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Understanding FIDIC
Understanding FIDIC explains in simple and practical terms what is often seen as a
very complex range of international engineering and construction contracts.
Covering the FIDIC 2017 Red, Yellow and Silver Books (referred to as “The R ainbow
Suite”), the book gives an overview of all three contracts, including coverage of changes
between the 1999 contracts and the present 2017 suite. FIDIC contracts are widely used
as far afield as Europe, the Middle East, Asia and Australia, and this book provides a
practical yet thorough guide to the key elements that practitioners preparing and ad-
ministering these contracts would need to be aware of.
In his approachable and readable style, Kelvin Hughes covers:
• The obligations and responsibilities of the Employer, the Employer’s Representa-

tive, the Engineer and the Contractor
• Quality and Defects Liability
• Design Responsibility and Liability
• Variations, Measurement and Payment Procedures
• Progress, Delays, Extensions of Time and Completion
• Suspension and Termination
• Insurances
• Employer’s and Contractor’s Claims
• The Dispute Avoidance/Adjudication Board and the Resolution of Disputes
• Tendering
Anyone working with FIDIC contracts whether as the Employer, Employer’s Repre-
sentative, Engineer or Contractor will benefit greatly from this easy-to-read guide to
the Rainbow Suite. Students on professional courses or researching the contracts for
project work will also find this book extremely useful.
Kelvin Hughes is a leading authority on construction contracts and has had substantial
theoretical and practical experience of all contracts, including FIDIC, over a 46-year
working life, including 4 years as a full-time consultant to a major project manage-
ment company drafting a suite of contracts for use on public projects in Qatar, and
was also head of contracts/claims for another major project management company in
Qatar. He has written eight previous practical books on construction contracts.
Understanding Construction
Understanding Quality Assurance in Construction

A practical guide to ISO 9000
H. W. Chung (1999)
Understanding Active Noise Cancellation

Colin H. Hansen (2001)
Understanding the CDM Regulations

Owen Griffiths (2006)
Understanding Building Failures, 4th edition

James Douglas and W. H. Ransom (2013)
Understanding NEC3: Professional Services Contract

Kelvin Hughes (2013)
Understanding NEC3: Engineering and Construction Short Contract

Understanding The Building Regulations 6th edition

Simon Polley (2014)
Understanding JCT Standard Building Contracts 10th edition

David Chappell (2017)
Understanding NEC4: Term Service Contract

Kelvin Hughes and Patrick Waterhouse (2018)
Understanding the NEC4 ECC Contract: A Practical Handbook

Understanding the NEC4 Professional Service Contract

A Practical Handbook
Understanding FIDIC
The Rainbow Suite
Understanding FIDIC
The Rainbow Suite
Kelvin Hughes
First published 2021
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
52 Vanderbilt Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2021 Kelvin Hughes
The right of Kelvin Hughes to be identified as author of this work has been
asserted by him in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in writing from the
publishers.
Trademark notice: Product or corporate names may be trademarks or registered
trademarks, and are used only for identification and explanation without intent
to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Hughes, Kelvin (Engineering consultant) author.
Title: Understanding FIDIC: the rainbow suite / Kelvin Hughes.
Description: Abingdon, Oxon; New York, NY: Routledge, 2021. |
Series: Understanding construction |
Includes bibliographical references and index.
Identifiers: LCCN 2020033749 (print) | LCCN 2020033750 (ebook) |
ISBN 9780367427917 (hardback) | ISBN 9780367427924 (paperback) |
ISBN 9780367855161 (ebook)
Subjects: LCSH: Construction contracts. | Engineering contracts. |
Architectural contracts. | Standardized terms of contract. |
International Federation of Consulting Engineers.
Classification: LCC K891.B8 H84 2021 (print) |
LCC K891.B8 (ebook) | DDC 343.07/8624—dc23
LC record available at https://lccn.loc.gov/2020033749
LC ebook record available at https://lccn.loc.gov/2020033750
ISBN: 978-0-367-42791-7 (hbk)

ISBN: 978-0-367-42792-4 (pbk)
ISBN: 978-0-367-85516-1 (ebk)
Typeset in Times New Roman
by codeMantra
Contents
Preface vi
Acknowledgements ix
1 Overview of FIDIC and its contracts 1
2 “The old and the new” – FIDIC 1999 becomes FIDIC 2017 24
3 Obligations and responsibilities of the Employer, the Employer’s

Representative, the Engineer and the Contractor 79
4 Quality and Defects Liability 118
5 Design responsibility and liability 142
6 Variations, Measurement and Payment Procedures 161
7 Progress, Delays, Extensions of Time and Completion 181
8 Suspension and Termination 203
9 Care of the Works and Indemnities, Exceptional Events

and Insurance 213
10 Employer’s and Contractor’s Claims 229
11 The Dispute Avoidance/Adjudication Board and the Resolution

of Disputes 255
12 Tendering using the FIDIC 2017 Contracts 266
Appendix: Errata to the FIDIC Conditions of Contract 2017 305
Index 311
Preface
I have been involved with the FIDIC contracts for over 25 years, in the capacity of
contract adviser, contract consultant and trainer, including a period spent in a senior
management role with a major project management consultant in Qatar.
In that time, I have advised on numerous projects using the FIDIC contracts from
as far back as FIDIC 1987 and as far afield as Europe, the Middle East, the Far East
and the Indian subcontinent.
This book provides an overview of FIDIC and its wide range of contracts; consid-
ers the obligations and responsibilities of the Employer, and those that represent the
Employer, in the form of the Engineer or the Employer’s Representative, and also the
Contractor; and then compares the previous FIDIC contracts with the FIDIC 2017
Contracts published in December 2017, followed by a detailed commentary on the new
contracts.
Whilst the FIDIC 2017 Contracts are structurally similar to the FIDIC 1999 Con-
tracts they are considerably larger, with far more pages than the previous editions.
For example, the General Conditions within the Red Book now comprise 106 pages,
whereas the FIDIC 1999 version was 62 pages, and there is a significant increase in
administrative requirements, mostly to achieve greater certainty of project outcome
over a wider range of projects in a wider range of locations.
The author is of the opinion that the FIDIC 2017 Contracts are significantly bet-
ter than the FIDIC 1999 Contracts, particularly in respect of clarity of wording, but
also in the new provisions in terms of programme, quality management, claims and
disputes. The newer contracts are also quite prescriptive, which lends itself to a more
clarified and disciplined approach to managing the contracts. There are those that say
that the FIDIC 2017 Contracts will be administratively burdensome in use, but these
are early days, so there is no clear evidence that this is true.
Certainly, the movement towards the use of the FIDIC 2017 Contracts appears to be
quite slow to date, time will tell as to whether FIDIC users will move from the previous
editions of the contract, particularly the FIDIC 1987 and 1999 Contracts to the newer
Contracts, and also whether users of other contracts will migrate to using FIDIC 2017
Contracts.
Though there are several contracts in the FIDIC family some of which are briefly
reviewed within this book, the book focuses primarily on the “Rainbow Suite”:
• Conditions of Contract for Construction (The “Red Book”) – for building or

