims (Sub-C.Jause 20.1) is more developed and detailed than~ in the old Red Book and Orange Book. Not onl)' does this Sub-Clause-regulate

claims for additional pa)ment, as in the past, but it also very sensiblyregulates claims for extension ofume, as there appeared no good (eason not~ 10 have the same procedure appl)' to claims for time and claims for mone~..

-II SulJjcCI. likc all pro\1sions of 111(" colliraci. to (he mandalOl)' requirements, if 3ny. of applicalJte 1:1\,~ I~ Se(" CSeppala. -u)nlraClor"s Claim~ Under The FIDICCivil EnginceringConlraC(",4Ih edn (1987; 1/1

Vol) 9 of (lie lnlt'nlallO1la/ BUj;lItJj 1.au'Yt7 at 395 3nd 457 (Seplcmber 3nd Oclober 1991).

..--.It ~ !~

-

\.to'" "('.-1'1.

2 J FIDI(:', 'V,'7// .\I'11Itiard ro777Z.\ of C(mlrflrl 24 i

proJ),:,~('rl by the En.[,'int:(:r or the Employer and approved by lIlt:~ "- (_:OI1Ir.tCI()r, th(~ EngillCt., ()J. EITlployer mu.~l respOlld "witll approv.tl,

or with dis.tpproval an() dct.tilcd commenL5". J-1c may also requc~jt any~ ncc(~ssary furthcr particulars "hut shall nevertheless give his responsc.'on the principles of the claim within such timc".~

This is the first time a FIDIC contract has required the Engineer or'- tIle Employer to respond to the claim of a Contractor within a giventime period. I~

5. The requiremenL5 of Sub-Clause 20.] are expressly stated to be "inaddioon to those of any other SulrClause which may apply to a claim".Thus, the Contractor must comply with the claims procedure...provided

for in SulrClause 20.] in addition to the requirements of anyother CI~,)~~ ~n the contrac.. whic:h the .::::ontrzctor may be lelying~ upon to assert a claim.

6. SulrClause 20.] further provides that::r. 18 K)f the Contractor fails to comply with this or another Sub-Clause in relation to

any claim, any extension of time and/or additional payment shall take accountof the extent (if any) to which the failure has prevented or prejudiced proper1i investigation of the claim. .." [emphasis added].

This (point 6 above) is a relaxaoon of the requirement in the test edioons.~ -The test editions had provided that, if the Contractor had failed to comply

with SulrClause 20.], the Time for Completion would not be extended and.the Contractor would not be enoued to addioonal payment.~ .After much reflection, the concll1sion of the ~D!C T;1Sk ~r.::>up was th~:

there must t~ c::; l-Jotice of ~iaim within 28 days for there to be a valid claim. If a:;, ~o~~~~~o:h:~~.a.~~i~.:~~r a?~di~o~~~l money or ~:e~I~~~~~,fl;OY1..e: i/s()~?O~I:d

.--~ .".~,' ~~ ~~ ..."s IJ lCa;,UlldOJe promptn -"_..~J ""6"" \6.uJ GaYSappeared to be a reasonable period. Most Contractors who work on:::I internauc!121 ?roject~ are )r.rge companies havii1g a statT tl1at is fujjy capableof recognising a claim situaoon when it arises. Conseq1JenU)', if the.

, ..~ontrai;;tqr'j1meed ~as a bona J"'1de claim, there would seem ~O be ;l°.-'i!??od -.~.

.i::'i' !:: !'eo2s?!1, '."'~y~~~::pe~e:-.cej COiiu~Ltorshoujdno[ be requIred, under paill 1.)[

forfeIture, to gIve a nouce of claim within 28 days (or four weeks) of the event:2 or circumstance giving rise to the claim.

]t should be emphasised that the Contractor has merely to give a bare..notice of claim within 28 days. This means that the Employer must be put on

notice that he may have to pa)' the Contractor additional money or grant himan extension of orne by reason ofa specified event or circumstance: a on(~- or:I two-sentence letter from u1e Contractor may do. There is no need for theContractor to provide paruculars within 28 days...~

On the other hand, it appeared to the Task Group to be less essential for~ the Contractor to have to compl)' ~rjth the other claim procedures inSub-Clause 20.] and elsewhere in the Contract. Therefore, J fail1.1re of the:S Contractor to comply \\1th these should not b(' fatal to the claim. Rather, if

.t}lC Contractor f..liled (0 l-onlpl}' \"ith these procedures. i}..c Contractor's:I::I

~

-

~., ..(~

~ I 't. ~ I flDIC'.s Nelu Sla1lfiu1d J-(Jnn.~ (1 L(}TL{Tar( '.!'1~~

.)j()W('V(OI, Irlltle Orange Book, p"blisllt:d ill )995, there was no longcl an~

.1'~llglrlctOI. (Jrlly all f~mployer's l{eprt:st:llliilivc. Under lh(~ Orangc I~()()k.-(li~J)lllt~~ 1.;1(110 tJC rcfr::.rrcd to an inclepelldt:lll dispute ttdjudication board ()r~

':)AI~" tiS a prt:(oll(lilion toaroilration. In.]9~}6.ttnd ]9~7., FIDIC publislled"' SupplcrJI(:'lt_\ I() I}IC Red and Yellow nooks In wilich provIsion was made for li

OAB to be availiiolt: to replace the Enginecr in determining disp\Jtes \Jnder:r t}lose contracts.

Undt:r the Genera,l Conditions of all of the new Books, provision is made=' for disputcs to be adjudicated by a DAB. However, the particular conditions

, of the 11CW Construction and Plant Contracts, which provide that they will be

administered by an Engineer, offer the option for the Engjneer to act as the~ DAB. In the EPC Contract, there is no Engineer. Therefore disputes underthat Book must be handled by a specially appointed DAB,~

T}~~ ~ysi.em cIa DP.R,W\'hjch is advocated by FIDIC, should be distinguished""'- from the Dispute Re\;ew Board ("DRB") advocated by the World Bank. The

basic difference betWeen the tWo systems is that the DAB renders a decision~ 8 that is immediately binding on the parties whether one of them is dissatisfied

with the decision or not. On the other hand, the DRB or Dispute Review-Board merely issues a recommendation and, if a party is dissatisfied with the~.

recommendation, ht: is not under any obligation to implement that

.recommendation,-~'

Standing versus ad hoc DAB;

.II? the case of the test editions, all three Books had provided that d!spu~es h~dto DC ~c:.::r:rcd iO a ~landing DAB. The DAB was a sianding board in the sense

-that it would be formed at the signature of the contract and would remain inplace contjnuous.ly until the wary.s had been completed. Typicaiiy, this 'WO11!dmean that the DAE would be in place for a period of years, the exact length:. depending on t.he duration of the particular project.

However, upon reflection, the FIDIC Task Group concluded that, at least.in the C2se afthe new Plant and EPC Contrac:.s, ii,-/ould be more appropri::ite~ (~': (ai1d, pl-obablY,_,)essexpensive for the parties) ~',:) p;-o';~de in the GCJ-lt:rai

Condiuoris for an ad hoc DtLB, u.,at is, a DAB which would onlv need to beJ~

constiLUted if and when a dispute or disputes arise(s) and which wouldnormally cease to operate once a decision on such dispute or disputes hadbeen issued. The main reason for a standing DAB is to deal \\rlth disputes 011:::I or related to the construction site. But, "lhen the conu-act provides mainly forthe design and manufacture of electrical or mechanical equipment in ~~ factory rather than constructioJl "lork on the site (as is true of many pro.jl:Cl.\

-for which the new Plant and EPC Conu-aclS would be used), the-incidencl: ofdisputes should be much less and, hence, it is much more difficult lojustif,'~ lhe lime and expense of maintaining a standing DAB in such a ca~l'Accordingly, FIDJC has opted for an ad hoc DAB in the General Conditioll~A

~ for these r/P~s of COnLr.1CLS.-"' An ad hoc DAB, 'vllich is onl)' i1ppoinled when a dispute arises, also has tIlt'

.-.;18-.-&~~

..."IJ8

(I( ,

I .,.

-"1.2) FID1C'sNewSiandardfarmsojConlract 25]~

(:iICi1 rrJl'rnl)er (If tiJl' DAB ,vjth a copy of till contract documents and papers~ "' tiJat iJ(' IIJay request.

l'ile l)AI~ lias wide discretion as to llow it should proceed in arriving at ~~ (Jecisi()rl. 11le DAB would nonT1ally be expected to conduct a hearing andmay request written submissions from both parties prior to the hearing.~ Subject to the lime restrictions within which it is required to operate, theDAB should ensure that each party has a reasonable opportunity to presentits case in relauon lO the dispute referred to the DAB for decision. The DAB's~ decision should set out briefly the matter in dispute, the relevant facts, theprinciples (including contractual provisiollS) to be applied and the basis for:f. its decision.~

SettIcJnenl of disputes by the DAB

)n the case of an ad hoc DAB, as provided for under the new Plant and EPC:i 18 Contracts, the sequence of events in the procedure for the settlement of

disputes is as follows:~

]. A Party gives nouce of its intenuon to refer a dispute to the DAB..(Sub-C]ause 20.2);

'- 2. Within 28 days thereafter. the parties must jointly appoint a DP~::a .(Sub-Clause 20.2)..)filie parues fail to do so, then the procedure for appoinung a DAB~

where there has been a default applies (Sub-C]ause 20.3) in order to...perm::. the D.A.R to be consututed;

3. Mter a DAB has been appointed, a party may refer a dispute to the:; DAB for its decision. The DAB has ~4 9ays in \':h:ch to give itS dec:isiO!1..'..h:ch ~-":-,t ';)e reasoned and is binding on the parues. )f a party is..dissausfied

with the decision it must give a notice of dissat~5f2c~ioj1 to~ the other parry within 28 days after receiving the decision (Sub-Clause

20.4);:! 8 4. Where either p~rty has given such a nouce oS: dissatisfaClioIl, the

parties are requIred to attempt to settle the dispute amicably for 56days (Sub-Clause 20.5); and:I

5. Mter the expirauon of such 56 day period (and assuming no amicablesettlement), each part)' is free to initiatf. arbitration as to the specific:I dispute (Sub-Clause 20.6).

As menuoned above, in the case of the Construction Contract, the DAB is.1:I standing or penT1anent one. ]n this case, the DAB must be jointly appointedbylhe parues within 28 da}'S of the Commencement Date. )fthe parties f'ailt()do so. then the procedure for appoinung a DAB where there has been ;1::I default applies (Sub-Clause 20.3) in order that the DAB can be constituted

OI1ce the standing DAB is i11 place, the procedure for the Jefen-ai ()f:I disputes to the DAB, for the D,~ to setue them and for requiring arbitratior1,is basicallv the -"ame as for an ad hoc DAB described above..,:I

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~ The Short Form of~ Contract

-.,.~ '8 Presentation by:

Tony Sanders OBE.1t Director of Dispute

~ -C Management". Mouchel Consulting

~ ..Limited

~.Paper by..

~ Edward Co rbett"",

~ 8 ~4uthor :'FIDIC 4th -APractical Legal Guide"

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It has a combined Offer/Acceptance form of Agreement. Definitions are consistent with ther

-major forrns. All ttlC events that are Employer's risk are gathered into one clause. Disputes "re

referred to a sinl'le adjudicator in accordance with rules included in the Book.I to',

No f~ngineer,

The Green Uook provides for an authorised person at clause 3.1 (Authorised Person):-~

"One of the Employer's personnel shall have authority to act for him.

Tlzi,\' aulhorised person s,lzc:l! be a.\ stated in the Appendix, or asi otherwise notified by the Employer to the Contractor. "Ie

The appointment of another representative, such as a professional engineer, is optionai under~

clause 3.2 (Employer's Representative):-~

"The Employer may also appoint a finn or individual to carry out..certain duties, Tlze appointee l1WY be named in the Appendix, or~

no£i;'ied by the Employer io the Conira'ctor from time to time. The~

Employer shall notify the Contractor of the delegated duties and

authorif}' of this Employer's representative."..,

.The clause does not allow !he Contractor to assume that the representative h2\3uthority ~,d so~

8 must c~eck the noticp of de!~g.:!tic~ t~ ensure that anything that the representative does is \\'ithin

his delegated authority. The IADC want an independent Engineer for dredging contracts as u~ey~

cor:sider that this provides them with protection and representation with the Employer, a view

that has now become uncornn10n.~:!~~

".~

-FlmC'.f .Short Form by Ed"'ard ("(Irbt.'cc 3

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.Claims----,

*c

The objective was to collect into one place all events that give rise to additional time and money~"

and for all such matters to carry both time and money, The list of events is at clause 6,1

-~ (Employer's Liabilities) , extension of time is at clause 7.3 (Extension of Time) and payment is at

---10.4 (Right to Cla\m). The time and money clauses simply refer to the list of Employer's--,

Liabilities.~~

Clause 6.1 lists 16 matters, all of which are familiar. Items (a) to (e) are the usual extreme risks

such as wars, riots and nuclear contamination. Del~y~ af'.d ~osts cau:;ed hy th~ Empioyer arc-.~

covered by (f) early use, (g) Employer's design, (j) suspension, (k) failure by the Employer and-8

(m) variations. Force majeure and unforeseeable forces of nature are at items (h) and (i). Changes~

of law are at (n) and inevitable losses and damage which are the consequence of the works are=-4

covered by (0) and (p).~

' Ground and other physical conditions are covered by item (1) in the list, as follows:-~'.

(I) physical obstructions or physical condition.. other th2n climctic ::,'7n.-1;iiO"l5.

encountered on the Site during the perfomtance of the Works, which obstructions or~

conditions were not reasollobly fCl,resee:!!J!e 1::)' an experienced cut/iractur and which the

Contractor immediately notified to the Employer, "~~

£) There is no exmcss obl!~ation on tl:~ Employer to provide soiis data nor Upon the Cont.r~ctor to~c .--~J,yj-,"' ~ld'Ve tXaIlunt:u {he Site prior to tendering. Both of these factors will be take:1 into aCCOilnl ill the~

test of what is reasonably foreseeable by an experienced contractor. The more data that is given to-..the

Contractor. the less he will be able to plead reasonable ignorance. If a Contractor fails to visit~

site, that will be no excuse if an experienced contractor would have done so.-.~

It will be a criticism of :...e fom1 th.1t the "experienced contractor" test has becn retained when the--tcst is rarely applied literally. Ho\\'e\'er, the test is used in the Red and Yellow Books and is

~~ generally accepted and understood in practice.

'"-~~~

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Money Claimsr

-~

I Clause 10.4 again refers to the list of Employer's Liabilities. The Contractor is paid "Cost" which

has the same definition as in the major forms: "all expenditure properly incurred (or to he

I incurred) by the Contractor. whether on or off the Site, including overheads and similar charges.

but does not include profit ". No attempt is made to distinguish between events for which p~ofitI

should or should not also be added. It is not recoverable for Employer's Liabilities.I

VariationsI

We were all very pleased VJith clause 10.1 (Right to Vary) which consists of just 5 words:-

8I "ThEI . Y ...'1, e mp oyer may Instruct arlatlons.

I 'f "Variation" is itself defined as "a change to the Specification and/or Drawings (if any) which is, '

I instructed by the Employer under clause 1 0.1",

~.I.. Procedure for Variations and Claims

I Clause J.O,5 (Variation a..'1d C!?im !>rocedure) says:-

I "The Contractor shall submit to the Employer an itemised make-up of the value of

I 18 Variations cnd claims V,'iihin 28 days of the instruction or of the event giving rise to the

claim. Ine E:nployer shall check and if possible agree the value, In tile absence of

I agreement. the Employer shall detennine the value."~

Variations are then valued in accordance with clause 10.2 (Valuation of Variations) at an agreed

lump sum, or at contract rates, or at new rates based on existing rates or new rates considered!

appropriate by the Employer or at daywork rates.:I

Force Majeure::5.

This is defined in a similar mannL'r to UtC major fomls but without thL' list of cxamples that arc:I

traditionally found in force majeurt' clauses:-,

F1D1C's Shl1rt Form b.v Edward Corh..cc 7

(~ ' ..

,,

.c) if the Employer has tenninated under Sub-Clause 12.1 or 12.3, the

Employer shall be entitled to a sum equivalent to 20% of the value~

.of those parts of the Work... not executed at the date of thei!

tennination, i

d) if the Contractor ha... temzinated under Sub-Clau...e 12.2 or 12.3,

I the Contractor shall be entitled to the Cost of his ...llspen,..ion and

demobilisation together with a sum equivalent to 10% of the value~

of those parts of the Work... not executed at the date of tennination.~

The net balance due shall be paid or repaid within 28 days of the notice of

tenniltation.~

8 It was calculated that 20% may represent a typical extra cost of engaging an alternative contractor:I

to complete the works where a Contractor has defaulted; and that 10% was proper compensation~

for lost profit,where the Employer has defaulted.~

Dispute Resolution

..~ Clause 15 provides for disputes to be referred (0 adjudication by a single adjudicator to be agreed

or appointed by the President of FIDIC unless another nominating body is named in the:;I

Appendix. The Rules are unique to the. Green Book and give the adjudicator 8 weeks to m"ke is

decision. This may seem long but the time soon disappears once each party has submitted his='

claim and response. The Adjudicator can, and should if possible, respond earlier.:Ie

The decision is final unless one party gives notice of dissatisfaction within 4 weeks:-::r

15.2 Notice of Dissatisfaction::I

"If a Part)' is dissatisfied ~\'ith the decision of the adjudicator or if no decision is given

"'ithin the time set OLlt in tilt' Rllie.\', thc Parry may give notice of dissatisfaction referring:r

to this Sub-Clause ~...ithin ~S days of receipt of the decision or the e_~pi1)' of the time for

the decision. If no notice of dissatisfilction i... given within the specified time, the decision~

shall be final and bindi",!,' p'l the Parlies. If notice ~r dissati...faction is given "'ithin the::t:

.../ry.I'Ci/iCl! rime, thc lic.i.\"i!)n .shall bt' .b~n'iing on th.c ~arties. \\'110 ,shall gi\'e ef~ect to ~~

wIthout delay utIle .\'.\- and untIl the decl.\"lpn of the adjudicator I,\" re\'I.\'ed by an arbItrator..~...=='

f'JJ>JC's Short Form by Edward Corb.'(1 9

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~~ The Dredging FormII

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bt4 () 8. resentatlon y:

Tony Sanders OBEDirector of Dispute

ManagementMouch tl' r onC'1~lf~ '-'A '--' ~UJ.I-J.J..b

Limited

; , Paper by:

~ Edward Corbetti

:I::, Author "FIDIC 4th -A

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~ IDC UK Conferences limited'"-

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~ Test Editione 2001

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~ London

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IntemJtional Construction LawyersChurch:un House::f 1 Hridgeman Road

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(;ruund Cunditi()ns-

S Supplcl1lcntil1g tilt; t;Jltitlement to claim timt; and mont;y for unforest;eable physical~

coJloiti(lns (clauses ().I. 7.3 ~nd 11).4) is cl~usc 2.3 (Sitc I)~ta) Tllis obliges tht; I:mplo)"cr

to lIand over all rt;lcv~nt information on tht; ground I.:onditions. (':onsistcnt with thc major~'-

forms. thc baldncing obligation on the Contractor is to intcrprct the data, inspect tllc Site

~ and make his own enquiries.'"""'"~

6 The familiar allocation of risk of unforeseen ground conditions should be achieved by

these clauses.~

e Risk Allocation~

7 The Employer's Liabilities of the Short Fonn have become the Defined Risks of the~

.Dredging Contract. This is l~ss to do with dredging than with the Task Group's belief that,=a. ." Defined Risks is a better description of the list of events and circumstances at clause 6.1.

