DEME 3-Day General Principles of Contract Management Training Presentation

GENERAL PRINCIPLES OF CONTRACT
MANAGEMENT
Training to DEME
(March, 25th – 27th, 2019)

Mark Castell – Regional Managing Director Ernst Jan de Jong – Senior Consultant
mark.castell@drivertrett.com ernst.dejong@drivertrett.com
What we do
The Group’s Expert Witness support service provider.
 World-class quantum, delay, and technical experts

for litigation
 Internationally experienced adjudicators,
arbitrators, and mediators
Provides multi-disciplinary consultancy services:
 Commercial and contract management

 Planning, programming and scheduling
 Dispute resolution support services
Overview
 Part of a global construction consultancy, providing construction and

engineering focused services since 1978
 Stock exchange listed plc. – AIM (2005)
 Driver Trett established in 2012 when Trett Consulting became part of

the Driver Group.
 Market leader in expert witness, planning, commercial and disputes.
 2015/2016: £58m turnover.
 Network of offices across Europe, Africa, Americas, Asia Pacific, and

the Middle East.
 Global reach with projects undertaken worldwide.

Global Presence
General Principles of Contract Management
Workshop Objectives
On days 1 and 2, to:
 Increase your awareness and understanding of contract management.
 Demonstrate how you can improve the DEME Group’s contractual and
commercial position in both the pre-contract and post-contract phases of
projects.
On day 3, to:
 Introduce the main FIDIC standard forms of contract.
 Explain the philosophy of the main FIDIC standard forms of contract and
what their use means.
 Compare FIDIC with some other standard forms of contract.

Some questions to start with
Q: What is common to every project?
A: Contracts, whether with a client, a supplier or

a subcontractor.
Q: What is a Contract?
A: Simply speaking, it is an agreement.
Q: What is the objective of a contract?
A: To define the relationship and how the parties

act – the ‘rules of the game’.
Q: What is contract management and what does it
cover?
A: Management of:
Opportunities & Risks
Responsibilities
Entitlement
Change
The Client or Subcontractor
It should include the avoidance of Disputes
Is this not part of project management?

Q: When should the management of contracts begin?
A: At the conception of a contract.
Q: When should the management of contracts end?
A: At the finalisation of all matters.

Contracts involve a Proces – from Cradle to Grave
 Understanding the clients’ needs and the opportunities and risks involved
 Making an offer, or tender
 Forming a legal agreement (‘wettelijk’; hier ‘afdwingbaar’)
 Understanding the parties’ obligations under the agreement
 Monitoring the parties’ actions against these obligations
 Identifying any variance
 Invoking (‘inroepen’) the terms of the contract according to the

circumstances
 Issuing and/or receiving requests for extra payment and additional time
 Agreeing financial and other matters

Contract’s life cycle
A ‘bad’ contract
What do we mean by the term ‘bad contract’?
 Discrepancies (‘tegenstrijdigheden’)/anomalies (‘afwijkingen’)

 Unclear wording
 Too much risk
 Technical difficulties
 Price too low for this work
 Schedule too tight
 etc
Responsible for a ‘bad’ contract
Q: Is it true (or fair) to say that a bad contract is the

fault of those involved at the tender stage?
A: No. Why?
Q: Is it true (or fair) to say that an unprofitable project is

the fault of those involved at the implementation
stage?
A: No. Why?
Q: Who is involved in managing a contract?
Revised Q: Who should be involved in managing a

contract?
A: Everyone within the business...
I suggest that this could be the key challenge

with respect to contract management
Course agenda
As managing contracts must be ‘from conception to grave’,

course agenda follows this:
Days 1 and 2
1. Tender stage
2. Procurement and Sub-Contracting
3. Contracts (Construction contracts and Letters Of Intent)
4. Setting up the project
5. Planning and Progress
6. Financial issues
7. Management of Change and Variations
8. Dispute resolution
Day 3
 FIDIC introduction
 Overview of differences between different standard forms
 Specific requirements of FIDIC contracts
 Comparison with other standard forms
1. Tender Stage
What is its main purpose?
Photograph credits to FreeDigitalPhoto.net & Grant Cochrane

Priority for a Tenderer
The priority is for a tenderer to understand what will be

expected of all the parties involved
This includes:
 Technical requirements
 Type and scope of works (i.e. dredging, design and build)
 Timing and timescale
 Legal considerations
 Type of contractual relationship (i.e. main contract, sub contract)
 Applicable terms and conditions
 Commercial aspects
 Method of valuing works (i.e. lump sum, re-measurable)
 Guarantees and payment conditions
How is this achieved?
 Studying all parts of the RFQ or tender documents.

 Verify all documents have been received
 Verify the correct documents have been received
 Involving supporting departments and area personnel.

 Legal and insurance - analysis of legal risks – LICRA
 Planning engineering – variance analysis of different scenarios
 Incorporating Opportunity and Risk Management (ORM).

 O & R register populated during tender phase
ORM
O & R REGISTER
Description
O&R Register • Main ORM tool that is used to manage O&R

during tender and execution phase
ORM
What Opportunities exist at tender stage?
 To understand the customer’s needs

 To see whether the proposed contract describes the same thing
 To influence the customer’s way of thinking
 To influence the provisions of the contract (terms and conditions)
 To influence the allocation of risk
 To agree the duration for undertaking the works
 To agree the price for undertaking the works
 To agree security of payment
 Et cetera
ORM
The client will have considered Risk allocation.

Remember:
 Risk should be allocated to the party best able to manage it.
 Standard Forms of Contract (such as one of the FIDIC or BIMCO

forms) generally allocate risk reasonably and fairly.
What type of risks should be considered?

ORM
Contracting Risks (1 of 2)
1. Extent of the scope of work
2. Safety provisions
3. Provision of bonds, guarantees
4. Security for payment
5. Liabilities
6. Physical conditions and access
7. Practicality of schedule dates
8. Use of specialist suppliers/sub contractors/ third parties
9. Dispute resolution provisions

ORM
Contracting Risks (2 of 2)
1. Clarity of the contract wording and provisions (no discrepancies)
2. Wording and provisions that can be easily understand by all
concerned
3. Document submittals at, or just after commencement
4. Condition precedent clauses (‘ontbindende voorwaarden’)
5. Notice requirements
6. Requirement for record keeping
7. Change process
8. Claims process
ORM
Contracting Risks are often indicated by:
 Manner in which contract was secured (‘binnen gehaald’)

 The consultants and their roles
 The level of definition of the works
 Feasibility (‘haalbaarheid’)
 The procurement status
 Financial circumstances
 Political aspects
 Legal / contractual
 New concept
ORM
Apart from risk allocation, why else should major

revisions to Standard Forms of Contract be considered
carefully by tendering contractors?
The revisions may prevent the contract from working in certain

circumstances.
In other words, links from one clause to another may be broken.

Management of the tender stage
Other requirements:
 Clarifying the responsibilities

− Document control essential – single point communication?
− Register of questions and answers – summarises status
− Records of any verbal discussions and meetings – how?
 Establishing a commercial strategy for the project

Exercise 1 – Tender Phase
Please refer to handout

2. Procurement and Sub-Contracting
Be aware !
Opportunity and Risk Sharing
 Risk should be allocated to the party best able to manage it.
 In sub-contract relationships, risk that is passed on should be

stepped down.
 Should opportunities be passed down too?
 Sometimes opportunities and risk must be retained at main

contractor level and especially on EPC/EPCI projects.
Examples of typical Opportunities and Risks
 Extent of scope of work (includes design?) and interfaces
 Safety provisions
 Provision of bonds and guarantees
 Practicality of programme dates within overall duration
 Notice and reporting provisions
If we are main contractor, what do we want to happen

with these in our subcontracts?
If we are a subcontractor, what do we want to happen

with the contents of the main contract?
Terms and Conditions for a Sub-Contract - 1
Which terms and conditions are to be used for a

subcontract?
 The ‘main’ contract conditions?
 Revised ‘main’ contract conditions? If so, how to revise?
 The DEME standard terms?
 Revised DEME standard terms? If so, how to revise?
 The phrase ‘back to back with the main contract’? If so, what
does it mean?
‘Back to back’
 A commonly used phrase that can lead to practical problems

 How can ‘applying the provisions of a main contract to a
subcontract’ work in practice?
− Is Contract Price the same as Subcontract Price?
− Are all the main contract conditions applicable?
− Involvement of the client (i.e. approvals)?
− Values of bonds?
− Insurance coverage?
 It’s not a shortcut for proper drafting of sub-contracts
 Can create a strong potential for disputes
Examples of Subcontract Wording …
 Article 3.1 says that ‘Subcontractor shall be deemed to have full knowledge
of the provisions of the Main Contract...
Contractor shall (if requested) make available a copy of the Main
Contract.
 Article 3.2 says ‘Subcontractor shall carry out and complete Subcontract
Works so that no act or omission of the Subcontractor shall result in
any breach of the Main Contract by the Contractor.
 Article 3.3 says ‘to the extent that such obligations and liabilities relate to
the Subcontract Works, the Subcontractor shall perform the obligations
and assume the liabilities of the Contractor under the Main Contract.’
An example of Main Contract Wording …
 Article 3.4 says ‘Subcontractor shall indemnify (‘vrijwaren’) the Contractor

against any claim, arising from any breach or non observance of such
obligations or non compliance therewith.’
 Article 15 (c) says that ‘Contractor must make all the terms and conditions
of Contract (as far as the same are applicable ) terms and conditions of
Subcontract and must not permit any alteration of the Subcontract without
the prior written consent of Company and must enter into a Subcontract
with the Subcontractor accordingly.’
Terms and Conditions for a Sub-Contract - 2
Which terms and conditions are to be used for a

subcontract?
 The ‘main’ contract conditions?

 Revised ‘main’ contract conditions? If so, how to revise?
 The DEME standard terms?
 Revised DEME standard terms? If so, how to revise?
All can work but in all cases, the parts of the main contract
relevant to the subcontract need identifying (and possibly
revising), and then be incorporated into the subcontract.
3. Contracts
Photograph credits to FreeDigitalPhoto.net & Boians Cho Joo Young

Simply speaking...
a Contract is an agreement,
which should be based
upon the mutual understanding
that was built up
in the tender stage.
Contractual Agreement
Depending on the applicable jurisdiction, there may need to be:
 A clear offer (or counter offer);

 Consideration (‘overweging’) – outlining circumstances;
 Capacity (i.e. authority – ‘bevoegdheid’) to bind a contracting party;
 An intention to create a mutually binding agreement that creates
obligations for both parties;
 Certain and essential terms (i.e. parties, scope, price, time):
 Express terms,
 Implied terms (based on jurisprudence and statute - ‘wet’);
 Acceptance of the offer,
creating consensus over price and performance:
 This can take many forms
The situation with POs
 You submit an offer to a prospective client.
 You receive a Purchase Order from the prospective client that does
not expressly refer to the offer.
 The Purchase Order includes certain terms and has on the back of
the document, the prospective client’s general terms and conditions.
 The first general term and condition says that “acceptance of this
order constitutes unconditional acceptance of these conditions”.
− What is the Purchase Order in this situation?
− What should you do?