engineering works where most of the design is provided by the Employer or his
Representative.
Preface vii
• Conditions of Contract for Plant and Design-Build (The “Yellow Book”) – for the
provision of electrical and/or mechanical plant, and for the design and execution
by the Contractor of building or engineering works.
• Conditions of Contract for EPC/Turnkey Project (The “Silver Book”) – for the
provision on a turnkey basis of a process or power plant, of a factory or similar
facility or of an infrastructure project or other type of development, where the
Contractor takes total responsibility for the design and execution of the project.
Whilst many practitioners still use previous editions of the FIDIC contracts – for ex-
ample, the FIDIC 1995 Orange Book, with which the author was personally involved
on projects in India – this book is primarily aimed at giving guidance to FIDIC 2017
Contract users, and also to a certain extent, FIDIC 1999 Contract users.
Although the structure and content of the FIDIC contracts was changed in 1999,
there are some broad similarities with the previous contracts, and to that end much of
the advice given in this book is of use to all FIDIC contract users.
The book is intended to be of benefit to professionals who are actually using the
FIDIC contracts on live projects, but also to students who need some awareness of
FIDIC contracts as part of their studies. I have also, as with my other books, in several
of the chapters explained subjects such as quality, programme and claims, which may
seem obvious to experienced practitioners, but I have done so in order that students
and less experienced practitioners understand the concepts and principles before re-
viewing those provisions within the FIDIC contracts.
Readers may note the absence of case law within the text of the book. As with my
previous books on NEC Contracts, this is a deliberate policy on my part as I am not
a lawyer, my background being in senior commercial positions within major building
contractors and more recently in senior management with a major project management
company in Qatar, so I felt, and readers may probably agree, that I was unqualified
to quote, and to attempt, a legal review of the contracts with a detailed commentary
on any case law, particularly as the FIDIC contracts are used in such a wide range of
countries and legislations.
In terms of the structure of the book, Chapter 1 provides an overview of the FIDIC
contracts; Chapter 2 provides a comparison of the FIDIC 2017 Contracts with the
previous FIDIC 1999 Contracts; Chapter 3 considers the obligations and responsibili-
ties of the Employer, the Employer’s Representative, the Engineer and the Contractor;
then Chapters 4–11 review the FIDIC 2017 Rainbow Contracts in some detail, high-
lighting the changes from the 1999 to 2017 Contracts, with Chapter 12 considering
tendering under the FIDIC 2017 Contracts.
Note, it is not my intention to provide a detailed “clause by clause” analysis of each
of the FIDIC contracts, but to provide a practical review of the areas covered by the
Contracts, with some commentary on some of the changes within the newer FIDIC
2017 Contracts.
I had originally intended to deal with the FIDIC Red, Yellow and Silver Books as
separate chapters, but the final structure I adopted lessens the risk of repetition, and I
hope lends itself to a more user friendly and readable volume.
Within each chapter I have referred to the Red, Yellow and Silver Books at the same
time, for example:
The Engineer (Employer under the Silver Book), the Engineer (under the Red and
Yellow Book), etc.
viii Preface
I have tended not to quote specific Clause/Sub-Clause numbers unless it is totally
relevant as I am comparing the provisions under the FIDIC Red, Yellow and Silver
Books, and it would be cumbersome to read if you refer simultaneously to the different
clause numbers under the three contracts that, in many cases, have exactly the same
wording.
I have used the Red Book as the baseline, then added Yellow Book and Silver Book
references if they are different to the Red Book. If there is no mention of the Yellow
Book and Silver Book then the reader can assume that the provisions and the relevant
Clauses/Sub-Clauses for these two contracts are the same as for the Red Book.
Kelvin Hughes
July 2020
Acknowledgements
As with all my previous books, I would like to extend my continued and sincere thanks
to my wife Lesley, who as always gives me the love, the time, the inspiration and the
support to fulfil my life’s ambitions.
Also love and thanks to my parents, Maureen and Dennis, who made me who I am,
and I hope in return I continue to make them proud.
I would also like to acknowledge the wisdom, support and friendship of Mr. Seah
Ban Kiat during my time in Qatar, when we dealt with FIDIC contracts, and contracts
derived from FIDIC, and various issues arising from them. We were also part of a
team which drafted our own suite of contracts.
My thanks also got to Seah’s family for their friendship, while my wife and I were
in Qatar.
Finally, I would like to thank Patrick Hetherington of Taylor & Francis Group for
his support and unfailing patience during the writing of this book as I juggled writing,
running a business and my family, amid the COVID-19 lockdown.
1 Overview of FIDIC and its contracts
This chapter provides an overview of FIDIC, and some of the various contracts that
have been published more recently, prior to the FIDIC 2017 Contracts, which are the
subject of this book.
What is FIDIC?
“FIDIC” is the acronym for “Federation Internationale des Ingenieurs-Conseils” (in
English “The International Federation of Consulting Engineers”), which is the lead-
ing body for developing forms of contract for use in the international construction
industry between Employers and Contractors, Contractors and Subcontractors, and
Employers and Consultants and Consultants and Subconsultants.
Of all the contracts in use today, FIDIC is the nearest to a truly “international”
form of contract and is the contract mostly recognised by international funders such
as the World Bank.
The International Federation of Consulting Engineers was founded on 22 July 1913,
following a search for independent consultants for the World Fair Exhibition.
There were 59 participants at the inaugural meeting, with delegates from Austria,
Belgium, Canada, Denmark, France, Germany, Hungary, the Netherlands, Russia,
Switzerland, the United Kingdom and the USA.
Three countries such as Belgium, France and Switzerland decided to found the
Federation, the other countries maintained provisional links during the initial years.
However, due to the World Wars and other major political disturbances, FIDIC
development was slow until the late 1940s. The number of member countries changed
constantly, and all came from Europe.
In 1959, they were joined by Australia, Canada, South Africa and the USA.
The Federation developed gradually over the years into a truly global organisation
with Member Associations representing countries from all regions of the world.
FIDIC also formed a partnership with the World Bank and other Multinational
Development Banks working in the different geographical regions to support the fi-
nancial requirements and international standards to deliver the infrastructure pro-
jects worldwide.
It was later referred to as the “International Federation of Consulting Engineers”
and now has over 100 member countries.
FIDIC publishes various standard contracts to be used for infrastructure projects,
construction works, consultancy services, major plant supplies, etc.
The aim is to have a standard form for international use which tries to achieve a
balance between a comprehensive coverage of the circumstances, problems and ob-
ligations which are likely, but does not try to cover every conceivable problem, an
impossible task which would result in an unmanageable document.
Written contracts are all about allocating risk and obligations and providing the
appropriate machinery for resolving issues likely to be encountered.
Each of the FIDIC contracts applies to a specific type of work and/or procurement
method and is characterised by an individual colour label e.g. Red Book, Yellow Book
and Silver Book (referred to as “The Rainbow Suite), which form the subject area for
this book, though other FIDIC contracts will be briefly reviewed.
The development of the FIDIC contracts

It is not proposed within this book to provide a full history, and to review all of the
FIDIC contracts since its inception, but the more recent contracts, particularly the
ones with which the author is familiar, are covered.
Note that the FIDIC contracts were originally modelled on the Institution of Civil
Engineers (ICE) Contracts, which were in turn modelled on the Association of Con-
sulting Engineers Contracts. The current day FIDIC contracts were modelled on the
various contracts below.
Conditions of Contract for Works of Civil Engineering Construction:

The Red Book (1987)
This contract is in two parts:
• Part I contains General Conditions, a Form of Tender with Appendix and a Form
of Agreement. The Appendix is a part of the Form of Tender and makes specific
provision for the insertion of details, which are essential and yet unique to each
project.
There are 72 clauses within the General Conditions.
• Part II contains Conditions of Particular Application with Guidelines for Prepa-
ration of Part II Clauses.
The Form of Tender and the Agreement provide that the Agreement should comprise
the Letter of Acceptance, the Conditions of Contract, the Specification, the Drawings
and the priced Bill of Quantities. If another document is to be given the same status
this should be clearly stated in the Agreement.
The Priority of Documents is in the following order:
1 The Contract Agreement

2 The Letter of Acceptance
3 The Tender
4 Part II of the Conditions (The Particular Conditions)
5 Part I of the Conditions (The General Conditions)
6 Any other document forming part of the Contract
Overview of FIDIC and its contracts 3
The Form of Tender provides for the undertaking to provide a Performance Security
within 28 days of the Letter of Acceptance. However, the final decision as to whether
to have a Performance Security is optional.
• The Contractor’s obligation is to construct the Works according to the Employer’s