.~

.8 The concept remains that the events that give rise to both time and money are li5ted il!

one place. The list has been increased at clause 6.1 (m) so that severe weather conditions:;

can be included. Rather than lea\'e the question in vague temiS such as "excep£iClnally

adverse", it is intended that the \\"eather be defined. In dredging projects, wind speeds and \='

wave heights are carefully recorded and have a real impact on progress. There should be

no great difficulty in defining thl' level at which the risk transfers to the Employcr.

-..:1

9 ~o~sistent with all the.,majOr t-onns. t~e potentialli~bility .of the C~ntractor ~s no.w

limited: scc clause 13._, and thl' t:.ible In the Appendix. This recognls~s th3t tor different=J-

li:.ibilitil:s. different insur3nl.'I.' mJ~ bl: available and different limits are appropriate. The

vil:\\' was taken that a single :.ill-purpos~ lilT,it was too simple a solution to :.i I.:omplex::1'

~rl:a. The fonn will oblige the p.1nies to think carefully about matters of li3bility and

insur;lIll.:c ~l the outsct-:::f

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Claims Procedures:..I~(

Christopher Wade"""-=II

ChainnanFIDIC Contracts~ Committee=1-~

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CIII{IS1'()PIII~R \VAD"~, Chief Enginecr, SWECO International, Stockholnl.--S"'cdcnl, and Chairman of fIDIC Contracts Committee--

-W1. Introduction

~C"-...

This talk deals with the procedure for claims contained in FIDIC's new (1999) Standard Forms of-..Contract for major works, viz.:~

..Conditions of Contract for Construction for Building and Engineering Works Designed by

.the Employer: The Construction Contract~

..Conditions. of Contract for Plant and Design-Build for Electrical and Mechanical Plant. and

for Building and Engineering Works, Designed by the Contractor: The Plant and~ Design/Build Con:ract:1'

.Conditions of Contract for EPCffurnkey Projects: The EPClTurnkey Contract~

~ Based on long experience of often mismanaged and/or late claims from nuny contractors, and. indeed.-0

general mishandiing of ciaims by some employers/engineers. the drafters or tilt: 1\'e\\ Books h:Ive~

sought to generally tighten up the rules concerning all claims" This has resulted in several innovations.~

1. CI.sims from the Contract()r-'~

i\ll1~'h l)f the trouble with mism~n:Ig~'J (Iaims trom contractors has been th~ lack of ~CCllr:It~ re.:ords.-' ~

;mJ. '-or lat~ claims. the possibility pf making othcr arrangcments because timely infornution on the~ ~'I)illcnti;ll claim has not hcen forthl'l)min~,-~ -

.Suo-Clallsl: 20. t -\\'hi\.'h is th\.' sam~ in all tile three Nc\- Ho()ks -r~qllirl's 'notil.:~' to hc gi\"1:11~-~

\\ithill 28 days-

,., -=:.".. I S\-I;( '\ 1IIIII:I11al""'al. tlt,X ]"1()-1-I. SI' 11'1 :(, S, l.h.-\m S\\l".I':1I \1.:1 ,4(,;\ (,'t) (oilS') I; ilia, 1 ..-h"""'l'h.:r " a.I.. !,,'," "., s.:)

"h.",.'phl:,waJI:I'rI:'1:1I1311I)l\II')\'-' I; ,.,' S\-l;' "() 1I1I"11I;l1I""al~

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""11£ 'fS('I.A"IUIIII.\(IIIII~"l"J~2rKJI

l .,- Tllc first nolice slarts tile claimsprocedurc:

..any oilIer f}1)ticcs and supporting dctails may also be required by specific clauses

I -.Clll'tclllpllrary rccI)rds to he kept

.rccllrd\ 11l;IY t"IC inspcctcd by I.:nginccr (I:mploycr)!

.fully dctail~d claim tl) t"IC suhmittcd wililill 42 days Ilf~vcnt (or olll~r agr~cd lim~J

.impllrtancc (If ~(llld record kccpin~ cannot he ovcr-cmpllasiscdS

.provisil)fl fIll on-going claims and submi!tal of their details:

.II'ithin ,I:! dllY,.. l)J rt'Cei\'inK, the, claim with detail.\' 'the f:.'ngineer (l:.'mplv.ver 1:."['C1') ,\'h{1l1

rc,\'p(lnd 1\'lth apprm'al, (Ir "'Ith dl.\"(lfJprO\'al and dctailed c()mment.\". lie may al...o reque.\"t ml\'

I nece.\'...aT\' Jilrther particular.\", bIll shall ne\'erthele.\".\' give his respOlI.\'e on the principle.\" oj the

claim "'ithin .\"uch time '.i

.tllis is the first time that a time limit has been imposed on the Engineer to reply to a claim

..'each payment certificate shall include such amounts for any claim as have been reasonably

I '0 substantiated'

.the Engineer (Employer EPCT) shall determine under CI 3,5 time extension or additional;

payment to which the Contractor is entitled under the Contract,

f .any other specified requirements must also be satisfied.I .

~. A further difficulty with claims in the past -from the Contractor's point of view -has been the

I Engineer who sits on claims without al~s\\'ering, or who 'stonewalls' ciaims by asking for more and

more details, and generally dela'ys giving a definite answer. It is hoped that the introduction of a time-~

limit \'.!ithin hich the Ertgineer'(Employer EPCT) has to give :l dcfiniti\e answer wiii help reduce this~

problem.

lOIn the Old Red and Yellow Books, if the Contractor \\'as not happy with the Engineer's response to his

claim, then he could ask for the 'Engineer's Decision' (Red Bool... Cl 67.1). In the !\"ew Books. the

.Engineer no longer has this pre-arbitral decision. This task is now taken o\'er by the DAB (but, as an.option, if agreed. the Engineer may still ~ gi\"en this task).~...

-'. Claims from the Employerf

In tile past I:mployers or their Engin~~rs ha\"e often summarily \\jlhht:ld paYll1cnl of monit:s \\hichS

riley considt:red wel:e -for on~ or anollier re3son -not due to tll~ ('{1IItr3ctor. SomL'ljm~s they hav~

similarly de f;icto t:.xtcnJt:d tll~ 1)t:IL~L1S I_ilhility Peri{>ll. T() try 10 pre\"ent lInf;lir \\itilholding of~

monit:s or extensions of tilt: 'gu;lr3nt~l" pcri(~. tile Ncw Ilooks -ill all ~ntircly nl:R Sub-CI;lusc :'.5 -

~ pr~sLril~ ;i pr(xt:dur~ wilicll hll... 10 hl" full,)\\'l'o hy thl: Employ~r if Ill' l.\)nsldL'rs lIim...l:lf I,) t)t: entilll:d

I.('htN"pllcr waJc l'Ic,cllla',oll ",)(", 3

'\\"1:('( I l'IIcllI;II'OIlJI.~1~11 (J(, I!

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.f()r mallcr5 call5ing him extra time or cost. Employcr5, on the othcr hand, as a rule arc nl()rC

.passive (if n()1 sonl'~timcs uncOllscious) of their claim right against thc C'ontraclor. It is oflcn IJ(lt

~ .until S()/J1C p;lrt f;Jils 111;Jt an Employcr lx.gins lo c(>nsidcr a claim ;Jgainst lIis ('ontr;JCI()r. Iii, t',IS!

f()r a lawyer tll ...llllul 'unfair imhalancc', bul the rcas()n is ()hvi()us 10 a pr;Jclical cnginccr:: -

~. <:onclu..i(111

~It i5 lIopcd tllal Illc ncw slrictcr rules, wilh lhc rcqllircmcnl for botll tile Contractor and tht:

~ E:ll1ployer 10 f()llow a spccificd proc~durc, will reduce somc of the difficullics currently ~ing mI:l

wilh rcgarding claims, For the Contractor, a strict time limit has been inlroduced for nolificalion of

~ lIis claim, so that all parties are made aware lhal a claim exisls and can keep proper records and

p~rhaps ~\'oid l:;lnec;.;:\5;Jry Cl)ns-:qt!O:l1l.:es. For the Engiiic:i, :-IC is now required lo give his

:;. response, at least on the prilll.:ipies of the claim, within a sct lime (which was not the case before).

~:(! For the Employer, he now is nOl enlilled lo deducl any .moni.cs, nor exlend lhe D~fec,ts Nolificalion

Period, unless he has followed lhe set procedure of nollficallon, and then delerrnmatlon.

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-:J ,,;)' Contract and the

~: Dispute Adjudication~~ Procedure~

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=I. HL1140,~

=13}

~."~) 5th -6th July, 2001

-e) ,68 Regent Street, London -ri'~

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~~ ~~.-"-';",;J Organised By

~) IBC UK Conferences Limited

~.mc UK Conferences, nor the authors, ~ mponsibility for the accuracy of this information and dis~ all

liability in mpect of such information. No~ in thh presentation constitutes legal advice. For information on any:jt specific legal mattu, always consult a qualified lawyer.

J Copyright C 2000 by mc UK Conferences Umikd. All rights reserved. Reproduction in whole or part without:d/ permission of mc or the speaku is prohibited.

-) ~~" ~ -.-~ ~ IBC UK Conf.,.ncM limlt~

Investing business with knowledge

':=Ii Mortimer House Tel: +44 (0)20 7637 4383 --,., 37-41 Mortimer Street Fax: +44 (0)20 7453 2090 , .~ .-

;.;.f London W1T 3JH www.ibc--uk.com ." '. ---,.

..~ ,~_. "' -1

-"."-:1

-) Contents

:=:)-: :)r(J~r;lmll1c I\~~n(!:}s .

"'-:),,--~ ()ver','ic\\' {If" I!I/:' !\'C\\' !\!:Ij:;r (~(Jlll";I\I.-;

.",,-"') Chri~';oplzL'r y~fadL'

.~ Chainnall~ I'IDIC Contracts Conm1ittcc

r~=?t') Tile FIDIC Conlr.1cts Guide

~~ Peter Booen1 Member .': -:-- .

FIDIC Contracts CommIttee, PrIncIPal Author of the GuIde~ Examination of Leg;';l Concerns -

~ Christopher Seppala~ Legal Advisor

FIDIC Contracts Committee_8

~1 The Short Form of Contract-~ Presentation by:

FI Tony Sanders OBE.Director of Dispute Management

R Moucel Consulting Limited

.Paper by:t~ Edward Corbett1- Author "PiDIC 4th -A P:-u~:';(;.":t: ~gai Gflirle';

:)

~:=~ The Dredging Form,.-- Presentation by:

~ Cl Tony Sanders OBE 1. .~ Director of Dispute Management

oJ Moucel Consulting Limited

!::IPaper by:iI Edward Corbett

~ Author "FlDIC 4th -A Practical Legal Guide".)

~ Claims ProceduresChristopher Wade

':t Chainnan

~ FIDIC Contracts Committee,8 ,.

~ca.t Decisions by Engineer or Dispute Adjudication Board .~ Peter Booen

:) Chairman

~ FIDIC Assessment Panel for Adjudicators~) ~~

~ ~ IBC UK (onf@renc@s Umfted:.;J '.:.:

c' . ~~

.'\

)

Intern:11 Arl)itratiun-' )

c::'hri.\"/ophcr Seppala) l.l',l;aIAd\lisvr .

) }:II)IC CI)lltr;l<:ts C()llllllittcc

'"),~ l~stal)lishillg tll~ I)isl)utc A(ljlldicati()1l l~oar(1

C;ardv/l L JaY/les \ ;,") Member

~ FIDIC l\sse~;smcnt PancJ for :\djtJdic.itors

.'}

~ Dispute Adjudioation Board ProccdurcsPeter ChapmanIntcrnationaJ Arbitrator and Atljondicator

:)

I~ Appendix 1

III? Biographies

i"~ Appendix 2

.:) S~er contact details

...Appendix 3

-Notes pages"; ....-....,i;}

;)

~.)

:;J

a:.I

:I...i

-8 1

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;;)

oJ Ii',J !~~ lac UK Conferences Umited.,- .~-

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~ --~ ~--:---

~;:'1.I -Programme Agenda -5th July

-:==.-:,,) 0900 Coffee al1d l?egi.\"trati()1'

--".~-~') 0930 Chair's 11Itroductioll Michael Mol1imer-!lawkm!.'

-1 Past Chainnnn, FIDIC Contracts Committce I

)

:=i 0940 Preselltatioll Overview of the New Major Contracts,) Chri!.'/opher Wade

-Chairman~.] .-.~IC Contracts Committee:)

;~~ 1050 Coffee Break

...Q: 1115 Presentatioll The }4"IDIC Contracts Guide"':-r'.i Peter Booen

..) Member

:~I FIDIC Contracts Committee, Principal Authori. of the Guide

--:=;t 1230 Questions & discussion-.9 1300 Lunch

~ ' 1430 Presentation Exa.ntination of Legal, Concerns

Chnstopher Seppala: Legal Advisor

~ FIDIC Contracts Committee

1530 Tea break

~ 1555 Preseniatic;"; The Short !4'orm of Contract

_.J Presentation by:~ Tony Sanders DBE

Director of Dispute Management-J Moucel Consulting Limited:;:=:',

I Paper by:

:::t\ Edward Corbett, ," Author "FIDIC 4th -A Practical Legal Guide";.:::A

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~ ~ lOC UK Co"f.~"", Umltod~__- ~~.

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'J Contr.lcts CommiltceChr; lo{Jher Wade, ClIa;/7nal" J:II)IC C()otr~cls

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:;J Chainnan

~ .FIDIC Contracts~ COll1ll'Jttee

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,~- FIDIC Conditions olf Contract-~

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:1'~ Overview of-NEW FIDIC CONTRACTSt' I:t I

~ : 1. Intr°.duction~ )-

.1 8'--"- -Conditions of Contract fa: --C~:1struction -, ,-.~g'.'- -

~ Designed by Employer: The Construction Contract

::::t ,- .Conditions of Contract for Plant and Design-Build-.).) Designed by Contractor: The Plant and Design/Build Contract

~ : .Condit!,ons of Contract for EPCffurnkey Projects I

'~ -:it The EPC/Turnkey Contract I

Short form of Contract: The Short Forrn. I~.. ,

::;; : First Edition 1999 .I

[) ..I~ -.~ a Replace existing 'Red Book', 'Yellow Book' and 'Orange Book': I~ .i

.; i

~. I;) .for Works of Civil Engineering Construction (1987) ,

' ,- ..-.:);;t .for Electrical and Mechanical Works (1987);8

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for Deslgn-Bmld and Turnkey (1995)..:::d. .

_8 Contracts Guide for the three major New Books., 1=- ;

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~ iJ. FIDK: GCCl1999 Forms \ 1

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:=:) 8 clauses applicable to most contracts

),,~') 8 alternative clauses ~~

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...;.1 8 clauses often interchangeable

') .,

.,_.) .data required by General Conditions in Appendix to Tender~ ,

') (EPCT Part. Conds)'J

~ ,: .~ .s~~lplc to dclcte or not1ii~ke CJ~,15(;S -"-"'..- ~ -_8 forms for guarantees, ~etter of Tender, Contract and

DAB Agreements, etc, Included

=i~ But remember:-..=;. :. pL~paration ~xperi~!1ced per~:{)nncl -n:)t ~blind' acceptance! .

" .~ .checkprl for app!'Or!'!2tC!'!.~~':;

~;) ~-I ,. 4. .f ,.r- ,'. C d..-!' : ' -".r:; Jt'~.;-:-'-"r'.o:';-'-.'-"".'..'.".'.'-'.-- o ~"~ a ~ e ""'&1.'.~ r t l"'.li i ar U i lll1\ -J11'-' I{,. ~ U.:i ~ ~. &&&~'-A'~&"'~"AV&-..)" U,,- All U AI' ~.. -A A '"~,

I~ .'" d ' 1)' .rD." C "" i~ i ". use \Jill ance tor 1 repal-ahoI:' 01 1 articular ondltlollS I

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~ FIDIC GCCll999 Fonns 3~~-'..

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~) .New Yellow Book covers all works desig ned bv the Contractor~, J

~ .for provision of E & M, and for building or engineering works

'"' .many will be combination of civil, e & m, and/or building

~..."~ .'Employer's Requirements' to which Contractor designs

1. .administration of Contract, supervision, approvals, paymentc~ ,j -~J /

') certificates by Engineer- -"- ,,-,-;-,--,"'.--'-" .,..Y ~ ~ ~ .payment' ~n Lump Sum basis, usually Schedule of Payments

-l:,~) testing procedures more complicated

=~.=;1

-8

'==! 6 Features of Construction and Plant and Design-Build i:;;;; -.Books I

"I_--:? '

I d O" I " t o ..t"~~ .tra JtIona COI!!p£t! lve teno_o~rlng I.:) --

~

;:C-'. 9 letter of Acceptance '. ,. I-, -IJ -0 -

IIf,

--4 .risk sharing is balanced ~;I

iI~ -4 EmpIo)'er takes risk of~ ~:t

;;I >- 'adverse ph)'sicaI conditions'

=i'.:8 >- unforeseeable 'operation of the forces of nature'

=&.» design by Employer~ --

~ ..» war (anywhere), terrorism, riot, & ~i~lI~r (in coun~_ry), etc

~~)-)

:::£) FIDIC GCClI999 F<Xms 5 -

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-.'

~

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~ ) 7. Need for Book where Final Price is More Certain)

::=S-)~ Old Books only covered part of need.

~') } .Old 'Red and Yellow Books' recognised for balanced .

:; '} risk-sharing,') ...

:;~ .BUT final ~rlce and time is uncertain ..~ ," ~ -,~...~. -~ "

,4-;.--, .'" ..::;1 .market requ)r~s more certain final orice and time:

")

=I-) ,,- -~ privately financed projects (BOT etc) need definition of

.) I final price and time

:;:J...Contractor must cover wider range of risks

~ .Employers must realise that:

:::( > C"Jrltractv,:'-$ ;;:-,'cn adeq-.;aie time andopportuiuty;It .

~. ~ nr i r o h1nh",... ..~ ,.0 ."'" "~"'r ~ r isJ.-tak ;r~~,' ,.. ~ --'- -'0 ~..s" \".~~ c: -h 15 I

~ --.~ '::> F 1~-. _.~ -:!! .".."...~-, :""""e 0 1 e r 't"sI"., .~) , ...:.:mp! :;el,>.~'",u"'J"aJ tlcJ." S n 1\.;"

" -,

-FIDIC prcdu~ed t~lis colizpletel.v .\re}i,' Book for: .I.

> Employers who ,\'ant traditional projects with more certain

" :8 fi al prl"ce and les~ ]:;'mnlo,'er- r "

lsk~ In ~ ~...t" .

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, :-Jr):ii ~ FID lC GCC/ 1999 FormsI J

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.: "- ) .all claims to follo,v a strif:t proccdurc

').; -') >- Employcr to consult witl. Contractor ~

~ :J >- if no agrecmcnt, Employer m~kes 'fair deterlnination.. '

.,..~ if not accepted, the~ Dispute Adjudicati~n Boar~ '

~ "" .Contractor has majority of risks, Employer pays more'

;7; ;t) -

":) .final price and time should-tremnre cert~in -"'---'" .."ri :J

~C)

~ -I..1 9. Circumstances Governing Use of EPCT Book..14 '~ -.1 Circumstances different from traditional projects:

'

':1-.1 op-, --" ..., , " ~ .~~'-"~~~;-:'-l :'-1-;-:;: '~'-';:'-'-ll ;'" Pr ll "" l n' c '-'nrl t' a o:J.c4"..;:.,~,':Jr: :.j ""'A'.t'AV.~ ,,' ..""':1'-+&- ~ ~,,- -~.. """-'- i.I" ..I... r'~ u U I.J.. 'oA_"Al?'"

