FIDIC contracts are the most commonly used standard form of international construction contracts in the world today. Standard FIDIC contracts are frequently used in both large and small construction projects, and they are suitable for parties of different nationalities, speaking different languages and coming from different jurisdictions.
The Fédération Internationale Des Ingénieurs-Conseils, more commonly known as FIDIC, was formed in 1913, in Belgium. Today, FIDIC is the largest international global representative body formed of national associations of consulting engineers, who come from more than 100 countries worldwide.[1] The first standard form of FIDIC construction contract, known as the Red Book, first edition, was published in 1957. The first version of the FIDIC Red Book Contract was based on a domestic contract which was itself developed based on the ICE Conditions of Contract published by the Institution of Civil Engineers.[2] This explains the many common law features of the FIDIC Suite of Contracts, at times greeted with scepticism by civil lawyers.
The FIDIC Red Book is the standard, and most commonly used, construction contract form in all projects where the design is provided by the Employer, following the traditional procurement route of Design, Bid and Build. The Contractor is paid on a measurement basis for the actual quantities of work performed. The accepted Contract Amount is based on estimated quantities. The Red Book has significantly evolved since its first published edition in 1957. The so called Multilateral Development Bank (“MDB”) Pink Book, is essentially an amendment to the Red Book published in 2005, developed to be used for development projects funded by the Bank. The 2010 Pink Book replaced earlier editions from 2005 and 2007.
The second type of FIDIC Contract, the so-called FIDIC Yellow Book, is a standard contract where the design is carried out by the Contractor. The Yellow Book is also known as a Plant and Design-Build contract. The Contractor is usually paid on a lump sum basis. The Yellow Book was published for the first time in 1963, with subsequent revisions.
In the 1990’s, following trends in the construction industry, significant changes to the original FIDIC contracts were introduced and the FIDIC Silver Book was published. The Silver book is used for EPC/Turnkey projects where a majority of risks are allocated to the Contractor. The design is carried out by the Contractor and payment is usually on a lump sum basis.
The FIDIC Red, Yellow and Silver Books were published together in September 1999, in what is known as the FIDIC Rainbow Suite. The FIDIC Rainbow Suite has been translated into a number of different languages in an attempt to avoid problems with unofficial and inaccurate translations. The languages to which the FIDIC Rainbow Suite has been translated include French, Chinese, Arabic, Polish, Portuguese, Romanian, Russian, Spanish, Turkish and Vietnamese.
The FIDIC White Book, or the Client/Consultant Model Services Agreement, is another important and well-known part of FIDIC Suite. The most recent version was published in 2017 and is today one of the most widely-used forms of professional services contracts internationally. The second edition of the Sub-Consultancy Agreement accompanying the White Book has also been published.
Other, less well-known FIDIC contracts include the so-called Green Book, which is a short form contract intended for relatively small projects of a repetitive nature or short duration where the Employer provides the design. Pursuant to FIDIC guidelines, USD 500,000 and 6 months are considered as reasonable limits on capital and duration for projects where Green Book forms are used.
Another form of FIDIC Contract is the so-called Gold Book. The first edition of the Gold Book was published in 2008 and is based on a typical design and build contract form where a period of operation and maintenance has been added. The Gold Book encompasses a complex range of different services and is intended to continue beyond a period of 20 years where the parties intend to extend their cooperation throughout the duration of a project.
Finally, the less well-known so-called FIDIC Blue Book contract was published in 2006 and is a form of contract for dredging, reclamation and ancillary construction work with a large variety of administrative arrangements. Usually, it is the Employer who is in charge of the design and the most important part of the Blue Book contract is the description of the activity itself, defined in detail in the specifications, drawings and design of the work.
The type of Contract that will be chosen by an Employer or the parties depends on the needs of each project and the Employer’s interests and preference as to who should be in charge of the design. The Red Book will naturally be preferable if the Employer has more experience in design and wishes to have a significant role in the design process. Otherwise, the Employer may opt for the Yellow Book or some other form of the FIDIC Suite. The Silver Book is usually preferable if no major unknown risks exist and the Employer prefers to have more security in terms of price and time.
All FIDIC Contracts have certain common features and recognize the need for a balanced approach between the roles and responsibilities of the parties involved, as well as a balanced allocation and management of risks. All of them are comprised of General Conditions of the Contract (“GCC”), which are deemed to be suitable in all cases, and Particular Conditions of the Contract (“PCC”), in which the parties can specify project-specific issues on a case-by-case basis. All FIDIC Contracts also include rules for the adaptation of agreed contract amounts and rules for the extension of time for completion and variation procedures. They all require experience and skilful staff, both on behalf of the Employer as well as on behalf of the Contractor, including the Engineer, who is to be independent and impartial.
Furthermore, most FIDIC forms provide for a multi-tier dispute resolution mechanism. Depending on the type of FIDIC Contract, the most commonly-used method for resolution of disputes is four-step: first, the decision of the Engineer, who is the Employer’s agent managing the construction project; second, the decision of the Engineer can be revised by a Dispute Adjudication Board (“DAB”), which is an independent panel of one or three construction experts who issue their decision; third, the parties should attempt an amicable settlement of their dispute; and, finally, the last remedy is for the dispute to be solved by binding arbitration or a national court, depending on the agreement of the parties in the Particular Conditions of the Contract.
By Nina Jankovic, Acerislaw.com
[1] See FIDIC Website, available at: http://fidic.org/about-fidic
[2] Nael Bunni, The FIDIC Forms of Contract, 3rd ed., Ch. 4 (Blackwell Publishing, 2005).