Consultant’s design, although some design responsibility may be reallocated to
the Contractor.
• “Necessary” levels of supervision must be provided by the Contractor, they should
be suitably conversant with the nature of the works to be undertaken.
• The Contractor or a competent agent approved by the Engineer should be con-
stantly kept on the works to receive directions and instructions on behalf of the
Contractor.
• The Contractor is responsible for setting out and for the correctness of positioning
levels, etc.
• The submission of a programme is an express requirement of the FIDIC Condi-
tions (Clause 14).
• The Contractor becomes responsible for the care of the Works from the Works
Commencement Date to the date of issue of a Taking-Over Certificate.
• An Engineer is needed who can act impartially between the parties in order to
interpret obligations and responsibilities as circumstances change.
• The Engineer will normally appoint the Resident Engineer or Clerk of Works to
be the Engineer’s Representative.
• Contracts made under the FIDIC Conditions are remeasure and value contracts
based on a Bill of Quantities. None of the documents state what the work will even-
tually cost. This is not a lump sum contract but one where the price is calculated
on completion and remeasurement.
• The Contractor is deemed to have inspected and examined the site and its surroundings.
• Also, the Contractor is deemed to have satisfied himself as to the nature of the
ground and sub-soil but only so far as is “practicable”.
• Adverse Physical Conditions and Artificial Obstructions require the value of the
Contract works to be ascertained and determined by the Engineer, and except as
otherwise stated, to do so by a measurement.
• Variations are required to be valued by the Engineer in accordance with principles
stated and after consultation with the Contractor, which require:
• Works similar to that in the Bill of Quantities are priced at the same rates.
• So far as reasonable Bill rates are to be used as the basis for pricing work.
• Where neither of the above methods can be used, then a fair valuation shall be
made.
• Valuation on a daywork basis where the work is so ordered.
• Clause 60 sets out the scheme for payment which depends on the submission by
the Contractor of monthly statements. The Contractor is required to set out the
amounts under heads (a) to (e) of Clause 60.1. Other than for unfixed materials, it
envisages that the amounts are estimated.
• The Contractor’s rights to claim additional payment pursuant to the FIDIC Con-
ditions are set out in various clauses. The categories for such payment include:
• Cost-based claims (Cost only);
• Value-based claims (Cost plus Profit);
• Other claims as defined in the Conditions.
• If the Employer wishes the Contractor to complete certain parts of the works
before the whole and to recover liquidated and ascertain damages for failure to
achieve the same, then the Sectional Completion provision in the Appendix should
be used. If it is used, then the Extension of Time mechanism in Clause 44 should
be applied to each Section.
• Clause 44 deals with Extensions of Time applies to the Works and Sections and
deals with time only, not money.
• Variations;
• Any cause of delay referred to in the Conditions;
• Exceptionally adverse climactic conditions;
• Any delay, impediment or prevention by Employer;
• Special circumstances.
• There are provisions for liquidated damages for delay in Completion.
• There are also provisions for Resolution of Disputes and Arbitration.
The Orange Book: Conditions of Contract for Design-Build and

Turnkey (1st Ed 1995)
The Conditions of Contract for Design-Build and Turnkey (The “Orange Book”) is rec-
ommended for the provision of electrical and/or mechanical plant, and for the design
and execution of building or Employer’s Representative works. The Contractor de-
signs and provides in accordance with the Employer’s Requirements.
Note that the FIDIC 1999 Contracts were structured on the same basis as the FIDIC
1995 Conditions of Contract for Design-Build and Turnkey (The “Orange Book”), so it
is worth considering this Contract in a little detail and readers will see how the FIDIC
1999 Yellow Book developed.
The Orange Book was published in 1995 due to a growing trend towards design and
build projects, and at that time FIDIC recognised that the world of contract drafting
was moving on.
The Orange Book contained Dispute Adjudication Board (DAB) provisions, whilst
the Red Book had, in 1996, a DAB supplement published by FIDIC.
The structure of the Orange Book is as follows:
1 The Contract
2 The Employer
3 The Employer’s Representative
4 The Contractor
5 Design
6 Staff and Labour
7 Plant, Materials and Workmanship
8 Commencement, Delays and Suspension
9 Tests on Completion
10 Employer’s Taking Over
11 Tests after Completion
12 Defects Liability
13 Contract Price and Payment
14 Variations
15 Default of Contractor
16 Default of Employer
17 Risk and Responsibility
18 Insurance
19 Force Majeure
20 Claims, Disputes and Arbitration
The Priority of Documents under the Orange Book in case of ambiguities or inconsist-
encies is in the following order of importance:
a The Contract Agreement

b The Letter of Acceptance
c The Employer’s Requirements
d The Tender
e The Conditions of Contract, Part II
f The Conditions of Contract, Part I
g The Schedules
h The Contractor’s Proposal
Some relevant Clauses are as follows:
Clause 3: The employer’s representative

The Employer’s Representative is the person appointed by the Employer to act on his
behalf and is named in the Appendix to Tender.
The Employer’s Representative and his staff must be suitably qualified and compe-
tent to carry out their duties. If there is any limitation on the Employer’s Represent-
ative’s level of authority, for example, the need to obtain the Employer’s approval on
major changes then this must be included within the contract.
Clause 4: The contractor

Clause 4 covers many of the Contractor’s general obligations.
Sub-Clause 4.1 states the Contractor’s obligation to execute the Works in accidence
with the Contract including compliance with the Employer’s Requirements, Contrac-
tor’s Proposal and Schedules.
Sub-Clause 4.3 describes the role of the Contractor’s Representative who has all the
authority necessary to act on the Contractor’s behalf and his whole time to running
the project.
Under Sub-Clause 4.9, the Employer is deemed to have made available all relevant data
in his possession on sub-surface and hydrological conditions by the Base Date, which is
28 days before the date of submission of the Tender. Note that the Employer is required to
make available any information he has, not to do an extensive site investigation himself!
The Contractor is responsible for interpreting the data and shall be deemed to have
inspected and examined the Site, its surroundings and other available information,
and satisfied himself on matters such as sub-surface conditions, hydrological and cli-
mactic conditions and the extent and nature of the work and works.
“Deemed” does not actually mean that the Contractor MUST visit the Site, but that
he is “fixed with the knowledge” as if he had….there is a subtle difference!
Sub-Clause 4.11 defines “unforeseeable” as “not reasonably foreseeable by an expe-
rienced Contractor by the date for submission of the Tender”.
If the Contractor encounters something which is unforeseeable he notifies the Em-
ployer’s Representative who may award an extension of time and additional cost.
Sub-Clause 4.14 covers the provision of programmes showing how the Contractor
proposes to execute the Works. Each such programme is to be supported by a report
describing the methods that the Contractor proposes to adopt.
The Contractor is required to submit a programme to the Employer’s Representa-
tive within the time stated in the Appendix to Tender.
The programme is required to show:
a The order in which the Contractor proposes to carry out the Works (including de-
sign, procurement, manufacture, delivery, installation, testing and commissioning);
b All major events and activities in the production of Construction Documents;
c Periods for pre-construction reviews and for submissions, approvals and consents;
and
d The sequence of tests specified in the Contract;
The contract describes the content of the Contractor’s programme which should include
order and sequence, timing of tests, method statement and details of resource levels.
Monthly progress reports are to be prepared by the Contractor and six copies sub-
mitted to the Employer’s Representative. The contract prescribes the content of each
report which includes:
a Photographs and detailed descriptions of progress including each stage of design,

procurement, manufacture, delivery to Site, construction, erection, testing and
commissioning;
b Charts showing the status of Construction Documents, purchase orders, manu-
facture and construction;
c For the manufacture of each main item of Plant and Materials, name of manu-
facturer, manufacture location, percentage progress and expected dates of com-
mencement of manufacture, inspection, tests and delivery;
d Records of personnel and Contractor’s Equipment on Site;
e Copies of quality assurance documents, test results, etc.;
f Safety statistics including details of hazardous incidents and activities related to
environmental aspects;
g Comparisons of actual and planned progress with details of any aspects which
may jeopardise completion.
Clause 5: Design
The Contractor is responsible for carrying out the design of the Works. He is required
to submit the name of each designer, design Subcontractor to the Employer’s Repre-
sentative and gain prior consent.
The Contractor “holds himself” as having the experience and capability necessary
for the design.
The Contractor is to prepare and update a complete set of “as built” records and
keep them on Site. Two copies are to be submitted to the Employer’s Representative
prior to commencement of the Tests on Completion.
In addition, the Contractor must submit “as built” drawings of the Works which
shall be submitted to the Employer’s Representative for his inspection.
Prior to the issue of any Taking-Over Certificate the Contractor shall submit to
the Employer’s Representative one microfiche copy, one full size original copy and
six printed copies of the relevant “as built” drawings, and any further Construction
Docents stated in the Employer’s Requirements. NB: The Works are not considered
complete until this is done.
Clause 8: Commencement, delays and suspension