I'., I~ 81 .P rocu-rp m pnt nr('c~n.J ,r .J:l'L" r ~ fj 4. II .-~4J -.-~ """,uu.. -.;,:> till!.\; t: ll.

I.:it !',! "'.-1 ,-..j-.'A-:::'..-;;:_;Y ,' ...' I.

~ OJ ..-: 11uCr\..r,;} ..0 "\..111) d11 liUUllllauoll ana tiara

'18iJ! I:.~\ > tenucr~l- inay also have tv car-ry <Jut prt:iimjnary design I

;.. I.',~ i >- smallllumber of te.t1derers'f. 8:

;I

i .! > tendering period has to pernlit some discussions~~i .!

j :1 .Contractor gi"en freedom to carry out in his chosen manner

.1 >- as long as end results meet specified pcrformance criteria:~ ._8 ~ Employer should not interfere

q.I~.

"-.. ~ but Employer \\ill ,vant to kno,v certain matters :-~ ;) I~

.;)

i ..J FIDIC GCCJl999 fums --9 .

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aa

:'i -, ) ..-0'-.)-..I., ') .

'? 10. Comparison of Salient Features of Plant andi ) .~

~ Design-Build and EPCffurnkey I~ooksI ,! ,

~ .,:) EPCT -all matters that could cause a price change (incl. time change)

=:I::) should be agreed before Contract s!gna~ure to ensure firm fin.al price.

~ .:) ..I

~"- ,-~ Notable differences -apart from extra risk -include:

~

~ .for P&DB best tender accepted by LOA. ---:}

=I .EPCT direct to Contract Agreement.~ I .EPCT Employer administers -Employer's Representative

--.I::t I .EPCT payments without certification .

I=J I .P&DB Engineer may issue necessary instructions

I

~ I .EPCT Employer may only issue if he can state obligations in Contract.

~: I~ I' .both Books require :fit.forpUl]Jose' 9tvhich means Conb-actor ni~O;;-.. J

'""-.- .] !13.~'~ compli:te i~f',T:':1,;,;ti~:lr; 2n.~i ~;_lfficieTlt time to s~rt.!!inize, ,'crify

~ I and ev3luat~ 311 rcle"'3nt data:

,,-:'t I ..In P&Dll Employer responsible for Emplo}'eJ:-'s Requirements, but-~

,..J .Tenderer to obtain all information etc 'tv thc e.l""tcllt Jphicll Jj'as-:J I ,. Practicable' before submitting the Tender:I'

-8 .After signature, scrutiny period to find out all)' errors, etc.~ j.;-. ,

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~ FIDICGCCJl999~ 11J .-~: ---0 .':"

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~) 11. Conclusion)

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:=; .3 matching new standard forms for major contracts

~ .'Green Boor' f~r minor works

:::;( .updated and widened scope of FIDIC standard forms

~ .suitable for use on eve~ ~oject ;;;./),

~ 0 cc- I

~~ .from o"unor, through whole range of traditional, to the largey')

(

~ complex projects, including]OT or similar type.

,)

~".. Which Book to select -guidance in the FIDIC Contracts Guide I

~ II~ I

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~- )

)

:=--) FIDIC Conditions of Contract

) IBC Conference 2001.

;=!-) ~

e}

:;::I:t Presentation Notes on: () e .

:) OVERVIEW OF THE NEW MAJOR CONTRlCTS

::'::;:)~, -

~:) Speaker: CHRISTOPHER WADE, Chief Engineer, SWECO International, Stockholm,

., Swedenl, and Chairman of FIDIC.CoDtracts Committee ~ ~:::ij~ ~",,_._~-="' ,"+__e'e__"_. -

(-~ 1. Introduction~ -\ t.,...", ",I.::;# ,it",.~,*.-' .;-'-'-

.) FIDIC'- the International Federation of Consulting Engineers -published late in 1999 a suite of four

~ new Standard Forms of Contracr. This new suite comprises 3 Books for major works and 1 for minor:.=f( .Conditions ofContra~~-for Co:struction for Building and Engineering Works Designed by the

~ Ernpl~~er : The Construction .Contract- ~'. , .e8 ~ CoiiJ!Uc'n:; ,.:.of CUfJU-act for P:~r:~ ~:1d u;::sign-1:.Ulld tor Electncal ana MtOCnarucal Plant, and

~. for .BUi~di~~ :nd Engineering .Works, Designed by the Contractor: The Plant and

DeslgnlLJi4lla L.omract

::1 .Conditions of Contract for EPCfrurnkey Projects: The EPClTurnkey Contract:

-:-J .Shoit form of Contract: The Short F onn.

=-' ,-'-.L .II k ..l'h" }:'." 1{1{\~' ,-_e. h '\. beT.:; :::. Jr\or~!!1 t~~ ne.w suIte are a mar. el! ~ ~st clItIon 77~, allG me rC.lson 1$ l ~tllley can not'" .

"'-:~ re~~rded. ~S clrect UPcl:J.tcs of FillIC's verv \\'ell-known and widely used 'Red Book'. 'Yellow Book"-.::a -...and 'Orange Book,3, i.e. respectively:

,,~_f,

..,-,8...Conditions of Contract for Works of Civii Engineering Construction (1987)

==:. .Conditions of Contract for Electricai and l..iechanical Works including Erection on Site (1987)

..Conditions of Contract for De-sign-Build and Turnkey (1995).

~_8 The suite has no\V been complemented by the Contracts Guide for the three major New Books.

~, .~~ J! .0 I S\\'ECO Inlemalional. Rox 34044, SE 100 26 Siockhoim. Swedeue (Tel: +468 695 605~ E.mail: chri>I'J!JIIc:rwilJc:@swecose)

J_~ ~ Avail3ble from FlDlC Boo~hop. POBox 86. CH.lOOO Lausanne 12. S"llzerland: hltp':i/wwwefidicorg .

~ Also available from FIDIC~I .) Ouislopber wade. overview 1

--SWECO Inlematiooal e~,2001~12 ~

~ :c ~~~ ,

..., ,','"",' " ", ,'," IBC London & 'Brussels 2001

...~ -')

~ ) 4. Conditions of Contract for Construction ~or Building and Engineering Works Designed by the

.Employer)

~-)) The New Red Book is similar to -and an update of -the Old Red Book, but with new features:

~ -} .Old 'Red Book' dealt only with civil construction work -the New Red Book covers all types

.., of work designed by the Employer,

:A ') .suitable for 'all projects ~here main responsibili\y for design lies with Employer (or his

")

Engineer)=R ,) .some design may, of course, be carried out by Contractor

~. !~ ) .basically an update of Old Red Book ;:~C- .

,. .-~.administration ofCo~~ct acnd s~~~-1]):.~l!gin~e: -~-, ,,_c'-' ,c.-.'o'-':'-' ,,- ,,;. ~'o

~ ') .approval of work, payment, etc, certified by Engineer

~ .wo~k done is measUred, payment acco,rding to Bill of Quantities ',,-:;;.:.

~ .optIon for payment on Lump Sum basIs,~

~ .5. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for..Building and Engineeri~g-Works;Dc5igned by Contractor:;=' .

.'-.-..The New Yellow Book replaces both the Old Yellow Book and the Orange Book: -,

~ ..C.;.J '~:'eiJGo;; ~;oo=~' dealt only with electrical and mechanical cons~ruction works (most design

-,.. being done by Contractor)~ ..rh~ 'Orange Jcck' from 1995 dealt with Design-Build and Turnkey for civil and other

-,:) construction where majority of design Cone L-') Contractor--.()

.the New Yellow Book covers all types of work designed by the Contractor

:4 .it thereiure updates and replaces both the Old Yel!c',',' a.ld ;i:e Oliinge BooKs

.} ..(layout of all the New Books follows closely that of the Orange Book)

: a .New Yellow Book is thus suitable for all t)-pes of projects where main responsibili()' for

:of design lies with Contractor

:: ;:I .recommended for the provision of electrical and/or rnechJnical plant, alld tor the design and

:) execution of building or engineering works

: -.(the majori(y of such proj~cts may \vell be electrical and mechanical works. Many \\'ill be a

.combination of civil, e & m, and/or building): 8 .some design may, of course, be carried out by Employer or his Engineer

_8 .Employer prGo..idcs 'Employer's Requirements' to whicp Contractor designs

-.j ..'-':) .administration of Contract and supcr..isiOii by Engine'~G

..~ .approval of work. payment, etc. certified by Engineercc

, )Cluistophcr wade .ovcrvicw 3'

iJ SWECO Intcrutiooal, 2001-06-12 -;..

;,,). --0

-a ---

-..,r \1 IBC London & Bru~sels 200 I

~ 7. Need for a New B~~k where Fina; Price is More Certain

J.; The Old Books only covered part of the international need.

T) .Old 'Red and Yellow Books' recognised for b~lanced risk-sharing..meaning that:

:;:::;J -Employer only pays extra when specific risks actually occurI ') -Contractor does not have to estimate for unlikely hard-to-value risks I

~J " -Bln' final price and time is uncertain.I )

kh h "~ " fil " d "" .mar et as s own requIrement lor more certam Ilnal nnce and tl~ m two ways:~ -some Employers have -for many years -changed FIDIC Books balance to place more

) ,

-responsibility on Contractor

9 development of priv~t~lY-tinanced proj:~~_~~.?!_:t.cJ_~~e~e .le~de~_.~.~.~.~fl.'litiQ~ *-.' ~ ~ -~'.,_. ~, of final pnct:aridiime -"

:) .for such projects Contractor is asked to cover a wider range of risks of final cost and time

~i including often ground conditions, guaranteed result, etc ""'- -.) .Employers must, however, realise that:

~ -essential that Contractors are given adequate time and opportunity to consider and

: .evaluate all information and risks

=I -the price for the project will be higher to cover the extra risk-taking

--Employers will anyway have Some risks

:::=4 .FJDIC therefor~ prcduced tJ-Js t'umpleteiJ' flew Book for:

) -those pJ:ojects where Employers want traditional projects with a more certain final

~ p:::e :u;J le.-)s EmpIoyeI-risJ:

) -Bln' as a Book where Parties enter the Contract .with fun und~:-sta~?i1!g" and~~ ) acceptance, of the risks (instead of trying to adapt another risk-sharing arrangement)

:::-- -as a ~ur~~on startiGg ~~nt for ~PCrrurtike~_t).pe projects, usually \vith private~ fipanc..lg; In a BOT or silrular t:nvlrorUntilt

.) .the EPCT Book is thus intended to be suitable for the many projects, both larger and smaller: ~~ t -particularly E & M and other process plant projects

j~ -all types of employers---c) -often civil law countries

J=:::'i -where go',.emUlent employer or private developer wants his project on a fixed price

.turnkey basis and with strictly two-Party approach (i.e. no Engineer)

cd;'. EPCT Book includes an 'Introductory Note' whe~e these matters are uiscl'~-,ecf,-.., :

"-'*'~ ;~ ,

"J i -. -

~ 4EPC = 'engineering, procurement. construction' (US) which is app;-ox same as 'Turnkey' (European).I

Christopher wade -overview 5-L J SWECO Internatiooal~ 2001~12

J. ~ ()

~ --

" lllC umc.lon & llru~~ci~ ~OOI

,:::=, -however Employer will want to know that progress is following time programme.

work is up to quality, third parties are not disturbed, performance tests are met wit~.)

and other Employer's Requirements are adhered to~-.) .Contractor has to prove reliability and performance of completed project, therefore emphasis

=. on testing, often over considerable ~riod -

-, .privately-financed projects subject to more negotiation than public and therefore more likely

~ ..' to ~hange standard conditionr -b,ut a standard fonn is necessary anyway as a starting point.

) .These Conditions are not suj~able in following circumstances:

~~ -if time or information is insufficient before Contract signature

~ -if considerable work underground or difficult to inspect

1 -if Employer i~tends ~.~ ~rvise closely or co~trol or review --,-.- .~ '~'-. .

~:I -if.m intennediary determines interim payments

., -where part of Works is designed by Employer

:=~..a -for public bidding without negotiations --

) -for such circumstances P&DB should be used instead

:=~ .EPCT Book has come because of market demand -given free choice FIDIC would

.recommend use of P&DB with its balanced risk sharing

::'J.-8 10. Comparison of Salient Features of Plant and Design-Build and EPC/furnkey Books

;~-~ For EPCf th~ .intention is that all matters that could_cause a ~rice change (incl. time ~hang_e~ should -

~"-4I as far as possible -be sorted out :lnd agreed before l.,Vlltracl sIgnature t.) e!'!s'Jre firm nni1l p :e.

:o:=J :-~otable differences between these two Books -apart from the extra risks allocated to the Contractor -_.l~ include (inter alia) the following: ,;'

~~:)1:J .for P&DB usually the best tender is accepted by a LOA. For EPCf typi;;a}Jy be~v~5 iegally

..} effecti ve on signing the Contract Agreement

..~ .Employer administers the Contract -unless he appoints an Employer's RepresentativeI, -!a .interim and final payments are made without certification. usually Sch~dul~ of Pa~ments

under P&DB the Engineer rr.ay issue necessary instructions -CI 3.3. Under EPCT the):;:=;:1 Employer UW) vr.!y issue an instruction if he can state the obligations in the Contract to \\"hich

.1 it relates -CI 3.4

,:::=.1 .both Books require the Contractor to design the Works to 'befit/or purpose' -C14.1

,. -to enable the Contractor to acce?t this requirement he has to have complclc, -, .;-~=~ infonnation and sufficient time to scrutinize, verify and evaluate all relevant data.

J This is allowed for as follows:-.""'-;~.~, j Christopher wadc .Oycrvicw 7

~. SWECO lntcmatiooal._~ 200 1 .{X,.. I 2

,J """.. ~~

.."j

::=.t -however Employer will want to know that. progress is following time programme,

work is up to quality, third parties are not disturbed, perfonnance tests are met with,"

=t and other Employer's Requirements are adhered to

) .Contractor has to prove reliability and performance of completed project, therefore emphasis=t on testing, often over considerable pericld .

'") .privately-financed projects subject to more negotiation than public and therefore more likely

~ ~ change sta~dard conditions -but a srnd~d fonn is necessary anyway as a starting point.

) .These Conditions are not suitable in foUowing circumstances:

=1 -if time or information is insufficient before Contract signature') -if conside;able work underground or difficult to inspect '

~ -if Employer intends to supervise closely or control or review') --' o' --"-.-

-~~ -~f:in interrnerlialY detennines interimpa-y-rnents--.~., :) -where part of Works is designed by Employer

~ -for public bidding without negotiations ,.--

) -for such circumstances P&DB should be used instead

=I .EPCf Book h~s come because of market demand -given free choice FIDIC would

..recommend use of P&DB with its balanced risk sharing

=~j .-.10. Comparison of Salient Features of Plant and Design-Build and EPCffurnkey Books

q-.For EPCf the intention is that ail matters that could cause a price change (incl. time change) should -

II ~ as far as possihle- be so~ed out and :igreed ref')r!' CO/itrac: .)-i,."flulu,e to ensure firm final price.

~

.~ !'~o~ilble diffect:nces between these two Books -apart from the extra risks allocated to the Contractor -

~ ,~~ include (inter alia) the following: -

;' ~~ .for P&Dll usually th~ ~st tel1Ger i~ accepted~by a LOA. For EPCl typic~lly bccomc=s legal!:..

---1. effective on signing the Contract Agreement

,~ .Employer administers the Contract -unless he appoints an Employer's Representative

.J .interim and final payments are made without certification. usually Schedule of Payments

.--r .under P&DB the Engineer may issue n~cessa.ry instructions -CI 3.3. Under EPCf the

;J=J Employer n--.ay only isso.;e 3n instruction if he can state the obligations in the Contract to \\hich

it relates -C13.4'-1

d .both Books require the Contractor to design the Works to .be fit for purpose' -CI 4.1

_8 -to enable the Contractor to acce~t this requirement he has to have complete

=iI information and sufficient time~ to scrutinize. verify and evaluate all r~l~:va,nt data.

'- ,} This is allowed for as follows: i ,-~ c~

.) OIrislophcr "adc -ovcrvicw 7~.. SWECO Intemaliooal '~ 2001-06-12

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The FIDIC Contracts.Guiqe

!,:t'~,- -i' -,},- -,,' -"'..-"c ~ ,"",.,

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,-- Peter Booen

~ Member['I FIDIC Contracts~ Committee,

. Prm8 cl8 pal Au +h~- ~~ +1..e' .LJ..1UJ. UJ. 1.11

~ Guidea.

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~ T'~e FID""IC Co~t~racts Guide-

~ AullX>r, nx:mberOrFID~~::: :~~,: :mB's ~ or:')

~ Foreword and Abbreviations .

~ The FIDIC Contracts Guide ("the Guid~") covers the following "New Books" first published in 1999:

.."CONS": Conditions of Contract for Construction, wh1ch are recommended for building or

~ engineering works where the Employer provides most of the design. However, the works may...; .include some Contractor-designed ci~il, mechanical, electrical and/or construction \"orks.

~ ."P&DB": Conditions of Contract for Plant and Design-Build, which are recommended for the

:3 .provision ofele.ctrical and/or m~~~ical 'plant,a_n~~o~t~e.~d~sign ~n~ f"~"'(~1J"ti_on P.!" buildi~g 0: ---

~ enbj~-:;':.;oing \vcrks. 'ilowever; lite woikSmaY-lnclude some Employer-designed works.

, ."EPCT': Conditions of Contract for EPCrrurnkey Projects, which may be suitable for the

provision on a turnkey basis ora processor power plant, factory, infrastructure{)( other type of,J;;) 'Project where (i) a high degree of certaint)' of final price and completion time is required, and

=I (ii) the Contractor takes total responsibility for the design and execution of the project.

..As soon as it, was decided to produc,e a Guide corP.menting upon all three New Books, the need for

:=:=:t these abbreviations (CONS/P&DBrEPCT) beca.TJ1e self-evident. Each New Book comprises three

.-.parts:':=( General Conditions....jc ,' Guiu':'!!c~ for tne Preparation of the Particular Conditions ("GPPC")

.,'-' Letter of Tender, Contract Agreement and Dispute Adjudication Agreements~. .

~~ GPPC}:...v-,'iJ~:) ~ome b'i:.;ic guidance on what (if any) provisions may be appropriate for the

~ contract's Particular Conditions, including some ex2.!;'.p!~tc~~~ ~Jo;;t are not r~p~::~~ci in :hc uuju~.:;)

-..The General Conditions recognise the reali£)' that the tender doc~_rrf;;fits for it p'-~n:::u12: project

~ T)'Pi'::2!!y h~ve to :nclu,je provisions th::t are not appropriate for oth~r prcject:;, Prcpa..::l(,;) of" t};(, tender nocuments h~ bc~nlacilitateci b); "~

~:::~ .flexibili~:.(iJDy~ai1ticipating alternative procurement arrangements, and (ii) by stating in the

.General Conditions \vhich provisions are subject to what is stated in the Particular Conditions

::". (because they may not be universally applicable); and

,8 .user-friendliness, (i) by maximising the General Conditions so as to minimise Panicular

~. Conditions, and (ii) by identifying one locaTion for essential contract-specific data.

