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Legal Advice on the FIDIC Conditions of Contract for Plant and Design-Build (Yellow Book)

At Josh and Mak International, we are pleased to provide our clients with expert legal advice on the FIDIC Conditions of Contract for Plant and Design-Build (Yellow Book).  This contract is particularly suited for projects where the Contractor is responsible for both designing and constructing the works, potentially including civil, mechanical, electrical, and construction works as per the Employer’s specifications.

Questions? Get in touch at aemen@joshandmak.com 

The 2017 edition introduces several enhancements aimed at providing clearer and more detailed guidelines on contractual requirements. These improvements include more explicit instructions on notices and communications, equal and separate treatment of Employers’ and Contractors’ claims, advanced mechanisms for dispute avoidance, and comprehensive provisions for quality management and verification of contractual compliance. Such updates ensure that both parties are well-equipped to handle the complexities of modern construction projects.

For each contract, specific information relevant to the individual circumstances is included in the Particular Conditions Part A – Contract Data. The publication also acknowledges that many Employers, particularly governmental entities, may need to incorporate special conditions or procedures that deviate from the General Conditions, which can be addressed in Part B – Special Provisions.

To further aid Employers in the preparation of tender documents and the drafting of particular conditions tailored to specific contracts, the publication includes notes on the preparation of tender documents and special provisions. While these notes offer invaluable guidance to ensure that the contractual documents are free of ambiguities and consistent with the overall framework of the contract, legal advice becomes necessary when formulating these particular conditions.

For legal professionals and parties involved in drafting or negotiating contracts under this framework, it is advised to seek expert legal and engineering guidance to ensure the integrity and clarity of contract terms. At Josh and Mak International, our legal experts specialise in providing precise and thorough legal guidance to navigate the intricacies of the FIDIC Conditions of Contract for Plant and Design-Build. For tailored legal assistance, please do not hesitate to contact us at aemen@joshandmak.com.

These conditions are designed for use where tenders are invited on an international basis, reflecting the Second Edition 2017 of the FIDIC Yellow Book.

The terms of these contracts allow the Contractor to be responsible for the entire project scope, from design to execution, according to the Employer’s specifications. It is important to note that these Conditions are not suited for projects where the Contractor is expected to construct the works based on a detailed design provided by the Employer; for such situations, the FIDIC Conditions of Contract for Construction are recommended.

Given the varied legal environments across jurisdictions, modifications to the General Conditions may be necessary to align with local legal requirements, especially for domestic contracts. This aspect underlines the need for precise legal scrutiny to ensure that any amendments retain the intended balance of risks and obligations.

The FIDIC Golden Principles are central to maintaining the integrity of the FIDIC contractual framework. These principles emphasize the importance of clear and fair allocation of duties, rights, and obligations, ensuring that any changes to the General Conditions do not disrupt the balance of risk and reward, and maintaining the recognisability of the FIDIC contract. Drafters are encouraged to consult FIDIC’s Golden Principles to ensure that modifications are appropriate and reflect the project’s specific requirements and local laws.

When drafting Special Provisions (Particular Conditions – Part B), it is crucial to align with the General Conditions and ensure that any amendments are clearly identifiable, using the same clause numbers and titles. These provisions should take precedence over the General Conditions to avoid any ambiguity or misinterpretation during the execution of the contract.

The FIDIC Procurement Procedures Guide, 1st Edition 2011, offers a systematic approach to the procurement process, making it an essential resource for Employers planning to invite tenders on an international scale.

The tender documents are crucial in outlining the scope and requirements of the project. They typically include a letter of invitation, instructions to tenderers, the form of letter of tender and its appendices, conditions of contract (both general and particular), general and technical data, the Employer’s Requirements, and schedules or drawings. The FIDIC Procurement Procedures Guide provides detailed guidance on the content and format of these documents, ensuring they are comprehensive and structured to attract responsive, clear, and competitive tenders.

For projects under the FIDIC Conditions of Contract for Plant and Design-Build, it is recommended that the tender documents are prepared by engineers well-versed in the technical and contractual aspects of design-build projects. Additionally, a review by qualified legal professionals is advisable to ensure the contractual provisions are legally sound and protect the interests of the Employer.

Furthermore, the tendering process must be meticulously planned to include all necessary details such as the Schedule of Payments and any potential Daywork Schedule for minor works executed at cost. The Employer’s Requirements should clearly specify the functional, quality, and scope requirements of the completed works. It is crucial for drafters to ensure that all relevant matters are covered in the Employer’s Requirements to prevent the Contractor from being relieved of responsibilities due to oversight.

The Employer’s Requirements play a critical role in defining the scope and expectations of the project. These requirements should comprehensively outline the technical specifications, design obligations, and operational functionalities expected from the Contractor. Key sub-clauses, such as 7.2 [Samples], explicitly require specific information to be detailed in the Employer’s Requirements. Others, such as 1.8 [Care and Supply of Documents] and 1.13 [Compliance with Laws], emphasize the necessity of including relevant data in the Contract Data (Particular Conditions – Part A), which should be provided in the tender documents unless otherwise stated.

