WELCOME
International Construction Contracting: Use and Application of the FIDIC Form
Contracts and Trends in International Construction Contracting
Robert C. Epstein
Co-Chair, Global Construction Law Practice
Greenberg Traurig, LLP
William J. Wray
Shareholder
Holley, Driggs, Walch, Fine, Wray, Puzey & Thompson
Mike Carrato
Vice President, Legal & Contract Management
Alstom Transport
Mike Kolloway
Deputy General Counsel
Parsons Corporation
Our Panelists
Robert C. Epstein - Moderator– Co-Chair, Global Construction Law Practice
– Greenberg Traurig, LLP
William J. Wray– Member
– Holley, Driggs, Walch, Fine, Wray, Puzey & Thompson
Mike Carrato– Vice President, Legal & Contract Management
– Alstom Transport
Mike Kolloway– Deputy General Counsel
– Parsons Corporation
Worldwide Construction
$7.5 Trillion or 13% of Global Gross Domestic Product
Revenues of the World’s Biggest Contractors from Projects Outside Their Home Countries
Increased by $40 Billion in 2013 over 2012
Chinese Firms — largest revenue share
U.S. Firms — third place
Decreased by $22 Billion in 2014 over 2013
Chinese Firms — largest revenue shares
U.S. Firms — second place
Risks on International Projects
Political Risks– War, civil war, terrorism, social unrest, especially in developing countries
– Expropriation
– Leadership changes
Economic/Financial Risks– Fluctuations in economic conditions in host country (inflation, fluctuating prices)
– Foreign exchange rates
– Material and labor supply shortages
– Repatriation of profits back to home country
– Multi-cultural environment
– Financing complexity
– International joint ventures
What is FIDIC?
FIDIC is the International Federation of Consulting Engineers
The acronym derives from its French name - Fédération
Internationale des Ingénieurs-Conseils (FIDIC)
Founded originally in 1913 by France, Belgium and Switzerland
Aims to promote the interests of engineers, design
professionals and construction industry professions
Originally Europe based, but has grown into a leading global
construction industry organization
Now has 97 member countries around the world
FIDIC’s Stated Objectives
Be the recognized international authority on issues relating to consulting
engineering best practice.
Actively promote high standards of ethics and integrity among all stakeholders
involved in the development of infrastructure worldwide.
Maintain and enhance FIDIC’s representation of the consulting engineering
industry worldwide.
Enhance the image of consulting engineering.
Promote and assist the worldwide development of viable consulting engineering
industries.
Promote and enhance the leading position of FIDIC’s Forms of Contract.
Improve and develop FIDIC’s training and publishing activities.
To promote and encourage the development of Young Professionals in the
Consulting Engineering Industry.
Pertinent FIDIC Publications
International standard contracts forms for construction
Related materials such as standard pre-qualification forms
Business practice documents such as:– Policy Statements
– Position Papers
– Guidelines
– Training Manuals and Training Resource Kits in the areas of:
management systems (quality management, risk management, business
integrity management, environment management, sustainability)
business processes (consultant selection, quality based selection,
tendering, procurement, insurance, liability, technology transfer, capacity
building)
Copyrights
FIDIC is the sole owner of all Copyrights pertaining to the
FIDIC publications.
FIDIC is protective of its Copyrights and requires license
fees and/or subscription fees for use of its books, forms
and other documents and publications (similar to AIA in
the US).
Languages and Translations
All FIDIC documents are published primarily in English.
FIDIC sometimes translates its documents into other languages, but English
remains the official language of reference in case of legal dispute.
Other organizations sometimes translate and modify FIDIC documents to conform
to particular needs. Some examples include:– The Multilateral Development Banks (“MDB” an organization of international banking
institutions) developed a Harmonized Edition of the Construction Contract based on
FIDIC’s form that is used by MDB Banks, including the World Bank, for their projects.
– Some governmental Owners/Employers require that project contracts be in the official
language of the applicable nation or locality.
