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CONTRACTS: ADVANCED QUESTIONS CONSTRUCTION, PLANT, EPCT 1999 CONTRACTS QUESTION/ANSWER

Contracts: advanced questions Construction, Plant, EPCT 1999 Contracts


Question/Answer
Deducting delay damages
Question
How does the Employer deduct liquidated damages for delay as there appears to be an anomaly between the
Sub-clauses 8.6, 13.3(f) and 13.13. The Sub-clause 8.6 states that the Employer may deduct the amount of
such damages from any monies due, or to become due to the Contractor; but under Sub-clause 13.3 (f) the
Contractor's statement excludes deductions under Sub-clause 8.6- liquidated damages; and the Sub-clause
13.13 final payment certificate also excludes the deduction under Sub-clause 8.6. Can the Employer make
deductions for the liquidated damages from the amount certified by the Employer's Representative in the
interim payment certificate, or should the Employer's Representative already make the deductions for the
liquidated damages in the interim payment certificate?

Answer
The Sub-Clause references are not correct to the Plant and Design-Build Contract. If the same question is
applied to the P&DB then the answer is below. FIDIC very much hopes that you are not quoting from
ammended General Conditions. If you are, they have been ammended illegally to the best of FIDIC's
knowledge, since no licence has been grated by FIDIC to ammend. In order to deduct delay damages the
Employer must submit a Claim in accordance with Sub-Clause 2.5. As required by 2.5, the Engineer will then
make a determination under Sub-Clause 3.5. If the Engineer determines that the Employer is entitled to deduct
an amount as delay damages then it can be deducted from Payment Certificates in accordance with the final
paragraph of 2.5.

Adjustment Formula
Question
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I want to know how to use the following formula? 70.3) Adjustment Formula: The amount to be added to or
deducted from the Interim Payment Certificates in respect of changes in cost and legislation shall be
determined from the following formula: Pn = a + b.Ln / Lo + c.Fn / Fo + d.Cn / Co + e.Sn / So + f.En / Eo + g.Mn
/ Mo Where: Pn is the adjustment factor to be applied to the estimated value of the work carried out in month n,
determined in accordance with Paragraphs (d), (e) and (f) of Sub-Clause 60.1; a is a fixed coefficient, specified
in Appendix C to the Tender, representing the nonadjustable portion in contractual payments; b, c, d, e, f and g
are coefficients representing the estimated proportion of each cost element (labour, fuel, cement, reinforcing
steel, contractor's equipment and plant, and miscellaneous materials) in the Works, net of Provisional Sums, as
specified in the Appendix C to the Tender;

Answer
We are puzzled! FIDIC can only comment on the General Conditions, written by FIDIC. You refers to Clause
70.3) Adjustment Formula; Sub-Clause 60.1 (d), (e) and (f) and Appendix C to the Tender. These are not
FIDIC Clauses so FIDIC cannot comment. This looks very much like the case of FIDIC Feneral Conditions being
ammended. We have no record of an ammendment being licenced by FIDIC since we have on record copies of
ammended General Conditions prepared under licence. We may have misunderstood the situation but it looks
very much like you are dealing with conditions that have infringed copyright. This is a serious offense.

Adjustment of a coefficient
Question
Background: Sub-Clause 13.8 isnot changed in Particular Conditions. The coefficients "b" "c" and "d" defined in
paragraph 3 of Sub-Clause 13.8 [Adjustments for Changes in Cost], rendered unreasonable, unbalanced or
inapplicable,as a result of Variations. Illustration is made as under: A Coeficients provided in the Table of
Adjustment Data with a= 0.35; b + c + d = 0.65; Total = 1.00. After completion of the Contract: a= 0.35; b + c +
d = 0.75; Total = 1.10. Clarification requested: Whether the coefficient "a" fixed coefficient can be adjusted to
the lower value persuant to the last paragraph of Sub-Clause 13.8? In the above example, whether the
coefficent "a" can be adjusted from 0.35 to 0.25, so that the total shall be 1.00?

Answer
The coefficient "a" is stated in Sub-Clause 13.8 to be a fixed coefficient, representing the non-adjustable
portion in contractual payments. If you refer to the FIDIC Contracts Guide, at the third paragraph on page 231,
it is clear that "a" has been decided by the Employer and is not affected by the breakdown of the Contractor's
Costs. The other coefficients may be determined by each tenderer to suit their anticipated breakdown of Costs.
If Variations change the balance between labour, equipment, etc. in the total Costs then the coefficients "b",
"c", etc. may be changed in accordance with the final paragraph of Sub-Clause 13.8, but they should still total
(1-a).

Differences between FIDIC 4th Edition 1987 and Construction 1st Edition 1999
Question
Could you please tell me the difference between FIDIC IV and FIDIC 1999. I understand that the FIDIC
1987/1992 pertains to FIDIC IV and FIDIC 1999 is a altogether new book..is it true.

Answer
The Fourth Edition of the FIDIC Conditions of Contract for Works of Civil Engineering Construction, known as
the "Red Book", has been updated and replaced with a new standard form. The title of the new 1999 First
Edition construction book - which is red in color - is "Conditions of Contract for Construction for Building and
Engineering Works Designed by the Employer" ("New Red Book"). I consider whether the impartiality of the
Engineer has been enhanced or diminished in the New Red Book as compared to the Red Book. An overall
review of the New Red Book indicates that the contractual impartiality of the Engineer has been diminished
compared to the position in the Red Book. Examples of specific provisions which support this view are set out
below: (a) The New Red Book introduces an express statement regarding the relationship between the
Employer and the Engineer. Sub-Clause 3.1 of the New Red Book provides: "Except as otherwise slated in
these Conditions: (a) whenever carrying out duties or exercising authority, specified in or implied by the
Contract, the Engineer shall be deemed to act for the Employer... " (b) The express duty of the Engineer to
exercise his discretion impartially has been completely removed in the New Red Book. It has been replaced by
an express duty to make a fair determination. However, the contractual duty to make a fair determination only
applies where the Engineer is required to follow the procedure set out in Sub-Clause 3.5. (c) Under the New
Red Book, the Employer may replace the Engineer - this right does not exist under the Red Book. (d) Under the
New Red Book, the general indemnity given by the Contractor is extended to cover the "Employer's Personnel".
The definition of Employer's Personnel includes the Engineer and his assistants. (e) Under the New Red Book,
the Contractor may terminate the Contract if the Engineer fails to issue tile relevant Payment Certificate within

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the required time. The rationale for this inclusion may be based oil the statement in paragraph (a) above, that
is, that the Engineer is deemed to act for the Employer. However, there are instances in the New Red Book
where tile impartiality of the Engineer has been enhanced. For example, under the Red Book all disputes
between the Employer and the Contractor, including any dispute as to any opinion, instruction, determination,
certificate or valuation of the Engineer are referred to the Engineer. Note, however, in response to the
mounting criticism of the role of the Engineer as an adjudicator or quasi-arbitrator, the November 1996
Supplement to the Fourth Edition of the Red Book provided alternative wording to the disputes clause. The
alternative wording provides for disputes to be resolved by an adjudication board. The New Red Book supports
the alternative position and provides that all such disputes are to be referred to a Dispute Adjudication Board
and not the Engineer. This section considers the role of the Engineer under the main provisions of the Red
Book and the New Red Book. A detailed analysis of the above examples and other provisions regarding the
role of the Engineer is set out below. Clause 2 of the Red Book and Clause 3 of the New Red Book detail the
general provisions regarding the appointment and authority of the Engineer. For ease of reference, the
Attachment to this memo sets out the provisions in a table format to highlight the differences between the Red
Book and the New Red Book. The main differences between these provisions are highlighted below: (a)
Appointment of Engineer (i) Under the Red Book, "Engineer" means the person appointed by the Employer to
act as Engineer for the purposes of the Contract and named as such in Part II of these Conditions. (ii) The
definition in the New Red Book goes further because it states "or other person appointed, from tune to tune by
the Employer and notified to the Contractor under Sub-Clause 3.4." (iii) Sub-Clause 3.4 of the New Red Book
provides a mechanism for the Employer to replace the Engineer. There is no such mechanism in the Red Book.
(iv) Replacement of the Engineer requires notice of the intention to replace to be given by the Employer to the
Contractor. 1-lowever, the Employer shall not replace the Engineer with a person against whom the Contractor
raises objection by notice to the Employer, with supporting reasons. (b) Engineer's Representative (i) Under
the Red Book, "Engineer's Representative" means a person appointed from time to time by the Engineer under
Sub-Clause 2.2 (ii) Sub-Clause 2.2 provides that the Engineer's Representative shall be appointed by and be
responsible to the Engineer and shall carry out such duties and exercise such authority as may be delegated to
him by the Engineer under Sub-Clause 2.3. (iii) Under the New Red Book, an Engineer's Representative is not
appointed and the term is not used. (c) Delegation (i) Under Sub-Clause 2.3 of the Reef Book, tile Engineer
may delegate to the Engineer's Representative any of the duties arid authorities vested in the Engineer and he
may at any time revoke such delegation. Any communication given by die Engineer's Representative to the
Contractor in accordance with such delegation shall have the same effect as though it had been given by the
Engineer. (ii) Under Sub-Clause 3.2 of the New Red Book, the Engineer may from time to time assign duties
and delegate authority to assistants, and may also revoke such assignment or delegation. However. unlike the
Red Book there is a restriction that, unless otherwise agreed by both parties, the Engineer shall not delegate
the authority to determine matters in accordance with Sub-Clause 3.5 (Determinations). Any approval, consent,
instruction, notices etc, in accordance with the delegation, shall have the same effect as though it had been an
act of the Engineer. (d) Appointment of assistants (i) Under Sub-Clause 2.4 of the Red Book, the Engineer or
the Engineer's Representative may appoint any number of persons to assist the Engineer's Representative in
the carrying out of his duties. However, such assistants shall have no authority to issue any instructions to the
Contractor save in so far as such instruction may be necessary to enable them to carry out their duties and to
secure their acceptance of materials. (ii) There is no corresponding clause in the New Red Book. The term
assistants has a different meaning in the New Red Book - it relates to where the Engineer delegates authority.
(e) Instructions (i) The provisions dealing with the giving of written and oral instructions are similar in both the
Red Book and the New Red Book. However, the New Red Book expressly provides that the Contractor shall
only take instructions from the Engineer or from an assistant to whom the appropriate authority has been
delegated. (f) Engineer to Act Impartially/Determinations (i) This is an area where there is a significant
difference between the position adopted in die New Red Book compared to the Red Book. (ii) Sub-Clause 2.6
of the Red Book provides: "Wherever, under the Contract, the Engineer is required to exercise his discretion
by: (a) giving his decision, opinion or consent, (b) expressing his satisfaction or approval, (c) determining
value, or (d) otherwise taking action which may affect the rights and obligations of the Employer or Contractor,
he shall exercise such discretion impartially within the terms of the Contract and having regard to all the
circumstances." (iii) Sub-Clause 2.6 is important because it provides a general overriding contractual duty for
the Engineer to act impartially. However, this express requirement has been entirely omitted in the New Red
Book. (iv) Rather, Sub-Clause 3.5 of the New Red Book provides: "Whenever these Conditions provide that the
Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer
shall consult with each Party in an endeavour to reach agreement. If agreement is 7701 achieved, the Engineer
shall make a fair determination in accordance with the Contract, taking due regard of all relevant
circumstances. (v) The effect of the above clause, is that the Engineer is only under a contractual duty to act
fairly in circumstances where he is required by a particular clause to comply with Sub-Clause 3.5 (unless
otherwise specified). (vi) For example, the granting of an extension of time requires the Engineer to follow the
process set out in Sub-Clause 3.5, However, upon termination of the contract by reason of Force Majeure, the
Engineer is not expressly required to comply with Sub-Clause 3.5 when determining the value of work done. (a)
Extensions of Time (i) Under the Red Book, the Contractor is entitled to an extension of time for "any delay,
impediment or prevention by the Employer" (Sub-Clause 44.1). The implication is that there is no express
reference to a right to claim for an extension of time where the Engineer either delays or prevents the
Contractor. (ii) Under Sub-Clause 8.4(e) of the New Red Book, the Contractor is entitled to an extension of time
for "any delay, impediment or prevention caused by or attributable to the Employer, the Employer's Personnel
or the Employer's other contractors on Site. " (iii) Clause 8.4(e) refers to "Employer's Personnel". This term is
defined as follows: "Employer's Personnel means the Engineer, the assistants referred to in Sub-Clause 3.2

