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FIDIC DBOContracts
The FIDIC ContractGuide
Guide

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for the FIDIC Conditions of Contract for Design, Build
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and Operate Projects

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1st Edition 2011
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The FIDIC DBO Contract Guide

for the FIDIC Conditions of Contract for Design, Build

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and Operate Projects

First Edition, 2011

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FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS

INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS
INTERNATIONALE VEREINIGUNG BERATENDER INGENIEURE
FEDERACION INTERNACIONAL DE INGENIEROS CONSOLTORES
 Contents

1 Acknowledgements ............................................................................................ 1
2 FIDIC DBO Contract ........................................................................................... 2

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3 Introduction and Foreword ................................................................................. 3
4 Parties involved in a DBO Project ....................................................................... 5

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5 General Conditions – Clause-by-Clause Commentary ........................................ 9
Clause 1 General Provisions
Clause 2 The Employer
Clause 3 The Employer’s Representative

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Clause 4 The Contractor
Clause 5 Design
Clause 6 Staff and Labour
Clause 7
Clause 8
Clause 9
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Plant, Materials and Workmanship
Commencement Date, Completion and Programme
Design-Build
Clause 10 Operation Service
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Clause 11 Testing
Clause 12 Defects
Clause 13 Variations and Adjustments
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Clause 14 Contract Price and Payment

Clause 15 Termination by Employer
Clause 16 Suspension and Termination by Contractor
Clause 17 Risk Allocation
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Clause 18 Exceptional Risks

Clause 19 Insurance
Clause 20 Claims, Disputes and Arbitration
6 Particular Conditions Part A – Completing the Contract Data ......................... 141
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7 Particular Conditions Part B – Preparing Special Provisions ........................... 142

8 Structure of the Dispute Adjudication Board .................................................. 143
9 Index of Clauses and Sub-Clauses ................................................................ 145
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1 Acknowledgements

FIDIC would like to thank the principal author of this Guide, Michael Mortimer-Hawkins, who
was Chair of the task group responsible for drafting the DBO Conditions of Contract, Axel
Jaeger who was Chair of the Contracts Committee during this time, Nael Bunni for his help

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and words of wisdom in connection with the provisions relating to risks and insurance and
his work in modernising the procedures for dealing with claims and disputes, Chris Seppala
who reviewed the Guide for legal aspects, and the other members of the DBO task group.

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The FIDIC DBO Contract Guide was prepared by the FIDIC Secretariat under the
guidance of the FIDIC Executive Committee and the FIDIC Contracts Committee whose
members over the period that the Guide was drafted and published were: Nael Bunni,
Chartered Engineer, Ireland (Legal Adviser); Axel-Volkmar Jaeger, Consulting Engineer,
Germany; Philip Jenkinson, Atkins, UK; Michael Mortimer-Hawkins, Consulting Engineer,

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UK and Sweden; João Prego, Viaponte, Portugal; Christopher Seppala, White and Case
LLP, France (Special Adviser); Christoph Theune, Pöyry Environment GmbH, Germany;
Christopher Wade, Consulting Engineer, UK; Zoltan Zahonyi, Hungary.

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FIDIC wishes to record its appreciation of the time and effort devoted by all the above.
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© FIDIC 2011
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2 FIDIC DBO Contract

In 1999, the Fédération Internationale des Ingénieurs-Conseils (FIDIC) published a new

series of Conditions of Contract: (a) for Construction; (b) for Plant and Design- Build; and
(c) for EPC/Turnkey Projects. A guide for these contracts,The FIDIC Contracts Guide, was

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also published by FIDIC. This was followed by the Short Form of Contract for lower value
or less complex projects, and the Form of Contract for Dredging and Reclamation Works.
Following their publication, it became clear that there was a growing need for a document

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which combined a design-build obligation with a long-term operation commitment.

Whilst it was recognised that there are alternative scenarios encompassing the Design,
Build and Operate (DBO) concept, for example the “green field” scenario of Design - Build -
Operate, and the “brown field” scenario of Operate - Design - Build, it was also recognised
that different scenarios required different contract conditions. Moreover, the conditions

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applicable to short-term operation differed considerably to those applicable to long-term
operation. A further consideration was whether it was best to approach a DBO project as a
single long-term contract or as two separate or linked contracts.

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For the FIDIC Conditions of Contract for Design, Build and Operate Projects FIDIC chose
to adopt the green-field Design - Build - Operate scenario, with a 20-year operation period,
and opted for a single contract awarded to a single contracting entity (which would almost
certainly be a consortium or joint venture) to optimise the coordination of innovation, quality
and performance, rather than award separate contracts for design-build and for operation.
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The Contractor had no responsibility for either financing the project or for its ultimate
commercial success.

The document, as written, is not suitable for contracts which are not based on the traditional
Design - Build - Operate sequence, or where the Operation Period differs significantly from
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the 20 years adopted.

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© FIDIC 2011
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3 Introduction and Foreword

In 1999, the Fédération Internationale des Ingénieurs-Conseils (FIDIC) published substantially

updated Conditions of Contract (a) for Construction and (b) for Plant and Design-Build, and
a new form for EPC/Turnkey Projects. This was followed by the Short Form of Contract for

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lower value or less complex projects, and a form of Contract for Dredging and Reclamation
Works. Following their publication, it became clear that there was a growing need for a
document which combined a design-build obligation with a long-term operation commitment.

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Thus in 2008, FIDIC published the first edition of Conditions of Contract for Design, Build
and Operate Projects Contract.

Whilst it is recognised that there are alternative scenarios which encompass the Design
- Build - Operate (DBO) concept, FIDIC chose to base its document on the “green field”

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scenario. The Conditions of Contract have thus been prepared for projects leading to the
creation and development of a completely new facility from scratch.

The type of projects which could benefit from adopting the DBO form of procurement are

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typically infrastructure projects where the resulting facility will often produce an income
or revenue for the Employer and where the Employer might not have the resources or
experience to operate the facility himself and might otherwise consider engaging an service
provider or operator.
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The feasibility and environmental studies and the economic viability studies will normally
have been made by, or on behalf of, the Employer before he makes his decision on whether
or not to proceed with the Project, and it will also be the Employer who will be responsible
for land acquisition, financing, planning and other permissions.
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The Contract awarded to the Contractor will then be for the design and construction of
the Project or facility, followed by the long-term operation and maintenance of that facility
for a period of 20 years. At the time of commissioning and the issue of the Commissioning
Certificate, ownership of the facility reverts to the Employer, and during the 20-year
Operation Service Period, the Contractor will be operating and maintaining the facility under
an operating licence from the Employer.
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The document also assumes that the Contract will be awarded as a single contract to a
single contracting entity (which will almost certainly be a consortium or joint venture) rather
than adopt the alternative arrangement of one contract for the design-build of the Works,
and a separate service contract for the operation.
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It was felt that this arrangement would help to optimise the coordination of innovation,
quality and performance, and provide the Employer with a facility which is not only ‘fit for
purpose’, which is a fundamental requirement of the Contract, but also a facility which
is built to last, since the Contractor knows that he has the responsibility to operate and
maintain the facility for around 20 years.
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The document, as written, is not suitable for contracts which are not based on the assumed
Design - Build - Operate sequence, or where the Operation Period differs significantly from
the 20 years adopted, and parties who are considering undertaking a project incorporating
the elements of design, build and operation which is not based on the ‘green field’ scenario,
or where the planned operation period is significantly greater than or less than 20 years,
should not use this document without careful modification. FIDIC can provide assistance
and guidance if required.

A common alternative to the DBO ‘green field’ approach for the creation of a new facility

© FIDIC 2011
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 is the ‘brown field’ scenario for the up-grading of an existing facility. The current document
is not suitable for use for ‘brown field’ projects without careful amendment, and FIDIC
intends to produce a Part C to the Particular Conditions which will provide guidance as to
the changes which would need to be made before using the document for ‘brown field’
projects.

The DBO form of contract is based on the same structure and layout as the earlier (1999)
documents published by FIDIC, with General Conditions, Particular Conditions and a variety

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of Sample Forms. It is based on a 20-clause layout and, where appropriate, it uses the
same terminology and same definitions as are found in the 1999 documents. However,
the document contains a number of improvements and innovations not found in the

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earlier documents which make the document more user-friendly and more aligned to the
requirements of today’s construction industry. These can be briefly identified as follows:

- up-graded visual timelines showing key activities;

- definitions listed alphabetically;
- risk and insurance provisions restructured and up-dated;

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- claims procedures up-dated with emphasis on dispute avoidance;
- Particular Conditions containing two Parts:
- Part A – Contract Data
- Part B – Special Provisions

-
-
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with a Part C to be added for the “brown field” scenario;
additional sample forms provided.

Each of these aspects, and much more, is covered in this Guide.

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As with its other contract documents, the DBO document is recommended by FIDIC for
general use where tenders are invited on an international basis.

When preparing these Conditions of Contract for Design, Build and Operate Projects, the
drafting task group has attempted to include all conditions of a general nature, which are
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likely to apply to the majority of DBO contracts, into General Conditions. However it was
recognised that there are many essential provisions which are particular to each individual
project, and these have been included as Contract Data and are to be found in the Particular
Conditions Part A – Contract Data. In addition, it is recognised that many Employers or
governments or even different jurisdictions, particularly if the Conditions were to be used
on domestic contracts, may require special conditions of contract, or indeed particular
procedures, which differ from those included in the General Conditions. For this reason, the
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document also includes Particular Conditions Part B – Special Provisions where users may
add Special Provisions to replace or supplement the clauses to be found in the General
Conditions. This Guide however, provides commentary only on the clauses and sub-clauses
of the General Conditions.
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It is also recognised that, although the document includes clauses and procedures which are
written with the intention of having a common interpretation and use, different jurisdictions
based on, for example, common law or civil law, may well have different interpretations of
the written text. This Guide has tried to identify some areas where experience has shown
that this happens. However, users must be aware that wherever there is a conflict between
the provisions of the Contract and applicable mandatory law, which should be fairly
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infrequent, then applicable mandatory law will prevail.

The purpose of this Guide is to provide users with some commentary by the drafting
committee as to their thoughts and intentions when preparing the document. However,
users should note that it will only be the actual terms of the Contract which is entered into
by the Parties which will be binding on them.

FIDIC considers the official and authentic text of the FIDIC DBO Contract Guide for the
purposes of translation to be the version written in the English language.

© FIDIC 2011
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4 Parties involved in a DBO Project

There are a number of persons and parties who are involved in a DBO project and who are
named somewhere in the Contract Documents.

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Some of these persons and parties are defined in Sub-Clause 1.1 [Definitions] of the
General Conditions and some are not. However even those with no formal definition have
an important role to play.

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Signatories to the Contract

Only two Parties sign the Contract and are thereby bound by the terms of the Contract.
They are: the Employer (see Definition 1.1.32) and the Contractor (see Definition 1.1.17).

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They each have obligations, duties and rights towards one another under the Contract, and
each of these obligations, duties and rights is governed by the use of the word ”shall” or
“may” (see Sub-Clause 1.2 [Interpretation]).

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By Sub-Clause 1.8 [Assignment], neither Party may assign the whole or any part of the
Contract to a third party without the prior written agreement of the other Party to do so, and
the Contract is written assuming that both Parties fulfil the duties and obligations assigned
to them.
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Assignment means the transfer of rights under a contract to a third party and this
should not be confused with other relationships such as subcontracting (where, in
order to perform a construction contract, a contractor purchases services from another
contractor, called a subcontractor, who performs the services under the responsibility
of the contractor) or horizontal cooperation such as a joint venture (where two or more
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contractors agree to perform a project together and share the corresponding risks and
rewards of performance).

If either the Employer or the Contractor is to be called by another title such as ‘Owner’ or
‘Ministry’ or ‘Client’, or ‘Builder’ or ‘Constructor’, this revised terminology must be clearly
explained in the Contract Data or elsewhere in the Contract. Unless such explanation
contains any revisions to the foreseen roles of the parties concerned, then such parties shall
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be deemed to have the roles of the Employer and Contractor as respectively given assigned
to them in the Contract.

It is essential that each Party is a legal person or entity under the law of the country under
which it has been constituted, as only legal persons or entities can enter into contracts.
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Thus, to take some examples: a branch of a company is not normally a legal person or
entity, only the company itself is one, and an administration, authority or ministry of a state
may not be a legal person or entity, only the state itself may be one. Where there is any
uncertainty about whether a particular body is a legal person or entity, it is advisable to seek
a legal opinion.
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Other defined parties (in alphabetical order)

Auditing Body

The Auditing Body (see Definition 1.1.4) is a jointly appointed (by the Employer and the
Contractor) and totally impartial body which is active during the Operation Service Period
to monitor the performance of both Parties during the Operation Service Period. The body
may be one or more persons and their role is to check that both Parties are performing
the Contract in a properly way during the Operation Service Period. This role should not be

© FIDIC 2011
5
 left to the Employer’s Representative as he will not have the required independence and
impartiality to fulfil the duties of the Auditing Body.

The Auditing Body is there to monitor and identify possible failings in the performance of
both Parties, but it cannot instruct the failing Party on how or when to rectify the failure.
Such instruction must be given by the Employer’s Representative – so the Auditing Body
will advise the Parties and the Employer’s Representative of the failure and the Employer’s
Representative will take the necessary action to see that the failure is rectified.

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If the Parties choose to appoint another person, such as an inspector or controller instead of
the Auditing Body, that person’s role and authority must be clearly identified in the Contract.

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However, unless something else is stated, such person would be required to act impartially
and independently and fulfil all the duties assigned to the Auditing Body under the Contract.

Contractor’s Representative

The Contractor’s Representative (see Definition 1.1.22) is appointed by the Contractor

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to represent the Contractor on Site in the day-to-day running of the Contract. Once the
Contractor has chosen his Representative, such person must have the consent of the
Employer’s Representative before commencing his duties. Once appointed, it is not
intended that such person shall be changed or replaced, but if replacement is necessary for

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reasons of illness or death or leaving the company, then a replacement must be appointed
and again, such appointment is subject to the consent of the Employer’s Representative.
Certain jurisdictions require the Contractor’s Representative to possess a kind of licence or
specific experience. Should this be the case, the Special Provisions shall incorporate these
additional requirements.
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Note the use of the word ‘consent’ rather than ‘approval’. ‘Consent’ is another way of saying
’no objection’, but makes it quite clear that the choice of the Contractor’s Representative,
and his subsequent actions and behaviour, are the sole responsibility of the Contractor.
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Most Contractors refer to their Representative as Site Agent, Site Manager, Project
Manager, Construction Manager or some similar title. Whatever title they choose to use,
the person concerned has the complete duties and responsibilities which are assigned to
the Contractor’s Representative in the Contract, and it must be made quite clear where the
lines of communication and responsibility lie. Any delegation of responsibility or authority
within the Contractor’s organisation, for example the authority to receive day-to-day
work instructions by the Site foremen, must be clearly recorded in writing and notified to
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the Employer and his Representative. However, any such delegation will not relieve the
Contractor of any of his obligations or duties under the Contract.

Dispute Adjudication Board

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The role and appointment of the DAB or Dispute Adjudication Board (see Definition 1.1.27)
is covered in detail in Clause 20 [Claims, Disputes and Arbitration]. The General Conditions
of the Dispute Adjudication Agreement follow the General Conditions of Contract in the
DBO document and give the general obligations of the DAB member towards the Employer
and the Contractor, and the general obligation of these two Parties towards the member.
It is not intended that these General Conditions should be changed, but if there are special
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provisions which the Employer wishes to, or needs to, include in relation to the status or
role of the DAB, these should be separately given as Special Conditions to the DAB General
Conditions in a similar way to the use of the Particular Conditions to the Contract. A key
requirement in appointing DAB members in accordance with Sub-Clause 20.3 [Appointment
of the Dispute Adjudication Board], is that such persons shall be independent of the two
Parties, and Article 3 of the General Conditions of the Dispute Adjudication Agreement
addresses the question of challenges of independence of a DAB member by either Party.
The Procedural Rules concerning the performance and behaviour of the DAB are also

© FIDIC 2011
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 given, and again, if these are to be changed or revised, it is most important to see that the
members of the DAB retain their complete independence and integrity.

Employer’s Representative

An important member of the Employer’s team is the Employer’s Representative (see

Definition 1.1.35). This person is appointed by the Employer and should be named in the
Contract Data so that tenderers know, when preparing their tenders, who the Employer is

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intending to appoint as his Representative. The Employer has various options when making
this appointment, and the choice is entirely his. If his organisation (such as the Ministry
of Works or the government electricity authority) contains an appropriate Engineering

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Department which has possibly been involved in the planning and development of the
project, the Employer may well select a senior member of his Engineering Department to be
his Employer’s Representative. Alternatively, if the Employer has engaged an international
or domestic firm of consulting engineers in the planning or conceptual design of the project,
he may choose to appoint that firm as his Representative. Whoever he appoints must
have a clear understanding of his role which, according to Sub-Clause 3.1 [Employer’s

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Representative’s Duties and Authority], is to “act for the Employer” and in the best interests
of the Employer, but at the same time, he must act with fairness and integrity when making
determinations under Sub-Clause 3.5 [Determinations].

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If the Employer chooses to call his Representative by another title, such as Site Inspector
or Administrator or Project Officer or whatever, this must be clearly stated, and unless the
documents give a different role or different duties and responsibilities to such person, then
it will be assumed that he has the same duties and responsibilities as are allotted to the
Employer’ Representative in the Contract.
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It is not intended that the Employer should split or divide the role of his Representative as it
is foreseen in the Contract, but if he does, for example, by appointing a Design Engineer to
review the design of the Works and a Supervision Engineer to oversee their construction or
installation, then each of these persons must be clearly named and identified in the Contract
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and their role and authority carefully described.

Subcontractors

It is more than likely that the Contractor will wish to engage one or more Subcontractors
(see Definition 1.1.74) to help him during the execution of the Works. However there are
strict regulations regarding the appointment of Subcontractors. Firstly, the Contractor is not
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permitted to subcontract the whole of the Works or the provision of the Operation Service,
and if he does, then by Sub-Clause 15.2(d), these are grounds for the Employer to terminate
the Contract. In any event the Contractor must obtain the consent of the Employer’s
Representative prior to engaging any Subcontractor unless the Subcontractor (or supplier)
is named in the Contract. Note that this is ‘consent’ not ‘approval’ and reinforces the
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point that the Contractor is fully responsible for any actions, omissions or failures of his
Subcontractors, notwithstanding any consent.

If the Employer wishes the Contractor to use a particular subcontractor or supplier for a
particular part of the Works (a nominated Subcontractor) – for example to give work to a
local contractor, or to standardise on the use of equipment with other similar facilities owned
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by the Employer – then he can require the Contractor to engage such persons by naming
them in the Employer’s Requirements (see Sub-Clause 4.5 [Nominated Subcontractors]).
However, the Employer cannot force the Contractor to accept a nominated Subcontractor
against whom the Contractor raises reasonable objection. Such objections could, for
example, be lack of production capacity or inability to meet the safety requirements carried
by the Contractor under the Contract. In such cases the Contractor must give Notice to
the Employer’s Representative, and if the Employer insists on the use of the nominated
Subcontractor, then the Contractor would probably be released from certain liabilities in
respect of the nominated Subcontractor’s performance.

© FIDIC 2011
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 Other parties involved in the Contract

Financing. It is the Employer’s responsibility to arrange adequate and available financing to

pay the Contractor for performing the Contract, and he is required to provide evidence that
such financing is available when issuing tender documents and inviting tenders. Tenderers
will need reassurance when tendering that financing will be available for the complete
project, and the Employer is required to provide a Financial Memorandum (see Definition
1.1.43). Whether financing for the project is being provided by one of the International

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Financial Institutions (such as the World Bank) or governmental loans or grants, the Employer
must attach evidence of his financial arrangements to the Employer’s Requirements. Such
evidence could be in the form of copies of financing agreements or irrevocable letters of

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credit, sufficient for tenderers to have confidence that funding is, or will be, in place for the
complete project.

If financing is being provided by a third party, such as in financing institution, it is important

for the Employer to check that the procedures and routines required by the financing
institution are compatible with the Employer’s obligations to pay the Contractor under

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Clause 14 [Contract Price and Payment]. For example, if the Employer will be unable to
meet the times for payment given in the Contract (Sub-Clause 14.8 [Payment]) due to the
requirements of the financing institution, it is important that he revises the times for payment
by including a revised text in the Particular Conditions Part B – Special Provisions.

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Insurance. The DBO Contract assumes that all the insurances required (see Clause 19
[Insurance]) will be provided by the Contractor. Prior to effecting the insurances, the
Contractor is required to obtain the approval of the Employer to both the insurance
company the Contractor is intending to use, and the terms and conditions of the policies
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he intends to take out. In this case, the Employer is required to give his ‘approval’ – not his
consent – and the reason for this is that in many cases the insurance has to be taken out in
the joint names of the Contractor and the Employer, so it is very important for the Employer
to have the policies checked by a competent insurance expert to see that he will be
adequately protected. Normally the Employer’s Representative will not have the expertise
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to check insurance policies and he should not be asked to carry out this function. However,
when approving the insurance provisions being proposed by the Contractor, it is important
to remember that the currency of payments made by the insurance company must be in a
suitably convertible currency such that it can be used by the beneficiary (be it the Employer
or the Contractor) to compensate the losses he has suffered.

Other Persons or Parties. If the Contract includes persons or parties who are not named or
OR

defined in the FIDIC General Conditions such as ’project manager’, ’inspector’, ’manager’,
or any other person or party, their titles, positions, authority and role must be clearly
indentified and defined in the Particular Conditions Part B – Special Provisions. In addition
to their role, their relationship to their principal (the Employer or the Contractor) must be
explained and their authority to issue and receive instructions must be clearly stated. If these
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details are not provided in the tender documents, then they must be agreed and made clear
in the Contract documents (if necessary in the form of a memorandum) prior to signature
of the Contract.
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© FIDIC 2011
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 5 General Conditions – Clause-by-Clause Commentary

The notes which follow the individual clauses of the DBO Conditions of Contract are made
by the drafting committee and are intended to serve as a practical guide to the intended
operation and use of the various clauses and explain how they inter-relate with each other.

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The text from the DBO Contract is shown indented; the commentary by the drafting task
group is shown below the indented text.

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Not all sub-clauses have commentary. Where the drafting committee felt that no explanation
or comment would help in the understanding of the text, no commentary is given.

Clause 1 General Conditions

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1.1 Definitions

In the Conditions of Contract (“these Conditions”), which include Particular

Conditions and these General Conditions, the following words and expressions shall

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have the meanings stated. Words indicating persons or parties include corporations
and other legal entities, except where the context requires otherwise.

The defined words are listed alphabetically and they are identifiable in the text of the various
clauses and sub-clauses by the use of capital initial letters.
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1.1.1 “Accepted Contract Amount” means the amount accepted in the Letter of
Acceptance for the Design-Build of the Works and the provision of the Operation
Service, including the amount of the Asset Replacement Fund.
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It is important that the “Accepted Contract Amount” is stated in the Letter of Acceptance
or, if there is no Letter of Acceptance, then in the Contract Agreement. If this is not done,
it could be argued that the Accepted Contract Amount is the same as the Tender Sum
offered by the Contractor to whom the Contract is being awarded. The Accepted Contract
Amount should separately identify the amounts applying to the Design-Build of the Works,
the Operation Service and the amount of the Asset Replacement Fund.
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1.1.2 “Asset Replacement Fund” means the fund provided for under Sub-Clause 14.18
[Asset Replacement Fund].

1.1.3 “Asset Replacement Schedule” means the schedule referred to in Sub-Clause

14.5 [Asset Replacement Schedule] prepared by the Contractor covering the
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identification and timing of asset replacements.

It is recognised that during an operation commitment lasting 20 years, a number of items of

Plant or Materials will need replacing. The frequency of replacement will depend on the quality
of the initial installation included by the Contractor in his basic design. Since the content and
value of the Schedule and Fund will be prepared by the Contractor, it is very important that
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this is checked against the Contractor’s basic design to see that it meets the requirements
of Sub-Clauses 14.5 [Asset Replacement Schedule] and 14.18 [Asset Replacement Fund].

1.1.4 “Auditing Body” means the independent and impartial body appointed to
conduct the Independent Compliance Audit in accordance with Sub-Clause 10.3
[Independent Compliance Audit].

It is important that both Parties fulfil their obligations during the Operation Service Period if
the Operation Service is to be successful. The Auditing Body is independent from both the

© FIDIC 2011
9
 Employer and the Contractor and has the role to monitor the performance of both during the
Operation Service Period. The Auditing Body cannot issue instructions, but it can identify
failures of either Party and notify the Employer’s Representative, who still retains an active
role during the Operation Service Period, of the failure and the possible consequences. The
Employer’s Representative must then take the appropriate action against the failing Party.

1.1.5 “Base Date” means the date 28 days prior to the latest date for submission of the
Tender.

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The Base Date assumes that tenderers will not have had the opportunity, from a practical
point of view, to take account of any events which may have an effect on their tender and

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which occur less than 28 days before the date by which tenders have to be submitted.
Any such events occurring after the Base Date will normally allow the Contractor to claim
additional time and/or compensation of costs (plus reasonable profit), if appropriate.

1.1.6 “Commencement Date” means the date notified under Sub-Clause 8.1
[Commencement Date].

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It is important that the Commencement Date is properly recorded in the Employer’s
Representative’s Notice under Sub-Clause 8.1 [Commencement Date]. The Time for
Completion of the Design-Build is calculated from the Commencement Date (see Definition

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1.1.78), and not from the date on which the Letter of Acceptance is issued or the Contract
Agreement is signed. Furthermore, in order to protect the Contractor from a delayed start
once the Contract has been awarded, the Commencement Date must be within 42 days
after the Contractor receives the Letter of Acceptance. If it is later than this the Contractor
can claim that his rates and prices which were agreed and accepted when the Contract
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was awarded, are no longer valid and claim an appropriate adjustment.

1.1.7 “Commercial Risk” means a risk which results in financial loss and/or time loss for
either of the Parties, where insurance is not generally or commercially available.
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There are two types of risk which the Parties face; one is Commercial Risk where insurance
is not readily or generally available; and the other is Risk of Damage (see Definition 1.1.67)
where insurance is normally commercially available. See also commentary under Clause 19
[Insurance].

1.1.8 “Commissioning Certificate” means the certificate issued by the Employer’s

Representative to the Contractor under Sub-Clause 11.7 [Commissioning Certificate]
OR

marking the end of the Design-Build Period under Sub-Clause 9.12 [Completion of
Design-Build], and the commencement of the Operation Service Period.

The Commissioning Certificate is the equivalent of the Taking Over Certificate in the more
conventional FIDIC forms of contract. It serves various purposes. Not only does it record the
TF

end of the Design-Build Period and the commencement of the Operation Service Period,
but it also triggers the Operating Licence (see Definition 1.1.54), and establishes the date
when the Employer takes over ownership of the facility.

1.1.9 “Commissioning Period” means that period of time when commissioning tests are
being carried out.
NO

1.1.10 “Contract” means the Contract Agreement, the Letter of Acceptance, the Letter
of Tender, these Conditions, the Employer’s Requirements, the Schedules, the
Contractor’s Proposal, the Operating Licence, and the further documents (if any)
which are listed in the Contract Agreement or in the Letter of Acceptance.

The Contract is made up of a number of documents which are listed. If there are other
documents which the Parties require to be included, for example specific pre-award
letters or records or other agreements, these must be named and identified in the Letter of

© FIDIC 2011
10
 Acceptance or Contract Agreement. If they are not so mentioned, they will not be deemed
to be part of the Contract.

1.1.11 “Contract Agreement” means the Contract Agreement (if any) referred to in Sub-
Clause 1.6 [Contract Agreement].

1.1.12 “Contract Completion Certificate” means the certificate issued by the Employer’s
Representative under Sub-Clause 8.6 [Contract Completion Certificate].

E
1.1.13 “Contract Completion Date” means the date contained in the Contract Completion
Certificate as being the date on which the Operation Service has been completed.

US
Whereas the Commissioning Certificate is issued at the end of the Design-Build Period,
the Contract Completion Certificate is issued at the end of the Operation Service Period,
and certifies that the Employer is satisfied that the Contractor has fulfilled all his obligations
under the Contract. Since no extension of the Operation Service Period is provided for in
the Contract, the Contract Completion Certificate must be issued at this time provided that

CT
the Contractor has fulfilled all the pre-conditions listed in Sub-Clause 10.8 [Completion of
Operation Service]. Furthermore the Contract Completion Certificate must state the date on
which the Operation Service ended and the fact that the Contractor has met the required
pre-conditions.

RA
1.1.14 “Contract Data” means the pages completed by the Employer entitled Contract
Data which constitute Part A of the Particular Conditions.

The Contract Data is essential information which is given as Part A of the Particular Conditions
NT
(in previous FIDIC Conditions of Contracts it is referred to as “Appendix to Tender”). It is
normal that all this Data is provided by the Employer and included in the tender documents,
as tenderers will need this information in order to prepare and submit responsive tenders.
If there are any elements of the Contract Data which the Employer requires tenderers to fill
in prior to submitting their tenders, this must be clearly stated. Also if there are any items
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which the Employer requires to be filled in prior to the award of the Contract, as agreed
terms (for example, the Time for Completion, or the agreement of Sections), these must
also be clearly identified. If any items of Contract Data are inadvertently left blank at the
time the Contract is signed, then either the ‘fall-back’ provision included in the Contract (if
any) will apply, or if there is no such provision, the Contract will be deemed to be silent on
that point and, if the matter gives rise to a Dispute, the provisions of the Contract relating
to Disputes will apply.
OR

1.1.13 “Contract Period” means the Design-Build Period plus the Operation Service Period.

1.1.16 “Contract Price” means the price defined in Sub-Clause 14.1 [The Contract Price],
and includes adjustments in accordance with the Contract.
TF

The Contract Price is the amount which the Contractor is actually paid, and should not be
confused with the Accepted Contract Amount (see Definition 1.1.1).

1.1.17 “Contractor” means the person named as Contractor in the Letter of Tender
accepted by the Employer and the legal successors in title to this person.
NO

1.1.18 “Contractor’s Equipment” means all apparatus, machinery, vehicles and other
things required for the execution and completion of the Works and the remedying
of any defects. However, Contractor’s Equipment excludes Temporary Works,
Employer’s Equipment (if any), Plant, Materials and any other things intended to
form or forming part of the Works.

1.1.19 “Contractor’s Documents” means the calculations, computer programs and other
software, drawings, manuals, models and other documents of a technical nature

© FIDIC 2011
11
 supplied by the Contractor under the Contract; as described in Sub-Clause 5.2
[Contractor’s Documents].

1.1.20 “Contractor’s Proposal” means the document entitled proposal, which the
Contractor submitted with the Letter of Tender, as included in the Contract.

1.1.21 “Contractor’s Personnel” means the Contractor’s Representative and all personnel
whom the Contractor utilises on Site, including the staff, labour and other employees

E
of the Contractor and of each Subcontractor, and any other personnel assisting the
Contractor in the execution of the Works and provision of the Operation Service.

US
1.1.22 “Contractor’s Representative” means the person named as such by the Contractor
in the Contract or appointed from time to time by the Contractor under Sub-Clause
4.3 [Contractor’s Representative], who acts on behalf of the Contractor.

All these six definitions concern the Contractor and matters for which the Contractor is
basically responsible.

CT
1.1.23 “Cost” means all expenditure reasonably incurred (or to be incurred) by the
Contractor, whether on or off the Site, including overhead and similar charges, but
does not include profit.

RA
1.1.24 “Cost Plus Profit” means Cost plus the applicable percentage agreed and stated
in the Contract Data. Such percentage shall only be added where the Sub-Clause
states that the Contractor is entitled to Cost Plus Profit.
NT
When determining the Contractor’s right to additional reimbursement, it is important to
understand when he is entitled simply to Cost (i.e. his actual cost plus an allowance for
overheads), and when he is entitled to include a percentage for profit. Each Sub-Clause
entitling the Contractor to claim additional reimbursement clearly states ‘Cost’ or ‘Cost Plus
Profit’. The reasoning behind allowing the Contractor to include profit depends on whether
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the event or occurrence causing the Contractor extra cost was an action or failure of the
Employer (in which case profit is allowed) or whether it was some other cause (in which
case profit is not allowed). The purpose of naming a percentage in the Contract Data is to
avoid the need to agree a figure every time the right of the Contractor to ‘Cost Plus Profit’
occurs.

1.1.25 “Country” means the country in which the Site (or most of it) is located, where the
OR

Permanent Works are to be executed.

1.1.26 “Cut-Off Date” means the date, at the end of a specified period stated in the
Contract Data, after the Time for Completion of the Design-Build or any extension
thereto granted under Sub-Clause 9.3 [Extension of Time for Completion of Design-
TF

Build].

The purpose of the Cut-Off Date is to protect the Employer against a prolonged failure of
the Contractor to complete the Design-Build work. Under Sub-Clause 15.2 [Termination
for Contractor’s Default], the Employer may terminate the Contract if the Contractor fails to
complete the Design-Build by the Cut-Off Date.
NO

1.1.27 “DAB” means the person or three persons so named in the Contract, or
other person(s) appointed under Sub-Clause 20.3 [Appointment of the Dispute
Adjudication Board] or Sub-Clause 20.4 [Failure to Agree Dispute Adjudication
Board], or Sub-Clause 20.10 [Disputes Arising During the Operation Service Period].

The role of the DAB is to adjudicate Disputes which arise under the Contract. However,
according to Sub-Clause 20.5 [Avoidance of Disputes], the Parties may jointly and at
any time, refer a matter to the DAB to informally discuss the matter and try to reach an

© FIDIC 2011
12
 amicable solution. This means that the Contractor, for example, may discuss with the DAB
(jointly with the Employer) his right to claim in a given situation, or the Parties may informally
discuss with the DAB a determination of the Employer’s Representative given under Sub-
Clause 3.5 [Determinations], before deciding whether to formally refer the matter to the
DAB for a formal decision under Sub-Clause 20.6 [Obtaining Dispute Adjudication Board’s
Decision]. This provision under Sub-Clause 20.5 [Avoidance of Disputes], called Avoidance
of Disputes, is intended to increase the understanding of the Parties as to their rights under
the Contract, and to minimise the occurrence and cost of Disputes.

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1.1.28 “day” means a calendar day.

US
As “day” means a calendar day, this definition ties in with the definition of “year” (see
Definition 1.1.83) meaning 365 days. These two words are the only definitions which do not
begin with a capital letter in the text. It should also be noted that all references to days are
in multiples of seven, i.e., easily convertible to weeks. However, weeks and months are not
used as measurements of time.

CT
1.1.29 “Design-Build” means all work to be performed by the Contractor under the Contract
to design, build, test and complete the Works and obtain the Commissioning
Certificate issued in accordance with Sub-Clause 9.12 [Completion of Design-Build].

RA
1.1.30 “Design-Build Period” means the period from the Commencement Date to the date
stated in the Commissioning Certificate.

1.1.31 ”Dispute” means any situation where: (a) one Party makes a claim against the other
Party, (b) the other Party rejects the claim in whole or in part, and (c) the first Party
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does not acquiesce, provided however that a failure by the other Party to oppose
or respond to the claim, in whole or in part, may constitute a rejection if, in the
circumstances, the DAB or the arbitrator(s), as the case may be, deem it reasonable
for it to do so.
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It is important for the Parties to know if and when they are in Dispute, and what constitutes a
Dispute under the Contract. A simple disagreement of fact is not necessarily a Dispute. The
Contractor’s right to claim under Sub-Clause 20.1 [Contractor’s Claims], or the Employer’s
right to claim under Sub-Clause 20.2 [Employer’s Claims], does not necessarily mean that
a Dispute is in the making. It is often only when a claim from one Party, which, according
to Sub-Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision], can be in respect
of “any certificate, determination, instruction, opinion or valuation” is rejected by the other
OR

Party, and the claiming Party does not accept the rejection, that we have a Dispute. Under
the Contract there are a number of circumstances which give a Party the contractual right
to claim, and Sub-Clauses 20.1 [Contractor’s Claims] and 20.2 [Employer’s Claims] provide
for the procedure which each Party must follow if it wishes to pursue the claim. Typically
it is only when the other Party does not accept the contractual or other basis of a claim or
TF

the quantum of a claim, in whole or in part, or the Employer’s Representative’s evaluation

thereof, that there may exist a Dispute, and Clause 20 [Claims, Disputes and Arbitration]
contains the mechanism for resolving such Disputes.

1.1.32 “Employer” means the person named as Employer in the Contract Data and the
legal successors in title to this person.
NO

1.1.33 “Employer’s Equipment” means the apparatus, machinery and vehicles (if any)
made available by the Employer for the use of the Contractor in the execution of the
Works and/or the Operation Service, as stated in the Employer’s Requirements, but
does not include Plant which has not been taken over by the Employer.

1.1.34 “Employer’s Personnel” means the Employer’s Representative, the assistants

referred to in Sub-Clause 3.2 [Delegation by the Employer’s Representative] and all
other staff, labour and other employees of the Employer’s Representative and of the

© FIDIC 2011
13
 Employer; and any other personnel notified to the Contractor, by the Employer or
the Employer’s Representative, as Employer’s Personnel.

1.1.35 “Employer’s Representative” means the person appointed by the Employer to act
as Employer’s Representative for the purposes of the Contract and named as such
in the Contract Data, or other person appointed from time to time by the Employer
and notified as such to the Contractor under Sub-Clause 3.4 [Replacement of the
Employer’s Representative].

E
The DBO form of contract does not include an Engineer as is to be found in the FIDIC
Construction and Plant and Design-Build forms of contract documents. The Employer

US
appoints an Employer’s Representative who acts for him in administering the Contract and
in ensuring that the Contractor abides by the terms of the Contract and fulfils his obligations
therein. The Employer’s Representative may be anybody of the Employer’s choice, but he
must be qualified and experienced (in the subject matter of the Contract, although this is not
specifically stated). The Employer has the right to choose a member of his own staff from, for
example, his engineering department, or he may appoint an independent firm of consulting

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engineers. However, whoever is appointed must have a clear understanding of the need for
integrity and fairness especially when acting under Sub-Clause 3.5 [Determinations].

1.1.36 “Employer’s Requirements” means the document entitled Employer’s Requirements,

RA
as included in the Contract, and any additions and modifications made thereto in
accordance with the Contract. Such document specifies the purpose, scope,
and/or design and/or other technical criteria, for the execution of the Works and
provision of the Operation Service.
NT
The Employer’s Requirements is one of the most important documents to form part of the
Contract, and it is the responsibility of the Employer to make sure the document is complete
in all respects when the tender documents are sent out to tenderers. In this document the
Employer gives his precise requirements for the completed Works including all matters in the
various clauses of the Contract which make reference to the Employer’s Requirements, and
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all matters which he wishes to include even if they are not covered in the General Conditions.
In particular the Employer must clearly state the purpose of the Works when they are
completed so that the Contractor can fulfil his undertaking in Sub-Clause 4.1 [Contractor’s
General Obligations] that the Works will be ‘fit for the purposes for which the Works are
intended’. The Employer must also make sure that details of his financial arrangements are
included in or attached to the Employer’s Requirements (see Definition 1.1.43).
OR

1.1.37 “Exceptional Event” means an event or circumstance which is (a) beyond a Party’s
control; (b) which the Party could not reasonably have provided against before
entering into the Contract; (c) which having arisen, such Party could not reasonably
have avoided or overcome; and (d) which is not substantially attributable to the other
Party.
TF

Users who are familiar with the other FIDIC forms of Contract (for example, Construction,
Plant and Design-Build and EPC) may be aware of difficulties which have arisen with regard
to the term ‘Force Majeure’. Although to many this is a recognised term used to describe an
event which is effectively beyond the control of a Party and affects such Party’s performance,
some may be confused in cases where, under the law governing the Contract, the term has
NO

a different legal meaning from that given in the FIDIC conditions. To avoid the use of legal
terminology which some may find confusing, the DBO form of contract has replaced the
term ‘Force Majeure’ with the term “Exceptional Event”, and Clause 19 [Insurance] has been
revised somewhat to simplify the treatment of such events.

1.1.38 “FIDIC” means the Fédération Internationale des Ingénieurs-Conseils, the International
Federation of Consulting Engineers.

1.1.39 “Final Payment Certificate Design-Build” means the payment certificate issued

© FIDIC 2011
14
 for the Design-Build under Sub-Clause 14.12 [Issue of Final Payment Certificate
Design-Build].

1.1.40 “Final Payment Certificate Operation Service” means the payment certificate
issued for the Operation Service under Sub-Clause 14.15 [Issue of Final Payment
Certificate Operation Service].

1.1.41 “Final Statement Design-Build” means the Statement defined in Sub-Clause 14.11

E
[Application for Final Payment Certificate Design-Build].

1.1.42 “Final Statement Operation Service” means the Statement defined in Sub-Clause

US
14.13 [Application for Final Payment Certificate Operation Service].

The Final Payment Certificate Design-Build is issued following the Contractor’s application
(Final Statement Design-Build) at the end of the Retention Period following the completion
of the Design-Build. The Certificate includes ‘the amount which is finally due for the Design-
Build’. With his application the Contractor gives a written undertaking that the amount

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claimed is in ‘full and final settlement’ of all work done in connection with the Design-Build.

The Final Payment Operation Service is dealt with in a similar way, but the Contractor’s
application is made within 56 days after the Contract Completion Certificate is issued. The

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Certificate includes “the amount which is finally due for the Operation Service” and “the
amount which is finally due for the Contract”. With his application the Contractor provides a
written discharge (see Sub-Clause 14.14 [Discharge]) that the amount claimed is in “full and
final settlement of all monies due to the Contractor under or in connection with the Contract”.
NT
1.1.43 “Financial Memorandum” means the document which details the Employer’s financial
arrangements and is attached to or forms part of the Employer’s Requirements.

It is important that tenderers are assured, at the time of tendering, that the Employer is
expected to have sufficient long-term funding to cover both the design and construction of
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the facility, and the 20-year operation period. Thus the Employer is required to include in, or
attach to his Employer’s Requirements, evidence of his financial arrangements – for example
in the form of a written loan agreement from his funding agency or bank – confirming that
adequate funding will be available. Tenderers need to know this to be able to confidently
submit competitive tenders without the worry that funding will fail somewhere along the way.

1.1.44 “Foreign Currency” means a currency in which part (or all) of the Contract Price is
OR

payable, but not the Local Currency.

1.1.45 “Goods” means Contractor’s Equipment, Materials, Plant and Temporary Works, or
any of them as appropriate.
TF

1.1.46 “Interim Payment Certificate” means a payment certificate issued under Clause 14
[Contract Price and Payment], other than the Final Payment Certificate.

1.1.47 “Laws” means all national (or state) legislation, statutes, ordinances and other laws,
and regulations and by-laws of any legally constituted public authority.
NO

‘Laws’ covers all manner of laws, by-laws, regulations and ‘other laws’ which the Parties
have to abide by and of which they must be aware. Very often, but not always, the Laws
are those in the Country (see Definition 1.1.25), so that it will be the Laws of the Country
which will rule. The country whose Laws will govern the Contract will normally be selected
by the Employer and will usually be his country. It is assumed that the Contractor will have
familiarised himself with such Laws, since (a) ignorance of the Laws is no excuse for failing
to abide by them, and (b) if there is an ambiguity between the Laws and the Contract, the
provisions of the Laws, where they are of a mandatory nature, will overrule provisions of
the Contract.

© FIDIC 2011
15
 1.1.48 “Letter of Acceptance” means the letter of formal acceptance, signed by the
Employer, of the Letter of Tender, including any annexed memoranda comprising
agreements between and signed by both Parties. If there is no such Letter of
Acceptance, the expression “Letter of Acceptance” means the Contract Agreement
and the date of issuing or receiving the Letter of Acceptance means the date of
signing the Contract Agreement.

1.1.49 “Letter of Tender” means the document entitled Letter of Tender, which was

E
completed by the Contractor and includes the signed offer to the Employer for the
execution of the Works and provision of the Operation Service.

US
These two documents are the key to the whole Contract, and they are likely together
to create a legally binding contract between the Parties – as a result of the Contractor
submitting his Letter of Tender, and the Employer responding with his Letter of Acceptance.
However, it is not sufficient to call a letter accepting a tender a “Letter of Acceptance” in
order for it to have that effect if the text of the letter does not clearly and unconditionally
accept the tender or offer from the Contractor. A sample form for a Letter of Acceptance is

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included in the Sample Forms section of the document.

1.1.50 “Local Currency” means the currency of the Country.

RA
1.1.51 “Maintenance Retention Fund” and “Maintenance Retention Guarantee” mean the
fund and guarantee provided for under Sub-Clause 14.19 [Maintenance Retention
Fund].

At the end of the Operation Service Period, it is required that the facility will be in a condition
NT
to meet the handback requirements specified in Sub-Clause 8.7 [Handback Requirements].
To achieve this it is important that the facility is properly maintained and kept in good repair
right up to the end of the Operation Service Period, and the Maintenance Retention Fund
(which can be replaced by a Maintenance Retention Guarantee) is built up to provide a fund
to enable the Employer to do this work if the Contractor fails to do so. If the Contractor does
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carry out proper maintenance etc., then the value of the Fund will be included in the Final
Payment Certificate Operation Service and repaid to the Contractor.

1.1.52 “Materials” means things of all kinds (other than Plant) whether on the Site or
otherwise allocated to the Contract and intended to form or forming part of the
Works, including the supply-only Materials (if any) to be supplied by the Contractor
under the Contract.
OR

1.1.53 ”Notice” means a written communication identified as a Notice and issued in

accordance with the provisions of Sub-Clause 1.3 [Notices and Communications].

There are over 70 sub-clauses requiring one Party to give Notice to the other Party regarding
TF

some occurrence or event. Most of these will result in further action or the establishment of
further rights to payment or time extension. It is therefore essential to know what constitutes
a Notice and what is a simple communication. This is further clarified in Sub-Clause 1.3
[Notices and Other Communications].

1.1.54 “Operating Licence” means the licence referred to in Sub-Clause 1.7 [Operating
NO

Licence] by which the Employer grants a royalty-free licence to the Contractor to

operate and maintain the Works during the Operation Service.

Once the Design-Build is complete and the Commissioning Certificate has been issued, the
ownership of the facility passes to the Employer. To allow the Employer to authorise the
Contractor access to operate and maintain the facility in accordance with the Contract, the
Employer must provide the Contractor with an Operating Licence. The Operating Licence
is provided at the time the Letter of Acceptance is issued, although it does not come into
effect until the Commissioning Certificate is issued on completion of the Design-Build.

© FIDIC 2011
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 1 .1.55 “Operation Management Requirements” means the set of procedures and
requirements, provided by the Employer, included in the Employer’s Requirements
for the proper implementation of the Operation Service.

1.1.56 “Operation and Maintenance Plan” means the plan for operating and maintaining the
facility, submitted by the Contractor, and agreed and included in the Contract.

The Operation Management Requirements is a document prepared by the Employer as part of

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the Employer’s Requirements and included in the tender documents which informs tenderers
what the Employer expects from the Contractor and from the facility during the Operation
Service. The Operation and Maintenance Plan is the Contractor’s response to the Operation

US
Management Requirements showing how he plans to operate and maintain the facility.

1.1.57 “Operation Service” means the operation and maintenance of the facility as set out
in the Operation Management Requirements.

1.1.58 “Operation Service Period” means the period from the date stated in the

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Commissioning Certificate as provided for under Sub-Clause 10.2 [Commencement
of Operation Service] to the date stated in the Contract Completion Certificate.

The DBO Contract is written assuming an Operation Service Period of 20 years. This time

RA
period can be adjusted by, say plus or minus five years and the document can still be used
without major adjustment or problem. However, if the Operation Service Period is more than
five years either side of the 20 years, then major changes to the provisions may be necessary
and there are a number of clauses and sub-clauses which will need amending. These issues
are addressed briefly at the end of this Guide in sections dealing with Particular Conditions.
NT
1.1.59 “Party” means the Employer or the Contractor, as the context requires.

1.1.60 “Performance Security” means the security under Sub-Clause 4.2 [Performance
Security].
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1.1.61 “Permanent Works” means the permanent works to be designed, executed and
operated by the Contractor under the Contract.