Notwithstanding, the English language version is considered by FIDIC as the
official version AND the authentic original source text for the purposes of
translation into other languages.
Unique Vocabulary
FIDIC and international construction documents sometimes utilize unique or
differing vocabulary.
Some examples include:– Employer: Synonymous with “Owner”
– Engineer: In FIDIC docs is generally analogous to “Architect” (or Architect of Record or
AOR) in AIA and other typical US construction contracts. NOTE: In FIDIC contracts and other typical international construction contracts, the roles of all project
engineering work, including architectural work, are generally contracted to a single engineering firm.
– Bespoke Contracts or Bespoke Terms: Contracts or contract terms which are specially
or specifically drafted or prepared for a particular purpose. Non-standard or non-
boilerplate contacts or terms are sometimes referred to as Bespoke contracts or terms.
– Re-measurement Contract: Analogous to “Cost-Plus” or “Time & Materials (T&M)” types
of contracts are sometimes referred to as Re-measurement Contracts.
– Facilities: Equipment, items and facilities (other than the Project land) necessary to
facilitate completion of the contemplated works.
FIDIC Construction Contract Forms Books
The primary FIDIC Rainbow Suite of New Contracts was published in
1999, and comprises most of the typical FIDIC form contracts currently
in use, including the following Books for the stated situations and
circumstances:
– The Green Book: Conditions of Short Form of Contract
– The Red Book: Conditions of Contract for Construction for Building and Engineering Works Designed
by the Employer
– The Yellow Book: Conditions of Contract for Plant and Design-Build
– The Silver Book: Conditions of Contract for EPC Turnkey Projects
FIDIC Flowchart
Additional FIDIC Books
The additional range of the FIDIC Rainbow of
construction contracting Books includes:
– The Blue Book: Contract for Dredging and Reclamation
Works
– The Pink Book: (or the MDB/FIDIC Contract): Modified
FIDIC Contract incorporating special conditions terms for
use where MDBs are providing financing
– The White Book: Client/Consultant Model Services
Agreement
– The Gold Book: FIDIC Design, Build and Operate Projects
Project Engineer: Critical Role in FIDIC Contracts
The standard FIDIC Books/forms typically provide that the
Project Engineer (which includes the Architect’s roles)
oversees:– project administration functions
– certain dispute resolution functions
The FIDIC Books define the role of Project Engineer as
agent of the Employer (Owner).
The Project Engineer typically:– issues instructions and notices
– monitors the works
– acts as certifier/commissioner of completed works
Project Engineer: Critical Role in FIDIC Contracts (cont.)
The Engineer is often assigned initial adjudication and
resolution authority concerning project disputes, AND is
supposed to act impartially when the rights and
obligations of the parties are affected.
– However, absence of bias is not in reality practical:
Firstly, a FIDIC Project Engineer will primarily (as expected)
protect its own interests; and
Secondly, under FIDIC Contracts the Engineer is deemed to,
and in practice typical does, act for and in the best interests of
the Employer.
Role of the Contractor in FIDIC Book Contracts
The Contractor's main obligation under any construction contract
is the construction and completion of the works in accordance
with the contract terms, conditions and specifications.
Under the FIDIC Red and Yellow Books, the Contractor’s
obligations include:– Fitness for purpose – ensuring that the design will meet the employer's requirements
– Design responsibility (limited in the Red Book, more comprehensive in the Yellow Book)
– Carrying out the works in a proper and workmanlike manner with properly equipped
Facilities and non-hazardous materials
– Providing the requisite Facilities (equipment, etc.)
– Responsibility for choosing the Facilities and means, materials and methods of
completing the work
Other Typical Contractor Functions
FIDIC Project Contractors are assigned other typical
administrative and performance facilitating functions, including:
– Providing information needed for the execution and completion of
the works
– The issuing of typical project and claims related notices, including
notice of any events that impact costs or completion time
– NOTE: The Claims notice period in FIDIC Books is typically very
short, e.g., “not later than 28 days after the Contractor became
aware, or should have become aware, of the event or circumstance”
giving rise to a right to claim (FIDIC Red Book and Yellow Book,
Clause 20.1).