Sub-Clause 8.4 defines the Contractor’s entitlement to extensions of time.
There are five grounds for extension of time:
a A Variation (unless an adjustment to the Time for Completion is agreed under

Sub-Clause 14.3);
b A Force Majeure event (as defined in Sub-Clause 19.1);
c A cause of delay giving rise to an entitlement under the contract;
d Physical conditions or circumstances on the Site which are exceptionally adverse
and not foreseeable by an experienced Contractor; or
e Any delay, impediment or prevention by the Employer.
If the Contractor fails to comply with Sub-Clause 8.2 i.e. to complete within the Time
for Completion, he must pay to the Employer the relevant sum stated in the Appendix
to Tender for every day or part of a day elapsed between the relevant Time for Comple-
tion and the date stated in the Taking-Over Certificate. Except that the total payment
may be limited within the Appendix to Tender.
In the event that an extension of time is granted under Sub-Clause 8.3, the amount
shall be recalculated accordingly and any over payment refunded.
At any time after the Employer has become entitled to liquidated damages the Em-
ployer’s Representative may give notice to the Contractor under Sub-Clause 15.2, re-
quiring the Contractor to complete within a reasonable time for completion.
Clause 9: Tests on completion

The Contractor is required to carry out all Tests on Completion. He has to give the Em-
ployer’s Representative not less than 21 days’ notice prior to each Test on Completion.
Unless otherwise agreed the Tests shall be carried out within 14 days after this date.
In considering the results of the Tests on Completion, the Employer’s Representa-
tive makes allowances for the effect of any use of the Works by the Employer on the
performance of the Works. As soon as the Works or a Section has passed the Tests on
Completion the Contractor provides the Employer’s Representative and the Employer
with a certified report of the Test results.
Clause 10: Taking over of the works and sections
The Works are taken over by the Employer when they have been completed in accord-
ance with the contract and have passed the Tests on Completion, and a Taking-Over
Certificate has been issued. The Contractor may apply by notice to the Employer’s Rep-
resentative for a Taking-Over Certificate not earlier than 14 days prior to completion.
The Employer’s Representative shall within 28 days after receiving the Contractor’s
application:
a Issue the Taking-Over Certificate to the Contractor stating the date on which the
works were completed including passing the Tests on Completion.
b Reject the application giving his reasons and specifying the work required to be
done by the Contractor to enable the Taking-Over Certificate to be issued, the
Contractor then completes such work before issuing a further notice under this
Sub-Clause.
If the Employer’s Representative fails to either issue the Taking-Over Certificate or to

reject the Contractor’s application within 28 days, and the Works are substantially in
accordance with the Contract, the Taking-Over Certificate shall be deemed to have
been issued.
Clause 12: Defects liability

Defects Liability obligations are specified in Clause 12.
The issue of the Performance Certificate confirms that the Contractor has fulfilled
all his obligations under the contract. The Certificate is issued by the date 28 days
after the expiry of the Contract Period or as soon after such date as the Contractor
has provided all the Construction Documents and completed and tested all the Works
including remedying any defects. Only the Performance Certificate shall constitute
approval of the Works.
Clause 13: The contract price

Unless otherwise stated in Part II:
a Payment for the Works shall be on a lump sum basis.

b The Contract Price shall not be adjusted for changes in the cost of labour, materi-
als or other matters.
c The Contractor shall pay all duties and taxes, and the Contract Price shall not be
adjusted for such costs.
d Any quantities which may be set out in a Schedule are only estimated quantities
and not to be taken as actual and correct quantities of the Works to be executed
by the Contractor.
e Any quantities, prices or rates of payment per unit quantity which may be set out
in a Schedule are only to be used for the purposes stated in the Schedule.
If any part of the Works is to be paid according to quantity supplied or work done, the
provisions for measurement and valuation shall be stated on Part II.
The Contractor is required to submit a Statement (six copies) to the Employer’s
Representative after the end of each month showing in detail the amounts to which he
considers himself entitled together with supporting documents.
The Statement includes:
a The estimated contract value of Construction Documents produced and the

Works executed up to the end of the month;
b Any amounts due to changes in legislation (Sub-Clause 13.16);
c Any amount to be deducted for retention calculated by applying the retention
percentage to the above amounts;
d Any amounts to be added or deducted for advance payments;
e Any amounts due for Plant and Materials intended for the Works (Sub-Clause
13.5);
f Any other additions or deductions which may have become due other than under
Sub-Clause 8.6;
g Deduction of any amounts certified in previous certificates.
Provided the Employer has received and approved the Performance Security, the
Employer’s Representative certifies payments within 28 days of receiving each
Contractor’s Statement. A copy of the certificate is sent to the Employer and the
Contractor.
Clause 14: Variations and adjustments

The Employer’s Representative may vary the works at any time during the Contract
Period either by instruction or by a request for the Contractor to submit a proposal.
If the Employer’s Representative requests the Contractor to submit a proposal and
subsequently elects not to proceed with the work, the Contractor is reimbursed for the
Cost incurred.
Sub-Clause 14.2 allows the Contractor to submit a proposal to the Employer’s Rep-
resentative which could reduce the cost of constructing, maintaining or operating the
Works, or improve the efficiency or value to the Employer of the completed Works.
Any such proposal shall be prepared at the cost of the Contractor.
If the Employer’s Representative requests a proposal, prior to instructing a Varia-
tion, the Contractor shall submit as soon as practicable:
a A description of the proposed design and/or work to be performed and a pro-

gramme for its execution;
b The Contractor’s Proposal for any necessary modification to the programme;
c The Contractor’s Proposal for adjustment to the Contract Price, Time for Com-
pletion and/or modifications to the Contract.
The Employer’s Representative shall, as soon as practicable after receipt, respond with
approval, rejection or comments.
If the Employer’s Representative instructs a Variation, he shall proceed in accord-
ance with Sub-Clause 3.5 to agree or determine adjustments to the Contract Price
(including reasonable profit), Time for Completion and Schedule of Payments.
Clause 19: Force majeure
Clause 19 covers Force Majeure, which is defined in Sub-Clause 19.1 as an event which
is beyond the control of the Employer and Contractor, which makes it impossible or
illegal to perform. Examples include Acts of God, war, embargo nuclear contam-
ination and riot, unless solely restricted to the employees of the Contractor or his
Subcontractors.
Clause 20: Claims, disputes and arbitration

Clause 20 covers the submission of claims and the settlement of disputes.
If the Contractor considers himself entitled to additional payment, he gives notice
to the Employer’s Representative not later than 28 days of the start of the event giving
rise to the claim.
The Contractor keeps contemporaneous records and upon receipt the Employer’s
Representative may instruct the keeping of further records.
Within 28 days of such notice, or some other time as may be agreed by the E
mployer’s
Representative, the Contractor sends to the Employer’s Representative an account
giving details and amount of the claim. Where the claim has a continuing effect, he
sends an interim account with a final account within 28 days of the end of the effects
of the event.
If the Contractor fails to comply with this Sub-Clause he shall not be entitled to
additional payment.
The Contractor shall be entitled to have included in any Interim Payment Certifi-
cate such amount for any claim as the Employer’s Representative considers due.
Unless the members of the DAB have been previously agreed upon between and by
the parties, the parties shall within 28 days of the Effective Date ensure the appoint-
ment of a DAB.
The terms of appointment:
a Incorporate the model terms published by the Federation Internationale des