It is imperative for the Employer to ensure that any additional data or information required from the tenderers is clearly communicated through the tender documents. This can be effectively managed by including a detailed questionnaire or specific instructions in the Instructions to Tenderers. These instructions should also address any constraints on completing the Contract Data and Schedules and outline the extent of other information to be included with the tender.

The tender process may also require the tenderers to submit certain guarantees such as tender securities or parent company guarantees. Example forms and instructions on these requirements should be included within the Instructions to Tenderers to ensure clarity and compliance from all participants.

Furthermore, the scope of the works, including any fixtures, fittings, equipment, and the extent of their inclusion in the project, must be explicitly defined in the Employer’s Requirements. This includes specifying any operational responsibilities the Contractor may have post-construction, such as trial operations or extended operational periods.

The Employer’s Requirements should also address the key sub-clauses listed, from 2.1 [Right of Access to the Site] to 12.1 [Procedure for Tests after Completion], ensuring all aspects of the contract are clearly defined and understood by all parties involved. This comprehensive approach helps in mitigating risks and aligning expectations, thereby facilitating smoother project execution.

For detailed assistance in drafting and reviewing your FIDIC contract documents, or any other legal support related to FIDIC Conditions of Contract for Plant and Design-Build, please do not hesitate to contact our team at aemen@joshandmak.com. Our legal experts are well-equipped to handle the nuances of these contracts, ensuring that your legal and contractual frameworks are robust and aligned with your project’s specific needs.

When drafting the Instructions to Tenderers, it is essential to consider the realistic capabilities and limitations of the tenderers, especially when they are required to conduct preliminary designs or studies as part of their proposals. Employers should be mindful of the potential reluctance of tenderers to incur significant expenses during the tender preparation phase. Thus, the extent of the detail required in their proposals should be clearly defined in the Instructions to Tenderers, ensuring that it is both reasonable and practicable for the tenderers to comply without imposing undue burdens.

Additionally, it is worth considering the possibility of remunerating tenderers for their preliminary design work or studies, especially when such efforts are substantial and necessary to provide a responsive tender. This approach can encourage more thorough and innovative submissions by offsetting some of the risks and costs incurred by the tenderers.

The planning of the overall project timeline should also be a priority. Employers must allocate sufficient time for tenderers to prepare and submit their proposals. This includes setting a realistic timeframe that avoids being too short, which may deter competition and result in inadequate proposals, or too long, which could lead to inefficiencies. It is also crucial to allow adequate time for the review and evaluation of tenders and the subsequent awarding of the contract. The minimum period during which tenderers are expected to keep their offers valid should be clearly communicated to avoid any misunderstandings.

Legal considerations play a pivotal role in the preparation of tender documents. Employers and their advisers must ensure that the terminology used in the General Conditions is compliant with the legal standards and practices of the jurisdiction in which the project is located. For instance, terms like “gross negligence” and “indemnify” can have different implications under different legal systems, and their use should be carefully considered to ensure that the contractual obligations and protections are clear and enforceable.

At Josh and Mak International, our expertise extends to the careful drafting and review of Special Provisions and the adaptation of the General Conditions to meet specific project needs and legal requirements. We are equipped to provide the necessary legal support to navigate the complexities of FIDIC contracts effectively.

For detailed assistance and expert consultation, please do not hesitate to contact us at aemen@joshandmak.com. Our team is committed to ensuring that your legal and contractual frameworks are robust, compliant, and tailored to your project’s specific needs.

Sub-Clause 1.1 Definitions The definitions provided in the FIDIC Conditions are foundational to the interpretation of the entire contract, influencing all contract documents including the Employer’s Requirements and the Contractor’s Proposal. It is vital that both parties adhere strictly to these definitions to avoid ambiguities and ensure consistency throughout the contractual documents. For example, the “Base Date” is critical for determining the relevance and applicability of provided data, and any late provision of significant data should prompt the Employer to consider extending the submission deadline to ensure compliance with this date.

Sub-Clause 1.1.77 Site considerations are essential where the definition of ‘Site’ extends beyond the immediate location of permanent works. If additional locations for equipment or materials are anticipated, these should be specified within the contract to cover aspects such as insurances and security.

Modifications to Definitions While generally, it is advisable to adhere to the definitions in the General Conditions, there may be instances where amendments are necessary to reflect specific project needs or local legal requirements. Such changes should be approached with caution to avoid unintended consequences in contract interpretation. New terms should be clearly defined and added in a manner that does not disrupt the existing numbering and structure of the General Conditions.

Sub-Clause 1.3 Notices and Other Communications If paper format notices are required, it may be prudent to adjust the timelines within the contract to account for postal delays, ensuring that all parties receive sufficient notice to respond appropriately.

Sub-Clause 1.5 Priority of Documents An order of precedence is crucial for resolving any discrepancies between contract documents. If multiple documents form part of the Employer’s Requirements, specifying their order of precedence can prevent conflicts during contract execution.