1.1.62 “Plant” means the apparatus, machinery and vehicles intended to form or forming
part of the Permanent Works.
OR

1.1.63 “Provisional Sum” means a sum (if any) which is specified in the Contract by the
Employer as a Provisional Sum, for the execution of any part of the Works or for the
supply of Plant, Materials or services under Sub-Clause 13.5 [Provisional Sums].

Provisional Sums may be included in the Contract by the Employer for various reasons.
TF

Either he may wish to provide a sum of money for the execution of additional work or the
provision of additional services, or he may wish to provide a sum of money for the purchase
of a particular item of equipment where he has not finally decided on all the details. It is
he, the Employer, who decides how many Provisional Sums he wishes to include and their
purpose, and it is he who puts a price against each one. The Contractor includes the items
and the sums in his tender, but they are only used to the extent ordered by the Employer
NO

through his Representative.

1.1.64 “Rates and Prices” means the rates and prices inserted in the Schedules for
the design, execution and completion of the Works and for the provision of the
Operation Service as incorporated in the Contract.

1.1.65 “Retention Money” means the accumulated retention moneys which the Employer
retains under Sub-Clause 14.3 [Application for Advance and Interim Payment
Certificates].

© FIDIC 2011
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 1.1.66 “Retention Period” means the period of 1 year after the date stated in the
Commissioning Certificate for the completion of outstanding work.

1.1.67 “Risk of Damage” means a risk which results in physical loss or damage to the
Works or other property belonging to either Party, other than a Commercial Risk.

1.1.68 “Schedules” means the document(s) entitled Schedules, completed by the

Contractor and submitted with the Letter of Tender, as included in the Contract.

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Such document shall include the Asset Replacement Schedule, and may also
include data, lists, Schedules of Payments and/or prices, and guarantees.

US
1.1.69 “Schedule of Payments” means those Schedules (if any) incorporated in the
Contract showing the manner in which payments are to be made to the Contractor.

It may be that payments to the Contractor are based on a pre-agreed Schedule of Payments
based on either the achievement of key events or milestones, or simply on a breakdown
of the Accepted Contract Amount into lump sum payments related to the Contractor’s

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expected progress as indicated by the Programme. If progress does not comply with the
Programme, or if there are Variations or other external events which affect the performance
of the Contractor, the Schedule of Payments will need up-dating as work proceeds.

any).
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1.1.70 “Section” means a part of the Works specified in the Contract Data as a Section (if

1.1.71 “Section Commissioning Certificate” means a certificate issued by the Employer’s

Representative to the Contractor under Sub-Clause 11.7 [Commissioning Certificate].
NT
1.1.72 “Site” means the places where the Permanent Works are to be executed and to
which Plant and Materials are to be delivered, and where the Operation Service is to
be provided, and any other places as may be specified in the Contract as forming
part of the Site.
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It should be noted that places chosen by the Contractor, e.g. for his workshops or camp,
even if approved by the Employer, will not form part of the Site unless specifically mentioned
or identified in the Contract as being part of the Site.

1.1.73 “Statement” means a financial Statement submitted by the Contractor as part

of an application, under Clause 14 [Contract Price and Payment], for a payment
OR

certificate.

The use of the word ‘Statement’ in any form related to payment or money must not be
confused with the use of the word in the context of making an oral statement.
TF

1.1.74 “Subcontractor” means any person named in the Contract as a subcontractor, or

any person appointed as a subcontractor, for a part of the Works; and the legal
successors in title to each of these persons.

By Sub-Clause 4.5 [Nominated Subcontractors], any person nominated by the Employer

as a ‘nominated subcontractor’ is also considered as a Subcontractor, and the Contractor
NO

is responsible for such persons.

1.1.75 “Tender” means the Letter of Tender and all other documents which the Contractor
submitted with the Letter of Tender, as included in the Contract.

1.1.76 “Tests on Completion of Design-Build” means the tests which are specified in the
Contract or agreed by both Parties or instructed as a Variation, and which are to be
carried out under Clause 11 [Testing] before the Works or a Section (as the case may
be) are deemed to be fit for purpose as defined in the Employer’s Requirements.

© FIDIC 2011
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 1.1.77 “Tests Prior to Contract Completion” means the tests (if any) which are specified
in the Contract and any other such tests as may be agreed by the Employer’s
Representative and the Contractor or instructed as a Variation and which are to be
carried out under Clause 11 [Testing] before the expiry of the Contract Period.

There are two sets of Tests which the Contractor is required to perform – one at the end
of the Design-Build Period as a condition precedent to obtaining the Commissioning
Certificate, and one at the end of the Operation Service Period. If these Tests are specified

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in the Employer’s Requirements, the Contractor will have included for them in the Accepted
Contract Amount. If they have not been so specified and are ordered at a later date, the
Contractor is still bound to carry them out, but he will be entitled to additional payment.

US
1.1.78 “Time for Completion of Design-Build“ means the time for completing the Design-
Build or a Section thereof (as the case may be) under Sub-Clause 9.2 [Time for
Completion of Design-Build], as stated in the Contract Data (with any extension
under Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]),
calculated from the Commencement Date.

CT
It is important to remember that the Time for Completion is calculated from the
Commencement Date and not from the date on which the Contract is awarded. Thus it is
very important to make sure that the Commencement Date is properly recorded in the Notice

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given by the Employer’s Representative under Sub-Clause 8.1 [Commencement Date].

1 .1.79 “Temporary Works” means all temporary works of every kind (other than Contractor’s
Equipment) required on Site for the execution, and completion and operation of the
Works.
NT
1.1.80 “Unforeseeable” means not reasonably foreseeable by an experienced contractor
by the date for submission of the Tender.

The Contractor may be entitled to claim additional time or cost if an event occurs which
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is described as “Unforeseeable”. When it is alleged that such an event has occurred,

the Employer’s Representative must make an objective judgement as to whether an
experienced contractor (i.e., experienced in the type of Works being executed) would or
should have foreseen the possibility of such an event occurring.

1.1.81 “Variation” means any change to the Employer’s Requirements or the Works,
which is instructed or approved as a Variation under Clause 13 [Variations and
OR

Adjustments].

1.1.82 “Works” means the Permanent Works and Temporary Works or either of them as
appropriate and the facility to be operated by the Contractor during the Operation
Service Period.
TF

This definition introduces the word ‘facility’ as being another word frequently used to
describe the Works, especially during the Operation Service Period. The word ‘facility’ has
not been defined in its own right, since it may not always be appropriate to refer to the
completed Works as the facility, but when they are so described, this definition of Works
makes sure that they are properly encompassed and incorporated.
NO

1.1.83 “year” means 365 days

1.2 Interpretation

In the Contract, except where the context requires otherwise:

(a) words indicating one gender include all genders;
(b) words indicating the singular also include the plural and words indicating the
plural also include the singular;

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 (c) provisions including the word “agree”, “agreed” or “agreement” require the
agreement to be recorded in writing;
(d) “written” or “in writing” means hand-written, type-written, printed or electronically
made, and resulting in a permanent record;
(e) “shall” means that the Party or person referred to has an obligation under the
Contract to perform the duty referred to; and
(f) “may” means that the Party or person referred to has the choice of whether to
act or not in the matter referred to.

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The marginal words and other headings shall not be taken into consideration in the
interpretation of these Conditions.

US
The provisions are explanations as to how fairly common words used in the text are to be
understood and interpreted. It is also necessary to explain why the words “shall” and “may”
are used in respect of a Party’s rights and obligations under the Contract. The word “shall”
indicates an obligation” and the word “may” indicates an option.

1.3 Notices and Other Communications

CT
Wherever these Conditions provide for the giving or issuing of a Notice or
other communication including approvals, certificates, consents, determinations,
instructions and requests, such Notice or communication shall be:

RA
(a) where it is a Notice, identified as a Notice and include reference to the Clause
under which it is issued;
(b) where it is another form of communication, identified as such, and include
reference to the Clause under which it is issued where appropriate;
(c) in writing and delivered by hand (against receipt), sent by mail or courier, or
NT
transmitted by using any of the agreed systems of electronic transmission as
stated in the Contract Data; and
(d) delivered, sent or transmitted to the address for the recipient’s communications
as stated in the Contract Data. However:
(i) if the recipient gives Notice of another address, communications shall
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thereafter be delivered accordingly; and

(ii) if the recipient has not stated otherwise when requesting an approval or
consent, it may be sent to the address from which the request was issued.
Notices and other communications shall not be unreasonably withheld or delayed.
When a certificate is issued to a Party, the certifier shall send a copy to the other
Party. When a Notice is issued to a Party, by the other Party or the Employer’s
Representative, a copy shall be sent to the Employer’s Representative or the other
OR

Party, as the case may be.

A Notice is a special form of communication usually associated either with a Party establishing
its right to additional compensation, or giving Notice to the other Party of important
requirements or instructions affecting the structure or content of the Contract or the work to
TF

be done. That is why ‘Notice’ is a defined term (see Definition 1.1.53). If it is intended that
instructions or other communications given during a meeting and recorded in the minutes of
that meeting, are intended to be Notices given by one Party to the other, this intention should
be clearly stated in the minutes. By signing the minutes, both Parties have then accepted
this provision. If this is not properly recorded, the minutes may well be construed simply as
a record of a statement made during the meeting, and have no contractual weight.
NO

1.4 Law and Language

The Contract shall be governed by the law of the country (or other jurisdiction)
stated in the Contract Data.
If there are versions of any part of the Contract which are written in more than one
language, the version which is in the ruling language stated in the Contract Data
shall prevail.
The language for communications shall be that stated in the Contract Data. If

© FIDIC 2011
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 no language is stated there, the language for communications shall be the ruling
language of the Contract.

It is important to ensure that the national (or other) law which is to govern the Contract is
specified (see comments to Definition 1.1.47).

Sometimes different documents are written in different languages. For example, the
Conditions of Contract may be written in one language familiar to the Employer, whilst the

E
technical documents may be written in English where the other language cannot adequately
describe the technical requirements. In such a case it is important to specify in the Contract
Data which language will be used in the event that it becomes necessary to make a

US
determination or decision concerning the interpretation of certain written words. If no ruling
language is specified, then it is likely that the tribunal responsible for finally deciding the
rights and obligations of the Parties (i.e., the Dispute Adjudication Board or an arbitration
tribunal) will decide on the ruling language.

1.5 Priority of Documents

CT
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 in
accordance with the following sequence:

RA
(a) the Contract Agreement (if any),
(b) the Letter of Acceptance,
(c) the Letter of Tender,
(d) the Particular Conditions – Part A (Contract Data),
(e) the Particular Conditions – Part B (Special Conditions),
NT
(f) these General Conditions,
(g) the Employer’s Requirements,
(h) the Schedules, and
(i) the Contractor’s Proposal and any other documents forming part of the Contract.
If an ambiguity or discrepancy is found in the documents, the Employer’s
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Representative shall issue any necessary clarification or instruction.

When preparing a Contract which consists of a number of both contractual and technical
documents (see Definition 1.1.10), it is very likely that, however careful the drafters of the
documents are, there will be discrepancies or ambiguities between them. This Sub-Clause
requires that all the listed documents shall be considered together when ascertaining a
particular meaning or requirement. Where two documents contain conflicting provisions, the
OR

meaning contained in the document which is higher in the given list shall be given priority.

Where there is a discrepancy or ambiguity which cannot be resolved according to this

principle, then the Employer’s Representative shall give a ruling and where necessary issue
a written clarification. If, in the Employer’s Representatives’ opinion, a simple clarification
TF

is not sufficient to deal fairly with the ambiguity, he may issue a written instruction telling
the Contractor what he requires. If the Contractor considers that such instruction entitles
him to additional reimbursement or time, he can claim accordingly under Sub-Clause 20.1
[Contractor’s Claims].

1.6 Contract Agreement

NO

The Parties shall enter into a Contract Agreement within 28 days after the Contractor
receives the Letter of Acceptance, unless they agree otherwise. The Contract
Agreement shall be based upon the form annexed to the Particular Conditions. The
costs of stamp duties and similar charges (if any) imposed by law in connection with
entry into the Contract Agreement shall be borne by the Employer.

This Sub-Clause requires the Parties to enter into a formal Contract Agreement, and a
sample form of Contract Agreement is included at the end of the DBO document (Sample

© FIDIC 2011
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 Forms). In many cases this will need minor amendments to suit the needs of the Employer,
but the amendments should not depart substantially from the sample given. Under the laws
of many countries the Tender and Letter of Acceptance will be sufficient to create a binding
contract between the Parties, and the Contract Agreement will merely further record or
confirm the terms of that contract.

1.7 Operating Licence

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Together with the Letter of Acceptance, the Employer shall issue to the Contractor
the Operating Licence or equivalent legal authorisation to enable the Contractor to
operate and maintain the Works during the Operation Service Period.

US
The Operating Licence shall automatically come into full force and effect upon
the issue of the Commissioning Certificate upon completion of the Design-Build
under Sub-Clause 9.12 [Completion of Design-Build] and shall remain in force until
the issue of the Contract Completion Certificate under Sub-Clause 8.6 [Contract
Completion Certificate].
The Operating Licence shall only extend to those parts of the Site which it is required

CT
to occupy for the purposes of carrying out the Works and Operation Service as set
out in the Contract. The Operating Licence granted pursuant to this Sub-Clause
shall not operate nor be deemed to operate as a tenement or a demise of the Site or
any part thereof. The Contractor shall not have or be entitled to any estate right, title,

RA
or interest in the Site. The licence will immediately terminate upon the termination of
this Contract for whatever reason.

Since the facility becomes the property of the Employer upon the issuance of the
Commissioning Certificate, it is necessary for the Employer to authorise the Contractor to
NT
operate and maintain the facility during the Operation Service Period in order to enable the
Contractor to fulfil his obligations under the Contract. This the Employer does by providing
the Contractor with an Operating Licence. The Employer provides this at the start of the
Contract when issuing the Letter of Acceptance so that the Contractor has the assurance
that the Employer is committed to the complete project, but the Operating Licence does not
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come into effect until the Commissioning Certificate is issued which is when the Operation
Service commences. The Sub-Clause makes it clear that the Operating Licence does not
bestow any right of ownership or title or other interest in the Site on the Contractor.

1.8 Assignment

Neither Party shall assign the whole or any part of the Contract or any benefit or
OR

interest in or under the Contract. However, either Party:

(a) may assign the whole or any part with the prior agreement of the other Party, at
the sole discretion of such other Party; and
(b) may, as security in favour of a bank or financial institution, assign its right to any
moneys due, or to become due, under the Contract.
TF

Neither Party is allowed to transfer or assign any of its rights or obligations under the
Contract except with the written agreement of the other Party. An Employer who has
chosen the Contractor based on his expertise, experience and reputation may be reluctant
to allow the Contractor to assign any part of the Contract under this Sub-Clause. However
the Contractor is permitted to assign payments due under the Contract to his bank or other
NO

source of financing.

1.9 Care and Supply of Documents

Each of the Contractor’s Documents shall be in the custody and care of the
Contractor, unless and until taken over by the Employer. Unless otherwise stated
in the Contract, the Contractor shall supply to the Employer’s Representative six
copies of each of the Contractor’s Documents.
The Contractor shall keep, on the Site, a copy of the Contract, publications named

© FIDIC 2011
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 in the Employer’s Requirements, the Contractor’s Documents, and Variations and
other communications given under the Contract. The Employer’s Personnel shall
have the right of access to all these documents at all reasonable times.
If a Party becomes aware of an error or defect of a technical nature in a document
which was prepared for use in executing the Works, the Party shall promptly give
Notice to the other Party of such error or defect.

The Contractor is required to provide the Employer with Contractor’s Documents at various

E
times during the Contract. Until such time as the documents are handed over, they remain
in the care and custody of the Contractor. After they have been handed over they will be in
the care and custody of the Employer.

US
1.10 Errors in the Employer’s Requirements

Notwithstanding the Contractor’s obligations to scrutinise the Employer’s

Requirements under Sub-Clause 5.1 [General Design Obligations], if the Contractor
finds an error in the Employer’s Requirements, he shall immediately give a written

CT
Notice to the Employer’s Representative advising him of the nature and details of
the error and requesting instruction regarding its rectification.
After receiving this Notice, the Employer’s Representative shall, without prejudice
to other rights and obligations of the Parties, promptly confirm to the Contractor:

Contractor’s Notice,
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(a) whether or not there is an error in the Employer’s Requirements as stated in the

(b) whether or not an experienced contractor should have discovered the error
when scrutinising the Employer’s Requirements under Sub-Clause 5.1 [General
Design Obligations], and
NT
(c) the measures which the Employer’s Representative requires the Contractor to
take to rectify the error.
If the Contractor suffers delay and/or incurs Cost as a result of an error in the
Employer’s Requirements, and an experienced contractor exercising due care
would not have discovered the error when scrutinising the Employer’s Requirements
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under Sub-Clause 5.1 [General Design Obligations], the Contractor shall be entitled,
subject to Sub-Clause 20.1 [Contractor’s Claims] to:
(i) an extension of time for any such delay, if completion is or will be delayed under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build] and
(ii) payment of any such Cost Plus Profit, which shall be included in the Contract
Price.
OR

Following the Commencement Date, the Contractor has a specified period (given in the
Contract Data under Sub-Clause 5.1 [General Design Obligations]) in which to scrutinise the
Employer’s Requirements and other information provided by the Employer to check for any
errors or faults which he can find. By this Sub-Clause, if the Contractor finds errors or faults
after the given scrutiny period, he is required to notify the Employer’s Representative and ask
TF

for instruction as to how to deal with the alleged error or fault. On receiving such a Notice,
the Employer’s Representative is required to do three things: (a) confirm whether or not there
is such a fault or error; (b) tell the Contractor if he considers that an experienced contractor
should have discovered the error during the scrutiny period; and (c) tell the Contractor what
measures he requires the Contractor to take. Note that under (b), it is a question of what
‘an experienced contractor’ should have discovered. If the answer is that an experienced
NO

contractor should have discovered the error, then the Contractor will not get any additional
compensation. If the Employer’s Representative considers that an experienced contractor
would not have discovered the error, then the Contractor will be entitled to compensation.

1.11 Employer’s Use of Contractor’s Documents

As between the Parties, the Contractor shall retain the copyright and other intellectual
property rights in the Contractor’s Documents and other design documents made
by (or on behalf of) the Contractor.

© FIDIC 2011
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 The Contractor shall be deemed (by signing the Contract) to give to the Employer
a non-terminable transferable non-exclusive royalty-free licence to copy, use
and communicate the Contractor’s Documents, including making and using
modifications of them. This licence shall:
(a) apply throughout the actual or intended working life (whichever is longer) of the
relevant part of the Works;
(b) entitle any person in proper possession of the relevant part of the Works to
copy, use and communicate the Contractor’s Documents for the purposes of

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completing, operating, maintaining, altering, adjusting, repairing and demolishing
the Works;
(c) in the case of Contractor’s Documents which are in the form of computer

US
programs and other software, permit their use on any computer on the Site
and other places as envisaged by the Contract, including replacements of any
computers supplied by the Contractor; and
(d) enable the Employer to relet the Contract as provided for under Clause 15.2
[Termination for Contractor’s Default].
The Contractor’s Documents and other design documents made by (or on behalf

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of) the Contractor shall not, without the Contractor’s consent, be used, copied or
communicated to a third party by (or on behalf of) the Employer for purposes other
than those permitted under this Sub-Clause.

RA
Since the Contractor is the originator of the Contractor’s Documents, it is he who retains the
copyright or intellectual property right to those documents, and this Sub-Clause clarifies the
extent to which the Employer can use such documents for the purposes of the Contract.
If there are any Contractor’s Documents, such as computer programs or maintenance
manuals etc. which the Employer may wish to use outside the scope of the Contract,
NT
then he must clearly indicate such requirement in the Employer’s Requirements, so the
Contractor is aware of this at the time of preparing his tender.

1.12 Contractor’s Use of Employer’s Documents

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As between the Parties, the Employer shall retain the copyright and other intellectual
property rights in the Employer’s Requirements and other documents made by (or
on behalf of) the Employer. The Contractor may, at his cost, copy, use, and obtain
communication of these documents for the purposes of the Contract. They shall
not, without the Employer’s consent, be copied, used, or communicated to a third
party by the Contractor, except as necessary for the purposes of the Contract.
OR

This Sub-Clause mirrors the provisions of Sub-Clause 1.11 [Employer’s Use of Contractor’s
Documents].

1.13 Confidential Details

TF

The Contractor shall disclose all such confidential and other information as the
Employer’s Representative may reasonably require in order to verify the Contractor’s
compliance with the Contract.
The Contractor shall treat the details of the Contract as private and confidential,
except to the extent necessary to carry out his obligations under the Contract. The
Contractor shall not publish, permit to be published, or disclose any particulars of the
NO

Contract in any trade or technical paper or elsewhere without the previous consent in
writing of the Employer. The said consent shall not be unreasonably withheld.
The Employer shall treat all information designated by the Contractor as
confidential, as confidential, and shall not disclose it to third parties, except
as maybe necessary when exercising his rights under 15.2 [Termination for
Contractor’s Default].

In this Sub-Clause, each Party undertakes to respect the confidentiality of documents supplied
by the other Party which have been designated as ‘Confidential’. This is not intended as a

© FIDIC 2011
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 blanket clause to cover everything either Party may produce, but recognises that there may
be certain processes or design criteria which the Contractor or his Subcontractors consider
as trade secrets and wish to keep confidential. Notwithstanding this provision, there is a
requirement that the Contractor shall provide the Employer’s Representative with sufficient
information, confidential of otherwise, which the Employer’s Representative may reasonably
require to verify the Contractor’s designs, etc. Where this is the case, the Contractor may
need to be assured that such information will be treated as confidential.

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1.14 Compliance with Laws

The Contractor shall, in performing the Contract, comply with applicable Laws.

US
Unless otherwise stated in the Employer’s Requirements:
(a) the Employer shall have obtained (or shall obtain) the planning, zoning, building
permit, or similar permission for the Permanent Works and for the Operation
Service, and any other permissions described in the Employer’s Requirements
as having been (or being) obtained by the Employer; and the Employer shall
indemnify and hold the Contractor harmless against and from the consequences

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of any failure to do so;
(b) the Contractor shall give all notices, pay all taxes, duties and fees, and obtain all
further permits, licences and approvals, as required by the Laws, in relation to
the design, execution and completion of the Works and Operation Service and

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the remedying of any defects; and the Contractor shall indemnify and hold the
Employer harmless against and from the consequences of any failure to do so;
and
(c) the Contractor shall at all times and in all respects comply with, give all notices
under, and pay all fees required by any licence obtained by the Employer in
NT
respect of the Site or the Works or Operation Service, whether relating to the
Works on or off the Site.

By Definition 1.1.47, ‘Laws’ means all national (or state) legislation, statutes, ordinances,
and other laws, and regulations and by-laws of any legally constituted public authority. Since
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by this Sub-Clause the Contractor must not only comply with the Laws, but, in accordance
with paragraph (b), he must also pay all duties and fees, etc., it is very important that he
knows what laws and by-laws etc exist, and it is not uncommon for the Employer to give
tenderers some guidance about this in the tender documents. However, whether or not the
Employer chooses to do this, the Contractor remains liable for the matters covered by the
Sub-Clause, and he must remember that “ignorance of the law is no excuse”.
OR

1.15 Joint and Several Liability

If the Contractor constitutes (under applicable Laws) a joint venture, consortium or

other unincorporated grouping of two or more persons:
(a) these persons shall be deemed to be jointly and severally liable to the Employer
TF

for the performance of the Contract;

(b) these persons shall notify the Employer of their leader who shall have authority
to bind the Contractor and each of these persons; and
(c) the Contractor shall not alter his composition or legal status without the prior
consent of the Employer.
NO

It is quite common to find that the Party awarded the Contract as Contractor is in fact a
joint venture or consortium of two or more contractors who together have the necessary
skills and experience to cover all the disciplines called for by the Contract. In such a case,
the contractors involved are likely to have entered into some form of joint venture or other
agreement between them which sets out their duties and obligations towards each other,
and also their responsibilities towards the Employer. This will include the appointment of a
leader, who has the authority to take instructions and make decisions on their behalf, and
also an acknowledgement that the members of the joint venture shall be jointly and severally
liable to the Employer.

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Clause 2 The Employer

2.1 Right of Access to the Site

The Employer shall give the Contractor right of access to, and possession of, all
or part of the Site within the time (or times) stated in the Contract Data. The right
and possession may not be exclusive to the Contractor. If, under the contract,
the Employer is required to give (to the Contractor) possession of any foundation,

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structure, plant or means of access, the Employer shall do so in the time and manner
stated in the Employer’s Requirements. However, the Employer may withhold any
such right or possession until the Performance Security has been received.

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If no such time is stated in the Contract Data, the Employer shall give the Contractor
right of access to, and possession of, the Site within such times as may be required
to enable the Contractor to proceed in accordance with the programme submitted
under Sub-Clause 8.3 [Programme].
If the Contractor suffers delay and/or incurs Cost as a result of a failure by the
Employer to give any such right or possession within such time, the Contractor shall

CT
give Notice to the Employer’s Representative and shall be entitled subject to Sub-
Clause 20.1 [Contractor’s Claims] to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and

Price.
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(b) payment of any such Cost Plus Profit, which shall be included in the Contract

After receiving this Notice, the Employer’s Representative shall proceed in

accordance with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.
NT
However, if and to the extent that the Employer’s failure was caused by any error or
delay by the Contractor, including an error in, or delay in the submission of, any of
the Contractor’s Documents, the Contractor shall not be entitled to such extension
of time or cost.
CO

One of the fundamental duties of the Employer is to make the Site available to the
Contractor, either within a given time (if so stated in the Contract Data), or as indicated in
the Contractor’s Programme (if not stated in the Contract Data). It is not necessary for the
Employer to grant access to the whole Site right at the start: it is sufficient to enable the
Contractor to proceed unhindered in accordance with his Programme. If, for example, the
Contract involved the construction of a 100-km long toll road, it could be sufficient to initially
give the Contractor access to the first 10 km.
OR

It should be noted that the Employer is only required to give the Contractor the ‘right’ of
access to the Site. It is up to the Contractor to ensure that the means of access is either
already available in conjunction with the ‘right’, and if so, that it is suitable for the Contractor’s
needs, or if not, that suitable means of access can be constructed or otherwise provided or
TF

found by the Contractor. If the Employer fails to make the Site available as required by this
Sub-Clause, the Contractor is entitled to be reimbursed Cost Plus Profit (see comment to
Definition 1.1.24). These costs could include for disruption to the Contractor’s Programme
or sequence of working. If access is delayed to the whole Site so that it is not possible
for the Employer’s Representative to give the Notice to commence under Sub-Clause 8.1
[Commencement Date], the Contractor will not need a time extension since the Time for
NO

Completion does not start until the Commencement Date has been established. However, if
the delay exceeds the 42 days after the Letter of Acceptance allowed for in Sub-Clause 8.1
[Commencement Date], the Contractor could claim an adjustment to his rates and prices.
Also if later releases of parts of the Site were delayed, the Contractor could in such cases
also claim an extension of time.

2.2 Permits, Licences or Approvals

The Employer shall provide, at the request of the Contractor, such reasonable

© FIDIC 2011
26
 assistance as to allow the Contractor to obtain:
a) copies of the Laws of the Country which are relevant to the Contract but are not
readily available, and
(b) any permits, licences or approvals required by the Laws of the Country,
including details of the information required to be submitted by the Contractor
in order to obtain such permits, licences or approvals:
(i) which the Contractor is required to obtain under Sub-Clause 1.14
[Compliance with Laws];

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(ii) for the delivery of Goods, including clearance through customs; and
(iii) for the export of Contractor’s Equipment when it is removed from the Site.

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Under the Laws of the Country, permits, licences or approvals may be required for certain
aspects of the Works, such as the Contractor’s design, import of Goods and Materials,
temporary import of equipment etc. Although it is an obligation of the Contractor to obtain
these, the Contract recognises that he may need help in identifying the various laws
and requirements which apply, and requires the Employer, when so requested by the
Contractor, to provide ‘reasonable assistance’. It is difficult to define what ‘reasonable’

CT
means in this context, as this may vary from case to case, but it is in the interests of
the Employer to provide what assistance he can so that the Works can proceed without
unnecessary hindrance from the authorities.

2.3 Employer’s Personnel

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The Employer shall be responsible for ensuring that the Employer’s Personnel and
the Employer’s other contractors on the Site:
(a) co-operate with the Contractor’s efforts under Sub-Clause 4.6 [Co-operation]
NT
and
(b) take actions similar to those which the Contractor is required to take under
sub-paragraphs (a), (b) and (c) of Sub-Clause 4.8 [Safety Procedures] and under
Sub-Clause 4.18 [Protection of the Environment].
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There are certain sub-clauses where the Employer and his personnel are required to act in a
proper manner to fulfil the various provisions of the Contract – for example, when it comes
to safety and environmental matters, or maintaining the integrity of the insurance provisions
where the Employer is named as a joint insured or beneficiary.

2.4 Employer’s Financial Arrangements

OR

The Employer’s arrangements for financing the design, execution and operation of
the Works, including the provision of the Asset Replacement Fund, shall be detailed
in the Financial Memorandum.
If the Employer intends to make any material changes to the financial arrangements
or has to do so because of changes in his financial or economic situation the
TF

Employer shall give Notice to the Contractor with detailed particulars. Within
28 days after receiving any request of the Contractor the Employer shall give
reasonable evidence that financial arrangements have been made and are being
maintained which will enable the Employer to pay the Contract Price.

See comments to Definition 1.1.43. The nature of the evidence may often depend upon
NO

the source of funding. If funding is being provided as a loan or grant from an International
Financing Institution (IFI) such as one of the multilateral development banks, it should be
possible to provide copies of loan documentation evidencing the arrangements. Similarly,
if funding is coming from a national or governmental source, a letter confirming the
arrangements and availability of funds should be provided with the Employer’s Requirements
so that tenderers know that funding has been secured.

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Clause 3 The Employer’s Representative

3.1 Employer’s Representative’s Duties and Authority

The Employer shall appoint the Employer’s Representative prior to the signing of the
Contract, who shall be suitably qualified and experienced and who shall carry out
the duties assigned to him in the Contract. The Employer’s Representative’s staff
shall include suitably qualified engineers and other professionals who are competent

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to carry out these duties.
The Employer’s Representative shall have no authority to amend the Contract.
The Employer’s Representative may exercise the authority attributable to the

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Employer’s Representative as specified in or necessarily to be implied from the
Contract.
The Employer undertakes not to impose further constraints on the Employer’s
Representative’s authority, except as agreed with the Contractor.
However, whenever the Employer’s Representative exercises a specified authority
for which the Employer’s approval is required, then (for the purposes of the

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Contract) the Employer shall be deemed to have given approval.
Except as otherwise stated in these Conditions:
(a) whenever carrying out duties or exercising authority, specified in or implied by
the Contract, the Employer’s Representative shall be deemed to act for the
Employer;
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(b) the Employer’s Representative has no authority to relieve either Party of any
duties, obligations or responsibilities under the Contract; and
(c) any approval, check, certificate, consent, examination, inspection, instruction,
Notice, proposal, request, test, or similar act by the Employer’s Representative
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(including absence of disapproval) shall not relieve the Contractor from any
responsibility he has under the Contract, including responsibility for errors,
omissions, discrepancies and non-compliances.

As mentioned under Definition 1.1.35, the Employer’s Representative is appointed by

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the Employer before the Contract with the Contractor is signed. Normally the Employer’s
Representative will be known before the tender documents are issued, and it is a
requirement that he shall be identified and named in the Contract Data (1.1.35). Under the
Contract the Employer’s Representative has duties which he must perform, and authority
which he may exercise. However he is not empowered to amend the Contract in any way,
and he may not relieve either Party from any of the duties, obligations or responsibilities
assigned to it under the Contract.
OR

By signing the Contract, both Parties have accepted the role of the Employer’s Representative
in the Contract, and the Contractor accepts that the Employer’s Representative is acting
for the Employer. However, the Employer’s Representative has a responsibility to see that
he does not exceed the authority assigned to him and, when acting under Sub-Clause
TF

3.5 [Determinations], he is required to “make a fair determination in accordance with

the Contract”. If his determination is not seen to be ‘fair’, the Contractor may submit the
determination to the DAB who in their turn may correct it.

3.2 Delegation by the Employer’s Representative

NO

The Employer’s Representative may from time to time assign duties and delegate
authority to assistants, and may also revoke such assignment or delegation.
These assistants may include independent inspectors (other than the Auditing
Body) appointed to inspect and/or test items of Plant and/or Materials and/or
workmanship or monitor the provision of the Operation Service. The assignment,
delegation or revocation shall be in writing and shall not take effect until copies have
been received by both Parties. However, unless otherwise agreed by both Parties,
the Employer’s Representative shall not delegate the authority to determine any
matter in accordance with Sub-Clause 3.5 [Determinations].

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 Assistants shall be suitably qualified persons, who are competent to carry out
these duties and exercise this authority, and who are fluent in the language for
communications defined in Sub-Clause 1.4 [Law and Language].
Each assistant, to whom duties have been assigned or authority has been delegated,
shall only be authorised to issue instructions to the Contractor to the extent
defined by the delegation. Any approval, check, certificate, consent, examination,
inspection, instruction, Notice, proposal, request, test or similar act by an assistant,
in accordance with the delegation, shall have the same effect as though the act had

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been an act of the Employer’s Representative. However:
(a) any failure to disapprove any work, Plant, Materials or any part of the Operation
Service shall not constitute approval, and shall therefore not prejudice the right

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of the Employer’s Representative to reject the work, Plant, Materials or any part
of the Operation Service; and
(b) if the Contractor questions any determination or instruction of an assistant, the
Contractor may refer the matter to the Employer’s Representative, who shall
promptly confirm, reverse or vary the determination or instruction.

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It is clear that the Employer’s Representative cannot perform all the duties assigned to
him under the Contract by himself, and he will certainly need to appoint assistants to help
him. By this Sub-Clause he is entitled to delegate any of his duties and authority except
in connection with making a determination under Sub-Clause 3.5 [Determinations]. This

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determination must be made by the appointed Employer’s Representative and cannot be
delegated by him to others. Clearly the assistants have an important role to play, and any
instruction or other authority given or exercised by them in accordance with the terms of his
delegated authority shall carry the same weight as if it had been given by the Employer’s
Representative himself. So assistants must be carefully selected, and they must be aware
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of the authority they have and the limits of that authority. The Employer’s Representative
can however step in and act where an assistant has failed to act, and the Contractor
can question any instruction from an assistant by referring the matter directly to the
Employer’s Representative with the request that he reviews and, if appropriate, overrules
the instruction.
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3.3 Instructions of the Employer’s Representative

The Employer’s Representative may issue to the Contractor (at any time)
instructions which may be necessary for the execution of the Works and the
remedying of any defects, all in accordance with the Contract. The Contractor shall
only take instructions from the Employer’s Representative, or from an assistant
OR

to whom the appropriate authority has been delegated under this Clause. If an
instruction constitutes a Variation, Clause 13 [Variations and Adjustments] shall
apply.
The Contractor shall comply with the instructions given by the Employer’s
Representative or delegated assistant, on any matter related to the Contract. These
TF

instructions shall be given in writing.

If the Contractor considers that any instruction of the Employer’s Representative
does not comply with applicable Laws or is technically impossible, he shall
immediately notify the Employer’s Representative in writing. The Employer’s
Representative shall then either confirm or amend such instruction.
NO

The Employer’s Representative is the centre of communications on the project, and the
Contract does not allow, except in a limited number of identified cases, direct communication
between the Employer and the Contractor. The Contractor must comply with all instructions
from the Employer’s Representative (or from an assistant with delegated authority), except
in cases where there may be specific provisions permitting non-compliance.

All instructions must be in writing, and where the Contractor believes there are reasons to
justify non-compliance, he must notify the Employer’s Representative in writing with details
of the reasons which he believes relieve or excuse him from compliance.

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3.3 Replacement of the Employer’s Representative

If the Employer intends to replace the Employer’s Representative, the Employer

shall, not less than 42 days before the intended date of replacement, give Notice
to the Contractor of the name, address, and relevant experience of the intended
replacement Employer’s Representative.
The Employer shall not replace the Employer’s Representative with a person against
whom the Contractor raises reasonable objection by Notice to the Employer, with

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supporting particulars.

As mentioned in the commentary to Sub-Clause 3.1 [Employer’s Representative’s Duties

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and Authority] above, the Employer’s Representative is named in the Contract Data, and
tenderers will have taken note of this when preparing their tenders. The Contractor is
therefore entitled to be informed if the Employer is planning to change his Representative,
and he is also entitled to raise ‘reasonable objection’, giving appropriate details, if he is not
happy with the proposed replacement. If, for example, the original Representative was an
external firm of consulting engineers, and the Employer wishes to replace them by a person

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from his ‘engineering department’, the Contractor may consider that such person will not
have the managerial and technical skills or experience of the original Representative, and
he could object on those grounds. The Employer should not make any such replacement
if the Contractor has raised ‘reasonable objection’, but the question remains as to what

3.5 Determinations
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constitutes ‘reasonable objection’. This will depend on the facts of the case.

Whenever these Conditions provide that the Employer’s Representative shall

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proceed in accordance with this Sub-Clause to agree or determine any matter,
the Employer’s Representative shall consult with each Party in an endeavour to
reach agreement. If agreement is not achieved, the Employer’s Representative shall
make a fair determination in accordance with the Contract, taking due regard of all
relevant circumstances.
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The Employer’s Representative shall give Notice to both Parties of each agreement
or determination, with supporting particulars. Each Party shall give effect to each
agreement or determination unless and until revised under Clause 20 [Claims,
Disputes and Arbitration].

This Sub-Clause specifies the procedure which is to be followed whenever there is a

reference in any other sub-clause of the Contract to a requirement for the Employer’s
OR

Representative to “proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or

determine these matters”. This reference occurs in a number of sub-clauses in cases where
the Contractor (or the Employer) is given an entitlement to claim for additional financial
compensation or a time extension, and where the Employer’s Representative is required to
make a determination of what is fair and reasonable in the circumstances.
TF

The Employer’s Representative is required to consult with both Parties – not just the
claiming Party – so that he understands both sides, and then he is required to try and help
the Parties reach an agreement or an agreed settlement. Such agreement may be based
on what the Employer’s Representative considers to be reasonable in the circumstances,
having listened to both Parties but the actual agreement, if any, is between the Parties and
NO

is not considered as a determination by the Employer’s Representative. If agreement is

reached, then there will be no opening for either Party to refer the matter to the DAB at a
later date. The terms of any such agreement should in any event be recorded in a Notice
from the Employer’s Representative to both Parties.

However, if there is no agreement between the Parties, then the Employer’s Representative
has to make his own determination, which must be fair and which must be based on the
Contract. Such a determination must be recorded in a Notice to both Parties. If, in making
his determination, the Employer’s Representative is obliged to take into account the Law of

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 the Contract (see Sub-Clause 1.4 [Law and Language]), he may need to take legal advice
before issuing his determination. However, when the determination is given, it is important
that it is given as the determination of the Employer’s Representative, and not of anyone
else.

There is no time limit in which the Employer’s Representative has to respond and give his
determination, and this is sensible, since the time needed may depend, amongst other
things, on the time the two Parties took in trying to reach an amicable agreement before the

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Employer’s Representative was required to make his own determination. However, by Sub-
Clause 1.4 [Law and Language], the Notice (of determination) shall not be unreasonably
delayed.

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Once a determination is given, both Parties are required to give immediate effect to
that determination: monies must be certified and paid, and time extensions granted in
accordance with the determination. Even if a Party is dissatisfied with the determination,
it must still give immediate effect to the determination as given, but may refer the matter
as a claim under Sub-Clause 20.1 [Contractor’s Claims] (or Sub-Clause 20.2 [Employer’s

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Claims]), and thereafter follow the procedures provided in that Sub-Clause.

Clause 4

4.1
The Contractor

Contractor’s General Obligations

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The Contractor shall design, execute and complete the Works and provide the
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Operation Service in accordance with the Contract and shall remedy any defects
in the Works. When completed, the Works shall be fit for the purposes for which
the Works are intended as defined in the Contract, and the Contractor shall be
responsible for ensuring that the Works remain fit for such purposes during the
Operation Service Period.
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The Contractor shall provide the Plant and Contractor’s Documents specified in the
Contract, and all Contractor’s Personnel, Goods, consumables and other things
and services, whether of a temporary or permanent nature, required to meet the
Contractor’s obligations under the Contract.
The Works shall include any work which is necessary to satisfy the Employer’s
Requirements, Contractor’s Proposal and Schedules, or is implied by the Contract,
and all works which (although not mentioned in the Contract) are necessary for
OR

stability or for the completion, or safe and proper operation, of the Works.
The Contractor shall be responsible for the adequacy, stability and safety of all Site
operations, of all methods of construction and of all the Works during both the
Design-Build Period and the Operation Service Period.
The Contractor shall, whenever required by the Employer’s Representative, submit
TF

details of the arrangements and methods which the Contractor proposes to adopt
for the execution of the Works. No significant alteration to these arrangements
and methods shall be made without this having previously been notified to the
Employer’s Representative.
The Contractor shall attend all meetings as reasonably required by the Employer or
the Employer’s Representative.
NO

This Sub-Clause summarises the Contractor’s overall obligation to design and carry out
the Works and provide the Operation Service “in accordance with the Contract”. The
requirement is that the Works shall be “fit for the purposes … defined in the Contract”
when they are completed, and that they shall remain ‘fit for purpose’ during the complete
Operation Service Period. This means that all work done by the Contractor during the
Operation Service Period, and all materials and items replaced by him during this time must
be of sufficient standard and quality to ensure that the Works remain ‘fit for purpose’ until
the Contract Completion Certificate is issued.

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 It is up to the Employer to ensure that everything he requires the Contractor to take into
account when designing the Works is covered in the Employer’s Requirements or elsewhere
in the Contract, so that the Contractor can determine the ‘fitness’ criteria he is expected to
meet. If something is missing, the Contractor may well be relieved of complying with that
requirement unless he is properly compensated.

However, if any work or requirement is not mentioned but can be reasonably understood
as being necessary either for the completion of the Works, or for reasons of safety, stability

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or operation, then the Contractor is required to undertake such work at his own cost, even
though it was not specifically mentioned or itemised.

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‘Fitness for purpose’ is required, irrespective of the level of skill, care and diligence exercised
by the Contractor’s designers, and irrespective of whether such designers are able to obtain
professional liability or other insurance to cover more than the usual professional duty of
skill care and diligence. The Contractor carries the risk of ‘fitness for purpose’ irrespective
of whether or not his designers were able to obtain the necessary professional insurances.

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4.2 Performance Security

The Contractor shall obtain at his cost the Performance Security for proper
performance of the Contract, in the amounts and currencies set out in the Contract

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Data. If no amount is stated in the Contract Data, this Sub-Clause shall not apply.
At the end of the Retention Period, the Contractor is entitled to a reduction of the
amount of the Performance Security, as stated in the Contract Data.
The Contractor shall deliver the Performance Security to the Employer within
28 days after receiving the Letter of Acceptance, and shall send a copy to the
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Employer’s Representative. The Performance Security shall be issued by an entity
and from within a country (or other jurisdiction) approved by the Employer, and shall
be based on the sample form included in the tender documents, or in another form
approved by the Employer.
The Contractor shall ensure that the Performance Security is valid and enforceable
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until the issue of the Contract Completion Certificate. If the terms of the Performance
Security specify its expiry date, and the Contractor has not become entitled to
receive the Contract Completion Certificate by the date 28 days prior to the expiry
date, the Contractor shall extend the validity of the Performance Security until
the Works and the Operation Service have been completed (or alternatively, until
the Contractor has been entitled to receive the Contract Completion Certificate).
Failure by the Contractor to maintain the validity of the Performance Security shall
OR

be grounds for termination in accordance with Sub-Clause 15.2 [Termination for

Contractor’s Default].
The Employer shall not make a claim under the Performance Security except for
amounts to which the Employer is entitled under the Contract in the event of:
(a) failure by the Contractor to extend the validity of the Performance Security
TF

as described in the preceding paragraph, in which event the Employer may

claim the full or, in case of an earlier reduction, the reduced amount of the
Performance Security;
(b) failure by the Contractor to pay the Employer an amount due, as either agreed
by the Contractor or determined under Sub-Clause 3.5 [Determinations] or
Clause 20 [Claims, Disputes and Arbitration], within 42 days after this agreement
NO

or determination;
(c) failure by the Contractor to remedy a default within 42 days after receiving the
Employer’s Notice requiring the default to be remedied; or
(d) circumstances which entitle the Employer to terminate under Sub-Clause
15.2 [Termination for Contractors Default], irrespective of whether Notice of
termination has been given.
The Employer shall indemnify and hold the Contractor harmless against and from all
damages, losses and expenses (including legal fees and expenses) resulting from a
claim under the Performance Security which the Employer was not entitled to make.

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 The Employer shall return the Performance Security to the Contractor within 21 days
after receiving a copy of the Contract Completion Certificate.

The requirement for a Performance Security is a common way for the Employer to protect
himself against a possible failure or default of the Contractor during the performance of the
Contract. Failure of the Employer to state the amount of the required security in the Contract
Data will mean that no Performance Security is required, and the Employer will not be able
to call for any such payment in the event of a failure or default of the Contractor.

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The Sub-Clause envisages that the Performance Security will be valid from commencement
until the issue of the Contract Completion Certificate, with a permitted reduction in the

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value of the Security at the end of the Retention Period. It is recognised that there are other
ways in which to arrange this Security during the Operation Service Period. For example,
by requiring a separate long-term new Security, or by requiring a short term (e.g., 1-year or
5-year) renewable Security to cover this Period. Some Employers may choose not to require
a Performance Security during the Operation Service Period as they may see this phase of
the Contract as being equivalent to a ‘service contract’ where a Performance Security is not

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appropriate. For this reason the DBO document includes two sample forms of Performance
Security (see the section “Sample Forms”) – the Demand Guarantee and the Surety
Bond. Each sample form incorporates (by reference) the Uniform Rules published by the
International Chamber of Commerce (ICC) corresponding to that form of instrument. The

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wording of each sample reflects the requirements of the Uniform Rules, and if any changes
are to be made in the sample forms, it is important to obtain expert advice to ensure that the
revised forms remain consistent with the respective Uniform Rules and provide the proper
security for the Employer.
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However, it should be noted that both sample forms are written to apply solely to the Design-
Build phase of the Contract and expire 70 days after the expected date for completion of
the Design-Build. It is therefore up to the Employer, if he requires a Security during the
Operation Service Period, to modify his chosen form of Security to suit the manner in
which he wishes to secure the performance of the Contractor during the Operation Service,
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not forgetting that he should also approve the provider of the Security and – this is most
important – where the Security is payable.

There are listed a number of ‘failures’ of the Contractor or other circumstances which will
entitle the Employer to call the Security, and under no circumstances should the Employer
try to call the Security for other reasons. If the Employer is in any doubt as to whether he
has the right to call the Security in a given situation, he should seek expert legal advice
OR

before acting.

The final requirement is that the Employer shall (must) return the Security to the Contractor
within 21 days of its expiry. Failure to do so could result in the Contractor being required
to pay extended premiums (despite the Security’s specified expiry date) until the Security
TF

is returned, and this in turn will give the Contractor the right to claim the additional cost
incurred.

4.3 Contractor’s Representative

The Contractor shall appoint the Contractor’s Representative and shall give him all
NO

authority necessary to act on the Contractor’s behalf under the Contract.

Unless the Contractor’s Representative is named in the Contract, the Contractor
shall, prior to the Commencement Date, submit to the Employer’s Representative
for consent the name and particulars of the person the Contractor proposes to
appoint as Contractor’s Representative. If consent is withheld or subsequently
revoked, or if the appointed person fails to act as Contractor’s Representative, the
Contractor shall similarly submit the name and particulars of another suitable person
for such appointment.
The Contractor shall not, without the prior consent of the Employer’s Representative,

© FIDIC 2011
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 revoke the appointment of the Contractor’s Representative or appoint a replacement.
The whole time of the Contractor’s Representative shall be given to directing the
Contractor’s performance of the Contract. If the Contractor’s Representative is to
be temporarily absent from the Site during the execution of the Works or provision of
the Operation Service, a suitable replacement person shall be appointed, subject to
the Employer’s Representative’s prior consent, and the Employer’s Representative
shall be notified accordingly.
The Contractor’s Representative shall, on behalf of the Contractor, receive

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instructions under Sub-Clause 3.3 [Instructions of the Employer’s Representative].
The Contractor’s Representative may delegate any powers, functions and authority
to any competent person, and may at any time revoke the delegation. Any delegation

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or revocation shall not take effect until the Employer’s Representative has received
prior Notice signed by the Contractor’s Representative, naming the person and
specifying the powers, functions and authority being delegated or revoked.
The Contractor’s Representative and all these persons shall be fluent in the language
for communications defined in Sub-Clause 1.4 [Law and Language].

