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FIDIC USERS GUIDE APRACTICAL GUIDE TO THE 1999 RED

BOOK


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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, givingthe rights and obligations of the Parties, and were only consulted when a claim or dispute becamea serious problem. Resident Engineers and Constructors Project Managers were probably awarethat 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 theincreasing demand from Clients and Employers that projects should finish on time andwithin budget have increased the pressure for improved management techniques onconstruction sites. The current emphasis on improved procedures for the avoidance or resolutionof claims and disputes has added to these pressures on the staff on site.

One of the consequences of the movement towards improving efficiency andreducing costs has been the increasing use of the Conditions of Contract as a manual ofgood project management procedures. This development has been evident in the successiverevisions to the Federation Internationale des Ingenieurs (FIDIC0 Conditions of Contract for Worksof 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 inLondon. The New Engineering Contract not only incorporated procedures which virtually formed amanual of good project management techniques and encouraged a less approach to therelationship between Contractor and Employer but also was written in good English, in a style andformat that could be readily understood by construction professionals. The Conditions ofContract, which were published by FIDIC in 1999, mark a further step forward in theprocess of the incorporation of management procedures expressed in a practical styleand format. Hence, it is now inconceivable that Resident Engineers, Contracts Managers and the

other construction professionals who prepare documents and administer projects on site should nothave the Conditions of Contract on their desks and refer to its requirements and procedures on


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This book is a practical guide for the people who actually use FIDIC Conditions ofContract, based on the authors practical experience construction projects, conductingtraining courses and the resolution on disputes. It is intended to assist the people whoare preparing Contact documents as well as those are administering the project on theSite or dealing with claims and disputes. The book includes a detailed review of theConditions 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. Theinterrelation of the actions and notices by the Employer, Contractor and Engineer with themilestone events during the construction of the project are shown in a series of flow charts. Thereis also comparison with previous FIDIC Conditions and comparison on Clause numbers to assistthose who are familiar with the traditional FIDIC Red Book. The book is not intended to be a legalanalysis of the new FIDIC Conditions or a comparison of the correct interpretation of the conditionsof 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.


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CONTENTS

PART 1 THE TRADITIONAL AND THE 1999 FIDIC CONDITIONS OF CONTRACT

1. Introduction to the FIDIC Conditions of Contract2. The 1999 FIDIC Conditions of Contract for Construction3. Comparisons between the different FIDIC Conditions of Contract4. Claims and dispute procedures5. Flow charts

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

6. Introduction to Part 27. Contents: General Conditions8. Definitions listed alphabetically9. Clause 1: General Provisions10. Clause 2: The Employer

11. Clause 3: The Engineer12. Clause 4: The Contractor13. Clause 5: Nominated Subcontractors14. Clause 6: Staff and Labour15. Cause 7: Plant, Materials and Workmanship16. Clause 8: Commencement, Delays and Suspension R.B. & L.P.17. Clause 9: Tests on Completion18. Clause 10: Employers Taking Over L.P.

19. Clause 11: Defects Liability R.B.20. Clause 12: Measurement and Evaluation


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21. Clause 13: Variations and Adjustments R.B.

22. Clause 14: Contract Price and Payment M.S. & A.P.23. Clause 15: Termination by Employer24. Clause 16: Suspension and Termination by Contractor25. Clause 17: Risk and Responsibility26. Clause 18: Insurance L.P.27. Clause 19: Force Majeure28. Clause 20 : Claims, Disputes and Arbitration J.McC.

PART 3 APPENDICESA1 General Conditions of Dispute Adjudication Agreement J.McC.A2 Annex: Procedural RulesA3 Index of Sub-ClausesA4 Annexes and Forms

PART 4 SUB-CLAUSE COMPARISONA 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


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PART 1: THE TRADITIONAL AND THE 1999

FIDICCONDITIONS OF CONTRACT


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CHAPTER 1: INTRODUCTION TO THE FIDIC CONDITIONS OF CONTRACT

1.1 CONSTRUCTION CONTRACTS

(a) The Constructors Tender(b) The Employers 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


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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.