Sub-Clause 1.10 Employer’s Use of Contractor’s Documents Additional provisions may be needed, especially concerning intellectual property such as computer software, where rights might need to be explicitly assigned to the Employer.

Sub-Clause 1.13 Compliance with Laws This sub-clause should clearly articulate the responsibilities of the Contractor in complying with local laws, especially regarding environmental permits and other regulatory requirements. The Employer must ensure these obligations are detailed in the Employer’s Requirements.

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Sub-Clause 1.14 Joint and Several Liability In cases involving a Joint Venture (JV), specific requirements, such as the provision of parent company guarantees and the appointment of a JV leader, should be clearly outlined in the Instructions to Tenderers to facilitate effective communication and avoid intra-JV disputes.

Understanding these nuances is vital for the successful execution of contracts under the FIDIC framework. For detailed legal support and guidance on drafting and negotiating these complex agreements, please contact us at aemen@joshandmak.com. Our team is equipped to ensure that your contractual arrangements are robust, compliant, and effectively managed. 

Sub-Clause 1.15 is related to the Limitation of Liability. This clause is critical for both Employers and Contractors to understand as it outlines the scope and limitations of liabilities under the contract, significantly impacting the risk management and financial aspects of a project.

Sub-Clause 1.15 Limitation of Liability delineates the extent to which each party is responsible for losses or damages arising from various scenarios within the project’s lifecycle. This clause is structured to ensure that both parties are aware of their potential liabilities and can make informed decisions about risk allocation and insurance coverage.

Key points under this sub-clause include:

  • The limitations of liability are itemized specifically for different types of failures and damages, such as delays (Sub-Clause 8.2 [Time for Completion]) and defects or damages attributable to the Contractor.
  • Financial caps are explicitly set for various liabilities, defined in the Contract Data as Sum A, Sum B, and Sum C, which provide clear limits on compensation for specific issues like loss of profit, damage to the Employer’s property, and other contractual matters.
  • The Contractor’s liability in cases of death, injury, or third-party claims is generally linked directly to the values set by required insurance coverages, ensuring that insurance policies are adequately designed to cover potential claims.

For instance, in the Contract Data, amounts specifying the limits of liability (Sum A, Sum B, and Sum C) should be clearly defined. Adjustments to Sub-Clause 1.15 might include specifying the exact figures for these sums, ensuring that the contract clearly communicates the financial limits of liability for both parties.

Moreover, the sub-clause explicitly states that there are no limitations on liability for gross negligence, fraud, deliberate default, or reckless misconduct. This ensures that neither party can contractually limit their liability for actions that significantly deviate from standard professional conduct.

It is also essential for Employers and Contractors to understand how their liabilities under the contract can be influenced by external factors such as legal requirements and insurance provisions. For example, adjustments to the clause may be necessary to align with local regulations that impact contractual liabilities or insurance requirements.

For organizations engaging in contracts governed by FIDIC conditions, it is crucial to have expert legal support in drafting, reviewing, and negotiating these terms to ensure that the contract is not only compliant with local laws but also effectively manages risk. Josh and Mak International is well-equipped to assist with these needs.

For detailed assistance and expert consultation on managing the complexities of FIDIC contracts, please do not hesitate to contact us at aemen@joshandmak.com. Our team of legal professionals is here to ensure that your contractual frameworks are robust, clear, and tailored to safeguard your project’s interests. 

An in-depth understanding of Clause 2 and Clause 3 of these conditions is crucial for both the Employer and the Contractor to manage the rights, obligations, and procedures effectively throughout the project’s lifecycle.

Clause 2: The Employer

Sub-Clause 2.1 Right of Access to the Site This sub-clause deals with the Contractor’s right to access the site. It is essential for the Employer to clearly specify in the Employer’s Requirements any early access for surveys or sub-surface investigations, including any restrictions on this access. If normal access cannot be granted, the Employer needs to detail this in the Employer’s Requirements and make necessary amendments to ensure that the Contractor can commence work in accordance with the contract’s terms.

Sub-Clause 2.3 Employer’s Personnel and Other Contractors This sub-clause emphasizes the necessity for cooperation between the Contractor and any other contractors working on or near the site. It is advisable for the Employer to reflect these cooperation requirements in contracts with other contractors to avoid conflicts and ensure seamless project execution.

Sub-Clause 2.6 Employer-Supplied Materials and Employer’s Equipment This sub-clause outlines the provisions for Employer-supplied materials and equipment. The Employer must specify the timing and conditions of supply in the Employer’s Requirements. It is crucial for these items to be inspected upon delivery, and any defects or shortages should be reported immediately. The responsibility for these materials and equipment shifts to the Contractor once they have been inspected and accepted.

Clause 3: The Engineer

Sub-Clause 3.1 The Engineer The appointment of the Engineer should be governed by a formal agreement, preferably the FIDIC Client/Consultant Model Services Agreement. The role of the Engineer is central to the administration of the contract, and their impartiality and adherence to ethical standards are paramount.

