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FIDIC USER’S GUIDE A

PRACTICAL GUIDE TO THE 1999 RED


BOOK
PREFACE

In recent years the role of the Conditions of Contract in a construction project has
undergone a radical change. The Conditions of Contract were originally a legal document, giving
the rights and obligations of the Parties, and were only consulted when a claim or dispute became
a serious problem. Resident Engineers and Constructor’s Project Managers were probably aware
that such documents existed, but most of them had never even seen the Conditions of Contract,
much less used it as a reference to guide their actions on the site.
In more recent years, the increase in the size and complexity of projects and the
increasing demand from Clients and Employers that projects should finish on time and
within budget have increased the pressure for improved management techniques on
construction sites. The current emphasis on improved procedures for the avoidance or resolution
of claims and disputes has added to these pressures on the staff on site.
One of the consequences of the movement towards improving efficiency and
reducing costs has been the increasing use of the Conditions of Contract as a manual of
good project management procedures. This development has been evident in the successive
revisions to the Federation Internationale des Ingenieurs (FIDIC0 Conditions of Contract for Works
of Civil Engineering Construction, the traditional FIDIC ‘Red Book’, and experienced a major leap
forward with the publication of the New Engineering Contract by The Institution of Civil Engineers in
London. The New Engineering Contract not only incorporated procedures which virtually formed a
manual of good project management techniques and encouraged a less approach to the
relationship between Contractor and Employer but also was written in good English, in a style and
format that could be readily understood by construction professionals. The Conditions of
Contract, which were published by FIDIC in 1999, mark a further step forward in the
process of the incorporation of management procedures expressed in a practical style
and format. Hence, it is now inconceivable that Resident Engineers, Contract’s Managers and the
other construction professionals who prepare documents and administer projects on site should not
have the Conditions of Contract on their desks and refer to its requirements and procedures on
This book is a practical guide for the people who actually use FIDIC Conditions of
Contract, based on the author’s practical experience construction projects, conducting
training courses and the resolution on disputes. It is intended to assist the people who
are preparing Contact documents as well as those are administering the project on the
Site or dealing with claims and disputes. The book includes a detailed review of the
Conditions of Contract for Construction and comparison with the other FIDIC Conditions which were
published in 1999. To review must be read together with the wording of the actual Sub Clause. The
interrelation of the actions and notices by the Employer, Contractor and Engineer with the
milestone events during the construction of the project are shown in a series of flow charts. There
is also comparison with previous FIDIC Conditions and comparison on Clause numbers to assist
those who are familiar with the traditional FIDIC Red Book. The book is not intended to be a legal
analysis of the new FIDIC Conditions or a comparison of the correct interpretation of the conditions
of contract in different jurisdictions. That task can be for those who are better qualified to analyze
and speculate on the correct legal interpretation of controversial Clauses.
CONTENTS

PART 1 – THE TRADITIONAL AND THE 1999 FIDIC CONDITIONS OF CONTRACT

1. Introduction to the FIDIC Conditions of Contract


2. The 1999 FIDIC Conditions of Contract for Construction
3. Comparisons between the different FIDIC Conditions of Contract
4. Claims and dispute procedures
5. Flow charts

PART 2 – THE FIDIC CONDITIONS OF CONTRACT FOR CONSTRUCTION - GENERAL P.B.

6. Introduction to Part 2
7. Contents: General Conditions
8. Definitions listed alphabetically
9. Clause 1: General Provisions
10. Clause 2: The Employer
11. Clause 3: The Engineer
12. Clause 4: The Contractor
13. Clause 5: Nominated Subcontractors
14. Clause 6: Staff and Labour
15. Cause 7: Plant, Materials and Workmanship
16. Clause 8: Commencement, Delays and Suspension – R.B. & L.P.
17. Clause 9: Tests on Completion
18. Clause 10: Employer’s Taking Over – L.P.
19. Clause 11: Defects Liability – R.B.
20. Clause 12: Measurement and Evaluation
21. Clause 13: Variations and Adjustments – R.B.
22. Clause 14: Contract Price and Payment – M.S. & A.P.
23. Clause 15: Termination by Employer
24. Clause 16: Suspension and Termination by Contractor
25. Clause 17: Risk and Responsibility
26. Clause 18: Insurance – L.P.
27. Clause 19: Force Majeure
28. Clause 20 : Claims, Disputes and Arbitration – J.McC.

