Seminar Slides (85p) PDF

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FIDIC
Cornerstone Seminar
1
TANER DEDEZADE
CASABLANCA
1-3 FEBRUARY 2017
Workshops
2
1 2 3 4 5 6
Man Utd Contractor Engineer Employer Contractor Engineer Employer
Chelsea Employer Contractor Engineer Employer Contractor DAB
Arsenal Engineer Employer Contractor Engineer Employer Contractor
LECTURES 1 and 2 9-10.30

Introduction to the FIDIC contracts and which form to use?
3
A0910 PB Negligence: other issues 1

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FIDIC
4
FEDERATION INTERNATIONAL DES

INGENIEURS-CONSEILS (“FIDIC”)
Founded 1913
France, Belgium, Switzerland.
First edition of Conditions of Contract
(international) for Works of Civil Engineering
Construction published August 1957
Based on ACE/ICE Conditions in UK
FIDIC Objectives
5
1. Be the recognised international authority on issues

relating to consulting engineering best practice.
2. Actively promote high standards of ethics and
integrity among all stakeholders involved in the
development of infrastructure worldwide.
3. Maintain and enhance FIDIC’s representation of
the consulting engineering industry worldwide.
4. Enhance the image of consulting engineering.
continued
6
5. Promote and assist the worldwide development of

viable consulting engineering industries.
6. Promote and enhance the leading position of
FIDIC’s Forms of Contract.
7. Improve and develop FIDIC’s training and
publishing activities.
8. To promote and encourage the development of
Young Professionals in the Consulting Engineering
Industry.

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History of ICE Form

mainly for domestic construction in UK
7
December 1945
January 1950 (second ed.)
March 1951 (third ed.)
January 1955 (fourth ed. Later amended in 1969)
1973 (5th edition) – controversial prompted new
revision of the FIDIC book
1991 (6th edition)
ACE (Association of Consulting Engineers

8
August 1956 Overseas (Civil)Conditions of Contract

(“The ACE form”), perhaps the first standard form of
international conditions of contract for civil
engineering works based on the ICE form.
History of Red Book

9
Conditions of Contract (International) for Works of

Civil Engineering Construction
1st – August 1957
2nd – July 1969 (text remained – Part III added for
dredging projects)
3rd – March 1977
4th - September 1987 1992 amendments
November 1996 supplement to 4th introducing the
DAB

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History of Yellow Book

10
Conditions of Contract for Electrical and

Mechanical Works including erection on site
E&M contract
1st – 1963
2nd – 1980
3rd - 1987
Integration between the 2

11
The old forms were classified by different

engineering disciplines
The idea was that the old red and yellow book could
co-exist side-by-side
With the contractor for either being allocated the
overall responsibility for the whole project.
Orange Book
12
Concept of single point responsibility

Conditions of Contract for Design Build and Turnkey
1995
Contractor totally responsible and liable for design.

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Introduction to the FIDIC 1999

Suite of Contracts
13
The
The
Conditions of
Conditions of
contract for
contract for
construction plant and
(red book) design-build
(Yellow book)
The
The short
Conditions of
form of
contract for
contract
EPC turnkey
(green)
(silver book)
Transfer of risk
14
Employer Risk
Contractor Risk
RED BOOK
15
recommended for building or engineering works

designed by the Employer or by his
representative, the Engineer. Under the usual
arrangements for this type of contract, the
Contractor constructs the works in accordance with a
design provided by the Employer. However, the
works may include some elements of Contractor-
designed civil, mechanical, electrical and/or
construction works.

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Type of contract
16
The Red book is a measurement or lump sum

contract.
Lump sum means design needs to be virtually complete and
works quantified when put out to tender. Contractors then
must price accurately. Variations common.
Re measurement means payment for completed work which is
measured as it proceeds. This is common when work cannot be
fully quantified at tender stage. Common for unforeseen and
unquantifiable work
We will look at the payment mechanism in the
contract later on.
Traditional model
17
1999 suite – origins of 1999 red

18
1999 red is not a revision of 4th ed. Red. But it

embodies nearly all concepts of old red but with
different arrangement of text and significant
changes:
Changed role of engineer – cl.3
2.4, 2.5
Fitness for purpose

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Yellow Book
19
recommended for the provision of electrical and/or

mechanical plant, and for the design and execution
of building or engineering works. Under the usual
arrangements for this type of contract, the
Contractor designs and provides, in accordance
with the Employer's requirements, plant and/or
other works; which may include any combination of
civil, mechanical, electrical and/or construction
works.
Lump sum contract

20
The yellow and silver books are contemplated as

being lump-sum contracts. 14.1 (a)
Silver book was developed for projects where a
higher degree of certainty of final price and time was
required and the Contractor was to take an increased
responsibility for design and execution of the project.
Design build model

21
Employer
Design-
Employer’s
Build
advisors
Contractor
Structural Services Sub-

Architect (QS)
Engineer Engineer Contractors

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Origins of Yellow, Silver and Green

22
1995 Orange/1987 yellow became 1999 yellow.
Silver and green completely new
Yellow Book Clause 5.1

23
The Contractor shall carry out, and be responsible

for, the design of the Works. Design shall be
prepared by qualified designers who are engineers or
other professionals who comply with the criteria (if
any) stated in the Employer's Requirements.
The Contractor warrants that he, his designers and

design Subcontractors have the experience and
capability necessary for the design.
Silver Book
24
recommended for the provision on a turnkey basis of

a process or power plant, and which may also be
used where one entity takes total responsibility
for the design and execution of a privately
financed infrastructure project which involves
little or no work underground. Under the usual
arrangements for this type of contract, the entity
carries out all the Engineering, Procurement and
Construction ("EPC"): providing a fully-equipped
facility, ready for operation (at the "turn of the key").

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Green Book
25
Short Form of Contract, which is recommended for

relatively simple or repetitive work, or for work of
short duration or of small capital value ($1/2m).
Basis of colour coding of 1999 forms

26
1999 forms are based on allocation of design and

existence of engineer.
Other FIDIC forms in chron order

27
White Book – 4th ed. 2006

Blue Book – Dredging and reclamation form 1st ed.
2006 based on green book
Pink Book – Conditions of Contract for construction
for building and engineering works designed by the
Employer Multilateral Development Bank “MDB”
harmonised 1st edition March 2006. Amended twice.
Latest edition is the 3rd ed. 2010.

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Other contracts continued

28
Gold Book – Design Build and Operate Projects 1st

ed. 2008 – C would have responsibility for building
and operating for example a greenfield water
treatment plant. Yellow book improved a bit with
build and operate bolt-on.
FIDIC’s first subcontract for use with the 1987 Red
book 4th ed. Was introduced in 1994
Task Groups updating 1999 forms – 2016 due?
Subcontract
29
FIDIC’s first subcontract for use with the 1987 Red

book 4th ed. Was introduced in 1994
Conditions of Subcontract 1st ed. 2011 is for use with
the 1999 Red book
Similarities between the books

30
Red book has 165 clauses

132 of the clauses are identical between red book and
yellow book
Bigger differences between the yellow book and
silver book as the silver book has no Engineer
Crude analysis based on book sales. Sales of red
down. Yellow and silver up.

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Book sales
31
Risk
32
The function of a construction contract is to allocate

risk so that it is clear whose problem a given risk is
going to be. FIDIC Forms are generally recognised as
a fair and balanced standard form for construction
works.
Exception to this is the silver book – but so what?
33

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Structure of Red Book

34
1 General 6 Staff and 11 Defects 16 C

Provisions Labour Liability Terminatio
n
2 The Employer 7 Plant Materials 12 Measurement 17 Risk and
and and evaluation Responsibilit
workmanship y
3 The Engineer 8 Time 13 Variations 18 Insurance
4 The Contractor 9 Tests 14 Payment 19 Force

Majeure
5 Nominated 10 Taking Over 15 E Termination 20 Claims

sub-
contractors
Coffee - 10.30-10.45
35
Workshop 1 – 10.45 – 12.15

36
Choosing the right procurement method
Man Utd Contractor

Chelsea Employer
Arsenal Engineer

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Lecture 3 – Role of Employer and Engineer

12.15-13.00
37
The role of the Employer

38
2.1 Right of Access

2.2 Permits. Licenses or Approvals
2.3 Employer’s Personnel
2.4 E’s financial arrangements – NEXT SLIDE
2.5 E’s claims – LATER
Sub-Clause 2.4
39
The Employer shall submit, within 28 days after

receiving any request from the Contractor,
reasonable evidence that financial arrangements
have been made and are being maintained which will
enable the Employer to pay the Contract Price (as
estimated at that time) in accordance with Clause 14
[Contract Price and Payment]. If the Employer
intends to make any material change to his financial
arrangements, the Employer shall give notice to the
Contractor with detailed particulars.