Sub-Clause 3.2 Engineer’s Duties and Authority The Engineer must perform their duties with due regard for ethical standards, including those pertaining to preventing corruption and bribery. It is essential that any actions requiring the Employer’s consent are clearly delineated in the Special Provisions of the contract.

Sub-Clause 3.4 Delegation by the Engineer Delegation by the Engineer should be clearly defined, especially concerning language requirements and the capabilities of any assistants. If language barriers exist, the Engineer must provide competent interpreters to ensure clear communication.

Sub-Clause 3.5 Engineer’s Instructions Modifications to this sub-clause may be necessary to ensure that instructions from the Engineer do not adversely affect the health and safety of the Contractor’s personnel. Additionally, provisions for oral instructions should be carefully managed to ensure they are documented and confirmed in writing.

Sub-Clause 3.7 Agreement or Determination The Engineer must act neutrally and is not deemed to act for the Employer in their determinations. This neutrality is crucial for fair and balanced decision-making.

Sub-Clause 3.8 Meetings Regular meetings are vital for the management of the project, and a schedule of these meetings should be included in the Employer’s Requirements to ensure all parties are adequately prepared and informed.

Sub-Clause 4.1 Contractor’s General Obligations This sub-clause underscores the necessity for the Employer’s Requirements to clearly define the specific purposes of the facility to ensure that the completed works are fit for the intended use. It is imperative that these requirements are detailed and precise to avoid ambiguities that could affect the Contractor’s ability to deliver a project that meets the stipulated needs.

Sub-Clause 4.2 Performance Security The performance security, essential for safeguarding the Employer’s interests, should be specified in the tender documents. It is important to choose forms of security that are acceptable and legal under the applicable laws. Adjustments might be necessary to align with local legal requirements, including specific conditions about the issuing institution or the nature of the guarantee.

Sub-Clause 4.3 Contractor’s Representative The qualifications and experience of the Contractor’s Representative are critical. It is recommended that this individual’s expertise aligns with the main engineering discipline of the works, which must be identified and stipulated in the contract. Additionally, language proficiency requirements should be clearly stated, ensuring that the Representative can effectively communicate in the project’s primary language, or that appropriate translation services are provided.

Sub-Clause 4.4 Subcontractors This sub-clause deals with the employment of subcontractors. It is advisable to encourage the hiring of local subcontractors to enhance community benefits and compliance with local laws. The contract should specify any requirements for the Engineer’s approval of subcontractors and the conditions under which subcontracting is allowed. If specific materials or critical subcontracted elements are involved, the Employer might require the Engineer’s prior consent for these suppliers.

Special Provisions for Subcontractors If the contract might be terminated due to the Contractor’s default, provisions for the assignment of subcontracts to the Employer should be included to ensure continuity and completion of the works. Similarly, if a Subcontractor’s obligations extend beyond the contract’s expiry, these obligations should be assignable to the Employer to maintain the integrity and functionality of the completed works.

Nominated Subcontractors Where the Employer wishes to select specific subcontractors, this preference should be clearly indicated in the Employer’s Requirements. This ensures that all tendering contractors are aware of these stipulations from the outset, allowing them to plan and price their bids accordingly. The legal framework should provide for the Employer to pay the Contractor for works or services procured from these nominated subcontractors.

Understanding these aspects of the FIDIC Conditions of Contract for Plant and Design-Build is essential for Contractors and Employers alike to ensure that all parties meet their obligations and that the project proceeds smoothly. For detailed legal support and guidance on FIDIC contracts or any related queries, please do not hesitate to contact us at aemen@joshandmak.com. Our team is dedicated to ensuring your contractual arrangements are comprehensive, compliant, and effectively managed to protect your interests throughout the project lifecycle.

Sub-Clause 4.8 Health and Safety Obligations This sub-clause highlights the importance of defining health and safety obligations clearly, especially when multiple contractors share the site. It is crucial to specify what health and safety measures are the responsibility of the Contractor and what are borne by the Employer or other parties. This clarity helps prevent overlaps and ensures that all safety requirements are met without confusion.

Sub-Clause 4.9.1 Quality Management System The Contractor must implement a quality management system that adheres to the highest standards. If the Employer requires the appointment of a Quality Manager on site, this requirement should be explicitly mentioned in the Employer’s Requirements. The system should facilitate seamless interfaces with other contractors and the Employer, ensuring all parties understand their roles and contributions to the project’s quality objectives.

Sub-Clause 4.12 Unforeseeable Physical Conditions When projects involve significant sub-surface works, the allocation of risks related to adverse sub-surface conditions must be carefully considered during the tender preparation phase. If these risks are shared between the Parties, amendments to this sub-clause should clearly delineate the percentage of costs each Party will bear. Additionally, including a Baseline Report in the contract can provide a reference point for assessing these conditions and facilitating fair adjustments.

Sub-Clause 4.16 Transport of Goods There may be instances where specific permissions are needed before delivering certain goods to the site. It is advisable to list these goods in the Employer’s Requirements and include provisions in the contract that require the Contractor to obtain necessary permissions from the Engineer prior to delivery.

