The following article was originally published in Climate Control Middle East.
The FIDIC suite of construction contracts is written and published by the International Federation of Consulting Engineers. The FIDIC acronym stands for the French version of the Federation’s name (Federation Internationale des Ingenieurs-Conseil).
FIDIC’s Contracts Committee produces standard forms of contract for civil engineering projects, which are used globally. The purpose of these standard forms is to define the contractual relationship between parties and to allocate risks between the contractor and the employer. FIDIC states that their contracts allocate risks fairly to the party that is best able to bear and control that risk.
The Green Book is FIDIC’s Short Form of Contract, recommended for use on smaller value projects (less than USD 500,000) or when the construction time is shorter (less than six months) – although it is often used for higher value, longer projects. The first edition was launched in 1999 and consists of 15 clauses across 10 pages.
Under the usual arrangements for this type of contract, the Contractor constructs the Works in accordance with design provided by the Employer. However, it may also be suitable for contracts that include, or wholly comprise, the contractor’s design. There is no reference to an impartial Engineer in the contract – something that has been an area of concern for contractors. The second edition of the Green Book, first introduced at FIDIC’s annual conference, will be launched in 2021 and is intended to be a ‘Pro’ version, ‘fixing’ the issues or gaps felt by all parties in the original edition. The new Green Book will be substantially longer than the first edition – but still shorter than other FIDIC books – and will be more wide-reaching, providing greater clarity. The Appendix in the 1st edition has also been developed into a more detailed list of Particular Conditions in the pre-release version.
Some of the key areas addressed by the new Green Book include:
- The inclusion of the Engineer. This makes the Green Book more aligned to the Red and Yellow Books provisions, adding contract administration details. The Engineer is to “act neutrally between the Parties and shall not be deemed to act for the Employer”.
- Prolongation Cost entitlement. Defined as “on-site and off-site overheads associated with a compensable extension of time, as stated in the Contract Data”. These overheads are based on the average ‘Weight’ of the overheads and are payable to the contractor from the employer at a daily rate for the duration of the extension of time. Part A (the Contract Data) of Particular Conditions states that the PGC “shall be the only compensation due from the Employer to the Contractor for an EOT resulting from a compensable delay”, but the same section goes on to say that this does “not affect the Contractor’s compensation rights for other Costs (if any), such as disruption Costs (if any)”.
- Claims and Disputes, which are now two separate clauses. There is clear distinction between the two – a Claim is an entitlement under the terms of the contract, and a Dispute occurs when that Claim is rejected. It is also worth noting that Claims and Variations are also separated. The dispute resolution provisions in the FIDIC Green Book are more basic than other FIDIC contracts: There is no reference to ICC arbitration or a Dispute Adjudication Board. The parties decide on the applicable rules in the Appendix, but the Contract does also include Rules for Adjudication, an Adjudicator’s Agreement and guidance notes.
- Advance Warning provision, where either party is to notify the other and the Engineer about possible delays or disruptions.
- Other new clauses, such as testing and commissioning/take over, defects, limits on liability and indemnities will be much welcomed.
The new Green Book has also been designed for ease of use, with some new structural amends, as follows:
- A table that sets out the Employer’s risks
- A table that sets out the insurance responsibilities of each of the parties, inclusive of professional indemnity cover
- A tick box selection for payment valuation
Overall, given that the 1999 Green Book was being used increasingly for projects of higher value, the new version will be gratefully received, as it gives all parties more clarity and structure. The inclusion of some familiar FIDIC provisions – but which are new to the FIDIC Green Book – such as intellectual property and confidentiality, are also much needed. It is certainly in keeping with FIDIC’s stated mission: “To improve the business climate and promote the interests of consulting engineering firms globally and locally, consistent with the responsibility to provide quality services for the benefit of society and the environment.” At last, the FIDIC Green Book can take its rightful place with the Red, Silver, Yellow and Pink Books.
Other releases in 2021 of note are:
- A Guide to the 2017 Red, Yellow and Silver books (first quarter 2021).
- A new Bronze Book (originally scheduled for 2020), which is an Operate-Design-Build-Operate contract (as the Gold Book) but for brownfield sites that include an upgrade for existing facilities
Other contracts to look out for are:
- Sub-contracts for the 2017 Suite by the end of 2022.
- A form for PPP projects (2023), including concession agreements and direct agreements not covered by the Silver Book.
- A collaborative contracting form (2023) with optional payment provisions, such as Target Price.
- An EPCm form (2023).
Authored by Asim Ahmed, partner and head of litigation; and Hazem Balbaa, Associate.