Construction Contract Considerations
Type of industry:
Type of payment:
 Dredging
 Lump sum
 Energy
 Target price
 Building
 Unit rates / re-measurement
 Industrial
 Reimbursable
 Infrastructure
Type of arrangement:
 Employer & contractor
 Contractor & subcontractor
 Turnkey
 Design & build
Contract Requirements
Contracts vary in contents but they should however:
 Identify the names of the parties

 Allocate functions / responsibilities (i.e. scope of work)
 Allocate risk between the parties
− Including defining limitations on liability
 Identify the applicable law and language

 Define price and payment conditions
 Provide for changes in scope
 Deal with time (i.e. start and finish)
 Provide for changes in duration
Failure to comply
What is the consequence of

a party failing to comply
with the contract?
Breach of Contract
Failure to comply is a breach of contract
In the event of a breach:
 Follow contractual procedures if a breach of an express term

occurs;
 If a breach of an implied term, there is a possibility to relay on
damages at law;
 Unless the contract states otherwise, a party will normally
have the opportunity to remedy the breach within reasonable
time (following receipt of a notice of default).
Failure to comply with Milestones
Breach of the time provisions by the contractor (i.e.

delay to completion) is normally expressly dealt with.
 Stated damages for late completion allow definition of risk, if it is

the only remedy for delay.
 If none stated, damages still apply.
 Note; Liquidated damages (LDs) has a particular meaning under

English Law.
What if works are
needed to start
prior to a contract
being in place?
The Dilemma ...
 Employers and contractors are faced with time constraints in

negotiating full contract documentation
 The start of the procurement process (where there are long lead in
times) or the start of engineering or mobilisation needs to happen
so the required completion date(s) will be met
 The alternative is delaying contract commencement but this will

mean the required completion date(s) will not be met
Some further Considerations
 What has caused the problem?
− Did Employer (to be) start its procurement process too late?
− Is it however, now in your interest to start?
 Who should resolve it?
− Resolution needs to be undertaken together
 What can you do / ensure happens?
− If works starts, you must ensure the basis upon which it does
so is defined in writing
Various Options
 A mini contract for the works that are needed to start
− Should be straight forward to agree and formalise
− Should not need agreement of the full terms and conditions
− May be standalone, or eventually merged into the full contract
 A binding Letter Of Intent (‘LOI’)
− This requires careful drafting

Difficulties with LOIs
 They are often letters of comfort (i.e. one party’s intention

towards another with no agreement and no instruction or
authorisation for any works).
 They are sometimes unclear or vague as to the extent of the

parties’ commitment (i.e. entire project, initial works).
 They can be non-binding because they omit certain legal

requirements (i.e. offer, acceptance, intention to create a legal
relation and certain essential terms – names of parties, scope of
work, price, time)
Exercise 2
Consider the following
Please refer to the next slides,
Part 1 and Part 2
Part 1
Example Letter of Intent sent

by Main Contractor to Sub-Contractor
“As you know from our meeting this morning, we have just received a letter of intent from
[X] for the [Y] project, which includes your [equipment].
In our turn, we are pleased to confirm that it is our intention to enter into a sub contract
with [you] for your [equipment], this will be generally be on the basis of the Sub Contract
document that we discussed this morning (ref…)
We also agreed that we would incorporate your final comments on the draft Sub Contract
and that you would provide details of the Advance Payment Bond, on-demand Performance
Bond and insurance that you can offer.
The main contract commencement date is…
Please acknowledge receipt.”
Consider what this letter is saying and what your response would be
Part 2
Second example Letter of Intent sent

by Main Contractor to Sub-Contractor
“This is to place a letter of intent (LOI) for [W] works to [X] ... by [Y] … strictly in
accordance with the following terms and conditions and to give an authorisation to
proceed immediately with the engineering, procurement and manufacturing in
accordance with this requisition.”
Sections then cover matters including:
 Scope and Price
 Payments Terms
 Delivery Terms and Date
 Contract Documents
 Etc.
Consider what this letter is saying and what your response would be
4. Setting up the Project
Now, Contract is signed – we’re in a risky stadium !
 All knowledge gained at tender stage

must be transferred to project team
 Strong tendency to re-do engineering process
(no budget for this !)
 Several urgent needs:
 Baseline and SoW must be (made) clear
 Admin according to contracted requirements
 Insurance in place
 Procurement
 Project organisation aligned (resources, equipment, subcontractors,
suppliers, ….)
 Several deliverables due within ‘a month’
 ….
ORM revisited
The DEME procedure is for the O & R register to be updated

upon contract award
Why?
 With Contract Award (“sign off”), the O & R profile is now

fixed
 Changes may have been made since it was drawn up at
tender stage
And: it should kept up to date throughout contract life.

Knowledge Transfer Process - 1
 It’s essential, good practice and now a DEME policy
 It means a structured hand-over of knowledge gained at the

tender and pre-award stages, to the execution team
 It involves:
− Knowledge Transfer Checklist to be populated
− Knowledge Transfer Meeting to be held according to template
Knowledge Transfer Meeting - Template
Tender-project transition
• Hand Over
Checklist
aims to
structure the
hand over
between TM and
PM
• Hand over
checklist will be
part of updated
PMM
• Signed by
AM/TM/PM
 It’s essential, good practice and now a DEME policy
 It means a structured hand-over of knowledge gained at the

tender and pre-award stages, to the execution team
 It involves:
− Knowledge Transfer Checklist to be populated
− Knowledge Transfer Meeting to be held according to template
− Responsible, Accountable, Consulted, Informed (RACI) table to be
populated and kept up to date
RACI Table
Item Topic Description Responsible Accountable Consulted Informed

1Tender-Project Transition
1Project Responsible & Assign ORM 'point of contact' for project Project Manager Project Manager ORM department
Accountable PM p.p.
Knowledge Transfer Meeting Define attendees Project Manager Project Manager
PM p.p.
Knowledge Transfer Meeting Sign Knowledge Transfer Checklist Project Manager Project Manager ORM department
Tender Manager Tender Manager
O&R Register Update/manage O&R Register Project Manager Project Manager ORM department (SC)
PM p.p.
Work budget Create/update work budget Project Manager Project Manager AD/BU/GM
PM p.p. Area Controller
Contingency budget Create/update contingency budget Project Manager Project Manager AD/BU/GM
PM p.p. Area Controller
Primary Kick-Off Meeting Define attendees Project Manager Project Manager DRIVE department
PM p.p.
Primary Kick-Off Meeting Organize/prepare Primary Kick-Off meetings Project Manager Project Manager
PM p.p.
Primary Kick-Off Meeting Define mitigation strategies for O&R Project Manager Project Manager DRIVE department
PM p.p.
Operational Action log Create/update operational action log Works Manager Project Manager DRIVE department DRIVE (SC)
All action holders (SC)
Operational staff (SC)
Non-operational Action log Create/update non-operational action log Finance Manager Project Manager Relevant supporting Core Project Management
departments Team (SC)
 Does this process repeat when more implementation

personnel join the project?
 Does it repeat again prior to the offshore phase?

Relevance of the Contract
Design &
Engineering
Opportunity Planning
& Risk
Contracts
Finance Procurement and

subcontracting
So, do you ?
Review your contract to identify obligations and the need for project-specific
systems?
If so, what for?
 Securities and guarantees; insurance requirements
 Deliverables
 Planning submittals
 Discrepancies
 Notices
 Payments
 Correspondence and reporting

Do You also ?
Have a kick off meeting with the Employer ?
If so, what do you cover?
 Confirmation and clarification of scope or uncertainties

 Agreement of formats/procedures for reporting and coordination
 Communication routes/details
 QHSE
How useful is a kick off meeting with the Employer when

considering commercial strategy for a project?
5. Planning and Progress
The Planning Process
The Planning Process involves deciding:
> What to do (scope)
> How to do it (method)
> When to do it (schedule)
> What resources to use (staff, equipment, plant and material)

Planning and Programming
 A programme is a project management tool

used to monitor and control the project
 It is not just a ‘picture’
Consider ….
 Should the Contractor submit a programme (schedule) early in

the implementation stage?
− Yes – to show how it intends to undertake the works
 On what basis should this programme (schedule) be put

together?
− It should show what was agreed in the Contract and serve as the
baseline
 Should the programme (schedule) be agreed?

− This depends on the wording of the contract
but it generally shows Contractor's choices
The Baseline Schedule
 It should:
− Reflect the Contract requirements (the Baseline)
− Show contract Milestones
− Show intended sequence of Works
− Incorporate any resource constraints
− Show the critical path
And remember:
No planning → no deviation →
no variation → no compensation
Critical Path
The Critical Path – why is it important?
 Determines the earliest completion date for the project.
 Determines the earliest and latest completion dates for

individual activities.
 Calculates float.
 Identifies which activities are important to the completion of

the project.
 Identifies areas of opportunity and risk.
 Identifies areas where action should be taken to reduce the

project duration or recover from delays.
The Critical Path - Shortest route between work and the pub
Critcal Path Analysis - 1
New Wall
No Activity Time (days) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
1 Excavate the trench
2 Pour the foundation
3 Raise the brickwork
4 Place the coping
5 Complete
6
7
8
Link Activity
New Wall
4 Place the coping
5 Complete
6
7
8
Critical Link Critical Activity

New Wall
4 Place the coping
5 Complete
6 Design
7 Order concrete
8 Order bricks
Critical Link Critical Activity

New Wall
4 Place the coping
5 Complete
6 Design
7 Order concrete
8 Order bricks
New Wall
4 Place the coping
5 Complete
6 Design
7 Order concrete
8 Order bricks
New Wall
4 Place the coping
5 Complete
6 Design
7 Order concrete
8 Order bricks
New Wall
4 Place the coping
5 Complete
6 Design
7 Order concrete
8 Order bricks
Total Float
Exercise 3 – Planning
Please refer to next slide for instruction
and hand out for doing the exercise
Instruction for Exercise 3
Activity No Description Duration

010 Apply hand brake 0 Make a
020 Find spare wheel 2 min
030 Check that there is air in the spare wheel 1 min programme
(if 020 & 030 are unsuccessful the whole
sequence is obsolete)
(schedule) for:
040 Find something to chock wheels 2 min
050
(safety should be planned into a project)
Chock car wheels 1 min  When you are
060
070
Find car jack & wheel brace
Loosen wheel nuts
2
6
min
min
alone
080 Position jack 3 min
090 Raise car 4 min
100 Remove wheel nuts 1 min 110
120
Remove wheel
Install spare wheel
1
1
min
min
 When you have
130 Replace wheel nuts 1 min a friend helping
140 Tighten wheel nuts 2 min
150 Lower car 1 min
160 Final tighten wheel nuts 2 min
170 Remove jack 1 min
180 Stow jack, wheel brace & punctured wheel 2 min  When you have
190 Remove chocks 1 min
200 Wipe hands 1 min two friends
210 Complete 0
helping
Solution 1: When you are alone
Barchart for Wheel Change - Alone (35 minutes)