Sub-Clause 4.17 Contractor’s Equipment If not all necessary equipment is provided by the Contractor, the Employer’s obligations regarding the supply and vesting of Contractor’s Equipment should be clearly defined. This includes detailing the conditions under which the Employer takes ownership of the equipment and the responsibilities of both parties in maintaining and managing the equipment.

Sub-Clause 4.18 Protection of the Environment Environmental management plans are crucial for compliance with environmental laws. These plans, along with their review and approval processes, should be detailed in the Employer’s Requirements to ensure that the Contractor fulfills all environmental responsibilities effectively.

Sub-Clause 4.21 Security of the Site Security responsibilities must be clearly allocated, especially when the Contractor shares the site with others. Amendments to this sub-clause should outline specific security duties of the Contractor and other parties to avoid disputes and ensure comprehensive site security.

Sub-Clause 4.22 Contractor’s Operations on Site Responsibilities for clearing the site of wreckage, rubbish, and hazardous waste should be specifically allocated if the site is shared with other contractors. This ensures efficient management of the site and prevents operational conflicts.

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Milestone Provisions Introducing Milestones into the contract can help manage project timelines effectively. Defining these Milestones in the Employer’s Requirements and including corresponding provisions in the Contract Data ensures that both parties are aligned on expected outcomes and deadlines. Provisions for delay damages related to Milestones should be clear to enforce timelines while limiting liabilities appropriately.

For detailed legal support and guidance on managing FIDIC contracts or any related queries, please do not hesitate to contact us at aemen@joshandmak.com. Our team is dedicated to ensuring your contractual arrangements are comprehensive, compliant, and effectively managed to protect your interests throughout the project lifecycle.

Sub-Clause 5.1 General Design Obligations It is imperative for the Instructions to Tenderers to require details such as the name, address, and relevant experience of each proposed designer or design subcontractor. This enables the Employer to assess compliance with the specified conditions of the contract. The Contractor must review the Employer’s Requirements thoroughly, particularly if an outline design is provided, to understand whether it is a suggestion or a firm requirement, thus ensuring that the works delivered are fit for the intended purposes.

Sub-Clause 5.2 Contractor’s Documents The Employer’s Requirements should specify which documents the Contractor is required to prepare. This might include installation drawings for plant or other necessary documentation to facilitate the proper installation and integration of the plant into the site. It’s crucial that these requirements are clear to ensure that all necessary documents for the successful execution of the works are provided and reviewed as needed.

Sub-Clause 5.2.2 Review by Engineer Documents submitted by the Contractor must be reviewed by the Engineer as stipulated in the Employer’s Requirements. If the standard review period is insufficient due to the complexity or volume of the submissions, it should be adjusted in the Employer’s Requirements. Additionally, in jurisdictions where mandatory review or verification of the design by a legally recognized professional is required, this must be clearly communicated in the Instructions to Tenderers and appropriate adjustments made to ensure compliance.

Sub-Clause 5.5 Training If the project involves new or innovative technology, it is advisable to include provisions for training the Employer’s Personnel. This training could potentially take place at similar facilities to ensure that the Employer’s Personnel are well-prepared to operate and maintain the new plant or technology effectively.

Sub-Clause 5.7 Operation and Maintenance Manuals The contract should clearly specify if the Contractor is required to supply spare parts, including details such as the types and quantities of spare parts and the guarantee periods. This ensures that all necessary components are available to maintain the operational integrity of the plant post-completion.

Legal and Engineering Guidance Given the complexities and specific requirements that may arise during the project, particularly concerning design and compliance with local laws, it is highly recommended that the Employer seeks advice from both legal and engineering professionals. This ensures that all aspects of the contract, especially those related to design reviews and submissions, are thoroughly vetted and compliant with applicable laws.

For further details and expert consultation on FIDIC contracts or any related queries, please do not hesitate to contact us at aemen@joshandmak.com. Our team is committed to providing comprehensive, clear, and tailored legal services to ensure your projects are managed efficiently and in compliance with all contractual obligations.

Sub-Clause 6.3 Recruitment of Persons This sub-clause may need to be revised or removed depending on the local labor laws, which may not permit restrictions on workers seeking other employment. It’s crucial that the contract respects the legal rights of workers while also meeting the project’s staffing needs.

Sub-Clause 6.6 Facilities for Staff and Labour If the Employer is to provide facilities or accommodations for the Contractor’s personnel, these should be clearly detailed in the Employer’s Requirements. This ensures that both parties understand their responsibilities, particularly the Employer’s obligations to provide and maintain these facilities.

Sub-Clause 6.8 Contractor’s Superintendence It’s essential that the Contractor’s superintending staff can effectively communicate in the project’s primary language. If language barriers exist, the contract must require the provision of competent interpreters to ensure that all supervisory communications are clearly understood and that the project’s standards are maintained.

