UK: An Introduction To FIDIC And FIDIC Standard Form Construction And Engineering Contracts

Last Updated: 16 October 2012
Article by David Savage and Simon Green

FIDIC is an acronym for Fédération Internationale Des Ingénieurs – Conseils - i.e. the French for the International Federation of Consulting Engineers). The organisation was founded in 1913 by three countries each wholly or partly francophone (being Belgium, France and Switzerland). There are now 78 Member Associations from all over the world, and FIDIC is currently located in the World Trade Centre in Geneva, Switzerland.

FIDIC represents globally the consulting engineering industry by promoting the business interests of firms supplying technology-based intellectual services for the built and natural environment. FIDIC is particularly well known for its work in drafting standard form conditions of contract which are used on higher value international construction projects, and are endorsed by many multilateral development banks.

Companies and organisations belong to FIDIC national member associations. Many of these national associations now represent other professionals, such as architects. FIDIC also has affiliate members interested in the work it undertakes, such as lawyers and insurers. FIDIC organises conference, seminars and training courses.

What do the FIDIC suite of contracts cover?

In 1999, FIDIC published a completely new suite of contracts, the 'Rainbow Suite', including:

  • Red Book: Conditions of Contract for Construction for Building and Engineering Works designed by the Employer (1st Edition 1999).
  • Yellow Book: Conditions of Contract for Plant and Design-Build – for electrical and mechanical plant, and for building works, designed by the Contractor (1st Edition 1999).
  • Silver Book: Conditions of Contract for EPC / Turnkey Projects (1st Edition 1999)
  • Green Book: Short form of Contract (1st Edition 1999)

Other FIDIC contracts published before or after that date include:

  • Pink Book: A version of the Red Book approved for use by the Multilateral Development Banks. The Islamic Development Bank and the World Bank worked with FIDIC in developing this contract form.
  • Orange Book: Conditions of Contract for Design – Build and Turnkey (1st Edition 1995).
  • Gold Book: DBO Contract - Conditions of Contract for Design, Build and Operate Projects (1st Edition 2008)
  • Sub-consultancy Agreement (1st Edition 1992)
  • White Book: Client/Consultant Model Services Agreement (4th Edition 2006)
  • Blue – Green Book: Dredgers Contract (1st Edition 2006)
  • Conditions of Subcontract for Construction: for use with the Red Book and the Pink Book (Test Book was published in 2009, 1st edition 2011).

The most well known forms of FIDIC Contract are the Red Book, the Yellow Book and the Silver Book. i.e. Traditional, D&B, and EPC / turnkey conditions respectively. The structure and layout of each of these 1999 contracts are generally the same, which aids familiarity with the contract clauses across the various contracts.

The 1999 Red Book is, worldwide, the most commonly used standard form of contract for construction and engineering works where most (or all) of the works are to be designed by the Employer, although the earlier edition of the Red Book (the 4th Edition, 1984) is also still used in some jurisdictions.

As a general risk profile, FIDIC has historically allocated risk on the basis of which party is best placed to assume that risk. For example, with the Red Book and the Yellow Book, the employer takes on risks such as unforeseeable ground conditions, unforeseeable operations of the forces of nature, force majeure (such as acts of war, terrorism and natural disasters) planning and environmental permits, changes in the law. The party who has prepared the design takes on the responsibility for defects in that design. In contrast to this drafting approach, the 1999 Silver Book EPC form adopts a more market practice approach by placing the vast majority of risk on the contractor, to primarily include design and design co-ordination (including any Employer design). Parties contracting on FIDIC forms should take reputable legal advice, as there are many "traps for the unwary" that can arise from their use. A couple of examples are set out below.

Commencement date

One of the features of the 1999 edition of the Red Book is the reorganisation of the various terms of the contract into what is, undoubtedly, a much more "logical" format. Clause 8 now deals with all topics related to starting work, programming, delays and suspension during the course of the works.

Clause 8.1 says that, unless the particular conditions provide otherwise, the 'commencement date' is 42 days after the contractor receives the 'letter of acceptance'. The engineer gives the contractor at least 7 days notice of the commencement date. The Red Book therefore proceeds from the assumption that the project will be competitively tendered and that the employer will send a letter of acceptance in relation to the accepted tender. Whilst the contract contains a proforma letter of tender there is no such letter of acceptance. The contract assumes that this letter, signed by the employer, will be an unconditional acceptance of a tender. The contract assumes that contractual relations between the parties will have been created before the contract is actually signed, by this letter of acceptance.

In practice, many contracts are negotiated with no tendering at all or else there are significant negotiations post tender. The contract can easily be amended but it is suggested that it would be far simpler if FIDIC followed the model of other standard form construction contracts and introduced the commencement date as an agreed date to be inserted into the contract particulars.

Notices – Condition Precedent

The most controversial innovation of the FIDIC 1999 Red Book is the claim notice requirement under Clause 20.1 which is a condition precedent to any claim for extension of time or additional cost. The references to this Clause 20.1 elsewhere in the contract make it plain that if the contractor does not comply with Clause 20.1 he forfeits any entitlement to an extension of time or cost no matter what the other circumstances may be!

Accordingly, it is clear that contractors must be alert to and giving notices under Clause 20.1 as soon as possible and throughout the contract. The only area in which the contractor is given any leeway is in circumstances where it was reasonable to conclude that he could not have been aware of the event or circumstance giving rise to the entitlement to extra time and/or cost.

The above highlights just two potential traps which need to be considered. Consequently, professional advice should always be sought in relation to using any of the FIDIC forms of contract. The Middle East Real Estate & Construction team within Charles Russell has significant experience of advising on all forms of FIDIC contracts across a range of projects in Bahrain and the wider GCC region.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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