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[Delegation by the Engineer] and all other staff, labour and other employees of the Engineer and of the
.Employer: and any other personnel notified to the Contractor, by the Employer or the Engineer, as Employer's
Personnel." (iv) On this basis, the New Red Book expressly entitles the Contractor to claim for an extension of
time for any delay or prevention by the Engineer or his assistants. (v) An extension of time claim under the Red
Book is determined by the Engineer after due consultation with the Employer and the Contractor. (vi) An
extension of tithe claim under the New Red Book is determined in accordance with Sub-Clause 3.5 - that is, the
Engineer shall consult with each Party in an endeavor to reach agreement but if agreement is not achieved, the
Engineer shall snake a fair determination in accordance with the Contract, taking due regard of all relevant
circumstances. (b) Suspension (i) Under Sub-Clause 16.1 of the New Red Book, the Contractor may, by notice
in writing to the Employer, suspend work if the Engineer fails to certify in accordance with Sub-Clause 14.6
(Issue of Interim Payment Certificates). (ii) There is no equivalent right of suspension in the Red Book. (iii)
Under the Red Book, in the event of suspension by the Contractor, the Engineer determines the cost and time
implications after due consultation with the Contractor and the Employer. (iv) Under the New Red Book, the
Engineer is required to follow the procedure in set out in Sub-Clause 3.5. (c) Default by Employer (i) Under the
Sub-Clause 16.2(b) of the New Red Book, the Contractor has a right to terminate if the Engineer fails, within 56
days after receiving a Statement and supporting documents, to issue the relevant Payment Certificate. This is a
useful provision for contractors. (ii) There is no equivalent right of termination in the Red Book. (d) Default by
Contractor (i) Sub-Clause 63.1 of the Red Book provides that the Employer cats only terminate, in certain
circumstances, where the Engineer has certified that, in his opinion, the Contractor has failed to do something
eg failed to commence work. (ii) This requirement has been deleted in the New Red Book, which is to the
advantage of contractors. (e) Indemnity provided by Contractor (i) Under Sub-Clause 22.1 of the Red Book, the
Contractor provides a general indemnity to the Employer for the death of or injury to any person and for the
loss of or damage to any property arising out of the execution of the Works. This indemnity does not extend to
the Engineer. (ii) However, under the New Red Book the general indemnity is extended to include "Employer's
Personnel" and the definition of Employer's Personnel includes the Engineer and his assistants. (f) Indemnity
provided by the Employer (i) Under Sub-Clause 22.3 of the Red Book, the Employer gives a general indemnity
to the Contractor in respect of certain events including circumstances where there is "death of or it jury to
persons or loss of or damage to property, resulting from any act or neglect of the Employer, his agents or
servants or other contractors..." (ii) Note, there is no express reference to any acts or neglect of the Engineer.
(iii) However, Sub-Clause 1.1 of the New Red Book removes any doubt that the indemnity is intended to extend
to cover acts or neglect of the Engineer by indemnifying the Contractor for loss of or damage "which is
attributable to any negligence, willful act or breach of the Contract-act by the Employer, Employer's Personnel,
or any of their respective agents." (iv) As noted above, Employer's Personnel includes the Engineer. (g)
Assignment of benefit (i) Under Sub-Clause 4.5 of the New Red Book, if a subcontractor's obligations extend
beyond the expiry of the relevant Defects Nomination Period and the Engineer, prior to this date, instructs the
Contractor to assign the benefit of such obligations to the Employer, then the Contractor shall do so. (ii) Under
the Red Book, the Contractor must assign such obligations in those circumstances at the request of the
Employer and not the Engineer. The above analysis highlights some significant changes in the New Red Book
compared to the Red Book regarding the role of the Engineer and his relationship with the Contractor and
Employer. Overall, these changes have reduced the contractual impartiality of the Engineer. However,
obviously the parties may through the use of Particular Conditions amend the General Conditions.

Employer's Entitlement to Termination


Question
The FIDIC 1999 suite contains the abovementioned clause Employer's Entitlement to Termination. In terms of
this clause, if the Employer terminates for its convenience then the Employer must pay the Contractor in
accordance with the "Optional Termination, Payment and Release" clause. In terms of the latter clause the
Employer must pay, inter alia: "any other Cost or liability which in the circumstances was reasonably incurred by
the Contractor in the expectation of completing the Works". The FIDIC Contracts Guide states that this clause
"provides a method for determining a reasonable payment in respect of work carried out for which a price is not
separately stated." A Contractor (whose mining contract has been terminated) under this Clause, priced the
equipment and labour to be used for the contract at a monthly rate. On account of the cancellation 6 months
prior to the contractual expiry date, he is now claiming the monthly rate for his equipment for the 6 months
period, stating that he is liable for bank repayments, interest, etc., and he is also claiming retrenchment costs
for his people. Clearly this clause did not intend for such a claim. Please could you offer any advice or
guidance which may be used to counter his claim. Also please advise whether you know of any English Law
precedent where this clause has been invoked and a similar claim made.

Answer
The answer depends on what it is written in the Contract documents, and we assume that it is a FIDIC
Construction Contract 1999 Edition. One argument which is based more on reasonability is: if the Contractor
finished the works within one month would he be entitled to recover the damages requested? The answer is no.
Contractor's offer: the offer has to be studied. Did he mention that he will have his own equipment or not? What
type of equipment? Contractual aspects: Sub-Clause 15.5 introduces the right of the Employer to terminate for
convenience. Sub-Clause 15.5 provides that the steps to be taken by the Contractor are the ones presented in
the Sub-clause 16.3 and the payment is to be made in accordance with Sub-clause 19.6 in which is mentioned:
"Upon such termination, the Engineer shall determine the value of the work done and issue a Payment

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Certificate which shall include: (a) the amounts payable for any work carried out for which a price is stated in
the Contract; (b) the Cost of Plant and Materials ordered for the Works which have been delivered to the
Contractor, or of which the Contractor is liable to accept delivery: this Plant and Materials shall become the
property of (and be at the risk of) the Employer when paid for by the Employer, and the Contractor shall place
the same at the Employer's disposal; (c) any other Cost or liability which in the circumstances was reasonably
incurred by the Contractor in the expectation of completing the Works; (d) the Cost of removal of Temporary
Works and Contractor's Equipment from the Site and the return of these items to the Contractor's works in his
country (or to any other destination at no greater cost); and (e) the Cost of repatriation of the Contractor's staff
and labour employed wholly in connection with the Works at the date of termination." It is clear that the
Contractor will receive the cost or liability incurred until the termination and not the cost or liability which will be
incurred. It is to be mentioned that he will receive only cost without profit. You may argue that the Contractor is
claiming indirect loss or damage and in accordance with the provisions of the Sub-clause 17.6 the Employer is
not liable for this. The provisions of Sub-clause 17.6 mention: "Neither Party shall be liable to the other Party
for loss of use of any Works, loss of profit, loss of any contract or for any indirect or consequential loss or
damage which may be suffered by the other Party in connection with the Contract, other than under SubClause 16.4 [Payment on Termination] and Sub-Clause 17.1 [Indemnities].." Regarding the provisions of
English law precedent, this will be addressed separately.

Free-issue materials
Question
We have signed contract with client for complete delivery, erection and commissioning of IT/AV system for one
hotel. After six month of contract signed, the client changed his hotel operator who reject our offered material
and asked for different suppliers and got a quotation from those new suppliers direct to the owner. Do we have
the right under FIDIC to have our tag on top of those prices if we decide to go ahead and does he has the right
to do so?

Answer
Depends on what is written in the Contract, but for the FIDIC Construction Contracts, 1999 edition, Sub-clause
4.20 deal with these aspects. Normally, the Employer can supply, free of charge, "free-issue materials" (if any)
in accordance with the details stated in the Specification. The Employer shall, at his risk and cost, provide
these materials at the time and place specified in the Contract. The Contractor shall then visually inspect them,
and shall promptly give notice to the Engineer of any shortage, defect or default in these materials. Unless
otherwise agreed by both Parties, the Employer shall immediately rectify the notified shortage, defect or
default. After this visual inspection, the free-issue materials shall come under the care, custody and control of
the Contractor. The Contractor's obligations of inspection, care, custody and control shall not relieve the
Employer of liability for any shortage, defect or default not apparent from a visual inspection. The Contractor
may ask for at least a portion of his tag to be on top (like site overheads and profit).

Definition of unforseeable
Question
Reference is made to the definition of unforseeable (Sub-clause 1.1.6.8), how can a time limit or date be
specified for an event or circumstance that is unforeseeable? Surely what is unforeseeable before submission
of the Tender remains so after it, especially when referred to sub-clause 4.12. It would surely be appropriate to
eliminate the seemingly superfluous last part of the sentence, namely ..by the date...?

Answer
We refer to the question "How can a time limit or date be specified for an event or circumstance that is
Unforeseeable? Surely what is unforeseeable before submission of the Tender remains so after it, especially
when referred to sub-clause 4.12." If additional data (on sub-surface or hydrological conditions at the Site)
becomes available on or after the Tender submission date, it might well be possible thereafter to foresee
(based upon such additional data) something which was unforeseeable before the Tender submission date
(based upon the data available at the Base Date). Therefore, it is essential to define the time at which the
question of foreseeability is to be judged.

Role of the Engineer


Question
Please let me know the FIDIC regulations about the role of the Engineer, namely, the terms involving the
Designing Engineer of a dam project during the construction period, where the supervision of Construction has
been assigned to a different Consulting Engineer. Please note that the International Commission of Large
Dams guidlines were significantly involved during construction to ensure that the design intent was met.

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Answer
The FIDIC contracts usually involve "the Engineer", who has a defined role to play during construction - and we
assume this is the "different Consulting Engineer" referred to. The "Designing Engineer" could be an engineer
engaged by the Employer just to design the Works (with the other Engineer taking over to supervise the Works
during construction) - or he could be an engineer engaged by the Contractor if it is a design-build or turnkey
type project. In the first case, presumably he would be engaged under the FIDIC White Book (or something
similar) and his terms of reference under that should define his role (if any) during the construction period. In
the second case (if he is engaged by the Contractor), he will presumably be considered to be a part of the
Contractor's organisation carrying, in effect, the Contractor's responsibilities in the Contract for design.

Definition of Cost Reimbursable


Question
I am the legal adviser to an oil company. This company has contracted, using FIDIC Conditions of Contract,
with a construction company to perform certain construction works during a refinery shutdown period. A portion
of the contract is "cost reimbursable" and I am seeking some definition of this phrase as the costs which are to
be reimbursed have caused the contract price to increase by 100% due to lack of management by the
contractor. Is there an element of "reasonableness" in a cost reimbursable contract or is the contractor entitled
to every penny spent by him?

Answer
We refer to your fax to FIDIC, describing how a portion of the contract is "cost reimbursable" and that you are
seeking some definition of this phrase. We regret to advise you that FIDIC is unable to give advice on specific
contracts, although it is prepared to give some elaboration of its publications. It seems to us that your enquiry
solely relates to provisions drafted for the particular contract, and not to provisions published by FIDIC. You
pose the question "Is there an element of 'reasonableness' in a cost reimbursable We would have thought that
such a question cannot be answered in isolation, but must depend upon the detailed provisions of the contract,
the law governing it, the reasons for any alleged overspend, and (possibly) other matters.

Extension of Time
Question
Please assist us in understanding the Extension of Time (EOT): a) Is it necessary for the Engineer to determine
the EOT prior to the date of completion; b) If the EOT is not granted within the currency of the contract does it
render the time at large and enforcement of liquidated damages as redundant; c) What will be relevance and
validity of EOT if the Engineer does not assign any reason for the grant of EOT. What happens to prolongation
costs.

Answer
Regarding your recent enquiry regarding Extension of Time and asked me to send you a short reply. Normally,
an event causing a delay will occur before the contractual Time for Completion and the Contractor must make
his claim within a given time of the event occurring (Red Book Clause 44.2, Yellow Book Clause 26.1). The
Engineer must then respond with a given time (or a reasonable time) - he cannot wait until completion to see if
the Contract actually needs the time extension. If the event occurs after the contractual time for completion and
the Contractor is running late, he may still be entitled to an extension if the circumstances have caused him
even more delay (and it was not his fault). If the Engineer does not grant a time extension (or reply to the
Contractor's claim) within the currency of the Contract, it would depend very much on the circumstances, and I
would suggest that he cannot call liquidated damages until he has replied to the Contractor's claim and
definitely rejected it. Normally the Engineer will only grant an extension of time if the Contractor applies for one
so I cannot see an Engineer granting an extension "for no reason" - normally it would be in response to the
Contractor's claim. The question of costs will depend on the circumstances. If the Contractor can prove he has
suffered extra cost, then maybe he is entitled to reimbursement - but it is not an automatic right and will depend
on the circumstances. As you will see, any matters concerning extensions of time depend very much on the
circumstances at the time and it is very difficult to give general answers. The intention of the FIDIC Conditions
is that the matter shall be dealt with as quickly as possible so that the Contractor knows if he will get an
extension and so that he can then plan the rest of his works accordingly. If the Contractor is of the opinion that
the Engineer is unreasonably delaying the matter, he should read Clause 5.1 (both books) and see if this can
help.

Time limit for delay damages


Question
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I need to raise a question which I would kindly ask for a reply. In a FIDIC contract project, the project was
delayed in completion by 6 months. No extention of time was granted. Neither the consultant nor the client has
written to the contractor to justify the reasons for delay, not even a letter to apply the liquidated damages
clause. The preliminary handover certificate was issued. My question is: can the client apply the penalty on the
contractor now? Or any time? The final payment certificate is not yet issued and approved, also some variation
orders are not yet finalised.

Answer
Sub-clause 8.7 of the General Conditions of Contract gives the possibility for the Employer to apply delay
damages in the limit stated in the Appendix to Tender. The Employer must follow the procedure stated in the
Sub-clause 2.5 for claiming from the Contractor the delay damages. If you look at Sub-clause 2.5, there are no
time constraints related to the point in time when the Employer can claim the delay damages, so the Employer
can claim at any time.