Activity Activity Description Duration Hour 1
No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
10 Apply hand brake 0

20 Find and remove spare w heel 2
30 Check air in spare tyre 1
40 Find something to 'chock' w heels 2
50 Chock car w heels 1
60 Find and remove jack & brace 2
70 Loosen w heel nuts 6
80 Position jack 3
90 Raise car 4
100 Remove w heel nuts 1
110 Remove w heel 1
120 Install spare w heel 1
130 Replace w heel nuts 1
140 Tighten w heel nuts 2
150 Low er car 1
160 Final tighten w heel nuts 2
170 Remove jack 1
180 Stow jack, brace & punctured w heel 2
190 Remove chocks 1
200 Wipe hands 1
210 Wheel change complete 0
Legend :
Project : Wheel Change Current Plan
Date : 1 Jan 2015
Prepared by : Superplan
Solution 2: When you are with a Friend
Barchart of Wheel Change - With a Friend (26 minutes)

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

80 Position jack 3
90 Raise car 4
110 Remove w heel 1
150 Low er car 1
170 Remove jack 1
190 Remove chocks 1
200 Wipe hands 1
Legend :
Project : Wheel Change Driver Passenger
Date : 1 Jan 2015
Prepared by : Superplan
Solution 3: When you are with two Friends
Barchart for Wheel Change - With 2 Friends (24 minutes)

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

80 Position jack 3
90 Raise car 4
110 Remove w heel 1
150 Low er car 1
170 Remove jack 1
190 Remove chocks 1
200 Wipe hands 1
Legend :
Date : 1 Jan 2015
Prepared by : Superplan 2nd Passenger
Resource Planning and Critcal Path
Barchart for Wheel Change - With 2 Friends (24 minutes)

No Minutes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

80 Position jack 3
90 Raise car 4
110 Remove w heel 1
150 Low er car 1
170 Remove jack 1
190 Remove chocks 1
200 Wipe hands 1
Legend :
Date : 1 Jan 2015
Prepared by : Superplan 2nd Passenger Critical path
Driver
Passenger
2nd Passenger
Networked Planning
zoek blokkeer
blokken de wielen
40 2 50 1
Trek zoek het controleer los de

handrem reserve druk in wielbouten
10 0 20 2 30 1 80
Changing wheel
zoek krik verwijder Plaats de krik de

en wieldop krik auto
60 1 70 1 90 3 100 4
verwijder verwijder plaats plaats wiel zet bouten

wiel wiel reserve bouten vast
110 1 120 1 130 1 140 1 150 2
trek plaats
wielbouten wieldop
170 2 190 1
laat auto verwijder berg krik, maak wiel is

zakken krik de sleutel handen verwisseld
160 1 180 1 200 1 220 1 230 0
verwijder
blokken/st
210 1
Progress Reporting
Involves:
 Measuring actual progress
 Updating your plan or schedule for this actual progress
 Forecasting the impact in the future
 Making a report
This has to be done in context of the Contract with your Employer.
For this, you will require details from your Subcontractors but who
should report in the context of their Contract with you.
Contractor’s Progress Records and Monitoring
 The need for progress records and monitoring
− Accurate assessment of status of project

− Accurate & agreed records in case of dispute
− Record and keep results
− How deal with changes?
− Plot and compare results
− Analyse trends - predict the future
− Compare different trends
 Contractor may not want to declare the actual status of project

 Contractor may not want accurate & robust records – confuse the
issue
Consider …
 The items the Contractor should include in its Progress Reports.
 Should the contractor prepare different Progress Reports for

internal circulation to that submitted to the Employer ?
 If so, what would be the differences?

Other required records
 These include, for example:
− Correspondence
− As-built, it’s easier to do as the project advances
− Daily reports including weather and numbers of resources
− The reasons for decisions to move resources
− Effects of changes
 Consider how and where they are kept.
Remember, for Subcontract and Main Contract activities.

6. Financial Issues
Common valuation options
On a lump sum basis
On a lump sum basis with schedule of rates
On a lump sum basis with bill of quantities
On a re-measurable basis with bill of quantities
Cost plus
What do each mean?

For Lump Sum Contracts
 Only changed for adjustments allowed the Contract

(i.e. instructed Variations and Claims)
 No change resulting from a Contractor revising its design

For re-measurement contracts
 Changed for adjustments allowed the contract

(i.e. re-measurement, instructed variations and claims)
 Is there a difference between re-measurement and variations?
 Needs a method of measurement

 What does re-measurable on a ‘net’ basis mean?
Interim Payments
Common Interim Payments options
 Based on actual value of work undertaken
 Based on a pre-agreed schedule
 Based on achieving milestones

Issues to be addressed
 How calculate value of work undertaken?
 Front loading of schedule

 Effect of poor progress
 Variations – how much and when?

 Completed/part completed
 Agreed/disputed
 Definition of each milestone – is it clear or controllable?

 Achievement of milestone means what?
Timing of Payments
Are these milestones clear? Controllable by the contractor?
 10% of purchase price at order confirmation
 10% of purchase price at order of main materials
 10% of purchase price at mobilisation on site
 20% of purchase price at completion of section 1
 20% of purchase price at completion of section 2
 20% of purchase price at completion of all works onsite
 10% of purchase price at issue of ‘as builts’

Issues to be addressed
 Remember, the Employer’s primary obligation is to pay the

contractor for the work undertaken.
 Late payments – recourse?
 Adherence to Contract procedures is essential

 Agreed format in the Contract, or one to be agreed?
 Issue a request for payment or an invoice?
 Agreed procedure, or one to be agreed?
 Timing of request and / or invoice

7. Management of Change and Variations
“No Contract goes completely to plan”
Indicators of potential problems-at tender
(Slide 24 refers)
 Manner in which the Contract was secured
 The consultants and their roles
 The level of definition of the works
 Feasibility
 The procurement status
 Financial circumstances
 Political aspects
 Legal / contractual
Early days of Project execution
 Drawings, information and ‘Holds’
 Approvals
 Relationships
 Consultants’ performance
 Access to works
 Local authority / government bodies
 Payment
 The manner in which early problems are dealt with
 Performance of nominated sub-contractors

The Project under way
 Major design changes  Widening gap between

 Policy changes by client application and certification
 Many variations  Programme slippage
 Lots of day work  Problems with
 Long information sub-contractors
outstanding list  Labour disputes
 Inability to procure long  Poor drawings
lead items  Arguments about consultants’
 Payment problems responsibilities
 Valuation problems  Acceleration
 Interim payments not  Tone of letters
detailed  Relationships
The Management of Change and Variations
Example Areas of ‘Change’
 Additional or omitted  New or revised drawings

work being issued
 Varied or modified work  Holds being placed on
 Substituted work drawings
 Standard of work  Identity of owner
 Physical or geological or representative/ consultants/
marine conditions subcontractors/ vendors
 Time of year work carried  Identity of contractors
out personnel
 Location work is carried  Late access to site
out  Late issue of material
So can affect scope and/or schedule and/or conditions

The Employer can ‘change’
 The scope of work
 The location of the work / equipment within
 The timing and extent of access to site
 The amount of information available to the Contractor
 The period for drawing review / approval
 The period for responding to requests for information
 The extent of interference
 The amounts and timing of payment
 The supervisory staff or personnel
 The type of equipment or materials it provides

The Contractor can ‘change’
 Method of working
 Sequence of working
 Coordination of the work processes
 Timing of undertaking the works
 Quality or standard of the permanent works
 Submission of required records and notices
 Workers, staff or supervision personnel
 Provision of access / facilities / materials to Subcontractors
 Design
 Use of Subcontractors
The Subcontractor can ‘change’
 Method of working
 Sequence of working
 Timing of undertaking the works
 Quality or standard of the permanent works
 Submission of required records and notices
 Workers, staff or supervision personnel
 Manning levels
 Price of work
 Location of off-site works
 Design
In Construction / Engineering projects:
‘change’ means what?
“Something different from the contractual agreement”.
It can affect scope and/ or schedule and/ or conditions
And can be initiated by:

subcontractors
and/ or
contractors
and/ or
customers.
Management of Change
Involves awareness
that change will occur,
recognition of the Change itself
and the subsequent actions –
5 steps
Step 1
Management of change
1. Read the contract to understand the baseline

2. Identify a change has occurred
3. Follow the appropriate contractual process
4. Maintain records
5. Assess the time and money effects
Contracts contain obligations and responsibilities - 1
What if the obligations within the Contract are unclear?
 Is there a contract clause for dealing with anomalies?
 Does it matter whether such a clause exists?

As an example …
“The documents forming the Contract are to be taken as mutually explanatory of

one another. For the purposes of interpretation, the priority of the documents shall
be …:
[a] The Contract Agreement (if any)

[b] The Letter of Acceptance
[c] The Letter of Tender
[d] The Particular Conditions
[e] These General Conditions
[f] The Employer’s Requirements
[g] The Schedules, and
[h] The Contractor’s Proposal and any other documents forming part of
the Contract
If an ambiguity or discrepancy is found … the Engineer shall issue any necessary

clarification or instruction.”
Contracts contain obligations and responsibilities - 2
What if the obligations within the contract are unclear?
 Is there a contract clause for dealing with anomalies?
 Does it matter whether such a clause exists?
Contracts also foresee / allow certain types of Changes
What types?
As an example …
The various types of foreseeable changes can include:
1) Failure of the client to give the contractor right of access to site.
2) Failure of the client to provide the contractor with free-issue materials.
3) The existence of unforeseeable physical conditions.
4) Suspension of part or all of the works.
5) Instructed variations.
6) The contractor proposes value engineering.
7) The whole or part use of Provisional Sums.
8) Force Majeure.
Allowable and foreseeable Changes - issues
 What constitutes each type of change?
 Has the correct procedure been followed?
 Who has the authority to initiate each type of change?
 Are there any limitations or restrictions?

As an example …
In the case of instructed Variations, further relevant details are often contained
elsewhere and can include:
1) The definition of a Variation (i.e. what can it comprise).
2) The communications rules (i.e. for the instruction).
3) The language for these communications.
4) Who has the authority to issue instructions that are a Variation.
5) Who has the authority to receive instructions that are a Variation.
6) Whether instructions need to be complied with; or if not, in what situations.
7) Variation valuation rules.


4. Maintain records
Early identification is essential
 Be aware that changes will occur.
 Appreciate that the correct contractual process
may not always be followed.
 Refer back to the baseline as a reference point.
 Constantly monitor events, occurrences and communications
to identify the cause or effect of change.

 Drawings – new ones, revisions and holds
 Progress updates
 Cost reports

4. Maintain records
Contractual processes- issues
 What type of change has occurred?
 What is the correct procedure to be followed in this case?
 Written notification is often required.

Notices
 Notices must often be submitted to the client when a contractor is

aware (or sometime worded as ‘should have been aware’) of an
event or circumstance that gives rise to entitlement to a possible
claim for time and / or money.
 The notices are sometimes subject to restrictions on timing and can

also be condition precedent to payment of additional money and / or
award of more time.
 Notices must state the event and be clear it’s notice of a potential
claim
 Notices are for the benefit of the recipient.
 Notices cannot be refused.