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The Contractor is required to appoint a Contractor’s Representative who shall have full
authority to act on behalf of the Contractor during the performance of the Contract. This
includes receiving and acting on instructions and making decisions and commitments in the
name of the Contractor. Sometimes this person may be known as the Contractor’s Agent

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or Contractor’s Project Manager, but whatever the Contractor chooses to call him, he is the
Contractor’s Representative under the Contract. There is no requirement that he should be
named prior to the award of Contract, but there is a requirement that the proposed person
shall have the consent of the Employer’s Representative prior to being appointed. Similarly,
any changes or replacements must be consented to by the Employer’s Representative
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before being made. This requirement also applies to any replacement or deputy when
the Contractor’s Representative is away from the Site for any reason. Furthermore, if the
Contractor’s Representative intends to delegate any part of his role to any person, he must
advise the Employer’s Representative of such delegation. The Contractor still remains
responsible and liable for all actions and failures of his Representative or any persons to
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whom the Representative has delegated authority or power.

4.4 Subcontractors

The Contractor shall not subcontract the whole of the Works. Unless otherwise
agreed, the Contractor shall not subcontract the provision of the Operation Service.
The Contractor shall be responsible for the acts or defaults of any Subcontractor,
OR

his agents or employees, as if they were the acts or defaults of the Contractor.
Unless otherwise stated in the Particular Conditions:
(a) the Contractor shall not be required to obtain consent to suppliers of Materials,
or to a subcontract for which the Subcontractor is named in the Contract;
(b) the prior consent of the Employer’s Representative shall be obtained to other
TF

proposed Subcontractors; and

(c) the Contractor shall give the Employer’s Representative not less than 28 days’
Notice of the intended date of the commencement of each Subcontractor’s
work, and of the commencement of such work on the Site.
If any Subcontractor is entitled under any contract or agreement relating to the
Works to relief from any risk on terms additional to or broader than those specified
NO

in the Contract, such additional or broader events or circumstances shall not excuse
the Contractor’s non-performance or entitle him to relief under the Contract.

The need of the Contractor to subcontract some of the Works is very common and widely
accepted. By this Sub-Clause he retains that right, but with some restrictions and conditions.
Firstly, he is not permitted to sub-let the whole of the Works. The Employer has, after a
careful selection procedure which considers the Contractor’s experience and reputation,
chosen to award the Contract to the Contractor, and he does not want the Contractor to
then sub-let the whole of the Works to a third party. Furthermore, the Contractor is not

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 permitted (unless specifically agreed) to sub-let the provision of the Operation Service. It
is intended that if the Contractor requires to engage additional resources to provide this
Service, such persons or party will be engaged as a joint venture partner and thus have
joint and several liability with the other joint-venture partners for the full performance of the
Contractor’s obligations.

If any Subcontractor is named in the Contract, either as an agreed Subcontractor or supplier,

or as a Nominated Subcontractor (see Sub-Clause 4.5 [Nominated Subcontractors].),

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then the Contractor does not require any consent to engage such persons. Any other
Subcontractors which the Contractor plans to use must have the prior consent of the
Employer’s Representative before they can be engaged. Each application for consent must

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include details of the work which the Contractor proposes to sub-let to the Subcontractor.

Most importantly, even if and when consent is given, the Contractor is liable for any failures
or misconduct by the Subcontractor, and this includes subcontractors, by reference to Sub-
Clause 4.5 [Nominated Subcontractors].

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4.5 Nominated Subcontractors

In this Sub-Clause, “nominated Subcontractor” means a Subcontractor named

as such in the Employer’s Requirements or whom the Employer’s Representative,

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under Clause 13 [Variations and Adjustments], instructs the Contractor to employ
as a Subcontractor. The Contractor shall not be under any obligation to employ a
nominated Subcontractor against whom the Contractor raises reasonable objection
by Notice to the Employer’s Representative as soon as practicable, with supporting
particulars.
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It is quite common for an Employer to nominate a particular Subcontractor or supplier
which he requires the Contractor to use. If, for example, he already has similar equipment
from a particular supplier, it makes the handling of spare parts easier and his personnel
may already be trained in using that equipment, and it makes sense to use the same
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make of equipment in the new plant. Or it may simply be a wish to engage a local
subcontractor or supplier. Ideally, any planned nominated Subcontractor should be
identified in the Employer’s Requirements so that tenderers know about them when pricing
their tenders. If the requirement arises during the performance of the Contract, then a
nominated Subcontractor can be introduced as a Variation under Clause 13 [Variations
and Adjustments]. For the Contractor, a nominated Subcontractor (unless objected to)
is the same thing as a Subcontractor according to Sub-Clause 4.4 [Subcontractors] and
OR

the Contractor is responsible for their actions and failures. Thus it would be unfair for the
Employer to impose such persons on the Contractor without him having the right to raise
reasonable objection to engaging them. The term ‘reasonable objection’ could for example
be if the nominated Subcontractor did not have sufficient experience or resources or
financial capacity, or if the nominated Subcontractor refused to indemnify the Contractor
TF

against failures which could affect the Contractor’s ability to perform under the Contract.

If the Contractor raises such reasonable objection, he must do so in writing as a Notice to

the Employer’s Representative. In such cases he is not obliged to employ the proposed
person or company.
NO

4.6 Co-operation

The Contractor shall, as specified in the Contract or as instructed by the Employer’s

Representative, allow appropriate opportunities for carrying out work to:
(a) the Employer’s Personnel;
(b) any other contractors employed by the Employer; and
(c) the personnel of any legally constituted public authorities.
who may be employed in the execution on or near the Site of any work not included
in the Contract.

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 Any such instruction shall constitute a Variation if and to the extent that it causes
the Contractor to incur Unforeseeable cost. Services for these personnel and other
contractors may include the use of Contractor’s Equipment, Temporary Works or
access arrangements which are the responsibility of the Contractor.
The Contractor shall be responsible for his construction and operation activities on
the Site, and shall co-ordinate his own activities with those of other contractors to
the extent (if any) specified in the Employer’s Requirements.
If, under the Contract, the Employer is required to give to the Contractor

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possession of any foundation, structure, plant or means of access in accordance
with Contractor’s Documents, the Contractor shall submit such documents to
the Employer’s Representative in the time and manner stated in the Employer’s

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Requirements.

As stated in Sub-Clause 2.1 [Right of Access to the Site], the Contractor may not have
exclusive use or possession of the Site or the access thereto, and the Contractor must
allow others involved in the project appropriate opportunity to carry out their work. As stated
in Sub-Clause 2.3(a), this requirement is reciprocated in that the Employer’s Personnel as

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well as the Employer’s other contractors are required to cooperate with the Contractor
as provided in this Sub-Clause. If the requirement in this Sub-Clause is detailed in the
Contract, the Contractor is expected to have allowed for such cooperation in his price and
no additional compensation will be due. However, if the requirement comes in the form of

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an instruction from the Employer’s Representative at a later date, then this would be treated
as a Variation under Clause 13 [Variations and Adjustments], and the Contractor may be
entitled to additional compensation.

4.7 Setting Out

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The Contractor shall set out the Works in relation to original points, lines and levels
of reference specified in the Contract or notified by the Employer’s Representative.
The Contractor shall be responsible for the correct positioning of all parts of the
Works, and shall rectify any error in the positions, levels, dimensions or alignment
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of the Works.
The Employer shall be responsible for any errors in these specified or notified items
of reference, but the Contractor shall use reasonable efforts to verify their accuracy
before they are used.
If the Contractor suffers delay and/or incurs Cost from executing work which was
necessitated by an error in these items of reference, and an experienced contractor
could not reasonably have discovered such error and avoided this delay and/or
OR

Cost, the Contractor shall give Notice to the Employer’s Representative and shall
be entitled subject to Sub-Clause 20.1 [Contractor’s Claims] to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) payment of any such Cost Plus Profit, which shall be included in the Contract
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Price.
After receiving this Notice, the Employer’s Representative shall proceed in
accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) whether
and (if so) to what extent the error could not reasonably have been discovered, and
(ii) the matters described in sub-paragraphs (a) and (b) above related to this extent.
NO

The Contractor is entirely responsible for the correct setting out of the Works and is
responsible for any errors irrespective of whether the setting out has been checked and/or
approved by the Employer’s Representative, or not.

Setting out is based on reference points and levels provided by the Employer, and the
Contractor is required to use reasonable efforts to verify their accuracy. However, if errors
are subsequently found in the reference points provided by the Employer which could not
have been discovered by the Contractor using reasonable efforts, the Employer shall be
liable for the consequences including any Cost Plus Profit incurred by the Contractor.

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4.8 Safety Procedures

The Contractor shall:

(a) comply with all applicable safety regulations;
(b) take care for the safety of all persons entitled to be on the Site;
(c) use reasonable efforts to keep the Site and Works clear of unnecessary
obstruction so as to avoid danger to these persons;
(d) provide fencing, lighting, guarding and watching of the Works until the issue of

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the Contract Completion Certificate; and
(e) provide any Temporary Works (including roadways, footways, guards and
fences) which may be necessary, because of the execution of the Works, for the

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use and protection of the public and of owners and occupiers of adjacent land.

This Sub-Clause places the responsibility of safety and security on the Site upon the
Contractor. The listed requirements are not exclusive and the Contractor is expected to
provide all safety measures required by law or necessary for the execution of the Works,
such as scaffolding, ladders, etc., even if not specifically mentioned.

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4.9 Quality Assurance

The Contractor shall institute a quality assurance system to demonstrate compliance

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with the requirements of the Contract. The system shall be in accordance with the
details stated in the Contract. The Employer’s Representative shall be entitled to
audit any aspect of the system.
Details of all procedures and compliance documents shall be submitted to the
Employer’s Representative for information before each design, execution and
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operation stage is commenced. When any document of a technical nature is issued
to the Employer’s Representative, evidence of the prior approval by the Contractor
himself shall be apparent on the document itself.
Compliance with the quality assurance system shall not relieve the Contractor of any
of his duties, obligations or responsibilities under the Contract.
CO

The Contract should include details of the quality assurance system which the Contractor
is required to institute. This will depend on the nature of the Works and Service to be
provided, but if nothing is stated in the Contract, the inference is that no quality assurance
system is required. Alternatively, Employers who are uncertain of how an appropriate quality
assurance system should be set up, may require tenderers to propose suitable systems
when submitting their tenders .
OR

4.10 Site Data

The Employer shall have made available to the Contractor for his information, prior
to the Base Date, all relevant data in the Employer’s possession on sub-surface,
TF

hydrological and climatic conditions at the Site, including environmental aspects.

The Employer shall similarly make available to the Contractor all such data which
come into the Employer’s possession after the Base Date. The Contractor shall be
responsible for interpreting all such data.
To the extent which was practicable (taking account of cost and time), the
Contractor shall be deemed to have obtained all necessary information as to risks,
NO

contingencies and other circumstances which may influence or affect the Tender or
Works or the provision of the Operation Service. To the same extent, the Contractor
shall be deemed to have inspected and examined the Site, its surroundings, the
above data and other available information, and to have been satisfied before
submitting the Tender as to all relevant matters, including (without limitation):
(a) the form and nature of the Site, including sub-surface conditions;
(b) the hydrological and climatic conditions;
(c) the extent and nature of the work and Goods necessary for the execution and
completion of the Works and the remedying of any defects;

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 (d) the Laws, procedures of regulatory and other authorities and labour practices
of the Country; and
(e) the Contractor’s requirements for access, accommodation, facilities, personnel,
power, transport, water and other services.

It is a fundamental requirement of the Contract that the Employer shall provide tenderers
with any relevant information he may have concerning sub-surface, hydrological or climatic
conditions. It is not an option for the Employer and the Contract assumes that all such

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information was given to tenderers at the time of tender.

However, the Employer is only required to provide the facts (i.e. ‘data’), and an Employer

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should not try to provide any interpretation of those facts, as interpretation is the
responsibility of the Contractor. Also the Employer should be wary of providing any ‘expert
opinions’ which he may have obtained. These are also ‘interpretations’ which should be left
to the Contractor to make. However, a wise Employer will recognise that it is of no benefit to
withhold information: the more information he is able to give tenderers, the more responsive
and competitive the tenders are likely to be.

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The information to be provided by the Employer may be in the form of published weather
records, or records from his own investigations when selecting the Site, such as geological
records or borehole logs. The logic behind this requirement is firstly, that all tenderers will

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be basing their tenders on the same basic information, and secondly, it may not be practical
or indeed desirable for a dozen or so tenderers to all start digging investigation pits and
boreholes all over the intended Site.

However, it is recognised that the information provided by the Employer will probably not
NT
be the only information available: there may be other records available from public sources
which are not in his possession. It is up to the Contractor to obtain sight of any such
additional records and make any other investigations he deems necessary to understand
everything which could affect his obligations under the Contract. This could include data
affecting his design criteria in the form of ‘codes of practice’ and other design standards,
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safety regulations, on-site procedures, location of quarries, etc., accommodation facilities

and medical arrangements. He needs to be satisfied that his price covers all of these.

However, this requirement is tempered by the statement “To the extent which was
practicable (taking account of cost and time) ….......”. In other words, bearing in mind that
only one tenderer will be awarded the Contract and be in position to recover his tendering
costs, it is not reasonable, either time-wise or cost-wise, to expect all tenderers to
OR

undertake major and expensive Site and other investigations, even if such were physically
possible.

4.11 Sufficiency of the Accepted Contract Amount

TF

The Contractor shall be deemed to:

(a) have satisfied himself as to the correctness and sufficiency of the Accepted
Contract Amount, and
(b) have based the Accepted Contract Amount on the data, interpretations,
necessary information, inspections, examinations and satisfaction as to all
relevant matters referred to in Sub-Clause 4.10 [Site Data], and any further data
NO

relevant to the Contractor’s design.

The Accepted Contract Amount covers all the Contractor’s obligations under the
Contract (including those under Provisional Sums, if any) and all things necessary
for the proper design, execution and completion of the Works, the remedying of any
defects and the provision of the Operation Service.

This Sub-Clause simply emphasizes that the Accepted Contract Amount (see Definition
1.1.1) covers all of the Contractor’s obligations, including those covered in Sub-Clause
4.10 [Site Data].

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4.12 Unforeseeable Physical Conditions

In this Sub-Clause, “physical conditions” means natural physical conditions and

man-made and other physical obstructions and pollutants, which the Contractor
encounters at the Site when executing the Works, including sub-surface and
hydrological conditions but excluding climatic conditions.
If the Contractor encounters adverse physical conditions which he considers to
have been Unforeseeable, the Contractor shall give Notice to the Employer’s

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Representative as soon as practicable.
This Notice shall describe the physical conditions, so that they can be inspected by
the Employer’s Representative, and shall set out the reasons why the Contractor

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considers them to be Unforeseeable. The Contractor shall continue executing the
Works, using such proper and reasonable measures as are appropriate for the
physical conditions, and shall comply with any instructions which the Employer’s
Representative may give. If an instruction constitutes a Variation, Clause 13
[Variations and Adjustments] shall apply.
If and to the extent that the Contractor encounters physical conditions which are

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Unforeseeable, gives such a Notice, and suffers delay and/or incurs cost due
to these conditions, the Contractor shall be entitled subject to Sub-Clause 20.1
[Contractor’s Claims] to:
(a) an extension of time for any such delay, if completion is or will be delayed, under

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Sub- Sub-Clause 9.3 [Extension of Time for Completion of Design-Build], and
(b) payment of any such Cost, which shall be included in the Contract Price.
After receiving such Notice and inspecting and/or investigating these physical
conditions, the Employer’s Representative shall proceed in accordance with Sub-
Clause 3.5 [Determinations] to agree or determine (i) whether and (if so) to what
NT
extent these physical conditions were Unforeseeable, and (ii) the matters described
in sub-paragraphs (a) and (b) above.
However, before additional Cost is finally agreed or determined under sub-
paragraph (ii), the Employer’s Representative may also review whether other
physical conditions in similar parts of the Works (if any) were more favourable than
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could reasonably have been foreseen when the Contractor submitted the Tender.
If and to the extent that these more favourable conditions were encountered,
the Employer’s Representative may proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine the reductions in Cost which were due to
these conditions, which may be included (as deductions) in the Contract Price
and Payment Certificates. However, the net effect of all adjustments under sub-
paragraph (b) and all these reductions, for all the physical conditions encountered
OR

in similar parts of the Works, shall not result in a net reduction in the Contract Price.
The Employer’s Representative may take account of any evidence of the physical
conditions foreseen by the Contractor when submitting the Tender, which may be
made available by the Contractor, but shall not be bound by any such evidence.
TF

The first paragraph describes what is meant by ‘physical conditions’, and by referring to
the Site, such conditions must occur on the Site (see Definition 1.1.72). If the conditions
occur in a place or at a location which is not encompassed by the definition of Site, then
the condition is not a ‘physical condition within the meaning of this Sub-Clause. The second
paragraph describes the action which the Contractor is required to take if he considers that
he has encountered such a condition which was Unforeseeable.
NO

It is important to look at the definition of ‘Unforeseeable’ (see Definition 1.1.80), since it does
not mean that the Contractor himself did not or could not foresee the condition. It means
that it was not reasonably foreseeable by an experienced contractor, i.e., a contractor
experienced in the type of work covered by the Contract.

Having given Notice to the Employer’s Representative, and unless the conditions
encountered are considered to be an Exceptional Event (see Definition 1.1.37), in which
case the Parties are referred to Clause 18 [Exceptional Risks], the Contractor shall continue

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 with executing the Works, and at the same time comply with any instructions which the
Employer’s Representative may issue. If any instruction constitutes a Variation, then the
Contractor is entitled to proceed in accordance with Clause 13 [Variations and Adjustments]
and claim additional time and money, if appropriate.

Upon receiving the Notice from the Contractor the Employer’s Representative must fairly
determine (hence the reference to Sub-Clause 3.5 [Determinations]) whether the condition
or event was indeed Unforeseeable and, if so, fairly determine the compensation and/or

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time extension due.

It should be noted that not all Unforeseeable events or conditions are adverse, and the

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Contractor may encounter conditions which were more favourable than he could reasonably
have anticipated, for example, rock conditions which allowed twice the rate of excavation
than the Contractor had anticipated when preparing his Programme. In such a case, in the
event that the Contractor subsequently meets further adverse conditions in similar parts of
the Works which he considers were Unforeseeable and submits a Notice, the Employer’s
Representative may take account of the effect of the more favourable conditions previously

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encountered by the Contractor when making his determination. This is a very fair provision,
but the Contractor cannot lose because however favourable the conditions may prove to
be, the total effect cannot result in a reduction in the Contract Price.

4.13 Rights of Way and Facilities

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The Contractor shall bear all costs and charges for special and/or temporary rights-
of-way which he may require, including those for access to the Site. The Contractor
shall also obtain, at his risk and cost, any additional facilities outside the Site which
NT
he may require for the purposes of the Works.

Whilst under Sub-Clause 2.1 [Right of Access to the Site], the Employer gives the Contractor
‘right of access’ to the Site, and under Sub-Clause 4.15 [Access Route], the Contractor is
responsible for making sure that such access is suitable for his needs, this Sub-Clause 4.13
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is dealing with the possible need of the Contractor for additional or special rights-of-way,
for example for his camp or workshop area, which is outside the defined area of the Site.
In such cases the Contractor is fully responsible for obtaining all permissions and paying all
costs and land rents, etc., associated with such rights-of-way and access.

4.14 Avoidance of Interference

OR

The Contractor shall not interfere unnecessarily or improperly with:

(a) the convenience of the public, or
(b) the access to and use and occupation of all roads and footpaths, irrespective
of whether they are public or in the possession of the Employer or of others.
The Contractor shall indemnify and hold the Employer harmless against and from all
TF

damages, losses and expenses (including legal fees and expenses) resulting from
any such unnecessary or improper interference.

This is a fair requirement for the Contractor to be responsible for the way he uses public
roads and facilities including indemnifying the Employer, especially as many claims from
the public may well be directed to the Employer in such cases. However, if damage occurs
NO

which is unavoidable due to the nature of the work which the Contractor is performing under
the Contract, then by Sub-Clause 17.3(b)(i), the Employer may be required to indemnify the
Contractor against any such damage.

4.15 Access Route

The Contractor shall be deemed to have been satisfied as to the suitability and
availability of access routes to the Site. The Contractor shall use reasonable efforts
to prevent any road or bridge from being damaged by the Contractor’s traffic or by

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 the Contractor’s Personnel. These efforts shall include the proper use of appropriate
vehicles and routes.
Except as otherwise stated in these Conditions:
(a) the Contractor shall (as between the Parties) be responsible for any maintenance
which may be required as a result of his use of access routes;
(b) the Contractor shall provide all necessary signs or directions along access
routes, and shall obtain any permission which may be required from the relevant
authorities for his use of routes, signs and directions;

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(c) the Employer shall not be responsible for any claims which may arise from the
use or otherwise of any access route;
(d) the Employer does not guarantee the suitability or availability of particular

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access routes; and
(e) Costs due to non-suitability or non-availability, for the use required by the
Contractor, of access routes shall be borne by the Contractor.

Under Sub-Clause 2.1 [Right of Access to the Site], the Employer is required to give the
Contractor ‘right-of-access’ to the Site such that the Contractor is legally entitled to go

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onto the Site. Such right must include the means of reaching the Site and is referred to
in this Sub-Clause as ‘access routes’. Since the Employer cannot know what plant and
equipment, etc., the Contractor will wish to transport along the access route, it is up to the
Contractor (during his Site inspection under Sub-Clause 4.10 [Site Data]) to ascertain what,

4.16
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if any, upgrading or strengthening work will be necessary on the roads and bridges he will
be using, and their proper maintenance.

Transport of Goods
NT
Unless otherwise stated in the Particular Conditions:
(a) the Contractor shall give Notice to the Employer’s Representative not less than
21 days prior to the date on which any Plant or a major item of other Goods will
be delivered to the Site; and
(b) the Contractor shall be responsible for packing, loading, transporting, receiving,
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unloading, storing and protecting all Goods and other things required for the
Works or provision of Operation Service; and
(c) the Contractor shall indemnify and hold the Employer harmless against and from
all damages, losses and expenses (including legal fees and expenses) resulting
from the transport of Goods, and shall negotiate and pay all claims arising from
their transport.
OR

On some projects with, for example, Plant deliveries being made to an existing Employer
owned facility, it will be necessary for the Employer to have delivery details of Plant and
Goods so that appropriate arrangements can be made to receive them. For some projects
the Employer may change the requirements of this Sub-Clause in the Particular Conditions
Part B, such that approval of the delivery conditions is made as a pre-requisite before
TF

delivery will be permitted. Damage to any part of the access route or public roads during
transportation is covered in Sub-Clause 4.15 [Access Route].

4.17 Contractor’s Equipment

The Contractor shall be responsible for all Contractor’s Equipment. When brought on
NO

to the Site, Contractor’s Equipment shall be deemed to be exclusively intended for

the execution of the Works and provision of the Operation Service. The Contractor
shall not remove from the Site any major items of Contractor’s Equipment without
the consent of the Employer’s Representative. However, consent shall not be
required for vehicles transporting Goods or Contractor’s Personnel off Site.

Contractor’s Equipment, which includes equipment brought onto the Site by Subcontractors,
is exclusively intended to be used for the execution of the Works on the Site and its use
for this purpose is paid for in the Contract Price. There is therefore a control, in the form

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 of consent from the Employer’s Representative, as to when major items may be removed
from the Site. However, by Sub-Clause 1.3 [Notices and Other Communications], any such
consent cannot be unreasonably withheld.

4.18 Protection of the Environment

The Contractor shall take all reasonable steps to protect the environment (both on
and off the Site) and to limit damage and nuisance to people and property resulting

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from pollution, noise and other results of his operations.
The Contractor shall ensure that emissions, surface discharges and effluent from
the Contractor’s activities shall not exceed the values indicated in the Employer’s

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Requirements, and shall not exceed the values prescribed by applicable Laws.

This Sub-Clause relates to noise and nuisance resulting from the Contractor’s activities and
methods of working, rather than noise emanating from the facility he is constructing. Even if
the Employer’s Requirements do not give any permitted maximum pollution or noise levels,
the Contractor must still work within the limits prescribed by law, and he still has a duty to

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avoid nuisance to the public.

4.19 Electricity, Water and Gas

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Except as stated below, the Contractor shall be responsible for the provision of all
electricity, water and other services he may require.
The Contractor shall be entitled to use for the purposes of the Works and provision
of the Operation Service such supplies of electricity, water, gas and other services
as may be available on the Site and of which details are given in the Employer’s
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Requirements.
In such a case the Contractor shall take over in his own name and shall be
responsible for payment of the electricity, water, gas and other services to the utility
provider. The Contractor will be allowed to take over the existing service entry and
provision points and shall be responsible for taking and recording such information
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as is necessary for the utility providers to correctly charge the Contractor from the
Commencement Date.

Very often there are service facilities available, owned by the Employer, on the Site where
the Works are being carried out. In such cases such services may or may not be available
for use by the Contractor during the performance of the Contract. If they are, clear details
of availability (e.g., power available, daily consumption of water permissible) should be
OR

given in the Employer’s Requirements, together with any restrictions, so that the Contractor
knows what is available and what he is required to provide himself. If the Employer requires
payment (rather than the Contractor paying the service provider directly), then details should
also be given in the Employer’s Requirements.
TF

4.20 Employer’s Equipment and Free-Issue Materials

The Employer shall make the Employer’s Equipment (if any) available for the use
of the Contractor in the execution of the Works in accordance with the details,
arrangements and prices stated in the Employer’s Requirements. Unless otherwise
stated in the Employer’s Requirements:
NO

(a) the Employer shall be responsible for the Employer’s Equipment, except that
(b) the Contractor shall be responsible for each item of Employer’s Equipment
whilst any of the Contractor’s Personnel is operating it, driving it, directing it or
in possession or control of it.
The appropriate quantities and the amounts due (at such stated prices) for the
use of Employer’s Equipment shall be agreed or determined by the Employer’s
Representative in accordance with Sub-Clause 20.2 [Employer’s Claims] and
Sub- Clause 3.5 [Determinations]. The Contractor shall pay these amounts to the
Employer.

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 The Employer shall supply, free of charge, the “free-issue materials” (if any) in
accordance with the details stated in the Employer’s Requirements. The Employer
shall, at his risk and cost, provide these materials at the time and place specified
in the Contract. The Contractor shall then visually inspect them, and shall promptly
give Notice to the Employer’s Representative of any shortage, defect or default
in these materials. Unless otherwise agreed by both Parties, the Employer shall
immediately rectify the notified shortage, defect or default.
After this visual inspection, the free-issue materials shall come under the care,

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custody and control of the Contractor. The Contractor’s obligations of inspection,
care, custody and control shall not relieve the Employer of liability for any shortage,
defect or default not apparent from a visual inspection.

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Similar to Sub-Clause 4.19 [Electricity, Water and Gas], this Sub-Clause covers Employer’s
Equipment which the Employer may choose to make available to the Contractor. For
example there may be Employer’s transport facilities or Employer’s cranes which he is
prepared to allow the Contractor to use. Full details, including any restrictions and periods
of non-availability should be given in the Employer’s Requirements, together with any

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particular requirements or regulations regarding their use.

If the Employer is supplying any free-issue materials, these need to be listed in the Employer’s
Requirements. However, notwithstanding any visual inspection of such materials, if there

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is any defect or fault which could not be seen from the visual inspection, the Employer is
responsible and liable for correcting the defect or fault. This would also cover the situation
where a free-issue material did not prove to be ‘fit for purpose’ (see Sub-Clause 4.1
[Contractor’s General Obligations]).
NT
4.21 Progress Reports

During the Design-Build Period, monthly progress reports, in a format agreed with
the Employer’s Representative shall be prepared by the Contractor and submitted
to the Employer’s Representative in one original and five copies, unless otherwise
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stated in the Employer’s Requirements. The first report shall cover the period up
to the end of the first calendar month following the Commencement Date. Reports
shall be submitted monthly thereafter, each within 7 days after the last day of the
period to which it relates.
Reporting on progress shall continue until the Contractor has received the Contract
Completion Certificate. Details of the content of the progress reports for the
Design-Build Period and the Operation Service Period shall be as specified in the
OR

Employer’s Requirements.
Unless otherwise stated or agreed, each progress report shall include:
(a) charts and detailed descriptions of progress, including each stage of design,
Contractor’s Documents, procurement, manufacture, delivery to Site,
construction or replacement, erection, testing, commissioning, trial operation
TF

and provision of Operation Service;

(b) photographs showing the status of manufacture or replacement and of progress
on the Site;
(c) for the manufacture or replacement of each main item of Plant and Materials,
the name of the manufacturer, manufacture location, percentage progress, and
the actual or expected dates of:
NO

(i) commencement of manufacture,

(ii) Contractor’s inspections,
(iii) tests, and
(iv) shipment and arrival at the Site;
(d) the details described in Sub-Clause 6.10 [Records of Contractor’s Personnel
and Equipment];
(e) copies of quality assurance documents, test results and certificates of Materials;
(f) list of Variations, Notices given under Sub-Clause 20.1 [Contractor’s Claims]
and Notices given under Sub-Clause 20.2 [Employer’s Claims];

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 (g) safety statistics, including details of any hazardous incidents and activities
relating to environmental aspects and public relations; and
(h) comparisons of actual and planned progress, with details of any events or
circumstances which may jeopardise the completion in accordance with the
Contract, and the measures being (or to be) adopted to overcome delays.
The particular reporting requirements during the Operation Service Period shall be
as specified in the Employer’s Requirements.

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This Sub-Clause requires the Contractor to submit Progress Reports on a monthly basis
during the Design-Build Period. The main requirement is that the format of the Progress
Reports shall be agreed with the Employer’s Representative – in other words, the

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Employer’s Representative will say what he wants and when he wants it, and the Contractor
will submit Reports accordingly.

Alternatively, the format can be detailed in the Employer’s Requirements. In either case
there is a suggested list of matters which should be covered in the Progress Report, and it
is a useful guideline as to what should be included.

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Although reporting is to continue until the issue of the Contract Completion Certificate, i.e.,
at the end of the Operation Service Period, it is recognised that the format of the Progress
Report will need to be substantially modified during the Operation Service Period, and the

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required format will either need to be given in the Employer’s Requirements or agreed
between the Parties, but clearly the reporting requirements will differ between constructional
reporting and operational reporting.

4.22 Security of the Site

NT
The Contractor shall be responsible for the security of the Site. Unless otherwise
stated in the Particular Conditions:
(a) the Contractor shall be responsible for keeping unauthorised persons off the
Site; and
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(b) authorised persons shall be limited to the Contractor’s Personnel and the
Employer’s Personnel, and to any other personnel notified to the Contractor, by
the Employer or the Employer’s Representative, as authorised personnel of the
Employer’s other contractors on the Site.

Security against trespass, theft and any other unlawful presence or activity, is the responsibility
of the Contractor, and this Sub-Clause should be read in conjunction with Sub-Clause 4.8
OR

[Safety Procedures]. If the Site is an existing property or facility under the ownership of the
Employer, the Employer may wish to amend this Sub-Clause and accept responsibility for
security. Such amendment should be made in the Particular Conditions Part B.

4.23 Contractor’s Operations on Site

TF

The Contractor shall confine his operations to the Site, and to any additional
areas which may be obtained by the Contractor and agreed by the Employer’s
Representative as working areas. The Contractor shall take all necessary precautions
to keep Contractor’s Equipment and Contractor’s Personnel within the Site and
these additional areas, and to keep them off adjacent land.
NO

At all times the Contractor shall keep the Site free from all unnecessary obstruction,
and shall store or dispose of any Contractor’s Equipment or surplus materials. The
Contractor shall promptly clear away and remove from the Site any surplus material,
wreckage, rubbish and Temporary Works which are no longer required.
Upon the issue of a Commissioning Certificate, the Contractor shall clear away
and remove, from that part of the Site and Works to which the Commissioning
Certificate refers, all Contractor’s Equipment, surplus material, wreckage, rubbish
and Temporary Works. The Contractor shall leave that part of the Site and the
Works in a clean and safe condition.

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 The Contract Completion Certificate shall not be issued until the Contractor has
removed any remaining Contractor’s Equipment, surplus material, wreckage,
rubbish and Temporary Works from the Site which are not required. The Contractor
shall leave the Site and the Works in a clean and safe condition.

Where the Site is surrounded by property owned by other land-owners, it is important that
the Contractor restricts his activities to the land which he is authorised to occupy and use,
i.e., the Site. This Sub-Clause is not only intended to minimise inconvenience to local land

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and property owners, but it should also be read in conjunction with Sub-Clauses 4.14
[Avoidance of Interference] and 4.18 [Protection of the Environment].

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4.24 Fossils

All fossils, coins, articles of value or antiquity, and structures and other remains
or items of geological or archaeological interest found on the Site shall be placed
under the care and authority of the Employer. The Contractor shall take reasonable
precautions to prevent Contractor’s Personnel or other persons from removing or

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damaging any of these findings.
The Contractor shall, upon discovery of any such finding, promptly give Notice to
the Employer’s Representative, who shall issue instructions for dealing with it. If the
Contractor suffers delay and/or incurs cost from complying with the instructions, the

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Contractor shall give a further Notice to the Employer’s Representative and shall be
entitled, subject to Sub-Clause 20.1 [Contractor’s Claims], to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) payment of any such Cost, which shall be included in the Contract Price.
NT
After receiving this further Notice, the Employer’s Representative shall proceed
in accordance with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.

Usually fossils and other antiquities are the property of the State. If any such articles
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are found on the Site during the life of the Contract, they are put under the care and
responsibility of the Employer, and it is the Employer’s Representative who must find
out from the appropriate authorities what needs to be done, and instruct the Contractor
accordingly. Very often such discoveries result in delays and investigations, and if the
Contractor suffers cost or delay, he is entitled to additional time and additional Cost. Note
that since the occurrence was not caused by the Employer, there is no entitlement to profit,
so the Contractor is only entitled to Cost (see comments to Definitions 1.1.23 and 1.1.24).
OR

4.25 Changes in the Contractor’s Financial Situation

If the Contractor becomes aware of any change in the Contractor’s financial

situation which will or could adversely affect his ability to complete and fulfil all his
TF

obligations under the Contract, he shall immediately give Notice to the Employer
with detailed particulars. Within 28 days of receiving such Notice, the Employer
shall advise the Contractor of what action he intends to take and/or what action the
Employer requires the Contractor to take.
In any event, the Contractor shall provide the Employer annually with his audited
financial statements and reports.
NO

Similar to the provisions to be found in Sub-Clause 2.4 [Employer’s Financial Arrangements],

where the Employer is obliged to inform the Contractor of any changes to the financial
arrangements he has made for financing the project, this Sub-Clause requires the
Contractor to inform the Employer if he (the Contractor) becomes aware of any change
in the Contractor’s financial situation which could adversely affect his ability to complete
the Works and the Operation Service. Note that if the Contractor is a joint venture, then
this requirement will apply to all members of the joint venture. On receiving this Notice the
Employer has the right to consider the circumstances and the Contractor’s potential ability

© FIDIC 2011
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 to complete his obligations under the Contract, and take action accordingly. Such action
could be moves to improve the Contractor’s cash flow by perhaps changing the payment
provisions, or, if it is a very serious situation from which the Employer concludes that the
Contractor will not be able to recover or complete the Works, the Employer may terminate
the Contract under Sub-Clause 15.2(e).

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Clause 5 Design

Although the General Conditions only refer to ‘the design of the Works’, the design generally

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comprises various stages as the project develops from conception to reality.

The first stage, or conceptual design (if any), will usually be included in the Employer’s
Requirements and will be a simple layout with possibly basic dimensions and defined criteria
to identify the Works sufficiently for tenderers to be able to understand and develop the
requirements in order to prepare a responsive tender.

CT
The second stage will usually be some form of preliminary design prepared by the
tenderer and included in the tender to demonstrate his understanding of the Employer’s
Requirements and his proposals for meeting those requirements. The level of detail required

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in the preliminary design should be stated in the tender documents but it should be limited
to that necessary for the Employer to be able to understand the offer from the tenderer.
Tenderers should not be asked for an elaborate detailed design at this stage since this
would be very expensive to produce, and a waste of money for all except the successful
tenderer.
NT
The final design stage is that made by the Contractor as part of his obligations under the
Contract. Unless any changes have been agreed prior to the Contract award this will usually
be a development of his preliminary design and will become a part of the Contractor’s
Documents (see Definition 1.1.19).
CO

The provisions in this Clause 5 relate to this final design stage and the Contractor’s
obligations under the Contract.

5.1 General Design Obligations

The Contractor shall carry out, and be responsible for, the design of the Works.
OR

Design shall be prepared by qualified designers who are engineers or other

professionals who comply with the criteria (if any) stated in the Employer’s
Requirements. Unless otherwise stated in the Contract, the Contractor shall submit
to the Employer’s Representative for consent the name and particulars of each
proposed designer and design Subcontractor.
TF

The Contractor warrants that he, his designers and design Subcontractors have
the experience and capability necessary for the design. The Contractor undertakes
that the designers shall be available to attend discussions with the Employer’s
Representative at all reasonable times.
Upon receiving Notice under Sub-Clause 8.1 [Commencement Date], the
Contractor shall scrutinise the Employer’s Requirements (including design criteria
NO

and calculations, if any) and the items of reference mentioned in Sub-Clause

4.7 [Setting Out]. Within the period stated in the Contract Data, calculated from
the Commencement Date, the Contractor shall give Notice to the Employer’s
Representative of any error, fault or other defect found in the Employer’s
Requirements or these items of reference.
After receiving this Notice, the Employer’s Representative shall determine whether
Clause 13 [Variations and Adjustments] shall be applied, and shall give Notice to the
Contractor accordingly. If and to the extent that (taking account of cost and time) an
experienced contractor exercising due care would have discovered the error, fault

© FIDIC 2011
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 or other defect when examining the Site and the Employer’s Requirements before
submitting the Tender, the Time for Completion shall not be extended and the
Contract Price shall not be adjusted.
If the Contractor finds any error, fault or other defect in the Employer’s Requirements
after the period stated in the Contract Data, then Sub-Clause 1.10 [Errors in the
Employer’s Requirements] shall be applicable.

The Contract assumes that the full responsibility and liability for the design lies with the

E
Contractor. However, if the Employer’s Requirements contain any immutable provisions or
require that any part of the design (e.g., plant foundations) be carried out by a third party
(e.g. by a local building contractor), then the responsibility for those provisions or parts must

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be clearly separated from the general responsibilities of the Contractor under this Sub-
Clause. However if such third party is designated as a nominated designer (Nominated Sub-
contractor), then according to the provisions of Sub-Clauses 4.4 [Subcontractors] and 4.5
[Nominated Subcontractors], responsibility for the design will remain with the Contractor.

Although the Contractor has a general ‘fitness for purpose’ obligation under Sub-Clause

CT
4.1 [Contractor’s General Obligations] which includes his responsibility to see that his
design is also ‘fit for purpose’, it may be difficult for the Contractor to obtain professional
liability insurance (PLI) to cover this obligation. Very often PLI will only cover ‘due care and
diligence’ which is not the same as ‘fitness for purpose’. However, this does not relieve the

RA
Contractor of his overall obligation. He must accept the additional risk in ensuring that he
fulfils the requirement that the Works will be ‘fit for purpose’. There is a requirement that the
Contractor’s designers and design subcontractors shall be subject to the consent of the
Employer’s Representative, but again, any such consent does not relieve the Contractor of
any of his design responsibilities.
NT
There are three stages of scrutiny of the Employer’s Requirements. The first covers errors
which an experienced contractor would have discovered during the tendering process.
These should have been brought to the attention of the Employer during tendering and any
corrective action required by the Employer would have been circulated to all tenderers in
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the form of an addendum to the tender documents so that all tenders would be based on
the same amended tender documents.

The second stage of scrutiny occurs after the award of the Contract. After receiving the
Notice to commence the Works, the Contractor has a set time (given in the Contract
Data) in which to scrutinise the Employer’s Requirements and search for any fault, error
or defect. The purpose of this provision is to require the Contractor, with his experience
OR

of similar Works, to see if there are any obvious errors or faults in the Employer’s
Requirement of which the Employer may not have been aware and which the Contractor
did not discover or could not reasonably have discovered during the tendering process.
If the Contractor discovers any such errors or faults, he is required to give Notice to the
Employer’s Representative, and the Employer’s Representative will decide what needs to
TF

be done.

The third stage comes after the second stage scrutiny period, when any fault or error
discovered in the Employer’s Requirements is dealt with in accordance with the provisions
of Sub-Clause 1.10 [Errors in the Employer’s Requirements].
NO

Normally any faults or errors in the Employer’s Requirements are the responsibility of
the Employer, unless it can be reasonably determined that an experienced contractor
would or should have discovered them during the first two stages of scrutiny. Note again,
that the judgement to be made is whether the errors could have been discovered by an
‘experienced’ contractor.

5.2 Contractor’s Documents

The Contractor’s Documents shall comprise the technical documents specified

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 in the Employer’s Requirements, documents required to satisfy all regulatory
approvals, and the documents described in Sub-Clause 5.5 [As-Built Documents]
and Sub-Clause 5.6 [Operation and Maintenance Manuals]. Unless otherwise stated
in the Employer’s Requirements, the Contractor’s Documents shall be written in the
language for communications defined in Sub-Clause 1.4 [Law and Language].
The Contractor shall prepare all Contractor’s Documents, and shall also prepare any
other documents necessary to instruct the Contractor’s Personnel. The Employer’s
Personnel shall have the right to inspect the preparation of all these documents,

E
wherever they are being prepared.
If the Employer’s Requirements describe the Contractor’s Documents which are
to be submitted to the Employer’s Representative for review leading to consent

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and/or for approval, they shall be submitted accordingly, together with a Notice as
described below. The Employer’s Representative gives his consent to a document
when he is satisfied that the Contractor’s Documents conform to the Employer’s
Requirements.
In the following provisions of this Sub-Clause, (i) “review period” means the period
required by the Employer’s Representative for review leading to consent and (if so

CT
specified) for approval, and (ii) “Contractor’s Documents” exclude any documents
which are not specified as being required to be submitted for review leading to
consent and/or for approval. The Contractor’s Documents which require approval
from the Employer’s Representative shall be as listed in the Contract Data.

RA
Unless otherwise stated in the Employer’s Requirements or agreed with the
Employer’s Representative, each review period shall not exceed 21 days, calculated
from the date on which the Employer’s Representative receives a Contractor’s
Document and the Contractor’s Notice. This Notice shall state that the Contractor’s
Document is considered ready for review leading to either approval (if so specified)
NT
or consent with regard to conformity with the Employer’s Requirements, in
accordance with this Sub-Clause and for use. The Notice shall also state that the
Contractor’s Document complies with the Contract, or the extent to which it does
not comply.
The Employer’s Representative may, within the review period, give Notice to the
CO

Contractor that a Contractor’s Document fails (to the extent stated) to conform with
the Contract. If a Contractor’s Document so fails to conform, it shall be rectified,
resubmitted and reviewed (and, if specified, approved) in accordance with this
Sub-Clause, at the Contractor’s cost. If such re-submission and review causes the
Employer to incur additional costs, the Contractor shall, subject to Sub-Clause 20.2
[Employer’s Claims], pay these costs to the Employer.
For each part of the Works, and except to the extent that the prior approval or
OR

consent of the Employer’s Representative shall have been obtained:

(a) in the case of a Contractor’s Document which has (as specified) been submitted
for the Employer’s Representative’s approval or consent:
(i) the Employer’s Representative shall give Notice to the Contractor that
the Employer’s Representative gives his consent that the Contractor’s
TF

Document conforms with the Employer’s Requirements or is approved, or

that it does not (to the extent stated) comply with the Contract;
(ii) execution of such part of the Works shall not commence until the Employer’s
Representative has either approved or given his consent to the Contractor’s
Document; and
(iii) the Employer’s Representative shall be deemed to have approved the
NO

Contractor’s Documents or given his consent that the Contractor’s

Documents conform to the Employer’s Requirements upon the expiry of the
review periods for all the Contractor’s Documents which are relevant to the
design and execution of such part, unless the Employer’s Representative
has previously notified otherwise in accordance with sub-paragraph (i);
(b) execution of such part of the Works shall not commence prior to the expiry of
the review periods for all the Contractor’s Documents which are relevant to its
design and execution;
(c) execution of such part of the Works shall be in accordance with those

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 Contractor’s Documents for which the Employer’s Representative has given
his consent as to the conformity with the Employer’s Requirements, (and, if
specified, approved); and
(d) if the Contractor wishes to modify any design or document which has previously
been submitted for review (and, if specified, approval), the Contractor shall
immediately give Notice to the Employer’s Representative, accompanied by a
written explanation of the need for such modification. Thereafter, the Contractor
shall submit revised documents to the Employer’s Representative in accordance

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with the above procedure.
Any such consent and/or approval (where specified) (under this Sub-Clause or
otherwise) shall not relieve the Contractor from any obligation or responsibility.

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By definition, the Contractor’s Documents include “the calculations, computer programs
and other software, drawings, manuals, models and other documents of a technical nature
supplied by the Contractor under the Contract”. In other words everything of a technical
nature which the Contractor is required to produce in connection with the Contract. In
addition to the listed items, there will be documents which are specified in the Employer’s

CT
Requirements; documents required to satisfy regulatory approvals or consents; there will
be as-built documentation to be provided under Sub-Clause 5.5 [Technical Standards
and Regulations]; and there will be operation and maintenance manuals to be provided
under Sub-Clause 5.6 [Operation and Maintenance Manuals]. All these, and any other

RA
documents of a technical nature which the Contractor is required to provide are separately
and collectively known as Contractor’s Documents.

The Contractor’s Documents must be in a language which is acceptable to the Employer

and the persons who will be using the documents and, unless otherwise stated, that shall
NT
be the language for communications given in the Contract Data (Sub-Clause 1.4 [Law and
Language]).

As these documents form such an important part of the work to be done by the Contractor,
the Contract gives the Employer’s Representative and/or his Personnel, the right to
CO

inspect, review, comment upon and give consent to the Contractor’s Documents, and the
Contractor is not permitted to proceed until such consent is given. If the Contractor wishes
to change or amend the Contractor’s Documents after they have been consented to by the
Employer’s Representative, the Contractor is required to re-submit the amended document
for consent before it can be used.

Any consent (or where specified, approval or review) shall not relieve the Contractor of any
OR

of his responsibilities as to the correctness of such documents and his ultimate obligation
that the Works will be ‘fit for purpose’.

5.3 Contractor’s Undertaking

TF

If the Employer’s Representative reasonably instructs that further Contractor’s

Documents are required, the Contractor shall prepare them promptly at his own
cost.
The Contractor undertakes that the design, the Contractor’s Documents, the
execution and the completed Works will be in accordance with:
(a) the Laws of the Country; and
NO

(b) the documents forming the Contract, as altered or modified by Variations.

Since the Contractor is responsible for producing the Contractor’s Documents, he is also
responsible to see that they comply with the requirements of any law or by-law or other
legislation or regulation which may apply to the design or construction or use and operation
of the Works. He is also responsible for ensuring that the provisions contained in the
Contractor’s Documents do not conflict with or compromise any other documents forming
the Contract, and when a Variation is issued he must also ensure that the introduction of
the Variation will also meet these requirements.

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5.4 Technical Standards and Regulations

Unless otherwise stated, the design, the Contractor’s Documents, the execution
and the completed Works shall comply with the Country’s technical standards,
building, construction and environmental Laws, Laws applicable to the product
being produced from the Works, and other standards specified in the Employer’s
Requirements, applicable to the Works, or defined by the applicable Laws.
All these Laws shall, in respect of the Works and each Section, be those prevailing

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when the Commissioning Certificate is issued in accordance with Sub-Clause 11.7
[Commissioning Certificate]. References in the Contract to published standards
shall be understood to be references to the edition applicable on the Base Date,

US
unless stated otherwise.
If changed or new applicable standards come into force in the Country after the
Base Date, the Contractor shall give Notice to the Employer’s Representative and
(if appropriate) submit proposals for compliance. In the event that:
(a) the Employer’s Representative determines that compliance is required; and
(b) the proposals for compliance constitute a variation, then the Employer’s

CT
Representative shall initiate a Variation in accordance with Clause 13 [Variations
and Adjustments].