Applicability of changed rates


Question
We are a user of FIDIC contract document on an ADB assisted project. We have encountered a problem of
interpretation of one of the clauses and would like to have your esteemed and learned opinion on that. In
Clause 12.3 of Conditions, the tender prices are subject to change provided that variation is more than 25% in
an item of work and further provided that the change exceeds 1% of the Initial Contract price. Now the quantity
of a particular item in this case is more than say 50% of the initial quantity for the same item. And it is also more
than 1% of the initial contract price. The changed rate would be applicable to all quantities over the contract
quantities, or would it be applied to the quantity over contract quantity plus the above mentioned limit of 25%?

Answer
Sub-clause 12.3 says 12.3 - Evaluation: Except as otherwise stated in the Contract, the Engineer shall proceed
in accordance with Sub-Clause 3.5 [Determinations] to agree or determine the Contract Price by evaluating
each item of work, applying the measurement agreed or determined in accordance with the above Sub-Clauses
12.1 and 12.2 and the appropriate rate or price for the item. For each item of work, the appropriate rate or
price for the item shall be the rate or price specified for such item in the Contract or, if there is no such item,
specified for similar work. However, a new rate or price shall be appropriate for an item of work if: (a)(i) the
measured quantity of the item is changed by more than 10% from the quantity of this item in the Bill of
Quantities or other Schedule, (ii) this change in quantity, multiplied by such specified rate for this item exceeds
0.01% of the Accepted Contract Amount, (iii) this change in quantity directly Changes the Cost per unit quantity
of this item by more than 1%, and (iv) this item is not specified in the Contract as a "fixed rate item"; or (b)(i) the
work is instructed under Clause 13 [Variations and Adjustments], (ii) no rate or price is specified in the Contract
for this item, and (iii) no specified rate or price is appropriate because the item of work is not of similar
character, or is not executed under similar conditions, as any item in the Contract. Each new rate or price shall
be derived from any relevant rates or prices in the Contract, with reasonable adjustments to take account of
the matters described in sub-paragraph (a) and/or (b), as applicable. If no rates or prices are relevant for the
derivation of a new rate or price, it shall be derived from the reasonable Cost of executing the work, together
with reasonable profit, taking account of any other relevant matters. Until such time as an appropriate rate or
price is agreed or determined, the Engineer shall determine a provisional rate or price for the purposes of
Interim Payment Certificates. So it is clearly specified that a new rate or price shall be appropriate for an item
if...... Therefore, the new rate is applicable for the entire quantity.

Priority of documents
Question
As per Sub-Clause 1.5 of FIDIC, "the tender" is placed at position (c). "the tender" takes priority over "the
specifications" and "the drawings". In very many contracting organisations the priced bill of quantities is placed
as the last priority. We feel that prced bill of quantities (BOQ) is part of the tender submitted by the contractor
and as such the priced bill of quantities should take priority over "the specifications" and "the drawings". Please
advise on this intrepretaton and clarify this issue/matter.

Answer
The FIDIC 1999 edition of the Construction Contract in Sub-Clause 1.5 says 1.5 - Priority of Documents: The
documents forming the Contract are to be taken as mutually explanatory of one another. For the purposes of
interpretation, the priority of the documents shall be in accordance with the following sequence: (a) the
Contract Agreement (if any), (b) the Letter of Acceptance, (c) the Letter of Tender, (d) the Particular
Conditions, (e) these General Conditions, (f) the Specification, (g) the Drawings, and (h) the Schedules and
any other documents forming part of the Contract. The Bill of Quantities is at point h) as a priority. The

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confusion consists in the definition of the Bill of Quantities. We can say that the Bill of Quantities is a bidding
document prepared by the Employer, and as such it is an itemised list of articles required to construct,
maintain, or repair a specific structure. The Contractor is responsible for putting the unit rates when calculating
his offer. He cannot be responsible for potential errors in the quantities but he is responsible for pricing the
items. Of the three FIDIC Forms, only the FIDIC Red Book refers to a Bill of Quantities, although even then this
is not the only method envisaged for establishing interim payments due. The FIDIC Red Book has moved away
from the over-dependence on the Bill of Quantities of other standard forms, and allows the Contractor's buildup of his tendered price to be in the form of an appropriate Schedule, but still requires a method of
measurement to be stated, and still allows additional payment for differences in quantities which are not
minimal. The Bill of Quantities where it is used, is the basis for valuation of variations. Sub-Clause 1.1.1.1 of the
Red Book defines the Contract in terms of documents which include the "Schedules". Sub-Clause 1.1.1.7
defines Schedules to mean those documents which are titled "schedules" and completed by the Contractor and
submitted with the Letter of Tender and states that it may include the Bill of Quantities. Sub-Clause 1.1.1.10
defines Bill of Quantities to be the documents so named (if any) which are comprised in the Schedules. The
FIDIC Red Book does not therefore require a Bill of Quantities for pricing, but allows instead a schedule of
rates and/or prices. Sub-Clause 1.5 provides that the documents forming the Contract are to be taken as
mutually explanatory of one another. For the purposes of interpretation the priority of documents is given, in
which the Schedules have the lowest priority. Sub-Clause 14.1 further defines the status of the Bill of Quantities
in defining the work. Sub-Clause 14.1 (c) provides that any quantities which may be set out in the Bill of
Quantities are estimated quantities and are not to be taken as the actual and correct quantities of the Works
which the Contractor is required to execute. The Method of Measurement is dealt by Sub-Clause 12.2(b) which
provides that except as otherwise stated in the Contract and notwithstanding local practice, the method of
measurement shall be in accordance with the Bill of Quantities or other applicable Schedules. It is necessary
therefore for the Bill of Quantities (if any) to state, usually in the Preamble to the Bill, the method applicable.
Sub-Clause 12.3 deals with the effect of differences between the quantities in the original tendered Bill and the
as-built quantities. The modern trend is to avoid claims for items which have little consequences and this is
reflected in Sub-Clause 12.3(a) which requires four criteria to be satisfied if a new rate is to apply to an item of
work: a) the measured quantity of the item differs by more than 10%; b) the change in quantity multiplied by the
original rate exceeds 0.01% of the Accepted Contract Amount; c) the change in quantity directly changes the
Cost per unit quantity of the item by more than 1%; and d) the item is not specified in the Contract as a "fixed
rate item". The new rate is then derived in the same way as new rates for variations. Sub-Clause 14.1(a)
requires the Contractor to submit to the Engineer, within 28 days after the Commencement Date, a proposed
breakdown of each lump-sum price in the Schedules. The Engineer can take this into account when preparing
Payment Certificates, but is not bound by it. This is a useful provision since the Schedules (including the Bill of
Quantities) are used as a Schedule of Rates for rating variations. The provision is particularly useful in relation
to Preliminary Items. Sub-Clause 14.4 anticipates that Interim Payments may not be on the basis of
measurement of the Works. If the Contract includes a schedule of payments specifying the installments, then
payments are made against the schedule adjusted for progress. Otherwise the Contractor's Statement under
Sub-Clause 14.3(a) is simply stated as the estimated contract value of the Works executed. There is no
reference to the Bill of Quantities but Sub-Clause 12.1 requires the work to be measured and valued for
payment and 12.2 require the method of measurement to be in accordance with the Bill of Quantities. As a
conclusion the quantities (BOQ) is at point h) as a priority and represent just quantities, but the pricing of the
items is part of the Contractor's offer, see also Sub-Clauses 4.10 and 4.11.

Delay damages if the Employer experiences no damage


Question
A recent FIDIC seminar presented a FIDIC contract as a basis of contract as fair for both parties. A delay
occurred in our current case, the consequences resulting from Sub-Clause 8.7, Delay Damages, can be
assumed to be known. In this context we have the following question: has the Contractor to pay for delay
damages also in a case where no damage occurred for the Employer? In our case, we built a new landfill in
eastern Europe and fell behind schedule. But - even after completion of the works - there was no damage for
the Employer because: a) he still has no operating company; b) he could not enforce the communities to
increase the fee for domestic waste which was a pre-condition for the (much longer) transport to and the
storage of the waste in the new landfill. Therefore, up now, he stores the waste in unauthorised places nearby
cities. Are there any court decisions, which would suit for our situation?

Answer
Sub-Clause 8.7 of the 1999 editions of the FIDIC major works contracts provides for delay damages for the
Contractor's failure to comply with Sub-Clause 8.2 which requires the Contractor to complete the whole of the
Works and each Section within the Time for Completion for the Works or Section. There does not appear to be
provision for stating delay damages for each Section. The rate of delay damages is stated in the Appendix
(1999 Red and Yellow Books) or the Particular Conditions (199 Silver Book) as a rate per day of delay and
there is provision for stating a maximum amount of delay damages. The Appendix (Red and Yellow) requires a
percentage of the Accepted Contract Amount to be stated for both the delay damages and the limit. SubClause 14.15(b) (Red and Yellow) provides that the payment of damages are to be made in the currencies and
proportions stated in the Appendix to Tender, which states that the proportions are those in which the Contract

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Price is payable. Clause 8.2 Red, Yellow and Silver expressly states that the delay damages are the only
damages due from the Contractor for default under Sub-Clause 8.2 except in the event of termination under
Sub-Clause 15.2. The mechanism of liquidated damages is built into the form and the Appendix or Particular
Conditions are therefore required to be completed and must not be left blank. The Employer's right in relation
to delay damages is subject to Sub-Clause 2.5 (Red and Yellow) which specifies the notice of claim required to
be provided by the Employer. The Delay Damage is a fine or a penalty which is applicable to the Contractor in
the case he has not finished a project on time. Is like driving a car: if you exceed the speed limit you pay a fine,
even if the state or government experienced no damage.

Contractor increasing overhead and profit


Question
To which extent can the Contractor increase his overhead and profit, bearing in mind the following: a) the
overhead and profit are clearly specified under the conditions of particular application as 25%; b) the project's
contract completion date is 31 August 2009 and was extended to 21 November 2009. The project is managed
under the provisions of FIDIC 1999 Red Book.

Answer
The Contractor can increase the overhead if he can prove that owing to the extension of time for completion, or
other circumstances which were not in the original scope of the Contract (such as additional works) he incurred
additional costs for the site office overhead.

Delay for payment of interim payments


Question
For the Construction Contract, within what period of time must the Employer pay the interim payments? In other
words: "the number of days after the contractor submitted his interim payment". Should he fail to pay within this
time perid what action can the Contractor take or what are the Sontractor's rights then.

Answer
In accordance with Sub-Clause 14.7 the Employer shall pay to the Contractor the amount certified in each
Interim Payment Certificate within 56 days after the Engineer receives the Statement and supporting
documents. In the case that the Employer does not pay on time the Contractor is entitled to receive financing
charges compounded monthly on the amount unpaid during the period of delay This period shall be deemed to
commence on the date for payment specified in Sub-Clause 14.7 (Payment), irrespective (in the case of its
sub-paragraph (b)) of the date on which any Interim Payment Certificate is issued. Unless otherwise stated in
the Particular Conditions, these financing charges shall be calculated at the annual rate of three percentage
points above the discount rate of the central bank in the country of the currency of payment, and shall be paid
in such currency. The Contractor shall be entitled to this payment without formal notice or certification, and
without prejudice to any other right or remedy (Sub-Clause 14.8). In addition, the Contractor is entitled to
suspend the works, see Sub-Clause 16.1, and even more to terminate the Contract, see Sub-Clause 16.2

Employer's right to vary


Question
We are a legal consultant representing our Client, a construction company (as the Contractor), who has a
contract with a gas company ("Employer"). Our client's contract with the Employer is based on FIDIC's
Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Works and For Building and
Engineering Works Designed by the Contractor of 1999 ("Main Contract"). We are writing this email in relation
to our Client's concern over a dispute with regard to the interpretation of one of the Articles in the Contract.
During the course of the work, the Employer has executed its right under Sub-Clause 1.1.6.9 to delete one item
from the scope of work under the Main Contract, which at the time was already subcontracted by our Client to
one of its subcontractors. As a result of this deletion, the subcontractor was notified and requested not to carry
out any work in relation to the deleted scope of work. However the subcontractor objects to the deletion by the
Employer and claims that the Employer has no right to do so under Clause 13 Variations and Adjustments,
more specifically Clause 13.1 Right to Vary in the Main Contract. Article 13.1 stated that: "A variation shall not
comprise the omission of any work which is to be carried out by others." Our client has a different opinion on its
subcontractor's interpretation as mentioned above and understand that the subcontractor is obliged to follow
the Employer's Variations. Upon your confirmation for opinion, we will provide you with more detail of the case.