Compliance with instructions
 Properly given instructions must sometimes be complied

with without agreement of the time and money effect.
 There may be circumstances however, in which this is not

the case. For example:
 If the materials and / or equipment cannot be procured.
 If it impacts on any overall guarantees that are part of the

contractors obligations.

4. Maintain records
Record Keeping
 Why?
 What type?
 Should they be agreed?
 How should they be maintained for future use?


4. Maintain records
The effects of Change
Change
Time / schedule Cost Value
Direct Indirect
Valuation of Change
 What type of change has occurred?
 Any procedural requirements for the valuation?

 Time frames for submission
 Time frames for response
 What is the correct method for valuation to be followed?

 Money – value, cost or cost and profit?
 Time – prospective or respective?
 Consider direct and indirect effects.

Under many contracts a ‘Variation’ is:
Simply, an instructed change to the baseline scope of work.
Valuation should include time impact as well as money impact.
Valuation rules will normally apply – money is value or cost plus profit;
Time either prospective or respective.
And a ‘Claim’?
Simply, a request for reimbursement, from one party to another, of the money
and / or time consequences flowing from an event that the contractor was not
required to anticipate.
Valuation rules will normally again apply – money mainly cost or cost and
profit; time either prospective or respective.
Money impact
Valuation of Claims for compensation
beyond Contract
Good Quantity Surveying Practice
 Use contract unit rates for valuing work of

similar character undertaken under similar conditions
 Use contract unit rates as a basis for valuing work of

dissimilar character or undertaken under dissimilar conditions
 Do not use Contract unit rates for quite different work.

Consider cost plus reasonable profit.
And again:
good records enhance substantiation

Time Impact – extension of Time Claims
Extension of Time
An Extension of Time:
 does not (‘automatically’) mean an entitlement to additional

money
 relieves Contractor from liability

to pay damages for delay (for the ‘old’ milestone/ completion date)
 establishes new milestones/ a new completion date
 allows the Employer

to impose damages for any delay
(after the new milestone/ completion date)
Extension of Time
considerations
 Contract provisions define the basis of entitlement
 Delay to be on the critical path
 ‘Ownership’ of float
 Effect of concurrency
 Choice of delay analysis technique

Delay analysis techniques
 Time extensions after completion of project (retrospective):

 Collapsed As-built
 As-planned –v- As-built
 Windows Analysis
Retrospective or actual based analysis
Activity 1 2 3 4 5 6 7 8 9 10 11
ACTIVITY A
Original
ACTIVITY B Completion
ACTIVITY C
Why Delay?
 A. Time extensions after completion of project (retrospective):

 B. Time extensions during currency of project (prospective)

 Impacted As-Planned
 Time Impact Analysis
Prospective or Model Based Analysis
Activity 1 2 3 4 5 6 7 8 9 10 11
ACTIVITY A Event
Original
ACTIVITY B Completion
ACTIVITY C
Estimate of Delay
 A. Time extensions after completion of project (retrospective):

 B. Time extensions during currency of project (prospective)

 Impacted As-Planned
 Time Impact Analysis
A. As-Planned V As-Built Method - 1
The As-Planned Programme
Activity A
Activity B
Activity C
Activity D
Activity E
Completion
Plot the As-Built Programme
Activity A
Activity B
Activity C
Activity D
Activity E
Completion
Identify the Employer events
Activity A
Activity B
Activity C
Activity D
Activity E
Completion
Assess delaying effect of events
Activity A
Activity B
Activity C
Activity D
Activity E
Completion
(extension of time)
(contractor culpable)
 Advantages
− Simple to understand
− Transparent
− Does not require a networked programme
− Relies upon actual progress
 Disadvantages
− Subjective assessment of critical delays
− Depends also on opinion
− Requires as-built programme
B. Impacted As-Planned Method - 1
 The As-Planned programme
Activity A
Activity B
Activity C
Activity D
Activity E
Completion
 Impact (add) the delaying event
Activity A
Activity B
Activity C Delaying event
Activity D
Activity E
Completion
 Reschedule the programme
Activity A
Activity B
Activity C Delaying event
Activity D
Activity E
Completion Impacted completion date
(extension of time)
 Advantages
− Quick
− Simple to carry out and understand
− Transparent
− As-built programme not required
− Can demonstrate acceleration and mitigation
 Disadvantages
− Theoretical conclusions
− Requires a reasonable and robust as-planned programme
− Ignores actual progress
− Can hide concurrent delay
Delay Analysis Methods
Which technique should be used ?
Consider:
 Contract conditions
 Records available
 Time available
 Applicable law
 Value of dispute
 Most practical and common sense approach in circumstances
Delay Analysis Techniques
Analysis Critical Path Delay Impact

Method of analysis Requires
Type Determined Determined
Impacted as-planned Cause & Logic linked baseline

Prospectively Prospectively Selection of delay
effect events
Logic linked baseline
Updated programmes /
Time impact analysis Contemp- progress data
Cause & Prospectively
oraneously Selection of delay
effect
events
Logic linked baseline
Windows analysis Contemp- Updated programmes /
Effect & Retrospectively
oraneously progress data
cause
As-planned v as-built Effect & baseline

Contemp-
cause Retrospectively As built data
oraneously
From SCL Delay and Disruption Protocol, 2nd edition paragraph 11.5
Exercise 4 - Case Study
‘The Delayed Project’
Please refer to next slide for instrcutions
and the hand out for the exercise itself
Instruction for Exercise 4
1. Taking the position of the 1.) Sub-Contractor, 2.) Contractor or 3.)

Employer, your team has to prepare for three progress meetings – end of
months 1, 2 and 7.
2. You will be handed over a list of the relevant correspondence that it has
submitted to that other team showing date, subject matter and brief
description of contents.
3. During the meetings, the sub-contractor, contractor and client team/
representatives are to explain to the other party/parties:
 Current status of the project and anticipated future programme.

 The factual background to the delay and the over-run on man-hours.
 The contractual situation.
 Your team will be required to simulate participation to a real progress meeting

and content of your input into this meeting should be based upon case
analysis of the technical, factual and contractual aspects.
Recovering Time and/ or Money
Impact following a Change
Recovery of entitlement
 Requires timely notice
 Require a well drafted document, showing:
 Contractual entitlement
 Narrative / story
 Cause and effect
 Apportionment
 Quantum of time or money
 Requires recognition of strengths and weaknesses

6 Steps for making an Extension of Time Claim
1. The contract
2. The records
3. The facts
4. The planning analysis
5. The Scott Schedule
6. The Statement of Claim

Step 4 – The planning analysis
[with assumed proper performance of:

Steps 1 (Contract read), 2 (Facts straight), and 3 (Records properly made)]
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Planned
1 STEEL FRAME Completion
Sub-Contractor A
2 WALLS & ROOF

Main Contractor
3 SWITCH GEAR plus

Sub-Contractor B 1 week’s float
Delay 3
Inherent Design Fault
4 ACCESS GANTRY Discovered
Main Contractor
200T CRANE
Main Contractor
Approved Programme
Step 5 – The Scott Schedule
To be populated meticulously –
a highly valuable tool at any stage
Event Description Brief Facts Clause Notice Relevant Activity Period of
No Ref Docs Affected Delay
1 Design Fault The connection 26.4(ii) Letter MOM Act 4.AG 2 wks
to Access detail for the 10.10.01 31.10.01
Gallery upper part of Drg 201 rev A
the gantry was dated
identified as 27.10.01
being Progress
underspecified report
on 10.10.01. 30.11.01
The engineer
was
immediately
notified. A
revised drawing
was issued on
22.10.01 and
the works
proceeded on
24.10.01.
Step 5 – The Scott Schedule
Event Description Brief Facts Clause Notice Relevant Activity Period

Separation No Ref Docs Affected of Delay
of events
1 Design Fault The connection 26.4(ii) Letter MOM Act 4.AG 2 wks
to Access detail for the 10.10.01 31.10.01
Gallery upper part of Drg 201 rev A
the gantry was dated
identified as 27.10.01
being Progress
underspecified report
on 10.10.01. 30.11.01
The engineer
was
immediately
notified. A
revised drawing
was issued on
22.10.01 and
the works
proceeded on
24.10.01.
Linking cause, communication,

entitlement and effect(s)
Step 6 – The Statement of Claim
The actual claim for compensation is simple and efficient
“In accordance with clause x,

the contractor claims a 2 week extension of time
arising from Event 1,
notified on 10.10.01,
all as particularised in the Scott Schedule and planning analysis.”
Burden of Proof with Claimant
Entitlement ↔ Obligation (ref. Contract)
CAUSE
Gives rise to the Entitlement / Breach
EFFECT
8. Dispute Resolution
Dispute Avoidance – the basics 1
Steps (conditions) to avoid comments becoming a dispute:
1) Enter into a clear, comprehensible contract

2) The enquiry to comment or event occured:
Scope
Conditions
Risks
Facts
3) Link results of the enquiry to the Contract
4) Formulate clearly and unambiguously
5) Create shared understanding (= agreement) on ‘2’ and ‘3’
Dispute Avoidance – the basics 2
 Have a commercial strategy

(e.g. ‘minimising risk’, ‘optimising profit’, etc.)
 Work procedures
(e.g. internal - external communication, document management, ….)
 Agree records
(“what do we accept to be substantiation if needed ?”)
 Encourage, submit and respond to notices (in a timely manner !)
 Publish in compliance with the contract

(do not make assumptions here !)
Dispute Resolution - Generally
Non-Binding
 Negotiation us
 Mediation us with help
 Conciliation us with more help
 Mini trial us with even more help
 Expert determination them
 Adjudication them
Binding
 Arbitration them
 Litigation them
If there are no further questions:
www.drivertrett.com
Photograph credits to FreeDigitalPhoto.net & David Castilo Dominici

GENERAL PRINCIPLES OF CONTRACT
MANAGEMENT
Training to DEME
(March 25th – 27th, 2019)
As managing contracts must be ‘from conception to grave’; course
agenda follows this.
 Days 1 and 2
 Tendering
 Procurement and sub-contracting
 Construction contracts and letters of intent
 Setting up the project
 Planning & progress
 Financial issues
 Management of change
 Dispute resolution
 Day 3
 FIDIC introduction
 Overview of differences between different standard forms
 Specific requirements of FIDIC contracts
 Comparison with other standard forms
2
Introduction to FIDIC
3
FIDIC
Fédération Internationale des Ingénieurs-Conseils
 Federation of national associations of consulting engineers

 Based in Geneva
 Founded in 1913 with original founding members from France,
Belgium and Switzerland
 UK joined 1949, USA joined 1958
 Seen as international from 1970s and members from about 70
counties
FIDIC aims
 High ethical standards
 High professional standards
 Development of engineering profession in developing countries

FIDIC documents
 Standard Forms of Contracts – since 1957
 Guides to Standard Forms of Contracts
 Tendering procedures
 Model Agreements
Standard Forms of Contract
7
General principles of FIDIC Standard Forms of
Contract - 1
 Often known by their colour i.e. red, yellow, silver, blue.