~~ The General Conditions were drafted on the principle that users would find it more convenient if an)',~ pro\"isions which they did not wish to apply could simply be deleted or not in\'okcd, than if additional

;"~ text h:!dto be \\Tittcn in the Panicular Conditions (bec?l.:~e the Gtrncaa! Conditions did':not cover their~=:8 requirem~nts). Therefore, some of the provisions contained in the General C~nditions may not be

'- ;) considered uppropriate for an apparently typic:.! c~::::::.:t. T1il.: ~aSic concept was to provide maximum,..- .

~J convenience for users of the New Books, particularty those who prepare the tender documents..)

;--.:r", .,~, .,~-.;I .-~-= ~

~:.:. .-

"./

;) ..

~') Project Procurement

~ Two other FI~IC publications were taken into account, both being second editions published in 1994:

-'-' .Tendenng Procedure, and)

==> .Standard Prequalification Fonn for Contractors. ~

., Tendering Procedure seemed to constitute an excellent introduction to procurement stratcgy, prequal-

~ ification, tender proc~?ures, opening and evaluating tenders, and awarding the contract. It contains

" diagrams illustrating recommended procurement procedureslandguidance on these procedures, but no

1 spec~fic e~ample Instructions to Tenderers. Also, it only refers to the forms of contract that FIDIC

" published m the 1 980s, and was not upd.ated so as to refer to the Orange Book publishr j in 1995.

':=:i The Standard Prequalification Form comprises a set of tables to be completed by each applicant for") " prequalification. Although the Form conta4ns no ~idance on th~ "r("~~!tu[es.. inSt(uctions are inc:udcJ "",,-'-

'. ~..,.,..." ..,-, ,,' -.-,.~._",-,,-- -,- & --

=:jj~ .\vhlch shouid be sufficient fo~ each applicant for prequalification to be able to enter the required data,

~ and ~ufficie~t for each a~sessor ofthe.apPlic.atio~s to unde~stand a.nd evaluate the sUbm,itted data. ,

~ Havmg decided to publIsh a substantial GuIde IncorporatIng advIce on procurement, It seemed lIkely

that there would no longer be a need for a separate publication on tendering procedure. By

~ incorporating all this advice in a Guide, those s~eking advice on tendering procedure would be able to

.~ consult other parts of the Guide at the same ti1i1e, and thus be able to study the wording of particular

~ sub-claus.es. The G~ide th.erefore c~ntains procure~ent advice that is intended to repl~ce that ~'hic~

~ was previously pu'bllshed In Tendenng Procedure. SInce three New Books are covered In the GuIde, It

..could conveniently address aspects that logically precede the choice of which Book to use.

~ r\fter the Guidc's in-o.roductory pages 4 to 8, containing useful information for selecting the General

:=;i ~:: i :\~:i C:I ~::: i 7::~:~e::: :no:t~ o:;o~:~ .

::) determining the appropriate procurement strategy befqre selecting the General Conditions. For any

i ~ _..major works, the Employer and his consultants should revie~-his requirements and prioritise criteria:I ~ .ti~~: ~~t:.impC:1ancc of coffiPle,t.ing .the pro~e\.~ as soorl,as POSSibl~, ., --.~. -'.:. "

:ost: the m-:~urt:lncc of completing the project economically, anac' ~ ." ",~ ~ .control: the importance of being able to prescribe all detailed aspects of the \yorks;

:I and then make appropriate decisions on the follo".ing matter~:~ :::::i .the works to be executed under each ccr.!ract (often call1~d .'contract packaging'.);

" and, for each contract

=i) .the extent of design to be provided to, or to be carried out by, the contractor, and:I

=I .lump-sum, measure-and-value, cost-plus or other basis for determining the final contract price;

-,8 and then consider whi~h of the Ne,,' Books is closest to fulfi~ling these requilcmcnts. :\.-; noted ~~t the

=i) foot of page 10, there may be borderline cases \\'here the selection of the appropriate Book is

'- ::) provisional at this ~tage. ;

~,) ~

~'DIC I~.IIIIIIII.: Thc FIDIC C"."KI5 ~' ~ ~, 3 Got« CI P.,., L 8oocn

~;.)I c, "~ ".,.,

~ I.

.)

~) As noted above, FIDIC's Standard Prequalification Form comprises a set of tables to be completed by

.) each applicant for prequalification, with instructions that should be sufficient for eac". applicant for

;;f) prequalification to be able to enter the required data and for each assessor of the applications to

) understand and evalu..te the applicant's data. FIDIC's publication of this Form enables the Employer

:i) (in li~u.ofpreparing a separate prequalification document) to publish a prequalification advertisement

~ containing:

:::I) .information on the prequalification procedure and criteria,

'9 .instructions on the form of each application, namely the FIDIC Form, and

~ .information on the contract, and on the project of which it forms part (if any).

::=1' Following the above detailed guidance on prequalification, it may seem surprising that the guidance

~ on tender documentation covers less thaon.J:wO pages. However, the Guide Contains another 298 ~a~e~. ".-.~~. ~...",..,., c_-,,'-""'~:"'-':=--~' " --~ ,--~'--,-_. ---~ , ::t1 oi--Gcn'eral Lorid1tlons ana commentary thereon that should constitute useful guIdance for those

~ preparing tender documentation. Also, as noted on page 3, the Guide is not intended to provide

~ complete training material for the expertise required for the preparation of tender documents.

~ Suitably qualified personnel with the relevant expertise, including the relevant procurement, .

-I contractual and technical aspects, should prepare tender documents. Whilst it would be unwise for

~ them to distort the allocation of risks contained in the General Conditions, these personnel need to

..ensure that all the complete Conditions of Contract, the General and Pal1icular Conditions, are

~ appropriate for the works, the Employer and the jurisdiction.

..In view of the above comment on the Guide replacing FIDIC's publication entitled Tende~~_g -.-

:==J --Procedure, i~may a-Iso seerrl surf,nsingthat gt;idancc-'onfu;S-topicappears-to be limited 'to pages 15, 16 -

.and 20. The previous FIDIC publication contained general guidance on the procedures, with the result

~ " .., h -. 1 I - t T ~ ' f ' ~\. ." ' ..r ~ Y""" ...,-, ~",'t, -~_.. " "...~"~n- ---", tha! ',:.~ ~..)cr 11~u:"uwrllcallt ,"nec-~sary_C1()r:llmPn{~, 1 ,,~I_.~ n",.ru~..~I._.~ .~.._~.~..).

,~ One of the puf!!oses 9f tne Tno;tructioils is !~ !~fc!"m tende:-~rs cf 211 aspec~s of 1 hI:'. ~Ci;'~':'ii1;g ;.,!,:.cedurc,

;;,;:.;) thus defining the rules by which the "game" is to be "played". Many of these rules are not universal,

8F but V~'j. according!G the 'i")pc of';;orks, Employer, jurisdiction, etc. Nev.;:;Ithelcss,-!! scemed 'pr~ter~ble

~J to provide ~xamp'i~furrns,lor instr';.;lions and thert:b~! infotm r!~;;ders -}[';jT:;ta! !enl:':ering proce(1ures, -'

.j rather than to give guidance on such procedures and let them write the Instructions.-:l The section on Procurement Documentation concludes with the suggestion that a person be appointed

:a tendering co-ordinator by (or on behalf of) the Employer, to take sole responsibility for:

=t e dcsp atchinl! tender documents to each prQsp~ctive tenderer, plus details of the site visit (if any),.-

,,--- .verifying that each prospective tenderer contlm1S having received all documents,

~

..m3naging such a site visit by all tenderers, including the preparation of detailed records,

~ .receiving and responding to queries from prospective tenderers,

-8

-:.I .similarly dt:~patching addenda [0 tenderers and veritying receipt and, possibly,

~ .!T!:!n;!g:ng the opening cfTenders, including-the preparation of a rt:corG ()f'thp rroceedings-

~ 1~~'OIC The flDIC ConI"'"~ '<WI 5 .Guide C PtIer L:-

,~

,-"" ,

l ..(~

1:(Jr caco suo-clatlsc, toc torcc tcxts are di~playcd sidr:-oy-sidc, undcr thc acronym headings ('()NS,

1'&I)li and 1:.('("1". We had to vary the layout where thc texts do not rclatc to the same suhjcct-mattcr

=-:8- (cg, I () hIlt tricd not to vary it too much whcre similar topics arc ocing addrcsscd (eg, (:Iatlsc 1)

After toc tcxt of caco sllo-clausc, a box is inscrtcd cOlltaining thc numhcrs of any suo-clall~c~ III toc:-:B

-()Id I~cd, Yello\\' alld ()rangc IJook~ that rclatc tl) sirllilar mattcrs, 011 many prcVlolls I)LCa~I()nS,

Ijllc<;ti()ns had occn raised I)n wocre tor: suoJcct-mattcr of onc of thcse Old nooks \\'a~ aJdrcsscd In thc="";1

~ew liouks, ~o it sccmcd as though somc readers might \vant this typc of infomlation,

Thc commcntary includes a iable listing the clauses relating to claims on pages 90 to 93; commcnts on~

1:IDIC's cxamplc !{)mlS of security (see annexes to (II'PC) on pages 100 to 102; example fomls for

ccrti ficatcs issued under Sub-Clauses I v,l, I f.J,2 and 11,9; and advice on resolution of disputes (sec=--;;

later papcrs) by DAHs on pages 336 to 33X, \10st of the Guide thus comprises detailed commcntary

that is intended to as~!st all those involved in the procurefl1cnt and excc~~iO:l oftlie \','r,.\.~:=--.=Q

.the Employer's team selecting the ~ew Book and writing tender documents for a Contract;=-:;i-Y

.tendcrers' teams attempting to foresee the consequences of being awarded the Contract:

."Employer's Personnel" and "Contractor's Personnel" managing the Contract; and=:..:;

.DABs and others inv'olved in !he avoidance and resolution of disputes under the Contract.=-:;

G!ossary of Contract Termif1olog~'

.-The Guide concludes with a glossary of words and phrases used in the fields of building, consultancy,~

~ngincering and- associated activiti~s, D~ubtless, some, may disagree with some of ~he de~nit;l)ns,

~'-::',.:~~se ~~~:' c~ ~hcse tem1S do no! na..'e ,Ii':: 52me meanings throughout the world and tor all tIme,=;

For example, conciliation and mediation are given the ~ar!1e definitiop Some ::,eopl.. ':e.:::.~.d

-::':::-:';::!::~::):-. ;;5 ",t,; ;y..vcedurr: under whicn a conciliator is more pro-active in terms of expressing his~

o\\'n \'ie\\'s and (if the conciliation t311si in tt'm1S of issuing recon~mcndai;vl1~ CI: se~:~iIle.lt (\\hil:/1,~-under some rules of conciliation. can become binding): and regard mediation as the procedure under-:"..-",-

\\"!1i.:h ~ T!icd,i2if1r ~::'"":.~ t,) ,a_void :,,\pr':~s~n~ his o\~n vi~'"",,; and does not :ssu.: recorrJl1en,dations Other,-.p"~;,!c

'.!.<:e !:'i'S': \\'!),:ds dltfl"rer,tl~, so Il seemed preterabli.. \0 apply the sallIe uc:fillltivii to ~'\llh u~

these \\'ords,~

H,)\\ e\'er, dispute aojuoication,:rc\it:;\' o,-'Jrl1s are gi\'en differcnt definitions, based upvn their original~

(on.:\.'pt:, i','O\\'. 2 c('ntrJ(! !1~:!~ c':!:.'c !l-- J dispute bo,lrd issuing recommendations that arc binding

~ ~ unl.:.'s and until it is re\i..;::d in 3i1 ;l;-:~;;'-Jb!e settlement, arbitration or litigation, \\nether the Board is

tl) llcli\'cr :) d.:cisioll or rl.":l'mm\.'nJ;lt:l"1n. ;md \\'hethl.'r (if notice is given) it is binding unless and until~

r\.'\'I.'cd in a s::ttl.:mcnt \.)r 3rbilrJtllm: lile.'\.' mattl.'rs dl.'pcnd upon th.: provision.' in the Col1lract, and n\.)(

ul'un \\'hl.'thl.'r th.: BoJrJ i~ rt:rl'nl'li It) ;I~ ;1 displllC ao,iudic,ltion board or J dispute rcvie\\' board,~,~

1-hl.' plll]1t)SC of thc glos~;lry is l,) illlli':;ltc 1:11)IC's illtcTl)rctation or (hc \vords and phrascs, ll.c

dl.'t-'nition..; ,Ir~ nol il1ll'11,lcJ I,) !):: !:'~.i;ly ~)rCLiSl'" or 10 1,-: Lonlparahl~ in :;;iy \.)thcr \\'a~ [0 [h~:.J

dCtl11itioll.' sp~ci fied in SUO-CI,lUSl' 1,1, \\'e hop~ that, as ~'ith thc oth~r parts or (hI.' Guide. re,llll.'rs \vill

-lipJ tot: gloss;lry helpful ill th... 'l'l:ll~;':'~ "l:'.!!":'S that ollcn foml rart ortnc prol.'Url'mel1l and c,"l.'culion:::.!

oll)uildin!! and cnginccrillg \\l)rl ; usIng the flDIC IlJ99 suite ofCunditions of<'~ol1lract,

.~ --.000< 1hc fll'l, ,..n""'"

~- .~ 7 t;u,,1c ~ I'M" l I"-_n::::;;..

"'"

,

-I)eci.\ions by Engineer or Disputc Adjudication Board

.Pcter I... Rooen-1 lI"'III",nnfI-JIIIC"sA.."",r,..."tl'",.,1 f(lrA'!jl/(!Kal'JI"". Ilil»lI',II"",I"f(il"I,a'1'

'1'111.' 11:t~ii, (If I/lt.' I)cfinilion, in l'/lc f:IOI(,' (:ontracts (;uidr

f )ISrlltt' A rancl of onc or three per~ons, each of whom cntcrs Into an agrecmcnt \\Ith

l~oarJ hoth Parties. anti to \\'hich a disputc hetween them is rcfcrreJ under " di~pllte

resolution procedure specified in the C:ontract, The procedure may Includeor

rrcscntation of evidence and conclude \\"ith the Board issuing a rccommend;l!ionHoard or decision Ill, settlement of the dispute, the eflcct of which dc:pc:nds up!'; the

provisions of the Contract, FIDfC's Sub-Clause 20,4 concludes "I f the DAB has

given its decision as to a matter in dispute to both Pal1ies, and no notice of

dissatisfaCiion has been given by either Pal1y \\'ithin 28 days after it received the

DAB's decision, then the decision shall become final and binding upon bothn P , "~ '-~) al1les,

Dispute A Dispute Board to which a dispute between the Parties is referred under a

=.4 Adjudication procedure that concludes with ~ binding decision in accordance with theBoard Contract. FIDIC's Sub-Clause 20.4 specifies that the DAB's "decision shall be

.binding on both Parties, \\'ho shall promptly give effect to it unless and until it~ or~ shall be revised in an amicable settlement or an arbitral award" .". In other

" DAB words, irrespecti,'e of \\'hether notice of dissatisfaction has been given, the~

-Parties must comply \\'ith the DAB's decision.

Dispute A 'Dispute Board 'to which a dispute between the Parties is referred under a~ Review procedure that concludes \\'ith a recommendation for settlemcnt of tilt: dispute.

Board Under twentieth century' provisions, if the ORB issued a recommendation to the=+'.

Parties and ~ne of them notified its intention to commence arbitration, \\'ithi!l 14or days, the reconlffiendation \\'as not binding; but if no notice had be~n gi'..en~

t[) DRB within such period, the recommendation 'vas both final and bir.ding,

However, the effect of the Board's recommendation (or decision) depends upon~

the provisions ot- the Contract, Some t\\'enty-first century provisions refer to the

Dispute Board as a "Dispute Revie\, Board" but require the Parti~s to comply'~

with its rc:.::ommr:ndation, irrespective of whether a notice has been given,

aJ-IIOC A Hoard Rhose membl:r{s) is are appointed after a particular dIspute has arlsr:n~

Hoard and is/arc: l'nly expc:ctr:d to consider that one dispute,

,~ full-ternl A Bo;IrJ \,host' mc:moc:r{s) is'are appointed at commencement and is are~ Board cxpccted tl' ser\'e It)r the full contract temvperiod,

.~ \\'lll:ther thl' [30;Iro is to delivr:r a ll\.'.::isil'll or recomml:ndation. and "hethc:r {if notll-C: IS given! It i~-~ oinJing utlll:s~ anli until rC:\'I:;\.'ll in ;I sc:ttlemel1t or arbitration: these n\:\ttc:r:; dcl'l.'n,..! UPl\!\ ror:

~ .-., .11rovi:;ions In the Contract, ~)II..!rlot lIJ'l'n \vhc:thc:r it rc:lcr~ (0 thl: Hoard as bc:int'; a [):\U or a [)I{B::.-

,~

"""--~

'( \

M .

-')c:ci.\i()"~ hy fh~ ":n~i"c:cr

-(-()~S'" (il'I'(' IIIL/UI!CS Ihe ff)llo\ving exalnple suo-clause ff)r pre-arhilral dccisiollS O) IlIl' (-:lIgilll'cr

.(I'.\:I >I!'s (il'I'(' IIIClullc\ all cxampil' suo-clause tllalls o;l"cd UPI)II ('C)NS and Ila-; a Sllllililr cf/eCI)

;)l'It:lc SuIJ-( '!;ltJSC\ ~0.2 and 20.3.

I )CJt:ll' Illc ,\CCIIJld paragr;lpll of Suo-Clause 2()4 alld SUhSlllulC:

nIL' /.:II~~IIIt:cr sll;111 ;lcl ;1\ Illc OAO ill accordance with Ihi\ Suh-C.jausc 2()4. aclillg falrlv,

1lllp;lrtlally all(! al Ihc cosl of the I:mployt:r. III Ihe evCll1 that Ihe f.:mploycr illlcllds 10

rcplace tllc 1:11j.:lllccr, tIle f:lllploycr's Iloticc ulldcr Suo-C'lause .1..4 shall include delailL'd

prllposals f(Jr tIle appoilltmelll of a replacemenT lJA 0

Tht: lllgillccr is ulltfouhlcdly ill thc bcst posilion to makc prc-arbllral dcci.'iions at minImum COSI ~Its

personnel would Ilave hccn adminislcring Ihc Contract when IIIC cvcnl or CIrcumstance occurred \\hlch

gave risc to the dispute, so he should br well informed aboul the subje;:t-maitcr of tIlt: cialln and

famiiiar with the relevant contemporaneous records. Thc quality and impartiality of Engineer's

decisions under Sub-Clause 20.4, which have to be reasoned, may be improved by having them I '~-prepared by people with only limited direci involvement in the administration of the Contract.

Fe\\"er man-hours should be required for the preparation of the Engineer's decision than would bc

spent by a Dispute Board, \\'hich may have to be given a detailed presentation of each Pal1y's case..I

.For similar reasons, the claimant Party may have to spend less time preparing a claim for submission~.

to the Engineer than would be required for preparing and presenting a claim to a Dispute Board.

, -Ho\\'ever, in many cases, the Contractor may conclude (possibly correctly) that the Engineer is too:I

fa\'ourable to the Employer and is therefore unahle to make pre-arbitral decisions "impanially.. E\.~n

If the Contractor is incorrect in this respect, his conclusion may result in him having little respect for

71 ' such a decision, increasing the likelihood of dissatisfaction and referral to arbitration.