Answer
This is a typical event which happens very often. It is difficult to answer the inquiry because the contract is

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"based on FIDIC contract" and is not a FIDIC contract if the General Conditions have been (illegally) adjusted.
Moreover, to understand Sub-Clause 13.1, one needs to know the agreed General Conditions and the
Particular Conditions. Under Sub-Clause 13.1 (Right to Vary) in the 1999 Yellow Book, it is clearly stated in the
first para, second sentence, that a Variation shall not comprise the omission of any work which is to be carried
out by others. This means that any Variation should not involve the omission of any work that is to be carried
out for the Employer by others. In contrast, the Engineer can omit works which are no longer needed under the
Contract and are not to be carried out by others. The wording 'any work' is not a defined term - so it means any
duty to be performed under the Contract. The wording 'other' is not a defined term - so it means any third
person = the Employer himself, designer, Contractor, subcontractors or nominated subcontractors under the
1999 Yellow Book. But under the 1999 Yellow Book the liability of the Contractor is "Fitness for Purpose" for
which the Works are intended as defined in the Contract, so he has to design, execute and complete the Works
and shall remedy any defects in the Works; and the Contract Price shall be the lump sum Accepted Contract
Amount and be subject to adjustments in accordance with the Contract (e.g., Variations). Therefore the lump
sum Accepted Contract Amount imputed for all these duties due to the very wide scope of responsibility
assumed by the Contractor under the Contract to achieve that the Works, when completed, shall be fit for the
purposes for which the Works are intended as defined in the Contract. If the Engineer requests or instructs an
omission of any work to be performed and carried out by others (e.g., to be executed by another contractor of
the Employer), and these works were originally needed for the Works to be executed by the Contractor under
the Contract and being part of the lump sum, the Engineer has amended the Contract, but he has no authority
to do so, see Sub-Clause 3.1 (Engineer's Duties and Authority) second para. He has also interfered with the
entire calculation of the Contractor, and the possible liability of the Contractor. If he omitted works from the
scope and purpose of the Works under the Contract and employed another contractor on behalf of the
Employer to carry out this work, he is in breach of the Contract. The Engineer can omit works which are no
longer needed, and usually he wants to reduce the lump sum of/for this works, but then the Contractor may be
entitled for compensation, akin to the 1999 Red Book, Sub-Clause 12.4 (Omissions), and has to follow the
procedure according to the 1999 Yellow Book Sub-Clause 13.3 (Variation Procedure), especially 13.3 (c), e.g.,
costs resulting from the omission are similar to potential expenditure reasonably incurred, overhead and similar
charges. If the Contractor decided to use a Subcontractor for specific works under his responsibility, e.g.,
where the Contractor has no in-house resources, he can do so taking due regard of the procedure listed in
Sub-Clause 4.4 ( and 4.5 ). But in accordance with Sub-Clause 4.4 (b) (Subcontractors), unless otherwise
stated in the Particular Conditions, the Contractor shall obtain "the prior consent of the Engineer to other
proposed Subcontractors". But all this (Contractor's own resources or using a Subcontractor's resources )
does not affect the correct interpretation of of Sub-Clause 13.1 first para, second sentence.

Interim Payment Certificate refused


Question
We are a government agency executing a major project of constructing a Dry Dock under FIDIC form, Yellow
Book( Plant & Design Build). During scrutiny of Interim Payment Certificate we have come across a stalemate
on the interpretation of Sub-Clause 14.6. The point of contention is on the para 2 of above clause which reads:
"However, prior to issuing Taking Over Certificate for the works, the Engineer shall not be bound to issue an
interim payment certificate in an amount which would (after retention and other deductions) be less than the
minimum amount of IPC stated in the Appendix to Tender. In this event, the Engineer shall give notice to the
Contractor accordingly." In our Contract, as part of Appendix to Tender, the following was specified for SubClause 14.6: "Minimum amount of Interim Payment Certificate: 1% of Accepted Contract Amount".
The Contractor has submitted request for second interim payment for the work don. (the first one being the
release of the Advance Payment). The net amount is less than the 1% of the Accepted Contract Amount.
Accordingly, the Engineer has returned the interim payment application.
Contractor's point of view: since Sub-Vlause 14.6 of FIDIC refers to the last IPC, prior to issuing the Taking
Over Certificate, this condition is not applicable now. Accordingly, payment should be released. Due to this, the
firm is unable to refund the Advance taken and delay of repayment is leading to increase in the amount of
interest. If Sub-Clause 14.6 is read in conjuction with Sub-Clause 14.10 then the minimum amount of 1% of
accepted contract amount is only applicable to the IPC prior to the final Taking Over Certificate.
Employer's view: The 14.6 sub-clause should be read in conjunction with Sub-Clause 14.10 which deals with
issue of IPC and the condition made in Appendix to Tender (mentioned at para. 1 above). The payment cannot
be made if any of the IPC submitted during the course of contract execution has a net amount less than 1% of
Accepted Contract Amount. Moreover, as per Sub-Clause 1.5 of FIDIC, priority of documents, the minimum
amount of IPC mentioned as 1% of CA amount.
We would be extremely grateful if you could send a clarification on the above issue to overcome the impasse.

Answer
The question relates to Sub-clause 14.6 of the 1999 Yellow Book, specifically paragraph 2 of this sub-clause,
which reads "However, prior to issuing the Taking-Over Certificate for the Works, the Engineer shall not be

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bound to issue an Interim Payment Certificate in an amount which would (after retention and other deductions)
be less than the minimum amount of Interim Payment Certificates (if any) stated in the Appendix to Tender. In
this event, the Engineer shall give notice to the Contractor accordingly."
Under this paragraph, as long as the Taking-Over Certificate has not been issued, the Engineer may decline to
issue an Interim Payment Certificate in an amount which would be less than a "minimum amount of Interim
Payment Certificates" stated in the Appendix to Tender.
However, it is stated in the FIDIC Contracts Guide for the 1999 suite that "the Engineer should not regard his
duty as being to endeavor to minimize certification, and therefore declining to certify whenever he is entitled to
do so. Withholding of certification may be of benefit to neither Party."

Claims owing to a change in regulation or legislation


Question
I am using FIDIC 1987 Red Book Contract. Please guide me whether as per FIDIC 1987 Red Book, I claim an
Extension of Time with Time and Cost for "Changes in Regulation". Clause 70.2 (Subsequent Legislation),
refers to additional cost only. How can I claim "Time" because of the continued delay by the authorities in
finalising the new regulations.

Answer
Clause 44 provides the mechanism for extension of time to be granted. If the Contractor is fairly entitled to an
extension, the Engineer must grant one, having first consulted with the parties. The qualifying grounds are as
follows: a) extra work; b) other grounds "referred to in these Conditions"; c) exceptionally bad weather; d)
Employers' delays, e) special circumstances. The Contractor is to give notice of the delay within four weeks and
is to submit detailed particulars four weeks later. If the delaying event is continuous, provision is made for
interim and final particulars and the determination of interim and, after consultation, final extensions. The final
extension may not reduce the interim extensions granted. It is suggested to use the provisions of Sub-Clause
44.1 paragraph d and to claim an extension of time owing to the Employer's delays.

Increased scope of work under a variation order


Question
Please direct me to articles which discuss the effect of increaseing the contract value "substantially" due to
variations ....... what is the effect on unit rates go up? My concern is that the scope of work on present
contracts has been increased significantly under a Variation Order (double...not different scope, just increased
quantity). Am using FIDIC 1999 on some contracts, and older 1987 (1992 updates) version on others. Do all
initial tender rates have to be renegotiated and would the unit rates go up or down? (reduced price due to bulk
ordering, or increased rates to cover additional overhead/increased material costs.) Are the revised rates then
applied for VO work only, or both VO and BOQ work? Time extensions have been granted...contract period
now double ... and payment made for "general and preliminary items", at the monthly BOQ rate. I appreciate
your direction on where I can information to these two questions.

Answer
This is a complex question! The requirements are different in the 1987 and 1999 Contracts, so it is not possible
to give a simple general reply to your question. For the 1987 Contract you have referred to Sub-Clause 52.3.
This gives a procedure to be usedif the total of varied work and remeasurement of estimated quantities gives
anincrease of more than 15% in the totalfigures as described. The Engineer then agrees or determines a lump
sum addition or deduction to the Contract Price"having regard to the Contractor's Site and general overhead
costs of the Contract". This is explained in more detail in the FIDIC publication "Guide to the use of FIDIC
Conditions of Contract for Works of Civil Engineering Construction Fourth Edition", at page 117. The 1999
Contract refers, at Sub-Clause 12.3, to adjustments to individual rates to give a new rate. This only applies to
individual rateswhen the criteria have been s subparagraph (a) for measured quantitiesor (b) for Variations.
The procedure is described in the next paragraph andfurther explanation is given in "The FIDIC Contracts
Guide" to the 1999 Contracts, at pages 209 for measured quantitiesand 210 for Variations.

Bonus payments for early or accelerated completion


Question
My organisation would like to include a provision in the IFB to allow for bonus payments for accelerated
completion. FIDIC Construction 1st Edition 1999 Clause 8.7 deals with Delay Damages, but not with bonus
payments for early or accelerated completion. However, the index of sub-clauses in the FIDIC Constriction

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Contract mentions a sample sub-clause for 8.7 that is related to faster completion.How should we address this
in the COPAs?

Answer
This is a rare example where it is better to refer to 1987! The wording of a Sub-Clause in the Particular
Conditions will depend on the exact provision which the Employer wishes to include. You could consult the
Guidance for the Preparation of the Particular Conditions for the 1999 Construction Contract, but this only
gives example wording for bonus payments on the completion of Sections. You might also want to consider the
example wording in the Guidance for the Preparation of Particular Conditions for the 1987 Fourth Edition Red
Book. Changing the Clause references to suit the 1999 Contract this would become: If the Contractor achieves
completion of the Works in accordance with Sub-Clause 8.2 prior to the time prescribed in the Appendix to
Tender, the Employer shall pay to the Contractor, subject to Sub-Clause 20.1 [Contractor's Claims], the sum
stated in the Appendix to Tender for every day which shall elapse between the date stated in the Taking-Over
Certificate in respect of the Works issued in accordance with Sub-Clause 10.1 [Taking Over of the Works and
Sections] and the time prescribed in the Appendix to Tender. You would need to change this wording to suit
your particular requirements. A figure for the bonus payment per day would need to be stated in the Appendix
to Tender.

Insuring the Works


Question
I need your advice on how to understand the first sentence of Clause 18.2 of the 1999 FIDIC Construction
Contract: "The insuring party shall insure the works, plant, materials and contractor's documents for not less
than the full reinstatement cost including the costs of demolition, removal of debris and professional fees and
profit." Let us deal with "the works". The insurance sum for CAR is based on the estimated contract value which
is also mentioned in the standard Munich Re conditions (insurance standard contract). Saying this, it means
that in case of total damage on the day before delivery to employer we will experience that costs to demolition
will not be compensated as it would in theory exceed the compensation made from the insurer (=estimated
contract value which is a so called first-risk basis insurance). Usually the CAR would hold cover for a limited
debris removal (which could be in excess of the insured project value). Professional fees should already be
included in the estimated contract value and as such I see no problem as well with profit. In practise it would be
possible to increase the estimated contract value with a "safety" sum. Furthermore you will always see some
kind of sublimits (limitations of coverage) on the CAR. It is not possible to take out full insurance cover for all
risks as fx. natural catastrophes, tunnels, trench. Finally all policies will hold a deductible which is basically also
against the rule of this specific FIDIC clause as Pihl would have to insure to full reinstatement cost. So all in all,
as I understand FIDIC I must take out CAR with full reinstatement value but due to the insurance market it is not
possible because of the sublimits. I kindly ask you to comment on this issue. If I am correct in my
understandings of the difficulties to obey the FIDIC then I would like for your assistance. As you know the
employer does not like that the contractor has limitations/reservations in a tender situation and we might be
disqualified due to such reservations. It seems that other contractors are not aware of the above issue and may
present their tender without any limitation/reservation on insurance. Is it possible for FIDIC to issue a formal
document showing/supporting us in this issue.

Answer
This is a good point. The FIDIC 2007 DBO Contract has changed the wording, in Sub-Clause 19.2 (a), to be
the replacement value plus 15%. However, that is not really relevant to his problem. One can say the following:
The insurance provisions in the 1999 contracts have been used successfully on a large number of projects.
We have noted the points which you make but we cannot comment on how these matters should be dealt with
in a Tender, or how they have been dealt with in Contractor's Tenders on particular projects. We suggest that
you should discuss this with an insurance expert or an insurance company who have previously provided this
insurance under a FIDIC Contract. The commentary on this clause in The FIDIC Contracts Guide suggests that
contractors may wish to consult insurance experts. Alternatively, you could raise a query with the Employer
during the tender period. Moreover, to fully answer the questions one would need to devote twenty or thirty
hours and write a voluminous essay on the subject see for example, N. Bunni, "Risk and Insurance in
Construction, 2nd Edition". Its details are set out below. The book should be consulted if further elaboration is
needed or necessary. The question deals with "the Works" and ask a number of questions relating to a case of
total damage on the day before delivery of the project to the Employer. 2.1. Sum Insured: The proper standard
CAR insurance policy would require that the sum insured is adjusted at the end of the project by the jointly
insured parties and hence the value of the project goes up with the value of certificates issued and would then
include for all additional sums, such as variations, escalation, etc. If that is not done, a claim by the Insureds
would be subject to the Average Clause. An additional premium would then be due at the end. 2.2. Removal of
Debris: This is a sum which should be fixed by the Engineer or the Employer's Representative at the Tender
stage, as it differs from one project to another and is calculated on the basis of what could go wrong as a
matter of probability and not possibility. The cost of removal of debris if the whole project collapses is a very
small fraction of the value of the project even if the whole project collapsed. 2.3. Limitation in the cover in terms
of deductible on excess: This is referred to under Clause 18.2(d) of the FIDIC 1999 Forms of Contract for major

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works and should be fixed by the Engineer or the Employer's Representative in the Appendix to Tender. Please
note that it would be a mistake to follow the words in brackets at the end of Clause 18.2(d), since Insurers will
always insist on applying such deductibles. 2.4. Limitation in the cover in terms of standard exclusions in the
CAR policy: It is accepted generally that the standard CAR cover is not really an All-Risks cover and that there
are certain exclusions that Insurers will insist on. Therefore, there are exclusions permitted under Clause
18.2(e) of the FIDIC 1999 Forms of Contract for major works. However, adjustments of these exclusions under
this Sub-Clause should be considered by the Engineer or the Employers Representative, depending on the
type of project and its detailed requirements, at the design stage and should be incorporated and implemented
in the Tender Documents. 2.5. Finally, it is incorrect to state that it is not possible to satisfy Clause 18 of the
FIDIC Contracts because a properly drafted and administered contract could do so It has to repeated that if a
full understanding of the subject of construction insurance is required, then it should be properly studied and
comprehended.