 Historically based on Anglo Saxon type of contracts.
So, more reliance on documentation as part of contract itself.
 Drafted for general use on an international basis.
So, applicable law and ruling language
needs to be agreed / stated.
 Modifications may be required in some jurisdictions.
These should be included as revisions.
General principles of FIDIC Standard Forms
of Contract - 2
 FIDIC standard forms are:
- generally accepted to be well-written,
- capable of being understood by users
- and have a balanced risk/reward allocation.
 They recognise there will be problems and potential for conflict

and dispute on projects but set out processes to resolve them
including:
 Placing a significant administrative burden on the parties and
 Requiring the parties to deal with issues the moment they

occur.
The Current FIDIC
10
CURRENT FIDIC MAIN STANDARD FORMS OF CONTRACT
Blue-Green Green Red Pink

(2016) (1999) (1999) (2010)
Yellow (1999) Silver (1999) Gold (2008)

Blue-Green Red book:

book: Construction
Dredgers Contract
Contract
Green book: Pink book:

Short Form MDB
Construction
Contract
Yellow book:
Plant and
Design-Build
Contract
Silver book:
EPC/Turnkey
Contract
Gold book:
DBO Contract
WHEN DO YOU USE WHICH STANDARD FORM?
For dredging and reclamation works: the Blue book
Can be used for Employer designed or Contractor designed Works

WHICH CONTRACT FOR WHICH SITUATION ?
Employer
Straightforward project ? Design ?
< € 500K or < 6 months no yes
no
yes
Contractor design
Little employer All types of project

involvement, no with high unforeseen
no major risks
unforeseen risks
yes
yes Ongoing
operation
? no
yes
Confirm your
understanding 1
16
EXERCISE
Low Risk to Contractor High
Arrange in the order of risk to Contractor (low to high).

ANSWER - 5
Burden of risk on Contractor

Low High
Q: But, where should the Blue Book be placed?
A: It depends on the specific project

Overview of Current FIDIC
19
The Blue book
20
GENERALLY – BLUE BOOK
 FIDIC produces the General Conditions (15 clauses) and does not
anticipate separate Particular Conditions to be used (however notes for
guidance are included).
 Tenders issued with Specification and Drawings.

 Sub-clause 1.1.23, Specification includes the Employers design and its
requirements in respect of design to be carried out by the Contractor
 Sub-clause 1.1.12, Drawings are the Employers drawings of the Works
 Sub-clause 5.2, Employer is responsible for Specification and Drawings
 Tenders issued with site data.

 Sub-clause 2.3 Employer to provide “all data in Employer’s possession relevant
to the execution of the Works including climatic, hydrological, geological, and
soil conditions and properties, man-made and other objects, maritime traffic
and environmental data”
 Contract Data used to contain project-specific information.
 Rules for Dispute Adjudication, Dispute Adjudication Board

Member’s Agreement and Forms of Securities are included.
 Agreement records offer and acceptance and signifies a contract
has been entered into.
FORMATION OF A CONTRACT – BLUE BOOK
FIDIC Blue Book Form of Agreement
Printed form to avoid uncertainties regarding ‘letters of acceptance’

and ‘letters of intent’.
Step 1: Employer part completes for tender documents:
23
Step 2: Contractor completes offer as part of tender:
24
Step 3: Employer completes acceptance to effect a Contract:
25
So, Employer signing the Acceptance part of the

Agreement and the Contractor receiving a copy
signifies the contract coming into full force
Any changes from negotiations should be noted and initialled
26
BLUE BOOK GENERAL CONDITIONS
Clause 1 - General Provisions
Clauses 2 to 4 - The Employer, the Engineer and the Contractor
Clause 5 - Design
Clause 6 - Defined Risks
Clauses 7 and 8 – Time for Completion and Taking Over
Clause 9 - Remedying Defects
Clauses 10 and 11 – Variations, Claims, Contract Price and Payments
Clause 12 - Default
Clauses 13 and 14 – Risk, Responsibility and Insurance
Clause 15 – Resolution of Disputes

 Clause 1 includes:
 Definitions (sub-clause 1.1).
 Priority of documents provisions (sub-clause 1.3).
 Applicable law stated in Contract Data (sub-clause 1.4).
 Communications rules (sub-clause 1.5).

The Communications rules are important -1
Part of sub-clause 1.5 says:

“... communications shall be in writing and shall not
unreasonably withheld or delayed and shall be sent by one of
the methods and to the addresses stated in Contract Data. All
communications shall be in the language stated in the Contract
Data”
The Communications rules are important - 2
Part of sub-clause 1.5 says:

“... communications shall be in writing and shall not
unreasonably withheld or delayed and shall be sent by one of
the methods and to the addresses stated in Contract Data. All
communications shall be in the language stated in the Contract
Data”
 Employer has a limited role after contract is signed:
 Pay those fees and other charges stated in the Contract Data
(sub-clause 1.6)
 Employer has a limited role after contract is signed, continued:
 Provide Site and right of access (sub-clause 2.1).

 Obtain those permits etc in respect of any planning, zoning or
similar permissions for the permanent work (sub-clause 2.2).
See also Notes for Guidance
 Shall appoint an authorised person (sub-clause 2.4).
 Shall submit reasonable evidence that financial arrangements
have been made and are being maintained to fulfil his
payment obligations under the Contract if requested by the
Contractor (sub-clause 2.5).
 Contractor is responsible for interpreting site data and for inspecting

Site and making enquiries “so far as practicable (taking account of
cost and time) before submitting his tender” (sub-clause 2.3)
 Notes for Guidance (under sub-clause 6.1) recommends a

geotechnical base report being set as a reference.
 Engineer appointed as representative of Employer acting after

contract is signed to “carry out the duties assigned to him in the
Contract” (sub-clause 3.1).
“When valuing, certifying or making determinations, the Engineer

shall exercise his duties and authority promptly and in a fair manner
and in accordance with the Contract.” (sub-clause 3.1).
 Engineer can delegate specific duties and authority to assistants

(sub-clause 3.1).
 Contractor shall comply with instructions in respect of the Works

given by the Engineer (sub-clause 3.2).
 No approval or consent or absence of comment by the Employer or

Engineer shall affect the Contractor’s obligations (sub-clause 3.3).
 Contractor appoints Contractor’s Representative who is the only

person authorised to receive instructions (sub-clause 4.2).
Note; don’t forget the communications rules at sub-clause 1.5

 Any Contractor’s design responsibility is stated in the Contract Data

(sub-clause 5.1)
 Contractor to submit designs for comment or rejection by the

Engineer within 21 days of receipt (sub-clause 5.1).
 Works may proceed if comments received but design must be

resubmitted (sub-clause 5.1).
 Contractor is responsible for its design “which shall be fit for the
intended purpose as specified in the Contract, or where no purposes
are specified, fit for their ordinary purposes” (sub-clause 5.2).
 Responsibility for Defined Risks with Employer (sub-clause 6.1).
 Contractor to commence Works on the Commencement Date and

complete within the Time for Completion (sub-clause 7.1).
 Contractor to submit a programme to the Engineer as stated in the
Contract Data. Revised programmes to be submitted “whenever
reasonably required to do so by the Engineer” (sub-clause 7.2).
Note: no requirement for agreement of it

 Contractor entitled to an extension of the Time for Completion if

delayed by any of the Defined Risks or if actual re-measured
quantities are greater than the quantity stated in the Contract (sub-
clause 7.3).
 Contractor to make “a substantiated application with supporting
documents as soon as possible.” (sub-clause 7.3)
 Contractor liable if it fails to complete within the Time for Completion

(sub-clause 7.4).
Note: it’s the Contractor’s only liability for delay

 Engineer issues Taking Over Certificate to signify Works (or a

Section) are ready for taking over. This does not necessarily mean
they are complete (sub-clause 8.2).
 Provision for Taking Over for any completed part of the Works “...the
Employer shall not occupy or use any part of the Works prior to the
issue of a Taking-Over Certificate for that part of the Works” (sub-
clause 8.3)
 Period for remedying defects stated in the Contract Data (sub-clause

9.1).
 No period for remedying defects for dredging works defined in the

Contract Data (sub-clause 9.2).
 Only the Engineer (or delegated assistants) can vary the Works
(sub-clause 10.1).
 Variations is a defined term.
 Several options for valuing Variations (sub-clause 10.2).
 Early warning notices shall be issued by either Party as soon as

they are reasonably aware of any delay or disruption to the
Works or any possible claim for additional money (sub-clause
10.3).
 The claim procedure is to be followed when a Defined Risk occurs

and Contractor incurs Cost or suffers delay (sub-clauses 10.4 and
10.5).
 Employer’s claims possible (sub-clause 10.6)

 Valuation / payment to be as specified in the Contract Data (sub-

clause 11.1).
 Any advance payment is subject to a guarantee and is progressively

reduced as works proceeds (sub-clause 11.2)
 Contractor entitled to be paid at monthly intervals and submits a

statement to the Engineer (sub-clause 11.3);
 The Engineer certifies the monthly interim payments to be paid

to the Contractor. Can be withheld until Performance Security
and evidence of insurance received (sub-clause 11.4);
 Retention rules different for dredging works and other works

(sub-clauses 11.5 and 11.6);
 Contractor entitled to financing charges for late payment (sub-

clause 11.9);
 Remedies available to Contractor for failure of Engineer to certify

or Employer to pay (sub-clause 12.2);
 DAB appointed to resolve disputes on an ad-hoc basis with

subsequent recourse to Arbitration if needed (clause 15).
The Red book
42
GENERALLY – RED BOOK
 FIDIC produces the General Conditions (20 clauses) and

anticipates separate Particular Conditions to be used (notes for
 Tenders issued with Specification, Schedules (includes Bill of

Quantities) and Drawings
 Sub-clause 1.1.1.5, Specification specifies the Works
 Sub-clause 1.1.1.6, Drawings are the Employers drawings of the
Works

 Sub-clause 4.10 Employer to provide “all relevant data in Employer’s
possession…”
 Appendix to Tender used to contain project-specific information.
 Forms of Letter of Tender, Contract Agreement (including

Appendix to Tender), Dispute Adjudication Agreement and Forms
of Securities are included.
FORMATION OF A CONTRACT – RED BOOK
FIDIC Red Book Letter of Tender
Contains statements including:
“...We offer to execute and complete the Works and remedy any defects therein,
in conformity with this Tender ... for the sum of [amount of money]...”
“We agree to abide by this Tender until [date] and it shall remain binding upon
us and may be accepted at any time before that date.”
“If this offer is accepted, we will provide the specified Performance Security,
commence the Works as soon as reasonably practicable after the Commencement
Date and complete the Works in accordance with the above-named documents
within the Time for Completion.”
“Unless and until a formal Agreement is prepared and executed, this Letter of
Tender, together with your written acceptance thereof, shall constitute a
binding contract between us.”
45
FORMATION OF A CONTRACT – RED BOOK
Employer Letter of Acceptance signifies the contract

coming into full force
Refer definition at sub-clause 1.1.1.3 – includes annexed

memoranda
Contract Agreement either follows, or used instead of

a Letter of Acceptance (sub-clause 1.6) to signify the
contract coming into full force
46
RED BOOK GENERAL CONDITIONS
 Clause 1 - General Provisions

 Clauses 2 to 4 – The Employer, the Engineer and the Contractor
 Clause 5 – Nominated Subcontractors
 Clauses 6 and 7 - Staff, labour, plant, materials and workmanship
 Clause 8– Commencement, delays and suspension
 Clauses 9 and 10 – Tests on Completion and Employer’s Taking Over
 Clause 11 - Defects Liability
 Clause 12 – Measurement and Evaluation
 Clause 13 – Variations and Adjustments
 Clause 14 – Contract Price and Payment
 Clauses 15 and 16 – Termination and suspension
 Clauses 17 to 19 – Risk, Insurance and Force Majeure
 Clause 20 – Claims, Disputes and Arbitration
47
 Communications shall be in writing, transmitted using specific

methods and to the addresses stated in Appendix to Tender.
Allowable electronic systems of transmission also stated in
Appendix to Tender (clause 1.3).
 Applicable law and ruling language stated in Appendix to

Tender (sub-clause 1.4).