A J~cision by an Engineer whose impal1iaJity is questionable seems less likely to achieve its intended~

purpose: settlement of the dispute, An impartial Dispute Board: (i) may discuss a disagreement \\.i(h

both Pal1ies and give them its vie\\'s, \vhich may prevent the disagreement developing into a dispute:,

0 and (ii) should be able to give a more po:rsuasive r~asoned decision or recor!'-'11::ndat;Oil for s<:itiemer:t

Recommendations b~' a ORB under T~'pical T',.entieth Centur~. Pro'.isions,

For major construction \\.orks, it;\ Oi~r\Jt~ Board is to be invol\.ed, it should b~ a tull-~ml Dispu(~

I Rl);lrd \\hosc recommendatil)Il"; rc:pIJ\.'C: thL' Engineer.s decisions. Ho\\"e\'er. (herL' ha\'e b~en mall~

c:\;\mrl~s of contracts on \\'hich:

.thc ORB \\as not aproinlL'J unt i I ~l'JrS atic:r (ht: ('ontractor had commetlcl.'d (h~ execution of Ihl:I \\'orks, oy \\"hich timl.' (I) 1;\r.l;1: JlsrU!~s had ari:\l:n, and (ii) thc ORB ha\.lnot acquirl:J ;\ detailL'd

kllo\\'ledge of the pro_iL'L'( JIlJ hJJ IlOt \.isitcd the Site during (hc period \\hL'1l thl.-' evcnts or

I circumstallccs occurrl:d \\'hicll .l;J\l' ri:\1: tl) thc disrut~s: or

.(III: rolc of (hI: 1::Il~ill~'LI \\';IS ult;\tieL'tL'J so ilL' RoulJ ()liL'11 hI: r...'..jt:..."';!I..J III gi \ I.' ;1 J":CI";ll)11

I hL'I.:~\l1St: (hc claimalll I\;,J JL'(iJc:J t\.) rc:ll' (hI: claim to thl: L)!{O, in \\ hil.'h \.';\";L' thl: clain1ant \\;1:'

.IlloSI Ulllik.,:ly 10 aCL'l1)t ";11,11 JL'(i..;tl)1l (or L'\L"l1 tl) ~i\'L' It 111U.:JI ft:,"il\.'\..!): l)r

I .11(lth'~~'D'~ , 11c"""",b,t"o(,"~,,,\\!l'i -0\1' ,,' "CICI I It,.","

I~

I

c:

(-.-l"llll-frfm Of a(I-IIIIt' I>An'!

'rhc ('oll\lrlll"llflrl Itl)(lk ',\ (iCllt'r;11 ('onJ'lions specify a I"ull-Ier~11 I)AIJ, hlJllhlJSC liJr 1'.\:1 )I~ ;111111:1'(""1

-"I~'LII:. ;111 allllt)l" l)j\lt II(J\\"t"\cr, 1111\ 1T111\t IIllt hc 1111'llllcrJ)rclcJ ;I~ IIIJII.:;IIIII~ thaI Illc~c arl."

rt"'Jlt'lll\l'ly 1111." lyrIc, fIll )/\I~s tllal art: Illtl~t approprlatt" Ilr rt:l.:llllllllt:lltlt:J 0) I:II)I( \\'ht:11 ICIII!I."f

1111t:IIIIICfll\ arc IJt'flll-' prCllarCll. CIJIISillt:rallllll \1111111(1 nt: ~IVCII a, tl) lIlt: 111()~1 arprl)rrlalt: I)Alt. 1;lkllll'

;Illtlllllr (;1111(1111' ()IIIt"r 1IIIIIt~S) (Ilthc /(IIIII\\lrl~ mattt:r~

.:\ IIIII-lr:rlll I)A!~ l)pil";III~' \Isils lIlt: Sltt: 1)11 a rt'!;ular na,\IS allJ is a\allahlt: If tilt: I'arlit:s a~rl.'cII

r(llt)IIIII) rc:fcr a matter to tIlt' I)/\I~ for it to givt: its Opillioll Althllugh each Party mllst IIIJI sCt"k

.111\it:c: Ift)fll a I)AI~, Ollt: aJ\antagc I)f a I"1111-ll:rm I)!\I~ IS its availanility It) dl'it:uss d1sagrt:cJ

maltt:rs oc:/ilrt: Ihc';! OC\'t'lllr intll a dispute, al,,1 tllt:rt:ny to prt: \t:n I tllt'lll Jt'\t'II)pillg IlItll a

<fISPUtC

.Thc cxtcnt 01" thc Contractor's ;Jrtivitit~S off Site. particuJ;irly ;.lIIY that are ::::~:-;-:~:d oui Dt:I(lle ilt:

commences tile execution of the Permanent Works on the Site.

C .The extent of the Contractor's activities underground or clse\\'here subject to tile risk of

encountering conditions which he did not foresee when preparing his Tender,

.The extent to which the final Contract Price is to be subject to measurement, to man\

Variations, and/or to other matters not finally determined in the Contract,

t ..The Country andior the nationality of the Parties. The Books are recommended for use on an

...international basis, so the Parties are usually not of the same nationality. If the nationality ofi

.each DAB member is not the same as that of either PartY or of the other members (if anv). eacp, of the r~gular visit:; of a full-ternl DAB may requir~ ~Ignificant travelling e,xpenses..lf both

Parties are of the same nationali~', the member(s) of the DAB could be residents of the Countr\'.=1 with cons~quent savings of travel costs. .

.Tile magnitude of the contract. andior of its 'documentation. \\'hich mi~h: ind;:.:atc: ~ £rcater=1 likeliho;d of disputes. A full-teml three-person DAB may be appropriate~ for a CONS c~n!raCI

, involving an average montlll~' Pa~'ment Certificate exceeding two million US Dollars. at 200 I~~

Drices For average mo:1tlllv PJ\ment Ct:rtificat,:s or less than one million t'S DZ'liar-,. ~ a:-:;;?-I ~erson DAB ma; be prefe~ed .(or reasons of econom~': or the Enginecr could make tile pre-

arbitral decisions, if he is aole to do so impartially, \\'hen independent co~l'Jrate Engillc:("r~

make dccisioflS, tllc)' shuulJ r:n~llrl.' that peoplc \\'ho \\'erl.' flOt Involved rrl.'\iousl~ In tl1..'

disputl.'t! matters make su(1I t!I.'('1~1,)IIS. ;fI ordcr to maximise imrartlalit~, 31lli ;Jl.:lli.:v,: scttlemcnt

Tllt::'c f)ollar anloullts must lIot oc re~ar<fet! a~ firnl ~lIidelilles, Lcssl:r am,IUni., nla~ hI.' 1111.'

;'IPI)ropri;\tc criteria Il)r soml.' pr,Jlc.:IS: p;'lrticlllarl~ if Ol.)tll Partil:s. allt! thcrl.'lllrl.' ;.\Ii I1\l.'nlOl.'rs 01

tllc I~o;.!rd. arl.' oltlle saml' 11;'lli')II;'llit~, 111c lar~cr thc pro,icct. thl.' ~rc;'I!t:r tilt' !)l)!l'mi;11 I1l.'ll:llt of

Ila\ill.\; ;1 Ho;lrtl or tllrC:t' pl.'l)pll' r:xrt'ril'llct'J in l)ABs ;In.l in the rl.'lC:\;lrll I~'rl.' l\! \\ l\r~.

~ c ~ "0."" Co' ""OCCI ",~ .,

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(~-.~ IBC UK Conf~r~n(~~

I

: ' lie-, .c ,

.Volume 14, Part 4, October 1997

T 111~ N E v\' f- I D I CPR 0 \' I S I 0 I\' 1:- 0 R A D I S P l7 T E

_-\DJUDICATIO~ BOARD1

C:H RJSTOP H ER R SEPrALA ':

Partner, While (.:;' Case. Paris

The most sign.ificant development in the procedure for the resoluuon ofdisputes under i!1ter~Jtionai co~str.Jction contracts in re[J':I-ll years has beenthe introducuon of the dispute review or adjudication board, or, in the case'- of smaller c~ntracts. the use ofa single.adjudicator or expert decision-maker,

'=I to resolve disputes before, and. hopefully, instead of, arbiu-auon.The World Bank introduced this system into itS Standard Bidding

~ Documents-Procurement of Works in 19953 and flDIC introduced asimilar system into its Condiuons of Contract for Design/Build and Turnkey

'. (the "Orange Book~) published some months later in the same year -In 1996,~ FIDIC issued a Suppiem<::nt to its Condiuons of Contract for Works of Civil

, Engineering ConstrUcuon, fourth edition, 1987 (the "Red Book"), which.pro\;des. among other things," for a dispute adjudicauon board (the~ -"Board") consisung of either one or three persons. FIDIC proposes this as ~n

.."acceptable alternauve" to the Engineer's role in dispute resoluuon under~ Clause 67 of the Red Book.

.A..s regards the Board, the ne\\ FIDIC Supplement consists essentially ofthree documents: (i) Amendments to be m~de to Clause 67-Settleme~t of=' Disputes-and to the Appendix to Tender, (ii) a Guide to Amended Clause67-Disputes and Arbitrauon, and (iii) model Terms of Appointrnent and:i'

-0 Procedural Rules fo~ the Board. The Supplement is 20 page: ~ong (page.s A-Ito A-20). For con\'enlence. the full text of amended Clause 6/ IS se~ forth In anAnnex at the end of this arucle.=='

This arucle will briefl)'; (1) revie\\' ho\\' under the ne\\' Supplement a Boardis constitu[ed and functions. (2) .describe the steps in the procedure for [he

-+t settlemen[ of disputes b~' a Board. and (3) pro\ide some comments on [he~ Board procedure.

-f' .B:l5cd on ;I p;lpcr prc'cnlco ;II thc :{'" \\orltl HJllk/F/D/L Lrnlrcrcllrc un Inlcrn;lliOlIJI Procurcmcnl

~ hcld ill \icnn;l un II ;lnd I~'ul\ 1~/'Jti.co LC~;lI.-\cI\i-.ur ;Jnd 'Icmht:r or Ih,' FI D/C: T ;a~k (;roup r.,r Upd;lUII:Z thc Rr:cI ;Ind "ctlt.\\ Bllllk.\. HII\,'c"cr.

lilt" \ic\\s c~prc"~cd in thl) ~rticll' :lrc lilllSt" of Ihc JuthlJr ;lhJnc. ~ (~(}p\Ti~ht rc~rvcd=*' .Thr \\'(Irld B;lnk's ~;Jmrlc: Billoill!-, U.,cllmcnl,;-PruCUrcmCI1I (If \\orks. p'lhlishco in l)cccmhcr

I ~'J I. rccrnnmcndcd Ihc U)C l,r;J dl\plllt"~ rC\lC" huard hut did not prnpo\c J ~mplc clJUSC on thc suhJccl

-lur intrnducu(m inlu it, hlodln~ Ih,rlllnCnl\.~ .f.,r J 1:'-IICr;Jllic:ocroPII(:11 ,,1111., SI,rrlcm,'nl. ~cc B.,\,c(}ck. -ru.. ;\c'\ -,urrlcmcm II) Ihc fIOI(: Rrll~

Boul- (I9'J;1 14 1(:1.1{ 4';' Th.. S'IPlllcmcllt \';1' dc'clfJpCrl Irmn Ihc OrJnJ:c nnol) Tcrm, oj\ppfJlnllJlCnl I." ;. (}"PI'I" AI4"111(;II,."1 Bf,;Jrd Thc.'c T crm:\ ;1ft' illchlo,.(1 ;I' ~ h""c:-ICJI In't:rl In Ih...' -~

(_)r;J'I!-'c H-",l. ;111(1 rc:prf,du(r,J III FIOI(:', -(;ulor I-I thr LSC o[lhc' Or::..,::- B.,.,\.- (l..Ju~nnc. I~~t)}

.~

((I ..

( .....Pl.4] 7lle/v'ewFlD1CPrUVlj/On .445..

sug~eslcd, on ltle CJnucipCJled nCJlure of the isslles lhCJl lhe'. CJre likel,. lO bt:cCJlled upon (0 decide.

If lht:re is 10 be onl, one member of (he Board. (Ilen he clr she is [0 bechosen b~' mu[uCJI agree men [ of [he pCJr[ies. If(llere CJre [0 be three members.(Ilen each par~' shOllld nomina[e one for appro\.al of the other par~.. and [heparties should mu[lIJII,. CJgret' on [he third. .-\5 in (he case of the singlemember Board, all nlember~ ~\re lO be agreed llpon b,. both parties." Thepllrpose of this reguiremen[ is to ensure (ha( the entire Board has (heconfidence of (he paru~s. .

In (he case of d one-member Board or (he chairman of a three-memberBoard, i( is accepted that (he Employer ma~' propose candidates in theinl\;tation to tender documents for tendere!"5 :~ acceDt. Ho,,'.'e\'er, fIDICrightly emphasises thCJl (enderers should not be placed under pressure (0accept candidates proposed b)' the Employer. and neither the candidate for a

('"' one-member Board nor the Chairman of a three-member Board should~ '._/ ordinarily ha\'e the nCJuona]it), of either pCJr£),.IO If the parties cCJnnot CJgree on

any CJppoinm1ent, then the position is to be fil]ed b)' the appointing bod)' or=t. officia] (who mCJ~' be the President of FIDIC) nCJmed in the in\itauon to

tender.11...Each member must be, and remain throughout the contract period,::;.

independent of the parues, He must ha\'e no interest, financia] or other\~se,.in either of the parties and must not have been emplo)'ed by either of them or=--'

the Engi~eer (unless this h~s been disclosed). !hus. each parry'-appointed.ml~m.ber ;$ not a representat!ve of the parry namIng him although he can be

of the same nationali~'as that party. VI'hen making a decision, each member=" is required to act impartia]I)', as is true of the Engineer under the Red Book.l:?

The Emp!c)'er 2:1d th~ Conu-acior are each responsibie for one-half of the~ Board's remuneration.1j If one parry fails to pa~' its share. then the other par£)'~ may pay on its behalf and ret:=o\'er the amount not paid, together \,'ith

da:mages. from the par~' in default. If a Board member's in\'oices are not paid::+I L~! i~ due time then, he n:a~! eit~er suspend his seT"\ices until his in\'oices are

dIscharged or resIgn his appolntment,14,.

5188

2. ]{emuneration of Board Members~

The remuneration of members is to be mu[uaIly agreed upon by theEmployer, the Conlrac[or and each member. If the~' are unable lO agret:,..JI then each member's remuneration is (0 consis[ of (i) a dail~' f(~t: (for eacp

~ working da)') to bt: fixed in accordance \vith the dail\' fee established for~

"~;llpp_p.A-).--"'S ,- d ,..upp. pp. ,..-;)..n tJ

-"Sllpp.p.A-6., ,- ': Supp. pp- A-I ..ncl A.(j"

Supp- p. A-I.t ,~. "Sllpp pp A-II "nu-\-I-:~~

I;

-.,.,l-

f". \

.PI, 4] l'hrJ\'r;I,FIDICPrm!l~i(J11 ~-1i

\()lllnt;Jril\.. Olllcn"i~c. bJrrin~ ncJlh or disabilil\. d memb':l ~ appoil11111el11

(;lnl Icrminalt: onl,' b,' m\II\la! a,grt't:mcnl or thc parties.:."

Ha,'ing set'n tllt'11 110'\ lOt' Bo:1rd is ()I1Slit\lten ;'lnu rllnCtio11S. ho\\ doe" tilt:

Bo;Jrd go aba\11 making dt"cisioI1S~ Esst'nti;lll~. the procrnllre is thr S:1111e as

r()r the resolution of disp\IIt"~ b,. the Engineer \lnder CICllISt" 67.1

II. THE STEPS It\' THE PROCEDURE FOR DISPUTE

SETTLEME~TBYTHEBOARD

To underst2nd the procrdur-e for the sett1ement of disputes by the Board

provided for by Clause 67. as supplemented (the text of\,.hich, as pre\iousl~'

'] t"\ mentioned, is annexed he~eto) ,.it is co.nvenient to break it, do\\'n into se\'en ..~

"'-v) steFls. Each of these steps IS re\le\\'ed In sequence and brlefl). commented

~ upon belo\\':

~ .Step l: There must be a "dispute" between the Employer and the

, ConltI"actor

~ , To invoke Clause 67, it is not sufficient for the Emplo~'er or the Contractor to

8, hav(~ made a claim against the other. Instead, it is necessaT")' that a "dispute"

Z'1 exist be[\\'een the Employer and the Contractor in connt"ction \\;th the

COrii:;act.:!.'i T)pica:J)', a dispule exists \"here the Contractor has made a claim

\\'hic:h the Engineer or the Employer has rejected and the Contractor~th ..%-; contestS at releCtlOn.- ,

.~

The requirement of (1 dispute is important. If no "dispute" existS. then.-+00-

there can be no valid reference to the Board under Clause 6i and, thereafter,

no valid reference to arbitration.~;~- :'supp.p.A-~.; :; Tinc: prcsc:n~.ioll uf fin;lnci;al -(Iaim~- hv thc: C :Untractor C;l~ di~tincllrom -ui'putc:~-) i~ dcall \\;Ih ir, ;I

'<"p~r;ltc: clallst:. n;)mcl~. C1311~ 53 c:nlillc:d -Pruccdllrt: for C:I;lim!i-. Sct: Iilc: ;llllhur.~ -c.:,'nlr~c!()r~ <':I..im~;.-f"

undc:r thc FIDIC Ci\iJ En~inccril1~ (Alnlr;Jct-. Fourtll I I~~i) Ediliull. Inll'T7lnllllnnl b'u"n'.l1 l.au~.,.,.Oclu~r ;lnd t\'u\'cmbcr 1991. -

;"'. Scc: ft/onmuul/lJhir, (.-.(.: v. (.."oil,{/",';:;-' ;".'mp/rl IY6.; J :.nI.R .').1. If thc: oclt"rm'I1;1UIJn uf lhc: ulntr~ctur~

cl;Jim \":IS firs! m;ldc: hv thc En~inccr.\ Rt'rrc:\c:nl;II;\.l' C;J\ \,.nulrl nnrm;Jllv ht: lilt: C3~C:). in~I(";Jrl ()f hv Iht.:J I::n~int:c:r. thc C.onlr,1CIUr shuuld tir\! rc:tcr thc: m;lltcr 10 Ihl: EnRinc:c:r \,.ilO m;lv cc;nhrm, rc:vc:r~ or \-a~'uch dctc:mlill;ltion. ulldl'r ~uM:I~u'c.. ~.~ ul thc: Rl'U Bc,u~. ,w Ilb'l GI,.,.JIIII (.OfIUp \ \\o.,aII11.\""lmllllII ~~.I J i~ BI.R 1."1 in rrl:1lion I" ~IIIKuntr;Jct dl"'Ult.~. ;", \,rll;ls lilt' ;Jlltllllr.~ -lht. 't"', FI 01<.: J nlc:rn;Jli'JII;,1-, (:I\jll::n~inrcrillg Subcuntr;)ct- 119951 I:! ICLR S. pp. 1M tu ~I.~

:: ~(.t.' ICC t.:a!iC =,-"11. rJ.~~."I in I Y~I~ rc.'rllrlrcl j In F rC:llcll tr;J11\1;lliun I ill lllr/uurn/J/ rill I)rlii/ l"t,,"aIIIIIIIJ(

11~9.11 \'01. I, p. IO~~. .Yr aLJo tht. 3111111.r.~ 11'r-.-\rb,'rnl Prnr"lur,. c:~pcci;lliv rp..11 j III .1:!:! 011 chc.. othrrh;Jnd. il thr Boarc! \"crc: II' dc:cirlc th;J1 Ihc:rc: \\";J~ I") clj'PIIIC: ill a ~i\"CII C;\\c.'. Il' ciCCI""" ""lll,! nllt nt':::J u'~pl.sitivc. A p;Jrl\' cI)uld slill Ih,. fl)llcl"in~ thc: nc:\, <":Iau~t" fit .procc:dllrc: I rc:tcr \lIcll i~'ur 1', ifn IC:C:;Jrll,tr..llnllun;Jllor dCCI!illlll. Illllt" ~rbllr~1 tnllunal \'t"rc: Illcn Itlllnr! thOJllhc:rc: \'"3.\ ,n I;lCI OJ dl!ipulc. In Ihl.;Jlllhllr, ';c:'" Iilc: ;Jrhilr~llrihun..1 ,hl'II!!.! OJ\"lmt" juri\Clictil'll ;lllcI procc:r-d 10 dc:cldc: Ihc: dl~rulC: un II'

, 1 IIIt"rIL' Thcrr: "ould ~c:cm hillc: ruIn! 1I1j:C:IIIClC Ihc ~C)~rI!'~ vi..w of Ihc: nlt"nl\ al tl1..1 pclin! a, unlilc :III;:;..- [n~IClc:cr. thc: Buard wllulu ordln~nl, nlll h.., c: dC:~IIc:cI hrst-h;lnrl kn"".lcrl~(" of thc- pr'IIC:1 01 It' 'J\,n I"

.(clCllr,blllC: 10 ~ ,("'Vlulllm "IIIIC: dl'pull'~~

---",,'1~, ,~\1!\!f,

~:.(

( .