Preparation of drawings
Question
My query is related to the preparation of working/shop drawings. Do the FIDIC conditions of contract explicitly
define the preparation of working /shop drawings in the scope of the contractor? if yes, which clause is it? If no,
under which clause anengineer can issue instructions to the contractor to submit the working/shop drawings for
calculaton of quantities and regular site inspection?

Answer
You do not state which FIDIC Contract you are using. The answer to your question would be slightly different
for the 1999 Construction Contract (design by the Employer) and for the 1999 Design-Build Contract (design
by the Contractor). Under either Contract any working/shop drawings prepared by the Contractor would be
"Contractor's Documents" as defined at Sub-Clause 1.1.6.1. FIDIC Contracts do not refer specifically to the use
of Contractor's drawings for quantities and inspection but this could be covered at Sub-Clause 1.10,
Employer's Use of Contractor's Documents. Under the Construction Contract, Sub-Clause 4.1 gives the
requirements for Contractor's Documents for any part of the Permanent Works which are specified in the
Contract to be designed by the Contractor. If the Employer requires the Contractor to provide additional
drawings of any parts of the Works which are designed by the Employer then this should be specified in the
Contract in accordance with the first sentence of the second paragraph of Sub-Clause 4.1. Under the DesignBuild Contract the second paragraph of Sub-Clause 4.1 includes the same requirement as in the Construction
Contract. However, the provision of Contractor's Documents is covered in more detail at Sub-Clause 5.2. Any
instructions by the Engineer in connection with Contractor's Documents would be given under Sub-Clause 3.3
and might constitute a Variation under Clause 13.

Establishing overhead costs


Question
I would like to ask the following: (1) the design & build form of the contract is a lumpsum contract. is it suitable
for cost plus basis or needs changes or do you have a form that suits design & build as well as cost plus
contracts. (2) in the definition of persons of design & build contract, we found employer representative,
contractor, subcontractor etc., but "cost estimator" is not mentioned. What would be the basis for establishing
direct, indirect and overheads costs?

Answer
(1) The 1999 FIDIC Design-Build Contract is not suitable for use as a cost plus contract. The principle of this
contract is that the Contractor has submitted a lump sum tender based on the Employer's Requirements and
his preliminary design. If his detailed design requires increased quantities, or other design changes, then the
additional cost is borne by the Contractor. To combine Contractor's design with payment on a cost plus basis
would mean that the Contractor would be paid for any design changes between his tender design and final
design. In some countries this would conflict with the principles of competitive tendering. A Contractor could
increase the payment which he receives by increasing the quantities in his final design. The 1999 Construction
Contract is based on remeasurement and could be adapted to a cost plus basis, although this would mean
significant changes in the Particular Conditions. This Contract is based on Employer design, so the Contractor
cannot influence the design quantities. Please also refer to the Guidance for the Preparation of Particular
Conditions for the Construction Contract. The commentary on Sub-Clause 14.1 is at page 12. (2) The 1999
FIDIC Design-Build Contract includes an Engineer (Sub-Clause 1.1.2.4) who will administer the Contract. This
includes cost control. The Engineer can appoint assistants (Sub-Clauses 3.1 and 3.2), who could include
someone with experience as a cost estimator. Breakdowns of the Accepted Contract Amount to establish direct,
indirect and overhead costs would normally be initiated by the Engineer asking for proposals from the
Contractor. The Engineer would then consider the Contractor's submissions, based on his experience and
negotiate or determine the required breakdowns. Some Employers ask for a breakdown in the Particular

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Conditions or Employer's Requirements.

Delivery of a taking over certificate


Question
We do road building works financed by the EU in accordance with FIDIC. We turn to you again because of
disagreement between our customer and us. The reason of this disagreement is possibly an unsuccessful
translation of FIDIC into Latvian. Does security for performance of the Contract have to be valid untill delivery
of a taking over certificate, or it has to be valid after delivery of taking over certificate?

Answer
Please refer to Sub-Clause 11.9 of the 1999 Conditions of Contract for Construction. This states that the
Engineer shall issue the Performance Certificate within 28 days of the latest of the expiry dates of the Defects
Notification Periods or when the Contractor has completed the duties as listed. The final paragraph of SubClause 4.2 states that the Employer shall return the Performance Security to the Contractor within 21 days
after receiving a copy of the Performance Certificate. So the answer to your question is that the Performance
Security must be valid after the Taking-Over Certificate.

Failure to give notice of the Commencement Date


Question
I refer to Sub-Clause 8.1 (Commencement of Works) coupled with Clause 16.2 (Termination by Contractor)
hoping to know in case the Engineer has failed in giving the Contractor a notice of the Commencement Date
within the 42 days, whether such failure is regarded a substantial violation/ breach of Contract or not.

Answer
Whether the failure to issue notice of the Commencement Date within the 42 days period is a 'substantial'
breach of Contract will depend on the applicable law. We regret that FIDIC cannot comment on interpretation
under the applicable law. However, in our opinion whether a breach is 'substantial' may also depend on how
long the breach continues. For example, commencement on day 43 is very different to a much longer delay.

Defects Notification Period


Question
But we are very interested in the direct period of time "Defects Notification Period" (how long is it?). Our opinion
- the Defects Notification Period goes on from the moment of starting works and ends in the moment when
Taking Over Certificate is issued and signed. Do You agree with us? Unfortunately, the Employer's opinion is Defects Notification Period lasts from the moment the Engineer issues the Performance Certificate untill the end
of warranty period. Warranty period lasts two years from the day of signed Taking-Over Certificate. Does the
Defects Notification Period lasts as long as Warranty period?

Answer
Please refer to the definition of Defects Notification Period at Sub-Clause 1.1.3.7 and the requirements at
Clause 11. This confirms that the Defects Notification Period starts at the date when the Works or Section was
completed as certified in the Taking-Over Certificate, as Sub Clause 10.1. The standard length of this period,
as stated in the Appendix to Tender printed with the General Conditions, is 365 days. However this may be
changed by the Employer when preparing the tender documents. The Defects Notification Period is also shown
in the Flow Chart 'Typical Sequence of Events' which is printed in the Foreword at the start of the Conditions of
Contract. You will find further discussion on the Defects Notification Period in The FIDIC Contracts Guide, at
pages 195 to 204.

New rate or price


Question
The FIDIC Conditions of Contract stipulate under paragraph 12.3 the conditions under which a new rate or
price shall be appropriate for an item work. Discussing this paragraph with a colleague we wonder whether the
sub-clauses (a) (1) to (4) apply simultaneously, i.e., they all have to be true in order to justify a new rate: or
whether they apply individually, which means a new rate could be justified if only one of the sub-clauses is true.
My colleague also thinks that if variations lead to higher quantities, rates should go down vice versa. However,
we do not find any stipulation of that in the conditions of contract.

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Answer
Please note the word 'and' at the end of item (iii). This means that all the criteria (i) to (iv) must be met for a
new rate or price to be appropriate. For comparison you should note Sub-Clause 13.1, which has the word 'or'
after item (e), indicating that each criteria is considered separately. Whether the rate is increased or decreased
with depend on the circumstances. Criteria (iii) refers to a change in Cost per unit quantity. This change in Cost
may be upwards or downwards dependant on the effect the change in quantity has on the Contractor's Cost
per unit quantity.

Status of Yellow Book (Design-Build and Turnkey Contract)


Question
Now that Plant Contract has replaced the Yellow Book (the Plant and Design-Build Contract, 1987) we have the
following question: is the Yellow Book still published and updated or is it withdrawn.

Answer
As a matter of policy, FIDIC does not give any official interpretation in respect of any wording in the various
documents which it publishes, nor any ruling concerning the rights or wrongs of any actions taken by any
parties operating under the terms of a particular Contract. If there is any disagreement or potential dispute
between the parties which cannot be settled amicably between them, it will normally be a legal interpretation
based on the law of the Contract which will prevail.

When to use Plant Contract or Construction Contract


Question
Now that Plant Contract has replaced the Yellow Book (the Plant and Design-Build Contract, 1987) we have the
following question: is the Plant Contract fit for tendering the Electrical and Mechanical part of the work
separately from the Civil Engineering part.

Answer
The Yellow Book is designed for E&M work but can easily be adapted to include a small amount of civil work by
the same contractor (e.g., engineer-designed work) if required, in the Particular Conditions. You could use the
Red Book for the civil works if these are being let as a separate contract, but you should avoid using both
books under one contract with the same contractor. This can cause confusion and problems.

Differences between Plant Contract (1999) and Yellow Book (1995)


Question
Now that Plant Contract has replaced the Yellow Book (the Plant and Design-Build Contract, 1995) we have the
following question: we have spent great deal of time studying the Yellow Book and have experience in using it.
Are there some items that you are aware of that should be revised in accordance with the new Plant Contract.

Answer
The principal differences between the new Plant Contract (published 1999) and the Yellow Book concern the
handling and solving of dispute situations. The Yellow Book relies on the traditional Engineer's Decision whilst
the new Book is based on a Dispute Adjudication Board - which is totally independent of the Engineer and is
appointed jointly by the Employer and the Contractor to make pre-arbitral decisions in the event of a
disagreement between Employer and Contractor. The DAB decision is then binding on the parties unless and
until either party chooses to refer the matter to arbitration (the same as the Yellow Book). It is also made clear
that the Engineer is acting for and on behalf of the Employer, although he is still required to act in a fair and
proper manner. The new document is written for contractor-designed works (rather than specially E&M works)
and so may also be used for contractor designed building and civil works. The new document also includes a
"fitness for purpose" provision which puts a more stringent requirement on the contractor's design, and there
are also some small changes in the various procedures regarding claims. Apart from this, the principles in the
two documents are essentially the same, and either may be used for a typical hydropower project. The layout
of the documents is somewhat different, with the new document having only 20 clauses (but more sub-clauses)
and you would have to read and compare the two documents clause by clause to see all the differences.

Deductions: what are they?


Question
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Would you please advise on the S-Clause 14.2 (Advance Payment): sub-paragraph (a) reads as under:
"deductions shall commence in the Payment Certificate in which the total of all certified interim payments
(excluding the advance payment and deductions and repayments of retention) exceeds ................"
Does the word "deductions" mean: y
(i) all deductions under the Contract, or
(ii) deduction of retention money only, or
(iii) deduction of advance payment only?

Answer
In 14.2(a), the word "deductions" is subject to the subsequent phrase "of retention". (If "all deductions" had
been the intention, the word "deductions" would not have been preceded by the word "and".) Thus, this "total"
excludes the advance payments, excludes repayments of advance payments, excludes deductions of retention
money, and excludes repayments of retention money.

Cost adjustment and inflation


Question
Regarding Sub-Clause 13.7 (Adjustments for Changes in Legislation): is any rise in the cost of any material not
listed in "table of adjustment data" under Sub-Clause 13.8 (Adjustment for Changes in Cost) as a result of
Changes in Legislation, payable under Sub-Clause 13.7?

Answer
In 13.8, compensation for increased cost of unnamed materials (not named in the tables of adjustment data) is
intended to be covered by the adjustments calculated by reference to the indices which reflect the increased
cost of the materials that are named in the tables of adjustment data. This is the fundamental principle
underlying the use of escalation indices, namely that the formulae and tables of adjustment data are assumed
to compensate the contractor for the effect of inflation on all materials.
In 13.7, compensation for increased costs arises from changed legislation, typically taxation, and not from
inflation (market forces). Self-evidently, the contractor cannot be compensated twice, so he cannot be paid
under 13.7 for an increased tax which is included in the indices used in 13.8.
When preparing tender documents for use in a country where costs are largely controlled by legislation and not
by market forces, it may be necessary to consider the inter-relationship between 13.7 and 13.8. It may be
appropriate for 13.8 to be inapplicable and replaced by direct reimbursement of increased costs.
These comments on 13.7 & 13.8 are only general comments, because the operation of these sub-clauses will
depend upon other matters, including: for 13.7: the wording of the changed legislation, for 13.8: the entries in
the tables of adjustment data, and wording in the indices' source publications mentioned therein. FIDIC cannot
undertake to provide specific comments related to these matters.