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Sub-Clause 16.1
40
If the …Employer fails to comply with Sub-Clause 2.4

[Employer’s Financial Arrangements] …, the
Contractor may, after giving not less than 21 days’
notice to the Employer, suspend work (or reduce the
rate of work) unless and until the Contractor has
received … reasonable evidence … as described in the
notice.
Sub-Clause 16.2
41
The Contractor shall be entitled to terminate the

Contract if:
(a) the Contractor does not receive the reasonable
evidence within 42 days after giving notice under
Sub-Clause 16.1 [Contractor’s Entitlement to
Suspend Work] in respect of a failure to comply with
Sub-Clause 2.4 [Employer’s Financial
Arrangements],
Engineer’s duties

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Managing Time
Clause 8
Instructions and Variations
designer
contractor
Measurement and rate evaluation

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Design
Certifying Payment
Step 1 Sub- Contractor makes Interim Payment Application – see Sub-

Clause Clause 4.21 progress reports
14.3
Step 2 Sub- Engineer to issue Interim Payment Certificate within 28 days (unless <
Clause min. amount and notice is given). No sanction for not issuing within 28
14.6 days.
If no notice given within 56 days – termination right under Sub-Clause
16.2 (b)
Step 3 Sub- Employer shall pay amount in Interim Payment Certificate within 56
Clause days. No sanction for non-payment within 56 days.
14.7
If the Engineer fails to certify the Contractor may, after giving 21 days’
notice to the Employer suspend work (or reduce the rate of work)
If no payment is made within 42 days of the expiry of the 56 days set out
in Sub-Clause 14.7 – there is a termination right under Sub-Clause 16.2(c)
Making determinations
Under Sub-Clause 3.5

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Engineer’s duties under the FIDIC

Contract
Duties
1 Managing Time
Project
Management
2 Instructions and Variations skills
3 Measurement and
Programming
Legal skills
evaluation Skills
4 Design
Engineer
5 Certifying Payment
6 Making 3.5 determinations
Financial and
accounting Legal skills
7 Inspection and testing skills
8 Issuing TOC
Design Skills
Role of Engineer
50
Sub-Clause 14.6 – The Enginer has the duty to issue

to the Employer an IPC
Sub-Clause 3.3 – issue Instructions
3 main roles:
To act on behalf of the Employer as his agent
To administer the contract as it is written or can be interpreted
To make determinations under Sub-Clause 3.5
Importance of Engineer
51
Often an important factor for a contractor when

pricing a job is the quality of the Engineer:
How good is the Engineer at maintaining the time schedule for
the provision of drawings?
What is the Engineer’s attitude towards variations and their
valuation?
Does he issue instructions/variations quickly?
How efficiently does he deal with monthly payments?

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Sub-Clause 3.1
52
whenever carrying out duties or exercising

authority, specified in or implied by the Contract, the
Engineer shall be deemed to act for the Employer;
If the Engineer is required to obtain the approval of
the Employer before exercising a specified authority,
the requirements shall be as stated in the Particular
Conditions. The Employer undertakes not to impose
further constraints on the Engineer’s authority,
except as agreed with the Contractor.
Sub-Clause 3.5
53
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 not
achieved, the Engineer shall make a fair determin-
ation in accordance with the Contract, taking due
regard of all relevant circumstances.
Sub-Clause 3.5 continued

54
The Engineer shall give notice to both Parties of each

agreement or determination, with supporting
particulars. Each Party shall give effect to each
agreement or determination unless and until revised
under Clause 20 [Claims, Disputes and Arbitration].
A time period has been inserted into MDB 2010
(giving 28 days)

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Sub-Clause 3.4
55
If the Employer intends to replace the Engineer, the

Employer shall, not less than 42 days before the
intended date of replacement, give notice to the
Contractor of the name, address and relevant
experience of the intended replacement Engineer.
The Employer shall not replace the Engineer with a
person against whom the Contractor raises
reasonable objection by notice to the Employer, with
supporting particulars.
White book
56
White Book Client/Consultant

Model Services Agreement
57
1st ed. 1990. revised 1992, 1995, 1998.

4th ed. 2006
Intended to cover the minimum requirements of a typical
appointment contract
Intended use on: pre-investment and feasibility studies,
designs and administration of construction and project
management, both for Employer-led design and
Contractor-led design teams [i.e. suitable for use alongside
Red and Yellow books]. Also suitable for domestic
agreements.

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Structure of White Book

58
Agreement (i)
Particular Conditions (a-h)
A) References from clauses in GCC (like App.to T)
B) Additional Clauses
Appendices
1) Scope of Services; 2) Personnel Equipment,
Facilities and Services of Others to be provided by
Client; 3) Remuneration and Payment; 4) Time
Schedule for Services
GCC (1-12)
Letter of offer by Consultant/Letter of
acceptance by Client
The Client – Clause 2

59
2.1 the Client shall give to the Consultant free of cost

all information which may pertain to the Services
which the client is able to obtain. This may include
design information perhaps provided by experts?
Within a reasonable time
3.3 Reasonable skill and care

60
There is no other responsibility of the Consultant

other than to exercise reasonable skill, care and
diligence in the performance of his obligations under
the Agreement.
This is standard and aligns with PI insurance.
No reference to fit for purpose or obligation of result.

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4.4 delays
61
If the services are impeded or delayed by the Client

or his contractors so as to increase the scope, cost or
duration of the Services – a)inform – with
breakdown of probably effects, b)Additional
Services; c)EOT.
Limitation of liability and net contribution clause

62
Limitation of liability clause: Consultant only liable if

breach of 3.3.1;
What if, the Consultant fails to provide sufficient
numbers of qualified personnel? Certainly there is a
termination right – 4.6.2
sum limited to the sum set out in the PC under 6.3.1.
6.1.3 (c) is a net contribution clause.
FIDIC/EFCA policy statement on

limitation of liability
Insurance
63
7.1.1 “at the written request of the Client, the

Consultant shall make reasonable efforts to”
Only if there is a written request
What are reasonable efforts

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Scope of Services
64
ACE as published Conditions of Engagement which

may assist the drafting of Appendix 1
Scope is very country specific. E.g. need for
construction permit. Need for special licenses.
Dispute Resolution
65
3 tiers
Negotiation
Mediation
Arbitration
Lunch – 13.00 – 14.00

66

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Lecture 4: Risk, Responsibility, Liability Insurance

67
RISK RESPONSIBILITY LIABILITY INSURANCE

68
RISK
RESPONSIBILITY
LIABILITY
INSURANCE
OVERVIEW
69
IDENTIFY RISKS
ALLOCATE RISKS
MANAGE AND MITIGATE RISKS IF POSSIBLE
AS THE RISK HAS BEEN ALLOCATED THE PARTY
RESPONSIBLE FOR THAT RISK SHOULD BE APPARENT
CONTRACTOR TO PRICE FOR THE RISKS
WHEN/IF RISK EVENTUATES LIABILITY FOR THAT
RISK WILL NEED TO BE ESTABLISHED BY REFERENCE
TO THE RESPONSIBLE PARTY
INDEMNITIES AND INSURANCE TO BE ASSESSED

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What is risk?
70
R=PxC
R=risk
P= probability or frequency of occurrence of a
defined event
C= consequences of the occurrence of the hazard
E to IDENTIFY RISKS
71
TYPICALLY RISKS CAN BE CATEGORISED

1. TEMPORALLY AS BEING
1. PRE-CONSTRUCTION
2. IN THE CONSTRUCTION PHASE
3. POST CONSTRUCTION
2. BY CATEGORY
1. DIRECT RISKS OF LOSS AND DAMAGE OCCURING DURING
THE CONSTRUCTION PERIOD
2. INDIRECT RISKS THAT AFFECT TIME AND MONEY
The 4 principles
72
Which party
1. can best foresee the risk?
2. can best control the risk?
3. can best bear the risk?
4. most benefits/suffers if the risk eventuates?

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E to ALLOCATE RISKS
73
1. DETERMINE HOW THE CONSTRUCTION

CONTRACT SHOULD ALLOCATE THE RISKS
1. WHAT RISKS SHOULD E KEEP?
2. WHAT RISKS SHOULD C BEAR?
3. WHAT RISKS SHOULD ULTIMATELY BE BORNE BY
INSURERS?
2. Reference to the 4 principles may be appropriate in
making this decision
Un-allocated risks
74
If a contract fails to identify and then allocate risks

then recourse will need to be made to the applicable
law to determine where liability will fall. In these
circumstances there will necessarily be no
indemnities but insurance may cover the risk
The courts may consider the 4 principles in
determining where liability will fall
Manage risks
75
Once the risks have been identified and allocated

steps should be taken to reduce the consequences or
probability of occurrence first in the contract and
then on the ground.
If that is not possible, steps should be taken to
mitigate unavoidable risks

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Pricing and Responsibility

76
Once risks have been identified and allocated, a

Contractor will be in a position to price taking into
account what risks he is bearing.
C is then responsible for these risks if they eventuate
Liability and indemnity

77
If a risk eventuates then the responsible party is

likely to be liable for that risk whether or not an
indemnity has been expressly given as a failure to
deal with the risk is likely to be a breach of contract
Good drafting practice, however dictates that
indemnities should be given as an indemnity
provides an express obligation to compensate for loss
damage or expense
Insurance
78
The construction contract may provide for

mandatory insurance to be taken out by the parties
so that the parties will not directly have to bear risks.