P!,4J The/v't'lvFllJ/CPro1,z.slon 449

on It.(. parries ~nd musl be respecled. e"en if~ parr:' is dissatisfied \,"ith il (the

dl:cisiun C3n onl," be re\ised h~' an amicable seltlement or ?on ~rbitr31 a\'"3rn).

A" discussed in Section 13bo"e, the B()ard has broad freedom lO establish tht:

procedl're for nlaking a decision. \"e\'ertheless. the Cjuesuon is sometimes

raised. al least in common la,," jurisdictions. \,'hether adjudicators. like the

Jne~bers of a Board. m;1~' ~..~'cide qlleslio~s of la'~. An Australi~n ~~se has

dt"clded that the~' ma," do so. In that case, In response to the contenuon that

the~' m;1~' not. the court stated that the parties should ha\"e considered the

potential difficulties of using a single alternau,'e dispute resolution process

for all disputes prior to the execution of their contract.

The decision m_ust be given within 84 da)'s. This period can onl~' be

~xtended b~: an amendment to the contr2ct \,'hich, as ~ pracu<;al matter, the

parties are unlikely to agree to save in exceptional circumstances.

(f)=- J" St{:p 4: If Eiilier Party is Dissatisfied with the Board's Decision (or it fails

to give a Decision within 84 days) then either may, within 28 days, Notify

=- th(: Other (and for Information, the Engineer) of its Dissatisfaction

Ao::ording to Sub-Clause 67.2, the notice of dissausfacuon must state that it is

-given under Su]:}-Claiise 57.2 aild sei out the matter in dispute and the~ reason(s) for dissausfacuon. The effect of the giving of the notice of

, dis:sausfacuon is to establish the par~'.s contractual right to take the matter to~

arbitration under the arbitrauon clause in Sub-Clause 67.4" This (ollo\,'s from

SutrClause 67.2 which provides that ordinariI)' no arbitration in respect ora--d.ispute

ma~" be commenced unless such nouce of diss3tisfacuon has been, glv(~n.3() ,

IJr neither par£)' has given notice of dissatisfaction "rjthin 28 da~'s of='

rec.~i\rjng the Board's decision, then neither \\'ill have acquired the right ~C

ha\'e the dispute arbitrated and the Board's decision is said to become kfinal

and binding" upon the parties. .~ a pracucal matter, this means that each~

~ parity is bound to compJ,'with it, failing which such party is liabJe for breach of

con tract.~

If a parr:' fails 1.0 complv ,\'ith a final and binding decision of the Board,...i then the other parrYma~' exercise such rights to enforce the decision. if an~'.

as may be availabJe to him. Such a decision shculd not ordinarii," be~

enforceable Jike an internationaJ arbitraJ a\'lard as, among olher things,

SulrClause 67.2 expressJ,' pro\'ides that thc Board act" as a panel of experts--~lJ1d

not as arbitrator and the possibilit~ of arbitration is expressl\" pro\ided--

,-. /",bur AUlh'Ir1II'j .'iulJ"rr'llnl'flw,n /"""d \, "\uulh'"l Jnl,",fl/l/'I/(U /In,,I''!lmml,\ (.1"1"""'1/'" ~/\ J.ld, II~S-;-),.",

1111~~~lrll'd (Sm;cr! J in (.~~ml)11 U~\ DI\1)JUn of :"t'\\: Sullih \\;llc~" dcci~lon ,11'1, I i~.'<ti uf I~ ()c'oh~.rI ~IS,) cllC'd hv Burlc ..nt! t:hlnlm III I)r;u IIn~ ..\)Icrnallvl' l)1~rUll" RcsolulIlJn ("I..u~c~ r I ~Yf' IIC.lR 4~ ,i

Simil;Jrlv" Ihl' "ulh',r II", I;,lcc-n Ihl' p'/,ililll\ 111;11 Ihc [11~illl.t"r ~11'/tlltl bt" ..hlt" 1(1 dccicicc- qllt."'ljon, of 1;1\\Ilndrr ull;Jmcc-ndl.d (:I;,u~c fii .And 1!It'rl" ;"'r l'S C;l\CS III ~upr'/n Ihl~ \1(:\\, !'(:"c Ihr ;J'llh(Jr~ ?,.--,-Irb!lrl,,'~ /'"",tiuri'" csprcl..llv rp ~~,-3~Yr

~. Thcrc is nuuhliJ?;lllon. hf,"cvcr III prtl'rl:d lu "rhilr.Ali"'1 mt:rC'lv hl:c:..u~r os nl,IICI: "f UI,-,,",II\I:4CIIII'1

II;" hC"C'1l Kivrn~~

---

\.

J .

.I't- 4 J ]111' /".'w Fill/C Prolli-sIOl1 453

('xpcrl c\-idenct, and Iht Board ma\- ha\'c litll(, or no lime for indepcndenl

Irl"esligalion or e"en refJeclion. Thll.'i (like its predecessor. the Engineer).ttll' Board cannot be expected 10 decide dispules ".ilh ltle ri,gollr or

IhoroU1!;hnes.'i of inlernalional arbilralion ','here, as Ihe rules of 11alliral

,il,slice" musl be obsen.ed, each par~' is gi"en a reasonable opporlllnir\ 10

present its case. As Ihe procedure before (he Board is a summa~' procedllr<:,

(he Board may be of relali'.el~'limi(ed \-alue in the case of, for example, \.er:-

big or complex disputes. Fllrthermore, as seen earlier, the Board.s decision

\,'ill nor ordinarily consulu(e an arbitration award and, conseqtJenu\., ma," nor

be readily enforceable internauonall)'.

The Board procedure may afford the claimant, \\'ho can decide \\'hen and

in \\'hat form (0 submit a dispute to the Board, an undue ad\'anLage. The (ime

al.lowed (0 the claimant (0 prepare an iniual submission or reference to the

Board is unlimited, whereas (he respondent \\ill have only a few weeks a( mosl

e (0 answer, as the Board must decide a dispute within 84 days, This ma~' be:a in:;ufficient time in \\'hich to anS\"er to a welJ prepared, detailed claim.

However, for the majority of disputes, the ad\'antages of the Board should

~ outweigh its disad\'anl3ges. It allo\vs for speedy, interim decisions b~'

.(echnicalJy qualified persons, independent of the parties, and yet familiar-.with the project. While the decisions of (he Board cannot be expected to have~

necessarily been prepared with the care of arbitration a\\'ards, the Board.~ sau:sfies the need in construcUon for quick and roughly accurate decisions, by~

.a neuu-al decision-maker. In most instances, this is as much ju.c;~_ic( as an~ int<~mauonal COntraclor requires and, \\'here a serious error ma~' have

occurred, it may still refer the matter to international arbitration.~

The institution of the Board can be exp~cted to reduce the n~ed to resort

to i:rltemational arbitrauon i-or at least three reasons:

(i) As the Board is enurel)' independent of the Employer, the Board may.&,.' reasonably be expected (as menuoned earlier) to render more fair

and imparual deci.~ions than the Engineer. \A.'here decisions can~

() reaso~abl)'b~ belie\'ed to ha\'e been mad~ f2irl:'an~ im~artiall,., eachpar£)' IS less IJkel~. to \\'an( to take the matter (0 arbItration.

(ii) The decision of the Board may be submitted as evidence in a later:r arbitration, \\'here it \\'ill have more weight, in principle, than an

Engineer's decision, because (he Board consists of professionals \,'ho,'1 although the~' "'ill not be as f~miliar ,,'i(h the project as the E.nginee:,are indepnden( of the parties and ha\'e been chosen ',"I(h theIr

consent. As a Board's decision "'ill have more "'eight, a parn' ma~' be:f less inclined to challenge i( b~. arbitration.

(iii) Linder the ICC Rules of Arbi(ra(ion, the arbitra(or(s) must fix and:I

allocate the COS(5 of the arbitration be(\\'een (he panies.3,. In

determining hO\\. the COSl~ of an arbitration are lo be allocated, a

Arliclf ~(I of Ihc ICC Rulc~ of -\rhtlr:l!llm (,0\1.\ ..rc dcfiocd bro~d/\ ill :\rliclc ~ClIO includc ;sll CO\l\ of~ (tic" :lrhilrOJllon mc/udinI: 1~""\"C"r\. [c"C\ :In(/ cxpcn\c\- ~rhilr:llOr~' fC"c~ ann cxpcn.\c.\ and ~dmioi\(r~tl\,

.(o~l.\ of [tic" ICC:I

,~

~

""..~"~(. "

( .

.1'1" 4] 'rhl'.-\17vflIJ/LJ.llul'I\/ull -I:);)

.Itl(" '~II,~IIJ('(.r Ilrlr!t.r C:I;lll~(. fi7 TII(' Empl()\('J I(.tt II l;lr~("I\ it n()( \\tl(,lj\" 1(,ItJ(' t_Il~lrlf."('r 1(1 dt~;11 \\ilhlh(' (~()lllr;lclor":i rrlt.'rt.'llct'S lilldrr (~I~IIIS(' (,7

I~III (i., III to I~o;llri i~" lllllik(' Ih(' ['J~ill('t'r" \\11011\' intlepclldt'111 ()( 111('[~mpl()\'(OI. IIJ(' t_mpl()\t:r mll~1 no\' bt' prt"p;lrl'ri" \\'ilhlll;1 short lin1t' PCI'II)<!(I) 11J;lk(, SllhI11i<;"i()ll~ II) IIJ(' 1~(I;lrr! iJ1 r('pl\" 1(1 1!lt' (:()11IrtiClt)I'"S SllbIIJISSJI)ll';11101)1' f\., I (°tiO\ ;I'i 111(' C:Olltr~Cl()r 10 IJ1akt" illili;11 rl"ft"r(':nct"sofdisplll('~ 10 tI1('l)();lr(1 for (lccisiOIJ" f('\\ Empl()\'crs or En~in('t"rs (on bel1;llf of Emplo\t"rs)111;1'" "el be rcari,', h, trainin~ or experience. 10 lake on these ne\\ tasks"uI1iike a ContraCtor. Ihe\- art" 1101 in Ih~ h3bil ()f preparing submissioll~ lO ;1third par£" in order to persuade that person t() accept tht"ir point of,ie\\" 011the other hand. if Emplo~'ers fail 10 assume a sllfficientl)' acti\'e and asserti\'erole, the)' risk recei\-ing ad\'erse decisions from the Board, \\'hich can 0:'11\" b-: -

o'.'~~rlllrnt::d if til{",' Ihcmsclvcs initiare arbirralion. something Emplo\-ers areusuall" not inclined to do.

:a-~ 2. ~;electing Qualified Board Members

, A critical isstle ,,'ill be selecling qualified engineers and other pJ.ofessionals~

.,""ho are a\-ailable and ,\Tilling to sen.e as members oi a Board. Just as the.eff(~ctiveness of arbitration depends largely on the qualit). of the arbitrators,.so the effectiveness of a Board \,'ill depend, largel)', upon the quali~" of its~

me;mbers. ~ The initiaJ appoinrees to a Board \,ill be \.e~" important as, once selected.:I

members-cannot be changed wi[houl the agreement of both parties. Thus,.O!1 £l T!1ajar ?roject, ~he members ma~' be in place for fi,,'{' or Len years VI more

(e.g. the members of the Panel for the Channel Tunnel ha\'e reportedl~" been:tt' in office f()r ten ~'ears or more)_lndeed the flDIC rtlles might be impro\-ed ifil \\'ere made easier to replace a member (e.g" b," pro,iding at least for~

mar:id2!O~' reriremenr at a specified age) ,,-ithout making it so ea$~" to do so..s: -that StIch rtlles could be abllsed.

E.ich par£)' needs thorollghl~" 10 in\'estigate lhe background of each:=' candidate for a Board, not juSt the one ,,"horn the part)' proposes, because

each parr). must appro\"e all members and becallse one "bad-' member (t.g- amember \\'ho is not a\"ailabl~ \,'IIc:n needed. or \,"ho is p3rtisan or obslrucli\,t")~ can block or dela~' rhe ,,'ork of the Board JS a \,"hole: as no mcmbt"f CJn bt:'

rcmo\"ed prematul-el\ \,"itholll the consent of bOll1 p;lr[ies.~ Whil~ ~IDIC, lhe ICC's lnlerlla[ional C~lllrt: lor Experli.s~ and \-ariou<;

olhcr bodIes are prepared 10 ofjt:r their senlces to Ilelp appoint members toa Board, 3S adjudicaliun i"~ so 11t"\\-, no international illsti[ution 11JS ~o far hacl:I

~;llbstJntjal experience in making stIch ~Ippointmellts-

\\'hereJs [he rele,-ant conslrllction sites ar~ lik{'I~- t() be in the dt"'t:loping~ (Olilltrle~ (oftcrl in remott". oiffjcllit I() r<:;lcll" inc:1lions). most ()f tht: best..(111;\lified

candidal~~ for ~I B(};lr<l, ill Icrms of It'chnical qllalihCJli(In~ ;'111(1'":I:I

..

..1'1.4] Thri\:c-uIF1LJIC?rOU1SIOII 4:)/

.(,()n~('<Jut'nll~, th(' rll~put(' ma\ ul1resol\ed cxccpt tillougl\

~llb~equent arbitration.

4 -Rjsk r.hat Board Procedure be Deemed an .A.rbitratjon

T11(' s~'stem of dispiltr~ rc\'it'\" or adJudicJtioll boards, \\hich de\eloped

originally in the L:nited States, is gener~lll~' accepted in tht:. common IJ\\"

countries as 41 procedllre ".hich is disunguishable from arbitrauoo. L:nder

English la\\-, it is kno\\"n as '.interim expert d~termination- or "4Idjlldication-l'1

and under US la\,. as -.expert determination"_-I!

l-)owe\Ier, in some countries, it cannot be excluded that the Board

procedure would be considered an arbitration- Ifit '.':ere an arr,itrat.!u!l, then

ihe ;-e:evar;i 3lai'ut(J~' provisions dealing with arbitration \...otlld app!~',

ma~~ing it necessai)-, among other things, to obser\'e the requirement that

U~ each part)' be gi\'en a reasonable opportuniry to present itS case (kno\\"n in

French law as It princiPe du contradictoire) and making the Board.s decision

enforceable like an arbitration award.

In their recent treatise on international commercial arbitration law, Messrs

Fouchard, Gaillard and Goldman, three expertS on French arbitration la\,',

.stat(~ (translation):

"If th~ parur:s confr:r on a third par~' ,,-horn th~y call an ~xp~rt a po"'~r of dr:cision (~ith~r

.1.0 r~solv~ a tr:chnical disput~ or to \dlu~ an ass~t or an amount of damagr:s) this third

I part}-, not ha\ing onl~' a pur~l] cunsull;Jtiv(' mission, i.s i1/ rtalit)" t'itht'T an arbitrator, or-illthl'

:I ab.sfflCt' oj a di.sputl'--U (omlnO1l a,~/- -.~:I (Emphasis add('cl)

As the members of the Board are expressl}' called upon to decide a dispute

; b~' a "bin,~in~" de~isio~ (the- decision mu:t. be gi,:e? ~~ect. e\-erl if

cllall~ngea), tne)' mIght be arb;uators under thIS definItion, .\\7hlle these

eminent authors ma~- onl}' mean here a procedure \,-here a dispute is referred

~ to a third par£)' "'hose decisiorl \\'ilj be "final" (that is, not re\ie\,--able b~'

anouler tribunal), and not merel~' "binding", the~. refer explicitly ther~after

i ,.--, ;n ihe same chapter (dealing ,\'ith "the notion of internar.ional comm~":ci:?!

~'- arbitration") to trle procedure \,"hereby disputes are decided by a Panei

under the Channel Tunnel contract, \\'ithout expressing an opinion as to

a \,'hether they consider this procedure to amount to an arbitration under

French law or not.4-1 The procedure for the resolution of disputes under the

~ ", htndOiII. -[xpcrl Oclcrmln;llion in M;J;or Pru;ccLS-, Inl'7TIfIIIIJ"al bIIJln/'J.5 l.tIU'\I'T. April I yy; -P 1 i:1

" DI'l.c~. .-\dtlDnlaf!t:! and lI'IDdL'onlac/', 11 }..r/JI'T1 LJ"'lTmlnaIIUtI 0\ (.ultl/,nr,rllli (Jlltl'T I\J",hud\ Ilf UI\/IUI"

NJolul/lJn Ip~r~r prc~nlcd to Ihc ~C:CIIUII on Bu~illC:)' Lt\\"lnlcm~llol1;11 B:!r A~uciOililll1, I?" BlcnniOiI

~ Lfmlcrcncc, "OIris- St.-plcmbcl I~Y5) ..I: _\i Itl /lUrtI/'J fllnjil'71l Ii Uti IlrrJ 'lu tJ/"J al'p"llnll "xl""" un /J'IUllfJlf rlr lirrlt/,.. tlnll INll/r Iranfhrr UII 1IIIgr

Irrnnl'lUf. JOII /JOllr pruc;,lrr Ii Ir,'(Jlufllllln t/;1 n blnl III1 (I'u II fJflmmDf!I'J. r" 111'"T.5. " 'D.Yflnl p/UJ u".. ml.5Jltln .fJurr"...nl

I f"r/lnNIIIII"- ..JI m r';IJ/~'; JUI: un ~r;n'r... 1"II-II/'lb,mr" d" Cfltll"IIIll/f':-U" Infll.lt/fllfl':: rlJII,mun ..-Fuucnaru.