Scope of indices in table of adjustment date


Question
For the Construction Contract (1999) Clause 13.8 (Adjustments for Changes in Cost), the "table of adjustment
data" in the Appendix to Bid (a) contains inputs say "b" and "c", to the Works, and (b) does not contain input
say "d (electricity)", to the Works. Changes in legislation increase the cost of input "d (electricity)". Clarification
is required as to (a) Whether the Contract Price shall be adjusted as a result of increase in the cost of input "d"
(on account of Changes in Legislation), under Sub-Clause 13.7 (Adjustments for Changes in Legislation) or,
(b) Whether the amounts payable to the Contractor shall not be adjusted as a result of increase in the cost of
input "d" (on account of Changes in Legislation), under Sub-Clause 13.8 (Adjustments for Changes in Cost), as
its second paragraph reads: " .......... To the extent that full compensation for any rise or fall in Costs is not
covered by the provisions of this or other Clauses, the Accepted Contract Amount shall be deemed to have
included amounts to cover the contingency of other rises and decreases in costs.

Answer
Responding to your query on Sub-Clauses 13.7 & 13.8 of the Conditions of Contract for Construction, the
purpose of 13.8 is to adjust the prices in proportion to the change in specific indices of cost. The purpose of
13.7 is to reimburse other increases in cost, namely increases which arise from legislative changes and which
are not reflected by the indices defined in the Tables of Adjustment Data. Inevitably, there will be many cases
where the costs of a resource (such as electricity) is increased as a result of legislation, and such resource is
not named as being the scope of any index in the Tables (i.e., there is no index for electricity). It is typically

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impossible to specify an index for every resource used by the Contractor. The question to be addressed is: is
there an index which covers the particular resource? For example, the Tables may include a "cost of living"
index, which typically would include the rates charged to consumers for consumption of electricity; so any
increase in the cost of electricity (by law or otherwise) would cause the index to increase and the Contractor
would be compensated thereby. Before the parties enter into the contract, they should review the scope of the
various indices included in the Tables and the potential legislative changes which may arise. In other words, the
answer to the question depends upon the matters which the statisticians take into account in determining the
index each month or so, and not simply upon the words used in the Clause and Tables of Adjustment Data.
Therefore, we cannot interpret the actual situation, and can only provide this general guidance.

Direct payment to Contractors


Question
From my observation of the Construction Contract it appears that there so no protection of sub-contractors
when it comes to payment by the main contractor (the main Contractor is not a nominated Contractor). We
have had situations where the Contractor was not paying his subcontractors even though he was receiving
payment from the Employer(the Client). Can the Client pay the sub contractor in this case? Or is the only
recourse for this subcontractor is to go through Court.

Answer
Regarding your question on the Conditions of Contract for Construction, they do not contain provisions
enabling the Employer to make direct payment to subcontractors, except those who have been nominated
under Clause 5. Sub-Clause 5.4 covers direct payment to a subcontractor who is a nominated Subcontractor,
as defined in Sub-Clause 5.1.
Other subcontractors cannot seek payment from the Employer under the main contract because they are not a
party thereunder. Their recourse would depend upon the terms of their respective subcontracts and upon the
applicable law. FIDIC cannot advise on these situations, and is only able to provide clarification of the terms of
the forms of contract which it publishes. Inevitably, their application depends upon the law by which a contract
or subcontract is governed.

Which contract
Question
When should I use the new Plant and Design-Build contract?

Answer
The Plant Contrcat is for design prepared by the Contractor, and it is up to the Contractor to see that the
Works shall be fit for the intended purposes (Clause 4.1). So it depends on how much 'design' the Employer
has done in the Technical Specification included in his Employer's Requirements. The Employer's
Requirements can be anything from mere 'performance specifications' to fairly detailed requirements and
specifications, but under the Plant Contract, the Contractor will take over responsibility (see Clause 5.1)for the
fitness for purpose, except for errors in Employer's Requirementments (as Clause 1.9). This means that
tenderers will probably add a premium in their tenders to cover this risk. Certainly the Employer's Requirements
can include a Bill of Quantities, which helps with comparing tenders. The immediate reaction - considering that
it is a sewerage network rehabilitation - would be to use the new Construction Contract, where the Contractor
would be following the Tech Spec (i.e most of the design) prepared by the Employer, and where the Engineer
would be instructing him as to how much or how little work should be done at the various work places. This
should result in a lower price - the Contractor not guessing too much - and the Engineer ordering what work
actually is most suitable at each work place.

Guidance
Question
Would you please advise on the Sub-Clause 11.3 of the Construction Contract, 1999, Extension of Defects
Notification Period. Is the following correct? A Defects Notification Period shall not extend by more than two
years from the date on which the Works or Section is completed as certified under Sub-Clause 10.1 (Taking
Over of the Works and Sections).

Answer
As you may have noted from the language used in the FIDIC Contracts Guide and elsewhere, FIDIC is not,
unfortunately, in a position to assist with the interpretation of the standard contracts or to provide guidance for

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their application to individual cases. We do take good note of the queries received and find that they provide
valuable inputs for the enhancement of future editions of the contracts. For this reason, we forward your query
to our contracts experts for their information. In some cases, they are willing to provide answers to some
Frequently Asked Questions of more general character. These are found under www.fidic.org/faq
(http://w w w .fidic.org/faq) , which we recommend you to consult.S hould these questions and answers not apply to
your case, youare kindly advised to seek external legal expertise for resolving the matter. We regret that we
have not been able to assist you more this time.

Conflict of interest of a supplier


Question
We have a group of companies called X Group. Under this group, there is a contracting company "X Yapi" and
a manufacturing company "X Sismat". These are two different companies having no links with each other, but
their shareholders are the same. Let's suppose that the contractor "X Yapi" is submitting a tender for a
wastewater treatment plant contract and using the prices of the Group's manufacturing company "X Sismat" for
the equipment of this plant.Moreover, let's suppose that this manufacturing company "X Sismat" is giving prices
to the other competitors also in the same tender.I s this a conflict of interest according to FIDIC guidelines? If
yes, from which source we can find the relevant information?

Answer
With reference to your question, FIDIC does not explicitly and directly address the question you ask in any of its
current documents or guidelines. Generally speaking, it would be acceptable for a firm to appear as subcontractor or equipment supplier in several bids submitted by other firms. It would then normally be required
that this supply be made at arm's length, on normal commercial conditions, and with similar prices and other
conditions offered to each of the main contractors/suppliers.
However, one must always refer to the specific procurement policies and rules which are applicable in the
individual case. FIDIC strongly recommend's you to request a clarification from the client (well before the
deadline for submission of tenders!) whether the approach you propose would be acceptable in your particular
case. The fact that there is common ownership between the two firms you mention could be seen as a sufficient
reason to conclude that the proposed supply to several tenderers, including the related contractor, would be
impossible to make at arm's length. It would then not be accepted.

Particular Conditions for UK Housing Grant Act


Question
I am hoping you may be able to help me with a query relating to amendments or updates to the FIDIC
documents. Does FIDIC have a Book within their suite of documents that contains recommended amendments
or updates to their Orange and other main contracts, to include such things as Housing Grants Act 1998?

Answer
You are asking for special conditions for a FIDIC contract that would be suitable for a project that would be
funded under the UK Housing Grants Act. It is doubtful that special conditions have been drafted for this
particular need. Maybe you should try asking the FIDIC Member Association in the UK. The website is
http://www.acenet.co.uk (http://w w w .acenet.co.uk/) .

EU use of FIDIC contracts


Question
I am from the Euro info centre in Glasgow. I received an enquiry from a company who is participating on a trade
mission to Poland. They specialise in the provision of contractual advice relative to the old version and the new
1999 version of the FIDIC Conditions of Contract for Construction. The company is not sure if the projects
which are undertaken in Poland and are not EU funded projects are governed by the FIDIC conditions of
contract. Could you please clarify this?

Answer
There are available in Poland, Polish translations of the FIDIC contracts and these are used in the country. It is
difficult to estimate to what extent since there are also national contracts published by the government. FIDIC
aims to have its standard forms adopted by government for public procurement, but this has not yet happened
in Poland. The Polish versions of FIDIC contracts are available from the Polish FIDIC Member Association at
http://sidir.w.interia.pl (http://sidir.w .interia.pl/)

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Insuring againast loss or damage


Question
In the sub-clause 18.1, Requirements for insurance, it is stated that: "EACH POLICY INSURING AGAINST LOSS
OR DAMAGE SHALL PROVIDE FOR PAYMENTS TO BE MADE IN THE CURRENCIES REQUIRED TO RECTIFY
SUCH LOSS OR DAMAGE." Would you please tell me what this means? I believe it means that the insurance
company shall, in the case that insured party incurs any damage or loss, pay the full amount without deducting
any percentage.

Answer
No, this is not correct. The sentence which you have quoted refers to the currency for payment (Euro or dollar
etc) and not to the amount. The policy must require the insurance company to pay in the same currency which
the insured party had to use to repair the damage or loss. The amount to be paid is dealt with at other parts of
Clause 18.

Transfer of liability
Question
Although the FIDIC Orange book limits the Contractor's liability to 100f (?) the contract price, it does not say
when this liability is transferred to the Owner. Is it at the provisional acceptance or at final acceptance or as per
the law of the contract?

Answer
I assume you are referring to the second paragraph of Sub-Clause 17.6 in the 1999 P&DB contract. The
Contractor's liability is not transferred but eventually expires. When this happens will depend on the applicable
law. The period and limitation on liability vary considerably in different jurisdictions.

Is a guarantee needed if the Owner is responsible customs clearance?


Question
I have a query regarding Sub-Clause 14.5 of the Conditions of Contract for EPC/Turnkey projects. I would be
grateful if you could give me the possibility to discuss the matter with you. In fact you have referred to a bank
guarantee in item(b) of the clause. I would like to know if you still maintain that the guarantee should be issued
if the Owner is responsible for customs clearance and importing of the plant and materials to the country, and
receives the shipping documents including the bill of aiding which is issued in his name by the Contractor for
this purpose.

Answer
There can be no general rule. This is a matter of judgement for the Employer concerning any risk of the Plant
and/or Materials not arriving safely at the Site. The risk will depend on all the particular circumstances.

Measured quantities under lump sum Construction Contract


Question
We are doing a construction project that has been designed by the Employer and we want to award it on a
lump sum basis to the Contactor. How do I modify related questions of Clause 12 which deal only with
measured quantities? This is not an EPC contract. When the old Red Book was modified i 1987 to account for
lump sum Contractors, the drafters apparently knew that this gap existed in the Red Book. I am surprised that
such a key aspect has been missed.

Answer
Please refer to the Guidance for the Preparation of Particular Conditions which is in the same publication as
the Construction Contract. The guidance on Clause 14 gives the information which you need.

Tenderer forgets to submit the Appendix to Tender


Question
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In FIDIC's Plant Book there is an Appendix to Tender (following the Letter of Tender) which is normally filled-in
by the Employer and then included in the Tender Documents. When the Tenderer submits his Tender he is
required to complete the Appendix to Tender and submit it along with the Letter of Tender. This Appendix to
Tender appears as Particular Conditions Part A: Contract Data in the newly released MDB Harmonized
Edition. The current Plant Contract is being used by some Employers with the MDB's Standard Bidding
(Tender) Documents. The question is if the Tenderer/Bidder forgets to submit the signed Appendix to Tender
along with the Letter of Tender, is it a ground for rejecting a Tenderer since a) the Appendix to Tender is
referred to in the many Sub-Clauses which require specific data in order for them to become effective; b) when
the Letter of Tender is accepted in the Letter of Acceptance, including the Appendix to Tender, it typically
creates a legally-binding Contract. What was the intent of the Appendix to Tender when the FIDIC document
was drafted? If a tenderer forgets to submit the Appendix to Tender with the Tender can he not be requested to
submit it later?

Answer
In the 1999 P&DB Contract, the Appendix to Tender contains information which is an essential part of the
Contract. The Tenderer is required to complete any information which has not been inserted by the Employer,
initial each page to signify his agreement, and return the document with his Letter of Tender. Whether the
omission of this document means that the Tender is rejected, or whether it could be submitted later, is a matter
for the tender procedure and the Employer. You are correct that the MDB Harmonised Contract for
Construction includes similar information as Part A of the Particular Conditions, with all the information provided
by the Employer.

Delayed damages
Question
Under a FIDIC plant and design build contract, is it possible to include a delayed damages clause for the
design component of the contract? Can it be considered as a section of the works with an associated time for
completion and thus can the delayed damages clause be applied? What about the requirement for taking-over.
Can the design be taken-over under Clause 10.2?

Answer
The design is not a part of the Works as defined in the FIDIC Contract. It would not therefore be possible to
designate design as a Section of the Works for the purpose of delay damages. Design can not be taken over
separately under clause 10.2. Any sanction for late completion of design would require a separate provision
and a new clause in the Particular Conditions. This would require very careful drafting including legal advice.

Revised BOQ Rates


Question
While going through the FIDIC Contracts Guide for the 1999 suite of FIDIC Works contracts I have a little doubt
in Sub-Clause 12.3. I shall be grateful if the concerned expert can advise on the following: It appears that the
intent is to compensate the Contractor for the change in quantities subject to exceeding the stipulated limits.
The issues are: (a) Whether the revised unit rate is to be worked out to be applicable for the total measured
quantity on completion of the work? or (b) Whether the revised rate is to be applied for the increased quantity
only? (c) Does the pro rata rate to be applied over and above the increased quantity beyond the permissible
percentage or over the BOQ quantity? A typical example may throw more light and provide clarity in interpreting
this Sub-clause.