This requirement is similar to the preceding Sub-Clause in respect of compliance with laws

RA
and regulations, etc. However, the Works must comply with all the listed requirements at
the time the Commissioning Certificate is issued. This ties in with the requirement in the
preceding Sub-Clause that also Variations must also comply with all laws and regulations
etc. In the event that new standards or regulations come into force after the Base Date (see
Definition 1.1.5), the Employer’s Representative must decide how these are to be handled
NT
or incorporated, and if this involves a Variation, this must be issued in accordance with
Clause 13 [Variations and Adjustments].

5.5 As-Built Documents

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The Contractor shall prepare, and keep up-to-date, a complete set of “as-built”
records of the execution of the Works, showing the exact as-built locations, sizes
and details of the work as executed. These records shall be kept on the Site and
shall be used exclusively for the purposes of this Sub-Clause. At least two copies
shall be supplied to the Employer’s Representative prior to the commencement of
the Tests on Completion of Design-Build.
In addition, the Contractor shall supply to the Employer’s Representative as-built
OR

drawings of the Works, showing all Works as executed, and submit them to
the Employer’s Representative for review under Sub-Clause 5.2 [Contractor’s
Documents]. The Contractor shall obtain the consent of the Employer’s
Representative as to their size, the referencing system, and other relevant details.
Prior to the issue of the Commissioning Certificate, the Contractor shall supply to
TF

the Employer’s Representative the specified numbers and types of copies of the
relevant as-built drawings, in accordance with the Employer’s Requirements. The
relevant work shall not be considered to be completed for the purposes of issuing
the Commissioning Certificate under Sub-Clause 11.7 [Commissioning Certificate]
until the Employer’s Representative has received these documents.
NO

Since there can be differing opinions as to what constitutes ‘as-built drawings’ it would be
wise for the Employer to specify in the Employer’s Requirements, exactly what he requires
both as regards details, scales and numbers. According to Sub-Clause 5.2 [Contractor’s
Documents], as-built drawings come under the category of Contractor’s Documents, and
they will thus need the Employer’s Representative’s consent before being accepted. It is
important for the Contractor to commence the preparation of as-built drawings in good
time since not only do they require ‘consent’ as mentioned above, but the Employer’s
Representative will not issue the Commissioning Certificate until he has a complete set of
these documents.

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5.6 Operation and Maintenance Manuals

Prior to the commencement of the Commissioning Period, the Contractor

shall supply to the Employer’s Representative two copies of all operation and
maintenance manuals in sufficient detail for the Employer to operate, maintain,
dismantle, reassemble, adjust and repair the Plant and the Works. The Contractor
shall supply the balance of the required operation and maintenance manuals prior
to the issue of the Commissioning Certificate.

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The Works or any Section shall not be considered to be completed for the purposes
of issuing the Commissioning Certificate under Sub-Clause 11.7 [Commissioning
Certificate] until the Employer’s Representative has received these documents.

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Similar to the provisions of Sub-Clause 5.5 [As-Built Documents] regarding ‘as-built
drawings’, the Employer’s Representative will not issue the Commissioning Certificate until
he has received two copies of the operation and maintenance manuals. Again, the Employer
should consider giving full details of what he requires in the Employer’s Requirements,
including the language in which he requires the manuals to be produced.

CT
5.1 Design Error

If errors, omissions, ambiguities, inconsistencies, inadequacies or other defects are

RA
found in the Contractor’s Documents, they and the Works shall be corrected at the
Contractor’s cost, notwithstanding any consent or approval under this Clause.

This Sub-Clause covers errors in the Contractor’s Documents. Sub-Clause 1.10 [Errors in
the Employer’s Requirements] covers errors in the Employer’s Requirements. This Sub-
NT
Clause also reiterates the principle that consent or approval of any document does not
relieve the Contractor of his overall responsibility for the correctness of the document.
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Clause 6 Staff and Labour

Sub-Clauses 6.1 to 6.7 of this Clause deal with the Contractor’s basic obligations with
regard to the employment of labour, working hours and matters concerning health and
safety. All such arrangements are the responsibility of the Contractor, but there are certain
restrictions and conditions which he must abide by. In particular he must comply in all
respects with the local labour laws, which is a requirement consistent with the provisions
OR

of Sub-Clause 1.14, which is the overall requirement for the Contractor to comply with all
laws and regulations, etc.

In respect of working hours, the Contractor is required to respect the normal hours given in
the Contract Data and also locally recognised days of rest, which will usually include locally
TF

recognised religious holidays and festivals. This Clause recognises that the provision of the
Operation Service is not restricted by ‘normal working hours or locally recognised days of
rest’, and the Employer’s Requirements or the Operation Management Requirements (see
Definition 1.1.55) should give details of what is required and/or permissible.

The Contractor is also required to provide facilities for the Employer’s Personnel, which
NO

includes the Employer’s Representative, and the Employer should make sure that details of
his requirements (e.g., office space and furnishings) are given in the Employer’s Requirements
so that Contractor can allow for providing such facilities when preparing his tender.

6.1 Engagement of Staff and Labour

Except as otherwise stated in the Employer’s Requirements, the Contractor shall

make arrangements for the engagement of all staff and labour, local or otherwise,
and for their payment, housing, feeding and transport.

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6.2 Rates of Wages and Conditions of Employment

The Contractor shall pay rates of wages and observe conditions of labour which are
not lower than those established for the trade or industry where the work is carried
out. If no established rates or conditions are applicable, the Contractor shall pay
rates of wages and observe conditions which are not lower than the general level
of wages and conditions observed locally by employers whose trade or industry is
similar to that of the Contractor.

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6.3 Persons in the Service of Employer

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The Contractor shall not recruit, or attempt to recruit, staff and labour from amongst
the Employer’s Personnel.

6.4 Labour Laws

The Contractor shall comply with all the relevant labour Laws applicable to the

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Contractor’s Personnel, including Laws relating to their employment, health, safety,
welfare, immigration and emigration, and shall allow them all their legal rights.
The Contractor shall require the Contractor’s Personnel to obey all applicable Laws,
including those concerning safety at work.

6.5 Working Hours

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No work shall be carried out on the Site on locally recognised days of rest or outside
the normal working hours stated in the Contract Data, unless:
NT
(a) otherwise stated in the Contract;
(b) the Employer’s Representative gives consent;
(c) the work is unavoidable, or necessary for the protection of life or property or for
the safety of the Works, in which case the Contractor shall immediately advise
the Employer’s Representative; or
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(d) required for the proper fulfilment of the requirements of the Operation Service
Period.

6.6 Facilities for Staff and Labour

Except as otherwise stated in the Employer’s Requirements, the Contractor shall

provide and maintain all necessary accommodation and welfare facilities for the
OR

Contractor’s Personnel. The Contractor shall also provide facilities for the Employer’s
Personnel as stated in the Employer’s Requirements.

The Contractor shall not permit any of the Contractor’s Personnel to maintain any
temporary or permanent living quarters within the Site of the Works, save where the
TF

Employer has given the Contractor permission in writing.

6.7 Health and Safety

The Contractor shall at all times during the Contract Period take all reasonable
precautions to maintain the health and safety of the Contractor’s Personnel. In
NO

collaboration with local health authorities, the Contractor shall ensure that medical
staff, first aid facilities, sick bay and ambulance service are available at all times at
the Site and at any accommodation for Contractor’s and Employer’s Personnel,
and that suitable arrangements are made for all necessary welfare and hygiene
requirements and for the prevention of epidemics.
The Contractor shall appoint an accident prevention officer at the Site, responsible
for maintaining safety and protection against accidents. This person shall be
qualified for this responsibility, and shall have the authority to issue instructions
and take protective measures to prevent accidents. Throughout the execution and

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 operation of the Works, the Contractor shall provide whatever is required by this
person to exercise this responsibility and authority.
The Contractor shall send details of any accident to the Employer’s Representative
as soon as practicable after its occurrence. The Contractor shall maintain records
and make reports concerning health, safety and welfare of persons, and damage to
property, as the Employer’s Representative may reasonably require.

Sub-Clauses 6.8 to 6.11 cover the superintendence and behaviour of the Contractor’s staff

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and labour.

The Contractor’s Personnel must be experienced and qualified so he can fulfil his basic

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obligations in Sub-Clause 4.1 [Contractor’s General Obligations]. If the Employer’s
Representative is of the opinion that any person employed by the Contractor is guilty of any
of the defaults listed in Sub-Clause 6.9 [Contractor’s Personnel], he is entitled to require the
Contractor to remove them and engage a suitable replacement.

Under Sub-Clause 6.11 [Disorderly Conduct], the Contractor is required to take ‘reasonable

CT
precautions’ to see that the Contractor’s Personnel behave themselves and refrain from
riotous and unlawful conduct. Although the Sub-Clause does not say what is meant by
‘reasonable precautions’, and despite any precautions or measures which the Contractor
may or may not take, if any of the Contractor’s Personnel are involved in unlawful behaviour,

RA
then as between the Employer and the Contractor, the Contractor is liable. This does not
mean that an employee of the Contractor can hide behind this Sub-Clause to avoid his legal
obligations. On the contrary, if he is found guilty of any offence, be it a motoring offence,
tax evasion, unruly behaviour or whatever, the employee will be directly liable for whatever
punishment the Law prescribes.
NT
6.8 Contractor’s Superintendence

For the complete Contract Period, the Contractor shall provide all necessary
superintendence to plan, arrange, direct, manage, inspect, test and monitor the
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design and execution of the Works and the provision of the Operation Service in
accordance with his obligations under the Contract.
Superintendence shall be given by a sufficient number of persons having adequate
knowledge of the language for communications (defined in Sub-Clause 1.4 [Law
and Language]) and of the operations to be carried out (including the methods
and techniques required, the hazards likely to be encountered and methods of
preventing accidents), for the satisfactory and safe execution of the Works and the
OR

provision of the Operation Service.

6.9 Contractor’s Personnel

The Contractor’s Personnel shall be appropriately qualified, skilled and experienced

TF

in their respective trades or occupations. The Employer’s Representative may

require the Contractor to remove (or cause to be removed) any person employed
on the Site or Works, including the Contractor’s Representative if applicable, who:
(a) persists in any misconduct or lack of care;
(b) carries out duties incompetently or negligently;
(c) fails to conform with any provisions of the Contract; or
NO

(d) persists in any conduct which is prejudicial to safety, health, or the protection of
the environment.
If appropriate, the Contractor shall then appoint (or cause to be appointed) a suitable
replacement person.

6.10 Records of Contractor’s Personnel and Equipment

During the Design-Build Period, the Contractor shall submit, to the Employer’s
Representative, details showing the number of each class of Contractor’s Personnel

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 and of each type of Contractor’s Equipment on the Site. Any changes to the
Personnel or Equipment shall be notified at the end of each calendar month to the
Employer’s Representative.
During the Operation Service Period, any changes to the Personnel or Equipment
shall be notified at the end of each calendar month to the Employer’s Representative.

6.11 Disorderly Conduct

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The Contractor shall at all times take all reasonable precautions to prevent any
unlawful, riotous or disorderly conduct by or amongst the Contractor’s Personnel,
and to preserve peace and protection of persons and property on and near the

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Site.

Clause 7 Plant, Materials and Workmanship

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7.1 Manner of Execution

The Contractor shall carry out the manufacture and/or replacement and/or repair of
Plant, the production and manufacture of Materials, and all other activities during the

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execution of the Works and provision of the Operation Service:
(a) in accordance with the applicable Laws in the manner (if any) specified in the
Contract;
(b) in a proper workmanlike and careful manner, in accordance with recognised
good practice; and
NT
(c) with properly equipped facilities and non-hazardous Materials, except as
otherwise specified in the Contract.

This Sub-Clause contains the overall general requirement that all Plant, Materials and all other
activities shall be in accordance with the Contract (which includes the applicable Laws), shall
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be carried out in a proper and workmanlike manner, and shall use non-hazardous Materials.
These provisions are expanded and reflected in a number of other sub-clauses throughout
the document, and all tie in with the requirements of Sub-Clause 4.1 [Contractor’s General
Obligations] that the Works must be ‘in accordance with the Contract’.

7.2 Samples
OR

The Contractor shall submit the following samples of Materials, and relevant
information, to the Employer’s Representative for review in accordance with the
procedures for Contractor’s Documents described in Sub-Clause 5.2 [Contractor’s
Documents]:
(a) manufacturer’s standard samples of Materials and samples specified in the
TF

Contract, all at the Contractor’s cost; and

(b) additional samples instructed by the Employer’s Representative as a Variation.
Each sample shall be labelled as to origin and intended use in the Works.

The requirement for the Contractor to submit samples is a necessary control so that the
Employer’s Representative can satisfy himself that the Materials being supplied by the
NO

Contractor are in accordance with the Contract as required by Sub-Clauses 7.1 [Manner
of Execution] and 4.1 [Contractor’s General Obligations]. If the need for samples has been
identified in the Employer’s Requirements, the Contractor must supply them at his own
cost, but if the Employer’s Representative requires new or additional samples during the
progress of the Works, he can order them as a Variation and the Contractor will be entitled
to be paid for providing them.

Although by Definition 1.1.19, samples are not considered to be a Contractor’s Document,

the procedure for their submittal and review and consent is covered in Sub-Clause 5.2.

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7.3 Inspection

The Employer’s Personnel and other persons authorised by the Employer shall at
all reasonable times:
(a) have full access to all parts of the Site and to all places from which natural
Materials are being obtained;
(b) during production, manufacture and construction (at the Site and elsewhere),
operation and maintenance, be entitled to examine, inspect, measure and test

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the Materials and workmanship, and to check the progress of manufacture of
Plant and production and manufacture of Materials; and
(c) carry out other authorised duties and inspections.

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The Contractor shall give the Employer’s Personnel and other persons authorised
by the Employer full opportunity to carry out these activities, including providing
access, facilities, permissions and safety equipment. No such activity shall relieve
the Contractor from any obligation or responsibility.
The Contractor shall give Notice to the Employer’s Representative whenever
any work is ready and before it is covered up, put out of sight, or packaged for

CT
storage or transport. The Employer’s Representative shall then either carry out
the examination, inspection, measurement or testing without unreasonable delay,
or promptly give Notice to the Contractor that the Employer’s Representative
does not require to do so. If the Contractor fails to give the Notice, he shall, if and

RA
when required by the Employer’s Representative, uncover the work and thereafter
reinstate and make good, all at the Contractor’s cost.

This provision gives the Employer’s Personnel the right at all reasonable times, to visit all
parts of the Site and all places where Materials and Goods are being manufactured, for the
NT
purposes of examining, inspecting, testing, and carrying out other authorised duties.

The reference to ‘testing’ is a general reference during production, manufacture and

construction, and is not limited to the tests referred to in Sub-Clause 7.4 [Testing] and Clause
11 [Testing]. Whereas the ‘test’ referred to in Sub-Clause 7.4 [Testing] and Clause 11 [Testing]
CO

may require the Contractor to provide facilities and materials (for which he is expected to
made allowance in his tender), it is not anticipated that the Contractor will have made any
such allowance for tests and inspections under this Sub-Clause. If it is foreseen that significant
facilities will be required, these should be identified in the Employer’s Requirements.

7.4 Testing
OR

This Sub-Clause shall apply to all tests on Plant, Materials and workmanship
specified in the Contract.
The Contractor shall provide all apparatus, assistance, documents and other
information, electricity, equipment, fuel, consumables, instruments, labour,
materials, and suitably qualified and experienced staff, as are necessary to carry
TF

out the specified tests efficiently. The Contractor shall agree, with the Employer’s
Representative, the time and place for the specified testing of any Plant, Materials
and other parts of the Works.
The Employer’s Representative may, under Clause 13 [Variations and Adjustments],
vary the location or details of specified tests, or instruct the Contractor to carry
out additional tests. If these varied or additional tests show that the tested Plant,
NO

Materials or workmanship is not in accordance with the Contract, the cost of

carrying out this Variation shall be borne by the Contractor, notwithstanding other
provisions of the Contract.
The Employer’s Representative shall give Notice to the Contractor not less than
24 hours prior to the tests, of the Employer’s Representative’s intention to attend
the tests. If the Employer’s Representative does not attend at the time and place
agreed, the Contractor may proceed with the tests, unless otherwise instructed by
the Employer’s Representative, and the tests shall then be deemed to have been
made in the Employer’s Representative’s presence.

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 If the Contractor suffers delay in carrying out the tests and/or incurs cost from
complying with these instructions or as a result of a delay for which the Employer is
responsible, the Contractor shall give Notice to the Employer’s Representative and
shall be entitled, subject to Sub-Clause 20.1 [Contractor’s Claims], to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b payment of any such Cost Plus Profit, which shall be included in the Contract
Price.

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After receiving this Notice, the Employer’s Representative shall proceed in accordance
with Sub-Clause 3.5 [Determinations] to agree or determine these matters.
The Contractor shall promptly forward to the Employer’s Representative duly

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certified reports of the tests. When the specified tests have been passed, the
Employer’s Representative shall endorse the Contractor’s test certificate, or issue a
certificate to him, to that effect. If the Employer’s Representative has not attended
the tests, he shall be deemed to have accepted the readings as accurate.

This Sub-Clause applies primarily to tests which have been detailed and specified in the

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Contract. The Contractor knows what he is required to provide and his price is deemed to
include for such costs.

If the Employer’s Representative requires tests to be carried out which were not specified

RA
in the Employer’s Requirements, he may instruct the Contractor accordingly as a Variation.
However, if the tests show that the tested Plant or Materials or workmanship were not in
accordance with the Contract, then the Contractor is not entitled to claim any reimbursement
and the provisions of Sub-Clause 7.5 [Rejection] will apply. If the (additional) tests show that
the tested items were in accordance with the Contract, then the Contractor is entitled to
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claim reimbursement of related Cost (plus Profit) and extension of time (which is generally
granted if carrying out of additional tests causes delay to critical path activities).

7.5 Rejection
CO

If, as a result of an examination, inspection, measurement or testing, any Plant,

Materials, or workmanship is found to be defective or otherwise not in accordance
with the Contract, the Employer’s Representative may reject the Plant, Materials,
design or workmanship by giving Notice to the Contractor, with reasons. The
Contractor shall then promptly make good the defect at the Contractor’s cost and
ensure that the rejected item complies with the Contract.
If the Employer’s Representative requires this Plant, Materials, or workmanship to
OR

be retested, the tests shall be repeated under the same terms and conditions. If the
rejection and retesting cause the Employer to incur additional costs, the Contractor
shall, subject to Sub-Clause 20.2 [Employer’s Claims], pay these costs to the
Employer.
TF

This Sub-Clause describes the procedure if Plant, Materials or workmanship is found to

be defective and fails any inspection or test under Sub-Clauses 7.3 [Inspection] or 7.4
[Testing]. If the Employer’s Representative finds any item to be defective, he must give
Notice to the Contractor, with reasons. In other words he must tell the Contractor what
has failed, and then the Contractor must ‘promptly’ (i.e., without delay) repair or replace the
item concerned. The Employer’s Representative may then require the replaced item to be
NO

re-tested as described above.

If the Contractor fails to rectify the item as instructed, the Employer has the right to terminate
the Contract under Sub-Clause 15.2 [Termination for Contractor’s Default].

7.6 Remedial Work

At any time during the Contract Period, notwithstanding any previous test or
certification, the Employer’s Representative may instruct the Contractor to:

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 (a) repair, remove from the Site and replace, any Plant or Materials which is not in
accordance with the Contract;
(b) remove and re-execute any other work which is not in accordance with the
Contract; and
(c) execute any work which is urgently required for the safety of the Works or
the provision of the Operation Service, whether because of an accident,
unforeseeable event or otherwise.
The Contractor shall comply with the instruction within a reasonable time, which

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shall be the time (if any) specified in the instruction, or immediately if urgency is
specified under sub-paragraph (c).
Except to the extent that the Contractor may be entitled to payment for the work

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required under sub-paragraph (c), the Contractor shall bear the cost of such
remedial work.
If the Contractor fails to comply with the instruction, the Employer shall be entitled
to employ and pay other persons to carry out the work. Except to the extent that
the Contractor would have been entitled to payment for the work, the Contractor
shall, subject to Sub-Clause 20.2 [Employer’s Claims], pay to the Employer all costs

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arising from this failure.

The provisions of this Sub-Clause go hand-in-hand with the provisions of Sub-Clause 7.5
[Rejection].

7.7 Ownership of Plant and Materials

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Each item of Plant and Materials shall, to the extent consistent with the Laws of
the Country, become the property of the Employer at whichever is the earlier of the
NT
following times, free from liens and other encumbrances:
(a) when it is delivered to the Site;
(b) when the Contractor is paid the value of the Plant and Materials under Sub-
Clause 9.9 [Payment for Plant and Materials in Event of Suspension]; and
(c) when the Contractor is paid the value of the Plant and Materials under Sub-
CO

Clause 14.6 [Payment for Plant and Materials intended for the Works].

As a legal requirement, it may be necessary to establish ownership of Plant and Materials at

some point in time during the Contract, particularly in the case of bankruptcy or liquidation
of one of the Parties. Subject to what the Laws of the Country may prescribe in such a
situation, ownership passes from the Contractor to the Employer upon the earliest of the
three named occurrences.
OR

7.8 Royalties

Unless otherwise stated in the Employer’s Requirements, the Contractor shall pay
all royalties, rents and other payments for:
TF

(a) natural Materials obtained from outside the Site; and

(b) the disposal of material from demolitions and excavations and of other surplus
material (whether natural or man-made), except to the extent that disposal areas
within the Site are specified in the Contract.

Any natural materials found on the Site may normally be used by the Contractor for the
NO

purposes of executing the Works (such as excavation and other earthworks) without the
requirement to pay the Employer (or others) any form of royalty. Likewise disposal of any
material within the Site is normally royalty-free. However, if the Contractor is planning to use
natural material (earth fill, rock etc) from quarries or borrow areas owned by third parties,
or deposit waste material in spoil tips owned by others, he is responsible for making all
arrangements including the payment of royalties and other costs.

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Clause 8 Commencement Date, Completion and Programme

Clause 8 deals with commencement and completion of the complete Contract – the
Design-Build and the Operation Service – and its provisions are of a general nature relating
to the overall project.

Clause 9 [Design-Build] covers the particular requirements relating to the Design-Build, and
Clause 10 covers the requirements relating to the Operation Service, and in some of the

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Sub-Clauses to Clause 8, the reader is referred directly to the more detailed provisions of
Clauses 9 [Design-Build] and 10 [Operation Service].

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8.1 Commencement Date

The Employer’s Representative shall give Notice stating the Commencement Date
to the Contractor not less than 14 days prior to the Commencement Date. Unless
otherwise stated in the Particular Conditions, the Commencement Date shall be
within 42 days after the Contractor receives the Letter of Acceptance.

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It is important that the Notice clearly records the Commencement Date as this, according
to Definition 1.1.78, is the starting point from which the Time for Completion is calculated.
It is thus important for the Contractor to commence work as soon as he can after the
Commencement Date is established.
RA
Commencement activities may not be immediately visible on Site for some (considerable)
time as the Contractor’s first work under the Contract will probably be his obligation under
Sub-Clause 5.1 [General Design Obligations] to scrutinise the Employer’s Requirements
NT
(including design criteria and calculations), then to progress the design, approvals,
permitting and (possibly) land acquisition to the point where construction can start and the
items of reference mentioned in Sub-Clause 4.7 [Setting Out].

The consequences of a failure by the Employer’s Representative to provide the

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Commencement Date within 42 days of the Letter of Acceptance will depend on the
magnitude of the failure, and probably the applicable Laws. If it is a matter of a few days,
the Contractor will probably be entitled to financial compensation. However, if it is a
substantial failure, the Contractor may have the right to claim an adjustment of his rates
or, in the worst case, to terminate the Contract under Sub-Clause 16.2(e) [Termination
by Contractor].
OR

8.2 Time for Completion

The Contractor shall complete the whole of the Design-Build and each Section (if
any), in accordance with Sub-Clause 9.2 [Time for Completion of Design-Build], or
as extended under Sub-Clause 9.3 [Extension of Time for Completion of Design-
TF

Build], and shall provide the Operation Service for the period stated in the Contract
Data.

The Time for Completion is stated in the Contract Data and is calculated from the
Commencement Date which has been established in accordance with Sub-Clause 8.1
[Commencement Date].
NO

Within this time the Contractor must ensure that the Works pass the Tests on Completion
under Sub-Clause 11.1 [Testing of the Works] and make sure that all work which is stated
in the Contract as being required under Sub-Clause 11.5 [Completion of the Works and
Sections] has been completed.

Moreover, all Contractor’s Documents required under Sub-Clause 5.2 [Contractor’s

Documents] must be delivered to the Employer’s Representative within this time, the Time
for Completion.

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8.3 Programme

The Contractor shall submit a detailed time programme to the Employer’s

Representative within 28 days after receiving the Notice under Sub-Clause 8.1
[Commencement Date]. The Contractor shall also submit a revised programme
whenever the previous programme is inconsistent with actual progress or with the
Contractor’s obligations. Each programme shall include:
(a) the order in which the Contractor intends to carry out the Works, including

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the anticipated timing of each stage of design, Contractor’s Documents,
procurement, manufacture, inspection, delivery to Site, construction, erection,
testing, commissioning and trial operation;

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(b) the period of Operation Service;
(c) the periods for reviews under Sub-Clause 5.2 [Contractor’s Documents] and
for any other submissions, including the supply of samples in accordance with
Sub-Clause 7.2 [Samples], approvals and consents specified in the Employer’s
Requirements;
(d) the sequence and timing of inspections and tests specified in the Contract, and

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(e) a supporting report which includes:
(i) a general description of the methods which the Contractor intends to adopt
for both the Design-Build and the Operation Service;
(ii) details showing the Contractor’s reasonable estimate of the number of

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each class of Contractor’s Personnel and of each type of Contractor’s
Equipment, required on the Site for each major stage; and
(iii) the Contractor’s proposed manning schedule for the Operation Service.
Unless the Employer’s Representative, within 21 days after receiving a programme,
gives Notice to the Contractor stating the extent to which it does not comply with
NT
the Contract, the Contractor shall proceed in accordance with the programme,
subject to his other obligations under the Contract. The Employer’s Personnel shall
be entitled to rely upon the programme when planning their activities.
If, at any time, the Employer’s Representative gives Notice to the Contractor
that a programme fails (to the extent stated) to comply with the Contract or to
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be consistent with actual progress and the Contractor’s stated intentions, the
Contractor shall submit, within 14 days, a revised programme to the Employer’s
Representative in accordance with this Sub-Clause.

The time programme required under this Sub-Clause is one of the most important
documents which the Contractor is required to produce, and sometimes the Contractor
is very slow in producing his programme. Not only does the programme give a detailed
OR

time plan of how the Contractor intends to carry out the Works, but it also gives a great
deal of information about the associated events such as tests, inspections, reports – all
as mentioned in this Sub-Clause. Furthermore the Contractor’s programme often forms
basic supporting evidence according to which Contractor’s claims for time extension can
be evaluated, so it is in the Contractor’s interests to ensure that the programme is properly
TF

prepared as required by this Sub-Clause.

There is no requirement for the Employer’s Representative to approve or consent to the

programme. The only action required from the Employer’s Representative is to give Notice
to the Contractor in the event that the programme does not comply with the Contract (in
which event the Contractor must submit a revised programme). If no such Notice is received
NO

within 21 days, the Contractor shall proceed in accordance with this programme.

If the Employer requires the programme to be in a particular format by, for example showing
the critical path, he must state this requirement in the Employer’s Requirements, otherwise
the Contractor will be free to choose the format.

8.4 Advance Warning

Each Party shall endeavour to advise the other Party in advance of any known

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 or probable future events or circumstances which may adversely affect the work,
increase the Contract Price or delay the execution of the Works or the Operation
Service. The Employer’s Representative may require the Contractor to submit an
estimate of the anticipated effect of the future events or circumstances, and/or a
proposal under Sub-Clause 13.3 [Variation Procedure].

There may be a number of circumstances which could arise, either caused by the Employer,
or by third parties or other events, which the Contractor can reasonably judge will cause

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him delay or additional cost. In such cases the Contractor shall endeavour to warn the
Employer of such circumstances and the likely consequences. Likewise, the Employer may
know of future events or circumstances which could delay or affect the performance of the

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Contractor, and he should also try to give advance warning to the Contractor. Although the
Sub-Clause does not say how one Party shall ‘advise’ the other, such notification should
certainly be in writing and would normally come under Sub-Clause 1.3 [Notices and Other
Communications], and be considered as an ‘other communication’ and thus should comply
with the requirements accordingly.

CT
If special measures need to be taken, these can be treated as a Variation under Clause 13
[Variations and Adjustments] which gives the Parties the opportunity to mutually discuss and
agree the most appropriate steps for each of them to take, and, if necessary, to agree an
appropriate adjustment to the time for completion and cost.

8.5 Delay Damages

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If the Contractor fails to complete the Design-Build in accordance with the
requirements of Sub-Clause 9.2 [Time for Completion of Design-Build], he shall pay
NT
delay damages as detailed in Sub-Clause 9.6 [Delay Damages relating to Design-
Build].
If the Contractor fails or is unable to provide the Operation Service for the complete
period specified in the Contract, or parts of the Operation Service, and such failure is:
(a) due to a cause for which the Contractor is responsible; and
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(b) results in the Employer losing revenue or income which the Employer would
normally have expected to receive during the Operation Service Period; or
(c) results in the Employer suffering any other loss which he would not have
suffered but for such failure,
then the Contractor shall pay to the Employer compensation in accordance with
Sub-Clause 10.6 [Delays and Interruptions during the Operation Service].
OR

This Sub-Clause refers the reader to two other Sub-Clauses: Sub-Clause 9.6 [Delay Damages
relating to Design-Build] in respect of delay damages payable for late completion of the
Design-Build, and Sub-Clause 10.6 [Delays and Interruptions during the Operation Service] in
respect of delays and interruptions occurring during the Operation Service Period.
TF

8.6 Contract Completion Certificate

Performance of the Contractor’s obligations in respect of the Contract shall not be

considered to have been completed until the Contract Completion Certificate has
been signed by the Employer’s Representative and issued to the Contractor, stating
the date on which the Contractor completed his obligations in respect of both the
NO

Design-Build and the Operation Service (Contract Completion Date).

The Employer’s Representative shall, subject to Sub-Clause 11.8 [Joint Inspection
Prior to Contract Completion], Sub-Clause 10.8 [Completion of Operation Service]
and Sub-Clause 4.23 [Contractor’s Operations on Site], issue the Contract
Completion Certificate to the Contractor, with a copy to the Employer, within 21
days after the last day of the Contract Period. No extension of the Operation Service
Period shall be allowed except by written agreement between the Parties.
Only the Contract Completion Certificate shall be deemed to constitute the Employer’s
acceptance of the Contractor’s completion of his obligations under the Contract.

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 Following the issue of the Contract Completion Certificate the Employer shall be fully
responsible for the care, safety, operation, servicing and maintenance of the Works.

The Contract Completion Certificate is the document which is issued to the Contractor by
the Employer’s Representative within 21 days following the end of the Operation Service
Period. There are certain pre-conditions which must be fulfilled before the Certificate is
issued and these are detailed in Sub-Clauses 10.8 [Completion of Operation Service], 11.8
[Joint Inspection Prior to Contract Completion] and 4.23 [Contractor’s Operations on Site].

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This is the only Certificate which constitutes final approval or acceptance by the Employer
that the Contractor has fulfilled all his obligations under the Contract. The wording of this

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Sub-Clause is consistent with other provisions in the Contract which clearly state that
payments and approvals, consents and the like which are made by the Employer or his
Representative during the progress of the Works and prior to the issuance of the Contract
Completion Certificate, are of an interim nature and do not mean that work has accepted
by the Employer.

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Full responsibility for the care, safety and operation of the Works passes to the Employer
at this time.

8.7 Handback Requirements

RA
The Contractor shall ensure that the Works comply with the handback requirements
specified in the Employer’s Requirements prior to the issue of the Contract
Completion Certificate.
NT
The Employer will probably have certain requirements regarding the condition of the Works
at the time he takes over full responsibility for the Works when the Contract Completion
Certificate is issued. Such handback requirements must be stated in the Employer’s
Requirements so that the Contractor is aware of what he is obliged to provide.
CO

It is clear that the Employer will not want a facility which ceases to function or be of any use
as soon as the Operation Service Period has been completed, and he will certainly expect
some residual life during which he can continue to derive benefit from the facility.

One of the difficulties of specifying a particular period of residual life, e.g., that the facility will
continue to operate at 95% efficiency for a period of three years, or whatever, is the problem
of identifying responsibility if it fails. For example, is it a design failure or an operational failure.
OR

The Contract foresees that the criteria to determine the condition of the facility (the handback
requirements) prior to the issue of the Contract Completion Certificate shall be in the form
of physical quantifiable criteria which can be measured and checked – and if needs be,
corrected – before the Contract is concluded. Once these requirements have been met, the
TF

Contractor is relieved of any further obligation in respect of the future use or performance
of the facility, subject always to the provisions of Sub-Clause 8.8 [Unfulfilled Obligations].

8.8 Unfulfilled Obligations

After the Contract Completion Certificate has been issued, each Party shall
NO

remain liable for the fulfilment of any obligation under the Contract which remains
unperformed at that time. For the purposes of determining the nature and extent of
unperformed obligations, the Contract shall be deemed to remain in force.

Despite the provisions of other sub-clauses such as Sub-Clauses 8.7 [Handback

Requirements] and 10.8 [Completion of Operation Service], which refer to the completion
of the Contract and the fulfilment by the Contractor of his various obligations under the
Contract, this Sub-Clause covers the situation where, after the issue of the Contract
Completion Certificate, it is discovered that either Party has not properly or fully performed

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 its obligations as required under the Contract. Such a failure may lie with either Party, for
example, the Employer may not have paid the full amount due to the Contractor or the
Contractor may not have completed some outstanding work or failed to provide some
documents. However, just because the Contract Completion Certificate has been issued, it
does not mean that the defaulting Party is relieved from performing that obligation. By this
Sub-Clause he must make good the failure, and in order to determine what he is required
to do to satisfy his contractual obligations, the Contract shall be deemed to remain in force
and its provisions will be binding on the defaulting Party.

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Clause 9 Design-Build

9.1 Commencement of Design-Build

The Contractor shall commence the design and execution of the Works within 28
days of the Commencement Date, and shall then proceed with the Design-Build

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with due expedition and without delay.

The Commencement Date is established by the giving of a Notice under Sub-Clause

8.1 [Commencement Date]. The Contractor must commence work on the Design-Build

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activities within 28 days of receiving this Notice. The Contractor will normally satisfy the
words “with due expedition and without delay” if he proceeds according to his programme
which, according to Sub-Clause 8.3, also has to be issued within 28 days of receiving the
Notice under Sub-Clause 8.1 [Commencement Date].
NT
The provision in Sub-Clause 8.3 [Programme] giving the Employer’s Representative 21
days to comment on the programme does not mean that the Contractor must wait until
the 21 days have passed before he commences his activities. It is unlikely that his initial
activities will be the subject of any comment or change from the Employer’s Representative,
but if there are critical activities during this time, the Contractor would be well advised to
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draw them to the attention of the Employer’s Representative at the time the programme is
submitted, and agree on how to proceed with them critical activities.

9.2 Time for Completion of Design-Build

The Contractor shall complete the whole of the Design-Build of the Works, and
each Section (if any), within the Time for Completion of Design-Build of the Works
OR

or Section (as the case may be) as set out in the Contract Data, including:
(a) passing the Tests on Completion under Sub-Clause 11.1 [Testing of the Works];
(b) completing all work which is stated in the Contract as being required under
Sub-Clause 11.5 [Completion of the Works and Sections]; and
(c) preparation and delivery to the Employer’s Representative of Contractor’s
TF

Documents required under Sub-Clause 5.2 [Contractor’s Documents].

The Time for Completion of Design-Build is calculated from the Commencement Date
(see Definition 1.1.78). This is one of the Contractor’s fundamental obligations under the
Contract. If the Works are divided into Sections which have been identified in the Contract
Data, then each such Section may have a separate Time for Completion which the
NO

Contractor must meet.

The Sub-Clause contains three pre-conditions before the Works will be considered
sufficiently complete for the Commissioning Certificate to be issued in accordance with
Sub-Clause 11.7: (a) the Works must have passed the Tests on Completion; (b) all work
must have been completed; and (c) all required documents must have been provided.
It is understood that the Time for Completion may need to be changed in certain
circumstances, and this situation is covered in Sub-Clause 9.3 [Extension of Time for
Completion of Design-Build].

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9.3 Extension of Time for Completion of Design-Build

The Contractor shall be entitled, subject to Sub-Clause 20.1 [Contractor’s Claims],

to an extension of the Time for Completion of Design-Build if and to the extent that
completion for the purposes of Sub-Clause 11.5 [Completion of the Works and
Sections] is or will be delayed by any of the following causes:
(a) a Variation (unless an adjustment to the Time for Completion of Design-Build
has been agreed under Sub-Clause 13.3 [Variation Procedure]);

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(b) a cause of delay giving an entitlement to extension of time under a Sub-Clause
of these Conditions;
(c) exceptionally adverse climatic conditions;

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(d) Unforeseeable shortages in the availability of personnel or Goods caused by
epidemic or governmental actions; or
(e) any delay, impediment or prevention caused by or attributable to the Employer,
the Employer’s Personnel, or the Employer’s other contractors on the Site.
If the Contractor considers himself to be entitled to an extension of the Time for
Completion of Design-Build, the Contractor shall give Notice to the Employer’s

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Representative in accordance with Sub-Clause 20.1 [Contractor’s Claims]. When
determining each extension of time, the Employer’s Representative shall review
previous determinations and may increase, but shall not decrease, the total
extension of time.

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If a Dispute regarding an extension of time has been referred to the DAB, the
Contractor shall be immediately entitled to any extension of the Time for Completion
of Design-Build which is decided by the DAB under Sub-Clause 20.6 [Obtaining
Dispute Adjudication Board’s Decision].
NT
As mentioned in the comments to Sub-Clause 9.2 [Time for Completion of Design-Build],
it is likely that the Time for Completion foreseen at the time the Contract comes into force,
will need to be modified due to a variety of circumstances which will certainly arise during
the progress of the Contract.
CO

If the Contractor feels that any of the listed events, or any other events or circumstances, have
occurred and delayed him in following his programme (see Sub-Clause 8.3 [Programme]),
he is entitled to give a Notice under Sub-Clause 20.1 [Contractor’s Claims] claiming an
extension to the Time for Completion. As with any other claim which the Contractor may
wish to make under the Contract, the burden of proof lies with the Contractor: he must
substantiate his claim and show the Employer’s Representative that the events which have
occurred are firstly, one of the causes listed in this Sub-Clause, and secondly, that they
OR

have caused or will cause a delay to the completion of the Works. One of the most useful
tools for the Contractor in establishing that he has been delayed, is by making reference to
his programme which was current at the time the delay occurred.

It should be noted that this Sub-Clause does not address additional costs, and the point
TF

must be stressed that an extension of time does not automatically entitle the Contractor
to additional reimbursement. If the Contractor feels that he has incurred additional cost as
a result of the event which has delayed him, he must give a separate Notice under Sub-
Clause 20.1 [Contractor’s Claims] with details of his claim for reimbursement.

All claims made under this Sub-Clause are subject to an assessment of the facts by the
NO

Employer’s Representative except an extension of time which has been granted by the
Dispute Adjudication Board when giving a Decision under Sub-Clause 20.6 [Obtaining
Dispute Adjudication Board’s Decision]. Any such award of an extension of the Time for
Completion must be made immediately following the Decision of the DAB, and is not subject
to any opinion of the Employer, the Employer’s Representative, or indeed the Contractor.

9.4 Delays Caused by Authorities

If the following conditions apply during the Design-Build Period, namely:

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 (a) the Contractor has diligently followed the procedures laid down by the relevant
legally constituted public and/or local authorities in the Country;
(b) these authorities delay or disrupt the Contractor’s work; and
(c) the delay or disruption was Unforeseeable, then this delay or disruption will be
considered as a cause of delay under sub-paragraph (b) of Sub-Clause 9.3
[Extension of Time for Completion of Design-Build].

This Sub-Clause provides a further ground upon which the Contractor may seek an

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extension of time. However, before the Employer’s Representative will consider a claim
under this Sub-Clause, he must satisfy himself that all of the listed pre-conditions have
been met.

US
9.5 Rate of Progress

If, in the opinion of the Employer’s Representative, at any time during the Design-
Build Period:
(a) actual progress is too slow to complete within the Time for Completion of

CT
Design-Build; and/or
(b) progress has fallen (or will fall) behind the current programme under Sub-
Clause 8.3 [Programme], other than as a result of a cause listed in Sub-Clause
9.3 [Extension of Time for Completion of Design-Build], then the Employer’s

RA
Representative may instruct the Contractor to submit, under Sub-Clause 8.3
[Programme], a revised programme and supporting report describing the
revised methods which the Contractor proposes to adopt in order to expedite
progress and complete within the Time for Completion of Design-Build.
Unless the Employer’s Representative notifies otherwise, the Contractor shall adopt
NT
these revised methods, which may require increases in the working hours and/or
in the numbers of Contractor’s Personnel and/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 20.2 [Employer’s Claims], pay these
costs to the Employer, in addition to delay damages (if any) under Sub-Clause 9.6
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[Delay Damages relating to Design-Build] below.

This provision is a sensible requirement giving the Employer’s Representative an effective

tool in the event that he is of the opinion that the Contractor is not keeping up with his
programme. There is little point in the Contractor performing the Works in accordance
with a programme that is so out of date as to be virtually useless, and the Employer’s
Representative can use this Sub-Clause to make sure that the programme is appropriate
OR

and current in respect of the Contractor’ actual progress.

Before issuing an instruction to the Contractor to submit a revised programme, the

Employer’s Representative may well need to discuss the reasons and the proposed action
to be taken by the Contractor, so that both Parties have a full understanding of the need to
TF

revise the programme.

9.6 Delay Damages relating to Design-Build

If the Contractor fails to comply with Sub-Clause 9.2 [Time for Completion of Design-
Build], the Contractor shall, subject to Sub-Clause 20.2 [Employer’s Claims], pay delay
NO

damages to the Employer for this default. These delay damages shall be the amount
stated in the Contract Data, which shall be paid for every day which shall elapse
between the relevant Time for Completion and the date stated in the Commissioning
Certificate. However, the total amount due under this Sub-Clause shall not exceed
the maximum amount of delay damages (if any) stated in the Contract Data.
These delay damages shall be the only damages due from the Contractor for such
default, other than in the event of termination under Clause 15 [Termination by
Employer] prior to completion of the Works. These damages shall not relieve the
Contractor from his obligation to complete the Design-Build and the Operation

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 Service, or from any other duties, obligations or responsibilities which he may have
under the Contract.

This Sub-Clause defines the extent of the compensation to be paid by the Contractor to the
Employer in the event that the Design-Build is not completed within the Time for Completion
or any extension thereto granted under Sub-Clause 9.3 [Extension of Time for Completion
of Design-Build] or 9.4 [Delays Caused by Authorities]. It is important to note that this Sub-
Clause is not intended to impose a penalty on the Contractor for not completing on time.

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Instead it is intended to provide compensation to the Employer for damages he is expected
to suffer as a result of such delay.

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The Contract assumes that the amount of the damages has been pre-determined and
stated in the Contract Data as an amount for each day of delay up to a given maximum
amount. The Employer does not have to prove he has suffered any loss or damage and he
does not have to substantiate the amount of any such loss or damage. Even if the Employer
can show that the amount of loss or damage he has suffered exceeds the amount stated
in the Contract Data, he cannot normally recover amounts in excess of the stated amount.

CT
However, it would be wise to check the provisions of the Law of the Contract in this respect,
as this may over-rule the provisions of this Sub-Clause.

9.7 Suspension of Work

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The Employer’s Representative may at any time instruct the Contractor to suspend
progress of part or all of the Works. During such suspension, the Contractor shall
protect, store, secure and maintain such part or the Works against any deterioration,
loss or damage.
NT
The Employer’s Representative shall also notify the cause for the suspension. If and
to the extent that the cause is the responsibility of the Contractor, the following Sub-
Clauses 9.8 [Consequences of Suspension], 9.9 [Payment for Plant and Materials in
Event of Suspension] and 9.10 [Prolonged Suspension] shall not apply.
CO

There are a number of reasons why it may be necessary for the Employer’s Representative
to instruct the Contractor to suspend progress of the Works; natural events such as flooding
or storm; events caused by one of the Parties such as a failure by the Contractor to attend
to safety matters; or suspension for the convenience of the Employer if, for example, he
is not ready to receive an item of Plant or if there is disruption due to war or conflict, or
he wishes to make changes to the Works and needs time to consider what changes are
necessary.
OR

In any event, the Employer’s Representative must give the reason or cause for the suspension.
This is necessary because if, for example, the reason or cause of the suspension is a fault
or failure of the Contractor, he needs to know so that he can correct the fault or failure. If
the fault lies with the Contractor, then Sub-Clauses 9.8 [Consequences of Suspension], 9.9
TF

[Payment for Plant and Materials in Event of Suspension] and 9.10 [Prolonged Suspension]
will not apply, and the Contractor will have to bear all the consequences without
compensation. If the reason is not the responsibility of the Contractor, then the provisions
of Sub-Clauses 9.8 [Consequences of Suspension], 9.9 [Payment for Plant and Materials in
Event of Suspension] and 9.10 [Prolonged Suspension] will apply.
NO

9.8 Consequences of Suspension

If, during the Design-Build Period, the Contractor suffers delay and/or incurs cost
from complying with the Employer’s Representative’s instructions under Sub-
Clause 9.7 [Suspension of Work] and/or from resuming the work, the Contractor
shall give Notice to the Employer’s Representative and shall be entitled, subject to
Sub-Clause 20.1 [Contractor’s Claims], to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and

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 (b) payment of any such Cost, which shall be included in the Contract Price.
After receiving this Notice, the Employer’s Representative shall proceed in accordance
with Sub-Clause 3.5 [Determinations] to agree or determine these matters.
The Contractor shall not be entitled to an extension of time for, or to payment of the
Cost incurred in, making good the consequences of the Contractor’s faulty design,
workmanship or materials, or of the Contractor’s failure to

If the reason for the suspension does not lie with the Contractor, then he is entitled to claim

E
for any time extension he requires and any additional costs he has incurred as a result of the
suspension. To do this the Contractor must follow the procedures laid down in Sub-Clause
20.1 [Contractor’s Claims]. Although no time is stated in this Sub-Clause for the Contractor

US
to give Notice, reference to Sub-Clause 20.1 [Contractor’s Claims] makes it clear that
Notice must be given within 28 days of the Contractor becoming aware of the event. A wise
Contractor would therefore make sure that Notice is given immediately he receives such an
instruction from the Employer’s Representative and follow this with details (as required by
Sub-Clause 20.1 [Contractor’s Claims]) once the effects of the suspension can be determined.

CT
This Sub-Clause also makes it clear that if it is the Contractor who is at fault, then no time
extension or compensation will be considered.

9.9 Payment for Plant and Materials in Event of Suspension

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The Contractor shall be entitled to payment of the value (as at the date of suspension)
of Plant and/or Materials which have not been delivered to Site, if:
(a) the work on Plant or delivery of Plant and/or Materials has been suspended for
more than 28 days; and
NT
(b) the Contractor has marked the Plant and/or Materials as the Employer’s
property in accordance with the Employer’s Representative’s instructions.
Payment for Plant and/or Materials made pursuant to this Sub-Clause shall, if
requested by the Employer’s Representative, be subject to the production of
satisfactory evidence by the Contractor that the said Plant and/or Materials are fully
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owned by the Contractor and are not subject to any retention of title by the supplier.

This Sub-Clause entitles the Contractor to claim payment for Plant and Materials for which
he would have been entitled to payment if it were not for the suspension.