 Employer has a limited role after contract is signed (clause 2).

 Provide right of access and possession of Site (sub-clause 2.1).
 Provide reasonable assistance to the Contractor at the request of
the Contractor, for the Contractor’s application of any permits etc
(sub-clause 2.2).
 Can pursue financial claims against the Contractor (sub-clause
2.5)
 Engineer appointed as representative of Employer acting after

contract is signed to “carry out the duties assigned to him in the
Contract” (sub-clause 3.1).
“…Except as otherwise stated in these conditions:
Whenever carrying out duties or exercising authority, specified in or implied

by the Contract, the Engineer shall be deemed to act for the Employer. …”
Clause 3.5 gives the exception …
“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
determination in accordance with the Contract, taking due regard of all
relevant circumstances.”
 Engineer can delegate specific duties and authority to assistants (sub-

clause 3.2).
 Contractor shall comply with instructions in respect of the Works given by

the Engineer (sub-clause 3.3).
 Contractor appoints Contractor’s Representative who is the only person

authorised to receive instructions (sub-clause 4.3).
Note; don’t forget the communications rules at sub-clauses 1.3 and 1.4
 Contractor responsible for interpreting site data, inspecting and

examining Site and “to the extent which was practicable (taking account
of cost and time)” obtained all necessary information as to anything that
may affect the Tender or Works (sub-clause 4.10)

complete within the Time for Completion (sub-clauses 8.1 and
8.2).
 Contractor to submit a “detailed time programme” to the

Engineer within 28 days of the notice of commencement showing
all stages (sub-clause 8.3).
 Revised programmes to be submitted “whenever the previous
programme is inconsistent with actual progress or with the
Contractor’s obligations” (sub-clause 8.3).
 Engineer has 21 days to respond and give notice that it does not
comply with the Contract (sub-clause 8.3).
 Contractor to proceed in accordance with it (sub-clause 8.3).
Contractor to submit progress report (sub-clause 4.21):

 To be submitted monthly until completion of all work
 Comprehensive - shall include:
a) Charts & descriptions of progress for each stage
b) Photographs
c) Manufacture report
d) Contractor’s personnel & equipment
e) QA documents, test results etc
f) Notices of claims
g) Safety statistics
h) Comparisons planned versus actual progress, risks and
mitigation measures
Rate of progress provisions at sub-clause 8.6 state:
“If, at any time:

a) Actual progress is too slow to complete within the Time for Completion,
and / or
b) Progress has fallen (or will fall) behind the current programme under
Sub-Clause 8.3…
other than as a result of a cause listed in Sub-Clause 8.4 [Extension of

Time]…
Rate of progress provisions at sub-clause 8.6 continued:
…then the Engineer may instruct the Contractor to submit…a revised

programme…
Unless the Engineer notifies otherwise, the Contractor shall adopt these
revised methods, which may require increases in the working hours and / or
in the numbers of Contractor’s Personnel or Goods, at the risk and cost of
the Contractor…
If these revised methods cause the Employer to incur additional costs, the
Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay these
costs to the Employer, in addition to delay damages (if any) under Sub-
Clause 8.7 below.”
55

completion is or will be delayed for any of the stated reasons
(sub-clause 8.4).
 Contractor liable for delay damages if it fails to complete within

the Time for Completion (sub-clause 7.4).
 Sum stated in the Appendix and the Contractor’s only liability for
delay (sub-clause 7.4).
 Provision for Tests on Completion (clause 9).

 Employer issues Taking Over Certificate to signify Works (or a

Section) are ready for taking over. This does not necessarily
mean they are complete (sub-clause 10.1).
 Provision for Taking Over for any completed part of the Works
“...the Employer shall not use any part of the Works unless and
until the Engineer has issued of a Taking-Over Certificate for that
part..” (sub-clause 10.2)
 Period for undertaking outstanding work and remedying defects

stated in the Appendix to Tender (sub-clause 11.1).
 Performance Certificate issued at the end of Defects Notification
period and confirms Employer acceptance of the Works (sub-
clause 11.9)
 Works to be valued on a re-measurable basis (clause 12).

 Adjustments for valuing the Works are possible (sub-clause
12.3).
(sub-clause 13.1).
 Value engineering provisions are at sub-clause 13.2
 Contractor entitled to be paid at monthly intervals and submits 6

copies of a statement to the Engineer (sub-clause 14.3).
received (sub-clause 14.6).
 The Employer pays at certain timescales (sub-clause 14.7).

 Retention rules apply (sub-clause 14.9).
 Any advance payment is subject to a guarantee and is
progressively reduced as works proceeds (sub-clause 14.2)
 Payment procedure is different after Taking Over Certificate is

issued (sub-clauses 14.10 to 14.13)

clause 14.8).

or Employer to pay (sub-clause 16.1).
 Notice shall be issued by Contractor whenever it considers it to

be entitled to more time and / or money and within 28 days of
being aware (or should have been aware). Failure to comply
means a loss of rights to claim (sub-clause 20.1).
 Subsequent procedure for submission of any claims also subject
to timescales (sub-clause 20.1).
 DAB appointed to resolve disputes with subsequent recourse to

Arbitration if needed (sub-clause 20.2).
The Yellow book
61
GENERALLY – YELLOW BOOK

 Tenderers issued with Employer’s Requirements
According to Sub-clause 1.1.1.5, ERs must specify (cannot imply)

for each part of the works:
 The purpose
 The scope
 The design
 Other technical criteria

possession…”

 Letter of Acceptance signifies a contract has been

entered into, or the Contract Agreement if no Letter of
Acceptance.
YELLOW BOOK GENERAL CONDITIONS

 Clauses 2 to 4 - The Employer, the Engineer and the Contractor
 Clause 5 - Design
 Clause 8 - Commencement, delays and suspension
 Clauses 9 and 10 - Tests on Completion and Employer’s Taking Over
 Clause 12 - Tests after Completion
 Clause 13 - Variations and Adjustments
 Clause 14 - Contract Price and Payment
 Clauses 15 and 16 - Termination and suspension
 Clauses 17 to 19 - Risk, Insurance and Force Majeure
 Clause 20 - Claims, Disputes and Arbitration
64
GENERALLY – YELLOW BOOK (AS RED BOOK)

 Applicable law and ruling language stated in Appendix to Tender

(sub-clause 1.4).


 Provide right of access and possession of Site (sub-clause 2.1).
 Provide reasonable assistance to the Contractor at the request of
the Contractor, for the Contractor’s application of any permits etc
(sub-clause 2.2).
 Can pursue financial claims against the Contractor (sub-clause 2.5)
 Engineer appointed as representative of Employer acting after contract

is signed to “carry out the duties assigned to him in the Contract”
(sub-clause 3.1).
“…Except as otherwise stated in these conditions:
Whenever carrying out duties or exercising authority, specified in or implied by

the Contract, the Engineer shall be deemed to act for the Employer. …”
Clause 3.5 gives the exception …
“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 determination in
accordance with the Contract, taking due regard of all relevant
circumstances.”
 Engineer can delegate specific duties and authority to assistants (sub-

clause 3.2).
 Contractor shall comply with instructions in respect of the Works given by

the Engineer (sub-clause 3.3).
 Contractor appoints Contractor’s Representative who is the only person

authorised to receive instructions (sub-clause 4.3).
Note: don’t forget the communications rules at sub-clauses 1.3 and 1.4
 Contractor responsible for interpreting site data, inspecting and

examining Site and “to the extent which was practicable (taking account
of cost and time)” obtained all necessary information as to anything that
may affect the Tender or Works (sub-clause 4.10)
 Contractor to design and construct the Works so they are fit

for the purposes for which the Works are intended as
defined in the Contract (sub-clause 4.1).
 Intended purpose must be specified in the Employer’s

Requirements as defined in sub-clause 1.1.1.5.
 Treatment of errors in the Employer’s Requirements

provided for by the ‘experienced contractor test’ (sub-
clause 5.1).
 Resolution could be as a Variation or a claim.
 Procedure for the Engineer to review and / or approve

submitted documents (sub-clause 5.2).

8.2).

 Engineer has 21 days to respond and give notice that it does not
comply with the Contract (sub-clause 8.3).
GENERALLY – YELLOW BOOK (MAINLY AS RED BOOK)

a) Charts & descriptions of progress for each stage including
design
b) Photographs
mitigation measures
Rate of progress provisions at sub -clause 8.6 state:
“If, at any time:

a)Actual progress is too slow to complete within the Time for Completion,
and / or
b)Progress has fallen (or will fall) behind the current programme under Sub-
Clause 8.3…

Time]…
Rate of progress provisions at sub -clause 8.6 continued:
…then the Engineer may instruct the Contractor to submit…a revised

programme…
Unless the Engineer notifies otherwise, the Contractor shall adopt these
the Contractor…
73

(sub-clause 8.4).

 Provision for Tests on Completion (clause 9) and Tests after

Completion (clause 12).

 Provision for Taking Over for any completed part of the Works
“...the Employer shall not use any part of the Works unless and
until the Engineer has issued of a Taking-Over Certificate for that
part..” (sub-clause 10.2)

clause 11.9)
(sub-clause 13.1).
 Value engineering provisions are at sub-clause 13.2
 Works to be valued on a lump sum basis (clause 14).
 Contractor entitled to be paid at intervals stated in the

Appendix and submits 6 copies of a statement to the Engineer
(sub-clause 14.3).
received (sub-clause 14.6)



clause 14.8).

or Employer to pay (sub-clause 16.1).