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FIDIC
CLAUSES 17, 18, AND 19 DEAL WITH RISK,

RESPONSIBILITY, LIABILITY, AND INSURANCE
It is important to emphasise that the risks to which a
construction contract is exposed are spread
throughout the Conditions of Contract.
Some make the mistake in assuming that clause 17 is
the only clause dealing with risk.
Clause 17 only deals with loss damage and/or injury
Limitation of Liability
80
Sub-Clause 17.6
"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
(...)“
Remoteness
81
Under English law, a party to a contract cannot

recover all losses. The party in breach will not be
liable for losses that are too "remote". i.e. even if it
is shown that his breach caused a loss, if that loss
was sufficiently unusual or unlikely then he will not
usually be liable for it, unless he was aware of some
special or unusual circumstances when he entered
into the contract.

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Hadley v Baxendale limb 1 –direct loss

82
The test for "remoteness" was laid down in the case of

Hadley v Baxendale. Under the test, a person who
breaches a contract is generally liable for two types of
loss: (i) Loss that arises "naturally, i.e. according to
the usual course of things" from the breach. This is the
first limb of the remoteness test and is concerned with
what a reasonable man should know to be the "usual
course of things" or "ordinary circumstances". Loss
falling under this first limb is referred to by the courts
as "direct" loss; or
Second limb of Hadley v Baxendale

83
(ii) Loss that does not arise naturally but that "may
reasonably be supposed to have been in the
contemplation of both parties, at the time they made
the contract, as the probable result of the breach". This
is the second limb of the test and is concerned with
knowledge of special circumstances outside the usual
course of things and what loss could have reasonably
been contemplated by the party in breach with
knowledge of the special circumstances. Loss falling
under the second limb is referred to by the courts as
"indirect" or "consequential" loss.
Hadley v Baxendale limb 2 – indirect loss

84
Any loss which is more "remote" than (i) and (ii)

above is considered to be too remote and a party will
not generally be liable for it. As regards direct and
indirect loss, although the default position is that a
party will be liable for both, it is not uncommon for
parties to a contract to exclude liability for indirect
loss and certain types of direct loss.

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What loss is recoverable under FIDIC?

85
direct loss and expense – if they fall within the

definition of "Cost" and are directly linked to the
clause giving rise to the claim, they can be claimed.
preliminaries – as above, these are also recoverable.
overheads – also recoverable; the cost of running the
business, as distinct from general site costs, is
expressly allowed for in the definition of Cost.
Recoverable loss?
86
loss of productivity/disruption – in principle this is

recoverable but in practice proving this loss is
difficult. The "measured mile" approach compares
work in disrupted and undisrupted conditions with
the difference between the two being the disruption
factor.
profit – this is not recoverable, unless expressly
allowed for in the Contract. Profit is excluded from
both the definition of Cost and by Clause 17.6.
Recoverable loss?
87
interest – recoverable; the Contractor has an express

right to interest on any unpaid sums under the
standard FIDIC forms.
finance charges – recoverable; under English law, it is
possible to claim finance charges as part of a claim for
direct loss and expense.
inflation/exchange rate fluctuation – not recoverable;
increased costs resulting from inflation/exchange rate
fluctuation are classed as "consequential loss" and are
therefore excluded by Clause 17.6.

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Recoverable loss?
88
claims preparation costs – may be recoverable;

under English law can be recoverable in principle but
it is hard to establish such claims.
lost commercial opportunity and business
interruption – generally not recoverable
Lecture 5 – notices and claims procedure

14.30-15.15
89
Sub-Clause 20.1
1st paragraph
90
If the Contractor 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 shall give notice to the
Engineer, describing the event or circumstance
giving rise to the claim. The notice shall be given as
soon as practicable, and not later than 28 days after
the Contractor became aware, or should have
become aware, of the event or circumstance.

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Sub-Clause 20.1
2nd paragraph
91
If the Contractor fails to give notice of a claim within

such period of 28 days, the Time for Completion
shall not be extended, the Contractor shall not be
entitled to additional payment, and the Employer
shall be discharged from all liability in connection
with the claim. Otherwise, the following provisions
of this Sub-Clause shall apply.
20.1
92
Cases
Sisters of Mercy case in Australia
Steria v Sigma case in England
Bremer case in England
Education 4 Ayrshire case in Scotland
WW Gear case in England
Gibraltar Tunnel case in England
Sub-Clause 2.5
93
If the Employer considers himself to be entitled to any payment under any

Clause of these Conditions or otherwise in connection with the Contract,
and/or to any extension of the Defects Notification Period, the Employer or
the Engineer shall give notice and particulars to the Contractor. However,
notice is not required for payments due under Sub-Clause 4.19 [Electricity,
Water and Gas], under Sub-Clause 4.20 [Employer’s Equipment and Free-
Issue Material], or for other services requested by the Contractor.
The notice shall be given as soon as practicable after the Employer became
aware of the event or circumstances giving rise to the claim. A notice
relating to any extension of the Defects Notification Period shall be given
before the expiry of such period.
The particulars shall specify the Clause or other basis of the claim, and
shall include substantiation of the amount and/or extension to which the
Employer considers himself to be entitled in connection with the Contract.
The Engineer shall then proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine (i) the amount (if any) which the
Employer is entitled to be paid by the Contractor, and/or (ii) the extension
(if any) of the Defects Notification Period in accordance with Sub-
Clause 11.3 [Extension of Defects Notification Period].
This amount may be included as a deduction in the Contract Price and
Payment Certificates. The Employer shall only be entitled to set off against
or make any deduction from an amount certified in a Payment Certificate,
or to otherwise claim against the Contractor, in accordance with this Sub-
Clause.

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15.15 – 15.45 - TEA

94
Workshop 2 –
95
Claims Notices and extension of time claim
Man Utd Engineer

Chelsea Contractor
Arsenal Employer
End of Day 1
96
DAY 1 is over
Two more days to go!

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97
https://uk.linkedin.com/in/dedezade
Lecture 6 – Claims for delay

9.00-9.45
98
Time 1/4
99
Clauses relevant to Extension of Time under the 1999

Red Book
1.1.3.3 Time for Completion ;
1.9 Delayed Drawings or Instructions;
2.1 Right to Access to the Site;
4.6 Co-operation;
4.7 Setting Out;
4.10 Site Data;
4.12 Unforeseeable Physical Conditions;
4.24 Fossils;
7.4 Testing;

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Time 2/4
100
8.2 Time for Completion;

8.3 Programme;
8.4 Extension of Time for Completion;
8.5 Delays Caused by Authorities;
8.6 Rate of Progress;
8.7 Delay Damages;
8.8 Suspension of Work;
8.9 Consequences of Suspension;
Time 3/4
101
8.11 Prolonged Suspension;

10.1 Taking Over of the Works and Sections;
10.3 Interference with Tests on Completion;
13.1 Right to Vary;
13.2 Value Engineering;
13.3 Variation Procedure;
13.7 Adjustments for Changes in Legislation;
13.8 Adjustments for Changes in Cost;
15.5 Employer’s Entitlement to Termination;
Time 4/4
102
16.1 Contractor’s Entitlement to Suspend Work;

17.4 Consequences of Employer’s Risks;
19.4 Consequences of Force Majeure; and
20.1 Contractor’s Claims.

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Introduction
103
Time is usually important

Time costs money
A certain amount of time is required for any project
and there is pressure from the employer to keep it
short. That in itself creates risk both because of the
pressurised working environment and because the
likelihood of overrun is increased.
Construction and engineering projects are subject to
considerable risks
Risks cause delay

104
For contractors:. These often manifest themselves as

delay damages (if CRE), extended labour, material
and equipment costs, extended head and site and
office overheads and inefficiency (disruption) costs
(which may be recoverable if caused by ERE or SRE).
For employers: loss of profit, revenue opportunity
costs and consultancy fees.
As these costs can be significant the liability for delay
is frequently the subject of contention
FIDIC regime
105
8.2 Time for completion

8.4 and 8.5 mechanism for extending time for
completion
Various clauses throughout the conditions giving the
C entitlement to EOT
8.7 delay damages if C does not complete within the
Time for Completion or extended Time for
Completion.