9.10 Prolonged Suspension

OR

If the suspension under Sub-Clause 9.7 [Suspension of Work] has continued for
more than 84 days, the Contractor may request the Employer’s Representative’s
permission to proceed. If the Employer’s Representative does not give permission
within 28 days after being requested to do so, the Contractor may, by giving Notice
to the Employer’s Representative, treat the suspension as an omission under Clause
TF

13 [Variations and Adjustments] of the affected part of the Works. If the suspension
affects the whole of the Works, the Contractor may give Notice of termination under
Sub-Clause 16.2 [Termination by Contractor].

If the reason for suspension (e.g. a war or economic disruption) has a continuing effect
lasting more that 84 days (and such reason is not the responsibility of the Contractor), this
NO

Sub-Clause protects the Contractor against the effects of a long stoppage of work. At the
end of the 84 day period the Contractor is required to request permission to proceed, but if
this is denied, he can omit the suspended work from the work he is required to do under the
Contract, or, if the suspension affects the whole of the Works (as it would probably do in the
case of war or economic disruption), he can terminate the Contract under Sub-Clause 16.2
[Termination by Contractor]. It is up to the Contractor whether he chooses to terminate or not.

9.11 Resumption of Work

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 After the permission or instruction to proceed is given, the Contractor and the
Employer’s Representative shall jointly examine the Works and the Plant and
Materials affected by the suspension. The Contractor shall make good any
deterioration or defect in or loss of the Works or Plant or Materials, which has
occurred during the suspension. The Employer’s Representative shall make a
written record of all making good required to be carried out by the Contractor.

The requirement to examine the Works prior to proceeding after a suspension applies to

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both a suspension ordered under Sub-Clause 9.7 [Suspension of Work] and a prolonged
suspension under Sub-Clause 9.10 [Prolonged Suspension]. Under Sub-Clause 9.8
[Consequences of Suspension], the Contractor is entitled to claim any additional costs

US
associated with the examination and making good required under this Sub-Clause, unless
the suspension was due to a fault of the Contractor.

9.12 Completion of Design-Build

The Design-Build shall not be considered as complete until all of the following are

CT
achieved:
(a) the Works have been fully designed and executed in accordance with the
Employer’s Requirements and other relevant provisions of the Contract;
(b) the Works have passed the Tests on Completion of Design-Build in accordance

RA
with Sub-Clause 11.1 [Testing of the Works];
(c) Contractor’s Documents in accordance with Sub-Clause 5.5 [As-Built
Documents] and Sub-Clause 5.6 [Operation and Maintenance Manuals] have
been supplied and approved by the Employer’s Representative; and
(d) the Commissioning Certificate required under Sub-Clause 11.7 [Commissioning
NT
Certificate] has been issued stating the date upon which the Design-Build has
been completed and the Operation Service shall commence.

It is important to establish what constitutes ‘completion of Design-Build’ as this is the point

in time when the Operation Service commences, and also the time when the Contractor
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is considered to have fulfilled his obligations in respect of the Design-Build, except for
outstanding items of work which will not affect the operation of the facility and which the
Employer’s Representative has agreed can be completed during the Retention Period
(see Definition 1.1.66). The requirement is that not only that shall the Works shall have
been physically completed and tested, but also that As-Built Drawings and Operation and
Maintenance (O & M) Manuals shall have been given to and approved by the Employer’s
Representative, and the Commissioning Certificate issued. When all this has been done, the
OR

Design-Build will be considered complete.

9.13 Failure to Complete

Should the Contractor fail to complete the Design-Build prior to the Cut-Off Date,
TF

the Employer may, at his sole option, either:

(a) permit the Contractor to continue the Design-Build for a further named
period, with an absolute right to re-apply this Sub-Clause in the event that the
Contractor fails to complete the Design-Build within the extended period; or
(b) terminate the Contract in accordance with Sub-Clause 15.2 [Termination
for Contractor’s Default] and, if he so chooses, complete the work and
NO

subsequently execute the Operation Service himself or by engaging others.

In either case, the Employer will be entitled to recover from the Contractor any direct
loss incurred, including any loss resulting from the delayed operation of the Works,
subject to the limitations contained in Sub-Clause 9.6 [Delay Damages Relating to
Design-Build] and Sub-Clause 17.8 [Limitation of Liability].

If the Contractor fails to complete the Design-Build within the Time for Completion of Design-
Build (see Definition 1.1.78), the compensation to the Employer is in the form of Delay
Damages (see Sub-Clauses 8.5 [Delay Damages] and 9.6 [Delay Damages relating to Design-

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 Build]). However if there is a prolonged delay and the Contractor fails to complete by the Cut-
Off Date (see Definition 1.1.26), then the Employer has two options: either he can permit the
Contractor to continue, which he would probably do if he can reasonably conclude that the
Contractor will complete in the not too distant future, or if the Employer feels that there is little
chance that the Contractor will or can complete, he can terminate the Contract in accordance
with Sub-Clause 15.2 [Termination for Contractor’s Default]. Note that it is the Employer and
not the Employer’s Representative who makes the choice, although the Employer’s decision
would be conveyed to the Contractor, in writing, by the Employer’s Representative.

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This Sub-Clause also protects the Employer against his direct loss and any loss (e.g.
revenue) from the delayed operation of the facility, as he can recover these from the

US
Contractor, subject to the limitations in Sub-Clauses 9.6 [Delay Damages relating to Design-
Build] and 17.8 [Limitation of Liability].

Clause 10 Operation Service

CT
10.1 General Requirements

The Contractor shall comply with the Operation Management Requirements as

provided for in the Contract and any revisions thereof which are agreed during the
Contract Period.
RA
The Contractor shall follow the requirements of the Operation and Maintenance
Plan and the operation and maintenance manuals. No significant alteration to
such arrangements and methods shall be made without the prior approval of the
Employer’s Representative.
NT
During the Operation Service, the Contractor shall be responsible for ensuring that
the Works remain fit for the purposes for which they are intended.
The operators and maintenance personnel for the Works, including Plant operators,
shall have the appropriate experience and qualifications to perform the Operation
Service. The names, with details of their qualifications and experience, of all
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operation and maintenance personnel shall be submitted to the Employer for

approval, and no such personnel shall be engaged prior to receiving such approval.

The Contractor is required to follow the Operation Management Requirements (see

Definition 1.1.55) which give the Employer’s requirements as regards the operation of the
facility. These will have been provided with the tender documents, and the Contractor will
have provided his Operation and Maintenance Plan (see Definition 1.1.56) with his tender
OR

showing how he intends to fulfil the Operation Management Requirements. He will also have
provided operation and maintenance manuals according to the requirements of Sub-Clause
5.6 [Operation and Maintenance Manuals], which he is also required to follow these during
the operation and maintenance of the facility.
TF

An important requirement is that, having designed and built the Works so that they are ‘fit for
purpose’ according to Sub-Clause 4.1 [Contractor’s General Obligations], the Contractor
must operate and maintain them in such a way that they remain ‘fit for purpose’ during
the complete Operation Service. This means that replacement items or materials must be
selected and installed to maintain the ‘fit for purpose’ requirement. Finally, the Employer
shall approve all the operation and maintenance personnel before they are engaged, but
NO

such approval does not relieve the Contractor of any responsibility for the actions and
overall competence of his personnel.

10.2 Commencement of Operation Service

Unless otherwise stated in the Employer’s Requirements, the commencement of

the Operation Service shall be from the date stated in the Commissioning Certificate
issued under Sub-Clause 11.7 [Commissioning Certificate].
The Operation Service shall not commence until the Design-Build of the Works or

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 any Sections has been completed in accordance with Sub-Clause 9.12 [Completion
of Design-Build].
Should the Commissioning Certificate, or any Notice attached or pertaining thereto,
contain requirements or restrictions over and above those in the Contract, the
Contractor shall comply with such requirements and/or restrictions, and, to the
extent that the Contractor suffers additional Cost as a result, and subject to the
provisions of Sub-Clause 20.1 [Contractor’s Claims], he shall be reimbursed by
the Employer unless such requirements or restrictions were as a result of a fault or

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failure of the Contractor.
The Contractor shall thereafter provide the Operation Service in compliance with
the Operation Management Requirements and in accordance with Sub-Clause 5.5

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[As-Built Documents] and Sub-Clause 5.6 [Operation and Maintenance Manuals].
If the Contractor wishes to modify a document which has previously been
submitted and approved, the Contractor shall immediately notify the Employer’s
Representative, and shall subsequently submit revised document(s) to the
Employer’s Representative for review accompanied by a written explanation of the
need for such modification.

CT
The Contractor shall not implement any proposed modification in accordance
with sub-paragraph (d) of Sub-Clause 5.2 [Contractor’s Documents] until such
modification has been reviewed by the Employer’s Representative, and consent to
proceed has been given in writing. However, any such approval or consent, or any

RA
review (under this Sub-Clause or otherwise), shall not relieve the Contractor from
any obligation or responsibility.

The Contract assumes that the Operation Service commences on the same day as the
Design-Build is completed and that this date is recorded in the Commissioning Certificate. If
NT
this is not to be the case, and it is known to the Employer at the time tenders are invited, the
Employer’s Requirements should give details of the planned start of the Operation Service
so that the Contractor can make due allowance when planning and pricing his tender.

If the Commissioning Certificate contains any particular requirements or restrictions which

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were not identified in the tender documents or agreed when the Contract was signed, and
which are not as a result of some fault or failure by the Contractor, then the Contractor will
be entitled to claim additional cost for complying with such requirements.

The Sub-Clause also reiterates that the Contractor must comply with the Operation
Management Requirements, and the various Contractor’s Documents mentioned.
OR

10.3 Independent Compliance Audit

At least 182 days prior to the commencement of the Operation Service, the
Employer and the Contractor shall jointly appoint the Auditing Body to carry out
an independent and impartial audit during the Operation Service. The terms of
TF

appointment of the Auditing Body shall be included in the Employer’s Requirements,

and the purpose will be to audit and monitor the performance of both the Employer
and the Contractor during the Operation Service in compliance with the Operation
Management Requirements. If the Parties cannot agree on the appointment of the
Auditing Body, the matter shall be referred to the DAB by the Parties. The DAB shall
make the appointment and notify the Parties accordingly.
NO

The Auditing Body shall commence its duties on the same date as the Operation
Service commences.
Payment of the Auditing Body shall be made from the Provisional Sum included in
the Contract for that purpose.
Both Parties shall cooperate with the Auditing Body and give due regard to the
matters raised in each report issued by the Auditing Body.

Although the appointment of the Employer’s Representative also covers the Operation
Service Period, there is an additional need for a totally independent and impartial body to

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 act during the Operation Service to fairly and independently monitor the performance of
both Parties during this period. Both Parties are dependent on each other for the proper
and successful performance of their respective obligations – for example, the Contractor to
operate the facility, and the Employer to provide fuel or consumable materials.

It is important that the person or persons comprising the Auditing Body is/are jointly agreed
and appointed by both Parties. The Auditing Body is paid from a Provisional Sum in the
Contract which will have been determined by the Employer and included by the Contractor

E
in his price when tendering. However, if the provisions of Sub-Clause 13.5 [Provisional
Sums] are to be amended with reference to payments to be made to the Auditing Body,
such amendments should be included in the Particular Conditions Part B.

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Unless specifically mentioned in the terms of appointment of the Auditing Body (which must
be included as part of the Employer’s Requirements), the Auditing Body has no power to
instruct either Party in the event that it finds something which needs correcting or changing
(i.e., something not in accordance with the Contract). If such a situation arises, the Auditing
Body will advise the Parties in a report (copied to the Employer’s Representative) and it

CT
will be the Employer’s Representative who will instruct the Parties in respect of any matter
which either of them needs to correct or address.

10.4 Delivery of Raw Materials

RA
The Employer shall be responsible for the free issue and supply and delivery to
the Site (or other designated place) of the raw materials, fuels, consumables and
other such items specified in the Employer’s Requirements. The Employer shall be
responsible that all such items are fit for purpose and comply with the requirements
NT
of the Contract in respect of quality, purpose and function.
In the event that any such item or product is not delivered in accordance with the
agreed delivery programme or deviates from the specified quality, and such delay
or deviation causes the Contractor to suffer additional cost, the Contractor shall
be entitled to give due notice to the Employer of the nature of the costs which he
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has incurred and, subject to Sub-Clause 20.1 [Contractor’s Claims], be entitled to

recover his Cost Plus Profit.
The provisions of this Sub-Clause shall not apply in cases where delays are due to:
(a) breakdown, maintenance, repair, replacement or other operational failure under
the responsibility of the Contractor;
(b) health, safety and environmental risks carried by the Contractor; or
(c) any act or omission of the Contractor under the Contract.
OR

If the Employer is planning to supply any raw materials such as fuel or other consumables
during the Operation Service, details must be given in the Employer’s Requirements. Details
should include availability, quality, location, transportation and requirements for off-loading
etc. Once the free issue material has been delivered to Site, it comes under the care and
TF

control of the Contractor, but the Employer remains responsible for ensuring that such items
meet the requirements of the Contract in respect of quality and being ‘fit for purpose’. If the
items delivered by the Employer are delivered late or are not of the specified quality then the
Contractor can claim compensation for the costs he incurs unless the shortcomings were
due to a failure of the Contractor.
NO

10.5 Training

The Contractor shall carry out the training of Employer’s Personnel in the operation
and maintenance of the Works to the extent specified in the Employer’s Requirements.
The programme and scheduling of the training shall be agreed with the Employer,
and the Contractor shall provide experienced training staff, and all training materials
as stated in the Employer’s Requirements. The Employer shall be responsible for
providing the training facilities and nominating and selecting suitable personnel for
training.

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 Although the Contractor is responsible for operating and maintaining the facility during the
Operation Service Period, the Employer may wish to have some of his O & M staff trained so
that they are able to operate and maintain the facility when the Works are finally handed over
to the Employer at the end of the Operation Service Period. If this is the case, details must
be given in the Employer’s Requirements. The Contractor will have to prepare and agree
a suitable programme based on the training required by the Employer, and he will have to
supply competent training staff and proper materials to carry out the training.

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The Employer is responsible for selecting staff for the training programme and ensuring that
they are suitably fit and competent to undergo the training programme.

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The Parties must agree where the division of responsibility lies between the process of
teaching and the process of learning as it is not always clear how much responsibility the
Contractor can carry as to how much the Employer’s Personnel will actually learn.

10.6 Delays and Interruptions during the Operation Service

CT
Delays and interruptions during the Operation Service shall be agreed and
determined as follows:
(a) Delays or Interruptions caused by the Contractor
If there are any delays or interruptions during the Operation Service which are

RA
caused by the Contractor or by a cause for which the Contractor is responsible,
the Contractor shall compensate the Employer for any losses including loss of
revenue, loss of profit and overhead losses. The amount of compensation due
shall be agreed or determined according to Sub-Clause 3.5 [Determinations],
and the Employer shall be entitled to recover the amount due by making a
NT
corresponding deduction from the next payment due to the Contractor.
However, the total amount of compensation payable by the Contractor to the
Employer shall not exceed the amount stated in the Contract Data. There will
be no extension of the period of the Operation Service as a result of any such
delay or interruption.
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(b) Delays or Interruptions caused by the Employer

If there are any delays or interruptions during the Operation Service which are
caused by the Employer or by a cause for which the Employer is responsible,
the Employer shall compensate the Contractor for any cost and losses including
loss of revenue and loss of profit. The amount of compensation due shall be
agreed or determined according to Sub-Clause 3.5 [Determinations], and the
Employer shall pay the amount due by making a corresponding adjustment to
OR

the next payment due to the Contractor. In any event other than in the case
of election by the Employer to terminate for his convenience pursuant to Sub-
Clause 15.5 [Termination for Employer’s Convenience], the total amount of
compensation payable by the Employer to the Contractor shall not exceed the
amount stated in the Contract Data. There will be no extension of the period of
TF

the Operation Service as a result of any such delay or interruption.

(c) Suspension by the Employer
The Employer’s Representative may at any time during the Operation Service
instruct the Contractor to suspend progress of the Operation Service. During
such suspension, the Contractor shall protect, store, secure and maintain the
Plant against any deterioration, loss or damage.
NO

If the need to suspend the Operation Service by the Employer is due to

any failure of the Contractor or circumstances for which the Contractor is
responsible under the Contract, the provisions of paragraph (a) of this Sub-
Clause shall apply.
If the need to suspend the Operation Service is a result neither of any failure
by the Contractor nor of circumstances for which the Contractor is responsible
under the Contract, the provisions of paragraph (b) of this Sub-Clause shall apply.
If a suspension, which is due neither to any failure by the Contractor nor to
circumstances for which the Contractor is responsible under the Contract, has

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 continued for more than 84 days, the Contractor may request the Employer’s
Representative’s permission to proceed. If the Employer’s Representative
does not give permission within 28 days after being requested to do so, the
Contractor may give Notice of termination under Sub-Clause 16.2 [Termination
by Contractor].
After the permission or instruction to proceed is given, the Contractor and the
Employer’s Representative shall jointly examine the Works. The Contractor
shall make good any deterioration or defect in the Plant and the Employer’s

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Representative shall make a written record of all making good required to be
carried out by the Contractor. If the suspension is due neither to any failure by
the Contractor nor to circumstances for which the Contractor is responsible

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under the Contract, the Contractor shall be entitled to be paid the Cost Plus
Profit of making good the Works prior to re-commencing the Operation Service.

The Contract as no provisions for the Operation Service to be prolonged by an extension of

the Operation Service Period in the event of delays or interruptions caused by either Party.
However the suffering Party may be entitled to financial compensation under this Sub-Clause.

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This is one of the few occasions under the Contract where the Party who suffers from a
delay or interruption caused by the other Party may claim compensation including loss of
revenue and loss of profit.

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Compensation to the Parties will depend on the reason for the suspension. If the need is due
to a failure by the Contractor, then paragraph (a) applies, and if it not due to the Contractor
nor results from an event for which the Contractor is responsible under the Contract, then
paragraph (b) applies. Suspension may only be instructed by the Employer’s Representative
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and compensation to the Parties again depends on the reason for the suspension. If the
suspension lasts more than 84 days the situation is similar to that existing under Sub-Clause
9.10 [Prolonged Suspension], and the Contractor may terminate the Contract under Sub-
Clause 16.2 [Termination by Contractor].
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10.7 Failure to Reach Production Outputs

In the event that the Contractor fails to achieve the production outputs required
under the Contract, the Parties shall jointly establish the cause of such failure.
(a) If the cause of the failure lies with the Employer or any of his servants or agents,
then, after consultation with the Contractor, the Employer shall give written
instruction to the Contractor of the measures which the Employer requires the
OR

Contractor to take.
If the Contractor suffers any additional cost as a result of the failure or the
measures instructed by the Employer, the Employer, subject to Sub-Clause
3.5 [Determinations] and Sub-Clause 20.1 [Contractor’s Claims], shall pay the
Contractor his Cost Plus Profit.
TF

(b) If the cause of the failure lies with the Contractor then, after due consultation
with the Employer, the Contractor shall take all steps necessary to restore the
output to the levels required under the Contract.
If the Employer suffers any loss as a result of the failure or the measures taken
by the Contractor, the Contractor, subject to Sub-Clause 3.5 [Determinations],
shall pay the Employer the performance damages specified in the Contract Data.
NO

Unless otherwise stated in the Contract Data, if the failure continues for a period
of more than 84 days and the Contractor is unable to achieve the required
production output, the Employer may either:
(i) continue with the Operation Service at a reduced level of compensation
determined in accordance with Sub-Clause 3.5 [Determinations]; or,
(ii) if the production outputs fail to reach the minimum values required in the
Contract Data, give Notice to the Contractor not less than 56 days prior to
terminating the Contract, in accordance with Sub-Clause 15.2 [Termination
for Contractor’s Default].

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 In such an event, the Employer shall be free to continue the Operation Service
himself or by others.

If the Contractor is unable to achieve the required production outputs, it will be necessary to
establish the reason for the failure. There may well be a number of reasons why production
outputs have not been reached, some coming under the responsibility of the Contractor and
some coming under the responsibility of the Employer. Once the cause is established, the
Parties are required to consult with each other to decide on the action to be taken.

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If the Employer is responsible and the Contractor suffers additional cost, he is entitled to
receive compensation including an element of profit. If the Contractor is responsible he

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must pay the performance damages specified in the Contract Data (under Sub-Clause 10.7
[Failure to Reach Production Outputs]) to the Employer. This is the only compensation due to
the Employer for this failure, but if the failure continues for more than 84 days, he may either
let the Contractor continue with the Operation Service at a reduced level of remuneration
which the Parties will determine according to Sub-Clause 3.5 [Determinations], or he can
terminate the Contract and continue the Operation with his own staff or engage others.

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10.8 Completion of Operation Service

Unless the Parties have mutually agreed to prolong the Operation Service, the

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obligation of the Contractor to operate and maintain the Plant under the Operation
Service shall cease at the end of the period stated in the Contract as the Operation
Service Period.
Notwithstanding the foregoing, other services to be performed by the Contractor
must be completed before the Contractor will be entitled to receive the Contract
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Completion Certificate in accordance with Sub-Clause 8.6 [Contract Completion
Certificate].
Pre-conditions which must be fulfilled by the Contractor before the Contract
Completion Certificate will be issued are:
(a) Inspection in accordance with Sub-Clause 11.8 [Joint Inspection Prior to
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Contract Completion];
(b) Testing in accordance with Sub-Clause 11.9 [Procedure for Tests Prior to
Contract Completion];
(c) Updating Operation and Maintenance manuals providing performance records
and data in accordance with Sub-Clause 5.6 [Operation and Maintenance
Manuals]; and
(d) Remedying defects found during inspection in accordance with Sub-Clause
OR

11.8 [Joint Inspection Prior to Contract Completion].

As mentioned previously, there is no provision to extend the Operation Service beyond the
period stated in the Contract. At the end of the Operation Service Period, the Contractor
will receive the Contract Completion Certificate, but there are certain pre-conditions which
TF

have to be met before the Certificate will be issued. The timing of these activities (see Sub-
Clauses 11.8 [Joint Inspection Prior to Contract Completion] and 11.9 [Procedure for Tests
Prior to Contract Completion]) is such to ensure that all required inspections, tests and
any making good or replacements required as a result of the inspections or tests, can be
completed within the Operation Service Period, so that no activities will normally fall outside
this Period. If the Contractor fails to complete the pre-conditions, then the issue of the
NO

Contract Completion Certificate will be withheld until they have been completed.

10.9 Ownership of Output and Revenue

During the Operation Service, any production output and revenue shall be the
exclusive property of the Employer.

This statement is included to make it quite clear that the Contractor has no claim to
ownership of any revenue or other income resulting from his operation of the facility.

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Clause 11 Testing

11.1 Testing of the Works

The Contractor shall carry out the Tests on Completion of Design-Build in

accordance with this Clause and Sub-Clause 7.4 [Testing], after providing the
documents in accordance with Sub-Clause 5.5 [As-Built Documents] and Sub-
Clause 5.6 [Operation and Maintenance Manuals].

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The Contractor shall give Notice to the Employer’s Representative not less than
21 days prior to the date after which the Contractor will be ready to carry out each
of the Tests on Completion of Design-Build. Unless otherwise agreed, Tests on

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Completion of Design-Build shall be carried out within 14 days after this date, on
such day or days as the Employer’s Representative shall instruct.
Unless otherwise stated in the Particular Conditions, the Tests on Completion of
Design-Build shall be carried out in the following sequence and are further detailed
in the Employer’s Requirements:
(a) pre-commissioning tests, which shall include the appropriate inspections and

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(“dry” or “cold”) functional tests to demonstrate that each item of Plant can
safely undertake the next stage, (b);
(b) commissioning tests, which shall include the specified operational tests to
demonstrate that the Works or Section can be operated safely and as specified,

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under all available operating conditions; and
(c) trial operation, which shall demonstrate that the Works or Section perform
reliably and in accordance with the Contract.
The Employer shall be the sole beneficiary of any revenue or benefit resulting from
the Tests on Completion of Design-Build.
NT
During trial operation, when the Works are operating under stable conditions, the
Contractor shall give Notice to the Employer’s Representative that the Works are
ready for any other Tests on Completion of Design-Build, including performance
tests to demonstrate whether the Works conform with criteria specified in the
Employer’s Requirements and with the Schedule of Guarantees.
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Trial operation shall not constitute a commencement of the Operation Service under
Sub-Clause 10.2 [Commencement of Operation Service].
In considering the results of the Tests on Completion of Design-Build, the
Employer’s Representative shall make allowances for the effect of any use of the
Works by the Employer on the performance or other characteristics of the Works.
As soon as the Works, or a Section, have passed each of the Tests on Completion
of Design-Build described in sub-paragraph (a), (b) or (c) above, the Contractor
OR

shall submit a report certified by the Contractor of the results of these Tests to the
Employer’s Representative.

This Sub-Clause covers all tests which the Contractor is required to perform before the
Commissioning Certificate will be issued, and before commencement of the Operation
TF

Service.

The tests are divided into three types: the pre-commissioning tests; the commissioning
tests; and the trial operation of the facility. The purpose of the tests is generally described
in this Sub-Clause under paragraphs (a), (b) and (c), but the details of the required tests
will be given elsewhere in the Contract. Sub-Clause 7.4 [Testing] relates to the general
NO

requirements regarding testing of Plant, Materials and workmanship, whilst this Sub-Clause
relates to testing the completed Works.

Although the Commissioning Certificate will not be issued until testing the Works has been
successfully completed, if there is any revenue or benefit generated during or as a result of
the tests, such revenue or benefit belongs to the Employer.

As soon as the Works (or Section) passes the required tests, the Contractor is required to
submit a report to the Employer’s Representative confirming the results, and this will be the

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 evidence which the Employer’s Representative requires in order to confirm that the Works
have been completed as required by Sub-Clause 9.2 [Time for Completion of Design-Build].

11.2 Delayed Tests on Completion of Design-Build

If the Tests on Completion of Design-Build are being unduly delayed by the

Employer, Sub-Clause 7.4 [Testing] (fifth paragraph) shall be applicable.
If the Tests on Completion of Design-Build are being unduly delayed by the

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Contractor, the Employer’s Representative may by Notice require the Contractor to
carry out such Tests within 21 days after receiving the Notice. The Contractor shall
carry out such Tests on the day or days within that period as the Contractor may fix

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and of which he shall give Notice to the Employer’s Representative.
If the Contractor fails to carry out the Tests on Completion of Design-Build within
the period of 21 days, the Employer’s Personnel may proceed with the Tests at the
risk and cost of the Contractor. The Tests on Completion shall then be deemed to
have been carried out in the presence of the Contractor and the results of the Tests
shall be accepted as accurate.

CT
If the tests covered by Sub-Clause 11.1 [Testing of the Works] are delayed, and the
Employer is responsible, for example a delay by the Employer in attending the tests, then
the Contractor is entitled to an extension of time, plus Cost Plus Profit as described in Sub-
Clause 7.4 [Testing].
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However, if it is the Contractor who is delaying the tests (for example if he wants to delay
the issue of the Commissioning Certificate as he does not have the personnel ready
to commence the Operation Service), the Employer’s Representative can instruct the
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Contractor to carry out the tests and if the Contractor does not do so (within 21 days), the
Employer’s Personnel (who by Definition 1.1.34 can be anybody appointed by the Employer)
can perform the tests and thereby effectively prevent the Contractor from delaying the issue
of the Commissioning Certificate for his own advantage.
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11.3 Retesting of the Works

If the Works, or a Section, fail to pass the Tests on Completion of Design-Build,

Sub-Clause 7.5 [Rejection] shall apply, and the Employer’s Representative or the
Contractor may require the failed Tests, and Tests on Completion of Design-Build
on any related work, to be repeated under the same terms and conditions.
OR

11.4 Failure to Pass Tests on Completion of the Design-Build

If the Works, or a Section, fail to pass the Tests on Completion of Design-

Build repeated under Sub-Clause 11.3 [Retesting of the Works] the Employer’s
Representative shall be entitled to:
TF

(a) order further repetition of Tests on Completion of Design-Build under Sub-

Clause 11.3 [Retesting of the Works]; or
(b) issue a Notice under Sub-Clause 15.1 [Notice to Correct].

If the Tests on Completion of Design-Build fail, either Party may require the tests to be
repeated on the same terms and conditions as in Sub-Clause 11.2 [Delayed Tests on
NO

Completion of Design-Build]. However, if they still fail, the Employer’s Representative has
two choices:; if he feels there is still a chance that the Works can pass the tests he can order
a further re-test under Sub-Clause 11.4(a); or, if the failure is more serious, he can proceed
under via Sub-Clause 15.1 [Notice to Correct] by giving the Contractor a formal Notice
to correct the fault, and then, if the Contractor does not or cannot correct the fault, the
Employer can, if he so wishes, terminate the Contract under Sub-Clause 15.2 [Termination
for Contractor’s Default].

Note that whilst it is the Employer’s Representative who gives the Notice under Sub-Clause

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 15.1 [Notice to Correct], it is the Employer (not his Representative) who has the right to
terminate under Sub-Clause 15.2 [Termination for Contractor’s Default].

11.5 Completion of the Works and Sections

Except as stated in Sub-Clause 11.11 [Failure to Pass Tests Prior to Contract

Completion], the Works shall be deemed by the Employer to be completed when:
(a) the Works have been completed in accordance with the Contract, including the

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matters described in Sub-Clause 9.2 [Time for Completion of Design-Build] and
Sub-Clause 5.6 [Operation and Maintenance Manuals] and except as allowed
in sub-paragraph (i) below; and

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(b) a Commissioning Certificate has been issued, or is deemed to have been
issued, in accordance with this Sub-Clause.
The Contractor may apply by Notice to the Employer’s Representative for a
Commissioning Certificate not earlier than 14 days before the Works will, in the
Contractor’s opinion, be complete and ready for commencement of the Operation
Service Period. If the Works are divided into Sections, the Contractor may similarly

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apply for a Commissioning Certificate for each Section.
The Employer’s Representative shall, within 28 days after receiving the Contractor’s
application:
(i) issue the Commissioning Certificate to the Contractor, stating the date on

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which the Works or Section were completed in accordance with the Contract,
except for any minor outstanding work and defects which will not substantially
affect the use of the Works or Section for their intended purpose (listing such
outstanding work and defects which are to be remedied); or
(ii) reject the application, giving reasons and specifying the work required to be
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done by the Contractor to enable the Commissioning Certificate to be issued.
The Contractor shall then complete the work referred to in sub-paragraph (ii) above
before issuing a further Notice under this Sub-Clause.
If the Employer’s Representative either fails to issue the Commissioning Certificate
or reject the Contractor’s application within the period of 28 days, and if the Works
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or Section (as the case may be) are substantially in accordance with the Contract,
the Commissioning Certificate shall be deemed to have been issued on the last day
of that period.

This Sub-Clause concerns the completion of the Design-Build of the Works, and this takes
place when firstly when the Employer’s Representative is satisfied that the Works have been
completed and passed the Tests on Completion and the required documentation has been
OR

supplied, and secondly when the Commissioning Certificate has been issued.

It is the Contractor who makes the initial application for a Completion Certificate to be issued,
and he does this when, in his opinion, within 14 days, he and the Works will have fulfilled
all the pre-requisites for the Commissioning Certificate to be issued. Then within 21 days
TF

from this application, the Employer’s Representative must either issue the Commissioning
Certificate, or reject the application, giving his reasons.

If he accepts the application, it is very important that the Commissioning Certificate

records the date on which the Works were accepted as being complete (except for minor
outstanding work), as this date, unless otherwise agreed between the Parties will be the
NO

commencement date for the Operation Service.

If the application is rejected, the Contractor must make good and correct the failure before
he can re-apply for the Commissioning Certificate to be issued.

However, it is important for the Employer’s Representative to take action under either
paragraph (i) or (ii), since if he neither issues the Certificate, nor formally rejects the
application in accordance with the provisions of the Sub-Clause, then the Contractor can
assume that the Commissioning Certificate has been issued by default.

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11.6 Commissioning of Parts of the Works

The Employer’s Representative may, at the request of the Contractor, issue a

Section Commissioning Certificate for any part of the Permanent Works.
If a Section Commissioning Certificate has been issued for a part of the Works, the
delay damages thereafter for completion of the remainder of the Works shall be
reduced. Similarly, the delay damages for the remainder of the Section (if any) in
which this part is included shall also be reduced. For any period of delay after the

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date stated in this Section Commissioning Certificate, the proportional reduction
in these delay damages shall be calculated as the proportion which the value of
the part so certified bears to the value of the Works or Section (as the case may

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be) as a whole. The Employer’s Representative shall proceed in accordance with
Sub-Clause 3.5 [Determinations] to agree or determine these proportions. The
provisions of this paragraph shall only apply to the daily rate of delay damages under
Sub-Clause 9.6 [Delay Damages relating to Design-Build], and shall not affect the
maximum amount of these damages (if any).

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Completion of the whole of the Works or a Section (see Definition 1.1.70) is covered under
Sub-Clause 11.5 [Completion of the Works and Sections].

This Sub-Clause covers the case where the Contractor requests, and the Employer’s

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Representative agrees, to commission a part (usually a substantial part) of the Works
which has not been identified in the Contract as a Section. In such a case the Employer’s
Representative may issue a Section Commissioning Certificate (see Definition 1.1.71) for the
part concerned, and the delay damages for the remaining Works or Section (if applicable)
shall be reduced in proportion that the value of the part had to the value of the Works or
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Section as the case may be.

11.7 Commissioning Certificate

Performance of the Contractor’s Design-Build obligations, including care of the

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Works, shall not be considered to have been completed until the Commissioning
Certificate has been signed by the Employer’s Representative and delivered to
the Contractor, stating the date on which the Contractor, in the opinion of the
Employer’s Representative, completed all such obligations in accordance with the
Contract (subject to the outstanding works and defects listed in accordance with
Sub-Clause 11.5 [Completion of the Works and Sections]).
The Employer’s Representative shall issue the Commissioning Certificate to
OR

the Contractor within 28 days after the application by the Contractor for the
Commissioning Certificate subject to the provisions of Sub-Clause 11.5 [Completion
of the Works and Sections].
Only the Commissioning Certificate shall be deemed to constitute acceptance of the
Works.
TF

This is a very important Certificate. It has already been referred to in several sub-clauses as
it records the completion date for the Design-Build and the commencement date for the
Operation Service.

This Sub-Clause states quite clearly that it is only the Commissioning Certificate which
NO

constitutes acceptance of the Works by the Employer – that is, that the Works have been
designed and built in accordance with the Contract.

However, the Commissioning Certificate does not constitute acceptance by the Employer
that the Contractor has fulfilled all his obligations under the Contract (that is covered by the
Contract Completion Certificate, see Sub-Clause 8.6 [Contract Completion Certificate]).
After issue of the Commissioning Certificate the Contractor still has to provide the Operation
Service, and he is still liable for any outstanding obligations which he failed to fulfil during
the Design-Build Period.

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11.8 Joint Inspection Prior to Contract Completion

Not less than two years prior to the expiry date of the Operation Service Period, the
Employer’s Representative and the Contractor shall carry out a joint inspection of the
Works and, within 28 days of the completion of the joint inspection, the Contractor
shall submit a report on the condition of the Works identifying maintenance works
(excluding routine maintenance works and the correction of defects), replacements
and other works required to be carried out to satisfy the requirements of the

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Operation and Maintenance Plan after the Contract Completion Date.
The Contractor shall submit a programme for carrying out such works over the
remainder of the Operation Service Period.

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Following receipt of the Contractor’s report, the Employer’s Representative may,
throughout the remainder of the Operation Service Period, instruct the Contractor
to carry out all or part of the works identified in the Contractor’s report. The quoted
sums from the Asset Replacement Fund will be added to the monthly payments
upon replacement of items of Plant in accordance with the Schedule of replacement
prepared at Tender stage and the provisions of Sub-Clause 14.18 [Asset

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Replacement Fund]. Other works shall be carried out at the Contractor’s cost.
Upon satisfactory completion of the items identified in this Sub-Clause the Employer
shall instruct the Contractor to commence the Tests Prior to Contract Completion
in accordance with Sub-Clause 11.9 [Procedure for Tests Prior to Contract
Completion].
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Before the end of the Operation Service Period, it is necessary to carry out various tests and
inspections to make sure that the Works are in the condition required by the Contract when
they are handed over to the Employer at the end of the Operation Service Period.
NT
The handback requirements covered in Sub-Clause 8.7 [Handback Requirements] give the
specific requirements of the Employer as to what he requires after he has taken over the
operation of the facility after the issue of the Contract Completion Certificate. The provisions
of Sub-Clauses 11.8 to 11.12 contain a general requirement to inspect and test the Works,
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irrespective of what the Employer may or may not have given as his handback requirements.

The procedure begins more than to two years prior to the end of the Operation Service
Period to ensure that all the necessary testing and making good (where required) can be
completed before the Operation Service Period ends and thus avoid the need for delays and
uncertainties before the Contract Completion Certificate can be issued.
OR

The procedure for testing and delayed tests, and the provisions regarding failure and the
need for re-testing prior to Contract completion are very similar to those given in Sub-
Clauses 11.1 to 11.4 in respect of testing on completion of Design-Build.

11.9 Procedure for Tests Prior to Contract Completion

TF

The Tests Prior to Contract Completion (“Tests”) are to be carried out by the
Contractor who shall provide all necessary labour, materials, electricity, fuel and
water, other than items identified as being the responsibility of the Employer under
Sub-Clause 10.4 [Delivery of Raw Materials] , and undertake any required remedial
works as may be required. The Tests are to be carried out in accordance with the
NO

Employer’s Requirements.
The Tests shall be carried out towards the end of the Operation Service Period. The
Employer shall give Notice to the Contractor not less than 21 days prior to the date
after which the Tests shall be carried out. Unless otherwise agreed, such Tests shall
be commenced within 14 days after this date, on the day or days determined by the
Employer’s Representative.
The results of the Tests shall be compiled and evaluated by the Employer’s
Representative and the Contractor. The Contractor shall make the results of any
tests, inspections or monitoring available to the Employer’s Representative within 7

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 days of their receipt. Any effect on the results of the Tests which can reasonably be
shown to be due to prior use of the Works by the Contractor during the Operation
Service Period shall be taken into account in assessing such results.
As soon as the Contractor has completed the Tests, the Contractor shall notify
the Employer’s Representative that the Works are complete and ready for final
inspection. Upon the Employer’s Representative being satisfied that the Contractor
has satisfied the requirements of the Tests regarding such final inspection, the
Employer’s Representative shall notify the Employer and the Contractor prior to the

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issue of the Contract Completion Certificate.

See comments to Sub-Clause 11.8 [Joint Inspection Prior to Contract Completion] above.

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11.10 Delayed Tests Prior to Contract Completion

If the Employer incurs cost as a result of any unreasonable delay by the Contractor
in carrying out the Tests Prior to Contract Completion (“Tests”), the Employer shall
be entitled, subject to Sub-Clause 20.2 [Employer’s Claims], to payment of any

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such cost which shall be recoverable from the Contractor by the Employer, and
may be deducted by the Employer from any monies due, or to become due, to the
Contractor.
If the Contractor fails to commence the Tests on the day or days determined

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under Sub-Clause 11.9 [Procedure for Tests Prior to Contract Completion], the
Employer’s Representative shall give Notice to the Contractor that unless the
Tests are commenced within 14 days of this Notice the Employer’s Representative
may order that the Tests be undertaken by others on behalf of the Employer. In
such event, the Contractor shall be bound by the results of such Tests as being
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accurate and the Employer shall be entitled to deduct the costs associated with the
undertaking of the Tests by others from any monies due, or to become due, to the
Contractor.
If, for reasons not attributable to the Contractor, the Tests Prior to Contract
Completion of the Works, or any Section, cannot be completed during the Contract
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Period (or any other period agreed upon by both Parties), then the Works or Section
shall be deemed to have passed the Tests.

See comments to Sub-Clause 11.8 [Joint Inspection Prior to Contract Completion] above.

11.11 Failure to Pass Tests Prior to Contract Completion

OR

If the Works or a Section thereof, fails to pass the Tests Prior to Contract Completion
(“Tests”) under Sub-Clause 11.9 [Procedure for Tests Prior to Contract Completion],
the Employer’s Representative shall be entitled to:
(a) order further repetition of Tests under Sub-Clause 11.12 [Retesting Prior to
Contract Completion];
TF

(b) reject the Works or a Section thereof (as the case may be), in which event the
Employer shall have the same remedies against the Contractor as provided
under Clause 15 [Termination by Employer]; or
(c) issue a Contract Completion Certificate, if the Employer so requires. The
Contract Price shall then be reduced by such an amount as may be agreed by
the Employer and the Contractor (in full satisfaction of such failure only),
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and the Contractor shall then proceed in accordance with his other obligations
under the Contract.
In the event of (c) above, if the Works, or a Section, fail to pass any of the Tests
and the Contractor proposes to make adjustments or modifications to the Works
or such Section, the Contractor may be instructed by (or on behalf of) the Employer
that right of access to the Works or Section cannot be given until a time that is
convenient to the Employer. The Contractor shall then remain liable to carry out the
adjustments or modifications and to satisfy this Test, within a reasonable period of
receiving Notice by (or on behalf of) the Employer of the time that is convenient to

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 the Employer. However, if the Contractor does not receive this Notice during the
relevant Contract Period, the Contractor shall be relieved of this obligation and the
Works or Section (as the case may be) shall be deemed to have passed the Tests.
If the Contractor incurs additional cost as a result of any unreasonable delay by the
Employer in permitting access to the Works or Plant by the Contractor after issue of
the Contract Completion Certificate, either to investigate the causes of a failure
to pass any of the Tests or to carry out any adjustments or modifications, the
Contractor shall be paid the additional Cost Plus Profit, as determined or agreed in

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accordance with Sub-Clause 3.5 [Determinations], caused by such a delay.

See comments to Sub-Clause 11.8 [Joint Inspection Prior to Contract Completion] above.

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11.12 Retesting Prior to Contract Completion

If the Works, or a Section, fail to pass the Tests Prior to Contract Completion:
(a) sub-paragraph (b) of Sub-Clause 12.1 [Completion of Outstanding Work and
Remedying Defects] shall apply; and

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(b) the Employer may require the failed Tests, and the Tests Prior to Contract
Completion on any related work, to be repeated under the same terms and
conditions.
If such failure and retesting results from a default of the Contractor and causes

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the Employer to incur additional costs, such costs shall be recoverable from the
Contractor by the Employer, subject to Sub-Clause 20.2 [Employer’s Claims], and
may be deducted by the Employer from any monies due, or to become due, to the
Contractor.
The Employer’s Representative may carry out such additional tests, inspections and
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monitoring as he deems necessary. The costs of such tests, except where such
tests are carried out for the purpose of remedying any damage, defect or failure
to meet standards that are the responsibility of the Contractor under the Contract,
shall be borne by the Employer.
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See comments to Sub-Clause 11.8 [Joint Inspection Prior to Contract Completion] above.

Clause 12 Defects

12.1 Completion of Outstanding Work and Remedying Defects

OR

The requirements regarding the completion of outstanding work and the remedying
of defects are as follows:
(a) Design-Build Period: In order that the Works and Contractor’s Documents, and
each Section, shall be in the condition required by the Contract, the Contractor
TF

shall:
(i) complete any work which is outstanding on the date stated in the
Commissioning Certificate as soon as practicable after such date, and not
later than one year after such date; and
(ii) execute all work required to remedy defects or damage, as may be notified
by (or on behalf of) the Employer.
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Final payment for the Design-Build Period, in accordance with Clause 14 [Contract
Price and Payment], will not be certified until the above requirements have, in the
opinion of the Employer’s Representative, been met.
If a defect appears or damage occurs, the Contractor shall be notified accordingly,
by (or on behalf of) the Employer.
(b) Operation Service Period: The Contractor shall be responsible for repairing and
making good any damage or defect occurring during the Operation Service
Period, whether such defect or damage is notified by the Employer or his
Representative, or observed by the Contractor himself.

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 The Contract Completion Certificate issued under Sub-Clause 8.6 [Contract
Completion Certificate] will not be issued until all defects and damage and all
outstanding work, including all such items identified during the joint inspection
made in accordance with Sub-Clause 11.8 [Joint Inspection Prior to Contract
Completion], have been completed.

When the Commissioning Certificate is issued under Sub-Clause 11.7 [Commissioning

Certificate], the Works will have been substantially completed even if there are some items

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which do not affect the performance of the Works, which are still outstanding. These will
have been recorded in some form of ‘snag list’. This Sub-Clause requires the Contractor,
under paragraph (a), to complete such outstanding work ‘as soon as practicable’, but at

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the latest within one year after the completion of the Design-Build. The Contractor’s final
payment for the Design-Build is dependent on his completing this outstanding work, and
if he has not done so within the one year period, he will not get his final payment for the
Design-Build. There is no other provision in the Contract dealing with late completion of
outstanding work. This is because such late completion should not affect the ability of the
Contractor to operate the Works, and it should not affect the performance of the Works

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as such. It simply means that the Contractor will not get paid his final payment until the
outstanding work has been completed.

With regard to defects, there is no set period during which the Contractor is liable to

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make good and repair defects, as is to be found in the other FIDIC forms of contract. The
Contractor is liable for repairing defects and damage, if and when they occur, during the
whole Operation Service Period, whether they are identified and notified by the Employer
or by the Contractor himself. So failure by the Employer’s Representative to spot a defect
during the Operation Service Period does not relieve the Contractor of his obligation to
NT
make good such defect as may be necessary for the continued performance of the facility.
This is a necessary requirement since it is the Contractor who is operating the Works, and
it is the Contractor who is responsible for their continuing and efficient operation for the
complete Operation Service Period.
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12.2 Cost of Remedying Defects

All work required to repair defects or damage shall be executed at the risk and cost
of the Contractor, except:
(a) where it is attributable to any act by the Employer or the Employer’s Personnel
or agents; or
(b) where it is as a result of an event that is covered under Clause 18 [Exceptional
OR

Risks].
Where the Contractor is required to remedy a defect or damage to the Works
under sub-paragraphs (a) or (b) of this Sub-Clause, the Contractor shall notify the
Employer’s Representative and shall be entitled to a Variation under Clause 13
[Variations and Adjustments].
TF

Normally, it would be expected that any defect or damage will need to be repaired by
the Contractor in order that he can continue to operate the Works as required during the
Operation Service Period.

If the cause of the defect or damage lies with the Employer or anyone for whom the
NO

Employer is responsible under the Contract, or if it is the result of an Exceptional Risk which,
according to Clause 18 [Exceptional Risks] is a risk carried by the Employer, then the repair
work will be covered by a Variation and the Contractor must wait until the Variation order
has been issued or instructed or agreed before commencing the repair work. However the
Contractor will be entitled to be compensated for the cost of the work involved. If such
damage or defect occurs during the Design-Build Period, the Contractor will also be entitled
to an extension of time. However, if it occurs during the Operation Service Period, where
no time extension is allowed under the Contract, compensation will be purely financial
reimbursement. Note that if the work is to be covered by a Variation during the Operation

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 Service Period, by Sub-Clause 13.1 [Right to Vary], the cost of the Variation must be agreed
before the Contractor is obliged to proceed with the repair work.

If the cause of the defect or damage is not covered by paragraphs (a) or (b) of this Sub-
Clause, then the Contractor has to make the repair at his own risk and cost. He does not
need any instruction from the Employer’s Engineer’s Representative, and no compensation
or time extension should be requested or granted.