The Silver book
79
GENERALLY – SILVER BOOK (AS YELLOW BOOK)

 Tenderers issued with Employer’s Requirements
According to Sub-clause 1.1.1.3, ERs must specify (cannot imply)

for each part of the works:
 The purpose
 The scope
 The design
 Other technical criteria

possession…”

 Letter of Acceptance signifies a contract has been entered into,

or the Contract Agreement if no Letter of Acceptance.
SILVER BOOK GENERAL CONDITIONS

 Clauses 2 to 4 – The Employer, the Employer’s Administration and
the Contractor
 Clause 5 – Design
 Clause 8– Commencement, delays and suspension
 Clauses 9 and 10 – Tests on Completion and Employer’s Taking Over
 Clause 12 – Tests after Completion
 Clause 13 – Variations and Adjustments
 Clause 14 – Contract Price and Payment
 Clauses 15 and 16 – Termination and suspension
 Clauses 17 to 19 – Risk, Insurance and Force Majeure
82
 Clause 20 – Claims, Disputes and Arbitration

 Applicable law and ruling language stated in Appendix to

Tender (sub-clause 1.4).

GENERALLY – SILVER BOOK (DIFFERENT TO YELLOW BOOK)

 Provide right of access and possession of Site (sub-clause
2.1).
 Provide reasonable assistance to the Contractor at the
request of the Contractor, for the Contractor’s application of
any permits etc (sub-clause 2.2).
 Can pursue financial claims against the Contractor (sub-
clause 2.5)
 Employer’s Representative may be appointed to act on

Employer’s behalf after contract is signed (sub-clause 3.1).
Note: prime duties restricted to monitoring progress, quality and

testing.
Clause 3.5 is worded as follows…
“Whenever these Conditions provide that the Employer shall proceed in

accordance with this Sub-Clause 3.5 to agree or determine any matter, the
Employer shall consult with the Contractor in an endeavour to reach
agreement. If agreement is not achieved, the Employer shall make a fair
determination in accordance with the Contract, taking due regard of all
relevant circumstances.”
 Employer or Employer’s Representative can delegate specific

duties and authority to assistants (sub-clause 3.2).
 Contractor shall take instructions from the Employer or

Employer’s Representative (sub-clause 3.4).
 Contractor appoints Contractor’s Representative who is the only

person authorised to receive instructions (sub-clause 4.3).
Note; don’t forget the communications rules at sub-clauses 1.3 and 1.4
 Contractor responsible for verifying and interpreting site data. The

Employer shall have no responsibility for the accuracy,
sufficiency or completeness of such data, except as stated in
sub-clause 5.1 (sub-clause 4.10)
 Contractor to design and construct the Works so they are fit for
the purposes for which the Works are intended as defined in the
Contract (sub-clause 4.1).
 Intended purpose must be specified in the Employer’s

Requirements as defined in sub-clause 1.1.1.5.
 Contractor generally responsible for the accuracy of the

Employer’s Requirements (sub-clause 5.1).
 Procedure for the Employer to review submitted

documents (sub-clause 5.2).
GENERALLY – SILVER BOOK (SIMILAR TO YELLOW BOOK)

8.2).

 Employer has 21 days to respond and give notice that it does
not comply with the Contract (sub-clause 8.3).

a) Charts & descriptions of progress for each stage including
design
b) Photographs
mitigation measures
Rate of progress provisions at sub -clause 8.6 state:
“If, at any time:

a)Actual progress is too slow to complete within the Time for Completion,
and / or
b)Progress has fallen (or will fall) behind the current programme under Sub-
Clause 8.3…

Time]…
GENERALLY – SILVER BOOK (SIMILAR TO YELLOW BOOK)
Rate of progress provisions at sub -clause 8.6 continued:
…then the Employer may instruct the Contractor to submit…a revised

programme…
Unless the Employer notifies otherwise, the Contractor shall adopt these
the Contractor…
91

(sub-clause 8.4).

 Provision for Tests on Completion (clause 9) and Tests after

Completion (clause 12).

 Taking Over for any completed part of the Works is not

permitted unless agreed by the Parties (sub-clause 10.2)

clause 11.9)
 Only the Employer (or delegated assistants) can vary the

Works (sub-clause 13.1).
 Value engineering provisions are at sub-clause 13.2.
 Works to be valued on a lump sum basis (clause 14).
 Contractor entitled to be paid at intervals stated in the Appendix

and submits 6 copies of a statement to the Employer (sub-
clause 14.3).
 The Employer assesses the monthly interim payments to
be paid to the Contractor. Can be withheld until Performance
Security received (clause 14.6).



clause 14.8).
 Remedies available to Contractor for failure of Employer to pay

(sub-clause 16.1).

[Responsibility for nearly all risk with the Contractor]

Confirm your
understanding 2
97
EXERCISE
Low Risk to Contractor High
Employer design Re-measurable Engineer Contract Data
Appendix to
Employer’s Tender
Contractor design Lump Sum Representative
Particular
Conditions
Q for each book:
1. Who has design responsibility?
2. What is the basis of valuation?
3. Who supervises the Works?
4. Where do you find the project specific data?
5. Arrange in the order of risk to Contractor (low

to high).
ANSWER – 1 - 4
Design responsibility Contractor design Contractor design

Employer design
project specific
Valuation project
Re-measurable Lump Sum Lump Sum
specific
Engineer Engineer Engineer Employer’s

Representative
Contract Data Appendix to Appendix to Appendix to

Tender Tender Tender
Particular Particular Particular Particular

Conditions Conditions Conditions Conditions
project specific anticipated anticipated anticipated
ANSWER - 5
Low Burden of risk on Contractor High
Q: But, where should the Blue Book be placed?
A: It depends on the specific project

Confirm your
understanding 3
101
EXERCISE
Assuming a longer duration Yellow Book FIDIC project,

list :
 The documents that the Contractor should expect to submit

within a period of say 28 days of Contract Award
 The ‘things’ that the Contractor should expect to receive from

the Employer and/or his representative within say 28 days of
Contract Award
102
EXERCISE - ANSWERS
The documents that the Contractor should expect to submit within a

period of say 28 days of Contract Award:
 Sub-Clause 1.6 [Contract Agreement] says that the Employer and Contractor
shall enter into a Contract Agreement within 28 days of the Contractor receiving
the Letter of Acceptance.
 Sub-Clause 4.2 [Performance Security] states that the Contractor shall provide to
the Employer Performance Security.
 Sub-Clause 4.3 [Contractor’s Representative] provides for the Contractor to
appoint a Representative who will have the authority to act for the Contractor
(including issuing and receiving communications).
 A detailed time programme (and separate report) under sub-clause 8.3
[Programme].
 If Sub-Clause 14.4 [Schedule of Payments] applies and the Contract does not
contain a schedule of payments, the Contractor shall submit to the Engineer
within 42 days of the Commencement Date, non-binding estimates of the
expected payments during each quarterly period.
 If Sub-Clause 14.2 [Advance Payment] applies, the Contractor shall provide to
the Employer an advance payment guarantee.
 Sub-Clause 18.1 [General Requirements for Insurances] requires that the
relevant insuring Party shall provide to the other Party evidence that the
insurances have been effected, copies of policies and evidence of payment of
premiums; and give notice of such to the Engineer.
EXERCISE - ANSWERS
The ‘things’ that the Contractor should expect to receive from the
Employer and/or his representative within say 28 days of Contract
Award:
• Sub-Clause 1.6 [Contract Agreement] says that the Employer and Contractor
shall enter into a Contract Agreement within 28 days of the Contractor
receiving the Letter of Acceptance.
• Sub-Clause 2.1 [Right of Access to Site] says that the Employer shall give the
Contractor right of access to, and possession of parts of the Site as stated in
the Appendix to Tender.
• Sub-Clause 3.2 [Delegation by the Engineer] allows the Engineer to assign
duties and / or delegate authority to Assistants; this would include authority
to communicate with the Contractor on certain matters.
• Not less than 7 days notice of the Commencement Date (sub-clause 8.1).
• If Sub-Clause 14.2 [Advance Payment] applies, the Employer shall pay the
advance payment in accordance with Sub-Clause 14.7 [Payment].
• Sub-Clause 18.1 [General Requirements for Insurances] requires that the
relevant insuring Party shall provide to the other Party evidence that the
insurances have been effected, copies of policies and evidence of payment of
premiums; and give notice of such to the Engineer.
Some particular concepts of
FIDIC standard forms
105
Subcontracting
106
FIDIC requires a Contractor to obtain consent to sub-contract works
Blue book Clause 4.3

“Contractor shall not subcontract the whole of the Works. Contractor
shall not subcontract any part of the Works without the consent of the
Engineer.”
Yellow book Clause 4.4

“Contractor shall not subcontract the whole of the Works.
… shall be responsible for the acts and defaults of any
Subcontractors… as if they were the acts and defaults of Contractor.
… shall not be required to obtain consent for suppliers of Materials, or
a subcontract … named in the Contract.
The prior consent of the Engineer shall be obtained to other proposed
Subcontractors.
… shall give the Engineer not less than 28 days notice of the intended
date of commencement of each Subcontractor’s work…”
107
Variations
Variations – Blue Book
The Engineer under clause 10.1:
 Has the power to instruct Variations to limits in Contract Data.
 Cannot instruct omissions from the Works if then done by others.
 Has power to reach agreement on valuation.
 May request quotation in advance (time and cost).
 May instruct without agreement of consequences.
109
Variations – Blue Book
The Contractor under clause 10.1 (and 10.5):
 Must notify Engineer if instruction requires:

 Mobilisation of extra major dredging equipment.
 Early mobilisation of planned major dredging equipment.
 Shall comply with instructions from the Engineer (see also clause 3.2) unless
the above occurs and no agreement on time and cost consequences.
 Shall submit a build up of time and cost consequences, if not agreed, within
28 days of instruction.
110
Valuation of variations – Blue Book
 Clause 10.1 - to include time and cost consequences.
 Clause 10.2 - financial valuation:
 An agreed lump sum.
 Rates in the Contract.
 Using the rates in the Contract as a basis.
 Appropriate agreed new rates or as considered appropriate by the

Engineer.
 If instructed, at day work rates.
111
Variations – Yellow Book
 Clause 13.1 does not set out the types of changes that can be made i.e.
authority for variations
 A variation is defined (Clause 1) as “a change to the Employer’s

Requirements”
112
Procedure – Yellow Book
 Clause 3.3 states that the Contractor must comply with all instructions
from the Engineer
 Clause 13.1 does stipulate limited reasons for not doing so
 Clause 13.3 also provides for a Contractor’s proposal to be requested

prior to an variation being instructed
113
Valuation of variations – Yellow Book
 Adjustments to the Contract Price are to be agreed or determined by the

Engineer
 Reasonable profit is to be included
114
Claims
Blue Book Clause 10.6 – Employer’s claims
 Employer to submit particulars to the Contractor and Engineer

 No criteria regarding timing of issue is given
 Engineer to check the Employer’s submission, consult with Parties and if
possible agree the amount.
 Otherwise, Engineer shall determine
 Can deduct monies due
116
Yellow Book Clause 2.5 – Employer’s claims
 Employer or Engineer to give notice and particulars to the Contractor

 To be given as soon as possible after being aware of the event or
circumstance that gives rise to claim
 Engineer to agree / fairly determine (clause 3.5)
 Can deduct monies due
117
Yellow Book Employer’s claims
 Clause 2.5 provides for and sets out procedure

