New FIDIC Contracts

Last week, FIDIC published the Second Editions of its Red, Yellow and Silver Books at the FIDIC International Users’ Conference in London. These have come out 18 years after the First Editions of this Rainbow Suite in 1999.

The new contracts are:

• Conditions of Contract for Construction, Second Edition 2017 (Red Book)
• Conditions of Contract for Plant & Design Build, Second Edition 2017 (Yellow Book), and
• Conditions of Contract for EPC/Turnkey Projects, Second Edition 2017 (Silver Book).

The key changes to these contracts include:

• The contracts are quite a lot longer but some structural changes make them easier to use, such as the definitions being moved into alphabetical order and the addition of more sub-headings to divide up clauses.

• There are more reciprocal rights and obligations for both the Employer and Contractor to comply with eg both to comply with applicable laws, both to assist each other in obtaining permits. The overall changes to risk allocation are not substantial though.

• Changes to the insurance provisions include a requirement on the Contractor to obtain professional indemnity insurance and the Red Book contains more detail relating to the Contractor’s design responsibility where applicable.

• The Employer must now set out its financing arrangements in the Contract Data whereas previously it only had to provide reasonable evidence in response to a request by the Contractor.

• An addition to the extension of time provisions aims to cover a concurrent delay situation.

• New termination triggers have been put in for Contractor default including if the delay damages cap is exceeded. The Employer’s right to terminate for convenience has been modified though to require payment for loss of profits and other damages due to the termination.

• A fitness for purpose indemnity in favour of the Employer is included but it is not unlimited.

• Additional procedures for managing the contract have been introduced with more detailed provisions for giving notices, reviewing the contractor’s documents, variations, taking-over and payment applications. In particular, the procedure for determinations by the Engineer has been expanded, setting out different stages and timescales for the process.

• The claims clauses have been amended to join up the provisions relating to Employer’s and Contractor’s claims under Clause 20 and make them reciprocal and changes have been made to the time limitations for claims.

• Dispute Resolution is now at Clause 21 with the provision for a standing DAAB (Dispute Avoidance/Adjudication Board) in all three contracts.

Look out for our future articles in which we will comment more extensively on the key changes.