Ingenieurs-Conseils (FIDIC).
b Require each member of the DAB to remain independent of the parties.
c Require the DAB to act impartially and in accordance with the Contract.
d Include undertakings by the parties that the members of the DAB shall not be
liable for breach of duty or contract.
The Employer and the Contractor shall pay one half of the DAB’s remuneration.
If any of the following conditions apply:
a The parties fail to agree upon the sole member of a one person DAB within 28
days of the Effective Date.
b Each party fails to nominate an acceptable member for the DAB of three members
within 28 days of the Effective Date.
c The parties fail to agree upon the appointment of the third member (to act as
chairman) within 28 days of the Effective Date.
d The parties fail to agree upon the appointment of a replacement member of the
DAB within 28 days of the date on which a member of the DAB declines to act.
Both Party’s attempt to settle disputes amicably before the commencement of arbi-
tration. Arbitration commences within 56 days of a notice of dissatisfaction.
Any dispute in respect of which:
a The decision of the DAB has not become final and binding, and
b Amicable settlement has not been reached.
shall be settled by reference to arbitration.
The Harmonised Red Book (MDB Edition): Conditions of Contract

for Construction for Building and Engineering Works Designed by the
Employer (The Pink Book)
It is worth some consideration of this document, as an example of a collaborative exer-
cise between major global financial institutions and the publishers of an international
suite of contracts.
Several of the Multilateral Development Banks (MDBs) have, for many years, used
the FIDIC Conditions of Contract for Construction as part of their standard bidding
documents, which the MDBs require their borrowers to follow in financing construc-
tion projects.
In doing so, the MDBs introduced a number of additional clauses within the Par-
ticular Conditions.
These additional clauses, which were specific to the MDBs, had standard wording which
had to be repeated whenever procurement documents were prepared for a new project.
Also, these additional clauses were not the same for each MDB, which created
uncertainties amongst the users of the documents and increased the possibilities of
disputes.
As a result the MDBs decided to harmonise their tender documents on an interna-
tional basis, and resolved that there should be a modified form of the FIDIC Condi-
tions of Contract for Construction, 1st Edition 1999, in which the General Conditions
would contain the standard wording which previously had been incorporated into the
Particular Conditions.
The first version of the MDB Harmonised Construction Contract was released in
May 2005, with an amended second version in March 2006 and a third amended ver-
sion in 2010.
“The Pink Book” was launched for use as part of the standard bidding documents
by the MDBs.
The Islamic Development Bank and the World Bank worked with FIDIC in devel-
oping this contract, the MDBs being:
• The World Bank

• The European Bank for Reconstruction and Development
• African Development Bank
• Asian Development Bank
• Black Sea Trade and Development Bank (BSDB)
• Caribbean Development Bank (CDB)
• Council of Europe Development Bank (CEB)
• Inter-American Development Bank (IADB)
The MDBs represent lending agencies that fund projects on a global basis and as such
play a crucial role in the development of major infrastructure projects.
Clause 8.1 in particular had been amended from the Red Book, the amended Sub-
Clause requiring certain conditions to be met before the works can commence:
• The Contract must be signed by both parties.

• The Contractor must have received reasonable evidence of the Employer’s finan-
cial arrangements.
• The Contractor must have been given possession of the Site by the Employer.
• There must be in place provision for any advance payment and corresponding
guarantee/bond.
The Contract allowed the Contractor the option to terminate if the above matters were
not fully in place within 180 days of the Letter of Acceptance, which actually intro-
duced complexity and possible confusion prior to starting work; full possession of the
Site may not always be necessary or even possible from the outset.
The following clauses are referred to in the Specification:
• Definition of “Employer’s Equipment” (Clause 1.1.6.3)