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Balfour Beatty v Chestermount (1993)

106
"[I]t is right to examine the underlying contractual

purpose of the completion date [8.2]/extension of time
[8.4]/liquidated damages [8.7] regime. At the
foundation of this code is the obligation of the
contractor to complete the works within the
contractual period [8.2] terminating at the completion
date and on failure to do so to pay liquidated charges
[8.7] for the period of time by which practical
completion exceeds the completion date.
BB v Chestermount contd.
107
But superimposed on this regime is a system of allocation of

risk. If events occur which are non-contractor's risk events
(EREs/SREs) and those events caused the progress of the
works to be delayed, in as much as such delay would
otherwise cause the contractor to become liable for liquidated
damages or for more liquidated damages, the contract
provides for the completion date to be … adjusted in order to
reflect the period of delay so caused and thereby reduce pro
tanto the amount of liquidated damages payable by the
contractor. …. [in other words, if there has been an ERE or
SRE as per the claims tables, the C has grounds for an EOT]
8.2
108
The basic obligation to complete is contained in Sub-

Clause 8.2 – the Time for Completion
Without a contractual time for completion, in
common-law countries, completion would be within
a reasonable time.
Also, as a result of the prevention principle, if there
is a delay caused by a breach of contract or act of
prevention by the employer and there is no
applicable provision for an extension of time then
the date for completion would cease to apply and
time would be at large – reasonable time obligation
again. LDs provision also falls away

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Percy Bilton Ltd v GLC (1982)

109
"1...The general rule is that the main contractor is bound to

complete the work by the date for completion stated in the
contract. If he fails to do so, he will be liable for liquidated
damages to the employer. [Sub-Clause 8.2]
2. That is subject to the exception that the employer is not
entitled to liquidated damages [8.7] if by his acts or omissions
he has prevented the main contractor from completing his
work by the completion date....
3. These general rules may be amended by the express terms
of the contract. [8.4(e)]"
Question
110
Which party derives the most benefit from the EOT

clause?
Employer; or
Contractor?
Peak v McKinney (1970)

111
"A clause giving the employer liquidated damages [8.7] at so

much a week or month which elapses between the date fixed
for completion and the actual date for completion is usually
coupled, as in the present case, with an extension of time
clause.[8.4] The liquidated damages clause contemplates a
failure to complete on time due to the fault of the contractor.
It is inserted by the employer for his own protection;
for it enables him to recover a fixed sum as compensation for
delay instead of facing the difficulty and expense of proving
the actual damage which the delay may have caused him.

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Advantages of EOT clause

112
The EOT clause in 8.4 allows the completion date to

be extended due to an employer’s breach of contract
or act of prevention. This will mean that the
prevention principle will not kick in to set time-at-
large and the Employer will retain its ability to claim
liquidated damages – delay damages in FIDIC speak
Function of EOT clause

113
The clause also serves to relieve a contractor in delay

of liability for liquidated damages in the event that
certain causes of delay – not attributable to the
contractor occur and the contract entitles the
contractor to claim time.
8.7 is the delay damages clause
Prolongation costs
114
In practice, an EOT is the basis of a prolongation

cost claim.
There are several claims clauses littered throughout
the general conditions that allow the Contractor to
claim time and/or money – see divider 8
Sub-Clause 2.1 is a typical claims clause.
8.5 provides an additional ground – time not money

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Lecture 7: Critical Path analysis

115
What is critical path analysis?

116
The critical path was defined in the SCL protocol as:

“the sequence of activities through a project network from
start to finish, the sum of whose durations determines the overall
project duration” i.e. the longest continuous path through the
planned works.
Delay to any activity on the critical path will, without

acceleration or re-sequencing cause a delay to the Time for
Completion. By contrast, delay to activities that are not on the
critical path will not delay the Time for Completion.
Who owns the float

117
Float is the amount of time that non-critical

activities can absorb in excess of their original
intended duration, without impacting on the critical
path of the works as a whole.
The contractor may build some float into his
programme to give himself a cushion for unforeseen
problems.

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POW
118
8.3 programme
What is the overall duration of the project?
How detailed should the plan be?
How often should the plan be updated?
Who needs to receive information about progress?
What kind of reports should be prepared?
What graphics will be required to help communicate best?
How much time can be afforded on P.M.?
Base line POW

119
The starting point for any delay analysis.

Needs to be realistic and capable of being achieved.
Should be updated
Adjusting POW
Resources in POW
As-built POW
120
This demonstrates what actually happened.

The accuracy of an as-built POW should be based on
contemporaneous records.
Agreed records are preferable. Progress reports are
normally used. Site diaries may be a better source?

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Different Techniques of delay analysis

121
1. As planned vs as-built
2. Impacted as-planned
3. Collapsed as-built
4. Windows analysis
5. Time impact analysis
Prospective/retrospective
122
Prospective is forward looking

Retrospective is backward looking
1) As planned vs as-built
123
Comparison between what was planned and what was

actually built with a factual explanation of what caused the
difference between what was planned and what was built.
ADVANTAGES DISADVANTAGES
Based on fact of what happened, i.e. Depends on as built records being
relies on as-built data. reliable and planned POW being realistic.
The comparison could demonstrate the Envisages a like-for-like comparison
duration of delay of different individual which may not be possible due to changes
work activities and how that delay in the ground rendering the original
impacted on the Time for Completion programme so different from what was
hence showing the overrun period. built so as to enable a useful comparison
impossible.
Cheap method of analysis. Merely identifying periods of delay to
certain work activities does not by itself
demonstrate the causes of such delay.

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2) Impacted as-planned
124
Adjusting planned POW to reflect the

omission/additions to the works and other relevant
events which may have had an impact on the
progress of the works. The impact of potential delay
events is considered individually thereby quantifying
the extent of the delay attributable to each event.
Requires a POW with robust logic links and an
adequate baseline POW.
Major weakness with this approach is that it does not
consider the as-built and so is theoretical.
3) Collapsed as-built
125
The reverse of impacted as-planned. Starts with the

as-built and strips out the delay events to show what
would have happened during the project but for the
delaying effects of the relevant events.
Once all employer delay events have been removed
from the as-built programme, a new theoretical
programme will have been produced which purports
to show the completion date which the contractor
would have achieved absent the delays for which it
holds the employer responsible.
4) Windows analysis
126
2 types
Time slice windows analysis
As planned/as-built windows analysis
Both methods seek to find the criticial path through

the project. Needs an effective baseline programme
and regular (say monthly) and detailed progress
updates.
Basically the planned POW gets updated (monthly)
with actual progress data and each month the critical
path is established and the delay to planned
completion established – the delay being then
established.

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5) Time impact analysis

127
An updated planned POW is produced at the date of

a particular alleged delay by impacting the delay
onto the POW.
Rubbish in; Rubbish out

128
Delay “experts” are not able to give evidence as to the

factual timing, duration and causes of delay to
individual activities. These are matters of fact to be
ascertained on the evidence. Experts should
therefore set out the source for any data and not
make assumptions.
Experts should seek to agree factual material.
Coffee - 10.30-10.45
129

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Lecture 5 – Delay problem areas

130
Concurrency
Acceleration
Time at large
Concurrency
131
Definition: “a period of project overrun which is

caused by two or more effective causes of delay
which are approximately of equal causative potency.”
With this definition there is only true concurrncey
where both events cause delay to the progress of the
works and the delaying effect of the 2 events is felt at
the same time.
Concurrency – time
132
England
C is entitled to EOT where delay caused by matters falling
within the clause notwithstanding the matter relied upon by C
is not the dominant cause of delay and is of at least equal
“causative potency” with all the other matters causing delay.
De beers C “is entitled to have the time within which the
contract allows or which the employer’s conduct has made
reasonably necessary.”Notwithstanding that the would have
been unable to complete absent any breaches of contract on
the part of the employer
Scotland
Apportionment where there are concurrent
causes of delay, none of which can be
described as dominant

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Concurency - money
133
There is no concurrency clause in FIDIC and a

number of approaches have developed:
Malmaison - C is entitled to time but not money as the “but
for” test of causation cannot be satisfied, i.e. but for the
conduct complained of, the claimant would not have suffered
damage of which complaint is made (as there is also a CRE
occurring concurrently).
Burden of proof approach similar to but-for test
Dominant cause test
Apportionment
Summary on concurrency
134
C is probably entitled to time but not money if the

ERE was an effective cause of the delay even if there
was another concurrent CRE cause of the same delay
C only entitled to money where but for test satisfied.
Even if dominant cause test satisfied the C would fail
if there was a CRE that also caused a loss
Acceleration
135
The completion of work in a shorter time than

anticipated in the light of the resources in the degree,
disposition and under the circumstances anticipated
by the contract documents. Acceleration is usually
achieved by the adoption of increased working hours,
overtime and double/triple day shifts or by logic
changes which compress the work sequences.

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Constructive acceleration
136
Delay occurs which E considers is CRE but C

considers it is ERE and hence entitles him to an
EOT. If no EOT is granted then C has to make an
election whether to accelerate the works in order to
avoid the imposition of LDs or continue at the
programmed rate and thereafter seek an EOT and
associated prolongation costs.
If an EOT and loss and expense is ultimately granted
then arguably, it would not also be possible to claim
constructive acceleration as this would be double
recovery.
137
Prevention and
time at large
PREVENTION
138
Rede v Farr 1817 – “a party shall never take

advantage of his own wrong”
Roberts v Bury 1870 – “no person can take
advantage of the non-fulfilment of a condition the
performance of which has been hindered by
himself…he cannot sue for a breach occasioned by
his own breach of contract”
Amalgamated building 1952 “the building owner
cannot insist on a condition if it is his own fault that
the condition has not been fulfilled”

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Prevention and effect on Time

139
Holme v Guppy 1838 – C contracted to complete

within a fixed period. There was no EOT clause. E
prevented C from meeting the completion date. The
prevention principle
set time at large, i.e. the Time for Completion was disapplied
and provided time for completion should be within a
reasonable time.
Prevented the C from having to pay LDs.
EOT clause
140
With a view to safeguarding the regime, EOT clauses

were introduced into standard forms such as 8.4e
It was then held that if the EOT clause was
inadequate the prevention principle could still apply
– Wells v Army and Navy 1902
Several English cases in the 1970s and 1980s all
clearly establish that LDS not recoverable in
circumstances when the employer was at fault and
the EOT clause failed to properly address the
employer’s defaults
Modern application of prevention

141
In modern times, prevention kicks in even when

there is an eot clause such as 8.4 in circumstances
Where there is concurrency
Where there has been a failure to comply with 20.1

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142
Prevention and time bars
Prevention and time bar clauses

143
A failure by the Contractor to give notice under Sub-

Clause 20.1, bars the claim for time and/or money,
i.e. the time for completion is not extended as a
result of the Employer’s breach and notwithstanding
the fact that the delay was caused by the Employer,
the Employer retains the right to deduct delay
damages under Sub-Clause 8.7.
Is that right?
144
There has been much commentary and case-law on

whether a contractor should remain liable for
liquidated (delay) damages and be bound to finish
within the original Time for Completion in
circumstances where the delay was caused by a
breach of contract/act of prevention by the Employer
and the contractor has failed to comply with the
time-bar clause.

