William Godwin QC
How the 2017 FIDIC contracts compare with the 1999 editions
Let’s look now at some of the main features of the 2017 contracts which distinguish them from the 1999 editions.
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.
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%.
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.