by Michel Salem
Director of Contracts Department
In December 2017, FIDIC launched its 2nd Edition of the Red, Yellow and Silver Books after more than 18 years of the release of the previous 1999 versions. This Article will shed the light on the main changes FIDIC has made to the new Red Book.
Generalities: There are many changes and improvements in the 2017 form. The single most obvious change is the new language used in this edition in addition to the size of the General Conditions, which are now over 50,000 words spread over 106 pages. This version is now:
A new vocabulary has been introduced that users need to get acquainted with which is included in the definitions clause. For instance, “Notices”, “Claims”, and “Disputes” which were not defined in the previous versions, are now defined in the 2017 form. Moreover, “Notice of No-objection” which in the language of the previous version meant “consent” is now a defined term.
Whereas the 1999 form had an Appendix to Tender and Particular Conditions, the 2017 form has Particular Conditions which are further divided into “Contract Data” (replacing the long-standing Appendix to Tender) and “Special Provisions”.
Notification for Claim and Time Barring: The 2017 Red Book includes notice requirements in approximately 80 places. As mentioned earlier, the term ‘Notice’ is now defined and distinguished from other forms of communication; whereas the latter must reference the clause under which it is issued, a Notice does not. In addition, all notices and communications must “not be unreasonably withheld or delayed”.
Cost Plus Profit: In terms of Cost-Plus Profit for relief events, unless stated otherwise, the Contractor will be entitled to a 5% profit (whilst under the 1999 Red Book, there was no stated figure and the Profit only had to be reasonable). The 2017 Red Book also specifically entitles the Contractor to “any loss of profit or other losses and damages suffered” for variations and termination for convenience.
The Role of the Engineer: Greater clarity is given to the role of the Engineer. The 2017 version specifies that the Engineer must be a professional engineer holding suitable qualifications, experience, and competence to act as the Engineer. There is a reminder now included in the drafting that when making a determination, the Engineer is obliged to “act neutrally” as between the Parties, and shall not be deemed to act for the Employer. Overall, the manner in which the Engineer is required to administer the contract has become more prescriptive in the 2017 version and a greater onus is placed on the Engineer to administer claims efficiently.
Advance Warning: For the first time, the 2017 Red Book introduces advance warning provisions, which require each Party to advise the other “in advance of any known or probable future events which may (a) adversely affect the work of the Contractor’s Personnel; (b) adversely affect the performance of the Works when completed; (c) increase the Contract Price; and/or (d) delay the execution of the Works or a Section (if any).” There is no time limit for giving an advance warning, nor is there any express remedy for failing to do so.
Extension of Time: At least four important changes have been made to the EOT provision. First, unlike the 1999 Red Book, the Contractor is not required to give a separate notice of a claim for an EOT for a delay caused by a Variation (as this notice has been built into the Variation clause at 13.3). Second, delay for “exceptionally adverse climatic conditions” has been qualified to be “Unforeseeable having regard to climatic data.” Third, the Contractor has an express entitlement to an EOT if the delay is caused by an increase of more than 10% of an estimated quantity included in the Bill of Quantities. Fourth, the clause specifically and expressly considers the Contractor’s entitlement to an EOT in case of a concurrent delay.
Claims: The provisions relating to Claims and Disputes have been separated and redrafted substantially. Clause 20 (Claims) sets out a procedure for (a) Employer Claims (“additional payment from the Contractor (or reduction in the Contract Price) and/or to an extension of the DNP”); (b) Contractor claims for “additional payment from the Employer and/or to EOT”; and (c) either Party for “another entitlement or relief against the other...of any kind whatsoever…except (a) and (b).” Notably, the existing 28-day time requirement for notifying claims now applies to the Employer as well, and the old 42-day timeframe for the “fully detailed claim” has been increased to 84 Days.
Exceptional Events: Force Majeure has been replaced with Exceptional Event. According to Corbett & Co, this should enable users who have the doctrine of force majeure in their national law to read the clause without preconceptions. The risk allocation remains the same.
Dispute Resolution Procedures: Disputes and Arbitration are now dealt with in a separate Clause. The DAB has become DAAB or Dispute Avoidance/Adjudication Board and is now a standing Board appointed from the beginning of the Project.
The newly introduced DAAB brings with it a number of important procedures. First, unless the Parties agree otherwise, the DAAB members are to be appointed within 28 days after the Contractor receives the Letter of Acceptance; there are also detailed procedures for resignation, termination, and new appointments. Second, the DAAB may provide “Informal Assistance” if jointly requested by the Parties, who are not bound to act on the DAAB’s advice. Third, in terms of time bars (a) the DAAB must give its decision within 84 days after receiving the reference; (b) a Party must refer a Dispute to the DAAB within 42 days after giving or receiving a Notice of Dissatisfaction with the Engineer’s determination, and (c) a Party that is dissatisfied with the DAAB’s decision must give a Notice of Dissatisfaction to the other within 28 days or else the decision becomes final and binding on both Parties. Fourth, arbitral tribunals are empowered to order the enforcement of a DAAB decision, by way of summary or other expedited procedure, whether by an interim or provisional measure or award.
Guidance to the Particular Conditions: Various guidance has been provided for the drafting of the Particular Conditions. For instance, guidance for the inclusion of Milestones in the Contract is now available. Milestones differ from Sections in that they have to be completed by a certain timeframe but will not result in the issuance of a Taking-Over Certificate.
More guidance has been provided for the incorporation of Building Information Modelling (BIM) in the Contract, but FIDIC mentions that a separate publication will be provided to help users incorporate BIM in the Particular Provisions. More importantly, the guidance clearly mentions the Clauses that will be affected in case BIM was incorporated.
The above changes reflect only some of the key changes introduced by the revised 2017 FIDIC Red Book Contract, and the reader is invited to acquaint themselves as appropriate. It is fair to say that the changes introduced in the new suite of contracts are significant, and undoubtedly it will take some time for contracting parties to become familiar with the revised contracts. The revisions are intended to bring greater clarity to the contracts and to encourage increased collaboration between the Parties. However, the more prescriptive nature of many of the provisions may result in a greater burden on the Parties in administering the contract. It remains to be seen how the 2017 suite of contracts will be viewed by Employers, Contractors, and Engineers, and the extent to which these will be used in the market in the next coming years.