KEY ASPECTS OF FIDIC DBO

CONTRACTS

23/09/2011

Content
1. INTRODUCTION : THE NGRBA AND THE FRENCH
SUPPORT
2. HOW TO CHOOSE THE BEST FIDIC
CONSTRUCTION CONTRACT FOR A WASTE/WATER
INFRASTRUCTURE PROJECT IN PPP ?
3. MAIN PITFALLS IN CONSTRUCTION CONTRACT
BEFORE COMMERCIAL OPERATIONS

THE NGRBA AND THE FRENCH

SUPPORT

THE NGRBA AND THE FRENCH SUPPORT

THE NGRBA AND THE FRENCH

SUPPORT
Technical Assistance to NGRBA for project
preparation (FASEP team based in Delhi +
experts from France Consortium Egis / SCE /
Egis India)
Duration of the services is 15 months
Objectives :
=> Launch Team to facilitate the projects
implementation in the 5 states along Ganga river
=> Move ahead rapidly with the World Bank
Program
=> Support NGRBA in NMCG (ex-PMG)
operations

FRENCH EXPERIENCE IN WATER MANAGEMENT

Major features of water sector in France :

Creation of Water agencies since 1964 for the 6 main
hydrographical basins
they collect water consumption fees and pollution
taxes (households, industries, pesticides users)
They use them to invest in water infrastructures and
environmental actions within the river basin (subsidies
to local authorities).

FRENCH EXPERIENCE IN WATER MANAGEMENT

Major features of water sector in France :

Water Parliaments at the basin level provide the
democratic basis for debate and consultation in water
management issues.
There are water management plans at basin and subbasin levels.
They establish some rules related to water use,
licensing and public participation.

FRENCH EXPERIENCE IN WATER MANAGEMENT

Major features of water sector in France :

Private participation through delegation of public
service
Mainly CONCESSION (BOT) or LEASE CONTRACT in
water supply and sanitation.
The public authority is still present (regulatory role)
and shares the exploitation financial risk with the
private actor
The Contractor shall produce an annual reports
showing incomes and expenses in a transparent way,
including reinvestment of savings in infrastructures.

MEASURING RESULTS
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1990

2008
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FIDIC DBO CONTRACT

HOW TO CHOOSE THE BEST FIDIC

CONSTRUCTION CONTRACT FOR A WASTE/WATER
INFRASTRUCTURE PROJECT IN PPP ?

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FIDIC PRESENTATION
FIDIC founded by French engineers in 1913 as
Fdration Internationale des Ingnieurs Conseils
(International Federation of Consulting Engineers)
1945 = 40 Engineers Associations ; 2009 = 80
Engineers Associations including India
1957 = 1st Red Book as Conditions of Contract
for Construction for Building Works designed by
the Employer, 2008 = 1st Gold Book
www.fidic.org , HO in Geneva, Switzerland.
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FIDIC CONTRACTS / PARTIES INVOLVED

Lenders

The Employer

DESIGN
BUILD
Disputes
(Adjudication
Board)

SERVICE
CONTRACT

CONTRACT

OPERATION
TAKING-OVER

The Engineer
or Employers
representative

CERTIFICATE

Auditing Body

SERVICE

CONTRACT
The Contractor

FIDIC contract
Administration

No contractual link !

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Historic Background of FIDIC contracts

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Historic Background of FIDIC

contracts

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Best choice for FIDIC CONTRACT

The Engineer
undertakes
(small amounts, small risks)
the design ? yes
no
Small project ?

yes

no
The Contractor undertakes
the design
The project is a plant and includes a
balanced risk allocation ?
Fixed Cost
Risks borne mainly by the
Contractor

yes
no
Discuss in details

no

yes
Operations(DBO)
yes

no

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Principles FIDIC : Risks allocation

Increase cost of
Project

Increase risk
for The
Contractor

GOLD
BOOK /

SILVER
BOOK

YELLOW
BOOK
RED
BOOK
Increase risk for
the Employer

Increase design
control by the
Employer
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COMPARISON FIDIC / French law