• Permissions obtained by Employer (Clause 1.13(a))
• Opportunities for works by others (Clause 4.6
• Values for emissions and discharges (Clause 4.18)
• Details of Employer’s Equipment and Free-Issue Materials (Clause 4.19)
• Criteria for designers (Yellow Book – Clause 5.1)
• Technical documents to be included in Contractor’s Documents and Language for
Contractor’s Documents (Yellow Book – Clause 5.2)
• Contractor’s Documents to be submitted for Review and/or Approval (Yellow
Book – Clause 5.3)
• Other standards for compliance (Yellow Book – Clause 5.4)
• Training to be provided for Employer’s personnel (Yellow Book – Clause 5.5)
• Numbers and types of copies of As-Built Drawings (Yellow Book – Clause 5.6)
• Operation and Maintenance manuals (Yellow Book – Clause 5.7)
• Arrangements for staff and labour (Clause 6.1)
• Facilities for staff and labour (Clause 6.6)
• Payment of royalties (Clause 7.8)
Those faced with a Pink Book will have often been used to the Red Book and therefore
will be familiar with the general layout of the contract, the 20 clauses are still there
but there have been amendments which some may think are for the better, and others
otherwise.
Minor amendments have taken place to definitions of which some are worthy of
being noted:
• Cost no longer referred to “reasonable” profit, but stated the profit percentage
which was fixed at 5% unless stated otherwise in the Contract Data.
• Sub-Clause 1.5 was a new Sub-Clause that allowed the lender’s representatives to
inspect the Site and audit the Contractor’s accounts and records relative to the
project.
• Under Sub-Clause 2.1, access to the Site must be given such that the programme
can proceed “without disruption”.
• Under Sub-Clause 2.4, the Employer has to demonstrate its ability to pay the Con-
tract Price before “the Commencement Date”.
• Under Sub-Clause 2.5, the Employer had to give notice of its Claims within 28
days, which was quite onerous.
• Under Sub-Clause 3.1, the Engineer had to gain the Employer’s approval before
dealing with matters under Clauses in respect of Unforeseeable Physical Condi-
tions and the issue of Variations.
The Employer having to give approval to the Engineer in respect of Claims for
quite major issues such as Unforeseeable Physical Conditions and Variations can
be very dangerous and inadvisable, unless the Employer has a full understanding
of the construction process, and the various actions required in administering
that process. An ill-advised Employer (or possibly one that was advised but chose
not to take that advice!) could cause significant delays and additional costs to the
project.
• Under Sub-Clause 3.5, the Engineer had to give its determination “within 28 days
from receipt of the corresponding Claim or request”.
• Under Sub-Clause 6.2, there was an obligation upon the Contractor to inform its
personnel of their liability to pay local income tax.
• Under Sub-Clause 8.1, the project cannot commence unless:
• The contract agreement has been signed by both Parties.
• The Contractor has reasonable proof that funding is in place.
• The advance payment has been received by the Contractor.
• Under Sub-Clause 8.6, the Contractor could be paid for acceleration measures to
overcome Employer delays.
• Under Sub-Clause 13.1, the Contractor is not bound to carry out a Variation if
it would “trigger a substantial change in the sequence or progress of the works”.
• Under Sub-Clause 15.5, whilst the Employer can terminate for convenience, it
cannot terminate to pre-empt a rightful termination by the Contractor.
• Sub-Clause 15.6 is a new clause that attempts to deal with corrupt and/or fraudu-
lent practices.
• Under Sub-Clause 16.2, the Contractor must demonstrate that the Employer’s fail-
ures must “materially and adversely affect the economic balance of the contract
and/or the ability of the Contractor to perform the contract” prior to termination.
There are however two further grounds allowing the Contractor to terminate:
• Failure of the funder to provide funds;
• The absence of the Engineer’s Instruction to commence work 180 days after the
Letter of Acceptance.
• Under Sub-Clause 19.2, in order to claim Force Majeure, the claiming party
must demonstrate that it has been prevented from performing “its substantial
obligations”.
• Under Sub-Clause 20.6, arbitration rules may differ according to the origin of the
lending agency.
In February 2019, FIDIC entered into an agreement with the World Bank that will see
the international funding organisation adopt the use of six FIDIC standard contracts
for the next five years.
As part of the agreement, the World Bank is given a non-exclusive licence to refer to
the six major FIDIC contracts for projects they finance and the documents will also be
used as part of the World Bank’s standard bidding documents.
The contracts are primarily the FIDIC 2017 contracts.
The agreement includes translation into five major languages: Arabic, Chinese,
French, Spanish and Portuguese.
The six FIDIC contract documents covered by the FIDIC/World Bank agreement are:
• Conditions of Contract for Construction for Building and Engineering Works De-
signed by the Employer (“Red Book”), Second Edition 2017
• Conditions of Contract for Plant & Design-Build for Electrical & Mechanical Plant &
for Building & Engineering Works Designed by the Contractor (“Yellow book”),
Second Edition 2017
• Conditions of Contract for EPC Turnkey Projects (“Silver book”), Second Edition, 2017
• Client/Consultant Model Services Agreement (“White book”), Fifth Edition 2017
• Conditions of Contract for Design, Build and Operate Projects (“Gold book”), First
Edition 2008
• Short Form of Contract (“Green book”), First Edition 1999
The Gold Book: DBO Contract – Conditions for Design, Build and
Operate Projects (1st Ed 2008)
In September 2008, FIDIC published the Design, Build and Operate (DBO) contract,
with many of its provisions now similar to the FIDIC 2017 Rainbow Suite, so it is again
worth some consideration.
FIDIC had stated for some time that there was a growing need for a document
which would combine a design and build obligation, with a long-term operation and
maintenance commitment.
The question was whether it was best to have a design and build contract (such as the
Yellow or Silver Book), with a separate contract to operate the facility over a period of
time, the two contracts being completely separate or linked together, or alternatively
to have a combined “all in one contract”.
The Gold Book is the latter “all in one” combined contract, though it has been de-
scribed as “a Yellow Book with an operate and maintenance contract bolted on”, which
makes it sound as if it is not truly fit for the purpose, but it actually works quite well.
In reality although the principle is of a Design and Build Contract with an extra part
bolted on, it contains many differences to the Yellow Book in addition to the entirely
new provisions which deal with the suggested period of 20 years for operation and
maintenance of the facility.
Some said at the time that the Yellow Book should actually cover the Design and
Build part as it is a familiar Contract, and have an annexe to cover the operation and
maintenance part, but there was an opportunity to publish something new, and unique
for this contractual relationship.
It is to be used in a “green field” situation where the Employer wishes to employ a
single Contractor to design, build and subsequently operate and maintain the com-
pleted construction project for a period of 20 years.
It is likely that, although there is a single Contractor under the Gold Book, that
Contractor will be a Joint Venture (JV) with one partner responsible for the “design
and build” part, the other for the long-term “operation” part.
Note that the Gold Book is not a Design, Build, Finance, Operate (DBFO) contract,
the Contractor has no responsibility either for financing the project or for its ultimate
commercial success.
The Gold Book when launched in 2008 filled a gap within FIDIC’s Contracts and has
been widely used by various government departments, especially utilities providers.
The author has personal experience of the Gold Book being used in the Middle East
by a petroleum company.
It is a DBO contract that the industry has needed for some time to reflect the
ever-growing trend that Contractors no longer construct something then go away, but
they also maintain and operate the facility for many years to come.
Clearly, there is a very long-term commitment by both Parties with a contract of
this type, and any potential relationship issues or disputes between an Employer and
a Contractor carrying out a design and build contract where standards have not been
met would leave both Parties to have to live with each other for a very long period, but
it does remedy the situation where one Contractor designs and builds a plant, and a
totally separate entity maintains it.
When preparing the Conditions of Contract for Design, Build and Operate Projects,
the drafting group attempted to include all conditions of a general nature, which were
likely to apply to the majority of DBO contracts, into General Conditions.
The nature of DBO contracts and those who use them, whether they be public
or private organisations, is that they often require special conditions of contract,
or indeed particular procedures, which differ from those included in the General
Conditions.
For this reason, the DBO document Particular Conditions Part B – Special Provi-
sions which includes advice to drafters of contract documents who may wish to add
Special Provisions to replace or supplement the clauses to be found in the General
Conditions.
The Structure of the Contract is as follows:
1 General Provisions
2 The Employer
3 The Employer’s Representative
4 The Contractor
5 Design
6 Staff and Labour
7 Plant, Materials and Workmanship
8 Commencement Date, Completion and Programme
9 Design-Build
10 Operation Service
11 Testing
12 Defects
13 Variations and Adjustments
14 Contract Price and Payment
15 Termination by Employer
16 Suspension and Termination by Contractor
17 Risk Allocation
18 Exceptional Risks
19 Insurance
20 Claims, Disputes and Arbitration
Whilst it is not intended to review the DBO Contract in detail within this book, certain
provisions should be mentioned, as many of those provisions within the Gold Book
have been adopted within the FIDIC 2017 Contracts:
• The Contract covers the design and build plus operation and maintenance for 20
years by the same Contractor on a green field site.
• The design and build phase is similar to the FIDIC Yellow Book with specific
and challenging completion criteria, but also there is a cut-off date should the
Contractor be 182 days late in completion of the phase, leading to termination if
desired.
• Payment is on a lump sum basis but there is a defined “asset replacement fund”
and schedule that notes the timing and cost of the replacement of certain assets.
• The cost of replacing Plant and Equipment outside the schedule will be the re-
sponsibility of the Contractor, as is a cost to the Contractor over that stated on
the Schedule. Any surplus in the fund at the end of the 20 years is divided equally
between the Parties.
• The Employer is entitled to deduct 5% from payments during the “Operation Ser-
vice Period” (OSP) in case the Contractor does not fulfil its maintenance obliga-
tions. The fund is to be released, if not spent, within the Final Payment to the
Contractor. The Contractor is responsible for correcting its own defects arising
from the design and the construction in this period.
• An independent audit body is jointly appointed for the duration of the Operation
Service Period to monitor the performance of the Contractor and the Employer.
Whilst having no power, the Parties are intended to give “due regard” to matters
raised by the audit body.
• A joint inspection is required at least two years before the end of the Operation
Service Period. Any works identified must be carried out by the Contractor who
will also face completion tests similar to those at the end of the design and build
phase. Defaulting contractors risk losing the 5% Maintenance Retention Fund.
• A standing DAB is established from a set date for the design and build phase, and
a new DAB every five years during the OPS.
The key to success rests with the Contractor, who must design and build a quality
plant, ideally with low future operating and maintenance costs, but fit for purpose and
built to last.
Some key features are as follows:
Priority of documents
a The Contract Agreement
b The Letter of Acceptance
c The Letter of Tender
d The Particular Conditions Part A – Contract Data
e The Particular Conditions Part B – Special Provisions
f The General Conditions
g The Employer’s Requirements
h The Schedules
i The Contractor’s Proposals and any other documents forming part of the contract:
• The Employer is represented by an Employer’s Representative rather than an
Engineer.
• The Contractor’s general obligations include the obligation to design, execute
and complete the Works and also to provide the Operation Service in accord-
ance with the Contract.
• The Contractor is responsible for carrying out the design of the Works includ-
ing the Contractor’s Documents, as built records and operation and mainte-
nance manuals.
• Clause 14 deals with the Contract Price, its payment, and also with the possi-
bility of an advance payment. It also covers Application for Interim Payments.
It also includes for an Asset Replacement Schedule.
• Clause 17 lists risks held by the Employer during the Design-Build and Operation
periods and also the Contractor’s risks during the Operation Service Period.
• The Employer gives the Contractor the Operating Licence to operate and main-
tain the Works during the Operation Service Period.
• The Employer’s arrangements for financing the design, execution and operation
of the Works including the Asset Replacement Fund are detailed in the Finan-
cial Memorandum.
• The Contractor shall, as specified in the Contract or as instructed by the Engi-
neer, allow appropriate opportunities for carrying out the work to:
• The Employer’s Personnel;
• Any other contractors employed by the Employer;
• The personnel of any legally constituted public authorities.
• To the extent, which was practicable, the Contractor is deemed to have satisfied
himself regarding
• Form and nature of the Site;
• Hydrological and climactic conditions;
• The extent and nature of the works and goods necessary for the execution
and completion of the Works;
• Laws, procedures and labour practices;
• Requirements for access, accommodation, facilities, personnel, etc.
• If the Contractor encounters Unforeseeable Physical Conditions, he notifies
the Employer’s Representative. The Contractor may be awarded an extension
of time and/or Cost.
• Progress reports shall include:
• Charts and detailed descriptions of progress;
• Photographs showing status of manufacture and progress on Site;
• The name of the manufacturer, location, progress for each item of Plant and
Materials;
• Records of Contractor’s Personnel and Equipment;
• Copies of quality assurance documents, test results, etc.;
• Notices of Employer’s Claims and Contractor’s Claims;
• Safety statistics;
• Comparisons of actual and planned progress;
• Order in which the Contractor intends to carry out the Works;
• The period of Operation Service;
• The period for reviews of Contractor’s Documents, samples, approvals and
consents;
• Sequence and timing of inspections and tests;
• Method statements and resource schedules.
• Each Party shall endeavour to advise the other Party in advance of any known
or probable future event that could increase the Contract Price, or delay the
execution of the Works or the Operation Period.
• Performance of the Contractor’s obligations shall not be considered to have
been completed until the Contract Completion Certificate has been signed by
the Employer’s Representative.
• The Contractor shall commence the design and execution of the Works within
28 days of the Commencement Date.
• Extension of Time causes:
i A Variation;
ii A cause of delay covered by a Sub-Clause of the Conditions;
iii Exceptionally adverse climactic conditions;
iv Unforeseeable shortages caused by epidemic or governmental actions;
v Any delay, impediment or prevention caused by the Employer or his per-
sonnel or other Contractors:
• Contractor gives notice to the Employer’s Representatives not later
than 28 days after becoming aware of the event. Notice describes
event.
• Contractor keeps records.
• Within 42 days after he becomes aware, Contractor submits detailed
claim, further claims at monthly intervals.
• Within 42 days after receiving the claim, Employer’s Representative
responds.
• The Contractor is obliged to comply with the Operation Management Require-
ments in the Contract including following the Operation and Maintenance
Plan.
This Clause also covers the provision of an Independent Compliance Audit
to audit and monitor the performance of the Employer and the Contractor
during the Operation Service in compliance with the Operation Management
Requirements.
• The commencement of the Operation Service shall be from the date stated in
the Commissioning Certificate.
• The Contractor provides the Operation Service in compliance with the Opera-
tion Management Requirements.
• If there any delays or interruptions during the Operation Service caused by the
Contractor he shall compensate the Employer.
• If there any delays or interruptions during the Operation Service caused by the
Employer he shall compensate the Contractor.
• If a failure to reach production outputs is caused by the Employer, the Em-
ployer notifies the Contractor of the steps he should take, the Contractor is paid
Cost plus Profit.
• If a failure to reach production outputs is caused by the Contractor, the Con-
tractor pays performance damages.
• Contractor may submit a written proposal which if adopted:
i Accelerates completion;
ii Reduces the cost of executing, operating or maintaining the Works;
iii Improves the efficiency or value of the Works;
iv Includes other benefit.
• Contractor is NOT paid a fee.
• Regarding claims, Contractor’s and Employer’s Claims are both dealt with un-
der Clause 20, with strict provisions and time scales, which are common to the
FIDIC 1999 and 2017 Contracts.
There is also provision for avoidance of disputes, and also disputes arising
during the Operation Service Period, the former being relevant to the stand-
ing nature of the DAB and the latter relating to post issue of the Commission-
ing Certificate.
The initial Notice that has to be provided in submitting a claim is 28 days,
and failure to issue the Notice renders the claim time barred.
The FIDIC drafters, within the Gold Book, have perhaps considered those
who believe that fatal notices are unfair as they have introduced a potential
opportunity for the Contractor to be able to proceed with its claims despite
not having submitted a Notice within the required time period.
The solution which is similar to the FIDIC 2017 Contract is a referral to the
DAB should the Contractor consider that there were circumstances to justify
the late submission of the Notice. The DAB, which is a standing board, ap-
pointed at the commencement of the project has the authority to override the
28-day time limit if it considers it fair and reasonable to do so.
Following submission of the Notice the Contractor must keep contempora-
neous records to substantiate its claim.
Within 42 days after the Contractor became aware (or should have become
aware) of the event or circumstance giving rise to a claim for an entitlement
the Contractor must send to the Employer’s Representative a fully detailed
claim which includes all supporting particulars of the contractual basis for
the claim plus any delay analysis or quantum evidence as appropriate.
There are relaxations to the 42 days if allowed by the DAB following an
extension of the original 28-day Notice or if agreed between the Contractor
and the Employer’s Representative who may also ask for further supporting
particulars.
No matter how professional a Contractor may be it may often prove difficult
to gather all relevant information within the 42-day period, especially if the
Contractor has to rely upon a chain of third parties, such as Sub-Contractors
and their suppliers, to provide basic information and potentially involve law-
yers to advise upon the contractual or other basis of the claim.
The White Book: Client/Consultant Model Services Agreement