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The questions
145
If the Employer delays (as a result of breach of

contract/act of prevention) the contractor and the
contractor fails to comply with the time-bar clause:
1. Should the contractor in these circumstances still

be liable for delay damages?
2. Should the contractor in these circumstances be
obliged to complete within the Time for
Completion?
DEVICES
146
If a party fails to comply with the notice provisions

under Sub-Clause 20.1, such a failure will need to be
interpreted under the governing law.
In both common-law and civil law jurisdictions,
there may be arguments available that will have the
effect of:
striking down the time-bar clause; and/or
relieving the contractor of liquidated (delay) damages and/or
setting time at large.
Australia
147
whilst the authorities are divided, there is a view

given in the Gaymark case that the prevention
principle will be operational, time will be set at large
and the contractor will be relieved of liquidated
(delay) damages.

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England
148
This application of the prevention principle has

become known as the “Gaymark principle”.
MULTIPLEX decision disapproves Gaymark and
takes a hardline regarding the 20.1 timebar clause:
“If Gaymark is good law, then a contractor could disregard
with impunity any provision making proper notice a
condition precedent.”
Workshop 3 –
11.30-13.00
149
Critical path analysis
Man Utd Employer

Chelsea Engineer
Arsenal Contractor
Lunch – 13.00 – 14.00

150

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Lecture 9: Payment Provisions

151
Step 1 Sub-Clause 14.3 C makes IPA – see 4.21 progress reports
Step 2 Sub-Clause 14.6 Eng to issue IPC within 28 days (unless < min.
amount and notice is given). No sanction for not
issuing within 28 days.
If no notice given within 56 days – termination
right under Sub-Clause 16.2 (b)
Step 3 Sub-Clause 14.7 E shall pay amount in IPC within 56 days. No
sanction for non-payment within 56 days.
If no payment is made within 42 days of the
expiry of the 56 days set out in Sub-Clause 14.7
– termination right under Sub-Clause 16.2(c)
Variations
152
Variations on a theme of ping pong
Variations
153
It is almost inevitable that, however well thought

through a construction project is at design stage,
when it comes to be built, there will be a need for
some variations.
At least under English law an employer is not
entitled unilaterally to vary the works unless the
contract contains an express right to do so.

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Purpose of a variation clause

154
The purpose of a “variation clause” is to enable an

employer to avoid having to enter into a new contract
with the same contractor, or perhaps another
contractor, to have him perform a variation.
If the employer were to approach a new contractor, he would
face re-tendering costs, possible increases in prices, delay and
clashes between the original and new contractors on site.
If on the other hand the employer is able to vary the original
contract, costs and inconvenience may be kept to a minimum.
RB Definition of Variation
155
Sub-Clause 1.1.6.9
“any change to the Works,

which is instructed or
approved as a Variation
under Clause 13 [Variation
and Adjustments].”
RB Sub-Clause 13.1
156
“Variations may be initiated by the Engineer at any

time prior to issuing the Taking-Over Certificate for
the Works, either by an instruction or by a request to
the Contractor to submit a proposal….[ C] shall
execute and be bound by each Variation”.
Variation “may” include. From the wording it is not
clear whether the word “may” is intended to mean that
the list that follows is an exhaustive or non-exhaustive
- latter is more likely

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Exception
157
The only exception which enables the Engineer to

cancel, confirm or vary the instruction is where the
Contractor promptly gives notice and particulars to
the Engineer stating that he “cannot readily obtain
the Goods required for the Variation”.
Yellow Book and Silver Book

158
Neither the FIDIC Yellow Book nor the Silver Book

contains a list of possible Variations like the one
provided in the Red Book. Nor do they make
provision for the valuation of Variations like the Red
Book does.
Sub-Clause 13.1 of both Yellow and Silver Books does
pick up that a Variation shall not comprise the
omission of any work which is to be carried out by
others.
Scope of Variations clause

159
On a strict construction of Clause 13, there is no

restriction on the nature or scope of additional work
that can be instructed as long as it is a “change to the
Works”.
1876, Lord Cairns Thorn v London Corporation distinguished
between additional or varied work that was contemplated by the
contract, and work that was not. He described work not
contemplated by the contract as “additional or varied work, so
peculiar, so unexpected, and so different from what any person
reckoned or calculated upon, that it is not within the contract at
all” and concluded that such work would not fall within the
variation clause.

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Cardinal change
160
In the United States a “cardinal-change” doctrine has

developed. Initially it referred to the legal principle
by which a contractor is released from the obligation
to work under the terms of a government contract if
the government has made a major or cardinal change
to that contract by directing the contractor to
perform work not within its general scope.
Question of Fact
161
Plainly it will be a question of fact whether a change

falls within the Thorn test for a legitimate variation
or whether it crosses the threshold of a cardinal
change.
Valuation of Variations in RB
162
Sub-Clause 12.3
Rule 1 – Contract rates and prices
Rule 2 – based on contract rates and prices
Rule 3 – New rates and prices

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Lecture 10 – Ending the project

14.45 – 15.30
163
Taking Over the Project

Defect Notification Period
Suspension and Termination
Defects
164
Where there has been substantial completion the

measure of damages is the amount that the work is
worth less the value of the defects and omissions.
The normal rule is that damages are normally
calculated by the cost of making the defect good. The
exception to this rule is when the cost is
disproportionate to the end to be attained. Is it
reasonable to recover the damages claimed?
Ruxley electronics swimming pool case.
N.B. deduction should be made if
betterment
Defects Liability
165
Defects Notification Period – Defined in Sub-Clause

1.1.3.7.
11.1 provides that the C must complete any
outstanding work stated in the TOC, and remedy any
defects.
11.2 provides that the C shall bear the risk of
remedying defects if and to the extent that the work
is attributable to C design, plant, materials and
workmanship not in accordance with the Contract
and failure by the C to comply with any
other obligation

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Termination right
166
Termination right hidden in 9.4 and 11.4
Lecture 11: Design Build

15.30-16.00
167
Concept
General
Arrangement
Detail
Working
Shop
Material Selection
Basic dynamic of DB
168
C can find the cheapest solution which complies with

the Employer’s Requirements
That enables C to win the bid and be the cheapest.
Accordingly, it is critical that the Employer specifies
what matters, sometimes it is the detail that really
matters such as a hotel.

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Fitness for purpose – Sub-Clause 4.1

169
“When completed, the Works shall be fit for the

purposes for which the Works are intended as
defined in the Contract”
How the purpose should be defined in the contract is and will
remain a subject for debate.
The Contractor is supposed to state in his tender
letter that he has “ascertained that [the Employer’s
Requirements etc.] contain no errors or other
defects”.
170
However, after commencement, clause 5.1 provides

the Contractor with a set period to point out any
other errors and time and money is awarded unless
“… an experienced contractor exercising due care would have
discovered the error …before submitting the Tender.”
After the period has expired, any errors found later
will give rise to time and money only if that
experienced contractor would not have spotted the
error in the initial prescribed period.
Design responsibility
171
As a general rule: The one who designs is the one

who is responsible.
In red book as E designs, E responsible for design.
In silver book C responsible.
In YB if experienced C would not have picked up errors
in ERs within the design scrutiny period, then under
1.9, he has a claim for time and money. If an Ex. C
should have picked up errors then no claim – C risk
Patent Defect in ERs– C risk. Latent defect – E risk

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5.1
172
“The Contractor shall carry out, and be responsible

for, the design of the Works…Upon receiving notice
under Sub-Clause 8.1, the Contractor shall
scrutinise the ERs (including design criteria and
calculations, if any) … the Contractor shall give
notice to the Engineer of any error, fault or other
defect found in the ERs…After receiving this notice,
the Engineer shall determine whether Clause 13
shall be applied, and shall give notice to the
Contractor accordingly”
Sub-Clause 5.1 part 2

173
“If and to the extent that (taking account of cost and

time) an experienced contractor exercising due care
would have discovered the error, fault or other defect
when examining the Site and the Employer’s
Requirements before submitting the Tender, the Time
for Completion shall not be extended and the Contract
Price shall not be adjusted.”
Sub-Clause 1.9
174
If an experienced contractor would not have

discovered the errors in ERs and the C has suffered
delay and/or loss, then the C can claim time and/or
money under 1.9