1 YEAR

1 YEAR

1 YEAR

FRANCE

CCAG P.I.
IDEA => DEGREE OF PRECISION
CONCEPT

PFS -FEED

DTL DESIGN

2 YEARS

< 20 YEARS

CCAG
TRAVAUX
LAW

CONSTRUCTION

OPERATIONS

FRENCH CONSTRUCTION LAW

FIDIC

CONTRACTS GOVERNED BY LOCAL LAWS OF THE COUNTRY

White book

Red book
Yellow book
Silver book

Gold book
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FIDIC DBO CONTRACTS : KEY POINTS

Employers requirements :

Careful technical investigations of site

Risk assessments (technical, commercial, financial)
Infrastructure to be fit for purpose
Tender procedure with prequalification

Design responsibilities :
Strict definition of design criteria
Unforeseable difficulties to be foreseen (!)
Interfaces management (networks Vs. treatment plant)

Claim management :
Special care for drafting the Contract (Particular
Conditions of contract to be fit with the Laws)
Contemporary records to be kept
Mechanisms to avoid disputes
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20
CLAUSES

CLAUSE 3 The Employers representative

CLAUSE 2 The Employer

193 SUBCLAUSES
CLAUSE 4 The Contractor

CLAUSE 20.7 Amicable Settlement (DAB)

COST

CLAUSE 15 Termination by Employer

CLAUSE 16 Termination by Contractor
CLAUSE 19 Force Majeure
CLAUSE 20 Claims

COSTS

CLAUSE 1 General Provisions

CLAUSE 17 Risk allocation
CLAUSE 18 Exceptionnal Risks
CLAUSE 19 Insurance

CLAUSE 13 Variation and Adjustements

CLAUSE 14 Contract Price and Payment

FIDIC
CLAUSE 5 Design
CLAUSE 6 Staff and Labour
CLAUSE 7 Plant, Materials, Workm
CLAUSE 11 Testing
CLAUSE 12 Defects

QUALITY

CLAUSE 8 Commencement,
Completion and Programme
CLAUSE 9 Design-Build
CLAUSE 10 Operation Service

GOLD
BOOK

CLAIMS

NO

ES
TIC

DEL
AYS

CONTRACT

TIME
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SOME PITFALLS IN CONSTRUCTION

CONTRACT

3. MAIN PITFALLS IN CONSTRUCTION CONTRACT

BEFORE COMMERCIAL OPERATIONS

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SOME PITFALLS IN CONSTRUCTION

CONTRACT ACCESS TO SITE
Design

DELAYED
FOR SITE
INVESTIGATIONS
TOPOGRAPHY AND
GEOTECHNICS (SC 2.1)

FORCE MAJEURE
(EARTHQUAKE,
STRIKE, WAR) (SC
18)

New Critical
Path

Civil works
ADVERSE SUB-SOIL
CONDITIONS =>
COST +40% (SC
4.12)

Procurement

CUSTOM DUTIES NOT SOLVED

IN TIME DUE TO MINISTRIES
DELAYS (SC 9.4)

Initial Critical
Path
Erection

NO RAW WATER IN TIME

AS NETWORKS WORKS
ARE DELAYED (SC 11.2)

Commissioning
WHO PAYS FOR DELAY ? (SC
9.13)
OPERATIONS

Time of Completion
YEAR 1

YEAR 2

Cut-Off
UP TO Date
20 YEARS
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CONCLUSION
INTERNATIONAL FIDIC DBO CONTRACT GOLD BOOK IS
PARTICULARLY FIT FOR THE PURPOSE OF PPP WATER
TREATMENT; IT IS
COMPLETE
COMONLY SHARED BY ALL INTERNATIONAL PARTIES
DRAFTED TO AVOID AND TREAT PITFALLS

BUT WHO IS PROVIDING THE FINANCE ? FROM DBO,

ADD AN F THERE COMES THE DB

F O CONTRACT

- THANK YOU FOR YOUR ATTENTION THINK ABOUT FRENCH EXPERTISE ON FIDIC AND ON WATER PROCESS !

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