<';;lillOlrd. Loldm:.n, lrUII/' d" I.~rbllrufr (.lI"lrr,nnfJI l,rl'7TIallunfll II ~rl~ I':lYtJl. p. 22., Scc OIl", Arliclc 14Y6 of Ihc F rcnc I. ,\"ut,rfJU (.Ixi" Ii" Prucriiu rr L't..,/r \,'hich rrf..\..dc:~ 111011 (Ir4n,I~(lun I

..-Till' ;JrbllrOilur dcci<lcs ~ dl)PUlt. -011111 \\1-.:::;'; i, Illlcn rci('rrt'd If I h\ F rrllch I(,~;JI ~ulhllr~ \,'ht'n \("cLln~

= 10 dctillC ;arbllr~lion undcr frt'nch 101\\,. flluchOird. ~:.jll;Jrd. (;ulcim~n. p :.':;.~

~"

I

-

.~'-, '

i, '

.I

i.. PI. 4 J TnI' New rill/C PrO1-'1510n ~ =)~

;111 ;Irl)ilr;tl tril)urlal \\'iJJ drcide. al modesl CO,o;l"l anrl Wilhin a ~110ri lim!' fram!'

comJ)arcrllO inlcrnalional arbltralion. Thi... ShOllJrl enable more displllCS 10.b{' final/\' SClllcd ,,'ilholll arbilrJlion IhaJI "'a... trur ~'hen dispulrs "'ere

r{'ferrcolo rile I~nginecr. If Ihc decision of a Board should not finall\ resol\'t.a di~pulC 10 the parries' s;}tisfaction, il ma~' ne\'ertheJess sen'e 10 redllcc thc

gap bc[\\'ccn tJ1C two p;-.rlics' posilions. and thereb)' impro\'c the chances thatthe parlies tl1emseJ"es ,,'ill be able to negotiate an amicable setllemenl andthlJS avoid arbitrauon. Il is nole~'orth~' that, according to reportS. so far, incon trac tS ,,'h ere Boards or si miJar bodies (such as dispu res revie\\ boards,

independent adjudicators or panels of expertS) ha\'e been used, there havebeen relatively fe~' cases \,'here dispules proceeded to arbitration or !iugation

and, where they hav!'. don': so, they hav~ usual Iv been settled before an.-., 'I:-., arbitration award or judgment ~'a.S rendered.=>-

\DDITION.-\L NOTE~..In July 1997, as this arucle \'-as going to press, FIDIC issued a Supplement to

-itS IConditions of Contract for Electrical and Mechanical Works, third~ edition, 1987 (the "YeJlo\,'Book") pro\1dingfora disputeadjudicatjon board

" procedure which is modeled on, and veT)' similar to, the procedure=:,

applicable (0 the Red Book described in this arucle.

'. ANNEX=-' DISJr>UTE AD~TUDICATION BOARD

The follo\,.jng amendments to Clause 6i in Part J General Conditions of the~ Conditions of Contract for Works of Civil Engineering Con3truction and to ~h~~ Appe!"1d:x lO Tender ar{" JO b~ madc if ii is decided to replace (he Engjne:~r as

the d'~cision maker by a Disput~ Adjudication Board. The amendments to C!a::sf"::t' 6i should be included in Part II Conditions of Particular Application,

' Amendments to be made to Clause 6i-SettJemenf of Dispute!;~

-Delete ,rht' tcx: ~rClauJt 67 llnd Jubstitute:,~.SettJement of Disputes and Arbitration67.1 Dispute Adjudicatz'on Board~ If a diJjlUte of any kind whatsCJeVrr ansts hetWtt'11 the t-mplU;'t'T and the Contractor in connection

lLlZ.th. 01' anJing out oj, the Contract or tht ~xfcutioll of the lVOTkJ, including any dispute as If)-fI! fIn.. opinl:O)I, instruction, dl!tmni)lation, cn1.ijicalt or ~aluat~on of Ihe Engi n:n', Ih,~ dl!pute

...shalllnltlal~)" be reJmed 171 ulrltlng to the DIJpute AdjudIcation Board (Ihl' Board) jfJr It.!decision, Such rift'Tnlce shall slale that il is rnadt undn' thi.! ~'ub--Cl.aUJt.:t [.'nk'!j Ihr mml!Jtr or mml!Jtrj of Ihr Board hnv, hem prt"l/iou.!~). 7nutual~)' al7"fed upnn ~ Ihf

pnT1itJ and namtd in the Contracl, Ihr paT1irj Jhall, within 28 day.\" of tht ClImml'nr.nnnIILJall',jOinl{,. nlSurt the apjJlIin/7nml f)J Ihr Board. Thl! BlIard jhall (lImprisr juitab~) qualiji,d pn:srl1l\":I

~ .,1 [xpc:rlc:ncc in Iht. lnllC(1 ~UIC\ 'I'~(!"'I\ 1!I~llht. OIudili'>n;tJ r"\1 i, f;lll~" 111;tn 11Il" CI/'I u/ ;lr"iIJ~II()1J

"I /111~;lII('n ";11\4\, N;tlhl"\". ~mlljl ~J,(j "'f)CJr"', (.I,m/FU(/lun /)II/'ll/' fin 'In,. LJMrd .\lnnuall.\c', )or!..~ '~96),ppf.-;

,8ft; 'C' ,/Ad., P 14 Thi, conclu\Jon ~N) O1ppCClr\ ('J h<- rclnl()rc("c! h.. ~Xf)(.,.iC"IJc(" "ilh Ihc P3ncl {)f E\pt'r:,

undcr Iilc (;h~nncl T unncl (Onlr3{ I.~.~

oW

.

.1'14] lItr/v'ruJFlIJ/C:/JTOV1Jl()1/ 461

.J~7IJ~7Irn 'ji/t' prlrl7'.\ Jhnll p7f1mpll., makr allailnblr 1(1 Ihr 130a7d all Juch add/Ilona I17y/'nnallo7l, jl171hn a(U'JJ 10 Ihr SlIt, arId af1nofmale jacilllltj, aJ Iht 130ald TTtay rtqu 17f .for Ihr

.pu7"/JOJtJ oj rnldmng a dt(1jlOrl ft

'jilt' IJoard Jha/l h(II'C Jull pOWt'T, among olhn IhlngJ, 10'((1) t'jlabllJh Ihl' I'To(.i'durr 10 bt' at-plied In dtcidlng a dIJpUlt',(b) dl'adl' upnn thr IJoard j CU'71 junJdlcllon, and aJ lo lhr J(ofx oj any diJpul1' Tl'jmed lo It.

(() lakt lht InlllallVt In aJU'rlaining lhr jaClj and mallm rrqulTtd Jor a dtciJlon,

(d) 7nakl: Ujt oj iu oum Jprcialul knowLLdgr, if any,(t) dtcide upon lht pa.Vmt'Tll oj inleT~l in accordance wilh lht ConlTaCl,(J) dt'cide 10 fjTant prouisional rt'litj such aJ inlmm OT cO7lJt'TValory meaSUTt'S, and(gJ open up, Tt'Vit'W and rtViJr any opinion, irulruclion, drlt'Tminalion, Ct'Ttificalt or valuallon

oj IIlL E ngi ~t'T rt'lalLd lo IIlL dupuu.No lal.t'T than thL. eight)'founh day ajlD tIlL day on u,hich it rrCt'ived such reJ~mce, th! Board,acting clj a paru:l CJjc:xpt'Tt(J) and not aJ arbilTator(s), JhaUgiUl' notice oJ its deciJion, lo thr

par1l~ and (for injOi1T.o.lion) iu lM Enginel'T. Such dLruion, which shall be reaso~d, shall slait'

that it u given undt'T thu Sub-Claust.e Unkss the Contract has alread.,' btrn rtpudiattd or tt'Tminattd, tilL Contractor shal~ in rol'1)

cast, continue to proCt'.Ld with the Works with all dUt' diligrnce, and the Contractor and thtEmp,!oyt'T, as well as tilL Engl'TIt'l'T, shall givt effect Jorthwilh 10 roery decision oj the Board, u nlLss

and until the same shall bt rroioSed, as hl'Teinajtt'T providLd, in an amicabk settlem£nt or an

arbit;ral award.~L .If either. party is d~satiJJfi..td wilh !,~.! ~Q!!!'d:! d!ci..!!:n' then eit~ .pany, on ~ beJort tltt'row lWf'Tlly-ezghth day after the da)' on whIch It TtCt1ved notIce oj such deaslon, may notify the other

.party and (for injormation) tht Engin«T oj its dusatuJaction. If tilL Board JaiL.s to giUl' notice oj~ .its decisiO1I on or bejore tilL eighly-Jourth day ajL'!" tpoL da.,' on which it received tilL reJl'TrnCl, thrn

either par1y. on or beJore the tuornl,Y-l'ighlh day a!ta the day on which tilL said pl'Tiod oj 84 day.shas expiTtd, may notify the olher party and (for information) tht Enginel'T oj its dissatisJ~clion.

...In eitha rornt, such notice oj dissatujaclion shall state that it is givm undo thu Sub-Cll:use,and Stt out thl: matl.t'T in duputt and tht Ttason(s) JOT dissatis.{action. SubjOtct to St!b-Clcu.sc;67.5 a1~ 6i.6, no arbitralion in Tesped oj such disputt may he commt"nud unless such notice is

:I gz 1Jl'71.If thl: BoGTd has givrn notiCi' oj its dtcision as to a mattl'T in duputt to tilL Emp~'l'T. theContractor and the Engi~l'T, and no notiCi' oj dissatisjaction haJ been givrn ~~ t'ither pan." on or

:I 8 b!:Jore tht l.Wf'Tlt~ghth day aJlD the da,V on ~~ic~ .tht parti~ TeceiUl'd the Board 's decision, lhrn

lhl' BoaTd s dtrulon shall hl'CO77li final ana bindIng upon tht EmpLoyt'T and the COnlrGclo,.

:::I 67.3 Amiroble Sdt1£m£nt

l\1zl'Te noti(L oj dusatisjaaion hoj bern p'torn undtr Sub-ClaUSt 67.2, tht parties shall allt'TTiplto stttLL such dispute amicabl.)' heJor! tht commrnCt'mt'nt oj arbitration. Pro~'dtd that unLLs.l lht

:I par1its agrte otht'Twist, arbItration mo.)' he commt'Tlced on or aJtl'T tht fijty-sixlh da.; aftntM da.)'on which notict oj dis.lalisJaclion u'a_{ gttlnZ, rom if no atlempl at amicablr scttll'mml ha.s bt'm

madt.

::I 67.4 Arbitration .

A n.r di.rputt in rtsptd oj which:::I (a) tilt" decision. if an}. oj the Board ha.l 7:nt bccomt final and binding pur.luantto Su b-CiI; US(

67.2. and(b) Q"ti(abLL Stttll'mmt haJ not bt"m 7facht'd.

:f jhail be .leuLLd. unkss Otht'T1l,1.1( .lpcrificJ In th( (;orltrad. unan the RuLLs oj Conallalion Gnc, "",, r/"'Talion of thr lrtlt'T7lalional Ch,:mc.n ~f (:ommncc if:\' 070(' '" mOTe a.,bil7alorj a11)0: 7ilt'd

='.

~A

N c~tes

~ IBC UK Conf~r~"(~s

'.

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I

Establishing the DisputeAdjudication Board

Gordon L Jaynes --

MemberFill I C Assessment Panelfor Adjudicators

~

~ IBC UK (onfere.,(es limjt~-

-

.

."'11)1(: (:()NI)ITIONS OF CONTRACT & THE DISPUTE Af),J{JI)ICA TION PI{OCI.:f){JRI'~

". I'~STAHI,ISIIIN(; TIII'~ I)ISPUTI'; ADJUf)I(:A TI()r-.i I~()/\I{D

by

(;ordon I~. Jaynes.

Much is afoot in the international engineering and construction industry with respect to Dispute Boards.

The aim of this paper is to provide a mid-200r "snapshot" of this activi.tv.

FIDIC's publication of the 1999 First Editions of its three major sets of Conditions of Contract has been

8 followed this year by the publication in hard copy of its ~ to the use of those Conditions, which

includes detailed insight into the use of FIDIC's Dispute Adjudication Board system. In May of last year,

The World Bank published a new edition of its Standard Bidding Document, "Procurement of Works"

which includes the latest version of the Bank's Oispute Review Board system signific,,-ntly changed from

its previous version, Starting last year, and continuing into this year, FrnIC has conducted Training and

.Assessment Workshops for persons seekjng admission to its President's List. of Dispute Adjudicators. In

=- June of thi<; year, the American Arbitration Association opened its flfSt office outside the United States,

one aim of which is increasing its international activities with respect to Dispute Boards. Also in June,=- the Dispt'!e Review Board Fourldation held its first L'1ternaticnal ConfereilCt, with attendees from 13

~ countries. In September of this year, the U.K.'s Institution of Civil Engineers \vill present a seminar on

Dispute Boards' at The World Bank headquarters in Washington, D.C. The International Chamber of

=- 8 Commerce, acting through the Commission of its Court of International Arbitration, and through its

Centre for Expertise, is increasing its activities with respect to Dispute Boards.

~~1~anwhile, practitioners are encountering Dispute Board arrangements which differ significantly from

~ p:lst practice; also, the use of thl.' Dispute Board technique has begun to be used in aspects of large-projects other than just engineering and construction, such as in the resolution of disputes arising in the

~ l)pl.'rJtion of project financing arr3ngl.'ments for both projects undertaken as privately financed and those-undertaken as "public-private p:lrtnl.'rships".

~-~

.t~

-J

-I

~~I ~

c.

,-,.~" -I ((

.and 1992), hul ttlC '~allk's Part I" Conditions of Particular Application, amends Clause 67 of those

(,eneral (:ondili()n.. III Sllhstilutc tile Dispute Board for (he I:ngineer in the resolution of disputes,~

At FfDIC, --t

The use of Disputc llo;lrds in the FIDIC forms first appear.:-d in 1995, in Clause 20 of the Conditions of' , Contri;ct for Design-l.~uild and Turnkey (the "Orange BooJ:"'), and next appeared in the 1996 Supplement

10 the Fourth Edition of the "Conditions of Contract for Works of Civil Engineering Construction, The

~ three major forms published as I. 9~)9 First Editions all contain Dispute Board provisions, although in t\VO

versions -"full term" and "ad hoc". The Conditions of CorJtract for Construction use a "full term" Board

~ (8 ~, establishe.d befo~e the Contrac.t~r commences work), \vhereas the forms. Conditions of Co~tract f~~

Plant and Design-Build and Conditions of Contract for EPCrrurnkey Projects recommend ad hoc

=- Boards (i&." established only if, and after, a particular dispute arises).g ..~

".' The Dispute Board provisions of the 1999 Conditions of Contract for Construction differ significantly

from those of the 1996 Supplement to the Fourth Edition of the Conditions ofCo:ltract for Works ofCi,ile " Engineering Construction. Also, the Dispute Board provisions of both the 1999 Conditions of Contract

for Plant and Design-Bllild and those for EPCrrurnkey P-:ojects differ from the provisions of the 1995~

Conditions of Contract for Design-Build and Turnkey. The diff~rences are more in detail than in

fundamental structure. Il.owever, FlDIC's Dispute Board )rovisions, from their fLfSt arrival have had~ significant differences from those of The World Bank, principally:~

e .FffiIC's provisi<ms have been J substitution for a written decision ~(the Engin~er, intended to:l

take effect immediately, e\'en if noti.::e is given ~f .intcntion to ~efer the dispu.re to ~rbitrarion. T~e

Bank's provisions stemmed from the U.S,A. onglns of the Dispute Board, In \\'hich the Board s~

Recommendations were intended ro ~ persuasive rather than obligatory, and could be averted by

timely nc)rifi'cation of dissJrisfJ.::rion, This difference is reflected in the t~rminology of th~ t\\Oi

organisations: FlDl.C uses the nJm~ "Dispute Adjudication Board"; Th: \\'orld Bar:!: uses

"Dispure Review Board", rhe flame in general use in the U.S.A.~

.r;rDIC'~; provisions incliide ;In rl:quiremt.'nt for "amicable settlement'" efforts t"\.11Io\,'ing a notice of~.

dissatisfaction. Resort III Jlhilr:lril'll \.'Jnnot OCcur b(~fore a minimum of :,(, J;I~S l'l such effol1~

Tllc W<,rld Uank provisions pt.'rIllir imml:diate initiation of arbitration. Neirhcr S~( ot- pro\"isionsi '- .'1'( allY (illl\.' limir oy \\"Ilich :lrllirf:lli,'lllllllSI be COfllD1tnced.9i

,,~

",,",---

". !enlre ;llrt:;Jdy i~ irlv()I\/l:J in ~ervi'.:e 10 l)ispul':' Bu;lrds. including the c.xpansion of the Int.:.rn;ltional

I)ivisi(m's J{osler of J)ispult: J{eview IJoarJ :'v1cmbcrs from various countries, prcs~ntl~' including mor.:

Ilian hi) pl:r~(ms.

l'hl~ European offil:c of tile Ccntrc is headed ~y ~1r Mar~: Appel, Senior Vice President HI? can lx-

(Onlaclcd by ernail ;II ~lr[?l~lm~)adr.(!I£ or by fax at 00(353:(1) 418 2223. The address of the Centre is

Jlarcourt (:enlrl~ (Block 3), Harcourt Road, Dublin 2, Irelalld. The Centre's Dispute Board Guidt'lines,

J 'carinI! and Mc:elin1! ProtocQb, and Three Party A!!reCmenl. all offered as suggestions and not m3ndates,

can be found at www.adr.org.I;a

The DisDute Review Board Foundation ,'DRBP')I 18

I This not-for-profit corporation has a~; its purpose the promotion of the successful use of Dispute Boards.

In addition to its Annual Conferences, the DRBF publishes a, small journal, "Foundation Forum", and ...~.operales training programs on the us(~, and the chairing, of Dispute Review Boards. Although the DRBF' .publishes a list of its members, at prc~sent it does not maintain any list of persons fonnally recommended

'. by the DRBF for service on Disput~ Boards, Also, the Folmdation Members have published a book,

"Construction Dis pute Review Board Manual.ISI .

, The DRBF's first International Conference was held al a London Heathrow airport hotel in June of thisI

year, and cttracted over ,10 attendees from Canada, Eire, England, Iceland, Italy, Japan, Lef.o!h,::, Tht

I Netherlands, Northern Ireland, Poland, Scolland, Switzerland, 'and lhe U,S.A,16

I 8 The Institution of Civil Engin~~~ -'I

Although this organisation is based in London, England, it has Local Associations in \'arious countries.

,,)ne of which is th~ Mid-Atlantic Slal.:s Local Associalion ("ICE MASLA '.)17 ill September of this ~.ear,I

it will co-sponsor with The World Bank a seminar al The World Bank, entitled "Ten Years of ORB

SlICC':'-;S 3t China'.,; Ertan I)am", featuring a report by the Ertan Dispute Board Members on this difficultI

,llld l"omplex project which \\',IS completed ahead of schedule. with all disputes amicably settled by the

l'nu l1f construction, In addition to ICE ml'm~rs, the seminur was open to all interested professionals.I

-1.11"'lll,,llll~ II\l'IIII\('I.\ ()lllll' l)I{IJI:, ;1110 tIll' :\III,,'ri,,';111 S<.>l:icIY oll'ivil I~ngincers arId thl: American S{lCil:t:

1'1 ('\,nsulting L:nginccrsI

,-I

.5I

'.L II r "~-"'.'C-

(

.Inlcrnatjonal Airp()rt, and the continuing use b: the Hong Kong Architectural S.:r\iccs

.I)(~partmcnl of 'iJispllte resolution advisors",~'

.ror whatcvcr rcasons, Dispute Boards continue to t:c established late. The parties to cofitracts

us~d for several major projects financed by The World Bank have failed to establish the required

Dispute Boards until years after commencement of construction- This deprives the Boards of

th,:ir esselltial charactcristics of being conversant wi!;. construction as it rrogresses and being in

place to assist in resolution of disputes as soon as tney arise. It also leads to a "b:.;::kJog" {'If

disputes awaiting the Dispule Board when established -disputes on which the parties ha\-e

developed entrenched positions.