Answer
The application of Sub-Clause 12.3 depends on the particular circumstances, so it is not possible to give a
typical example which would apply in all circumstances. However the following general answers may be helpful:
(a) The Contractor is entitled to be paid, in the next Interim Payment Certificate, a fair rate for the work which
he has carried out, as Sub-Clause 14.6. If the Engineer thinks that there will be a further increase in quantities
which may affect his final determination of the revised rate then he should determine a provisional rate in
accordance with the final paragraph of Sub-Clause 12.3. If necessary the Interim Payment Certificates can be
corrected later as Sub-Clause 14.6. (b) The revised rate would normally apply only to the additional quantity.
However this depends on the circumstances and the make up of the revised rate. The Engineer should take all
factors into account when determining a revised rate. (c) Generally over the BOQ quantity.

Public authority
Question
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In connection with Sub-Clause 8.5 of the General Conditions of the Conditions of Contract for EPC/Turnkey
Projects, 1999. To wit, I have some indistinctness pursuant to that what shall be deemed the procedures and a
public authority within the meaning of the Sub-Clause 8.5, and what is a difference between the Sub-Clause 8.5
and Sub-Clause 13.7. I would be grateful if you could give an interpretation of said Sub-Clauses.

Answer
The definition of "Laws" at Sub-Clause 1.1.6.5 should help. The Contractor, in his Tender, allowed for the Laws
which were applicable at the Base Date, as defined at Sub-Clause 1.1.3.1. If he suffers because of a change in
these Laws then he may be entitled to compensation under Sub-Clause 13.7. Sub-Clause 8.5 concerns the
application of the procedures in the particular project. It requires that the Contractor has followed the
requirements of the Laws, including any requirements for the submission of Contractors Documents. However,
if he has then suffered an unforesseable delay due to some action, or lack of action, by a public authority, the
Contractor may be entitle to an extension of the Time for Completion under Sub-Clauses 8.5 and 8.4 (b). Any
more detailed comments would need to relate to the particular Country, Laws and Contract and cannot be
given by FIDIC.

Appointing a DAB
Question
I refer to Clause 20.2 of the Conditions of Contract for Construction. I agree that disputes should be
adjudicated by a DAB and that the Parties should jointly appoint a DAB by the date stated in the Appendix to
Tender. The Appendix to Tender and the Clause 20.2 give the impression that a DAB must be appointed. If my
interpretation is correct then I consider that the Employer and the Contractor should have a choice whether
they jointly wish to appoint a DAB or not. The appointment of a DAB involves costs and some Contractors and
Employers wish to avoid these costs. In my opinion, the wording in the Conditions of Contract should be slightly
modified so that the Parties can consider appointing a DAB after the Contract is let, if they so wish and when
they so wish.

Answer
The FIDIC Construction Contract allows for either an in situ or full-term DAB appointed on signature of the
contract, or an ad hoc DAB appointed if the need arises.

Contractors' reminders
Question
EPC/Turnkey 1999 clause 3.5 Determination: could you please have an expert to answer my following
question: what is the remedy that the Contractor has, should the Employer fail to give a determination within a
reasonable time and continues to ignore Contractor's reminders?

Answer
Your question refers to Clause 3.5 in EPCT, but the same situation arises for the Engineer in CONS and P&DB.
It is not possible to give a fixed time period because Clause 3.5 is a two-part procedure. First, a period for the
consultation, the length of which will depend on the circumstances, and then the determination. However, the
Employer is subject to the general requirement of Clause 1.3 that his determination must not be unreasonably
withheld or delayed. The next step will depend on the particular circumstances but the situation may create a
dispute, which would be referred to the DAB under Clause 20.4.

Contractor rights
Question
Section 8.11 of the General Conditions of the EPCT Contract states that the Contractor may treat an Employer
suspension of work on a project as an omission under Clause 13. When I review Clause 13 I do not see any
contactor rights relating to an omission in respect of the works. In fact, the only reference that I can find to
omission is in the first paragraph. Am I missing something?

Answer
You refer to EPCT Sub-Clause 8.11 which enables the Contractor to give notice to treat a prolonged
suspension as an omission under Clause 13. That is, the instruction to suspend progress of part or all of the
Works, under Sub-Clause 8.8, becomes an instruction to omit that work. The instruction under Sub-Clause 8.8
is then dealt with as an instruction for a Variation, in accordance with the procedures at Clause 13.

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Commencement Date
Question
We are a contracting company based in Egypt and we were awarded a project recently which is governed by
the FIDIC Construction Contarct. According to Clause 8.1 "Commencement Date" the commencement date is
stated to be within 7 days from the Letter of Acceptance and what actually happened was that the Client sent
us the Acceptance Letter and he stated that the Commencement Date is the same date of the Letter of
Acceptance. The Engineer's decision was made that the Client has this right as it is written to be within 7 days,
i.e., he can exercise this right at any time within the 7 days. Our question is :"Do we have the right to refuse
and we require the Commencement Date to be 7 days after the date of the Letter of Acceptance?"

Answer
The wording at Sub-Clause 8.1 of the 1999 FIDIC General Conditions is "The Engineer shall give the
Contractor not less than 7 days' notice of the Commencement Date." This means that the Engineer must issue
his notice at least 7 days before the Commencement Date. However, from the wording of your question it looks
as though the FIDIC wording has been changed in your Particular Conditions. We cannot comment on
Particular Conditions which were not written by FIDIC, so you should consult an independent expert.

Novation
Question
Is there a fidic standard form of contract for a design and build project (the construction of a large leisure
facility), procured by a UK company for construction in continental Europe by a German or Dutch contractor? if
so, would it allow for the employer's consultant designer to be novated to the contractor? is there any
supplement that would need to be used for such an arrangement?

Answer
The FIDIC Contract for design-build is the Conditions of Contract for Plant and Design-Build, First Edition 1999.
This is used when the Contractor designs and executes the Works, in accordance with the Employer's
requirements. There is no FIDIC Supplement for the Employer's consultant designer to be novated to the
Contractor. The contractual arrangements would depend on the relevant provisions in the applicable law, and
would vary for the different legal systems in different countries. You would need specialist legal advice.

New rate (Sub-clause 12.3 Evaluation)


Question
In the case of Sub-clause 12.3 [Evaluation] of General Conditions, with no change in the Particular Conditions,
whether new rate shall be appropriate for an item of work: (a) for the measured quantity, or (b) for the quantity
changed by more than 10% from the quantity of this item in the Bill of Quantities? I feel that a new rate shall be
applicable for the measured quantity.

Answer
The new rate must be appropriate for the quantity for which it is to be applied. Normally the new rate is
calculated to apply to the total final measured quantity. However, some Engineers insist that it should only be
used for the quantity which is additional to the BOQ quantity. If this is the case then the calculation of the new
rate as Sub-Clause 12.3 will be based on different figures.

Manufacturer's warranty
Question
A few days ago I have purchased the Construction Contract 1st Edition 1999 from you with the intention to use
it for my project. One issue that I could not find in the conditions is a tool that would allow me after the defects
notification period to get the contractor to repair oreplace any part of works, which is defective and that is still
under warranty or quality guarantee. That is actually what I am looking for. Did I miss it or should the defects
notification period be that long? I was used to defects liability period and beyond that I had contractor's or
manufacturer's warranty. Would please advice me on this issue?

Answer
The matter of manufacturers' warranties is sometimes raised in Central Europe. Their warranties seem to be
required by law to be longer than one year. It is interesting to note that that the old 4th Edition Clause 4.2

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required the Contractor to assign to the Employer the benefit of any Subcontractor's long term obligations. The
answer is that: the Contractor's obligations under the FIDIC Contract expire at the end of the Defects
Notification period. Some people extend this to 730 days in the Appendix to Tender, for certain types of work,
but any extension adds to the Tender Sum and is not normally economic. The applicable law normally covers
any defective work problems after the end of this period. An alternative is to require the Contractor to assign
any outstanding manufacturers' warranties to the Employer. The matter of warranties on change of ownership,
as Sub-Clause 7.7, should be checked with the applicable law.

Engineer's role in the event of a dispute


Question
We are currently looking for information about the position of the engineer in a dispute regarding a
construction work governed by FIDIC's Contract for Plant and Design-Build (Yellow Book). According to SubClause 3.5 of the General Conditions of the above mentioned contract, the engineer is obliged to determine
any matter. This includes also the determination and assessment of works in case of a termination of the
contract. If one of the parties to a construction contract governed by FIDIC's Yellow Book terminates the
contract, the engineer will therefore have to determine and assess the value of the works performed. We would
kindly like to ask you what the position of the engineer will be, when the parties subsequently can not settle any
disputes amicably, but refer them to arbitration as foreseen in Sub-Clause 20.6. Generally, there are two
possibilities: 1. The valuation of the engineer remains simple evidence, being part of the allegation of the party
which introduced it into the proceeding. 2. Since the engineer had a contractual obligation to determine and
assess the works, his position is that of an expert appointed by the parties. This question has, so far, not been
answered in the common literature to FIDIC's construction contracts. We would, therefore, kindly ask you if you
have any information about this problem. Has it already occurred and if so, where can we find relevant articles
or court decisions?

Answer
It was decided under the previous contracts to the FIDIC contract that the Engineer does not have a duty of
care to the Contractor. He is appointed by, and receives his fees from the Employer. Also, under the 1999
FIDIC Contracts, Sub-Clause 1.1.2.6 defines the Engineer as part of Employer's Personnel. Sub-Clause 3.1 (a)
states that the Engineer is deemed to act for the Employer, although, under Sub-Clauses 3.5, 14.1 and others,
he must act fairly. FIDIC takes the attitude in training courses that the Engineer has a difficult job, but must be
considered to be part of the Employer. We would certainly not consider him to be an expert appointed by the
parties. Regrettably, experience with disputes under the 1999 Contracts is tending to show that some
Engineers are rather too keen to support the Employer's point of view. If both parties agree with the Engineer
on some point there is no problem, but if one party disagrees then the Engineer's opinion is always argued.
Sub-Clause 20.6 gives the arbitrator the power to open up, etc., anything decided by the Engineer. An
arbitrator would have to look at the overall performance of the Engineer during the project and form his own
opinion on the weight to be given to any opinion, etc., of the Engineer. One cannot see an arbitrator or the
courts accepting the Engineer as an expert appointed by the parties. However, the attitude of the Courts will
depend very much on the particular jurisdiction.

Right to vary and rate of progress


Question
We are facing a couple of problems and your guidance will be appreciated. a) Clause 13.1 - Right to vary For
additional work, this clause is clear. For omission of part of the work, there appears to be a problem. Clause
13.1 (d) reads: Each variation may include: (d) omission of any work unless it is to be carried out by others. A
Contractor has been very slow; he is not likely to finish the job in time to cope with the traffic arrangememnts.
The Employer wants to reduce the Contractor's work and ask others to do that job. Any contractual problem in
view of Clause 13.1 (d)? b) Clause 8.6 - Rate of Progress. What action one can take if the Contractor does not
respond, other than delay damages? The Employer is more interested in getting the work done on time. All
comments will be appreciated.

Answer
Presumably you are referring to the 1999 Conditions of Contract for Construction, without any significant
changes in the Particular Conditions. You are correct that Sub-Clause 13.1 (d) prevents the Engineer from
issuing a variation to take work from the Contractor and give it to another contractor. Also, if the Contractor
fails to respond to Sub-Clause 8.6 then the consequence will be delay damages. You say that the Employer
wants the job finished on time. Of course the Contractor may have different views as to the reason for the
delays. The solution may be for the Employer and Contractor to negotiate an addendum to the Contract to
change Sub-Clause 13.1 (d).

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Remedying defects
Question
I would like to know if work is required to be done by the Contractor during the Defect Liability Period in
EPC/Turnkey Contract. The Conditions of Contract for EPC/Turnkey Projects is silent. Can anyone respond to
this. My belief is that Normal Maintenance is not covered in this, except the remedial of defects resulting in
design/construction fault ?

Answer
Please refer to Sub-Clause 11.1 (b) of the EPCT Contract. There it is clear that the Contractor is obliged to
carry out work which is "required to remedy defects or damage". Sub-Clause 11.2 gives further information.
The comments at pages 195 - 197 of the FIDIC Contracts Guide may also be helpful.

Insurances
Question
Regarding the interpretation of Sub-Clause 18.3 (i) and (ii) of the FIDIC EPC/Turnkey Contract. The two
questions I have are: (1) The first question is about the interpretation of Sub-Clause 18.3 (d) (i) which states
that the insurances [to be effected by the Contractor] "may however exclude liability to the extent that it arises
from (i) the Employer's right to have the Permanent Works executed on, over, under, in or through any land,
and to occupy this land for the Permanent Works". A broad interpretation of this clause would mean that its
scope includes any liability related to the Permanent Works which - in our view - would not make sense.
Assuming that, we would like to ask you if you could give us an example for which case this clause applies to.
(2) The second question is about the interpretation of Sub-Clause 18.3 (d) (ii) which states that the insurances
[to be effected by the Contractor] "may however exclude liability to the extent that it arises from (ii) damage
which is an unavoidable result of the Contractor's obligations to execute the Works and remedy any defects".
We are wondering if this Clause only includes liability which is based on the Contractor's compliance with the
Works (as defined in the contract) or it also includes liability resulting from Force Majeure events. The former
would mean that this clause is interpreted in an ex-ante-view the latter assumes an ex-post-view.

