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THE FIDIC CONTRACTSAND THEIR USE

Presentation by Daniel Ivarsson

Managing Director of FIDIC

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FIDIC CONTRACTS

CONSTRUCTION

PLANT AND DESIGN-BUILD

EPC/TURNKEY PROJECTS

SHORT FORM OF CONTRACT

CLIENT/CONSULTANT MODEL SERVICES AGREEMENT

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WHICH BOOK TO USE?

STRAIGHTFORWARD PROJECT ? EMPLOYER DESIGN ?

CONTRACTOR DESIGN

plant and/or high unforeseen risks

fixed price - lump sum little employer involvement

no major unforeseen risks

no

no

no

DISCUSS IN DETAIL

Employer ’s requirements with the Contractor, and

negotiate a modified FIDIC contract

no

yesyes

yes yes

SHORT

FORM

CONTRACT

CONDITIONSOF

CONTRACT FOR

CONSTRUCTION

Conditions of

Contract

for EPC

Turnkey Projects

Conditions of Contract forPlant and

Design Build

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FEATURES AND ADVANTAGES

fair apportioning of risks, rights and obligations between the parties

BALANCED

WELL TRIED

long case history for earlier contracts

ACCEPTED

known and recognised; in wide use for international contracts

SUPPORTED

recommended or required by development banks, ISPA, etc.

EFFECTIVE

clear and complete conditions; time limits; provisions for adjudication

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Key points: CONSTRUCTION

• Employer responsible for design

• Engineer, working for the Employer

• Drawings, specifications, Bill of Quantities

• Payments based upon measurements

• Certification of payments by Engineer

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Key points: PLANT & DESIGN-BUILD

• Contractor responsible for design

• Engineer, working for the Employer

• Employer’s requirements

• Lump sum pricing

• Payments according to progress

• Certification of payments by Engineer

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Key points: EPC/TURNKEY PROJECTS

• Contractor responsible for design and takes full responsibility

• Employer may appoint a Representative

• Fixed price, to cover risks taken on by Contractor

• Payments according to progress

• No certification of payments

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Key points: SHORT FORM

• Simple projects

• Design by either party

• Employer may appoint a Representative

• Valuation as appropriate; to be agreed

• Payments according to value of Works executed and Materials and Plant delivered to site

• No certification of payments

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Key points: CLIENT/CONSULTANT

• Agreed Scope of Services: Appendix A

• Normal, Additional and Exceptional Services

• Normal Services priced as agreed

• Additional and Exceptional Services at rates agreed

• Payment schedule as agreed

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STRUCTURE: 3 MAIN CONTRACTS

• General Conditions• Guidance for the Preparation of the Particular Conditions• Letter of Tender• Contract Agreement• Dispute Adjudication Agreements• Twenty main clauses, covering similar matters• Exceptions: Clauses 3, 5 and 12:

Construction: Plant and D-B: EPC/Turnkey:

3. Engineer Engineer Employer’s Admin.

5. Subcontractors Design Design

12. Measurement Tests after Compl. Tests after Compl.

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STRUCTURE: SHORT FORM

• Agreement• General Conditions• Particular Conditions• Rules for Adjudication• Notes for Guidance

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STRUCTURE: CLIENT/CONSULTANT

• Agreement• General Conditions• Particular Conditions• Appendix A: Scope of Services• Appendix B: Personnel, equipment, facilities and services

of others to be provided by the client• Appendix C: Remuneration and payment

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THE 1992 (OLD) AND 1999 (NEW) RED BOOKSSOME DIFFERENCES

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THE 1992 (OLD) AND 1999 (NEW) RED BOOKSSOME DIFFERENCES

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INNOVATIONS FAVOURING THE CONTRACTOR

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INNOVATIONS FAVOURING THE EMPLOYER

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SCHEDULE OF RESPONSIBILITIES: FIDIC 1999

Some major responsibilities EMPLOYER Clause 2.1 Grant access

Clause 2.2 Assist with Permits, Licenses, Approvals

Clause 2.4 Establish and maintain appropriate financial arrangements

- Issue Letter of Acceptance

Clause 3.1 Appoint the Engineer

Clause 3.4 Replace the Engineer

Clause 14.2 Advance Payment

Clause 14.7 Payment

Clause 15.2 Termination

Clause 17.3 Employers Risks

Clause 18.1 Insurance

Clause 20.2 Dispute Adjudication Board – Agree in appointment and pay

costs

Clause 20.1 / 20.5

Settle dispute

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SCHEDULE OF RESPONSIBILITIES: FIDIC 1999

CONTRACTOR

Clause 4.1 Execute and complete the Works in accordance with the Contract (including design to the extent specified).

Clause 4.2 Performance Security

Clause 4.3 Contractors Representatives

Clause 4.4 Sub-Contractors

Clause 4.6 Co-operate

Clause 4.8 Safety Procedures

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SCHEDULE OF RESPONSIBILITIES: FIDIC 1999

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SCHEDULE OF RESPONSIBILITIES: FIDIC 1999

DISPUTE ADJUDICATION BOARD Clause 20.2 Accept Appointment and the obligations pertaining thereto

Clause 20.4 Adjudicate on Disputes – hand down decisions

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SCHEDULE OF RESPONSIBILITIES: FIDIC 1999

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QUALITY OF DESIGN & DOCUMENTATION

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QUALITY OF DESIGN & DOCUMENTATION

Suggestions to Improve:

1. One boss for design / documentation production. 2. Avoid over specification; adopt standards. 3. Take particular care at overlaps between sections

of the work. 4. Identify RISKS and set down formal procedures

for managing these.

5. Quality Management System.

6. Peer Review.

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QUALITY CONTROLQUALITY ASSURANCE

The traditional contract (eg FIDIC 1992) is based on Quality Control (QC) that is, materials and operations are to subject to inspection and acceptance and/or rejection by the Engineer (or his Representative. Clauses 36-39 of FIDIC 1992.

Recent contracts have adopted a Quality Assurance approach, that is, the Contractor is required to put in place a Quality Management System which is designed to assure compliance with Contract requirements; and the Contractor is obliged to ensure that his work so complies; the Engineer only undertakes an auditing role, but nevertheless may reject completed works.

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FIDIC GUIDES

• The FIDIC Contracts Guide

• The White Book Guide

• Guide for the preparation of particular conditions (in the major contracts)

• Notes for Guidance (in the Short Form of Contract)

• Tendering Procedure and Pre-qualification forms

• Quality Based Selection

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USE OF FIDIC CONTRACTS

• Match contract and project

• Decide early

• Appoint DAB early

• Draft by professionals

• Do not touch the General Conditions

• Buy originals

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PREPARATION OF PROCUREMENT• Determination of needs and objectives• Determination of constraints• Identification of parties• Planning, budgeting, financing• Contract type• Selection procedure• Requirements / Specifications / Bills of Quantities /

Terms of Reference• Pre-qualification and evaluation criteria• Particular conditions• Publicity• Tender documents

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CONTRACT ADMINISTRATION

• Supervision

• Enforcement

• Quality and quantity

• Invoice verification

• Payments

• Extensions, variation orders, amendments

• Termination

• Disputes and their resolution