 Claims include:
 Electricity, water and gas consumption – clause 4.19
 Equipment and free issue materials – clause 4.20
 Rejection / retesting – clause 7.5
 Failure to do remedial work – clause 7.6
 Revised methods cause additional costs – clause 8.6
 Delay damages – clause 8.7
 Failure to pass tests on completion – clause 9.4
 Extension to Defects Notification Period – clause 11.3
 Failure to insure – clauses 18.1 / 18.2
118
Blue Book Clause 10.3 – Early Warning
 Either Contractor or Employer to notify other as soon as they are

aware of circumstance that gives rise to entitlement;
 Parties to minimise effects;
 Entitlement to additional payment / extension of time limited to

what due had Contractor given prompt notice and taken
reasonable steps.
119
Blue Book Contractor’s claims
Clause 10.4 - if Cost caused by the Defined Risks, entitlement to

recover the Cost, subject to the application of rates
stated in the Contract for this purpose (i.e. standby).
Clause 10.4 - if necessary to change Works, dealt with as a

Variation.
Clause 10.5 - itemised make-up to be submitted within 28 days of

any event that gives rise to entitlement.
Clause 10.5 - Engineer to check, consult and agree time and cost
effects, or determine.
120
Blue Book Clause 6.1 – Defined Risks
Defined Risks include:
 Use or occupation by the Employer except as specified.
 Design by the Employer / Engineer.
 Any unforeseeable operation of the forces of nature.
 Any failure by the Employer or Engineer.
 Any unforeseeable physical obstructions or conditions. Notes for

Guidance recommends a geotechnical base report be used as a reference
for what is unforeseeable.
 Adverse climatic conditions (refer to Contract Data for baseline).
 Delay or disruption caused by a Variation.
121
Yellow Book Clause 20.1 – Contractor’s claims
 Notice is mandatory and to be submitted within 28 days of being aware

of an event or circumstance that gives rise to entitlement
 Notice must be worded so the potential for a ‘claim’ is recognised
 Notice is condition precedent to additional payment / extension of time
122
 Records shall be kept, Engineer permitted to view

 Fully detailed claim to be submitted within 42 days of any event or
circumstance that gives rise to entitlement including full supporting
particulars
 Further claims to be submitted on a monthly basis if on-going
 Late submission of details may prejudice Contractor’s position
 Final submission within 28 days of end of effects
123
 Engineer to respond with 42 days of submission

 May request further particulars but must respond on principles of claim
 Interim payments allowed for amounts substantiated
 Engineer to agree / fairly determine (clause 3.5)
124
Yellow Book Contractor’s claims
 Clause 20.1 provides for and sets out procedure

 Claims include:
 Delayed drawings or instruction – clause 1.9
 Late access or possession – clause 2.1
 Setting out reference point errors – clause 4.7
 Adverse unforeseeable conditions – clause 4.12
 Extension of Time – clause 8.4
 Interference with tests – clause 10.3
 Variations – clause 13.3
 Change in law – clause 13.7
 Force Majeure – clause 19.4
125
FIDIC Exercise –
identifying the
changes
126
Dispute resolution
Resolution of Disputes under Blue Book
If not agreed, Engineer to make a determination (cl. 10.5).

Any dispute can be referred to the procedure in cl. 15:
 Adjudication by a Dispute Adjudication Board (DAB) in accordance with

the Appendix
 If any Party dissatisfied or decision not made when it should, Notice of
Dissatisfaction issued within 28 days
 Arbitration in accordance with the Rules of Arbitration of the International
Chamber of Commerce (ICC)
128
Resolution of Disputes under Yellow Book
If not agreed, Engineer to fairly determination (cl. 3.5).

Any dispute can be referred to the procedure in cl. 20:
 Adjudication by a Dispute Adjudication Board (DAB) in accordance with

the rules in the standard form
 If any Party dissatisfied or decision not made when it should, Notice of
Dissatisfaction issued within 28 days
 Arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce (ICC)
129
YELLOW BOOK TYPICAL SEQUENCE OF DISPUTE EVENTS
ENVISAGED IN CLAUSE 20
Parties present submissions to DAB Amicable settlement
<28d <84d <28d >56d

December 2017:
Changes
in the FIDIC Standard Forms
131
Second editions of the Red, Yellow and Silver books
are published in 2017
Why?
 To enhance project management tools and mechanisms
 To reinforce the role of the Engineer
 To achieve a balanced risk allocation
 To achieve clarity, transparency and certainty
 To reflect current international practice
 To address issues raised by users
 To emphasis dispute avoidance

MAIN TOPICS OF 2017 FIDIC-EDITION
 21 instead of 20 Clauses, clauses elaborated (‘huge book’ now);
 ‘Golden Principles’ for Special Conditions;
 Elaborated Procedural Rules for DAAB;
 Balanced risk allocation to Parties →
 Number of rights and obligations to both Parties;
 Incorporation of Best practices;
 New ‘advanced warning’ provision;
 Contractor not liable for defects or damages >2 years after DNP;
 ‘Exceptional Eevents’ replaces ‘Force Majeure’;
 Insurance obligations extended.

THE ROLE OF THE ENGINEER
 Shall continue to be deemed to act for the Employer except when

seeking to reach an Agreement or making a Determination;
 Then to act ‘neutrally’ between the Parties;
 Sub-clause 3.5 (Determinations) to be amended:
 headed “Agreement or Determination”,
 Engineer to have an obligation to encourage settlement of

claims,
 Must provide a record of any consultation with the Parties,
 Time limits for undertaking determination,
 Failure to comply with these time limits means claim is

rejected and can be referred to DAAB.
DISPUTE AVOIDANCE
 Clause 20 is split in two:
 Clause 20 has become “Employer’s and Contractor’s Claims”,
 Clause 21 has become “Disputes and Arbitration”.
 A Claim is to make a request for an entitlement under the Contract;
 A Dispute arises if that claim is rejected (in full or in part).
 DAB to be a Dispute Adjudication / Avoidance Board (‘DAAB’)
 To be standing (not ad hoc) and with expanded procedures,
 Primary purpose is to prevent claims from becoming disputes,
 To be used as a ‘sounding board’.

CLAIMS PROCEDURE
 Concept is: early or advance warning to encourage Parties to work

together to resolve potential difficulties at an early stage,
 Detailed claims procedure (with timings and time bar) to remain,
 Notices must state it’s a notice and make reference to the relevant
sub-clause.
TIME ISSUES
 More obligations with respect to programming, including:
 Contractor submissions to be in hard and soft (electronic) copy,
 All activities to be logic linked, showing early and late start and finish
dates, float and critical path,
 Must also show holiday periods, right of access dates, key delivery dates.
 Enforced obligation (Clause 8.7) to submit updated programme

when it ceases to reflect actual progress.
 Engineer to review all submitted programmes within time limits,
 Failure to comply with time limits means the programme is deemed

to comply.
FIDIC v BIMCO v
LOGIC
138
IN OVERVIEW
FIDIC Drafted for Needs Can include Engineer

Construction onshore significant design appointed by the
Contract construction revision for responsibility Employer
projects offshore works
BIMCO Drafted for Needs Charter party Just the Owner

Charter charter of significant only
Party vessels revision for
inclusion of any
works
Logic Drafted for Suitable for Can include Just the

Offshore Oil offshore offshore works design Company
& Gas construction responsibility Representative
Construction projects
Contract
A FIDIC and LOGIC contract means the Contractor takes on the
obligations and responsibility to complete certain Works in a prescribed
period of time for an amount of money that will be determined.
A BIMCO Supplytime contract is a time charter party under which the

Owner provides its vessel and its capabilities for a prescribed period of
time for an amount of money that will be determined.
Which carries more risks to DEME?

FIDIC v BIMCO v LOGIC
The contractual relationships between the parties involved are different:
Employer Engineer
Owner
Contractor
Company
Charterer
Contractor
General principles of contract management
Workshop Objectives
On days 1 and 2, to:
 Increase your awareness and understanding of contract management.
 Demonstrate how you can improve the DEME Group’s contractual and
commercial position in both the pre-contract and post-contract phases of
projects.
On day 3, to:
 Introduce the main FIDIC standard forms of contract.
 Explain the philosophy of the main FIDIC standard forms of contract and what
their use means.
 Compare FIDIC with some other standard forms of contract.
142
IF THERE ARE NO FURTHER QUESTIONS:
www.drivertrett.com
Photograph credits to FreeDigitalPhoto.net & David Castilo Dominici

143

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GENERAL PRINCIPLES OF CONTRACT

(March, 25th – 27th, 2019)

The Group’s Expert Witness support service provider.

 World-class quantum, delay, and technical experts

Provides multi-disciplinary consultancy services:

 Commercial and contract management

 Part of a global construction consultancy, providing construction and

 Stock exchange listed plc. – AIM (2005)

 Driver Trett established in 2012 when Trett Consulting became part of

 Market leader in expert witness, planning, commercial and disputes.

 2015/2016: £58m turnover.

 Network of offices across Europe, Africa, Americas, Asia Pacific, and

 Global reach with projects undertaken worldwide.

On days 1 and 2, to:

 Increase your awareness and understanding of contract management.

 Introduce the main FIDIC standard forms of contract.

 Compare FIDIC with some other standard forms of contract.

A: Contracts, whether with a client, a supplier or

A: Simply speaking, it is an agreement.

Q: What is the objective of a contract?

A: To define the relationship and how the parties

Is this not part of project management?

A: At the conception of a contract.

Q: When should the management of contracts end?

A: At the finalisation of all matters.

 Making an offer, or tender

 Forming a legal agreement (‘wettelijk’; hier ‘afdwingbaar’)

 Understanding the parties’ obligations under the agreement

 Monitoring the parties’ actions against these obligations

 Identifying any variance

 Invoking (‘inroepen’) the terms of the contract according to the

 Agreeing financial and other matters

What do we mean by the term ‘bad contract’?

 Discrepancies (‘tegenstrijdigheden’)/anomalies (‘afwijkingen’)

Q: Is it true (or fair) to say that a bad contract is the

Q: Is it true (or fair) to say that an unprofitable project is

Revised Q: Who should be involved in managing a

A: Everyone within the business...

I suggest that this could be the key challenge

As managing contracts must be ‘from conception to grave’,

What is its main purpose?

Photograph credits to FreeDigitalPhoto.net & Grant Cochrane

The priority is for a tenderer to understand what will be

 Studying all parts of the RFQ or tender documents.

 Involving supporting departments and area personnel.

 Incorporating Opportunity and Risk Management (ORM).

O&R Register • Main ORM tool that is used to manage O&R

What Opportunities exist at tender stage?

 To understand the customer’s needs

The client will have considered Risk allocation.

 Risk should be allocated to the party best able to manage it.

 Standard Forms of Contract (such as one of the FIDIC or BIMCO

What type of risks should be considered?

3. Provision of bonds, guarantees

4. Security for payment

6. Physical conditions and access

7. Practicality of schedule dates

8. Use of specialist suppliers/sub contractors/ third parties

9. Dispute resolution provisions

Contracting Risks are often indicated by:

 Manner in which contract was secured (‘binnen gehaald’)

Apart from risk allocation, why else should major

The revisions may prevent the contract from working in certain