Additional Sub-Clauses for Staff and Labour To address the various needs and legal requirements concerning staff and labour on international projects, several specific sub-clauses may be added:

  • Foreign Personnel: Ensuring compliance with immigration laws for foreign workers, including assistance from the Employer in obtaining necessary work permits and visas.
  • Supply of Food and Water: The Contractor should provide adequate and suitable food and water for their personnel, considering local conditions and requirements.
  • Health Protection: Measures must be implemented to protect workers from local health risks, including insect and pest control and compliance with local health regulations.
  • Prohibition on Alcohol, Drugs, and Arms: Strict controls on the importation, sale, and distribution of alcohol, drugs, and arms to ensure compliance with local laws.
  • Cultural and Religious Sensitivity: Respect for local cultural, religious practices, and observance of local holidays and customs.
  • Labour Practices: Prohibition of forced and child labor, ensuring that all employment is voluntary and conforms to local labor laws concerning minors.
  • Non-Discrimination and Equal Opportunity: The Contractor must adhere to principles of non-discrimination and equal opportunity in all employment practices.

These provisions ensure that the Contractor’s operations are not only compliant with local and international regulations but also respectful of the cultural and social norms of the project’s location.

For comprehensive legal support and detailed guidance on incorporating these aspects into your FIDIC contract, or for any queries related to construction law, please do not hesitate to contact us at aemen@joshandmak.com. Our team is committed to providing precise, informed, and ethical legal services to ensure your projects are executed smoothly and responsibly. 

Ownership of Plant and Materials It is crucial for the contract to clearly specify the ownership conditions of high-value plant and materials. If items need to be removed from the site for repairs, the Contractor must notify and obtain consent from the Engineer, detailing the reasons for removal, transportation arrangements, and the duration of repair. This ensures transparency and maintains the project schedule. Additionally, any plant or materials that become the property of the Employer should not be moved without proper authorization, safeguarding the Employer’s interests.

Commencement, Delays, and Suspension Detailed planning and scheduling are essential. The use of specific programming software recommended by the Engineer should be highlighted in the Employer’s Requirements to aid in the monitoring and management of the project’s progress. For projects with multiple completion stages, defining each stage as a Section within the Contract Data helps in managing the schedule and associated delay damages effectively.

Time for Completion Understanding what constitutes “exceptionally adverse climatic conditions” is critical and should be clearly defined relative to historical weather data. This clarity helps in managing extensions of time fairly and efficiently.

Delay Damages Delay damages should be set at a reasonable estimate of loss to the Employer due to delays, adhering to legal norms to avoid unenforceability. For contracts involving multiple currencies, defining delay damages as a percentage of the Accepted Contract Amount can offer clarity and fairness.

Incentives for Early Completion Incentivizing early completion can drive efficiency and cost savings. Such incentives should be clearly stipulated in the Employer’s Requirements, outlining the bonus mechanisms for early delivery without adjustments due to extensions of time.

Tests on Completion The Employer’s Requirements must detail the tests required before the Taking-Over Certificate can be issued. If the Works are to be taken over in sections, the testing of each section should be planned considering its impact on other sections. Also, involvement of the Employer’s personnel in operational tests and trial operations can be specified to ensure the system is operational as per the intended use.

Taking Over the Works and Sections Each stage of the project defined as a Section should have clear geographical definitions, associated timelines, and specific delay damages in the Contract Data. This structured approach ensures each section is managed effectively, facilitating phased completion and handover.

For detailed assistance and expert consultation on FIDIC contracts or any related queries, please do not hesitate to contact us at aemen@joshandmak.com. Our team is dedicated to ensuring your contractual arrangements are comprehensive, compliant, and effectively managed to protect your interests throughout the project lifecycle

Sub-Clause 14.1 The Contract Price This sub-clause often bases the contract on a lump sum price, thereby placing the risk of cost changes arising from the contractor’s design on the contractor themselves. To facilitate the valuation of variations and manage interim payments effectively, it is crucial for tender documents to include detailed price breakdowns. However, these breakdowns need to be competitively priced and verified by the Engineer to ensure that they reflect fair market values and do not bind the Employer to inflated costs.

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When special provisions are drafted, it’s important to consider the frequency and scale of payments. Provisions might include detailed clauses on the measurement and valuation of the work, particularly if parts of the project are to be paid based on actual measurements rather than a fixed price. These clauses ensure that payments are made for verified and agreed quantities of work, which helps in managing disputes about payment and the scope of work completed.

Variations in Contract Price Due to the complex nature of design-build contracts, variations are likely to occur. It is essential that the contract includes mechanisms for valuing these variations, whether they arise from changes in project scope or unforeseen circumstances. The contract should empower the Engineer to assess these variations accurately and equitably.

Sub-Clause 14.2 Advance Payment and Repayment Advance payments are commonly used to assist the contractor in initiating the project without undue financial hardship. The contract should specify the conditions under which these payments are made and the schedule for their repayment. This helps to align the contractor’s cash flow with project milestones and ensures that the Employer’s interests are safeguarded by linking repayments to progress.