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12.3 Failure to Remedy Defects

If the Contractor fails to remedy any defect or damage arising during either the

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Design-Build Period or the Operation Service Period within a reasonable time, a
date may be fixed by (or on behalf of) the Employer’s Representative, on or by which
the defect or damage is to be remedied. The Contractor shall be given reasonable
Notice of this date.
If the Contractor fails to remedy the defect or damage by such date and the
necessity for such work is due to the Contractor subject to Sub-Clause 12.2 [Cost

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of Remedying Defects], the Employer may (at his sole discretion):
(a) require the Employer’s Representative to determine and certify a reasonable
reduction in the Contract Price or the Rates and Prices submitted for the
Operation Service Period in accordance with Sub-Clause 3.5 [Determinations];
or
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(b) if the defect or damage is such that the Contractor has been unable to
commission the Works or continue providing the Operation Service and the
Employer has been deprived of substantially the whole of the benefit of the
Works or parts of the Works, the Employer shall be entitled to terminate the
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Contract in respect of such parts of the Works as cannot be put to the intended
use in accordance with the provisions of Clause 15 [Termination by Employer].
In the event of (b) above occurring, the Employer shall, notwithstanding the
provisions of Sub-Clause 15.4 [Payment after Termination for Contractor’s Default]:
(i) during the Design-Build Period, be entitled to recover from the Contractor all
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sums paid for such parts of the Works plus financing costs together with the
cost of dismantling the same, clearing the Site and returning Plant and Materials
to the Contractor; or, if the Employer chooses to complete the Works himself or
by engaging others, the Employer shall be entitled to recover the extra costs, if
any, of completing the Works after allowing for any sum due to the Contractor
under Sub-Clause 15.3 [Valuation at Date of Termination for Contractor’s
Default]. If there are no such extra costs, the Employer shall pay any balance to
OR

the Contractor; and

(ii) during the Operation Service Period, not be liable to make any further payments
to the Contractor until the costs of operation and maintenance, completion and
remedying of any defects and all other costs incurred and to be incurred by the
Employer have been established.
TF

Normally the Contractor will be keen to rectify and repair defects, especially during the
Operation Service Period, in order that he can proceed with the Operation Service.
However, if for any reason he does not do so ‘within a reasonable time’, the provisions
of this Sub-Clause allow the Employer to take action against the Contractor. Firstly, if the
Employer’s Representative considers that the Contractor has not corrected the defect
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‘within a reasonable time’, he can set a date by which the Contractor must deal with the
defect. If the Contractor fails to remedy, or indeed cannot remedy, the defect by the set
date, the options open to the Employer depend whether the failure occurs during the
Design-Build Period or the Operation Service Period.

If the failure to remedy occurs during the Design-Build Period, the Employer may accept
the facility, with the defect, at a reduced price to be determined by the Employer’s
Representative. However, if the Works cannot be commissioned, or the Contractor cannot
commence the Operation Service due to the defect, the Employer may terminate the

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 Contract under Sub-Clause 15.2 [Termination for Contractor’s Default] and recover monies
paid to the Contractor and the costs which the Employer has incurred as a result.

12.4 Further Tests

If the work of remedying any defect or damage may affect the performance of the
Works, the Employer’s Representative may require the repetition of any of the tests
described in the Contract. The requirement shall be made by Notice within 28 days

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after the defect or damage is remedied.
These tests shall be carried out in accordance with the terms applicable to the
previous tests, except that they shall be carried out at the risk and cost of the Party

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liable, under Sub-Clause 12.2 [Cost of Remedying Defects], for the cost of the
remedial work.

This Sub-Clause allows the Employer’s Representative to require the Works, or parts of the
Works, to be re-tested after remedial or repair work has been carried out.

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12.5 Removal of Defective Work

If the defect or damage cannot be remedied expeditiously on the Site and the
Employer gives consent, the Contractor may remove from the Site for the purposes

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of repair such items of Plant as are defective or damaged. This consent may require
the Contractor to increase the amount of the Performance Security by the full
replacement cost of these items, or to provide other appropriate security.

This provision allows the Contractor to remove items of Plant or equipment from the Site for
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the purposes of remedying defects, if it is not expedient for him to do so on Site. However,
before doing so, he must have the Employer’s consent, which, according to Sub-Clause
1.3 [Notices and Other Communications], must be in writing and shall not be unreasonably
withheld. So if the Contractor reasonably requests to remove an item of Plant from the Site
for such purpose, it is unlikely that the Employer will refuse him. However the Employer is
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entitled to require the Contractor to provide appropriate security, since by this time, the
Employer will have paid for the items and they are likely legally to be his property.

12.6 Contractor to Search

The Contractor shall, if required by the Employer’s Representative, search for the
cause of any defect, under the direction of the Employer’s Representative. Unless
OR

the defect is to be remedied at the cost of the Contractor under Sub-Clause 12.2
[Cost of Remedying Defects], the Cost Plus Profit of the search shall be agreed or
determined by the Employer’s Representative in accordance with Sub-Clause 3.5
[Determinations] and shall be included in the Contract Price.
TF

It is not always clear what has caused a defect, and this Sub-Clause allows the Employer’s
Representative to require the Contractor to investigate and search for the cause if a defect
has been discovered.

It is important to know the cause of a defect for two reasons: firstly it will help identify the
Party responsible or liable for the costs of remedying the defect; and secondly it will help
NO

determine the action which needs to be taken to remedy the defect and ensure that it does
not re-occur. If the Contractor is not responsible, he is entitled to be reimbursed the cost of
the search in accordance with Sub-Clause 12.2 [Cost of Remedying Defects].

Note that the search has to be made “under the direction of the Employer’s Representative”.
This is important since the Contractor should not be allowed to carry out this work, which
will result in determining liability, unsupervised.

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Clause 13 Variations and Adjustments

Very few contracts run their course without the need to introduce Variations, making
changes to the form or nature of the Works as compared to what was foreseen at the time
the Contract came into force.

In this Clause 13, the Design-Build-Operate Contract addresses three ways in which
Variations may be introduced. They may be initiated by the Employer’s Representative

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giving an instruction to the Contractor, or initiated by the Employer’s Representative
requesting a proposal from the Contractor, or proposed by the Contractor.

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However, in each case, the decision as to whether the Variation is to be executed, lies with
the Employer’s Representative. The Contractor is not permitted to introduce Variations
without an order or instruction in writing from the Employer’s Representative.

13.1 Right to Vary

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Variations may be initiated by the Employer’s Representative at any time prior to
issuing the Commissioning Certificate, either by an instruction to the Contractor
by the Employer’s Representative or by a request for the Contractor to submit a

carried out by others.

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proposal. A Variation shall not comprise the omission of any work which is to be

The Contractor shall execute and be bound by each Variation; unless the Contractor
promptly gives Notice to the Employer’s Representative stating (with supporting
particulars) that (i) the Contractor cannot readily obtain the Goods required for the
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Variation, (ii) it will reduce the safety or suitability of the Works for the purposes for
which they were intended under the Contract; (iii) it will have an adverse impact on
the achievement of the Schedule of guarantees; or (iv) it will have an adverse effect
on the provision of the Operation Service under the Contract. Upon receiving this
Notice, the Employer’s Representative shall cancel, confirm or vary the instruction
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and the Contractor shall execute and be bound by it.

If the Employer or the Employer’s Representative wishes to instruct a Variation
during the Operation Service Period, he shall give the Contractor written details of
his requirements. The Contractor shall then proceed in accordance with Sub-Clause
13.3 [Variation Procedure] sub-paragraphs (a), (b) and (c). However, the Contractor
shall not be obliged to proceed with the Variation until the matters covered in Sub-
Clause 13.3 [Variation Procedure] sub-paragraphs (a), (b) and (c) have been agreed
OR

between the Employer and the Contractor.

The Employer’s Representative may instruct or order a Variation at any time during the
Contract Period. However the procedure is slightly different depending on whether the
instruction comes during the Design-Build Period or the Operation Service Period.
TF

During the Design-Build Period the Contractor shall (must) comply with the instruction
unless he can give good reason why he cannot do so. The reasons for not complying are
(i) he cannot obtain the Goods required, (ii) the Variation will reduce safety or stability, (iii) it
will adversely affect the guarantees. If the Contractor feels that one of these applies he must
give written Notice to the Employer’s Representative with details. Failure to agree on cost
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or time extensions (see Sub-Clause 13.3 [Variation Procedure]) are not acceptable reasons
for the Contractor to delay proceeding with the Variation.

For Variations instructed during the Operation Service Period, the general procedure is the
same but the Parties must have agreed upon the cost implications before the Contractor is
obliged to proceed with executing the Variation.

The Employer’s Representative cannot issue a Variation to omit work which the Employer
then plans to give to a third party – for example, if the Employer finds that he can get the

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 excavation work done more cheaply by a local contractor, he is not permitted to omit the
excavation work from the Contractor’s scope and then award it to the local contractor.

13.2 Value Engineering

The Contractor may, at any time, submit to the Employer’s Representative a written
proposal, which (in the Contractor’s opinion) will, if adopted:
(a) accelerate completion of the Works;

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(b) reduce the cost to the Employer of executing, maintaining or operating the
Works;
(c) improve the efficiency or value to the Employer of the completed Works;

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(d) improve the efficiency of the Operation Service being provided; or
(e) otherwise be of benefit to the Employer.
The proposal shall be prepared at the cost of the Contractor and shall include the
items listed in Sub-Clause 13.3 [Variation Procedure].

Since it is the Contractor who will have designed the Works to suit the purposes defined in

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the Employer’s Requirements, it is not unlikely that the Contractor may become aware of
changes or improvements to his design which will benefit the Works, but at the same time
comply with the requirement of fitness for purpose.

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The benefits foreseen by the Contractor must be benefits to the Works or to the Employer.
Benefits to the Contractor in the way of a cheaper design or modified function, are, by
themselves, not enough.

If the Contractor believes that he can fulfil the requirements of this Sub-Clause, he may
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submit details in the form of a proposal (in the form described in Sub-Clause 13.3 [Variation
Procedure]) to the Employer’s Representative.

However he shall not proceed with the proposed changes until he receives a formal
instruction under Sub-Clause 13.3 [Variation Procedure]. If there are savings resulting from
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the value engineering, the share of this saving should be agreed prior to instructing the
variation. Alternatively, it is even better if the Special Provisions fix these proportions.

13.3 Variation Procedure

If the Employer’s Representative requests a proposal, prior to instructing a Variation,

the Contractor shall respond in writing as soon as practicable, either by giving
OR

reasons why he cannot comply (if this is the case) or by submitting:

(a) a description of the proposed design and/or work to be performed and a
programme for its execution;
(b) the Contractor’s proposal for any necessary modifications to the programme
according to Sub-Clause 8.3 [Programme] and to the Time for Completion; and
TF

(c) the Contractor’s proposal for adjustment to the Contract Price.

The Employer’s Representative shall, as soon as practicable after receiving such
proposal (under Sub-Clause 13.2 [Value Engineering] or otherwise), respond with
approval, disapproval or comments. The Contractor shall not delay any work whilst
awaiting a response.
Each instruction to execute a Variation, with any requirements for the recording of
NO

costs, shall be issued by the Employer’s Representative to the Contractor, who shall
acknowledge receipt.
Upon instructing or approving a Variation, the Employer’s Representative shall
proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine
adjustments to the Contract Price and the Schedule of Payments. These adjustments,
except adjustments made under Sub-Clause 13.6 [Adjustments for Changes in
Legislation] and Sub-Clause 13.7 [Adjustments for Changes in Technology], shall
include reasonable profit, and shall take account of the Contractor’s submissions
under Sub-Clause 13.2 [Value Engineering] if applicable.

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 As mentioned, Variations may be initiated in three ways, but, however they are initiated, the
Employer’s Representative will need to know how much they are going to cost and also
the possible effect they may have on the programme. So in each case, the Contractor is
required to give details of the effect which the Variation will have on the programme (and this
may be a saving of time if the proposal has come from the Contractor under Sub-Clause
13.2 [Value Engineering]), and the cost.

Once the Employer’s Representative has these details, he shall as soon as practicable

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decide whether or not to proceed with the Variation. This decision will not necessarily
depend on whether the Parties can agree the cost and time consequences. However it is
likely that if the Employer, during consultations under Sub-Clause 3.5 [Provisional Sums],

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makes it clear that he does not wish to proceed (for example if he cannot get additional
funds from his funding source) then the Employer’s Representative will not proceed with the
instruction. However, if the Contractor and the Employer cannot agree on the price during
consultations under Sub-Clause 3.5 [Provisional Sums], this is no reason to delay the work.

Once the Variation instruction is issued, the Contractor must comply (unless he gives Notice

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of a reason not to do so under Sub-Clause 13.1 [Right to Vary]). If the Parties cannot agree
on the cost, then the Employer’s Representative will determine what he considers to be a
fair price, and this is what the Contractor will be paid. If the Contractor is not happy with
the price, he can submit a claim to the Employer’s Representative under Sub-Clause 20.1

13.4 Payment in Applicable Currencies

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[Contractor’s Claims], but in the meantime he must proceed with the work.

If the Contract provides for payment of the Contract Price in more than one currency,
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then whenever an adjustment is agreed, approved or determined as stated above,
the amount payable in each of the applicable currencies shall be specified. For this
purpose, reference shall be made to the actual or expected currency proportions of
the cost of the varied work, and to the proportions of various currencies specified
for payment of the Contract Price.
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If this Sub-Clause applies, the Variation instruction should specify the amount payable in
each applicable currency.

13.5 Provisional Sums

Each Provisional Sum shall only be used, in whole or in part, in accordance with the
OR

Employer’s Representative’s instructions, and the Contract Price shall be adjusted

accordingly. The total sum paid to the Contractor shall include only such amounts,
for the work, supplies or services to which the Provisional Sum relates, as the
Employer’s Representative shall have instructed. For each Provisional Sum, the
Employer’s Representative may instruct:
TF

(a) work to be executed (including Plant, Materials or services to be supplied) by

the Contractor and valued under Sub-Clause 13.3 [Variation Procedure]; and/or
(b) Plant, Materials or services to be purchased by the Contractor, for which there
shall be included in the Contract Price:
(i) the actual amounts paid (or due to be paid) by the Contractor; and
(ii) a sum for overhead charges and profit, calculated as a percentage of these
NO

actual amounts by applying the relevant percentage rate (if any) stated in the
appropriate Schedule. If there is no such rate, the percentage rate stated in
the Contract Data shall be applied.
The Contractor shall, when required by the Employer’s Representative, produce
quotations, invoices, vouchers and accounts or receipts in substantiation.

Provisional Sums are included in the Contract by the Employer to cover work or Plant or
Materials or services for which the Employer wishes to make provision in the Contract, but
does not ask the tenderer to price when submitting his tender. The tenderer simply includes

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 the sum as instructed by the Employer. However, the money, and the items to which the
money refers (if specified) can only be used upon the written instruction of the Employer’s
Representative. He will instruct the Contractor of the work to be done or the services to be
purchased, and the amount to be spent, which may be all or just a part of the Provisional
Sum concerned. Sometimes the Contractor will be free to carry out the work himself, or
choose a supplier himself, and sometimes the Employer’s Representative will name or
nominate the person whom he requires shall be engaged by the Contractor for the work,
such as nominating a Sub-Contractor (who will then become a nominated Sub-Contractor

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under Sub-Clause 4.5 [Nominated Subcontractors]).

If the Employer’s Representative decides not to use a particular Provisional Sum, that

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money will remain unused and the Contractor has no right or claim to it.

When work is ordered, the Contractor is entitled to be paid the actual amount he has paid
for such work or service, plus a sum to cover his overheads and he is also entitled to an
element of profit. Unless the schedule for which money from the Provisional Sum is being
used specifically gives the sum or rate to be used for calculating the overheads and profit,

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then the percentage given in the Contract Data shall be used.

If the amount due to the Contractor exceeds the amount of the Provisional Sum, the
Employer must find additional funds to pay the Contractor.

13.6 Adjustments for Changes in Legislation

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Adjustments to the execution of the Works or provision of the Operation Service
necessitated by a change in Law shall be dealt with as a Variation and as provided
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for under Clause 13 [Variations and Adjustments]. Either Party may, by written
Notice to the other, require that adjustments shall be made to the provision of the
Contract as are necessary to enable the Contractor to comply with changes in Law.
The Contract Price and programme for design, execution and operation of the Works
shall be adjusted to take account of any increase or decrease in cost resulting from
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a change in the Laws of the Country (including the introduction of new Laws and
the repeal or modification of existing Laws) or in the judicial or official governmental
interpretation of such Laws or changes to technical standards and regulations in
accordance with Sub-Clause 5.4 [Technical Standards and Regulations], made after
the Base Date, which affect the Contractor in the performance of obligations under
the Contract.
If the Contractor suffers (or will suffer) delay and/or incurs (or will incur) additional
OR

cost as a result of these changes in the Laws or in such interpretations, made after
the Base Date, the Contractor shall give Notice to the Employer’s Representative
providing evidence supporting any adjustment, an indication of the nature of change
in cost and how the Contractor proposes to implement the necessary change.
The Contractor shall be entitled, subject to Sub-Clause 20.1 [Contractor’s Claims],
TF

to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) payment of any such additional Cost, which shall be included in the Contract
Price.
After receiving this Notice, the Employer’s Representative shall proceed in
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accordance with Sub-Clause 3.5 [Determinations] to agree or determine these

matters.

This Sub-Clause protects both Parties in the event that there is a change in Law (see
Definition 1.1.47), which occurs after the Base Date (see Definition 1.1.5) and which has an
effect on the Works and results in a change in cost or programme. Normally such changes
will either increase the cost of or delay the execution of the Works, and the Contractor can
proceed according to Sub-Clause 20.1 [Contractor’s Claim] to claim the extra, provided he
can substantiate his claim.

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 However, this Sub-Clause will also protect the Employer if there is a change in Law which,
for example, exempts the Contractor’s work force from paying income tax. In such a case,
the Employer could reasonably expect that the Contractor’s labour rates would be reduced,
and under this Sub-Clause (via Sub-Clause 20.2 [Employer’s Claims]) he could claim a
reduction in the Contract Price.

13.7 Adjustments for Changes in Technology

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The Contract Price and programme for design, execution and operation of the
Works shall be adjusted to take into account any increase or decrease in cost
resulting from any changes in technology, new materials or products which the

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Contractor is obliged to adopt, either:
(a) where a proposal from the Contractor under Sub-Clause 13.2 [Value Engineering]
is accepted by the Employer’s Representative;
(b) where the Employer’s Representative instructs the Contractor to use new
technology or new materials or products; or
(c) there is a statutory requirement for the Contractor to use new technology or

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new materials or products.
In any such case, the Contractor shall be entitled subject to Sub-Clause 20.1
[Contractor’s Claims] to:
(i) an extension of time for any such delay, if the events delay the completion of the
Design-Build; and
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(ii) any additional Cost, subject to an adjustment for any operational or other
savings which the Contractor may make as a result of the introduction of such
new technology, materials or products.
After receiving a Notice of claim, the Employer’s Representative shall proceed in
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accordance with Sub-Clause 3.5 [Determinations] to agree or determine these
matters. Where appropriate, the Employer’s Representative shall issue a Variation
to the Contractor with details of the required changes.

If certain events (listed in paragraphs (a), (b) and (c) of this Sub-Clause) result in the
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Contractor being obliged to incorporate new technology or new products in the Works
which results in either an increase or a decrease in the cost of the work, the Contractor will
be entitled to claim his Cost and an extension of time if there is a delay to completion of
the Design-Build. If the event occurs during the Operation Service Period, the Contractor is
entitled to receive financial compensation, but no time extension, as the Operation Service
Period is fixed and no time extensions allowed.
OR

Since the Sub-Clause also refers to a “decrease in cost”, the Employer may also make use
of this Sub-Clause and claim for a reduction in the Contract Price under Sub-Clause 20.2
[Employer’s Claims].

If necessary, the Employer’s Representative must issue a Variation instruction (see Sub-
TF

Clause 13.3 [Variation Procedure]) to cover the required changes.

13.8 Adjustments for Changes in Cost

The Contract Price and the Rates and Prices shall be adjusted in accordance with
the Schedules of cost indexation as contained in the Schedule of Payments. If there
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are no such Schedules of cost indexation included in the Contract, this Sub-Clause
shall not apply.

It would be normal for a long-term DBO contract to contain some provision for cost
escalation, especially during the Operation Service Period. These provisions should be
contained in the Schedule of Payments (see Definition 1.1.69). Normally the Contractor will
need to know these provisions when pricing his tender. However, if they are not contained
there or elsewhere in the Contract prior to the Contract coming into force, the Parties should
agree some appropriate indices. If they do not, and the Contract remains silent regarding this

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 issue, then this Sub-Clause 13.8 [Adjustments for Changes in Cost] shall not apply and the
Contract will in effect be on a fixed price basis for the entire duration of the Contract Period.

The inclusion of a “hardship” clause may even be justified and appropriate during the
Operation Service Period given its long (20-year) duration. In such a clause, the Parties
recognise that it may be impracticable to make provision for every contingency which may
arise, and state their intention that the Contract shall operate between them with fairness
and without prejudice to the interests of either of them. If it is intended to include such a

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provision, then legal help should be sought when drafting the clause.

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Clause 14 Contract Price and Payment

There are a number of different ways in which the Contractor can be reimbursed under a
DBO arrangement. The method of remuneration will be reflected in the manner in which
tenderers are required to submit their prices when tendering.

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The sample Letter of Tender provided at the end of the DBO document, requires that
tenderers submit their price to contain three component lump-sum amounts: one for the
Design-Build of the Works, one for the Operation Service, and one covering the amount of

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the Asset Replacement Fund. This requirement reflects the manner in which the Contractor
will be paid according to the provisions of this Clause 14 of the Contract. He is paid by the
Employer for the work he does, and his reimbursement does not depend on the income or
revenue generated by the operation of the facility.
NT
Other alternative methods of payment may include a situation where the Contractor is paid
for designing and constructing the facility, but he is dependent on the revenue from the
operation of the facility to finance his operation costs. Or, the financing of the project may
be a joint financing arrangement where the Contractor is providing a part of the financing.
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If another method of remuneration is to be incorporated, not only will the provisions of

Clause 14 need to be carefully re-drafted, but other factors such as ownership, risk and
liability may need to be reviewed. In such a case it is recommended that expert help be
sought to prepare and draft the necessary changes.

Any such changes should be included in the Particular Conditions Part B – Special
Provisions.
OR

14.1 The Contract Price

The Contract Price shall be the amount or amounts submitted by the Contractor
for the Design-Build and the Operation Service including the Asset Replacement
TF

Fund, priced at the Base Date, and due to be paid to the Contractor in accordance
with the Contract together with any adjustments as provided for under Clause
13 [Variations and Adjustments] or arising as a result of claims under Clause 20
[Claims, Disputes and Arbitration].
The Contractor shall pay all taxes, duties and fees required to be paid by him under
the Contract and the Contract Price shall not be adjusted for changes in any of
NO

these costs, except as provided for in Sub-Clause 13.6 [Adjustments for Changes
in Legislation] and to the extent allowed for under Clause 20 [Claims, Disputes and
Arbitration].

The Contract Price is the amount which the Contractor actually receives and should not be
confused with the Accepted Contract Amount (see Definition 1.1.1). It is made up of three
elements: the price for the Design-Build; the price for the Operation Service; and the price
of the Asset Replacement Fund. It includes any adjustments which are made under the
Contract such as amounts due for Variations, any adjustments for costs made under Sub-

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 Clause 13.8 [Adjustments for Changes in Cost], and any claims which have been agreed or
determined in accordance with the provisions of Sub-Clause 3.5 [Determinations]. It will also
include any decisions given by the Dispute Adjudication Board where a matter has been
referred to the DAB. The Contract Price includes all taxes and fees and other impositions
which the Contractor is required to pay, and the only reason the Contractor can claim
additional costs in this respect is if there have been any changes in legislation as covered
in Sub-Clause 13.6 [Adjustments for Changes in Legislation].

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14.2 Advance Payment

The Employer shall make an advance payment, as an interest-free loan for

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mobilisation and design, when the Contractor submits a guarantee in accordance
with this Sub-Clause that shall be based on the sample form included in the tender
documents or in another form acceptable to the Employer. The amount of the
advance payment and the applicable currencies shall be as stated in the Contract
Data.
Unless and until the Employer receives this guarantee, or if no advance payment is

CT
stated in the Contract Data, this Sub-Clause shall not apply.
The Employer’s Representative shall issue an Interim Payment Certificate for the
advance payment under Sub-Clause 14.7 [Issue of Advance and Interim Payment
Certificates] after receiving an application under Sub-Clause 14.3 [Application for

RA
Advance and Interim Payment Certificates] and after the Employer receives (i) the
Performance Security in accordance with Sub-Clause 4.2 [Performance Security]
and (ii) a guarantee in amounts and currencies equal to the advance payment. This
guarantee shall be issued by an entity and from within a country (or other jurisdiction)
approved by the Employer, and shall be based on the sample form included in the
NT
tender documents or in another form approved by the Employer.
The Contractor shall ensure that the guarantee is valid and enforceable until the
advance payment has been repaid, but its amount may be progressively reduced
by the amount repaid by the Contractor as indicated in the Interim Payment
Certificates.
CO

If the terms of the guarantee specify its expiry date, and the advance payment has
not been repaid by the date 28 days prior to the expiry date, the Contractor shall
extend the validity of the guarantee until the advance payment has been repaid.
The advance payment shall be repaid through percentage deductions in Interim
Payment Certificates. Unless other percentages are stated in the Contract Data:
(a) deductions shall commence in the Interim Payment Certificate in which the total
of all certified interim payments (excluding the advance payment and deductions
OR

and repayments of retention) exceeds ten percent (10%) of the Accepted

Contract Amount for the Design-Build less Provisional Sums; and
(b) deductions shall be made at the amortisation rate of one-quarter (25%) of the
amount of each Interim Payment Certificate (excluding the advance payment
and deductions and repayments of retention) issued during the Design-Build
TF

Period.
If the advance payment has not been repaid prior to the issue of the Commissioning
Certificate or prior to termination under Clause 15 [Termination by Employer], Clause
16 [Suspension and Termination by Contractor] or Clause 18 [Exceptional Risks]
(as the case may be), the whole of the balance then outstanding shall immediately
become due and payable by the Contractor to the Employer.
NO

It is very common for the Employer to make some form of advance payment (sometimes
called a mobilisation payment, or interest-free loan) in order to help the Contractor with
some of his early costs and expenditures before he has reached the stage where he can
submit an Interim Payment Certificate under Sub-Clause 14.3 [Application for Advance
and Interim Payment Certificates]. The amount of the advance payment needs to be
given in the Contract Data and is very often (but not always) in the order of 10% of the
Accepted Contract Amount. If no amount is given in the Contract Data, this Sub-Clause
will not apply.

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 A pre-requisite for paying the advance payment (apart from the amount being named in
the Contract Data) is that the Contractor shall have given the Employer a guarantee in the
form of the sample included in the Sample Forms section at the end of the document or in
another form acceptable to the Employer. The guarantee must be initially for the amount of
the advance payment, and it must be valid until the advance payment has been fully repaid.
However, as the advance payment is progressively repaid by deductions in each Payment
Certificate, as described in this Sub-Clause, the amount of the guarantee may be reduced
by a similar amount.

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If the Employer wishes to change the manner in which the advance payment is to be
re-paid, he must clearly state this in the Particular Conditions Part B, so that the Contractor

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had the opportunity of making due allowance when pricing his tender.

A further requirement is that the Contractor has provided his Performance Security
in accordance with Sub-Clause 4.2 [Performance Security] before the Employer’s
Representative will issue a Payment Certificate for the advance payment.

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Normally the provisions for repaying the advance payment by making deductions from
each Interim Payment Certificate will be sufficient to ensure that the entire amount has been
repaid before the Commissioning Certificate is issued, but if it has not, or if the Contract is
terminated and there is still some of the advance payment outstanding, the full outstanding

14.3
applicable Payment Certificate.

Contractor’s Representative
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balance becomes immediately due to the Employer and should be deducted from the next
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When submitting the advance payment guarantee required under Sub-Clause 14.2
[Advance Payment], the Contractor shall include his application for the advance
payment.
The Contractor shall thereafter submit a Statement in one original and five copies to
the Employer’s Representative after the end of each month (unless otherwise stated
CO

in the Contract), in a form approved by the Employer’s Representative, showing in

detail the amounts to which the Contractor considers himself to be entitled, together
with supporting documents.
The Statement shall include the following items, as applicable, which shall be
expressed in the various currencies in which the Contract Price is payable:
(a) the estimated contract value of the Works executed and the Contractor’s
Documents produced up to the end of the month (including Variations but
OR

excluding items described in sub-paragraphs (b) to (j) below);

(b) any amounts to be added and deducted for changes in legislation, changes
in cost and changes in technology, in accordance with Sub-Clause 13.6
[Adjustments for Changes in Legislation], Sub-Clause 13.7 [Adjustments for
Changes in Technology] and Sub-Clause 13.8 [Adjustments for Changes in
TF

Cost];
(c) any amount to be deducted for retention, calculated by applying the percentage
of retention stated in the Contract Data to the total of the above amounts, until
the amount so retained by the Employer’s Representative reaches the limit of
Retention Money (if any) stated in the Contract Data;
(d) any amounts to be added and deducted for the advance payment and
NO

repayments in accordance with Sub-Clause 14.2 [Advance Payment];

(e) any amounts to be added and deducted for Plant and Materials in accordance
with Sub-Clause 14.6 [Payment for Plant and Materials intended for the Works];
(f) any amounts due for Plant, Materials or services purchased by the Contractor
under Sub-Clause 13.5 [Provisional Sums];
(g) amounts due for the Operation Service;
(h) amounts due from the Asset Replacement Fund;
(i) adjustments due for the Maintenance Retention Fund;
(j) any other additions or deductions which may have become due under the

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 Contract or otherwise, including those under Clause 20 [Claims, Disputes and
Arbitration]; and
(k) the deduction of amounts certified in all previous Interim Payment Certificates.

This Sub-Clause gives the procedures to be followed by the Contractor in making

application for payment. His application is submitted to the Employer’s Representative
who, after checking its correctness, will issue a Payment Certificate to the Employer, and it
is against this Payment Certificate that the Employer makes payment to the Contractor in

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accordance with Sub-Clause 14.8 [Payment].

The Contractor’s first application for payment will be in respect of the advance payment and

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he submits this at the same time as he submits the advance payment guarantee required
under Sub-Clause 14.2 [Advance Payment]. This will normally be a simple application which
he can submit as soon as the guarantee is ready.

For normal interim payments, the Contractor will prepare applications in accordance with
the payment provisions included in the Contract, and this will usually be at monthly intervals.

CT
The Contractor is required to submit his application in an original and five copies and he
should have agreed the format of his application with the Employer’s Representative. In his
application he is entitled to include “the amounts to which the Contractor considers himself

RA
to be entitled”, so, whether it is the amount of work he has done, or his entitlement to a
claim, or in respect of other events which he feels entitle him to additional reimbursement,
the Contractor is entitled to include all these in his application together with full supporting
evidence and documentation. Whether all items will be included for payment in the
Payment Certificate issued by the Employer’s Representative will depend on the Employer’s
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Representative’s evaluation of the facts and supporting evidence and the provisions of the
Contract.

Whatever the Contractor chooses to include in his application must be presented in a

proper Statement and address each of the paragraphs (a) to (k) in the Sub-Clause.
CO

It is up to the Contractor to ensure that his application is complete with all supporting
evidence such as reference to DAB decisions and arbitral awards under Sub-Clause
14.3(j) in order that the Employer’s Representative may verify the amount claimed for
payment.

14.4 Schedule of Payments

OR

If the Contract includes a Schedule of Payments for the Design-Build Period and/
or the Operation Service Period specifying the instalments in which the Contract
Price and/or the Rates and Prices will be paid, then, unless otherwise stated in this
Schedule:
TF

(a) the instalments quoted in the Schedule of Payments shall be the estimated
values for the purposes of Sub-Clause 14.3 [Application for Advance and
Interim Payment Certificates];
(b) Sub-Clause 14.6 [Payment for Plant and Materials intended for the Works] shall
not apply; and
(c) if these instalments are not defined by reference to the actual progress achieved
NO

in executing the Works, and if actual progress is found to differ from that on
which the Schedule of Payments was based, then the Employer’s Representative
may proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or
determine revised instalments which shall take account of the extent to which
progress differs from that on which the instalments were previously based.
If the Contract does not include a Schedule of Payments for the Design-Build
Period and/or the Operation Service Period, the Contractor shall submit non-
binding estimates of the payments which he expects to become due during each
quarterly period. The first estimate shall be submitted within 42 days after the

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 Commencement Date. Revised estimates shall be submitted at quarterly intervals
until the Contract Completion Certificate has been issued.

If the Contract does not contain a Schedule of Payments, the only part of this Sub-Clause
which will apply will be the last paragraph which addresses the particular case when there
is no Schedule of Payments in the Contract and requires the Contractor to give a quarterly
estimate of his expected income. This can not only be very useful for the Contractor when
planning and analysing his cash flow, but also very useful for the Employer when planning

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his project budget.

If a Schedule of Payments is planned, it may take various forms, for example:

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(a) an agreed amount per month based on the foreseen progress of the Contractor
according to his programme;
(b) a percentage of the Accepted Contract Amount (see Definition 1.1.1) to be paid to the
Contractor every month;
(c) foreseen achievement of milestones; or

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(d) actual achievement of milestones.

All of these, except the actual achievement of milestones, assume the Contractor will follow
his programme and that there will be no interruptions or disturbances caused by Variations

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or other hindrances during the progress of the Works. This means that the Schedule of
Payments will need carefully monitoring and maybe adjusting as work proceeds to allow
for such events. Such adjustments will need to be made by the Employer’s Representative
acting in accordance with Sub-Clause 3.5 [Determinations], which means, ideally, that the
adjustments should be agreed between the Parties before being implemented.
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A Schedule based on actual achievement of milestones will make payments dependent
on the Contractor’s performance, but such a Schedule will need adjusting if and when
Variations are introduced or other events occur entitling the Contractor to additional
payment.
CO

The use of milestones or key events as payment criteria should be used wisely. If the
monetary value of an event is very high, or the time for completing that event very long, it will
be necessary to introduce some stage payments in the interim in order that the Contractor
receives due payment in due time and is not subjected to financial stress waiting for some
minor works to be completed before he becomes entitled to payment for a major element
of the Works.
OR

Some parts of the Contract are more readily suitable to the use of a Schedule of Payments
than others, such as the Operation Service Period, where it would be simple to agree a
monthly payment to be made to the Contractor.
TF

14.5 Asset Replacement Schedule

Payments from the Asset Replacement Fund shall be made in accordance with the
provisions of Sub-Clause 14.18 [Asset Replacement Fund].
On no account will payments be made for assets replaced which are not identified
in the Asset Replacement Schedule unless they have been instructed as a Variation
NO

under Clause 13 [Variations and Adjustments].

If Assets are replaced in advance of the date given in the Asset Replacement
Schedule, payment will not be released until the date stated in the Schedule has
been reached.
If Assets are not replaced on or before the scheduled date, payment will not be
released until such replacements have been effected.
Any monies remaining in the Asset Replacement Fund at the time of issue of the
Contract Completion Certificate will be disbursed between the Parties as described
in Sub-Clause 14.18 [Asset Replacement Fund].

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 An important part of the Contract comprises the provisions relating to the replacement of
items which have a life of less than 20 years and will thus have to be replaced to ensure the
continued efficient operation of the facility.

The Asset Replacement Schedule is prepared by the Contractor and included as part of his
tender for the Works. The content of the Schedule will depend on how often the Contractor
foresees that Materials and Plant will need replacing during the Operation Service Period,
which in turn will depend on the basic quality and life of plant and materials which he has

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incorporated in the design. It is expected that the Contractor will try to optimise the quality
and cost of the basic design with the cost and frequency of the need to replace critical items
during the Operation Service Period.

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Only items which the Contractor has identified for replacement in the Schedule will be
paid from the Asset Replacement Fund under Sub-Clause 14.8 [Payment]. If items need
replacing which have not been so identified, the Contractor must replace them at his own
cost unless he can reasonably show that the need for such replacement was due to an act
or failure of the Employer or persons for whom the Employer is responsible. The reason for

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this is that the value of the Asset Replacement Fund is, by definition (see Definition 1.1.1)
a part of the Accepted Contract Amount, and it is not acceptable for the Contractor to win
the Contract by including an incomplete Asset Replacement Schedule (and thus a low value
Fund) and try to recover this later.

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There are other conditions concerning the replacement of Assets. Firstly if it is necessary
to replace an Asset before the date given in the Schedule, the Contractor is not entitled to
payment from the Fund until the date stated in the Schedule has been reached. Secondly,
if the Asset is replaced later than the date in the Schedule, payment will be released on
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the date of the actual replacement, and thirdly, if the Asset is not replaced by the time
the Contract Completion Certificate is issued, then the remaining money shall be shared
equally between the Employer and the Contractor, and the Contractor can include his
share in his application for the Final Payment Certificate Operation Service submitted in
accordance with Sub-Clause 14.13 [Application for Final Payment Certificate Operation
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Service].

14.6 Payment for Plant and Materials intended for the Works

If this Sub-Clause applies, Interim Payment Certificates shall include, under sub-
paragraph (e) of Sub-Clause 14.3 [Application for Advance and Interim Payment
Certificates ], (i) an amount for Plant and Materials which have been sent to the Site
OR

for incorporation in the Permanent Works, and (ii) a reduction when the contract
value of such Plant and Materials is included as part of the Permanent Works under
sub-paragraph (a) of Sub-Clause 14.3.
If the lists referred to in sub-paragraphs (b)(i) or (c)(i) below are not included in the
Contract Data, this Sub-Clause shall not apply.
TF

The Employer’s Representative shall determine and certify each addition if the
following conditions are satisfied:
(a) the Contractor has:
(i) kept satisfactory records (including the orders, receipts, costs and use of
Plant and Materials) which are available for inspection; and
(ii) submitted a statement of the cost of acquiring and delivering the Plant and
NO

Materials to the Site, supported by satisfactory evidence; and either:

(b) the relevant Plant and Materials:
(i) are those listed in the Contract Data for payment when shipped;
(ii) have been shipped to the Country, en route to the Site, in accordance with
the Contract; and
(iii) are described in a clean shipped bill of lading or other evidence of shipment,
which has been submitted to the Employer’s Representative together
with evidence of payment of freight and insurance, any other documents
reasonably required, and a bank guarantee in a form and issued by an

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 entity approved by the Employer in amounts and currencies equal to the
amount due under this Sub-Clause. This guarantee may be in a similar form
to the form referred to in Sub-Clause 14.2 [Advance Payment] and shall be
valid until the Plant and Materials are properly stored on Site and protected
against loss, damage or deterioration; or
(c) the relevant Plant and Materials:
(i) are those listed in the Contract Data for payment when delivered to the Site;
and

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(ii) have been delivered to and are properly stored on the Site, are protected
against loss, damage or deterioration, and appear to be in accordance with
the Contract.

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The additional amount to be certified shall be the equivalent of eighty percent
(80%) of the Employer’s Representative determination of the cost of the Plant and
Materials (including delivery to Site), taking account of the documents mentioned in
this Sub-Clause and of the contract value of the Plant and Materials.
The currencies for this additional amount shall be the same as those in which
payment will become due when the contract value is included under sub-paragraph

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(a) of Sub-Clause 14.3 [Application for Advance and Interim Payment Certificates].
At that time, the Interim Payment Certificate shall include the applicable reduction
which shall be equivalent to, and in the same currencies and proportions as, this
additional amount for the relevant Plant and Materials.

RA
This Sub-Clause recognizes that the Contractor will have paid his suppliers for most of the
Plant and Materials before they have been shipped to the Site ready for installation, and
makes provision for the Contractor to be paid for certain items prior to them reaching the
Site. However there are certain conditions which the Contractor needs to fulfil before he is
NT
entitled to claim payment, and if he has not met those conditions then he cannot use the
benefits of this Sub-Clause.

Firstly, the Contractor must have identified those items for which he requires payment on
shipping with prices, and these, once agreed must be listed in the Contract Data.
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Secondly, they must have actually been shipped: they cannot be items which are still at
the Contractor’s or his supplier’s’ premises, even if they are ready for shipping. Under
paragraph (c) this includes items which have already arrived at Site (but not yet installed)
provided that they have been properly stored and protected.

Thirdly, they must be in accordance with the Contract, and this will have been verified by the
OR

Employer’s Representative or Employer’s Personnel when carrying out inspections under

Sub-Clause 7.3 [Inspection].

Fourthly, proper paper work is required in the form of receipts, shipping documents,
evidence of insurance, and provision of a bank guarantee.
TF

If this has been provided, then the Contractor is entitled to claim eighty percent (80%) of the
agreed value of the item including shipping costs.

Once the item has been installed, and payment has been claimed and certified for the
installed item at the rates in the Contract, then a reduction will need to be made to the
NO

payment to compensate for the monies which the Contractor has already been paid under
this Sub-Clause.

14.7 Issue of Advance and Interim Payment Certificates

No amount will be certified or paid until the Employer has received and approved
the Performance Security provided for in Sub-Clause 4.2 [Performance Security].
Upon receipt of the Contractor’s application for the advance payment, the
Employer’s Representative shall, within 14 days of receiving the application, issue

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 to the Employer an Interim Payment Certificate in respect of such payment, with a
copy to the Contractor. Thereafter, in respect of interim payment applications the
Employer’s Representative shall, within 28 days after receiving a Statement and
supporting documents, issue to the Employer an Interim Payment Certificate which
shall state the amount which the Employer’s Representative fairly determines to be
due, with supporting particulars, and shall include any amounts due to or from the
Contractor in accordance with a decision by the DAB made under Sub-Clause 20.6
[Obtaining Dispute Adjudication Board’s Decision].

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However, prior to issuing the Commissioning Certificate, the Employer’s
Representative shall not be bound to issue an Interim Payment Certificate in
an amount which would (after retention and other deductions) be less than the

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minimum amount of Interim Payment Certificates (if any) stated in the Contract Data.
In this event, the Employer’s Representative shall give Notice to the Contractor
accordingly.
An Interim Payment Certificate shall not be withheld for any other reason, although:
(a) if any thing supplied or work done by the Contractor is not in accordance with
the Contract, the cost of rectification or replacement may be withheld until

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rectification or replacement has been completed; and/or
(b) if the Contractor was or is failing to perform any work or obligation in accordance
with the Contract, and had been so notified by the Employer’s Representative,
the value of this work or obligation may be withheld until the work or obligation
has been performed.
RA
The Employer’s Representative may in any Payment Certificate make any correction
or modification that should properly be made to any previous Payment Certificate.
An Interim Payment Certificate shall not be deemed to indicate the Employer’s
Representative’s acceptance, approval, consent or satisfaction of the Works.
NT
This is a very important Sub-Clause, as it is the link between the Contractor’s application
to be paid, and the Employer’s obligation to pay him, and it applies in respect of both the
Contractor’s application for payment of the Advance Payment, and his applications for
interim payments.
CO

As mentioned under Sub-Clause 14.2 [Advance Payment], the Employer has no obligation
to pay the Advance Payment until he has received and approved the Performance Security,
irrespective of whether the Employer’s Representative has submitted the Payment Certificate
for the Advance Payment or not. If the Employer has not received the Performance Security
he is under no obligation to make payment under Sub-Clause 14.8 [Payment]: in fact he can
wait 21 days after he has received all the documents before making payment.
OR

Once the Employer’s Representative receives an application he must act expeditiously to

check the application and issue the Payment Certificate. For the Advance Payment, he
has 14 days after receiving the application to issue the Certificate, and in respect of interim
payments, he has 28 days. During this time he must check the application for errors or
TF

for payments which in his (the Employer’s Representative’s) opinion are not due, and then
prepare and issue a Payment Certificate for the amount which he “fairly determines to be
due”. So the Certificate is for the amount which the Employer’s Representative considers to
be correct, except when any amount is due following a decision of the DAB. In such cases
the amount is not subject to the opinion of the Employer’s Representative, and he must
include such amount as awarded, bearing in mind that such a decision may be in favour
NO

of the Employer and be in the form of a reduction in the amount due to the Contractor.
(Although the Sub-Clause does not specifically mention it, the same would apply for arbitral
awards).

If the amount of the due payment is less than the minimum amount of Interim Payment
Certificates stated in the Contract Data, he does not have to issue a Certificate, and the
amount due will be held over and included in the next due Interim Certificate. In all other
cases, the Employer’s Representative shall (must) issue a Certificate within the 28 days
permitted under this Sub-Clause. If he is late, there is still a chance that the Employer can

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 meet the requirements of the Contract and pay the Contractor within the time stipulated
in Sub-Clause 14.8 [Payment]. But even if the Employer’s Representative needs to make
a correction to the Contractor’s application, or finds that the Contractor has included
items which should not have been included, the Employer’s Representative must issue a
Certificate for the amount he can verify and justify. He cannot refuse to certify. If he does
refuse or fails to issue a Certificate after receiving a proper application from the Contractor,
the Contractor can firstly give 21 days Notice and suspend work under Sub-Clause 16.1
[Contractor’s Entitlement to Suspend Work], or, if the delay is more serious and exceeds

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56 days after receiving the application, the Contractor can terminate the Contract in
accordance with Sub-Clause 16.2 [Termination by Contractor].

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Finally under this Sub-Clause, the important point is made that certification of payment, or
indeed payment itself, does not mean that the Works have been accepted or approved, and
the Employer’s Representative is permitted to make any correction to any previously issued
Certificate that he finds to be necessary.

14.8 Payment

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The Employer shall pay to the Contractor:
(a) the advance payment within 21 days after receiving the documents in
accordance with Sub-Clause 4.2 [Performance Security] and Sub-Clause 14.2

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[Advance Payment] and the Payment Certificate for the advance payment
issued in accordance with Sub-Clause 14.7 [Issue of Advance and Interim
Payment Certificates];
(b) the amount certified in each Interim Payment Certificate within 56 days
after the Employer’s Representative receives the corresponding Statement
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and supporting documents, including any amounts due in accordance with
a decision by the DAB which have been included in the Interim Payment
Certificate; and
(c) the amounts certified in the Final Payment Certificate Design-Build and the
Final Payment Certificate Operation Service within 56 days after the Employer
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receives each such Final Payment Certificate, including any amounts due in
accordance with a decision by the DAB which have been included in the Final
Payment Certificate.
Payment of the amount due in each currency shall be made into the bank account,
nominated by the Contractor, in the payment country (for this currency) specified
in the Contract.
OR

This Sub-Clause makes it clear that once the Employer’s Representative has certified an
amount as being due for payment, then the Employer must (shall) pay. He cannot refuse to
pay or reduce the amount. Paragraph (b) also makes it clear that he must pay any amounts
awarded by the DAB. Even if he intends to question a decision by the DAB or submit the
matter further to arbitration, he must pay the amount awarded by the DAB as included in
TF

the Payment Certificate. If the decision of the DAB is later varied or reversed by arbitration,
the Employer can at that time make the necessary correction, but not until the arbitral award
is received.

The Employer also has strict time limits within which to pay, and if he fails to meet these
dates, then the Contractor has rights under Sub-Clauses 16.1 [Contractor’s Entitlement
NO

to Suspend Work] and 16.2 [Termination by Contractor] to firstly to suspend work until
payment is received, then if payment has not been received within 42 days after the period
stated in this Sub-Clause 14.8, the Contractor may terminate the Contract.

14.9 Delayed Payment

If the Contractor does not receive payment in accordance with Sub-Clause

14.8 [Payment], the Contractor shall be entitled to receive financing charges
compounded monthly on the amount unpaid during the period of delay. This period

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 shall be deemed to commence on the date for payment specified in Sub-Clause
14.8 [Payment], irrespective (in the case of its sub-paragraph (b)) of the date on
which any Interim Payment Certificate is issued.
Unless otherwise stated in the Contract Data, these financing charges shall be
calculated at the annual rate of three percentage points above the discount rate of
the central bank in the country of the currency (or currencies if more than one) of
payment, and shall be paid in such currencies.
The Contractor shall be entitled to this payment without formal Notice or certification,

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and without prejudice to any other right or remedy.

The Contractor’s rights to suspend and ultimately terminate the Contract under Clause 16

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[Suspension and Termination by Comtractor] if he is not paid relate to substantial delays
beyond the time limits given in Sub-Clause 14.8 [Payment].