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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 threesections General Conditions, Guidance and Forms - and includes far more than just

the Conditions of Contract. All these sections are important for the Employer orConsultant who is preparing Contract documents. However, only the General Conditions

and the other documents which are included in the Contract documents are importantfor the Contractor and the staff on the construction site who will administer theContract.

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


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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


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(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 Employers 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 toTender.


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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 differentdocuments which make up the Contract and the use of the different documents.

Clauses 2 to 5: The Employer; The Engineer; The Contractor; NominatedSubcontractors 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 Clausecontains more Sub-Clauses than all the others added together. It is the Contractor whois responsible for executing the Works and so is the most active of the people who areinvolved with the project. Many other Sub-Clauses throughout the General Conditionsrefer to the Contractor's obligations.

Clauses 6 and7: Staff and Labour; Plant, Materials and Workmanship deal

with the requirements for the items of men and materials which the Contractor bringsto the site and uses to execute the project.

Clauses 8, 9, 10 and11: Commencement, Delays and Suspension; Tests onCompletion; Employer's Taking Over; Defects Liabilityfollow the sequence ofevents during the construction of the project.

.


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Clauses 12, 13 and14: Measurement and Evaluation; Variations andAdjustments; Contract Price and Paymentgive the procedures for the Employer topay the Contractor for his work.

Clauses 15 and16: Termination by Employer; Suspension and Terminationby Contractorrefer to events which may occur at any time during the constructionsequence and may bring the Contract to a close.

Clause 17: Risk and Responsibilityrelates to the project as a whole and includesSub-Clauses, which are only used rarely, together with matters which are critical to theParties' responsibilities and overlap with the requirements of other important Sub-Clauses

Clause 18: Insurance includes important procedures, which must be implementedat or before the commencement of the Works in addition to the procedures to be usedwhen 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 theparticular problem occurs. The final Sub-Clause refers to release fromperformance in awider context than just due to Force Majeure.

Clause 20: Claims, Disputes and Arbitration will probably be the mostfrequently used Clause in the whole Conditions of Contract. It includes procedures suchas the submission and response to Contractor's claims, which must be used when aproblem 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.


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2.4 THE SEQUENCE OF THE CONSTRUCTION OPERATIONS

Commencement Progress CompletionDefects PeriodDisputes.


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CHAPTER 3 : COMPARISONS BETWEEN THE DIFFERENT FIDIC CONDITIONS OFCONTRACT

3.1 THE TRADITIONAL AND THE 1999 CONDITIONS OF CONTRACT3.2 THE TRADITIONAL RED BOOK AND THE CONDITIONS OF CONTRACT FOR

CONSTRUCTION3.3 COMPARISON BETWEEN THE DIFFERENT 1999 CONDITIONS OF CONTRACT

The Conditions of Contract for ConstructionThe Conditions of Contract for Plant and Design-BuildThe Conditions of Contract for EPC/Turnkey ProjectsThe Short Form of Contract

CHAPTER 4: CLAIMS AND DISPUTE PROCEDURES

4.1 INTRODUCTION4.2 CLAIMS AND THE CONDITIONS OF CONTRACT4.3 CLAIMS BY THE CONTRACTOR4.4 CLAIMS BY THE EMPLOYER4.5 THE DISPUTE ADJUDICATION BOARD (DAB)4.6 AMICABLE SETTLEMENT4.7 ARBITRATION

4.8 THE COURTS


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PART 2: THE FIDIC CONDITIONS OF CONTRACT FOR CONSTRUCTION

Clauses 0-20

CHAPTER 5 FLOW CHARTS

CHAPTER 6 INTRODUCTION TO PART 2


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PART 3 : APPENDICES

Appendix A1: General Conditions of Dispute Adjudication AgreementAppendix 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 PERFORMANCESECURITY- DEMAND

GUARANTEE

- Annex D EAMPLE FORM OF PERFORMANCESECURITY-DEMAND BOND- Annex E EXAMPLE OF ADVANCE PAYMENT GUARANTEE- Annex F EXAMPLE FORM OF RETENTION MONEY GUARANTEE- Annex G EXAMPLE FORM OF PAYMENT GUARANTEEBY EMPLOYER


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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 TheRed Book and the 1999 Conditions of Contract for Construction.