Special Provisions for Measurement and Valuation If the project involves complex engineering works, special provisions may be required to define precisely how measurements are taken and valued. This could include specifying the timing and procedures for such measurements, ensuring that both parties agree on the quantities and that these are verified by the Engineer. This process helps prevent disputes and facilitates smooth execution of the contract terms.

For any advice or detailed consultation on drafting or negotiating FIDIC contracts, or for assistance with any related legal matters, please do not hesitate to contact us at aemen@joshandmak.com. Our team is dedicated to providing expert legal services to ensure that your contractual arrangements are comprehensive, clear, and protect your interests effectively throughout the duration of your project.

Sub-Clause 14.7 Payment The contract must define periods for payments that balance the need for the Employer to manage finances while supporting the Contractor’s cash flow. This is critical to maintaining a positive working relationship and project momentum. Payments should be structured to facilitate the financial stability of the Contractor without causing undue financial strain on the Employer.

Sub-Clause 14.8 Delayed Payment To mitigate the financial impact of delayed payments on the Contractor, consideration can be given to compensating the Contractor for actual financing costs incurred due to delays. This approach takes into account the local financial environment and supports the Contractor in managing additional costs arising from delays that are beyond their control.

Sub-Clause 14.9 Release of Retention Money It’s often beneficial to release part of the Retention Money upon certain project milestones, substituting it with a suitable guarantee. This practice can improve the Contractor’s cash flow while still securing the Employer’s interest in the quality and completion of the works. An appropriate form of guarantee should be clearly defined and included in the tender documents to ensure all parties are aware of the conditions for the release of funds.

Currencies of Payment For contracts involving international transactions, specifying the currencies of payment is crucial. This ensures clarity and helps manage exchange rate risks. The contract should state whether payments are to be made in local or foreign currencies and set out the conditions under which each is applicable.

Financing Arrangements In cases where project financing involves international financial institutions or aid agencies, special provisions may need to be included in the contract to meet the financing institution’s requirements. These may influence various aspects of the contract, from procurement processes to payment terms, and may include specific conditions related to the eligibility of expenses, the law governing the contract, and dispute resolution mechanisms.

For projects financed by commercial banks or other private entities, the contract might need to restrict the Contractor’s rights more than usual, or require specific guarantees from the Employer to secure the payments due under the contract. The exact nature of these provisions will depend on the source of financing and the associated requirements.

For detailed legal support and consultation on managing the financial aspects of FIDIC contracts, or for assistance with any related legal queries, please do not hesitate to contact us at aemen@joshandmak.com. Our team is dedicated to providing precise, strategic, and practical legal solutions to ensure your contractual arrangements are robust and aligned with both local and international standards.

Clause 15.1 Termination by Employer Termination for Contractor’s Default is a critical aspect. Before issuing tenders, it is vital for the Employer to ensure that the grounds for termination and their wording are consistent with the governing law of the Contract. This alignment helps prevent legal disputes and ensures that the termination clauses are enforceable.

Sub-Clause 15.2.1 Notice addresses the issue of integrity and transparency, prohibiting bribes and similar misconduct. This clause serves to maintain high ethical standards throughout the duration of the contract.

Sub-Clause 15.2.3 After Termination suggests a revision to include handling of Employer-Supplied Materials and/or Employer’s Equipment, ensuring that these assets are properly accounted for and returned in cases of termination.

Termination for Employer’s Convenience is a complex area that may not always be permissible under applicable law. It is crucial for the Employer to verify that this sub-clause aligns with local legal standards before proceeding with tendering. This verification prevents legal complications that may arise from an unauthorized termination for convenience.

Clause 16 Suspension and Termination by Contractor This section reflects the Contractor’s rights under the contract, including the right to suspend or terminate the contract under specific circumstances. Just as with the Employer’s rights, these provisions must align with the governing law to ensure they are enforceable.

Sub-Clause 16.3 Contractor’s Obligations After Termination addresses the need for proper management of Employer-Supplied Materials and/or Equipment upon termination by the Contractor, ensuring that these are returned or handled as specified in the contract.

Care of the Works and Indemnities This section covers the responsibilities for the care of the works and includes indemnities that the Contractor must provide. It’s important that these responsibilities are clear and in line with the legal requirements to avoid unexpected liabilities.

Exceptional Events Handling of exceptionally adverse climatic conditions under Clause 19 Insurance and the associated risks is crucial. Employers should consider whether adjustments are necessary to the contract to ensure comprehensive coverage and clear delineation of responsibilities regarding insurance.

For detailed legal support and advice on drafting, negotiating, or understanding FIDIC contracts, please contact our team at aemen@joshandmak.com. At Josh and Mak International, we are committed to delivering tailored legal solutions that ensure the success and legal compliance of your construction projects.

Clause 21 – Disputes and Arbitration Clause 21 focuses on the constitution of the Dispute Avoidance/Adjudication Board (DAAB), which is a critical component in the dispute resolution mechanism. The DAAB serves not only as a tool for avoiding disputes but also assists in resolving them promptly should they arise. FIDIC recommends the appointment of a standing DAAB, which remains involved throughout the project to facilitate ongoing support in dispute avoidance and resolution.