PART 3 – APPENDICES
A1 – General Conditions of Dispute Adjudication Agreement – J.McC.
A2 – Annex: Procedural Rules
A3 – Index of Sub-Clauses
A4 – Annexes and Forms

PART 4 – SUB-CLAUSE COMPARISON


A comparison of Sub-Clause numbers between the fourth edition of ‘The
Red Book’ and the 1999 Conditions of Contract for Construction

ADDITIONAL TOPICS INCLUDED IN SEMINAR


* Implementation of FIDIC in Romania
* Conflicts between FIDIC and Romanian law 10
* Transfer of Ownership
PART 1: THE TRADITIONAL AND THE 1999
FIDIC
CONDITIONS OF CONTRACT
CHAPTER 1: INTRODUCTION TO THE FIDIC CONDITIONS OF CONTRACT

1.1 CONSTRUCTION CONTRACTS


(a) The Constructor’s Tender
(b) The Employer’s Letter of Acceptance
(c) The Contract Agreement
(d) The Conditions of Contract
(e) The Technical Documents

1.2 THE FIDIC CONDITIONS OF CONTRACT


• The General Conditions and
• The Particular Conditions
1.3 THE TRADITIONAL FIDIC CONDITIONS OF CONTRACT
• Conditions of Contract for Works of Civil Engineering Construction,
fourth edition 1987
• Conditions of Contract for Electrical and Mechanical Works, third
edition 1987
• Client/Consultant Model Services Agreement, first edition 1998
• Conditions of Contract for Design-Build and Turnkey, first edition 1995
• Conditions of Subcontract for Works of Civil Engineering Construction,
first edition 1994
• Tendering Procedure, second edition 1994
• Guides to the Use of the different FIDIC Conditions of Contract
• Amicable Settlement of Construction Disputes, first edition 1992
• Mediation; Explanation and Guidelines, first edition 1993
• Insurance of Large Civil Engineering Projects, 1981 plus 1997 update.
• Other publications on different aspects of the construction of
engineering projects and the work of FIDIC.

1.4 THE 1999 FIDIC CONDITIONS OF CONTRACT


• The Conditions of Contract for Construction.
• The Conditions of Contract for Plant and Design-Build.
• The Conditions of Contract for EPC/Turnkey Projects.
• The Short Form of Contract.
CHAPTER 2: THE 1999 FIDIC CONDITIONS OF CONDITIONS FOR CONTRACT

2.1 THE CONTENTS OF FIDIC PUBLICATION

The FlDlC publication Conditions of Contract for Construction is arranged in three


sections – General Conditions, Guidance and Forms - and includes far more than just
the Conditions of Contract. All these sections are important for the Employer or
Consultant who is preparing Contract documents. However, only the General Conditions
and the other documents which are included in the Contract documents are important
for the Contractor and the staff on the construction site who will administer the
Contract.

The FIDIC publication includes:

• Foreword
• General Conditions
- Contents
-The General Conditions, as Clauses 1 to 20
- Appendix - General Conditions of Dispute Adjudication Agreement
- Annex - Procedural Rules
- Index of Sub-Clauses
• Guidance for the Preparation of Particular Conditions
- Contents
- Introduction
- Notes on the Preparation of Tender documents
- Comments and Examples of alternative - and additional Sub-Clauses
- Annexes: Forms of Securities
- Annex A - Example Form of Parent Company Guarantee
- Annex B - Example Form of Tender Security
- Annex C - Example Form of Performance Security – Demand Guarantee
- Annex D - Example Form of Performance Security – Surety Bond
- Annex E - Example Form of Advance Payment Guarantee
- Annex F – Example Form of Retention Money Guarantee
- Annex G – Example Form of Payment Guarantee by Employer
• Forms for:
- Letter of Tender
- Contract Agreement
- Dispute Adjudication Agreement (for one-person DAB)
- Dispute Adjudication Agreement (for each member of a three-person DAB
The content of these documents is reviewed in Part 2 of this book but, in general,
they cover the following subjects.
(1) The Foreword
(2) The General Conditions
(3) The Guidance
(4) The Form

2.2 PREPARATION OF THE CONTRACT DOCUMENTS

• Incorporate the FIDIC General Conditions unchanged


- The Appendix to Tender
- The Particular Conditions
- The Specification, and
- ‘in the Contract’
• Insert essential information in the Appendix to Tender
• Prepare Particular Conditions to suit the Employer’s requirements
• Many of the Sub-Clauses in the General Conditions rely on the other Sub-Clauses
• Check the Sub-Clauses which refer to information in the Specification
• Check the Sub-Clauses which refer to information
• Consider the need for a Contract Agreement
• Decide whether a one-person or three-person Dispute Adjudication Board is
required
• Consider the use of FIDIC Annexes A to G for the forms of securities and
guarantees which are referred to in the General Conditions and the Appendix to
Tender.
2.3. THE LAYOUT OF THE GENERAL CONDITIONS

Clause 1: General Provisions covers subjects which apply to the Contract in general,
such as definitions, the applicable language and law, the priority of the different
documents which make up the Contract and the use of the different documents.

