Let’s look now at some of the main features of the 2017 contracts which distinguish them from the 1999 editions.

Aims

The first thing to say is that many of the new features of the 2017 updates were driven by the need to increase clarity and certainty. Contractor, Employer and Engineer/Employer should know more clearly what was expected of them and when it was expected. Another important aim was to improve project management and reflect international best practice. The Contracts have therefore become more detailed and prescriptive.

New Definitions

Users will find several new definitions, which are now in alphabetical order (clause1.1). ‘Claim’, ‘Dispute’, ‘Notice’ and ‘Programme’ , for example, are now defined terms; ‘may’, ‘shall’ and ‘consent’ are also defined, with the particular aim of assisting users whose first language is not English.

Other important definitions include ‘Particular Conditions’, which is now defined as comprising Part A – Contract Data, and Part B – Special Provisions. ‘Plus reasonable profit’, as used in 1999 Contracts, often caused difficulty. A new definition, ‘Cost Plus Profit’, now applies, and refers to a percentage for Contractor’s profit to be stated in the Contract Data or, if none is stated, 5%.

Notices

One very important procedural change concerns Notices in the 2017 Contracts. ‘Notices’ are now defined, in a new clause 1.3. They must be in writing and identify themselves as a Notice, among other requirements. Notices are particularly important in the 2017 Contracts as

(a) they are required in many more situations than previously and

(b) when given, they trigger time limits.

For example, under new clause 3.5 (Yellow and Red)/3.4 (Silver), if an instruction is a variation the Engineer (Yellow/Red) or Employer (‘ER’) (Silver) should state explicitly that it is a variation. If it is not so stated, but the Contractor thinks that the instruction is a variation, then he must immediately give a Notice to that effect with reasons. If the Engineer/ER does not respond within 7 days, by giving another Notice (confirming, reversing or varying the instruction), he is deemed to have revoked the instruction.

Role of the Engineer

The Engineer/Employer’s Representative’s role in agreeing or determining any claim or other matter arising under the Contract is also set out in more detail than in the 1999 Books, and in a step-by-step fashion with time limits. Clause 3.7 of the Yellow and Red Books 2017, for example, requires the Engineer first to consult the parties to try to reach agreement; if no agreement is reached within 42 days, or the parties give ‘early Notice’ of no agreement, then the Engineer must give a Notice accordingly and within 42 days (or other agreed time limit) must make his determination. If the Engineer is late then, in the case of a claim, the Engineer is deemed to have rejected the claim and, for any other matter, a dispute is deemed to have arisen which may be referred to the renamed Dispute Avoidance/Adjudication Board (DAAB) for its decision. Similar provisions apply in clause 3.5 of the 2017 Silver Book.

Managing the project better and avoiding disputes

New procedures designed to promote best practice and improve project management include requiring the Contractor to prepare and implement a Quality Management System to show compliance with the Contract requirements (clause 4.9.1) and a Compliance Verification System to show that the design, materials, workmanship and certain other matters all comply (clause 4.9.2).There is in general much greater emphasis on dispute avoidance, including an enhanced role for the DAAB in this respect, and promoting co-operation between the parties during the project.

Next time we will look at some of the key new contract clauses in more detail.

By our Fidic accredited course leader William Godwin QC- a highly experienced specialist practising barrister (Queen's Counsel) and arbitrator and legal member of the FIDIC Updates Task Group


The 2017 Red, Yellow and Silver Books are 1.5 times the length of the 1999 editions; they seem much more complex and prescriptive. Why is this?

Before we can understand the new contracts, we have to see how they compare with the 'old' 1999, editions.


So let's look at the main features of the 1999 Books :







Construction contract (Red Book)

Employer Design

Under the Red Book, the Employer is responsible for all or most of the design of the Works.

Measurement

The Contractor’s entitlement is to be paid according to the amount of work he executes in accordance with the Contract, applying the contract rates.

Engineer

There is an important role for the Engineer, to administer the contract and determine claims.

‘Even-handed’ risk allocation

The Contract strives to apportion risk according to each party’s ability to manage and control risk (for example, of unforeseeable physical events which delay the Works or result in additional cost).


Plant and Design Build contract (Yellow Book)

Contractor design

Like the Red Book, theContractor is responsible for all or most of the design of the Works.

Fixed price lump sum

Contractor is entitled to be paid the lump sum price stated in the Contract, subject to adjustments for such things as variations.

Engineer

Like the Red Book, there is an important role for the Engineer, to administer the contract and determine claims.

‘Even-handed’ risk allocation

Also like the Red Book, the Contract strives to apportion risk according to each party’s ability to manage and control risk.


EPC/turnkey contract (Silver Book)

Contractor design

Also like the Yellow Book, thContractor is entitled to be paid the lump sum price stated in the Contract, subject to adjustments. (The matters for which the Contractor may be entitled to such an adjustment are however fewer than in the Yellow Book.) ok.)

Fixed price lump sum

Also like the Yellow Book, the Contractor is entitled to be paid the lump sum price stated in the Contract, subject to adjustments. (The matters for which the Contractor may be entitled to such an adjustment are however fewer than in the Yellow Book.)

No Engineer

Unlike the Yellow Book, there is no Engineer in the Silver Book; the Employer is entitled to administer the Contract directly.

Contractor risk

Also unlike the Yellow Book, the Contractor bears nearly all the risk associated with design, procurement and construction. The Silver Book is used in projects in which the sponsors are particularly anxious to ensure completion on time and within budget. The scope for Contractor’s claims is severely reduced, by comparison with the Yellow Book.


Next time, we will start to look at how the new Contracts compare and contrast with the 1999 editions.


Come to one of our seminars on just this topic, and participate in more depth with case studies and plenty of opportunity for clarification and discussion. See our website for details of courses in London (including two nights’ accommodation!) and Dubai.

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