This proactive approach includes regular site visits by the DAAB and is maintained until the completion of the contract. Depending on the project’s specifics—its size, complexity, and duration—either a sole-member or a three-member DAAB may be appointed. The DAAB members should be jointly agreed upon by both parties, ensuring impartiality and fairness in the resolution process. If there is a failure to appoint DAAB member(s), the President of FIDIC can intervene to facilitate this appointment, drawing from the FIDIC President’s List of Approved Dispute Adjudicators.

In the event of unresolved disputes, the parties are encouraged to engage in amicable settlement discussions before proceeding to arbitration. The use of mediation and other forms of alternative dispute resolution is recommended to resolve issues in a less formal and costly manner than arbitration.

Clause 21.6 – Arbitration Should disputes advance beyond amicable solutions, Clause 21.6 outlines the procedures for formal arbitration. It is crucial for international contracts to specify that arbitration be conducted under internationally recognized rules, such as those of the International Chamber of Commerce (ICC). The choice of arbitration venue, typically in a neutral country, and the language of arbitration should be agreed upon by both parties to avoid any bias.

The arbitration process should be detailed in the contract, ensuring all parties are aware of the framework and procedural rules that will govern how disputes are handled. This includes specifying the number of arbitrators and the mechanism for their appointment.

Contact Us For detailed understanding and legal support on FIDIC Conditions of Contract for your projects, do not hesitate to contact our team at aemen@joshandmak.com. Our expertise ensures that your contractual engagements are protected and effectively managed from inception through to completion.

Understanding BIM in the Context of FIDIC Contracts

BIM encompasses more than just the use of advanced software tools; it establishes a collaborative platform where project stakeholders share vital information. This process requires the creation of a federated model that allows for real-time updates, integration, and access by all parties involved. Such a model aids in clash detection, coordination of designs, and effective communication throughout the construction process.

The integration of BIM with FIDIC contracts necessitates a thorough understanding of the contractual framework to ensure that the roles and responsibilities aligned with BIM are clearly defined and managed. Given the collaborative nature of BIM, it is imperative to align this approach with FIDIC’s balanced and fair contractual principles, particularly in design-build or turnkey projects where seamless integration of design and construction phases is crucial.

Advisory Notes on BIM for FIDIC Contract Users

  1. Contract Preparation and BIM Protocols: When preparing contracts involving BIM, it is crucial to clearly define the BIM goals and expectations in the Request for Proposals (RFP). This helps in selecting the most qualified team who can deliver the desired outcomes. The contractual terms should adequately reflect the BIM delivery method, supported by a well-drafted BIM Execution Plan and BIM Protocol that outline the processes and standards to be followed.
  2. Roles and Responsibilities: It is essential to define the roles and responsibilities related to BIM within the project team. This includes specifying the duties of the BIM manager, who will be responsible for managing the federated model and ensuring its integrity and security throughout the project lifecycle.
  3. Legal and Insurance Considerations: Given the complexities associated with BIM, legal advice should be sought to address potential risks, particularly those related to data management, cyber security, and professional indemnity coverage. The contractual framework should clearly state the scope of services and the liabilities associated with BIM tasks.
  4. Dispute Resolution: The collaborative nature of BIM suggests a need for dispute resolution mechanisms that reflect the cooperative spirit. Consideration should be given to including provisions for mediation or other forms of dispute resolution that encourage amicable settlement.
  5. Training and Competency: Ensuring that all parties involved in a BIM project are adequately trained and competent in their respective roles is fundamental. This includes ongoing training in the use of BIM tools and processes to maximise project outcomes.
  6. Integration with Traditional Contractual Roles: It is important to assess how traditional roles defined under FIDIC contracts, such as the Engineer, Contractor, and Employer, integrate within a BIM-enabled project delivery framework. Adjustments may be necessary to accommodate the collaborative approach required in BIM projects.

Contact Josh and Mak International

For expert legal guidance on incorporating BIM into your FIDIC contracts and ensuring that your contractual frameworks are robust and tailored to support high levels of BIM integration, please contact our team at aemen@joshandmak.com. Our expertise in both traditional legal frameworks and modern construction technologies ensures that your projects are not only legally sound but also set up for success in today’s digital construction environment

By The Josh and Mak Team

Josh and Mak International is a distinguished law firm with a rich legacy that sets us apart in the legal profession. With years of experience and expertise, we have earned a reputation as a trusted and reputable name in the field. Our firm is built on the pillars of professionalism, integrity, and an unwavering commitment to providing excellent legal services. We have a profound understanding of the law and its complexities, enabling us to deliver tailored legal solutions to meet the unique needs of each client. As a virtual law firm, we offer affordable, high-quality legal advice delivered with the same dedication and work ethic as traditional firms. Choose Josh and Mak International as your legal partner and gain an unfair strategic advantage over your competitors.

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