The FIDIC White Book is entitled the Client/Consultant Model Services Agreement
and consists of:
• Agreement
• General Conditions
• Particular Conditions
• Appendices 1, 2, 3 and 4
The White Book has been drafted to create conditions of agreement that would span
the life cycle of an Engineer’s or other Consultant’s involvement.
Accordingly, the document is suitable for use during:
• Pre-investment and feasibility studies;

• The design phase;
• The administration of a contract.
As with other FIDIC contracts there are both General Conditions and Particular Con-
ditions of Contract which combine to set out the scope of the Consultant’s work, pay-
ment terms and the like.
The White Book incorporates the same financial protection as afforded to Contrac-
tors, in that the consultant too can ask the Client (as opposed to the Employer) if it has
the ability to pay the Consultant’s fees.
In a similar vein, and maybe not surprising to some, the White Book limits the Con-
sultant’s responsibilities, and therefore liabilities, to “exercise reasonable skill, care
and allegiance in the performance of his obligations under the Agreement”.
This limitation is further qualified since nothing else in the agreement, or any legal
requirement of the country or any other jurisdiction can impose a greater risk upon
the consultant. Thus, the Consultant/Engineer has a limited risk that, it is suggested,
is not in accord with the thoughts of employers and contractors alike.
The Form of Contract for Dredging and Reclamation Works

(Blue Book)
The Form of Contract for Dredging and Reclamation Works (Blue Book) was originally
launched the First Edition in 2006, then the Second Edition in 2016.
It is based on the FIDIC Short Contract (Green Book) and was originally termed the
“Blue-Green Book”, but has an Engineer working on behalf of the Employer, whereas
the Green Book has an Employer’s Representative (if required).
It was published to allow users to have a specialist marine contract, rather than
having to use and adapt another member of the FIDIC contract family, in particular
the FIDIC Conditions of Contract for Works of Civil Engineering Construction 1987.
Like the Green Book, it is abbreviated and flexible. In terms of being a smaller doc-
ument the General Conditions are only 16 pages and 15 clauses long.
The format has also changed from the major forms with the Agreement and the
Appendix to the contract being the first section.
Perhaps, it is the major forms that have the order incorrect since it is those particular
terms that are the most important to recognise especially in such a flexible form as the
Blue Book.
Similarities with the major forms are in the inclusion of standard forms, such as
securities, a section on adjudication (a one- or three-person DAB) with rules and the
adjudicator’s agreement and the all-important guidance section.
The Engineer is still recognised within the contract; however, design responsibility
can rest with either the Employer (and its Engineer) or the Contractor.
Payment terms are extremely flexible, and a list of options, such as lump sum,
remeasurement and cost plus, are all noted within the Appendix.
It is perhaps apparent that a greater input of a Contractor’s organisation has influ-
enced some of the General Conditions, as has perhaps the use of other forms within
the industry as a whole:
• Notices by the Contractor in respect of a claim must be given within 28 days but
there is no fatal time bar.
• Claim items are listed as defined risks which may entitle the Contractor to mone-
tary or time compensation.
• The defined risks, recognising the likely impacts of weather upon the Contractor’s
ability to make progress, potentially soften the usual clause wording, entitling the
Contractor to make a claim if “any operation of the forces of nature affecting the
Site/and or the Works”, which was Unforeseeable or “against which an experi-
enced Contractor could not reasonably have been expected to take precautions”
but give the Employer (and Contractor) less room for debate by also defining the
Employer’s risk to be “climatic conditions more adverse than those specified in
the Appendix”.
• If disputes are not settled amicably they are to be settled by referral to adjudica-
tion by a DAB, and, if dissatisfied with the DAB’s decision (or if no decision is
made within the set timescale) the dispute can be referred to Arbitration.
The Blue Book is a model of a contract drafted by those with a particular section of
the industry in mind and with the knowledge to incorporate the necessary variations
to standard forms that may have been considered for use in the past.
The traditional method of appointing Contractors for a dredging and reclamation
work is on a remeasurable basis with the Employer being responsible for design; the
Employer also being responsible for obtaining planning permission, licences and per-
mits with the Contractor responsible for customs clearances, and some licences and cer-
tificates. However, the Contract is flexible enough to allow for other payment methods.
In some cases, the Contractor may be responsible for design, and some of the Em-
ployer’s obligations above.
Site Data is critical with a contract of this type, with the Contractor encountering
different conditions to what he had expected (and priced and programmed for) and the
contract specifically deals with issue in that respect.
There are also risks specific to work of this type, which again are covered by the
Contract.
Many of the other provisions within the Blue Book are similar to the members of
the Rainbow Suite (Red, Yellow and Silver Books), which are discussed in more detail
in later chapters of this book, including similar terminology; the Employer having to
provide sufficient evidence of funding, there is also the use of “Exceptional Events”
rather than the more traditional “force majeure”, in addition to limitations on liability.
Conditions of Contract for Underground Works (2019 Emerald Book)