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Workshop 4 –
175
The FIDIC 1999 Yellow Book
Man Utd Employer

Chelsea Engineer
Arsenal Contractor
End of Day 2
176
DAY 2 is over
One more day left to go
Lecture 12
Why did FIDIC create the Silver Book?
177
The first FIDIC form which does not adopt a

balanced risk allocation shifting more risk on the C
mainly to satisfy the BOT model and in particular the
financiers - rather than satisfying the best interests
of the project or to achieve the optimum outturn
price for the project.
desire for
single point responsibility for design.
Certainty of time and final price
• Previous books were simply amended to
transfer more risk on to the C

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Typical use
178
The Silver book is suitable for a process or power

plant, or an infrastructure project, if:
a higher degree of certainty of final price and time is required;
and
The Contractor takes total responsibility for the design and
execution of the project (including responsibility for Employer
design).
Funding infrastructure projects

179
Central government may allocate a budget to a

government department for use on infrastructure
projects.
that budget may be supplemented by loans/grants
from bodies such as the EU, World Bank, ADB etc.
The Government department would then become the
Employer and enter into a construction contract with
the Contractor. The dynamic that then inevitably
arises is where the money (budget) will come from
to pay the Contractor for its
claims/variations?
EPC Turnkey Contracting

180
The Silver book is intended specifically for BOT

projects but as it is a standard form construction
contract only it does not encompass other BOT
specific issues which will be relevant to contractors.
The silver book does not address the role that
financiers ought to play in a BOT project save for a
brief acknowledgement in the introductory note that
privately financed projects are usually subject to
more negotiation. Arguably this should be dealt
with head on

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BOT project
181
Grantor grants concession to SPV to provide finance

for, build and operate infrastructure over a set period
in exchange for compensation based on the
performance of the infrastructure
Finance is normally limited recourse debt (project
finance) which is why lenders providing the project
finance require risk to be allocated away from the
SPV and want C to bear a substantial portion of the
construction risk related to the project.
i.e. The financiers want limited scope
for the C to claim time and money.
What is limited recourse debt?

182
In a BOT project, the project company finances the

construction of the facility through equity
investment from its shareholders and debt from
lenders or the capital markets.
Limited recourse debt means that lenders will be
limited to the assets of the project company for
repayment of debt. The project company’s only
assets will be the concession and the facility to be
built.
Lenders keen to shift risk

183
Accordingly, lenders will wish to review the cost and

timing of the construction of the facility, the project
revenue stream and whether the revenue stream will
be sufficient to make the debt repayments plus a
margin for comfort.
The revenues of the project company from operation
of the facility are used to service the debt incurred by
the project company in building the facility, to cover
its working capital O&M costs and to provide a
return for its equity investors.

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Transfer of risk
184
The project company and the lenders will want to

reduce to a minimum the circumstances entitling the
contractor to additional time or money under the
construction contract and the extent to which the
project company bears any construction risk.
This process of passing risk from the project
company to the contractor is commonly referred to
as “back to backing” construction risk.
Return of lenders is fixed

185
Because the return of lenders is fixed, the lenders

will be less concerned about a higher price in order
to secure a complete pass-through of construction
risk.
So even if the contractor is not able to assess the risk
the idea is for more risk to be shifted to the C
2.4
186
As a result of this dynamic, an immediate concern

for the C is whether the project company has the
resources to pay the Contract Price.
Lenders will not normally accept such a provision
Contractors might want to insist – perhaps a
compromise would be a clarification of the meaning
of reasonable evidence.

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Insolvency and retention

187
The contractor needs to be aware that it may have

little protection where the project is terminated or
the project company becomes insolvent and the
contractor has outstanding amounts owing from the
project company.
14.3 provides for retention monies to be withheld
from interim payments. This increases the risk of C
as a creditor to the project company. An amendment
could be for the retention monies to be placed in a
separate trust account over which C has
rights and which is not subject to lenders
security rights. Alternatively bond in lieu of retention
The turnkey contract

188
Turnkey form for BOT or other similar projects

“The concept of turnkey in its pure form is that the Employer
goes away entirely and returns when the Contractor has a
completed project ready to meet the performance
specification”
So in a turnkey contract, the corollary to the
allocation of more risk to C should be little or no
interference with the C by the project company about
the way in which the project
MORE RISK = LESS INTERFERENCE
Turnkey contracting
189
A feature of the turnkey approach to contracting,

including revenue generating facilities is the
requirement for the contractor to prove the
reliability and performance of the plant and
equipment. Particular prominence is thus given to
the testing commissioning and handover and how
this is to be undertaken. It is critical that such
projects are on time and in budget and capable of
meeting the designed production and output levels.

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Turnkey contracting
190
Performance of the asset is particularly key in those

turnkey projects financed through project finance as
lender’s security is dependent largely on the ability of
the completed facility to operate and generate
revenue, whether power chemicals, processed metals
or road toll revenue.
FIDIC Silver reflects this key requirement as the
Time for Completion includes not simply completing
the works but achieving the passing of tests on
completion.
How does FIDIC Silver balance risk and

interference?
191
As previously stated the silver book is the first

contract FIDIC has produced that has an allocation
of risk which is not balanced. More risk is allocated
to the Contractor. See in particular 4.10 and 4.12.
The provisions permitting the project company to
interfere with the design and construction, however
remains the same as in the other FIDIC books.
Is the silver book fair?

192
Risk
In the SB, there is a strict standard for design – fitness for
purpose - and a clear responsibility on the C for that design
including ensuring accuracy of the ERs
Interference
Yet the project company has the same power to instruct, vary
and condemn works as in the other FIDIC books.

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Design Resp. - Definition of ER’s

193
Employer’s Requirements is defined in 1.1.1.3 and

has the same definition as in the YB
“means the document entitled employer’s requirements, as
included in the Contract, and any additions and modifications
to such document in accordance with the Contract. Such
document specifies the purpose, scope, and/or design and/or
other technical criteria, for the works.”
Design Resp. contd. - * Ground Conditions *

194
In the Red and Yellow books, the Employer retains

the risk for unforeseeable physical conditions. In the
SB under 4.10 it makes clear that:
“the Contractor shall be responsible for verifying and
interpreting all such data. The Employer shall have no
responsibility for the accuracy, sufficiency or completeness of
such data, except as stated in Sub-Clause 5.1”
N.B. verification required not just interpretation
Design Resp. contd. - 4.12

195
4.12 is also in clear terms:

“Except as otherwise stated in the Contract [5.1 exceptions]:
(a) the Contractor shall be deemed to have obtained all necessary
information as to risks contingencies and other circumstances
which may influence or affect the Works.
(b) by signing the Contract, the Contractor accepts total
responsibility for having foreseen all difficulties and costs of
successfully completing the Works; and
(c) the Contract Price shall not be adjusted to take account of any
unforeseen difficulties or costs.”
N.B. 4.12 (b) deals with unforeseeable difficulties NOT
RESTRICTED TO PHYSICAL CONDITIONS

1/25/2017
Design Resp. contd. –

4.12 clear but what about 19.7?
196
4.12 is clear but there is an impossibility clause at

clause 19.7 which discharges the Contractor from
further performance
“if an event or circumstance outside the control of the Parties
… arises which makes it impossible or unlawful for either or
both Parties to fulfil its or their contractual obligations …”.
This provision may well come under pressure where
ground conditions render the works impossible to
achieve as intended.

Fitness for purpose (4.1)
197
In the SB (as in the YB) the C’s obligation is to

design, execute and complete the Works and remedy
any defects in the Works.
There is a fitness for purpose obligation (like in the
YB)
This clause is a clause that Contractors are loth to accept, and
for good reason.
A contractor’s professional indemnity insurance policy rarely
insures such an obligation, the usual cover being in respect of a
failure to design with reasonable skill and care.
FITNESS FOR PURPOSE

198
If perhaps, because of the novel, cutting edge nature of a design

required on a project, a project fails to meet its operational
requirements so that it is arguably not fit for its intended
purpose, it is certainly possible that the contractor will
nevertheless have carried out its duties with reasonable skill and
care. In such circumstances, whilst the contractor may find itself
contractually liable, it may not be insured.

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Design Resp. contd. -

199
In the SB, the Contractor liable for design

notwithstanding errors in ERs except in (a)-(d) 5.1:
5.1 “the Employer shall not be responsible for any error,
inaccuracy or omission of any kind in the ERs as originally
included in the Contract and shall not be deemed to have
given any representation of accuracy or completeness of any
data or information except as stated below [see exceptions].
Any data or information received by the Contractor, from the
Employer or otherwise shall not relieve the Contractor from
his responsibility for design and execution of the Works”
Design Resp. cont.d

200
Ordinarily, the concept that a party should be

absolved of its fault or error is not favoured
The Contractor remains fully responsible for design
and design coordination (including any design of the
Employer) - so any errors in the Employer’s
requirements are at the Contractor’s risk with only
few exceptions (clauses 5.1 and 5.8).
Design Resp. contd. - The Exceptions

201
E shall be responsible for:

a) portions, data and information which are stated in the
Contract as being immutable or the responsibility of the
Employer,
(b) definitions of intended purposes of the Works or any
parts thereof,
(c)criteria for the testing and performance of the
completed Works, and
(d) portions, data and information which cannot be
verified by the Contractor, except as otherwise stated in the
Contract.