Sub-Clause 14.9 [Delayed Payment] covers the right of the Contractor to recover his
‘financing charges’ (sometimes called ‘interest’) as soon as payments are delayed beyond
the times for payment given in Sub-Clause 14.8 [Payment]. This right is an automatic right

CT
which does not require him to give Notice. But he will be required to provide evidence of
the delay in the form of either his Statement (Sub-Clause 14.3 [Application for Advance and
Interim Payment Certificates]) or the Employer’s Representative’s Payment Certificate (Sub-
Clause 14.7 [Issue of Advance and Interim Payment Certificates]), establishing the date from

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which the Employer’s time to pay is calculated, and a statement or other evidence from his
bank establishing when payment was actually made (Sub-Clause 14.8 [Payment]). From
these documents the Contractor can calculate, and the Employer’s Representative can
verify, the amount of financing charges due.
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14.10 Payment of Retention Money

When the Commissioning Certificate has been issued, the first half of the
Retention Money shall be certified by the Employer’s Representative for
payment to the Contractor. If a Section Commissioning Certificate is issued for a
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Section, the relevant percentage of the first half of the Retention Money shall be
certified and paid to the Contractor. Such amount shall be included for payment
in the next Interim Payment Certificate following the issue of the Commissioning
Certificate.
The Contractor shall be entitled to include the second half of the Retention Money
in the Final Statement Design-Build.
OR

Retention Money (see Definition 1.1.65) is calculated and withheld at the rate given in the
Contract Data. However this money is released back to the Contractor once the Design-
Build has been completed. There is no Retention during the Operation Service although
Sub-Clause 14.19 [Maintenance Retention Fund] gives details of the Maintenance Retention
Fund which is established during the Operation Service Period.
TF

The Retention Money is released in two halves. The first half when the Commissioning
Certificate has been issued, and this shall be included in the next Interim Payment Certificate,
and the second half at the end of the Retention Period (provided that the Contractor has
completed all outstanding work etc required to be done before the end of the Retention
Period), and this shall be included in the Final Payment Certificate Design-Build.
NO

14.11 Application for Final Payment Certificate Design-Build

Within 28 days after the end of the Retention Period, the Contractor shall submit to
the Employer’s Representative one original and five copies of the Final Statement
Design-Build with supporting documents showing:
(a) the value of all work done in respect of the Design-Build; and
(b) any further sums which the Contractor considers to be due to him under the
Contract in respect of the Design-Build.

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 Together with the Final Statement Design-Build, the Contractor shall submit a
written undertaking that the Statement is in full and final settlement of all matters
under or in connection with the Contract relating to the Design-Build.
If the Employer’s Representative disagrees with or cannot verify any part of the
Final Statement Design-Build, the Employer’s Representative and the Contractor
shall attempt to agree such matters, and the Contractor shall re-submit his Final
Statement based on the agreement with the Employer’s Representative. The
Employer’s Representative shall then issue a Final Payment Certificate Design-Build

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under Sub-Clause 14.12 [Issue of Final Payment Certificate Design-Build] for the
agreed amount. If the Parties cannot agree on such matters, or if the Contractor has
failed to submit his application for payment within the said 28 days, the Employer’s

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Representative shall issue an Interim Payment Certificate under Sub-Clause 14.7
[Issue of Advance and Interim Payment Certificates] for the amount which he
considers to be due to the Contractor. If the Contractor is dissatisfied with the
amount certified, he may refer the matter to the DAB for a decision in accordance
with Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision].

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Although the Contract is still on-going, and the Contractor still has a continuing requirement
to operate the facility during the Operation Service Period and ensure that it remains ‘fit for
purpose’ during that time, this Sub-Clause is intended to finalise the financial aspects of the
Design-Build part of the Contract, leaving a facility, which is commissioned and approved

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as being in accordance with the Contract and fit for the purposes defined in the Contract.
The remainder of the Contract requires the Contractor to operate that facility during the
Operation Service Period.

The Contractor is required to submit his application within 28 days after the end of the
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Retention Period, and in it he shall include the value of all the work he has done under
the Contract, including all Variations, and also any other payment to which the Contractor
considers himself to be entitled. This could be claims or other circumstances or events
which he feels entitle him to additional payment. In order to ensure that the Contractor
does not continue to come up with claims relating to the Design-Build during the Operation
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Service Period, he is required to provide a written undertaking with his application, that it is
“full and final settlement” of all matters relating to the Design-Build and in effect saying that
the Contractor will not be coming up with any more claims.

As this application may well contain claims for payments which the Contractor has not
previously submitted, the Employer’s Representative will need to verify them before
including them in the Final Certificate Design-Build in accordance with Sub-Clause 14.12
OR

[Issue of Final Payment Certificate Design-Build], so if there are any such items the
Contractor will also need to also enclose his evidence in support of those claims. If the
Employer’s Representative cannot agree to any part of the Final Statement, and he and the
Contractor cannot agree on what should be included, then the Employer’s Representative
has to issue an Interim Payment Certificate (see Sub-Clause 14.7 [Currencies of Payment])
TF

for the amount he considers due, which the Employer will duly pay according to Sub-Clause
14.8 [Asset Replacement Fund]. If the Contractor is not happy with the amount certified,
he may submit the matter to the DAB for a decision on his entitlement. Once this decision
is given, the amount decided by the DAB can be used for inclusion in a revised application
by the Contractor, and by Sub-Clauses 14.7 [Currencies of Payment] and 14.8 [Asset
Replacement Fund], this amount must be certified and paid.
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14.12 Issue of Final Payment Certificate Design-Build

Within 28 days of receiving the Final Statement Design-Build, or the resubmitted

Final Statement (as the case may be), and the written undertaking from the
Contractor in accordance with Sub-Clause 14.11 [Application for Final Payment
Certificate Design-Build], the Employer’s Representative shall issue to the Employer,
with a copy to the Contractor, the Final Payment Certificate Design-Build stating:
(a) the amount which is finally due for the Design-Build; and

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 (b) after giving credit to the Employer for all amounts previously paid by the
Employer and all sums to which the Employer is entitled in respect of the
Design-Build, the balance (if any) due from the Employer to the Contractor or
from the Contractor to the Employer, as the case may be.
Upon receipt of the Final Payment Certificate Design-Build, the Employer shall pay
the Contractor the amount, if any, due in accordance with the provisions of Sub-
Clause 14.8 [Payment].

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When the Employer’s Representative receives an application from the Contractor which
he can agree, together with the Contractor’s written undertaking referred to in Sub-
Clause 14.11 [Application for Final Payment Certificate Design-Build¨], he must, within

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28 days prepare and submit to the Employer (with a copy to the Contractor) the Final
Payment Certificate Design-Build showing the final amount to which the Contractor is
due for the Design-Build. Under Sub-Clause 14.8 [Payment] the Employer must pay the
amount due within 56 days of receiving the Payment Certificate from the Employer’s
Representative.

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If the Employer’s Representative has been unable to verify the Contractor’s application
under Sub-Clause 14.11 [Application for Final Payment Certificate Design-Build], he must
issue an Interim Payment Certificate according to Sub-Clause 14.7, and the Employer must
pay the amount certified within 56 days of the date on which the Employer’s Representative

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received the Contractor’s Statement. Note that this is a shorter time than is allowed if the
Statement had been agreed and the amount to be paid was agreed as the Final Payment
Certificate Design-Build (see Sub-Clause 14.8 [Payment]).

14.13 Application for Final Payment Certificate Operation Service

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Within 56 days after receiving the Contract Completion Certificate, the Contractor
shall submit to the Employer’s Representative one original and five copies of the
Final Statement Operation Service with supporting documents showing:
(a) the value of all work done in respect of the Operation Service including
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authorised expenditure from the Asset Replacement Fund; and

(b) any further sums which the Contractor considers to be due to him under the
Contract including any unused monies from the Maintenance Retention Fund.
Together with the Final Statement Operation Service, the Contractor shall submit a
written discharge according to the requirements of Sub-Clause 14.14 [Discharge].

At the end of the Operation Service Period, within 56 days after receiving the Contract
OR

Completion Certificate, the Contractor must submit his application for the Final Payment
Certificate Operation Service to be issued. In this application he shall include all work done
in connection with the Operation Service and any further sums to which he considers
himself entitled in respect of the Operation Service. This application should not include
or repeat matters relating to the Design-Build, as these have already been dealt with and
TF

finalised under Sub-Clauses 14.11 [Application for Final Payment Certificate Design-Build]
and 14.12 [Issue of Final Payment Certificate Design-Build].

With his application, the Contractor is required to submit a written discharge in accordance
with Sub-Clause 14.14 [Discharge] which links the Final Statement Design-Build with
the Final Statement Operation Service and confirms that these two statements together
NO

represent the total amount due to the Contractor is due to be paid under the Contract.

14.14 Discharge

When submitting the Final Statement Operation Service, the Contractor shall submit
a written discharge which confirms that the total of the Final Statement Operation
Service, together with the Final Statement Design-Build submitted according to Sub-
Clause 14.11 [Application for Final Payment Certificate Design-Build] represents full
and final settlement of all monies due to the Contractor under or in connection with

© FIDIC 2011
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 the Contract. This discharge may state that it becomes effective only after payment
due under the Final Payment Certificate Operation Service has been made and the
Performance Security referred to in Sub-Clause 4.2 [Performance Security] has
been returned to the Contractor.

This discharge is similar in effect to the written undertaking provided by the Contractor
with his application for the Final Certificate Design-Build made under Sub-Clause
14.11 [Application for Final Payment Certificate Design-Build]. However, whereas the

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undertaking referred to the Design-Build, this discharge refers to the complete Contract.
As this discharge is given with the Contractor’s application, there are two conditions
included to ensure that the Employer fulfils his last principal obligations. The conditions to

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the discharge becoming effective are firstly that the Employer has paid the due amount
according the Final Payment Certificate Operation Service, and the second is that he has
returned the Performance Security to the Contractor as required under Sub-Clause 4.2
[Advance Payment].

14.15 Issue of Final Payment Certificate Operation Service

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Within 28 days of receiving the Final Statement Operation Service and the written
discharge from the Contractor in accordance with Sub-Clause 14.13 [Application
for Final Payment Certificate Operation Service] and Sub-Clause 14.14 [Discharge]

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respectively, the Employer’s Representative shall issue to the Employer, with a copy
to the Contractor, the Final Payment Certificate Operation Service stating:
(a) the amount which is finally due for the Operation Service; and
(b) the amount which is finally due for the Contract; and
(c) after giving credit to the Employer for all amounts previously paid by the
NT
Employer and all sums to which the Employer is entitled in respect of the
Contract, the balance (if any) due from the Employer to the Contractor or from
the Contractor to the Employer, as the case may be.
If the Employer’s Representative disagrees with or cannot verify any part of the Final
Statement Operation Service, the Employer’s Representative and the Contractor
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shall attempt to agree such matters, and the Employer’s Representative shall issue
a Final Payment Certificate Operation Service for the agreed amount. If the Parties
cannot agree on such matters, the Employer’s Representative shall issue a Final
Payment Certificate Operation Service for the amount which he considers to be due
to the Contractor. If the Contractor is dissatisfied with the amount certified, he may
refer the matter to the DAB for a decision in accordance with Clause 20.6 [Obtaining
Dispute Adjudication Board’s Decision].
OR

Upon receipt of the Final Payment Certificate Operation Service, the Employer shall
pay the Contractor in accordance with the provisions of Sub-Clause 14.8 [Payment].

The Final Payment Certificate gives a summary of all payments due to the Contractor for
the performance of the Contract. If the Employer’s Representative has been unable to verify
TF

or agree any part of the Contractor’s application, the procedure is similar to that when the
parties could not agree the amount due to the Contractor for the Final Certificate Design-
Build. However, rather than issue a further Interim Certificate, the Employer’s Representative
is now required to issue a Final Certificate Operation Service for the amount he considers to
be due to the Contractor, and the Employer is required to pay this amount in accordance
with the provisions of Sub-Clause 14.8 [Payment]. If the Contractor is not satisfied with the
NO

certified amount, he may, within 56 days (see Sub-Clause 14.16 [Cessation of Employer’s
Liability]) submit the matter to the DAB in accordance with the provisions of Clause 20
[Claims, Disputes and Arbitration], and ultimately the Employer will be required to pay the
amount decided by the DAB.

14.16 Cessation of Employer’s Liability

The Employer shall not be liable to the Contractor for any matter or thing under or
in connection with the Contract or execution of the Works, except to the extent that

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 the Contractor shall have included an amount expressly for it in the Final Statement
Design-Build or the Final Statement Operation Service.
However, this Sub-Clause shall not limit the Employer’s liability under his
indemnification obligations, or the Employer’s liability in any case of fraud, deliberate
default or reckless misconduct by the Employer.
Furthermore, if the Contractor has not submitted any matter to the Dispute
Adjudication Board under Sub-Clause 20.6 [Obtaining Dispute Arbitration Board’s
Decision] within 56 days of receiving notification from the Employer’s Representative

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of the amounts included for payment in either the Final Certificate Design-Build or
the Final Certificate Operation Service, then he will be deemed to have accepted the
amounts so certified, and the Employer shall be deemed to have no further liability to

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the Contractor, subject only to that payment due under the Final Payment Certificate
Operation Service has been made and that the Performance Security referred to in
Sub-Clause 4.2 [Performance Security] has been returned to the Contractor.

This Sub-Clause limits the Employer’s liability to matters which the Contractor has raised
in his Final Statements for either Design-Build or Operation Service. If they have not been

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mentioned, the Employer has no liability in that regard under the Contract (subject to the
applicable Law ), and this ties in with the wording and intention of the undertaking provided
by the Contractor under Sub-Clause 14.11 [Application for Final Payment Certificate Design-
Build] and the discharge provided by him under Sub-Clause 14.13 [Application for Final

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Payment Certificate Operation Service]. It also means that the Employer remains liable to
honour any decision of the DAB regarding any matter which the Contractor submitted to the
DAB in respect of matters in the Contractor’s Final Statements, which were not accepted by
the Employer’s Representative and not included in the respective Final Payment Certificate.
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As mentioned in respect of the Contractor’s discharge, the liability of the Employer includes
payment according to Sub-Clause 14.8 [Payment], and return of the Performance Security
under Sub-Clause 4.2.

14.17 Currencies of Payment

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The Contract Price shall be paid in the currency or currencies named in the Contract
Data. Unless otherwise stated in the Particular Conditions, if more than one currency
is so named, payments shall be made as follows:
(a) if the Accepted Contract Amount was expressed in Local Currency only:
(i) the proportions or amounts of the Local and Foreign Currencies, and the
fixed rates of exchange to be used for calculating the payments, shall be as
OR

stated in the Contract Data, except as otherwise agreed by both Parties;

(ii) payments and deductions under Sub-Clause 13.5 [Provisional Sums] and
Sub-Clause 13.6 [Adjustments for Changes in Legislation] shall be made in
the applicable currencies and proportions; and
(iii) other payments and deductions under sub-paragraphs (a) to (d) of Sub-
TF

Clause 14.3 [Application for Advance and Interim Payment Certificates] shall
be made in the currencies and proportions specified in subparagraph (a)(i)
above;
(b) payment of the damages specified in the Contract Data shall be made in the
currencies and proportions specified in the Contract Data;
(c) other payments to the Employer by the Contractor shall be made in the currency
NO

in which the sum was expended by the Employer, or in such currency as may
be agreed by both Parties;
(d) if any amount payable by the Contractor to the Employer in a particular currency
exceeds the sum payable by the Employer to the Contractor in that currency,
the Employer may recover the balance of this amount from the sums otherwise
payable to the Contractor in other currencies; and
(e) if no rates of exchange are stated in the Contract Data, they shall be those
prevailing on the Base Date and determined by the central bank of the
Country.

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 This Sub-Clause describes how payments are to be made in Local and Foreign Currencies
for various amounts due to either Party.

14.18 Asset Replacement Fund

The Asset Replacement Fund is to provide the necessary funding for the replacement
of items of Plant identified in the Asset Replacement Schedule as required for the
continued efficient operation of the Works for the duration of the Operation Service

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Period.
In each application for an Interim Payment Certificate during the Operation Service
Period made in accordance with Sub-Clause 14.3 [Application for Advance and

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Interim Payment Certificates], the Contractor shall be entitled to include any monies
from the Asset Replacement Fund which, according to the Asset Replacement
Schedule, have become due following the replacement of the scheduled items by
the Contractor. Under no circumstances will the amount payable from the Asset
Replacement Fund be increased from the amount due according to the Asset
Replacement Schedule, irrespective of the value or amount of replacements which

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have been made. For any items which have not been replaced by the date or other
operational milestone identified in the Asset Replacement Schedule, payment will
not be released until such replacement has been effected.
In the event that there is money remaining in the Asset Replacement Fund upon

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completion of the Contract due to planned replacements, which by mutual
agreement of the Parties, are not required or used, such amount shall be shared
equally between the Parties, and the Contractor shall be entitled to include his
share of such amount in his Application for Final Payment Certificate Operation
Service made in accordance with Sub-Clause 14.13 [Application for Final Payment
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Certificate Operation Service].
The Asset Replacement Fund shall not cover the cost of:
(a) routine maintenance items associated with the correction of defects;
(b) replacement of Plant and Material which have a life expectancy of less than five
years;
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(c) providing spares between scheduled dates for major plant replacement; or
(d) the replacement of Plant and Materials which are not identified in the Asset
Replacement Schedule.
The cost of meeting the requirements of sub-paragraphs (a) to (d) above shall be
borne by the Contractor and be deemed to be included in the Contract Price.
The Contractor shall give Notice to the Employer’s Representative at least 28 days
prior to his intention to replace any item of Plant identified in the Asset Replacement
OR

Schedule.
The Employer shall authorise release of funds from the Asset Replacement Fund
in accordance with the amounts certified by the Employer’s Representative in
each applicable Interim Payment Certificate. Funds will only be disbursed from the
Asset Replacement Fund to the values and in accordance with the time scales for
TF

replacement identified in the Asset Replacement Schedule.

Where items of Plant require replacement at times earlier than the scheduled
replacement times given in the Asset Replacement Schedule, the appropriate funds
shall not be released until the scheduled replacement date has been reached.
If the Contract Price is subject to adjustments for changes in cost according to Sub-
Clause 13.8 [Adjustments for Changes in Cost], the amounts due from the Asset
NO

Replacement Fund shall be adjusted on the same basis as other costs.

In the event of a termination of the Contract under Clause 15 [Termination by
Employer], or Clause 16 [Suspension and Termination by Contractor], any amount
remaining in the Asset Replacement Fund, including any accrued interest, shall be
deemed to be to the account of the Employer and shall not be disbursed to the
Contractor.

The Asset Replacement Fund is arrived at by pricing the Asset Replacement Schedule (Sub-
Clause 14.5 [Asset Replacement Schedule]). Both the Schedule and the Fund are prepared

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 by the Contractor when tendering, and the resulting Asset Replacement Fund is part of the
Accepted Contract Amount (see Definition 1.1.1).

Money from the Fund may only be used to replace the items in the Asset Replacement
Schedule to which the amount refers. Money from the Fund cannot be used to replace
items which are not identified in the Schedule, and it cannot be used for work covered
by paragraphs (a) to (d) in the Sub-Clause. If it is necessary to replace items which are
not identified in the Schedule, the Contractor must replace these at his own cost and all

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work covered by paragraphs (a) to (d) must also be done by the Contractor at his own
cost (unless replacement became necessary due to an act or failure by the Employer
or his personnel). Furthermore, the Contractor is required to give 28 days’ Notice to the

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Employer’s Representative before he intends to replace any item. Note that the Contractor
is not required to obtain the Employer’s Representative’s approval or consent, but by
receiving Notice, the Employer’s Representative is able to relate the actual replacement
date to the planned replacement date given in the Schedule. Also, if the actual date of
replacement notified by the Contractor is for any reason not suitable or convenient to the
Employer, the Employer’s Representative can, by instruction, stop the Contractor making

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the replacement until a later date. Such an instruction should be discussed first with
the Contractor to see if a delay is feasible or indeed wise, and the Employer will have to
compensate the Contractor for his costs.

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When submitting an application for payment, the Contractor is entitled to include money
from the Fund which has been properly used to replace items from the Schedule. However,
the Contractor should not include money for replacing an item which has been replaced
before the replacement date given in the Schedule. If he has had to replace an item before
the Schedule date, he must wait until the Schedule date before including the payment in
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a payment application. In the event that a replacement is not deemed necessary on the
Scheduled date, but will be made later, the Contractor must wait until the replacement
has actually been made before including the due amount from the Fund in his payment
application.
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If there is money left in the Fund at the end of the Contract, and the Parties mutually agree
that the planned replacements are not required, then the money remaining in the Fund will
be divided equally between the Parties. However, if the Contract is terminated, either by the
Employer under Clause 15 [Termination by Employer] or by the Contractor under Clause 16
[Termination by Contractor], any money remaining in the Fund at the time of termination,
even for termination by the Contractor for the Employer’s default, shall be to the account
of the Employer, and the Contractor has no claim to any of it. This reflects the fact that the
OR

Fund is there to provide money to replace assets, and if the assets are not replaced due to
an early termination of the Contract, the Contractor is not entitled to any payment for such
items. Thus if termination falls under Sub-Clause 18.5 [Optional Termination, Payment and
Release] or 18.6 [Release from Performance under the Law], any remaining money in the
Fund is also to the account of the Employer.
TF

14.19 Maintenance Retention Fund

During the Operation Service Period, a Maintenance Retention Fund shall be

created by deducting five percent (5%) from the value of each interim payment,
determined by the Employer’s Representative in accordance with Sub-Clause
NO

14.7 [Issue of Advance and Interim Payment Certificates], due to the Contractor,
commencing with the first payment following the issue of the Commissioning
Certificate, and continuing until the last Interim Payment Certificate is issued or
until the amount in the Maintenance Retention Fund has reached the value (if any)
stated in the Contract Data, whichever is the earlier. If the Contractor so chooses,
the Maintenance Retention Fund may be replaced by a Maintenance Retention
Guarantee in a form and with an entity approved by the Employer. However, the
value of the Guarantee shall not exceed the maximum amount of the Maintenance
Retention Fund stated in the Contract Data. The Contractor shall ensure that the

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 Maintenance Retention Guarantee remains valid and in force until the issue of the
Contract Completion Certificate.
If the maintenance required under the Contract has not been carried out, the
Employer may, after giving due Notice to the Contractor, carry out such maintenance
himself and apply any amounts standing to the credit of the Maintenance Retention
Fund in so doing. Where such amounts are insufficient to cover the Employer’s
whole costs of carrying out the maintenance, the unrecovered costs shall be set
off against any payment due to the Contractor under the Contract, or to the extent

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that no such payment is due, shall become a debt due by the Contractor to the
Employer.
Following the issue of the Contract Completion Certificate under Sub-Clause 8.6

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[Contract Completion Certificate], all funds remaining in the Maintenance Retention
Fund shall be included in the Final Payment Certificate Operation Service and paid
to the Contractor with the final payment.

In the handback requirements (Sub-Clause 8.7 [Handback Requirements]), the Employer

will certainly require the facility to be in a well maintained condition when he takes over

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responsibility for operation of the facility at the end of the Contract Period.

However, it is necessary that the facility is kept in a well- maintained condition throughout
the Operation Service Period, and it is in the best interests of the Contractor to keep it so

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in order to optimise performance and minimise cost during this time.

In the event that the Contractor fails to maintain the Works properly, this may become
evident by a failure to reach performance outputs or it may come in the form of a report
from the Auditing Body (Sub-Clause 10.3 [Independent Compliance Audit]) or some other
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way. If this happens, the Contractor is responsible for dealing with the failure in the manner
required to bring the operation and condition of the facility back to that required by the
Contract. If the Contractor fails or is unable to do this, then the Employer will need to
engage others do the necessary maintenance work, and then he can use the money from
the Maintenance Retention Fund to pay for this. If the money from the Fund is insufficient,
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the Employer can recover the insufficiency from the Contractor as a debt and deduct it
from other payments due to the Contractor in addition to other rights under the Contract in
respect of the Contractor failing to fulfil his contractual obligations.

If the Contractor prefers, he may replace the Maintenance Retention Fund by a Maintenance
Retention Guarantee which must remain in force until the issue of the Contract Completion
Certificate, and must be of an equivalent amount to the amount which would have accrued
OR

if the Fund had been established as described in the Sub-Clause.

TF

Clause 15 Termination by Employer

There are many provisions in the Contract where an obligation on one Party to act or
perform, is directly followed by a remedy in the event that the Party fails to act or perform
as required. This is to provide the Parties with a contractual solution to deal with common
failures without the need to consult the applicable Law in order to resolve the problem. The
NO

answer is in the Contract.

However, the Contract cannot address all possible failures or serious failures where the only
solution is for the other Party to be able to terminate the Contract, and the provisions of
Clause 15 deal with commonly arising failures by the Contractor which give the Employer
the right to terminate the Contract.

Clause 16 deals with commonly arising failures by the Employer and those for whom the
Employer is responsible which give the Contractor the right to terminate the Contract.

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15.1 Notice to Correct

If the Contractor fails to carry out any obligation under the Contract, the Employer’s
Representative shall by Notice require the Contractor to make good the failure and
to remedy it within the time specified in the said Notice.

This is simply a requirement for the Employer’s Representative to notify the Contractor
through the Employer’s Representative by written Notice if the Contractor is failing to carry

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out any obligation under the Contract. The Notice must state the time which the Contractor
has to remedy the failure. The receipt by the Contractor of a Notice under this Sub-Clause
needs to be taken very seriously, as failure to rectify the failure can lead to termination by

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the Employer under Sub-Clause 15.2 [Termination for Contractor’s Default].

15.2 Termination for Contractor’s Default

The Employer shall be entitled to terminate the Contract if the Contractor:

(a) fails to comply with Sub-Clause 4.2 [Performance Security] or with a Notice

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under Sub-Clause 15.1 [Notice to Correct],
(b) abandons the Works or otherwise plainly demonstrates the intention not to
continue performance of his obligations under the Contract,
(c) without reasonable excuse fails:

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(i) to proceed with the Works in accordance with Sub-Clause 9.1
[Commencement of Design-Build] or Sub-Clause 10.2 [Commencement of
Operation Service]; or
(ii) to comply with a Notice issued under Sub-Clause 7.5 [Rejection] or Sub-
Clause 7.6 [Remedial Work], within 28 days after receiving it;
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(d) subcontracts the whole of the Works or assigns the Contract without the
required agreement or subcontracts the Operation Service or any parts of the
Works in breach of Sub-Clause 4.4 [Subcontractors];
(e) either gives Notice to the Employer under Sub-Clause 4.25 [Changes in the
Contractor’s Financial Situation] from which the Employer reasonably concludes
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that the Contractor will be unable to complete or fulfil his obligations under the
Contract or, if the Contractor fails to give such a Notice, but the Employer in any
event reasonably concludes that the Contractor will be unable to complete or
fulfil his obligations under the Contract due to the Contractor’s financial situation;
(f) becomes bankrupt or insolvent, goes into liquidation, has a receiving or
administration order made against him, compounds with his creditors, or carries
on business under a receiver, trustee or manager for the benefit of his creditors,
OR

or if any act is done or event occurs which (under applicable Laws) has a similar
effect to any of these acts or events;
(g) gives or offers to give (directly or indirectly, either before or during the currency
of the Contract) to any person any bribe, gift, gratuity, commission or other thing
of value, as an inducement or reward:
TF

(i) for doing or forbearing to do any action in relation to the Contract; or

(ii) for showing or forbearing to show favour or disfavour to any person in
relation to the Contract; or if any of the Contractor’s Personnel, agents or
Subcontractors gives or offers to give (directly or indirectly) to any person
any such inducement or reward as is described in this sub-paragraph (g).
However, lawful inducements and rewards to Contractor’s Personnel shall
NO

not give a right to termination;

(h) fails to complete the Design-Build by the Cut-Off Date stated in the Contract
Data or, if no such date is given, then a period of 182 days after the Time for
Completion of Design-Build.
In any of these events or circumstances, the Employer may, not less than 14
days after giving Notice to the Contractor, terminate the Contract and expel the
Contractor from the Site unless the Contractor cures the event or circumstance
within the said 14 days. However, in the case of sub-paragraph (f) or (g), the
Employer may by Notice terminate the Contract immediately.

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 The Employer’s election to terminate the Contract shall not prejudice any other
rights of the Employer, under the Contract or otherwise.
The Contractor shall then leave the Site and deliver any required Goods, all
Contractor’s Documents, and other design documents made by or for him, to the
Employer’s Representative. However, the Contractor shall use his best efforts to
comply immediately with any reasonable instructions included in the Notice (i) for
the assignment of any subcontract, and (ii) for the protection of life or property or
for the safety of the Works.

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After termination, the Employer may complete the Works and/or arrange for any
other entities to do so. The Employer and these entities may then use any Goods,
Contractor’s Documents and other design documents made by or on behalf of the

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Contractor.
The Employer shall then give Notice that the Contractor’s Equipment and Temporary
Works will be released to the Contractor at or near the Site. The Contractor shall
promptly arrange their removal, at the risk and cost of the Contractor. However, if
by this time the Contractor has failed to make a payment due to the Employer, these
items may be sold by the Employer in order to recover this payment. Any balance

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of the proceeds shall then be paid to the Contractor.

Under Sub-Clause 15.2(a), a failure to comply with a Notice issued under Sub-Clause
15.1 [Notice to Correct] is one of several reasons entitling the Employer to terminate the

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Contract, but it is not a pre-requisite that the Employer issues such a Notice before giving
the required 14 days Notice to terminate the Contract for any of the other named failures
and defaults.

However the Employer must be very certain of his grounds for terminating the Contract as
NT
the consequences of wrongful termination can be very serious. Some of the listed grounds
for termination are straight forward such as (d) subcontracting the whole of the Works
without approval, or (h) failing to complete the Design-Build by the Cut-Off Date and the
Employer can make his decision to terminate or not based on easily established events.
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However, other grounds call for a judgement by the Employer to establish whether the
failure by the Contractor is sufficient to warrant termination of the Contract, for example
under paragraph (b) or (c) or (e). In these cases the Employer must decide whether the
apparent failure is due to reasonable circumstances, and whether in those circumstances
the paragraph permits him to terminate.

A prudent Employer should always seek legal advice before deciding to terminate the
OR

Contract as the consequences of a wrongful termination by the Employer can be very

serious and very expensive. Note that termination is final and irrevocable: once the Contract
has been terminated then, as a legal matter, it cannot ordinarily be un-terminated or
reinstated.
TF

If the Employer intends to use this Sub-Clause to terminate the Contract, he must give the
Contractor 14 days Notice. During this Notice period, the Contractor has a last chance
to rectify the failure, and if he manages to do so, the Notice is deemed to have been
withdrawn. If the Contractor fails to rectify the failure within the 14 days, the termination
will become effective on the 14th day and the Contractor must leave the Site and hand
over to the Employer all Goods, Contractor’s Documents etc to the Employer. Thereafter
NO

the Employer is free to complete the Works himself, or get someone else to do so. The
only exceptions to the foregoing are covered in paragraphs (f) if the Contractor becomes
bankrupt, or (g) if the Contractor has been offering bribes or other inducements. In these
cases there is no 14 days Notice period. The Notice takes effect immediately.

After termination, the Employer may either complete the Works himself, or he may engage a
third party to do so complete the Works. In either event he is entitled to use the Contractor’s
Documents and designs prepared by the Contractor, as well as any Goods which the
Contractor may have brought to the Site.

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15.3 Valuation at Date of Termination for Contractor’s Default

As soon as practicable after a Notice of termination under Sub-Clause 15.2

[Termination for Contractor’s Default] has taken effect, the Employer’s Representative
shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or
determine the value of the Works, Goods and Contractor’s Documents, and
any other sums due to the Contractor for work executed in accordance with the
Contract.

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Even in the event of termination, the Contractor is entitled to be paid for the work he did
prior to the termination. In such a case, the Employer’s Representative is required to make

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a fair determination of the amount due to the Contractor in accordance with Sub-Clause
3.5 [Determinations]. This determination will also take account of any monies properly
owing to the Employer. However, no Payment Certificate is issued at this stage since
the Employer may be entitled to additional money from the Contractor in completing the
Works. This valuation is purely a record of the amount due to the Contractor at the date
of termination.

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15.4 Payment after Termination for Contractor’s Default

After a Notice of termination under Sub-Clause 15.2 [Termination for Contractor’s

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Default] has taken effect, the Employer may:
(a) proceed in accordance with Sub-Clause 20.2 [Employer’s Claims];
(b) withhold further payments to the Contractor until the costs of design, execution,
completion and remedying of any defects, damages for delay in completion (if
any), and all other costs incurred by the Employer, have been established; and/
NT
or
(c) recover from the Contractor any losses and damages incurred by the Employer
and any extra costs of completing the Works, after allowing for any sum due
to the Contractor under Sub-Clause 15.3 [Valuation at Date of Termination for
Contractor’s Default]. After recovering any such losses, damages and extra
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costs, the Employer shall pay any balance to the Contractor.

Under this Sub-Clause the Employer is entitled to recover from the Contractor all costs,
losses and damages incurred or suffered by the Employer as a result of the termination
under Sub-Clause 15.2 [Termination for Contractor’s Default]. Normally this amount will be
deducted from the amount determined to be due to the Contractor in accordance with Sub-
Clause 15.3 [Valuation at Date of Termination for Contractor’s Default], and the remaining
OR

amount will be certified in a Payment Certificate by the Employer’s Representative, and duly
paid by the Employer.

If the amount due to the Employer exceeds the amount determined to be due to the
Contractor under Sub-Clause 15.3 [Valuation at Date of Termination for Contractor’s
TF

Default], then the balance due to the Employer may be recovered by the Employer from the
Contractor as a commercial debt.

15.5 Termination for Employer’s Convenience

If at any time the Employer elects to terminate the Contract for reasons other than
NO

those specified in Sub-Clause 15.2 [Termination for Contractor’s Default], and

subject to the applicable Law of the Contract, he shall notify the Contractor in
writing, with a copy to the Employer’s Representative. Such termination shall be
deemed to be termination for the convenience of the Employer.
Upon issuing a Notice to terminate under this Sub-Clause, the Employer shall
immediately make arrangements to return the Performance Security to the
Contractor, and the termination shall take effect 28 days after the date the
Contractor receives the Notice, or 28 days after he receives the Performance
Security, whichever is the later.

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 Upon issuing the Notice, the Employer shall immediately cease to have any right
of use of any of the Contractor’s Documents, and shall forthwith return all and any
such Contractor’s Documents to the Contractor.
The Employer shall not terminate the Contract under this Sub-Clause in order to
execute or operate the Works (or any part thereof) himself, or arrange for the Works
(or any part thereof) to be executed by another contractor.

Termination by the Employer for reasons other than the Contractor’s default under Sub-

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Clause 15.2 [Termination for Contractor’s Default], is not encouraged, but it is permitted
since it would be difficult to prevent an Employer taking such action if he felt so inclined.
Such action could be for good reason (other than Contractor’s default) such as economic

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restrictions, or political decisions, or it may be for other reasons known only to the Employer.

However, the Employer may not terminate for his convenience if the Law of the Contract does
not permit such termination. For example, in many jurisdictions, where the Operation stage
of the Contract is considered to be akin to a ‘service contract’, neither party can terminate
such a ‘service contract’ for their convenience. Consequently, in such circumstances, this

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Sub-Clause would not apply.

Although the Contractor is compensated for such a termination (see Sub-Clause 15.6
[Valuation at Date of Termination for Employer’s Convenience]), the Employer is not

15.6
Works.
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permitted to terminate under this Sub-Clause in order to get someone else to complete the

Valuation at Date of Termination for Employer’s Convenience

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As soon as practicable after a Notice of termination under Sub-Clause 15.5
[Termination for Employer’s Convenience] has taken effect, the Employer’s
Representative shall proceed in accordance with Sub-Clause 3.5 [Determinations]
to agree or determine the value of the Works, Goods and Contractor’s Documents,
and any other sums due to the Contractor for work executed in accordance with
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the Contract.

After a Notice of termination, the Employer’s Representative needs to agree to determine

the value of various items.

15.7 Payment after Termination for Employer’s Convenience

OR

After termination for the Employer’s convenience under Sub-Clause 15.5 [Termination
for Employer’s Convenience], the Contractor shall proceed in accordance with Sub-
Clause 16.3 [Cessation of Work and Removal of Contractor’s Equipment] and shall
be paid in accordance with Sub-Clause 16.4 [Payment on Termination].
TF

Similar to the provisions of Sub-Clause 15.3 [Valuation at Date of Termination for Contractor’s
Default], the Employer’s Representative is required under Sub-Clause 15.6 [Valuation at
Date of Termination for Employer’s Convenience] to fairly determine the amount due to
the Contractor as soon as the Notice to terminate under Sub-Clause 15.5 [Termination
for Employer’s Convenience] has been issued. This amount must be immediately certified
in a Payment Certificate by the Employer’s Representative, and, according to Sub-Clause
NO

15.7 [Payment after Termination for Employer’s Convenience], the Employer must pay
in accordance with Sub-Clause 16.4 [Payment on Termination], which means he must
return the Performance Security to the Contractor, pay the Contractor all his Costs in
accordance with Sub-Clause 15.5 [Termination for Employer’s Convenience] and also pay
the Contractor the amount of any loss of profit or other loss or damage sustained by the
Contractor as a result of this termination.

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Clause 16 Termination by Contractor

16.1 Contractor’s Entitlement to Suspend Work

If the Employer’s Representative fails to certify in accordance with Sub-Clause

14.7 [Issue of Advance and Interim Payment Certificates], or the Employer fails to
comply with Sub-Clause 2.4 [Employer’s Financial Arrangements] or Sub-Clause
14.8 [Payment], the Contractor may, not less than 21 days after giving Notice to the

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Employer, suspend work (or reduce the rate of work) unless and until the Contractor
has received the Interim Payment Certificate, reasonable evidence or payment, as
the case may be and as described in the Notice.

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The Contractor’s action shall not prejudice his entitlements to financing charges
under Sub-Clause 14.9 [Delayed Payment] and to termination under Sub-Clause
16.2 [Termination by Contractor].
If the Contractor subsequently receives such Interim Payment Certificate, evidence
or payment (as described in the relevant Sub-Clause and in the above Notice)
before giving a Notice of termination, the Contractor shall resume normal working

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as soon as is reasonably practicable.
If the Contractor suffers delay and/or incurs cost as a result of suspending work (or
reducing the rate of work) in accordance with this Sub-Clause, the Contractor shall
give Notice to the Employer’s Representative and shall be entitled, subject to Sub-

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Clause 20.1 [Contractor’s Claims], to:
(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) payment of any such Cost Plus Profit, which shall be included in the Contract
Price.
NT
After receiving this Notice, the Employer’s Representative shall proceed in
accordance with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.

This is the only provision in the Design-Build-Operate Contract which entitles the Contractor
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to suspend work. It applies in the case where either the Employer’s Representative fails
to issue a Payment Certificate, as required by Sub-Clause 14.7 [Issue of Advance and
Interim Payment Certificates], or the Employer fails to pay the due amount as required
by Sub-Clause 14.8 [Payment]. The Contractor may also invoke this Sub-Clause if the
Employer fails to give reasonable evidence of his financial arrangements under Sub-
Clause 2.4 [Employer’s Financial Arrangements]. However, under the DBO contract this
will normally only apply either a) if the Employer has ordered a Variation or some additional
OR

expenditure, or b) there has been a material adverse change in the Employer’s financial
situation, and the Contractor wishes to verify that the funding that was deemed to be
available is in fact still is available.

The provisions in this Sub-Clause enable the Contractor to put pressure on the Employer
TF

to honour his various payment obligations without terminating the Contract or unlawfully
refusing to work if he is not being paid.

Action by the Contractor on account of a failure by the Employer or the Employer’s

Representative as referred to in the Sub-Clause may, if the failure is not cured within a
specified time, entitle the Contractor to terminate under Sub-Clause 16.2 [Termination by
NO

Contractor].

If action is taken by the Contractor under this Sub-Clause, he will normally be entitled to
an extension of time (the exception being if the suspension will not affect the Contractor’s
ability to complete on time), and payment of Cost Plus Profit which he suffers as a result of
the suspension. The amount of the time extension and the compensation must be claimed
by the Contractor according to the procedures laid down in Sub-Clause 20.1 [Contractor’s
Claims], but the amounts due will be determined by the Employer’s Representative in
accordance with Sub-Clause 3.5 [Determinations].

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16.2 Termination by Contractor

The Contractor shall be entitled to terminate the Contract if:

(a) the Contractor does not receive the reasonable evidence within 42 days after
giving Notice under Sub-Clause 16.1 [Contractor’s Entitlement to Suspend
Work] in respect of a failure to comply with Sub-Clause 2.4 [Employer’s
Financial Arrangements];
(b) the Employer’s Representative fails, within 56 days after receiving a Statement

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and supporting documents, to issue the relevant Payment Certificate;
(c) the Contractor does not receive the amount due under an Interim Payment
Certificate within 42 days after the expiry of the time stated in Sub-Clause

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14.8 [Payment] within which payment is to be made (except for deductions in
accordance with Sub-Clause 20.2 [Employer’s Claims]);
(d) the Employer substantially fails to perform his obligations under the Contract,
(e) the Employer fails to comply with Sub-Clause 1.6 [Contract Agreement] or Sub-
Clause 1.8 [Assignment];
(f) a prolonged suspension affects the whole of the Works as described in Sub-

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Clause 9.10 [Prolonged Suspension]; or
(g) the Employer becomes bankrupt or insolvent, goes into liquidation, has a
receiving or administration order made against him, compounds with his
creditors, or carries on business under a receiver, trustee or manager for the

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benefit of his creditors, or if any act is done or event occurs which (under
applicable Laws) has a similar effect to any of these acts or events.
In any of these events or circumstances, the Contractor may, not less than 14 days
after giving Notice to the Employer, terminate the Contract unless the Employer
cures the event or circumstance within the said 14 days. However, in the case
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of subparagraph (f) or (g), the Contractor may by Notice terminate the Contract
immediately.
The Contractor’s election to terminate the Contract shall not prejudice any other
rights of the Contractor, under the Contract or otherwise.
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Termination of the Contract by either Party is a very serious step, and the comments
given under Sub-Clause 15.2 [Termination for Contractor’s Default], in respect of the
Employer’s right to terminate the Contract, apply equally well to this Sub-Clause. In this
case, the Contractor must be very certain of his grounds for terminating the Contract as the
consequences of wrongful termination can be very serious.

Some of the listed grounds for termination are straightforward, but other grounds (e.g.
OR

paragraph (d)) call for a judgement by the Contractor to establish whether the failure by the
Employer is sufficiently serious to warrant termination of the Contract.

A prudent Contractor should always seek legal advice before deciding to terminate the
Contract as the consequences of a wrongful termination can have important adverse
TF

consequences for the Contractor. Note that termination is final and irrevocable: once the
Contract has been terminated then, as a legal matter, it cannot ordinarily be un-terminated
or reinstated.

Once the Notice has been given, the Employer has 14 days in which to correct the failure,
and if he does so, the Notice will be deemed to have been withdrawn. If after the 14 days,
NO

the failure has not been corrected, the Contractor may proceed to terminate the Contract.
Again, he can use his judgement as to whether termination is the best way to deal with the
situation, but the decision is his. By Sub-Clause 1.2 [Interpretation], the word ‘may’ in this
context means that the choice lies with the Contractor.

16.3 Cessation of Work and Removal of Contractor’s Equipment

After a Notice of termination under Sub-Clause 16.2 [Termination by Contractor] or

Sub-Clause 18.5 [Optional Termination, Payment and Release] has taken effect, the

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 Contractor shall, unless the Employer cured the event or circumstance within the
14-days’ Notice period, promptly:
(a) cease all further work, except for such work as may have been instructed by
the Employer’s Representative for the protection of life or property or for the
safety of the Works or protection of the environment. For all such instructed
work, the Contractor shall be entitled to be paid Cost Plus Profit and shall be
relieved of further liabilities under Sub-Clauses 4.8 [Safety Procedures] and 4.18
[Protection of the Environment];

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(b) hand over to the Employer the Contractor’s Documents, Plant, Materials and
other work, for which the Contractor has received payment; and
(c) remove all other Goods from the Site, except as necessary for safety, and leave

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the Site.

After the 14 days’ Notice under Sub-Clause 16.2 [Termination by Contractor] has passed,
and the Contractor has decided to proceed with the termination, he is required to comply
with all these requirements before leaving the Site. However, if compliance with any
requirements, including any instructions issued by the Employer’s Representative, cause

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the Contractor to incur additional cost which he would not have otherwise incurred, he
should be entitled to claim due compensation under paragraph (c) of Sub-Clause 16.4
[Payment on Termination].

16.4 Payment on Termination

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After a Notice of termination under Sub-Clause 16.2 [Termination by Contractor] has
taken effect, the Employer shall promptly:
(a) return the Performance Security to the Contractor;
NT
(b) pay the Contractor in accordance with Sub-Clause 18.6 [Optional Termination,
Payment and Release]; and
(c) pay to the Contractor the amount of any loss of profit or other loss or damage
sustained by the Contractor as a result of this termination.
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After termination under this Clause 16 [Termination by Contractor], the Contractor is entitled
to have his Performance Security returned and to receive full payment for all work done, all
the costs he has incurred as covered in Sub-Clause 18.5 [Optional Termination, Payment
and Release], plus any loss of profit or other loss which he has incurred.

However, according to the provisions of Sub-Clause 14.2 [Advance Payment], if there is any
portion of the advance payment which has not been repaid to the Employer at the time of
OR

the termination, this amount must be credited to the account of the Employer.

Clause 17 Risk Allocation

TF

The philosophy adopted by FIDIC in dealing with Risk (Clauses 17 [Risk Allocation] and 18
[Exceptional Risks]) and Insurance (Clause 19 [Insurance]) in the DBO document, has been
radically up-dated as compared to the way in which these items were dealt with in the 1999
forms of contract.
NO

Firstly, the clauses have been re-structured in a more logical sequence matching the natural
flow from risk allocation to responsibility to liability to insurance.

Secondly, the risks carried by both the Employer and the Contractor have been identified
and allocated.

Thirdly, the different types of risks have been identified: Commercial Risks (see Definition
1.1.7), which result in financial loss and for which insurance is not generally available, and
Risk of Damage (see Definition 1.1.67) which results in physical loss or damage.

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 Finally, the terminology has been made more reader-friendly.

Clause 17 [Risk Allocation] deals with the allocation of risk between the Parties and deals
with Commercial Risks and Risks of Damage occurring during both the Design-Build Period
and the Operation Service Period.

Clause 18 [Exceptional Risks] deals with Exceptional Risks. Many will recognise these risks
as the Force Majeure risks from the 1999 documents. However, with different jurisdictions

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having different understandings of the meaning of ‘force majeure’ and different legal
provisions and rights in the event that such an event occurs, it was confusing to the users
of the earlier FIDIC documents to know how to deal with such events, especially as FIDIC

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gave its own definition of Force Majeure (see Sub-Clause 19.1 of the 1999 documents).

For this reason, the term ‘Force Majeure’ has been replaced by the term ‘Exceptional Event’
(see Definition 1.1.37), and all the risks associated with Exceptional Events have been
named Exceptional Risks and covered in Clause 18 [Exceptional Risks].

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It is logical to cover all the risks first, and then to address the question of insurance, and
Clause 19 [Insurance] deals with Insurance in a simple and understandable way, so it is
very clear to the Contractor exactly what the requirements for insurance are during both the
Design-Build Period and the Operation Service Period. The Clause highlights the different

17.1
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insurances which are required during the two stages of the project.

The Employer’s Risks during the Design-Build Period

Subject to the provisions of Sub-Clause 17.8 [Limitation of Liability], the risks

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allocated to the Employer and for which the Employer is liable during the Design-
Build Period are divided into:
(a) The Employer’s Commercial Risks, which are:
(i) the financial loss, delay or damage allocated to the Employer under the
Contract or for which the Employer is liable by law, unless otherwise
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modified under the Contract;

(ii) the right of the Employer to construct the Works or any part thereof on,
over, under, in or through the Site;
(iii) the use or occupation of the Site by the Works or any part thereof, or for
the purpose of design, construction or completion of the Works other than
the abusive or wrongful use by the Contractor; and
(iv) the use or occupation by the Employer of any part of the Permanent Works,
OR

except as may be specified in the Contract;

and
(b) The Employer’s Risks of Damage, which are:
(i) damage due to any interference, whether temporary or permanent, with
any right of way, light, air, water or other easement (other than that resulting
TF

from the Contractor’s method of construction) which is the unavoidable

result of the construction of the Works in accordance with the Contract;
(ii) fault, error, defect or omission in any element of the design of the Works by
the Employer or which may be contained in the Employer’s Requirements,
other than design carried out by the Contractor pursuant to his obligations
under the Contract;
NO

(iii) any operation of the forces of nature (other than those allocated to the
Contractor in the Contract Data) against which an experienced contractor
could not reasonably have been expected to have taken adequate
preventative precautions; and
(iv) the Exceptional Risks under Clause 18 [Exceptional Risks].