8.Whether from lack of understanding or from detem.1ination to involve the Engineer in dispute

I resolution, many contracts on several projects financed by The World Bank ha\'e had "double .I

'. deckt~r" disput~ resolution vehicles. involving a traditional \~ritten decision of the Engineer

i followed by DIspute Board consideration of the dispute if either party is dissatisfied with theI.°

Engineer's decision. (There also have been instances of the reverse -a Dispute Board~.

consideration followed by an Engineer's decision if either of the parties is dissatisfied with theI

Dispute Board's detemlination.) Apart from creating great potential for delay in res('ll'!i~rt of

disputes, such "hybrids" lack the essential charact(:ristics of traditional Dispute Boards, andI

alp.1ost invite friction between the Engineer and the Dispute Board.

I .Th~ current ADIC "ad hoc" Dispute Board provisions for the Plant and Design-Build Conditions

e and the EPCrrurnkey Projects Conditions also deprive the Board of its traditional ad\'antages ofI

being in place from the outset of th~ Contract and, as with Boards established late, convert the

Board into an ADR device akin to a "pre-arbitration quasi-arbitration'.I

.Users should note the seeming conlrJJi.::tion in the present version of FIDIC's Appendix to theI

General Conditions entitled "GenerJI Conditions of Dispute Adjudication Agreement": l!nless

othcrwis(: agreed in writing, Clausr: 5~c) excludes Dispute Board Member liability for "anythingI

done or (,mitted in the disch;lrge or purr\.)rtr:d disL'har~:'.: of the Member's functions. unless the actI

or (JI~l:ssion is Sh(~~n to 11;1\( ~":I~ II) ~,Ill fJilh."~'. I h)\\r:\'r:~, C.lausr: 8. a ~road Jnd Dr;ll."\.)nian

pr()'v'lsIOI1, statcs: If the ~lr:mb~r IJll-, I\.) 1.'\.1mply \\"Ito :lny oblIgation under Clausr: -to hr:/shr: shallI

0- nll( be entitled to any fecs or e.\pensr:s hi.'rL'undr:r and shall. \vilhout prejudice to thr:ir o[I..r:r rights.

reil}lburs'~ till' I:mploycr al1ll tIll: ('l'lll[,I\.'[()[ fl)[ any r(t's ;ll1d .:xp~nsc-, rr:cr:ivr:d ~~ tl1:: \1...m~[I!

, 0

-.

--~~~.L~~'1!!'t;', ~: .,,~ u~ ::;~r I-~-' ; ., ~

(, -.

:,if

.

-

I "Faircross", Wcntworth Drivc, Virginia Watcr, SWTey GU25 4NY, UK; Tel: 44(1344) 845687; Fax:

44(1344)845087; Email: GU4LA W@aQ!:f.Qm

2 Pp, v and vi, "Introduction"

I J P. 135j

S 8 4 p, 205

SSP. 137

6 P.140 .'

"-, -~", 7 Pp, 135 ~~ ~

.8 These differences of use have been the subject of previous discussion in this Review. See, ~ [2<XX>] ICLR 42;~. an<!477 (at 4~'1) and 504 (at 531); also see [2001] ICLR 240 at 261. r'ICLR" is the International Construction La.wReview, published by LLP Limited. Copies can be requested from LLP Professional Publishing (Att.: BeverleyMcGrath) 69-77 Paul Street, London EC2A 4LQ; Fax: 44(20) 7553 1107; email: Beverlev.mcl!Jath@informa.com;~ telephone 44(:ZO) 7553 1690.

9 A more detailed comparison of the FIDIC and Bank Dispute Board provisions is appended to this paper.~

10 P.310S

II Thi!;l

e 12 Details, including application procedure and forms are at FIDIC's website,

.www.fidic.or resources/ad.udicators/admission. Alternatively, information can be obtained from FIDIC's~ headquarters iJ[} Lausanne, Switzerland, P.O. Box 86. 1000 Lausanne 12, or fax 41(21) 653 54 32. telephone 41(21)65444 11. To date, three such Workshops have been held by FIDIC and at present the List includes some 20~ persons.

13 P.310i

14 P. 136, f()()tnote 15

I~ Published by McGraw Hill, 11 W. 19th St. (4th Fir), New York, NY 10011-4285, U.S.A. Fax: 1(212) 337-6056.~

Cost, US$45; proceeds help fund the DRBF. For additional informa!~on on U.S.A. practi:ce. see [2001) ICLR 275.

16 Details of DRBF membership and ;:.!ivlties LJn be found at www.drb.org/home/~

17 I! can be contacted via Mr. IJynn De\\'lllfe. McDonough Bolyard Peck. 8315 Lee Highway, Suite 44. Fairfax.

\'A 22031-2215, U.S.A.i "-i

.9i

---~~'!"'.~~r-"-" .

II -.

a

APPENDIX

C()l\IPAI{ISON OF TIlE WORLD BI\NK DRB SYSTEM

WITII TIlE FillIC DAB SYSTEM

This comparison uses ONLY The World Bank's May 2000 Standard Bidding Document "Procurement of

Works" ("TWB") and the FIDIC 1999 First Edition "Conditions of Contract for Construction" ("FIDIC").

8 It ~~s not a~~ress the FIDIC provisions regarding what it tenns "ad hoc" DABs for the 1999 First

Edition Conditions of Contract for Plant and Design-Build ("P&DB") nor the Conditions of Contract for!

EPC Turnkey Projects ("EPCT"). ..

,~

'. It should be noted that there are earlier versions extant (and in use) of both TWB and FIDIC Dispute~'.

Board provisions which differ from the versions compared here.S

I. ~~@l: FIDIC "Guide" gives more detailed suggestions and guidance to the user than

TWB. FmIC publishes List of vetted Adjudicators; TWB, maintains DICON (Directory ofI

Co~sultants) but does not have a formal system of vetting people entered on DICON.

I 2.~: TWB requires three-person Board if contract estimated to cost US $50m or more;

e ol:herwise can use single Expert or the Engineer (if independent from the Engineer); if lessI

than US$IOm, can use adjudicator. FIDIC considers 3 Member Board appropriate if average

monthly Payment Certificate is expected to exceed US$2m (at year 2000 prices).r

3. Elitablishmem: TWB establishes a Board not later than 28 days after date of Employer's..r

Letter of Acceptance of \ontractor's Tender; FIDIC uses Appendix ~o Tender to set number

of Board Members and date of establishment of the Board. Also, FIDIC foresees possibleI

selection from list contained in Contract.

r .i 4. Criteria for M~: Under both. all Members to be agreed by both Parties. TWB criteria:

"experienced with the type of construction involv,~d in the Works and with the interpretation ri

'"0 of contractual documents" and "flucnt in thc language of the Contract"; FIOIC: "suitabl):

"

---.~ ~~~':i!;"T"'~"'if::! 1" ~ 1

~, I

,! °,~.: o-

f I

9. Board Comr>ensatioj!: FIDIC leaves to Paities and individual Member, thus Member

compensation can differ among Members; ai~o, compensation reviewed every 24 months;

retainer dropped to 50% at TaC. Both for(:~ee a monthly retainer plus a daily fee, plus~,

expenses. TWB gears both monthly retainer and daily fee to ICSID Arbitrators' Daily Fee,~ and fixes both for duration of service, with retainer fee reduced by 213 during DLP (or if~

Cor~tractor expelled). FIDIC foresees '.suilable security" to Member for costs before

attending Site visit or Board meeting; no comparable TWB provision.i~

10. ~i1~: TWB, not less than thrice in 1:2 rrJonths; FIDIC refers to three criteria -no less

b:. than 140 days (para. 1, Annex), no sooner than '70 days (Procedural Rule 1); "Typically every8 three or four months" (Introduction of Annex).:.

,.11. FIDIC has "Appendix" to General CondinO:'ls, entitled "General Conditions of Dispute~

'. Adjudication Agreement" (approx. 5 pages); als'o has "Annex" entitled "Procedural Rules"

(approx. 1.5 pages). TWB has "Rules and Procedures" (6 pages) and Board Member's~ °. "Declaration of Acceptance ,. (1 page). Key points:~

(i) TWB foresees possibility (with., prior consent of other Party) of employment

of a Board Member by a Party during service on Board (Para. l(c) of Rules:s and Procedures); u., Party appointment to a Board on a different project.

FIDIC also foresees same possibility but requires consent of Parties, the~ Engineer, and the other Board Members.0~

(ii) FIDIC discusses Member def.1ult, and includes liability, inter a!i'!, to~

reimburse all fees and expenses ,paid to all Members ~ proceedings or

decisions rendered void or ineffective. (But see para. 5 (c) of Appendix.) No~

such provision in TWB.i

(iii) FIDIC contains express confidentiality provision; TWB does not.i

(iv) Generally, FIDIC Appendix and Annex are br~.der, more detailed, and

provid~ much more guidance to users than TWB.i "-

I " 3I

r:

---, c, (~ -" ~ ".

C..'~'I -

~ .

.N o1:es

8=-~.

.::p.

-::p:r:r,-f

rr

III'-i.

~ lAC UK Conferences---

--

\--

Notes

\

I

!

=-I,

:;:]

~I

~ 18C UK Conferences

r-

.;i\ ...

-- ...

!

Dispute AdjudicationBoard Procedures

-

Peter ChapmanInternational Arbitrator and

Adjudicator

h\

!

~~~~~. IBC UK Conf.ren<M Llmlt.d

--

"" "-- -

"~.~;-;' :--- --I

~'"": .

--.J=IDIC CO~IDITIONS OF CON1"RACT

j~ -)\ND THE DISPUTE ADJUDICATION

PROCEDURE

"~

8~-~

Dispute Adjudication Board Procedures .....~.:'".~~;I~

e Peter H J Chapman

46 Essex Street Chambers=' e-ma i /:d isputeresol ution@PeterHJChapman. com='

j~

-~

.-~~

~

..Reinforces the 'long shadow' of the DAB.'- .Partil"s temp~r their approaches to contractual matters

.Rule 3

Site visit attendance and co-ordinationConference/secretarial facilitiesDAB Report

Comment

.DAB (especially for international projects) needs adequate notice.

.Arrange 'next' visit before leaving site whenever possible.

8 .Flexible approach to keep costs down and make the DAB, operation work efficiently.

.Needs a 'co-ordinator' on site. .'

.Self sufficiency is often beneficial.

..Report is essentially factual: e.g. Itinerary for visit, brief

description of the site inspections, report on joint meetings,'. DAB's observations and suggestion on how the parties can

progress contractual/commercial matters (in general), summary ofpotential and actual claims/disputes (often this is done byappending a joint report), details of next visit, etc.). Not a report

S on how the project should be constructed!

.Report should go to the parties at a senior level (and to funding

I agency?)

I 8 Rule 4.

Documents to be furnished (to each person).I All communications exchanged between all 'parties.

I Rule 5

I Upon referrals, Clause 20.4 of the Contract engages.Clause 20.4 states: Reference begins when chairman of DAB receives

I the referral, with in 84 days of referral, DAB to render rts (reasoned)

decision, decisiorl binc!.llg on the parties and effective immediatel~',I. absent notice of dissati~,faction within 28 days of the DAB decision

tilt" (!t"cisi()ll is fin~ll dll(i i)illdin~. ..

I '

I"

-:

'.""c",,

.n--"'-- Comn1ent

--~ .Inc1uisitor:,11 procedure essential to allow the DAB to investigate

-and proo(!. Often the parties may not have addressed all the

necessilry issues to enable full and complete resolution anddetermination. Cases are prepared on site -perhaps without a full

appreciation of the full legal and contractual complexities -theDAB must ensure all these are canvassed and that neither party is

adversely prejudiced..Restrict hearings to those persons who need to attend -not always

possible! Balance levels and styles of prese~tation..Default procedure -not at all iqeal and not in the spirit of the

DAB process.~~:S

Rule 8 "

Powers of the DAB --:s

,

ProcedureS " Jurisdiction

Scope of Dispute~

Conduct of hearingsInitiative to investigateI Use specialist knowledge (cf expert determination)

Finance charges! Provisional relief, conservation, etc.

8 Open up, review, revise, etc.i

CommentI

.Sets out the general (and very wide) limits of the operation of the

DAB. Prevents a party from establishing its own procedures, etc., .Clearly best to have the parties agree to these matters at the

outset.I

Rule 19i

DAB not to comment 011 ml""rits of the case during the hearing,

--DAB to convene in rrivdtl\ tl.I di~cuss and prepare decisionll,\..II)inl()lIS c!('C;S;()I) \\!I\l\f)l\\l\r J)l)5Siblt"!

.

I

-",-

.~.

Th H . c; .-L~[!!lg

~ More a site meeting than a court room,

After formclliti(\s, Referring Party opens with a presentation setting outits cas(~ and addressing the Responding Party's submission and any

further explanation of the questions previously asked by the DAB,DAB may ask further questions

Responding Party opens with a presentation setting out its case andaddressing points made by the Referring Party in its opening,DAB ma}' ask further questions,

Referring party allowed a further opportunity of addressing the DAB

Responding party allowed a further opportunity of addressing the'8 DDAABB ' k f h .

( ' bl ." )as s urt er questions pass I y requirIng written answers.

I DAB adjourns hearing, ..

I -, fost-HeariOE '

I '. DAB will convene for deliberations, discussions and drafting the

decision,I Sometimes a little 'space' betwee,n the hearing and the

deliberations can allow matters to settle in the mind. But watch theI time limits. ---

Chairman to lead in this phase of the procedure, allocating analysisto the members in accordance with their experience, etc..All

members to sign the decision, hopefully without dissenting

e opinions,..I Decision to be dispatched to the parties.

I The Decision

I Must set out the formalitiesMust set out with precision the actual dispute referred to the D,-\BI Must set out, in brief, the various contentions of the parties, the

submissions received and the essential elements of the discussionsB during the hearing. -t\1ust set out the findin~s ot tilE' DAB and must give the DAB'sI.

rt'J.soning behind r(,{lchill~ stich finding~;. .Very important for the1{)slng p"1rty to Kn()W \\11)' It 11JS lost. r\lso Inlportant for tht" rea50llSI

.

I

{; ,..

., '.

.

.Notes

8:J

=I.

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.~::Jr

...-~8:I:'jC

jt~~~~~.

~1~~ ' ~!.C Uk Cool.,..",

,",.~ -

\--.

r ~...Notes~.

,

~--'~...

~..L-.I ~I

I~~

.

".

~ 18C UK Conferen(~s

..,-...

, .--~

~

~ 'I Appendix 1

0

t

r.~-~ '.

~

:Je.

~

:J

:J

~

~ i

~

=- ~ IDC UK Confer.nces limit.d

L

.,- ~

BIOGRAPHIES.

Mic:hael Mortimer-Hawkins

Since 1978 Michael Mortimer-Hawkins has worked for Swedishconsultants operating on the international market. Michael nowworks as arl independent consultant engineer handling contractualmatters and claim adjudication resolution. Michael has been activein F:IDIC since 1984 working on thE~ committees responsible forpreparing and producing FIDIC's contract documents.

Christopher Wade

A ~)rofessional Consulting Engineer, Christopher Wade has 40<t years' practical experience of projects in many countries. He has

spel:;ialised in the contractual aspects of international constructionprojects and has long experience of project management. He has ..

worked with dispute resolution at all levels, and has an intimatekn01Nledge of the FIDIC Contract Conditions. Christopher recently

.-wro1:e "FIDIC's Standard Forms of Contract -Principles and Scope~ .of the Four New Books" -The International Law Review, January

.2000.

~ PetE~r L.. Booen

:s PetE~r L. Booen commenced his career working for a contractorfrom 1965 to 1972. ~-ie then joined Sir Alexander Gibb & Partners

:! (Iate!r GIBB Ltd.), working on sites in Oman and Scotland, and in8 Edirlburgh Office. r1e moved to GIBB's head office in 1978,

~ resp'onsible for the construction management of major international

projl~cts.

~ He has written various consultancy, investigation, demolition,con~;truction, repair, plant and design-build contracts, and

~ administered all aspects of such contracts. He has acted asadjudicator, conciliator, expert witness and dispute board member.

~ He gives expert advice on procurement, contractual andconstructional matters. including advising UNCITRAL for its 2001

~ -legislati'Je guide on privately financed infrastructure projects.

Since 1993, he has been active in the Federation I nternationale~ '- des Ingenieurs-Conseils(FIDIC): as principal drafter of the 1995

conc1itions for design-build & turnkey and of the 1999 conditions for~ ' construction, plant & design-build, and EPC/turnk~y contracts; ana

.-i.

introduced the' Dispute Board Concept to the World Bank

Procurement documents.

He currently chairs the ORB for the Xiaolangdi Dam Project on

China's Yellow River and for the Ghazi-Barotha Hydropower projecton the Indus River in Pakistan, and is a Board Member of the

Dispute Review Board Foundation.

An associate member of FIDIC, he serves on its three-manAssessment Panel for adjudicators and participates in its trainingand Assessment Workshops. He also serves on the Board ofInternational Development Law Institute, which trains lawyers from

Developing countries, and he is a member of the Editorial AdvisoryBoard of The Internationa! Constru~tion La...1V Review.---

0 Prior to entering private practice, Mr. Jaynes was employed asCounsel for Kaiser Engineers & Constructors, Inc., based inOa~~land, California, and worked on the company's project inVerlezuela and Australia before his transfer to England, where hecounselled on all of its projects in Europe, Africa and the Middle East

" " Petl~r Chapman

i';=I: -Arbitrator, Adjudicator and Mediator in construction disputes, PeterChe.pman is a Chartered Civil Engineer and Barrister-at-law. He has

=I ser\'ed on 15DAB/DRBs, five times as Chairman. Peter has over 30year.::; experience in the construction and engineering industry withparticular emphasis on heavy civil engineering projects. He is the

::I International Representative of the ORB Foundation and founder of

~ () the Adjudication Society

:I

:I

~~~iI

~C

~L

{.

,--

..~

!Appendix 2

ij~ -p-,~I .~

I

8

ii

(i)~~. 18C UK Conferences limited

,-,- ~- I

(,.( \W .

.Contact details

Booen, Peter

plbooen@gibb.co.uk.Chapman, Peter

I disputeresolution @ peterhjchapman.com

Corbett, Edwardmail@corbett.co.uk

FIDICwww.fidic.org .

8 Mortimer-Hawkins, Michael

mic:haelmh@tinyonline.co.uk

Sanders, Tonyaej .sanders @ cwcom. net~

: -Seppala, Christopher

'. csE!ppala@whitecase.co.uk,~

j ~ Wade, Christopher;:: christopher.wade@sweco.se

Ikf8

(

t ~.

\ ..I

.-rJ

o'

N

'-,~'--.H

: Iit"

Appendix

3~~

8t~ I

--.,~.-!

~

IBC

U

K

(onf.,.n<.s

llmit.d

,. "C'

~

~~

;,""'"1','

~--

iJ

":"

<.. ..

ho,

1;'.. Notes

~r~

(.I

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