In 2019 FIDIC launched a much anticipated new form of contract, the Emerald Book,
for Underground Works.
Whilst some practitioners questioned the need for a separate contract for under-
ground works, the nature of, for example, major tunnelling projects is that underground
and sub-surface construction works are highly dependent on the hydrogeological, geo-
logical and geotechnical properties of the ground itself.
Underground Works are predominantly characterised by three unique and high risk
features:
i The method of excavation and ground support, and the associated equipment and
other resources to carry out the works are major factors for the successful out-
come of the project.
ii Physical access to the Works is often limited to just a few locations or even a single
location with difficult access, which places serious constraints on construction
logistics, use of equipment and the environment.
iii The land above where the Works are to be carried out usually belongs to a number
of third parties, many of whom have no knowledge of what is being carried out.
There are also other important features that are not unique to Underground Works:
i They require extensive investment in Contractor’s Equipment.

ii Underground excavation and associated lining works are very time-consuming.
The Emerald Book is designed for use in connection with all sub-surface works, and
as such it can be applied to all common excavation methods, including blasting and
tunnelling using special tunnel boring machines (TBMs), and also may be appropriate
for other types of work that include significant geotechnical uncertainty, for example,
for caverns used in the energy sector.
The Emerald Book is based on the FIDIC Yellow Book 2017.
Particular features of the Emerald Book include:
• Disclosure of all available geological and geotechnical information;

• The inclusion of a contractual geotechnical baseline;
• The inclusion of a tailored “Unforeseeable Physical Conditions” clause;
• The provision of a flexible mechanism for remuneration according to ground con-
ditions, both foreseen and unforeseen;
• Time for Completion being influenced by ground conditions;
• The implementation of a ground classification system and supporting particular
conditions that reflect excavation and stabilisation activities.
The following contents of the Emerald Book are of particular relevance:
i The Geotechnical Baseline Report (GBR) is defined as the single contractual

source of risk allocation related to subsurface physical conditions to the Parties.
It addresses the reaction of the ground to excavation and support under the con-
tractually agreed construction methodology. All subsurface physical conditions
not addressed in the GBR are considered “Unforeseeable”.
ii The risks arising out of the foreseen properties of the ground, obstacles and ad-
verse reaction to the excavation and ground support processes are assigned to
the Contractor, as well as the production rates and cost of performing the Works
under the same conditions. Conversely, the risks arising out of unforeseen phys-
ical conditions of the ground, obstacles and adverse reaction to the excavation
and ground support processes are allocated to the Employer, with the Contractor
being able to receive an extension of time and/or reimbursement of cost.
iii The Time for Completion of the Works, of a Section or of any Milestone may
largely depend on the subsurface physical conditions that are encountered during
excavation. As the risk related to these conditions is allocated to the Employer,
Time for Completion should be adjusted by the variation of these conditions
within the limits defined by the GBR, insofar as this variation affects the critical
path of the Works, of a Section or of any Milestone. If the onerous conditions
encountered are higher than described in the GBR, the Time for Completion is
extended, but if less onerous, the Time for Completion is reduced.
iv The cost of the excavation and lining works will also largely depend on the subsur-
face physical conditions and/or ground reaction(s) to such works. The Conditions
provide that the excavation and lining works are to be measured and paid for
using rates and prices set out in the Bill of Quantities.
v Due to the typically long duration of underground works and to the high cost
of investment in equipment, an important portion of the cost to the Contractor,
such as, depreciation of and interest for equipment, and overhead charges, is time-
related, whilst the remainder of the cost depends on the volume or quantity of the
performed works.

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Understanding FIDIC

• The obligations and responsibilities of the Employer, the Employer’s Representa-

Understanding Quality Assurance in Construction

Understanding Active Noise Cancellation

Understanding the CDM Regulations

Understanding Building Failures, 4th edition

Understanding NEC3: Professional Services Contract

Understanding NEC3: Engineering and Construction Short Contract

Understanding The Building Regulations 6th edition

Understanding JCT Standard Building Contracts 10th edition

Understanding NEC4: Term Service Contract

Understanding the NEC4 ECC Contract: A Practical Handbook

Understanding the NEC4 Professional Service Contract

ISBN: 978-0-367-42791-7 (hbk)

1 Overview of FIDIC and its contracts 1

3 Obligations and responsibilities of the Employer, the Employer’s

4 Quality and Defects Liability 118

5 Design responsibility and liability 142

6 Variations, Measurement and Payment Procedures 161

7 Progress, Delays, Extensions of Time and Completion 181

8 Suspension and Termination 203

9 Care of the Works and Indemnities, Exceptional Events

10 Employer’s and Contractor’s Claims 229

11 The Dispute Avoidance/Adjudication Board and the Resolution

12 Tendering using the FIDIC 2017 Contracts 266

Appendix: Errata to the FIDIC Conditions of Contract 2017 305

• Conditions of Contract for Construction (The “Red Book”) – for building or

The development of the FIDIC contracts

Conditions of Contract for Works of Civil Engineering Construction:

1 The Contract Agreement

• The Contractor’s obligation is to construct the Works according to the Employer’s

The Orange Book: Conditions of Contract for Design-Build and

a The Contract Agreement

Some relevant Clauses are as follows:

Clause 3: The employer’s representative

Clause 4: The contractor

a Photographs and detailed descriptions of progress including each stage of design,

Clause 8: Commencement, delays and suspension

a A Variation (unless an adjustment to the Time for Completion is agreed under

Clause 9: Tests on completion

If the Employer’s Representative fails to either issue the Taking-Over Certificate or to

Clause 12: Defects liability

Clause 13: The contract price

a Payment for the Works shall be on a lump sum basis.

a The estimated contract value of Construction Documents produced and the

Clause 14: Variations and adjustments

a A description of the proposed design and/or work to be performed and a pro-

Clause 20: Claims, disputes and arbitration

a Incorporate the model terms published by the Federation Internationale des

shall be settled by reference to arbitration.

The Harmonised Red Book (MDB Edition): Conditions of Contract

• The World Bank

• The Contract must be signed by both parties.

• Definition of “Employer’s Equipment” (Clause 1.1.6.3)

The White Book: Client/Consultant Model Services Agreement

• Pre-investment and feasibility studies;

The Form of Contract for Dredging and Reclamation Works

Conditions of Contract for Underground Works (2019 Emerald Book)

i They require extensive investment in Contractor’s Equipment.