The FIDIC Books Are Not “Set in Stone”
As is typical with the use of boilerplate-based forms in the U.S.,
bespoke terms, conditions, variations and adjustments can be
applied to the FIDIC Books contact forms.
Such bespoke terms can be negotiated and included based
upon a Project’s and/or an Employer’s specific needs and
circumstances.
Modifications typically arise, for example, by:
– Employer's instruction
– Employer's request for a proposal
– Contractor's value engineering proposal
Which FIDIC Contract is right for a specific Project?
(Source: http://fidic.org/bookshop/about-bookshop/which-fidic-contract-should-i-us)
Additional Review & Analysis:
Use & Application of the Key FIDIC Contracting Books-
The Red Book
The Yellow Book
The Silver Book
The Red Book: Conditions of Contract for Construction forBuilding and Engineering Works Designed by the Employer
This is the typical basic contract for construction between
an Employer (Owner) and its prime contractor.
In its standard form, The Red Book is a Re-measurement
Contract (cost-plus or T&M contract), meaning that the
Employer and the Contractor typically negotiate the rates
for types or schedules of work and those rates will be
applied to the quantity of that work that the contractor
carries out.
The Red Book: Conditions of Contract for Construction forBuilding and Engineering Works Designed by the Employer
Under standard Red Book contracts, the Employer
typically takes the risk that the quantity estimates are
accurate, while the Contractor must ensure that its unit
prices for the quantities are adequate.
By bespoke terms and conditions the Red Book contract
can be modified and adopted to a lump-sum type
contract.
The Yellow Book: Conditions of Contract for Plant and Design-Build
Intended for use where the works are designed by the
Contractor.
In its standard form, the Yellow Book is a lump sum
contract, in which the Contractor promises to deliver the
project for a set price.
The Contractor takes the risk of quantities.
The Silver Book: Conditions of Contract for EPC Turnkey Projects
EPC Contract – Engineering Procurement and Construction
Intended where Employer looks to the Contractor to take total
responsibility for the design, procurement, construction and
turnkey completion of the Project.
Often used in large Infrastructure Projects (e.g., road, rail,
bridge, airport, water/sewage plant, transmission line or power
plant projects) or in international markets where the Employer,
who provides or secures the project financing, wishes to
implement the Project on a Fixed-Price Turnkey Basis.
The Silver Book: Conditions of Contract for EPC Turnkey Projects
Almost universally used in developing world large
Infrastructure Projects.
Increasingly used in the U.S. in projects, particularly
large infrastructure projects where specialized,
experienced international contractors are called in.
The Silver Book: Employer Centric Benefits
“Turnkey” and “End Result” Driven:
The Employer gets a higher degree of certainty that the agreed contract
price and time will not be exceeded, except for the risk of certain limited
and usually unforeseen conditions.
The Employer avoids involvement in the day-to-day progress of the
construction work, providing simply for an end result that meets the
Employer’s specified performance criteria.
The Employer typically and willingly pays more for the construction of a
Project (than would be the case if other contract forms were used) in
return for the Contractor bearing the extra risks associated with
enhanced certainty of final price and time.
The Silver Book: Trend Toward EPC Turnkey Contracts in Large International Projects
We live in an increasing, “end result”, “turnkey”, consumer-
driven world where purchasers of a product or service just want
it done and working right.
– Example 1: Consumer electronics products.
– Example 2: Current farm and irrigation equipment.
Many project Owners (or “Employers” international construction
nomenclature) in this “new world” are looking for this kind of
simple, “turnkey”, just “get it done and working right” type of
construction.
And they are willing to pay more for it!
Q & A
Robert C. EpsteinEmail: [email protected]
Phone: (973) 360-7945
William J. WrayEmail: [email protected]
Phone: (702) 791-0308
Mike CarratoEmail: [email protected]
Phone: (423) 902-5578
Mike KollowayEmail: [email protected]
Phone: (312) 930-5100
THANK YOU