1/25/2017
Beware of exception 5.1(d).

202
Sub-Clause 5.2
203
In both yellow and silver clause 5.2 deals with the

submission for review of those drawings and
documents that the ERs require to be submitted.
The review period is normally 21 days and within the time the
drawing may be disapproved for stated reasons on the basis that it
does not comply with the contract.
The contractor then must revise and resubmit his drawing.
In a turnkey contract this degree of control is surprising. How the
contractor achieves his performance criteria might be considered a
matter for him, provided that they are indeed achieved.
Design Resp. contd. - Claim available to C

204
If there is an error in the data stated in the Contract

as being immutable or the responsibility of the
Employer which delays the C then claim for time
under 8.4(c)
No express term to recover Cost or profit. So no
claim under the contract. But query whether the
governing law allows a claim.

1/25/2017

C responsible for accuracy of ERs
205
As set out in the slides above, therefore,

“the Contractor must be in the position to guarantee fitness
for purpose, which means that he must have found out all
necessary information and data, and have fully scrutinised
and understood the ERs, before the contract is signed”
N.B. (as with the YB) Sub-Clause 5.3 provides
necessity of C to ensure design complies with laws of
Country and technical standards (5.4)
Interference
206
So we have established from all the preceding slides

that there is a complete responsibility on the C for
the design including the necessity to verify.
the C should therefore have full control over the
design?
The silver book allows the project company to
tamper with the project and issue final instructions
without any impact on the C’s responsibility of the
final works.
Interference contd.
207
The project company is relieved of responsibility for

design specification and information while
maintaining the rights of supervision and
interference more commonly associated with the
Engineer:
Authority to issue instructions – Sub-Clause 3.4
Approval and review of C’s documents – Sub-Clause 5.2
Right to reject work that is not in accordance with the contract
Sub-Clause 7.5
- Variation procedure – Clause 13
- Right to withhold payment for work that appears
not to be wholly in accordance with the contract –
Sub-Clause 14

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Definition of Contract
208
Definition of “Contract” Yellow Book Silver Book
Contract Agreement √ √
Letter of Acceptance √
The Letter of Tender √
Tender √
These Conditions (GCC and PC) √ √
Employer’s Requirements √ √
Schedules √
Contractor’s Proposal √
Further documents (if any) listed √ √

in the Contract Agreement
or Letter of Acceptance √
Differences in Contract documents in SB

209
No Letter of Acceptance in SB
No Contractor’s Proposal. In YB. The Proposal
includes the Contractor’s preliminary design (a term
which is not defined). In SB the tenderer includes the
details of his proposals in the Tender. The definition
of Tender (1.1.1.4) excludes Conditions and ER’s so
that each of the documents can be allocated
appropriate priority in SB 1.5
No Appendix to Tender in SB. PC will contain info
This is to provide greater flexibility.
* Employer’s Representative *
210
There is no Engineer in the SB. An E’s Rep “may” be

named in the ER’s or may be appointed and notified
under 3.1. Contrast with RB and YB where Engineer
“shall” be appointed.
So the Employer and not a 3rd party performs the
role of the contract administrator in a SB contract.
The Employer’s Rep may be an employee of the
Employer or a 3rd party consultant.

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Employer’s Rep
211
The Employer may replace the E’s Rep at any time by

giving 14 days notice (second para of 3.1). C.f. 3.4 RB
Except in relation to Clause 15, the ER shall be
deemed to have the full authority of the Employer
under the Contract – this means that the ER is
essentially the Employer. There is no prohibition on
delegation in relation to 3.5 either. C.f.YB&RB 3.2
Approval of sub-contractors
212
In the Red and Yellow books the Contractor does not

need to obtain consent to suppliers of Materials to a
subcontract for which the subcontractor is named in
the contract but does in relation to un-named
subcontractors
No similar restrictions are placed on the Contractor
in the Silver book. Only notification is required.
Compare 4.4 in the respective books.
13.7 changes in Legislation

213
Changes in the law are claimable in the Silver book

as with the Yellow and Red books.

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13.8 – adjustments for changes in Cost

214
The Yellow and Red books contain a formula for

escalation if the Appendix to Tender contains a table
of adjustment data
The Silver book only allows escalation if the
Particular Conditions make provision for it.
Testing
215
All FIDIC forms provide a skeletal testing regime.

Necessarily the detail of testing is in the PCs,
particularly in SB contracts:
Sub-Clauses 7.3 and 7.4 makes provision for testing
during the construction period
Tests on Completion are carried out before the Works are
taken over (defined in 1.1.3.4.) specified in the Contract/or as
varied by the Employer – tests carried out under Clause 9.
Tests after Completion are carried out after Works are taken
over (defined in 1.1.3.6) specified in the Contract carried out
under Clause 12.
Testing
216
Testing regime is suitable for commissioning of plant

and machinery/ a power plant.
Employer's technical advisors to set performance/
reliability requirements as part of tender process.
Performance liquidated damages will be levied if the
Works do not meet specified performance
requirements. Performance liquidated damages are
typically between 10 and 20% (or greater) of the
Contract Price. (Clauses 9.4 and 11.4(c).)

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Testing
217
The Employer's technical advisor must review testing regime

and performance guarantee levels.
The consequences of failing to reach the performance
requirements/pass tests on completion are not dealt with well.
Bespoke forms are often drafted very carefully by employers in
this respect to provide that there is a certain level of
performance (usually called the minimum performance
requirements or criteria) which if the contractor is not able to
achieve it then the plant is simply regarded as unviable and no
amount of liquidated damages would compensate the
employer for the failure of the plant to achieve that level.
Testing
218
In such circumstances, the employer usually has the

right to terminate the contract and require the
contractor to remove any part of the works which
cannot be used and recover all sums paid to date.
Where the minimum performance requirements are
achieved then lds for underperformance below the
guaranteed levels may be applied.
Payment
219
The silver book like the YB is a lump sum contract

Price certainty
Fixed price lump sum payment against a schedule of
payments (clauses 14.1 and 14.4).
A fixed price lump sum payment process is a
standard sponsor/ funder requirement on a project-
financed deal.

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time
220
Limited rights for Contractor to claim EOT

(clauses 8.4 and 8.5). Missing from the list which
are present in the Red and Yellow books are:
Exceptionally adverse climatic conditions
Unforeseeable shortages in the availability of personnel or
goods caused by epidemic or governmental actions.
221
Basically, eot allowed for:

Variation
Delay impediment or prevention caused by or attributable

to Employer
Under the conditions
Clause 8.5 Delay caused by authorities provides an additional
ground.
Clause 19 force majeure is another.
Delay damages
222
The Employer is entitled to liquidated damages for delay

(clause 8.7). Rate to be agreed before Contract is executed
but typically between 10 and 20% (or greater) of the Contract
Price.

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Security – same in all three books

223
Contract allows for the Employer to receive an Advance

Payment Bond, Performance Bond (expiring on issue of
Performance Certificate) and/or Retention from the
Contractor to help cover potential risk of events such as delay,
breach or insolvency.
From an Employer’s/funders point of view, a robust security
package will be essential to help ensure that monies are
available in the event that the Contractor is in breach or
becomes insolvent.
A robust security package is a standard sponsor/ funder
requirement on a project-financed deal.
Warranty Bond should be considered for period of 24 months
after Taking Over (subject to amount of retention held).
(Clause 4.2.)
Instructions and Variations

224
3.3 - The Engineer’s ability to instruct is narrower

than under the yellow or red books. READ 3.4. There
is a requirement that the instruction has to be
justified under the contract unless it is a variation –
so in effect anything can be instructed if not under
the contract then as a variation.
3 ways for a variation

225
3 ways:
E may instruct the variation under sub-clause 13.1, without
prior agreement as to feasibility or price. C is given a right of
objection which can be overridden by the E or Eng. There is no
provision as to the result if the performance specification is not
met due to a variation being instructed despite the objections
of the contractor. It is difficult to see that the contractor could
be liable in such circumstances for the failure.
C may initiate his own proposals under sub-clause 13.2
(effectively value engineering) which are intended to benefit
both parties, or
E may request a proposal under sub-clause 13.3,
thus seeking agreement as to the time and cost
impact, prior to seeking the variation.