Clauses 2 to 5: The Employer; The Engineer; The Contractor; Nominated


Subcontractors deal with the duties and obligations of the different organisations who
play a part in the execution of the Works. It is significant that the Contractor's Clause
contains more Sub-Clauses than all the others added together. It is the Contractor who
is responsible for executing the Works and so is the most active of the people who are
involved with the project. Many other Sub-­Clauses throughout the General Conditions
refer to the Contractor's obligations.

Clauses 6 and 7: Staff and Labour; Plant, Materials and Workmanship deal
with the requirements for the items of men and materials which the Contractor brings
to the site and uses to execute the project.

Clauses 8, 9, 10 and 11: Commencement, Delays and Suspension; Tests on


Completion; Employer's Taking Over; Defects Liability follow the sequence of
events during the construction of the project. ‘

.
Clauses 12, 13 and 14: Measurement and Evaluation; Variations and
Adjustments; Contract Price and Payment give the procedures for the Employer to
pay the Contractor for his work.
Clauses 15 and 16: Termination by Employer; Suspension and Termination
by Contractor refer to events which may occur at any time during the construction
sequence and may bring the Contract to a close.
Clause 17: Risk and Responsibility relates to the project as a whole and includes
Sub-Clauses, which are only used rarely, together with matters which are critical to the
Parties' responsibilities and overlap with the requirements of other important Sub-
Clauses
Clause 18: Insurance includes important procedures, which must be implemented
at or before the commencement of the Works in addition to the procedures to be used
when a problem occurs which will give rise to an insurance claim.
Clause 19: Force Majeure is a general Clause which will only be used when the
particular problem occurs. The final Sub-Clause refers to release from performance in a
wider context than just due to Force Majeure.
Clause 20: Claims, Disputes and Arbitration will probably be the most
frequently used Clause in the whole Conditions of Contract. It includes procedures such
as the submission and response to Contractor's claims, which must be used when a
problem has arisen, as well. as the procedures for the resolution of claims and disputes.
Clause 20 also includes the procedures for the appoint­ment of the Dispute Adjudi.
Board, which must be used at or before the commencement of the Works.
2.4 THE SEQUENCE OF THE CONSTRUCTION OPERATIONS

• Commencement
• Progress
• Completion
• Defects Period
• Disputes.
CHAPTER 3 : COMPARISONS BETWEEN THE DIFFERENT FIDIC CONDITIONS OF
CONTRACT

3.1 THE TRADITIONAL AND THE 1999 CONDITIONS OF CONTRACT


3.2 THE TRADITIONAL ‘RED BOOK’ AND THE CONDITIONS OF CONTRACT FOR
CONSTRUCTION
3.3 COMPARISON BETWEEN THE DIFFERENT 1999 CONDITIONS OF CONTRACT
The Conditions of Contract for Construction
The Conditions of Contract for Plant and Design-Build
The Conditions of Contract for EPC/Turnkey Projects
The Short Form of Contract

CHAPTER 4: CLAIMS AND DISPUTE PROCEDURES

4.1 INTRODUCTION
4.2 CLAIMS AND THE CONDITIONS OF CONTRACT
4.3 CLAIMS BY THE CONTRACTOR
4.4 CLAIMS BY THE EMPLOYER
4.5 THE DISPUTE ADJUDICATION BOARD (DAB)
4.6 AMICABLE SETTLEMENT
4.7 ARBITRATION
4.8 THE COURTS
PART 2: THE FIDIC CONDITIONS OF CONTRACT FOR CONSTRUCTION

Clauses 0-20

CHAPTER 5 – FLOW CHARTS

CHAPTER 6 – INTRODUCTION TO PART 2


PART 3 : APPENDICES

Appendix A1: General Conditions of Dispute Adjudication Agreement


Appendix A2: Annex: Procedural Rules
Appendix A3: Index of Sub-Clauses

Appendix A4: Annexes and Forms


- Annex A – EXAMPLE FORM OF PARENT COMPANY GUARANTEE
- Annex B – EXAMPLE FORM OF TENDER SECURITY
- Annex C – EXAMPLE FORM OF PERFORMANCE SECURITY- DEMAND
GUARANTEE
- Annex D – EAMPLE FORM OF PERFORMANCE SECURITY- DEMAND BOND
- Annex E – EXAMPLE OF ADVANCE PAYMENT GUARANTEE
- Annex F – EXAMPLE FORM OF RETENTION MONEY GUARANTEE
- Annex G – EXAMPLE FORM OF PAYMENT GUARANTEE BY EMPLOYER
Annex F – LETTER OF TENDER
– APPENFDIX TO TENDER
– CONTRACT AGREEMENT
– DISPUTE ADJUDICATION AGREEMENT (for one- person DAB)
– DISPUTE ADJUDICATION AGREEMENT (for each member of a three-
person DAB)

PART 4: SUB-CLAUSE COMPARISON

A comparison of Sub-Clause numbers between the fourth edition of ‘The


Red Book’ and the 1999 Conditions of Contract for Construction.

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