Answer
The insurance provisions in the 1999 contracts should always be checked with an insurance expert who knows
the particular country and jurisdiction. The comment in the FIDIC Contracts Guide may also be helpful. One can
only give very general examples, but suggest: For Sub-Clause 18.3 (d) (i). If the Employer does not own the
site, or have the owner's permission to build. Or, if there is a planning or authority problem which would make it
illegal to build on the site. For Sub-Clause 18.3 (d) (ii). This appears to be a more general way of wording the
principle that the damage was due to the design. Both Sub-Clauses appear to be related to 18.3 (d) (iii) which
refers to Employer's Risks. Force Majeure is surely a separate subject.

Contractor's Claims
Question
I am currently working on a contract signed between a Ministry and a private company under the FIDIC Yellow
Book. Since the government institutions only recently have taken into use the FIDIC conditions, we would need
a few clarifications. The following questions have arisen: a) Has the Contractor got the right to start the Claims
procedure under Art. 20 of the FIDIC YB on the basis of the Employer's non execution of certain obligations
foreseen in the Employer's Requirements? b) Can the Contractor make Claims for unexpected cases not
directly mentioned in the General Conditions of the FIDIC YB? c) We are also interested to know if there are
any publications regarding the ICC jurisprudence as far as FIDIC is concerned or any publications regarding
the applicability of the Clause 20 (Claims, Disputes and Arbitration).

Answer
The Contractor can start a Clause 20 claims procedure whenever he "considers himself to be entitled to any
extension of the Time for Completion and/or any additional payment under any Clause of these Conditions or
otherwise in connection with the Contract". The Contractor can start the claims procedures if he considers that
he is entitled to compensation due to a failure to perform an obligation or any other default by the Employer, or
the Engineer acting on behalf of the Employer. The phrase "or otherwise in connection with the Contract" can
include unexpected situations which are not directly mentioned in any Clause. One of the strengths of the FIDIC
Contracts is that, if the Employer disputes the Contractor's entitlement to make a claim from some situation, the
entitlement to claim can be referred to the Engineer for a determination under Sub-Clause 3.5 and, if the
matter still can not be agreed, the dispute can be referred to the DAB. The Engineer and, if necessary, the
DAB can consider the principle of the entitlement, without having to wait for the situation to develop and for the
Contractor to submit a fully detailed claim. Many projects have found that this procedure helps to resolve

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differences which would otherwise develop and have a detrimental effect on the progress of the project.

Contractor's claims
Question
Can anybody give the interpretation of following: Conditions of contract for buildings and engineering works
designed by the employer, 1st edition 1999. Clause 20.1 contractor's claims - a 42 days time limit is given for
submission of contractor's claim, after the event. Can it be taken to construe that the engineer is entitled to
reject a claim if it is submitted after 42 day period specified in the conditions?

Answer
Please refer to the final paragraph of Sub-Clause 20.1. This is clear that if the Contractor fails to comply with
the 42 days requirement then any consequences of the late submission of the claim can be taken into account
when assessing the claim. A claim cannot be rejected just for late submission. The exception, as stated at the
end of the paragraph is a failure to give a notice as required by the first paragraph of the Sub-Clause.

Implementing a DAB decision


Question
My client had referred to 1999 CoC but in fact their concern on the project here is with FIDIC 4th Ed COPA,
from which it appears they have quoted rather than 1999. I am involved with this case, as is another adjudicator
on the President's List and we have both been advising the client on the meaning of this clause. Without
wanting to prejudice the FIDIC response, our view has been that while a timely Notice of Dissatisfaction
preserves a party's right to try amicable settlement or go to arbitration, it does not affect the interim but
immediately binding nature of a DAB Decision, which the Parties and the Engineer [curiouslythe Engineer is not
included under the 1999 or MDB versions] must implement forthwith unless and until revised by amicable
settlement or arbitration, asprovided for under the following extract from Sub-Clause 67.2 of 4th EdCOPA:
"Unless the Contractor has already been repudiated or terminated, the Contractor shall, in every case,
continue to proceed with the Works with all due diligence, and the Contractor and the Employer, as well as the
Engineer, shall give effect forthwith to every decision of the Board, unless and until the same shall be revised,
as hereinafter provided, in an amicable settlement or an arbitral award." I am writing this as it seems to be a
question of global importance.

Answer
You are quite correct that the DAB decision must be implemented promptly, regardless of whether a Notice of
Dissatisfaction has been issued. This is also confirmed in the FIDIC Contracts Guide to the 1999 Contracts,
which states at the top of page 314 "the Parties empower the DAB to reach decisions with which they undertake
to comply, irrespective of dissatisfaction".

Price escalation
Question
To the best of our knowledge, according to the FIDIC contract, building contractors receive some kind of
compensation, if the prices of raw materials increase above the contract price. In the last two years prices of
bitumen (derived from crude oil) and steel increased significantly more than their yearly average growth rate.
therefore it's reasonable to assume that building contractors got some kind of compensation with respect to the
FIDIC contract. We would like to find out, what kind of compensation the building contractors received from the
government when the market prices of raw materials especially bitumen (or crude oil) and steel rose above the
contract price (e.g. linking the contract prices of steel and bitumen to the steel, crude oil index respectively).

Answer
Sub-Clause 13.8 provides formulae to adjust the contract values to reflect escalation of costs due to inflation.
Under CONS or P&DB, the formulae require data which is to be specified in a table of adjustment data for each
payment currency, the tables being included in the Appendix to Tender. For a fixed-price contract where no
adjustments are to be made for escalation of costs, it is only necessary for there to be no such table in the
Appendix to Tender. However, it is better to include a statement like "Sub-Clause 13.8 not applicable", in order
to clarify the Parties' intentions. The example Appendix to Tender published at the end of CONS and P&DB
illustrates the format of each table of adjustment data. It must define the coefficients (proportions) and cost
indices (reference prices) which are to be used to adjust the other amounts included in each currency in each
Payment Certificate. Typically, the Employer will have defined the fixed (non-adjustable) coefficient "a" before
the tender documents are issued to tenderers, but may prefer each tenderer to define the other coefficients
and all the sources of the cost indices in the table for each currency, so that they can fairly reflect:

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the proportions of Cost (for example, different tenderers may anticipate different percentages for labour
and equipment), and
the sources of the cost indices (each of which should relate to the currency of Cost, which may also differ
between tenderers).
The total of the proportions (b + c + d + etc.) in each table of adjustment data must be checked
mathematically to ensure that it does not exceed (1 - a). For each index, the source and title/definition should
be stated in each table. Typically, tenderers will not know the value as at the Base Date, unless (unusually) its
value is published immediately before the tender submission date. Therefore, the fourth column of the table
may be used to define the value of the index at another recent date, which is then inserted in the fifth column.
This "recent date" does not become a substitute Base Date, and is only used as a reference linked to the
index's value which is stated in the fourth column. Knowing that the index had a certain value on a certain date,
the Engineer should be able to examine the published "source of index" and determine the index which has the
published "title/definition" stated in the table and had such value on such date. This purpose is clarified in the
fifth from last paragraph of the Sub-Clause, which follows immediately after the definitions of the expressions
used in the formula. For each index, the "country of origin" and "currency of index" should be stated in each
table. Typically, this country will be that of the "currency of index" but may not be the same as the particular
currency of payment to which the table relates. For example, the Contractor may incur Costs in many
currencies but only be paid in one Foreign Currency. Bearing in mind that each index reflects costs in a
particular currency, it is necessary to convert indices from the "currency of index" to the "currency of payment"
(unless these currencies are the same) in accordance with the fourth from last paragraph of the Sub-Clause.
The adjustment multiplier "Pn" is "to be applied to the estimated contract value". Note that Pn will usually
exceed "1" and is a multiplier. In order to calculate an amount to be added, as indicated in Sub-Clause 14.3(b),
then the mathematical expression (Pn - 1) must be multiplied by the estimated "contract value" of the work
carried out in period "n". This "contract value" is the value in accordance with the Contract, namely the
applicable part of the Contract Price defined in Sub- Clause 14.1(a). The expression "contract value" is also
used in Sub-Clause 14.3(a) and at the end of CONS/P&DB 14.5.

Change in legislation
Question
Recently, a government cabinet issued a decree based on an industry and commerce law which gives the
cabinet the authority to decide the prices of oil and fuel, that raised these prices. Our questions are: a) does
this decree constitute a "change in the legislation" in accordance with Clause No.13 of the Conditions of
Contract for Construction? FIDIC is the contracting reference for the construction industry in the country. And
b) does the definition of laws stated in the General Conditions apply to this decree?

Answer
The person is asking for an interpretation of FIDIC in accordance with a national law. This is not something
which FIDIC will address. Sub-Clause 13.7 of the Conditions of Contract for Construction refers to changes in
the Laws or in the judicial or official governmental interpretation of such Laws. Laws are defined at Sub-Clause
1.1.6.5 as all national (or state) legislation, statutes, ordinances and other laws, and regulations and by-laws of
any legally constituted public authority. Whether a decree to raise prices, based on authority given by the Law,
constitutes a change as defined at Sub-Clause 13.7 is really a matter of the correct interpretation of law of the
contract, rather than the interpretation of the FIDIC contract. We are sorry not to be more helpful but the
correct legal interpretation can vary from country to country so we cannot give an opinion about the Law in any
particular country.

Weather in Force Majeure


Question
Our company has a EPC contract for Engineering, Procurement, Construction and Installation for the offshore
LNG Platform at offshore FIELD in Nigeria. In terms of Force Majeure of CONTRACT, "Force Majeure is an
occurrence beyond the control and without the fault or negligence of the party affected and which said party is
unable to prevent or provide against by the excise of reasonable diligence including, but not limited to : acts of
God or the public enemy : expropriation or confiscation of facilities : changes in applicable LAW; war, rebellion,
civil disturbances, sabotage or riots, floods, unusually severe weather that could not reasonably have been
anticipated ; fires, explosions, or other catastrophes ; nationwide strikes or any other concerted, nationwide
acts of workers ; other similar occurrences." In this connection, please letme know what is real definition of the
condition "unusually severe weather".

Answer
The FIDIC EPC Turnkey Contract does not use the term "unusually severe weather" at the Definition of Force

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Majeure, Sub-Clause 19.1. The Definition wording has presumably been changed by the Employer. We cannot
comment on non-standard Clauses, but point our that the FIDIC Sub-Clause 19.2 requires a Party to be
"prevented from performing any of its obligations under the Contract by Force Majeure" for Clause 19 to apply.
We note that the adjustment of FIDIC Generakl Conditions is illegal and in breach of copyright. Any such
changes should be made in the General Conditions. FIDIC also does not feel obliged to comment on the
interpretation of non-standard clauses based on illegal modifications to its standard clauses.

PI insurance
Question
With respect to the 1999 Plant and Design-Build form, given that; Clause 4.5 identifies "nominated
subcontractor" to mean "subcontractor" and; that Clause 4.4 makes the contractor responsible for acts or
defaults of any subcontractor and; that Clause 5.1 makes the contractor responsible for design (incl. that of his
subcontractors). Where a provisional sum for the design, supply and installation of works is included in the
contract. Is it a correct interpretation of the contract that the contractor is responsible for this design
(notwithstanding nomination by the employer) and therefore responsible to maintain PI insurance in respect of
this design work (where the additional Clause 18 design insurance subclause is applicable)?

Answer
Under P&DB the Contractor is responsible for the design of the Works. You have mentioned Sub-Clause 5.1
and this is also stated at paragraph 3 of the Contract Agreement. This must include any design work by a
Subcontractor, either nominated or domestic. The PI Insurer should be advised of the situation. Sub-Clause 4.5
does give the Contractor the opportunity to object to any particular

Increased scope of work


Question
My concern is that the scope of work on present contracts has been increased significantly under VOs
(double...not different scope, just increased quantity). Am using FIDIC 1999 on some contracts, and older 1987
(1992 updates) version on others. Do all initial tender rates have to be renegotiated and would the unit rates
go up or down? (reduced price due to bulk ordering, or increased rates to cover additional overhead/increased
material costs.) Are the revised rates then applied for VO work only, or both VO and BOQ work? Time
extensions have been granted...contract period now double...and payment made for 'general and preliminary
items', at the monthly BOQ rate. I appreciate your direction on where I can information to these 2 questions

Answer
This is a complex question! The requirements are different in the 1987 and 1999 Contracts, so it is not possible
to give a simple general reply to your question. For the 1987 Contract you have referred to Sub-Clause 52.3.
This gives a procedure to be used if the total of varied work and remeasurement of estimated quantities gives
an increase of more than 15% in the total figures as described. The Engineer then agrees or determines a
lump sum addition or deduction to the Contract Price "having regard to the Contractor's Site and general
overhead costs of the Contract". This is explained in more detail in the FIDIC publication "Guide to the use of
FIDIC Conditions of Contract for Works of Civil Engineering Construction Fourth Edition", at page 117. The
1999 Contract refers, at Sub-Clause 12.3, to adjustments to individual rates to give a new rate. This only
applies to individual rates when the criteria have been met as subparagraph (a) for measured quantities or (b)
for Variations. The procedure is described in the next paragraph and further explanation is given in "The FIDIC
Contracts Guide" to the 1999 Contracts, at pages 209 for measured quantities and 210 for Variations.

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