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Valuation of variations
226
Unlike the red book, neither the YB or the SB make

provision for how variations are to be valued, if they
cannot be agreed. If a variation is not agreed, the
contractor is obliged to carry it out pursuant to 13.1.
it is not clear how such variation is to be valued save
that, ultimately, if agreement cannot be reached,
then the employer must make a fair determination
under 3.5 (which should include profit). And then
there is the DAB and arbitration mechanisms
thereafter.
Coffee - 10.30-10.45
227
Workshop 5 – 10.45 – 12.15

228
The Silver Book
Man Utd Engineer

Chelsea Contractor
Arsenal Employer

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Global Claims
229
In principle, the loss or delay attributable to each

cause relied upon by a contractor should be
separately identified, particularised and proved.
A global claim is one that provides an inadequate
explanation of the causal nexus between the
breaches of contract or relevant events/matters
relied upon and the alleged loss and damage or delay
that relief is claimed for.
An example is a total costs claim, expected cost of
the works – actual cost of the works.
Lectures 15 and 16– The DAB, Amicable

settlement and Arbitration
230
Overview of the Claim and

dispute resolution process
231
20.1 3.5 20.4 20.5
2.5
3 ROUTES TO
ARBITRATION 20.8 20.7 20.6
CLAIM
DISPUTE

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DAB - Sub-Clause 20.2

232
Appointment of the DAB

No. of DAB members 1 or 3 default is 3
Adhoc/standing
Adhoc formed when dispute arises
Standing formed at outset of project
Terms of appointment
Skills: communication skills, availability, technical knowledge,
legal knowledge, dispute resolution experience, independence
and impartiality
Renumeration
Replacement
Termination of DAB appointment
Independence
233
Independence. Dependence arises from

relationships between the Member and one of the
parties or someone closely connected with the
parties (e.g. his lawyer). An objective test
Impartiality
234
Impartiality. Partiality arises when the decision maker

favours one of the parties over the other or where he
is prejudiced over the subject matter in dispute.
Subjective test

1/25/2017
20.4
235
Any dispute whatsoever can be referred to the DAB

What is a dispute?
84 days must give a decision
Decision given late a nullity
Notice of dissatisfaction
Binding – 4th para of 20.4
Final and binding – 20.7
20.5
236
Amicable settlement period – 56 days
20.6
237
Arbitration.
Default position under the 1999 forms is ICC
arbitration.
The two particular features of ICC arbitration which
distinguish themselves from other forms of
arbitration are
scrutiny of the award; and
Terms of Reference.

1/25/2017
20.7
238
Enforcing final and binding DAB decision

Difficulties with enforcing a binding DAB decision
20.8
239
If no DAB is in place then a party can refer a dispute

straight to arbitration.
What happens if a party refuses to sign?
Recent cases
The English case: Peterborough City Council (“the
Council”) v Enterprise Managed Services Limited
(“EMS”)[2014] EWHC 3193 (TCC)
Swiss Federal Supreme Court Case dated 7 July 2014
(4A_124/2014)
Jurisdictional objections
240
Is a DAB seised if a dispute hasn’t crystallised?

What is a dispute?
Does the DAB become functus officio on day 84
absent agreement to extend the time to give a
decision?
Can a DAB unilaterally extend time to give its
decision?
What happens if the DAB does give its decision late?

1/25/2017
Reaching a Decision
241
Inquisitorial vs adversarial systems

To what extent should the DAB make its own enquiry
when reaching a decision?
Is the DAB limited to the material before it to make
its decision?
DAB should ascertain relevant facts; ascertain
relevant law (usually mainly contained in the
contract); apply the facts to the law
Standard and Burden of Proof

242
He who asserts must prove?

National law?
Balance of probabilities
Intimate conviction
Writing the decision

243
Decision should be clear, concise and be easily

implemented by the Parties. There should be no
confusion as to what has been decided. E.g.
Employer shall pay Contractor €x.
Reasons need to be given but they need not be
extensive.
DAB must ensure it covers all of the issues referred
and deal with the Parties’ submis

1/25/2017
Form of decision
244
The title of the decision should be “Decision”

State the name of the contract
The names of the Dispute Board Members
The names of the Parties
Introduce the background of the dispute
Set out the statement of the dispute including each
parties submissions
Form of decision
245
The law: Set out the relevant provisions of the

contract that apply to the dispute and any provisions
of the national law that are relevant
If there is a dispute on how the law should be
interpreted, set out the parties’ respective positions,
set out your reasoning for why you have preferred
one party’s position or reached a different position to
that set out by the parties
Form of decision
246
The DAB is obliged to give each party a reasonable

opportunity of putting its case and responding to the
other’s case. It is paramount therefore that the DAB
does not go on a frolic of its own in its decision. The
parties should not be taken by surprise when seeing
the DAB’s decision.
Example about programmer

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Form of decision
247
Arrive at your findings of fact. If there are disputed

facts, set out how you have reached your
conclusions on the facts, i.e. Deal with the evidence
before you and the submissions of the parties on
how you should consider the evidence.
Form of decision
248
When you have made your findings of fact and set

out your position on the law, the final stage is to
apply the facts to the law and give your decision.
The final part of the decision should be the
conclusion of the dispute. In arbitration it is called the
dispositive.
State whether the decision is unanimous or whether
there is dissenting member
Dissent
249
If there is a dissenting member, the position of the

dissenting member should be recorded in the
decision
All three Members should confirm at the conclusion
of the decision that the decision is unanimous or if
not set out that it dissented.
It is normally the Chairman responsible for the
drafting of the decision.

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Jurisdictional objections
250
Notices of dissatisfaction – there are two types:

NODs concerning decision
NODs concerning failure to make a decision
The standard Yellow Book DAA template provides

that the DAB adjudicates on a particular dispute.
When that ad-hoc DAB has given its decision,
therefore, its mandate is over
ICC Arbitration
251
20.6 20.6 Unless settled amicably, any dispute in respect of which the DAB’s decision
(if any) has not become final and binding shall be finally settled by inter-
national arbitration. Unless otherwise agreed by both Parties:
(a) the dispute shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce,
(b) the dispute shall be settled by three arbitrators appointed in
accordance with these Rules, and
(c) the arbitration shall be conducted in the language for communications
defined in Sub-Clause 1.4 [Law and Language].
The arbitrator(s) shall have full power to open up, review and revise any
certificate, determination, instruction, opinion or valuation of the
Engineer, and any decision of the DAB, relevant to the dispute. Nothing
shall disqualify the Engineer from being called as a witness and giving
evidence before the arbitrator(s) on any matter whatsoever relevant to the
dispute.
Neither Party shall be limited in the proceedings before the arbitrator(s) to
the evidence or arguments previously put before the DAB to obtain its
decision or to the reasons for dissatisfaction given in its notice of dis-
satisfaction. Any decision of the DAB shall be admissible in evidence in the
arbitration.
Arbitration may be commenced prior to or after completion of the Works.
The obligations of the Parties, the Engineer and the DAB shall not be
altered by reason of any arbitration being conducted during the progress of
the Works.
2 unique features of ICC arbitration

252
TOR
scrutiny

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ICC Rules
253
4-6 commencing the arbitration

5 Answer
7-12 The Arbitral Tribunal
13-23 The Arbitral Proceedings
24-29 Awards
30-31 costs
32-35 misc
Workshop 6 –
16.00-17.30
254
DAB hearing on termination
Man Utd Employer

Chelsea DAB
Arsenal Contractor
End of Day 3
255
DAY 3 is over
No more days left to go
Don’t hesitate to get in touch

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1/25/2017

Chelsea Employer Contractor Engineer Employer Contractor DAB

Arsenal Engineer Employer Contractor Engineer Employer Contractor

LECTURES 1 and 2 9-10.30

A0910 PB Negligence: other issues 1

FEDERATION INTERNATIONAL DES

1. Be the recognised international authority on issues

5. Promote and assist the worldwide development of

A0910 PB Negligence: other issues 2

History of ICE Form

ACE (Association of Consulting Engineers

August 1956 Overseas (Civil)Conditions of Contract

History of Red Book

Conditions of Contract (International) for Works of

A0910 PB Negligence: other issues 3

History of Yellow Book

Conditions of Contract for Electrical and

Integration between the 2

The old forms were classified by different

Concept of single point responsibility

A0910 PB Negligence: other issues 4

Introduction to the FIDIC 1999

recommended for building or engineering works

A0910 PB Negligence: other issues 5

The Red book is a measurement or lump sum

1999 suite – origins of 1999 red

1999 red is not a revision of 4th ed. Red. But it

A0910 PB Negligence: other issues 6

recommended for the provision of electrical and/or

Lump sum contract

The yellow and silver books are contemplated as

Design build model

Structural Services Sub-

A0910 PB Negligence: other issues 7

Origins of Yellow, Silver and Green

1995 Orange/1987 yellow became 1999 yellow.

Silver and green completely new

Yellow Book Clause 5.1

The Contractor shall carry out, and be responsible

The Contractor warrants that he, his designers and

recommended for the provision on a turnkey basis of

A0910 PB Negligence: other issues 8

Short Form of Contract, which is recommended for

Basis of colour coding of 1999 forms

1999 forms are based on allocation of design and

Other FIDIC forms in chron order

White Book – 4th ed. 2006

A0910 PB Negligence: other issues 9

Other contracts continued

Gold Book – Design Build and Operate Projects 1st

FIDIC’s first subcontract for use with the 1987 Red

Similarities between the books

Red book has 165 clauses

A0910 PB Negligence: other issues 10

The function of a construction contract is to allocate

A0910 PB Negligence: other issues 11

Structure of Red Book