This Sub-Clause clearly identifies the risks which are carried by the Employer during the
Design-Build Period, and these are divided into (a) the Employer’s Commercial Risks (see
Definition 1.1.7) and (b) Risks of Damage (see Definition 1.1.67). The Risks of Damage

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 include the Exceptional Risks (see Clause 18 [Exceptional Risks]), but if any of these risks
occur, the liability of the Employer is limited according to the provisions of Sub-Clause 17.8
[Limitation of Liability].

Whilst the Exceptional Risks in certain rare cases do not result in physical loss or damage
to the Works or other property belonging to either Party, it was decided to include this
category of risks for the sake of simplicity, since the consequences on the Parties’ rights
and obligations are the same as in the case of the other Employer’s Risks. Strictly speaking,

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a third category could have been created under this Sub-Clause 17.1 to cover “Employer’s
Risks as set out under Clause 18 [Exceptional Risks]”, but this would have made matters
more complicated due to the fact that most of these risks are insurable, requiring additional

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text in the Conditions.

If an event or circumstance arises which does not fall under (a) or (b), then, according to the
provisions of Sub-Clause 17.2 [The Contractor’s Risks during the Design-Build Period], that
risk is carried by the Contractor.

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17.2 The Contractor’s Risks during the Design-Build Period

Subject to the provisions of Sub-Clause 17.8 [Limitation of Liability], the risks

allocated to the Contractor and for which the Contractor is liable during the Design-

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Build Period are all the risks other than those listed under Sub-Clause 17.1 [The
Employer’s Risks during the Design-Build Period], including the care of both the
Works and the Goods.

Under this Sub-Clause the Contractor carries all risks (during the Design-Build Period) which
NT
are not listed in paragraphs (a) or (b) of Sub-Clause 17.1 [The Employer’s Risks during the
Design-Build Period], subject to the limitations of Sub-Clause 17.8 [Limitation of Liability].

With this formulation, all risks are covered and allocated between the Employer and the
Contractor, so whatever occurs, it is clear which Party is liable.
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In addition, this Sub-Clause makes it clear that it is the Contractor who is responsible and
liable for the care of the Works and the Goods during the Design-Build Period (see Sub-
Clause 17.5 [Responsibility for Care of the Works]).

17.3 The Employer’s Risks during the Operation Service Period

OR

Subject to the provisions of Sub-Clause 17.8 [Limitation of Liability], the risks

allocated to the Employer and for which the Employer is liable during the Operation
Service Period are divided into:
(a) The Employer’s Commercial Risks, which are:
(i) the financial loss, delay or damage allocated to the Employer under the
TF

Contract or for which the Employer is liable by law, unless otherwise

modified under the Contract;
(ii) the use or occupation by the Employer of any part of the Permanent Works,
except as may be specified in the Contract; and
(iii) the use or occupation of the Site by the Works or any part thereof, or for the
purpose of operating and maintaining the Permanent Works;
NO

and
(b) The Employer’s Risks of Damage, which are:
(i) damage due to any interference, whether temporary or permanent, with
any right of way, light, air, water or other easement (other than that resulting
from the Contractor’s methods of operation and maintenance) which is the
unavoidable result of operating and maintaining the Permanent Works in
accordance with the Contract;
(ii) fault, error, defect or omission in any element of the design of the Works by
the Employer or which may be contained in the Employer’s Requirements,

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 other than design carried out by the Contractor pursuant to his obligations
under the Contract;
(iii) any operation of the forces of nature against which an experienced
contractor could not reasonably have been expected to have taken
adequate preventative precautions; and
(iv) the Exceptional Risks under Clause 18 [Exceptional Risks].

This Sub-Clause is similar to (but not identical with) the provisions of Sub-Clause 17.1 [The

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Employer’s Risks during the Design-Build Period]. However, if a risk arises which is not
listed under paragraphs (a) or (b), it does not automatically mean that it is carried by the
Contractor. The Contractor’s Risks during the Operation Service Period are to be found

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in Sub-Clause 17.4 [The Contractor’s Risks during the Operation Service Period]. If a risk
arises and the Parties cannot agree where the risk lies, the matter will be decided by the
Dispute Adjudication Board (DAB), and the risk will be carried or shared by the Party or
Parties named by the DAB.

17.4 The Contractor’s Risks during the Operation Service Period

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Subject to the provisions of Sub-Clause 17.8 [Limitation of Liability], the risks
allocated to the Contractor and for which the Contractor is liable during the
Operation Service Period are:

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(a) all risks resulting or arising from the design (excluding any design allocated to
the Employer under Sub-Clauses 17.1(b)(ii) and 17.3(b)(ii)) or construction of the
Works, or the Materials used therein, notwithstanding any testing carried out by
or approved or witnessed by the Employer or the Employer’s Representative
during the Design-Build Period; and
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(b) all risks resulting or arising from the operation and maintenance of the Permanent
Works and the care of the Works excluding the Employer’s Risks listed under
Sub-Clause 17.3 [The Employer’s Risks during the Operation Service Period].

Although the Commissioning Certificate has been issued and the Works have been
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approved by the Employer’s Representative, if a fault reveals itself during the Operation
Service Period which is the result of a failure by the Contractor during the Design-Build
Period, the Contractor is still liable for that risk. He is also liable for all risks associated with
or arising from the operation of the facility. He will also be liable for any risk which the DAB
decides is his liability.

17.5 Responsibility for Care of the Works

OR

Unless the Contract is terminated in accordance with these Conditions, the

Contractor shall take full responsibility for the care of the Works and Goods from
the Commencement Date until the Commissioning Certificate for the whole of the
Works is issued pursuant to Sub-Clause 11.7 [Commissioning Certificate]. If the
TF

Contract is terminated in accordance with these Conditions, the Contractor shall

cease to be responsible for the care of the Works from the date of expiry of the
Notice of termination.
The Contractor shall also be responsible for the care of the Permanent Works during
the Operation Service Period in accordance with the requirements of the Operating
Licence pursuant to Sub-Clause 1.7 [Operating Licence].
NO

The Contractor shall also be responsible for the care of any part of the Permanent
Works for which a Section Commissioning Certificate has been issued.
The Contractor shall also take full responsibility for any outstanding work which he
shall have undertaken to complete during the Operation Service Period until all such
outstanding work is completed.

The Contractor is fully responsible for the care of the Works during the Design-Build Period.
He is also responsible for the care of the facility (or Permanent Works) to the extent required
in the Operating Licence issued in accordance with Sub-Clause 1.7 [Operating Licence].

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 If the Employer requires the Contractor to be responsible for the care of any part of the
facility or any aspect of the operation during the Operation Service Period, this must be
stated specifically and explained in detail as to the boundaries of the care required in
the Operating Licence. If nothing is said, and nothing else agreed, then the Contractor’s
responsibility for care of the Works will end with the issue of the Commissioning
Certificate.

17.6 Consequences of the Employer’s Risks of Damage

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Subject to the provisions of Sub-Clause 18.4 [Consequences of an Exceptional
Event], if any of the risks allocated as an Employer’s Risk under Sub-Clause 17.1

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[The Employer’s Risks during the Design-Build Period] and 17.3 [The Employer’s
Risks during the Operation Service Period] occurs and results in damage to the
Works or other property or Goods or Contractor’s Documents, the Contractor shall
promptly give Notice to the Employer’s Representative, and shall thereafter rectify
such loss and/or damage to the extent required by instruction of the Employer’s
Representative. Such instruction shall be deemed a Variation.

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In the event of the allocation of the risk not being governed by any other term of the
Contract, and such risk occurs during the Design-Build Period and the Contractor
is delayed and/or incurs cost from rectifying this damage, the Contractor shall give
a further Notice to the Employer’s Representative and shall be entitled to:

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(a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) payment of Cost Plus Profit, which shall be included in the Contract Price.
If the event occurs during the Operation Service Period, sub-paragraph (b) of this
Sub-Clause shall apply, but sub-paragraph (a) of this Sub-Clause shall not apply.
NT
The Employer’s Representative shall proceed in accordance with Sub-Clause 3.5
[Determinations] to determine the amounts due.

If an event occurs which has been designated an Employer’s Risk of Damage under Sub-
Clause 17.1 [The Employer’s Risks during the Design-Build Period] or 17.3 [The Employer’s
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Risks during the Operation Service Period], the Contractor is required to give a Notice to
the Employer’s Representative, and the Employer’s Representative is required to act under
Clause 13 [Variations and Adjustments]. in order for the Contractor to rectify or make good
the loss or damage.

This instruction is considered to be a Variation, and the Contractor will be entitled to claim
apply for both an extension of time and Cost Plus Profit in accordance with the provisions of
OR

Clause 13 [Variations and Adjustments]. However, if the event occurs during the Operation
Service Period, no extension of time will be given as the Operation Service Period cannot
be extended.

17.7 Consequences of the Contractor’s Risks resulting in Damage

TF

If any of the risks allocated as a Contractor’s risk under Sub-Clause 17.2 [The
Contractor’s Risks during the Design-Build Period] and 17.4 [The Contractor’s
Risks during the Operation Service Period] occurs and results in damage to the
Works or other property or Goods, the Contractor shall promptly give Notice to the
Employer’s Representative, and shall thereafter rectify such damage to the extent
NO

required by the Employer’s Representative. All such work of replacement, repair or

rectification shall be carried out by the Contractor at his own cost.

If an event causing loss or damage has been allocated as a Contractor’s Risk according
to Sub-Clauses 17.2 [The Contractor’s Risks during the Design-Build Period] or 17.4 [The
Contractor’s Risks during the Operation Service Period], then the Contractor is required to
give Notice to the Employer’s Representative and the Employer’s Representative is required
to inform the Contractor of the work he requires to be done to rectify the loss or damage,
and the Contractor is required to do such work at his own cost.

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17.8 Limitation of Liability

Neither Party shall be liable to the other Party for any loss of use of any Works, loss
of profit, loss of contract or for any other indirect loss or damage which may be
suffered by the other Party in connection with the Contract, other than under Sub-
Clause 10.6 [Delays and Interruptions during the Operation Service], Sub-Clause
16.4 [Payment on Termination], Sub-Clause 17.9 [Indemnities by the Contractor],
Sub- Clause 17.10 [Indemnities by the Employer] and Sub-Clause 17.12 [Risk of

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Infringement of Intellectual and Industrial Property Rights].
The total liability of the Contractor to the Employer, under or in connection with the
Contract, shall not exceed the sum stated in the Contract Data or (if a sum is not so

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stated) the Accepted Contract Amount.
This Sub-Clause shall not limit any liability in any case of fraud, deliberate default or
reckless misconduct by the defaulting Party.

It is very difficult for a Contractor to assess his risk exposure if he carries unlimited financial

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liability for the consequences of certain events occurring. Moreover, the Employer might
erroneously believe that he is covered for this unlimited risk exposure, whereas in fact he is not.

This Sub-Clause recognizes that it is in neither Party’s, nor the project’s best interests if a

liability.
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Party is forced into bankruptcy or an unacceptable financial situation by carrying unlimited

For this reason, neither Party is liable to the other Party for costs which it might be difficult
for him to know or establish in advance, such as loss of use, loss of contract and other
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indirect losses, except in connection with the identified Sub-Clauses. Furthermore, there
is an overall financial limit in respect of the liability of the Contractor towards the Employer
which is given in the Contract Data.

However, when calculating the liabilities to be included in reaching this limit, there are certain
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provisions which are excluded, so any damages arising under the named Sub-Clauses are
unlimited. Also if a Party is guilty of fraud, deliberate default or recklessness, the limits do
not apply, and the damages will be unlimited.

17.9 Indemnities by the Contractor

The Contractor shall indemnify and hold harmless the Employer, the Employer’s
OR

Personnel, and their respective agents, against and from all claims, damages,
losses and expenses (including legal fees and expenses) in respect of:
(a) bodily injury, sickness, disease or death, of any person whatsoever arising
out of or in the course of or by reason of the Contractor’s design, execution,
completion or operation and maintenance of the Works, unless attributable
TF

to any negligence, wilful act or breach of the Contract by the Employer, the
Employer’s Personnel, or any of their respective agents; and
(b) damage to or loss of any property, real or personal (other than the Works), to
the extent that such damage or loss;
(i) arises out of or in the course of or by reason of the Contractor’s design,
execution and completion or operation and maintenance of the Works, or
NO

(ii) is attributable to any negligence, wilful act or breach of the Contract by the
Contractor, the Contractor’s Personnel, their respective agents, or anyone
directly or indirectly employed by any of them.
The Contractor shall also indemnify the Employer against all errors in the Contractor’s
design of the Works and other professional services which result in the Works not
being fit for purpose or result in any loss and/or damage for the Employer.

Where a Party carries a risk, he is required to indemnify or protect the other Party in respect
of any claims he may receive or damage or loss he may suffer as a result of such risk. Thus

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 if a Party who is not liable for a risk under the Contract, receives a claim from a third party
or suffers loss or damage as a result of the risk eventuating, he is entitled to pass the claim
over to the other Party (the Party carrying the risk) to settle with the third party or to claim
any loss or damage from the other Party or Parties to the Contract.

The Contractor is also required to indemnify the Employer against the consequences of any
errors in the design or other professional services, which result in the Works not being fit for
purpose (as required by Sub-Clause 4.1 [Contractor’s General Obligations]).

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The Contract does not state how long this indemnity shall last; this will usually be determined
according to the Law governing the Contract.

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17.10 Indemnities by the Employer

The Employer shall indemnify and hold harmless the Contractor, the Contractor’s
Personnel, and their respective agents, against and from all claims, damages,
losses and expenses (including legal fees and expenses) in respect of:

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(a) bodily injury, sickness, disease or death, or loss of or damage to any property
other than the Works, which is attributable to any negligence, wilful act or
breach of the Contract by the Employer, the Employer’s Personnel, or any of
their respective agents; and

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(b) the Employer’s Risks as set out in Sub-Clauses 17.1 [The Employer’s Risks
during the Design-Build Period] and 17.3 [The Employer’s Risks during the
Operation Service Period].

This Sub-Clause requires the Employer to indemnify the Contractor in respect of those risks
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which the Employer carries in the same way as the Contractor indemnifies the Employer
under Sub-Clause 17.9 [Indemnities by the Contractor].

17.11 Shared Indemnities

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The Contractor’s liability to indemnify the Employer, as aforesaid, shall be reduced

proportionately to the extent that the Employer’s Risks may have contributed to
the said damage, loss or injury. Similarly, the Employer’s liability to indemnify the
Contractor, as aforesaid, shall be reduced proportionately to the extent that the
Contractor’s risks may have contributed to the said damage, loss or injury.

Where an event occurs where the risks carried by both Parties have contributed to the loss
OR

or damage incurred, then the damages payable from one Party to the other (or vice versa)
shall be reduced in proportion to the extent that the risk was shared.

17.12 Risk of Infringement of Intellectual and Industrial Property Rights

TF

In this Sub-Clause, “infringement” means an infringement (or alleged infringement)

of any patent, registered design, copyright, trademark, trade name, trade secret or
other intellectual or industrial property right relating to the Works; and “claim” means
a claim (or proceedings pursuing a claim) alleging an infringement.
Whenever a Party does not give Notice to the other Party of any claim within 28
days of receiving the claim, the first Party shall be deemed to have waived any right
NO

to indemnity under this Sub-Clause.

The Employer shall indemnify and hold the Contractor harmless against and from
any claim alleging an infringement which is or was:
(a) an unavoidable result of the Contractor’s compliance with the Employer’s
Requirements; or
(b) a result of any Works being used by the Employer:
(i) for a purpose other than that indicated by, or reasonably to be inferred from,
the Contract; or
(ii) in conjunction with any thing not supplied by the Contractor, unless such

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 use was disclosed to the Contractor prior to the Base Date or is stated in
the Contract.
The Contractor shall indemnify and hold the Employer harmless against and from
any other claim which arises out of or in relation to (i) the Contractor’s design,
manufacture, construction or execution of the Works, (ii) the use of Contractor’s
Equipment, or (iii) the proper use of the Works.
If a Party is entitled to be indemnified under this Sub-Clause, the indemnifying
Party may (at its cost) conduct negotiations for the settlement of the claim, and any

E
litigation or arbitration which may arise from it. The other Party shall, at the request
and cost of the indemnifying Party, assist in contesting the claim. This other Party
(and its Personnel) shall not make any admission which might be prejudicial to the

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indemnifying Party, unless the indemnifying Party failed to take over the conduct of
any negotiations, litigation or arbitration upon being requested to do so by the other
Party.

This Sub-Clause protects each Party against the consequences of infringement by the
other Party of any patent or other intellectual or industrial property right. The Employer must

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indemnify the Contractor against any such claims which are the unavoidable result of the
Contractor complying with the Employer’s Requirements or which arise due to the mis-use
of the facility by the Employer, and the Contractor must indemnify the Employer against all
such claims concerning the design or construction of the facility by the Contractor.

Clause 18 Exceptional Risks

RA
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18.1 Exceptional Risks

An exceptional risk is a risk arising from an Exceptional Event which includes, but
is not limited to:
(a) war, hostilities (whether war be declared or not), invasion, act of foreign
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enemies;
(b) rebellion, terrorism, revolution, insurrection, military or usurped power, or civil
war, within the Country;
(c) riot, commotion or disorder within the Country by persons other than
the Contractor’s Personnel and other employees of the Contractor and
Subcontractors;
(d) strike or lockout not solely involving the Contractor’s Personnel and other
OR

employees of the Contractor and Subcontractors;

(e) munitions of war, explosive materials, ionising radiation or contamination
by radio-activity, within the Country, except as may be attributable to the
Contractor’s use of such munitions, explosives, radiation or radio-activity; and
(f) natural catastrophes such as earthquake, hurricane, typhoon or volcanic
TF

activity which are Unforeseeable or against which an experienced contractor

could not reasonably have been expected to have taken adequate preventative
precautions.

An exceptional risk is the risk arising from an Exceptional Event, and all exceptional risks are
carried by the Employer. Definition 1.1.37 gives the basis for determining whether or not an
NO

event can be considered as an Exceptional Event, and this Sub-Clause 18.1 give a number
of examples of events which are considered as Exceptional Events. However, the list is not
exclusive , and if the Contractor considers that an event has occurred which falls within with
the definition given in 1.1.37, even if it is not specifically listed or named in this Sub-Clause
18.1, the Contractor may rightfully claim that the event gave rise to an exceptional risk under
this Sub-Clause 18.1, and that as such, it is a risk carried by the Employer.

The reasons that these exceptional risks are allocated to the Employer (see Sub-Clause
17.1 [The Employer’s Risks during the Design-Build Period]) include the fact that he is

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 the initiator of the project and he is the ultimate user and beneficiary. As such, the risks
start by being the Employer’s risks until they are shifted to the other Party or to insurers.
Furthermore, it would be extremely difficult for the Contractor to price such a risk if he was
required to carry it. Also the likelihood of such risks arising is small and it is better for the
Employer to pay for such risks if and when they occur, rather than ask the Contractor to
price for carrying the risk such that the Employer will pay for the risk (in the Contract Price),
whether or not it actually occurs.

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18.2 Notice of an Exceptional Event

If a Party is or will be prevented from performing any of its obligations under the

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Contract due to an Exceptional Event, then it shall give Notice to the other Party
of such event or circumstance and shall specify the obligations, the performance
of which is or will be prevented. The Notice shall be given within 14 days after the
Party became aware, or should have become aware, of the event or circumstance
constituting an Exceptional Event.
The Party shall, having given Notice, be excused performance of such obligations

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for so long as such Exceptional Event prevents it from performing them.
Notwithstanding any other provision of this Clause, the obligations of either Party to
make payments to the other Party under the Contract shall not be excused by an
Exceptional Event.

RA
If either Party becomes aware of an Exceptional Event which will prevent him for performing
his obligations, that Party must notify the other Party within 14 days of the circumstances
arising, giving details of their effect on his ability to perform. Following this Notice, the
affected Party is excused performance of such obligations.
NT
However, it is important that a Party does not attempt to claim relief from performance under
this Sub-Clause 18.2 for events or circumstances which do not constitute an Exceptional
Event. Should a Party be of the opinion that the other Party is attempting to mis-use this
Sub-Clause 18.2 in this way, it should immediately seek legal advice on its rights to stop
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such mis-use.

18.3 Duty to Minimise Delay

Each Party shall at all times use all reasonable endeavors to minimise any delay in
the performance of the Contract as a result of an Exceptional Event.
A Party shall give Notice to the other Party when it ceases to be affected by an
OR

Exceptional Event.

Both Parties are required to use all reasonable efforts to minimize delay due to an Exceptional
Event. In this context, ‘reasonable efforts’ means that a Party cannot be expected to take
steps which will entail unreasonable expenditure in an effort to minimise delay.
TF

If the Employer requires the Contractor to take specific steps or action, such an instruction
would be considered to be an instruction under another Sub-Clause, for example, an
instruction to suspend work would be given under Sub-Clause 9.7 [Suspension of Work]
and an instruction to vary the Works would be given under Sub-Clause 13.1 [Right to Vary]
and so on. In such a case it is to be expected that the Contractor would be entitled to claim
NO

the costs of complying with the instruction.

18.4 Consequences of an Exceptional Event

If the Contractor is prevented from performing any of his obligations under the
Contract due to an Exceptional Event of which Notice has been given under Sub-
Clause 18.2 [Notice of an Exceptional Event] and suffers delay and/or incurs cost
by reason of such Exceptional Event, the Contractor shall be entitled, subject to
Sub-Clause 20.1 [Contractor’s Claims], to:

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 (a) an extension of time for any such delay, if completion is or will be delayed, under
Sub-Clause 9.3 [Extension of Time for Completion of Design-Build]; and
(b) if the event or circumstance is of the kind described in sub-paragraphs (a) to (e)
of Sub-Clause 18.1 [Exceptional Risks] and, in the case of sub-paragraphs (b)
to (e), occurs in the Country, payment of any such Cost.
If the Exceptional Event occurs during the Operation Service Period, sub-paragraph
(a) of this Sub-Clause 18.4 will not apply.
After receiving this Notice, the Employer’s Representative shall proceed in

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accordance with Sub-Clause 3.5 [Determinations] to agree or determine these
matters.

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As mentioned, all exceptional risks are carried by the Employer, so if an Exceptional Event
occurs, the Contractor is entitled to compensation and, if required, a time extension. Note
that the Contractor must have ‘registered’ the event as an Exceptional Event according to
Sub-Clause 18.2 [Notice of an Exceptional Event] before he can claim, and if he plans to
claim, he must follow the procedures given in Sub-Clause 20.1 [Contractor’s Claims].

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The point is also made that if the Exceptional Event occurs during the Operation Service
Period, no extension of time should be sought or awarded, as the Operation Service Period
cannot be extended.

18.5
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Optional Termination, Payment and Release

If the execution of substantially all the Works in progress is prevented for a

continuous period of 84 days by reason of an Exceptional Event of which Notice has
been given under Sub-Clause 18.2 [Notice of an Exceptional Event], or for multiple
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periods which total more than 140 days due to the same notified Exceptional Event,
then either Party may give to the other Party a Notice of termination of the Contract.
In this event, the termination shall take effect 7 days after the Notice is given, and the
Contractor shall proceed in accordance with Sub-Clause 16.3 [Cessation of Work
and Removal of Contractor’s Equipment].
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Upon such termination, the Employer’s Representative shall determine the value of
the work done and issue a payment certificate which shall include:
(a) the amounts payable for any work carried out for which a price is stated in the
Contract;
(b) the Cost of Plant and Materials ordered for the Works which have been delivered
to the Contractor, or of which the Contractor is liable to accept delivery. This
Plant and Materials shall become the property of (and be at the risk of) the
OR

Employer when paid for by the Employer, and the Contractor shall place the
same at the Employer’s disposal;
(c) any other Cost or liability which in the circumstances was reasonably incurred
by the Contractor in the expectation of completing the Works;
(d) the Cost of removal of Temporary Works and Contractor’s Equipment from the
TF

Site and the return of these items to the Contractor’s works in his country (or to
any other destination at no greater cost); and
(e) the Cost of repatriation of the Contractor’s staff and labour employed wholly in
connection with the Works at the date of termination.

This Sub-Clause protects the Parties in the event that the effects of the Exceptional Event
NO

last for a continuous period of 84 days, or multiple periods totalling more than 140 days.
In such a case, neither Party may wish to continue waiting for an unlimited time before
being permitted to re-start work, and this Sub-Clause entitles either Party to give Notice of
termination to the other Party once the time limits have been exceeded.

Whichever Party decides to terminate under this Sub-Clause, the Contractor is entitled to
be fairly paid for the work he has done and the other costs he has incurred as itemised in
paragraphs (b) to (e), and the Employer’s Representative is required to prepare a Payment
Certificate accordingly.

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 18.6 Release from Performance under the Law

Notwithstanding any other provision of this Clause, if any event arises outside
the control of the Parties (including, but not limited to, an Exceptional Event)
which makes it impossible or unlawful for either or both Parties to fulfil its or their
contractual obligations or which, under the law governing the Contract, entitles the
Parties to be released from further performance of the Contract, then upon Notice
by either Party to the other Party of such event:

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(a) the Parties shall be discharged from further performance, without prejudice
to the rights of either Party in respect of any previous breach of the Contract;
and

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(b) the sum payable by the Employer to the Contractor shall be the same as would
have been payable under Sub-Clause 18.5 [Optional Termination, Payment and
Release] if the Contract had been terminated under that Sub-Clause.

Sometimes events occur which make it impossible or unlawful for a Party to continue,
or events occur which, according to the Law governing the Contract, release the Parties

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from any further obligation to perform the Contract. If this happens, the Contract shall be
deemed to have been terminated under Sub-Clause 18.5 [Optional Termination, Payment
and Release], and the Contractor will be entitled to be paid accordingly.

Clause 19 Insurance
RA
The provisions in Clause 19 are based on all the required insurances being provided by the
NT
Contractor. If the Employer plans to provide any of these himself, naming the Contractor
as joint insured, the responsibilities described will need amending, and an Employer
contemplating such a change would be well advised to consult an insurance expert before
introducing such changes to ensure that he and the Contractor are properly covered and
protected for the full duration of the Contract.
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The requirement for the Contractor to take out insurance is an obligation, not an option –
since it also provides for some of the indemnities which the Contractor is required to give
the Employer. In each case the wording “the Contractor shall effect and maintain …..”, and
‘shall’ (see Sub-Clause 1.2 [Interpretation]) means he must take out the required insurances
in accordance with the provisions of each Sub-Clause.
OR

Insurance protects the Party concerned (in this case, the Contractor) against the financial
consequences of risks arising for which he is liable under the terms of the Contract. Such
protection is necessary since the engineering and construction industry is recognised as
one which carries high risks and the financial consequences can be substantial – sometimes
far greater than a contractor could carry on his own.
TF

Note that both the terms of the policies and the insurers which the Contractor intends using
must be approved by the Employer, not the Employer’s Representative. The reason for this
is that in most of the policies the Employer is joint insured, so he is responsible for satisfying
himself that he is properly covered by the policy.
NO

The second reason is that the Employer’s Representative, whether he is an employee of the
Employer or a third party such as a firm of consulting engineers, is unlikely to have sufficient
specialist knowledge to make such a judgement, and such a person would be unwise to
take on such a responsibility.

Note also that the required insurances are divided between those required during the
Design-Build Period and those required during the Operation Service Period. This is due to
the different nature of the design and construction risks arising during the Design-Build, and
the operational risks arising during the Operation.

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19.1 General Requirements

Without limiting his or the Employer’s obligations or responsibilities under the

Contract, the Contractor shall effect and maintain all insurances for which he is
responsible with insurers and in terms, both of which shall be subject to approval by
the Employer, such approval shall not be unreasonably withheld or delayed.
The insurances required to be provided herein are the minimum required by the
Employer, and the Contractor may, at his own cost, add such other insurances that

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he may deem prudent.
Whenever required by the Employer, the Contractor shall produce the insurance
policies which he is required to effect under the Contract. As each premium is paid,

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the Contractor shall send a copy of each receipt of payment to the Employer.
If the Contractor fails to effect and keep in force any of the insurances required under
Sub-Clause 19.2 [Insurances to be provided by the Contractor during the Design-
Build Period], or fails to provide the policies or receipts as aforementioned, then, and
in any such case, the Employer may effect and keep in force such insurances and
pay any premium as may be necessary and recover the same from the Contractor

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from time to time by deducting the amount(s) so paid from any monies due to the
Contractor or otherwise recover the same as a debt from the Contractor.
If either the Contractor or the Employer fails to comply with the conditions attaching
to the insurances effected pursuant to the Contract, the Party so failing to comply

such failure.
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as aforesaid shall indemnify the other Party against all losses and claims arising from

The Contractor shall also be responsible for the following:

(a) notifying the insurers of any changes in the nature, extent or programme for the
execution of the Works;
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(b) notifying the insurers of any changes in the nature, extent or programme for the
provision of the Operation Service; and
(c) the adequacy and validity of the insurances in accordance with the Contract at
all times during the performance of the Contract.
The permitted deductible limits allowed in any policy shall not exceed the amounts
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stated in the Contract Data.

Where there is a shared liability the loss shall be borne by each Party in proportion
to its liability under Clause 17 [Risk Allocation] or Clause 18 [Exceptional Risks],
provided the non-recovery from insurers has not been caused by a breach of this
Clause by the Contractor. In the event that non-recovery from insurers has been
caused by such a breach of Contract by the Contractor, the Contractor shall bear
the loss suffered.
OR

As mentioned in the introduction to this Clause, it is the Contractor who is responsible for
taking out the named insurances, and it is the Employer who should check and approve the
identity of the insurers and the provisions of the policies. It is in neither Party’s interest for
TF

the Contractor to be uninsured or under-insured, and if the Contractor fails to take out or
maintain the required insurances, the Employer may do so at the Contractor’s cost.

The specified insurances are the minimum which the Contractor is required to provide. If he
wishes to take out additional insurance he is free to do so at his own cost.
NO

A basic requirement of any insurance policy is that it is issued based on certain conditions
and criteria, and it is important that both Parties follow those conditions to the letter. If they
do not, for example, by failing to notify the insurers within a given time of certain events
specified in the terms of the insurance cover, or failing to follow other specified procedures,
the risk is that the insurers might not honour the consequent liability. Accordingly, each
Party is required to indemnify the other Party against the consequences of such a failure.

Furthermore, the Contractor must notify the insurers if any circumstances upon which the
original insurance was based, change. This not only covers changes to the Works as such,

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 but also if the programme is extended, or if the policy requires particular notification to be
issued, the insurers must be informed so that proper insurance cover is maintained for the
complete Contract Period.

19.2 Insurances to be provided by the Contractor during the Design-Build Period

The Contractor shall provide the following insurances during the Design-Build
Period:

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(a) The Works
The Contractor shall insure and keep insured in the joint names of the Contractor
and the Employer from the Commencement Date until the date of issue of the

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Commissioning Certificate:
(i) the Works, together with Materials and Plant for incorporation therein, for their
full replacement value with deductible limits not exceeding those stated in the
Contract Data. The insurance cover shall extend to include loss and damage
of any part of the Works as a consequence of failure of elements defectively
designed or constructed with defective material or workmanship; and

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(ii) an additional sum of fifteen percent (15%) of such replacement value (or
such sum as may be specified in the Contract Data) to cover any additional
costs incidental to the rectification of loss or damage, including professional
fees and the cost of demolition and removal of debris.

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The insurance cover shall cover the Employer and the Contractor against all
loss or damage from whatever cause arising until the Commissioning Certificate
is issued. Thereafter, the insurance shall continue until the date of issue of
the Final Payment Certificate Design Build in respect of any incomplete work
for loss or damage arising from any cause occurring prior to the date of the
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Commissioning Certificate, and for any loss or damage occasioned by the
Contractor in the course of any operation carried out by him for the purpose of
complying with his obligations under Clause 12 [Defects].
The insurance cover provided by the Contractor for the Works may exclude any
of the following:
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(1) the cost of making good any part of the Works which is defective (including
defective material and workmanship) or otherwise does not comply with the
Contract, provided that it does not exclude the cost of making good any
loss or damage to any other part of the Works attributable to such defect or
non-compliance.
(2) indirect or consequential loss or damage including any reductions in the
Contract Price for delay.
OR

(3) wear and tear, shortages and pilferages.

(4) the Employer’s Risks set out in Sub-Clause 17.1 [Employer’s Risks during
the Design-Build Period] unless otherwise stated in the Contract Data
regarding the risks in sub-paragraph (b)(iii) thereof.
(5) the Exceptional Risks set out in Sub-Clause 18.1 [Exceptional Risks] unless,
TF

otherwise stated in the Contract Data regarding the risks in subparagraph (f)
thereof.

The first insurance to be provided by the Contractor during the Design-Build Period is
insurance of the Works, including Materials and Plant. The insurance must be in place and
valid from the Commencement Date and be in the joint names of the Contractor and the
NO

Employer, and it must remain in force until the date the Commissioning Certificate is issued.
It must cover the full replacement cost of the damaged items and damage caused to any
other items as a consequence, plus an amount set at 15% (unless otherwise stated) of the
insured amount for incidental costs and professional fees. If there is any outstanding work or
defects to be repaired after the issue of the Commissioning Certificate, the Works insurance
shall also cover such activities.

There are however, certain exclusions for situations where the Contractor is not required to
obtain cover. These are listed in paragraphs (1) to (5). If the Contract requires the Contractor

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 to cover any of these standard excluded items, details should be given in the Contract
Data. Sometimes Employers may wish to the Contractor’s insurance to cover some of
the Employer’s Risks or the Exceptional Risks. However, before asking the Contractor to
insure against such risks, Employers should be aware that many of the risks are not readily
insurable at commercially acceptable rates.

(b) Contractor’s Equipment

The Contractor shall insure in the joint names of the Employer and the

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Contractor the Contractor’s Equipment and other things brought onto Site by
the Contractor to the extent specified in the Contract Data.

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The Contractor is required to insure his Contractor’s Equipment against loss and damage.
Contractor’s Equipment, by definition (see 1.1.18), means all things brought onto the Site
by the Contractor which he needs to execute the Works. Some items within the definition
of Contractor’s Equipment, such as vehicles, may in any event be required to be insured
by law, and it is the Contractor’s responsibility to see that such items are properly insured
before being used. The amount of cover required is given in the Contract Data. Upon

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completion, these items are no longer required and will be removed by the Contractor from
the Site. Furthermore, due to the fact that in insurance terminology the word “equipment”
does not include items which can move under their own power, such items as cranes
and bulldozers, etc. which are commonly found on construction sites, may need to be

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separately classified as “machinery” and identified and insured accordingly (even though
Definition 1.1.18 for the Contractor’s Equipment mentions ‘machinery’).

(c) Liability for breach of professional duty

The Contractor shall insure the legal liability of the Contractor arising out of the
NT
negligent fault, defect, error or omission of the Contractor or any person for
whom the Contractor is responsible in the carrying out their professional duties
in an amount not less than that stated in the Contract Data.
Such insurance shall contain an extension indemnifying the Contractor for his
liability arising out of negligent fault, defect, error or omission in the carrying out
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his professional duties which result in the Works not being fit for the purpose
specified in the Contract and resulting in any loss and/or damage to the
Employer.
The Contractor shall maintain this insurance for the period specified in the
Contract Data.

Since the Contractor is responsible for the design of the Works, he must also take out, or
OR

see that his designers take out, professional liability insurance in the amount stated in the
Contract Data to cover him against defective design or other professional fault or error.
Since normal professional liability insurance often only covers for ‘due care and diligence’,
there is a requirement that the Contractor shall extend this cover such that the Contractor
is covered in the event that an error or fault by the Contractor (or his designers) results in
TF

the Works not being fit for purpose as required by Sub-Clause 4.1 [Contractor’s General
Obligations]. Even if the Contractor does not or cannot provide this required extension, he
is still liable in the event that elements of the design render the Works not fit for purpose, so
failure to acquire this extension does not relieve the Contractor of his liability.

(d) Injury to persons and damage to property

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The Contractor shall insure, in the joint names of the Contractor and the
Employer, against liabilities for death or injury to any person, or loss of or
damage to any property (other than the Works) arising out of the performance
of the Contract and occurring before the issue of the Final Payment Certificate
Design-Build, other than loss or damage caused by any event covered under
Sub-Clause 17.1 [Employer’s Risks during the Design-Build Period] or Sub-
Clause 18.1 [Exceptional Risks].
The insurance policy shall include a cross liability clause such that the insurance
shall apply to the Contractor and the Employer as separate insureds.

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 Such insurance shall be effected before the Contractor begins any work on
the Site and shall remain in force until the issue of the Final Payment Certificate
Design-Build and shall be for not less than the amount specified in the Contract
Data.

This Sub-Clause requires the Contractor to insure against liability towards third parties. He
is not required to take out such insurance in respect of risks for which the Employer is liable
according to Sub-Clauses 17.1 [The Employer’s Risks during the Design-Build Period] or

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18.1 [Exceptional Risks]. The amount of cover is given in the Contract Data and it must be
effected before the Contractor begins work on Site and remain in force until the issue of the
Final Payment Certificate Design-Build.

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Although the Contractor is required to insure in the joint names of himself and the Employer,
the insurance must include a cross liability clause so that the Contractor and the Employer
are also covered as separate insureds.

In addition, the insurance shall cover personnel and property of the Parties except where

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such personnel or property is covered by other sub-clauses. See Sub-Clause 19.2 (a) The
Works, and (e) Injury to employees.

(e) Injury to employees

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The Contractor shall effect and maintain insurance against liability for claims,
damages, losses and expenses (including legal fees and expenses) arising from
injury, sickness, disease or death of any person employed by the Contractor or
any other of the Contractor’s Personnel.
NT
The Employer and the Employer’s Representative shall also be indemnified
under the policy of insurance, except that this insurance may exclude losses
and claims to the extent that they arise from any act or neglect of the Employer
or of the Employer’s Personnel.
The insurance shall be maintained in full force and effect during the whole time
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that the Contractor’s Personnel are assisting in the execution of the Works. For
any person employed by a Subcontractor, the insurance may be effected by the
Subcontractor, but the Contractor shall be responsible for the Subcontractor’s
compliance with this Sub-Clause.

This insurance is in respect of injury or death to the Contractor’s own personnel and
employees and is, in many countries, a legal requirement for works being executed in that
OR

country. The Sub-Clause sets out the requirements of the Contract, but if the requirements
of the Law are more extensive or demanding, the Contractor must comply with such
requirements, and unless such requirements have been introduced since the Base Date
(see Definition 1.1.5), the Contractor will not be able to claim additional payment for any
such insurances which he failed to include when pricing his tender.
TF

(f) Other insurances required by Law and by local practice

Other insurances required by Law and by local practice (if any) shall be detailed
in the Contract Data and the Contractor shall provide such other insurances in
compliance with the details given, at his own cost.
NO

Similar to the comment made to paragraph (e) above, the Contractor must comply with
the legal requirements in the relevant country, and the Contractor is responsible for
doing so at his own cost. However, in this case, such requirements must be identified
in the Contract Data since tenderers may not be familiar with the requirements of ‘local
practice’. It is therefore important for the Employer to see that all such requirements are
stated in the Contract Data. It should be noted that this requirement for the Employer
to identify these ‘Other Insurances’, does not apply to paragraph (e) above. In that case
the Contractor is responsible for ascertaining all the requirements regarding insurance of
personnel, etc.

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19.3 Insurances to be provided by the Contractor during the Operation Service Period

The Contractor shall provide the following insurances during the Operation Service
Period:
(a) Fire extended cover for the Works
The Contractor shall provide, in the joint names of the Employer and the
Contractor, fire extended cover insurance for the Works as specified in the
Contract Data for the Operation Service Period. Notwithstanding any other

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provision in the Contract, the Operation Service shall not commence until the
fire extended cover insurance is effected and the terms and details have been
approved by the Employer.

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The terms of the policy shall be submitted to the Employer for his approval no
later than 28 days before the date upon which the Commissioning Certificate
is due to be issued, and shall come into force on the date stated in the
Commissioning Certificate.

Since the Works insurance provided under Sub-Clause 19.2(a) is only valid until the issue

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of the Commissioning Certificate, it is necessary to insure the facility against all risks of
damage, fire and loss during the Operation Service Period. This is called Fire Extended
Cover insurance and must be in place as a condition for the Operation Service to
commence. Thus it must be in place when the Commissioning Certificate is issued (as this

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is the date of commencement of the Operation Service), and the Contract requires that the
terms of the insurance shall have been submitted to the Employer for his approval 28 days
before the Commissioning Certificate is due to be issued. It is the Employer’s responsibility
to see that he approves the policy in good time (see Sub-Clause 1.3 [Notices and Other
Communications]) so that the Contractor is not delayed in commencing the Operation
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Service or, if the policy needs correction before being approved, giving the Contractor
sufficient time to make the necessary corrections.

(b) Injury to any person and damage to property

The Contractor shall ensure that an insurance as required under Sub-Clause
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19.2 (d) [Injury to persons and damage to property] be effected prior to the issue
of the Commissioning Certificate and maintained until the issue of the Contract
Completion Certificate. Such insurance shall be for an amount and in terms as
specified in the Contract Data.
(c) Injury to employees
The Contractor shall ensure that an insurance as required under Sub-Clause
19.2(e) [Injury to employees] be effected prior to the issue of the Commissioning
OR

Certificate and maintained until the issue of the Contract Completion Certificate,
or the last of his or any of his Subcontractors’ employees have left the Site,
whichever is the later.
(d) Other insurances required by Law and by local practice
Other insurances required by Law and by local practice (if any) shall be detailed
TF

in the Contract Data and the Contractor shall provide such insurances in
compliance with the details given, at his own cost
(e) Other optional operational insurances
Other optional insurances required (if any) shall be detailed in the Contract Data
and the Contractor shall provide such other insurances in compliance with the
details given, at his own cost.
NO

See the comments found under Sub-Clause 19.2 paragraphs (d), (e) and (f). Although
these provisions appear to be similar to those found under Sub-Clause 19.2 [Insurances
to be provided by the Contractor during the Design-Build Period], the circumstances may
differ due to the fact that personnel are facing operational risks rather than constructional
risks.

Also, the additional possible insurances required by Law or local practice will differ and
relate to the requirements of an essentially service-type of contract.

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 Again, if there are additional operational insurances which the Employer requires the
Contractor to take out, for example, in connection with existing plant or equipment near
the facility or in respect of environmental issues or other particular issues relating to the
operation of the facility, the Employer must make sure that such requirements are given
in the Contract Data. Provided he does this, the Contractor is responsible for including
such requirements in his prices. If such requirements are not given in the Contract Data,
the Contractor would be entitled to extra reimbursement for providing them should they
subsequently be required.

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Examples of insurance cover which might be required under paragraph (e) of this Sub-
Clause are: Machinery Breakdown; Loss of Profits; and Loss of Profits following Machinery

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Breakdown. In this connection, it would be advisable to engage a specialist advisor for the
task of selecting the appropriate ‘Other Operational Insurances’ for the project.

Clause 20 Dispute Resolution

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Clause 20 contains all the provisions relating to the submission of claims by either the
Contractor or the Employer, and their resolution by adjudication or arbitration in the event
that the Parties cannot reach an amicable settlement.

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The Clause is essentially a procedural clause giving procedures and time limits to be
observed if a Party wants to secure its right to claim. The events establishing the right
of a Party to claim will have arisen under other clauses of the Contract. It is important to
understand that there are many events and circumstances which will arise which give the
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Contractor the right to receive fair and proper compensation – events and circumstances
which may have been unknown to the Contractor when tendering for the work and which,
having arisen, may not be the responsibility or liability of the Contractor under the terms of
the Contract.
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However, it is up to the Party making the claim to prove its case, and it is important to
follow the procedures described. Some of the Sub-Clauses provide for possible relaxation
of procedures and/or time limits if the DAB considers that the circumstances were such that
the claiming Party was unable to reasonably comply with them. This provision recognises
that both Parties should be fairly treated and not be unfairly barred from claiming if the
circumstances warrant fair consideration and assessment.
OR

Claims from the two Parties are dealt with in two separate Sub-Clauses, since the
circumstances giving rise to the claims will differ in cause and character. However, the
provisions for resolution by adjudication or arbitration are common whichever Party is
making the claim.
TF

20.1 Contractor’s Claims

If the Contractor considers himself to be entitled to any extension of the Time for
Completion of Design-Build and/or any additional payment, under any Clause of
these Conditions or otherwise in connection with the Contract, he must comply with
the following procedures:
NO

(a) Notices
The Contractor shall give Notice to the Employer’s Representative, describing
the event or circumstance giving rise to the claim as soon as practicable, and
not later than 28 days after the Contractor became aware, or should have
become aware, of the event or circumstance. The Notice shall state that it is
given under this Sub-Clause.
If the Contractor fails to give Notice of a claim within such period of 28 days, the
Time for Completion of Design-Build shall not be extended, the Contractor shall
not be entitled to additional payment, and the Employer shall be discharged

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 from all liability in connection with the claim. However, if the Contractor
considers there are circumstances which justify the late submission, he may
submit the details to the DAB for a ruling. If the DAB considers that, in all the
circumstances, it is fair and reasonable that the late submission be accepted,
the DAB shall have the authority to overrule the relevant 28-day limit and, if it so
decides, it shall advise the Parties accordingly.
If the Contractor has submitted his Notice of claim within the 28-day limit or the
DAB has ruled that the late Notice was acceptable, then the Contractor shall

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proceed in accordance with the provisions of this Sub-Clause.

The first step if the Contractor wishes to make a claim is to give written Notice to the

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Employer’s Representative of the relevant event or circumstances. This he must do ‘as
soon as practicable’, but no later than 28 days after he became aware of the event or
circumstance, or ‘when he should have become aware of the event or circumstance’.
The extra wording is there is to prevent a contractor claiming that he was not aware of an
event when everyone knows that he was or at least should have been. If he fails to give this
Notice within the 28 days, he loses his right to claim. However, if he considers there were

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grounds to justify a late notification, he can apply to the DAB, and if the DAB also feel that
the late submission of the Notice was justified, they can overrule the 28 day limit and allow
the claim to go forward.

(b) Contemporary records

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Following the giving of Notice, the Contractor shall keep such contemporary
records as may be necessary to substantiate any claim. Contemporary records
shall be kept on Site unless agreed otherwise with the Employer’s Representative.
Without admitting the Employer’s liability, the Employer’s Representative may,
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after receiving any Notice under this Sub-Clause, monitor the record-keeping
and/or instruct the Contractor to keep additional contemporary records. The
Contractor shall permit the Employer’s Representative to inspect all these
records, and shall (if instructed) submit copies to the Employer’s Representative.
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After giving the Notice, the Contractor must keep proper records. He must be able to
substantiate his claim, not only the event or circumstance, but also the quantum, and the
Employer’s Representative has the right to inspect these records. Very often, having been
given Notice under paragraph (a), the Employer’s Representative will keep his own records
of events so that he can check the application from the Contractor, but this will not relieve
the Contractor of the requirement to keep his own records. One further important aspect
of this paragraph is that the Employer’s Representative may require the Contractor to keep
OR

specific additional records or to ask the Contractor to compile the records in a specific
manner to simplify subsequent checking and analysis.

(c) Details and particulars

Within 42 days after the Contractor became aware (or should have become
TF

aware) of the event or circumstance giving rise to the claim, or within such
other period as may be allowed by the DAB under paragraph (a) above, or
proposed by the Contractor and approved by the Employer’s Representative,
the Contractor shall send to the Employer’s Representative a fully detailed claim
which includes full supporting particulars of the contractual or other basis of
the claim and of the extension of time and/or additional payment claimed. The
NO

Contractor shall also provide the Employer’s Representative with any additional
particulars which the Employer’s Representative may reasonably require.
If the Contractor fails to provide the contractual or other basis of the claim
within the said 42 days or other time allowed or approved, the Notice given
under paragraph (a) above shall be deemed to have lapsed and shall no
longer be considered as a valid Notice. If the Contractor considers there are
circumstances which justify a late submission, he may submit the details to the
DAB for a ruling. If the DAB considers that, in all the circumstances, it is fair
and reasonable that the late submission be accepted, the DAB shall have the

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 authority to overrule the given 42-day limit and, if it so decides, it shall advise
the Parties accordingly.
If the event or circumstance giving rise to the claim has a continuing effect:
(i) the fully detailed claim shall be considered as interim;
(ii) the Contractor shall send further interim claims at 28-day intervals, giving the
accumulated delay and/or amount claimed, and such additional particulars
as the Employer’s Representative may reasonably require; and
(iii) the Contractor shall send a final claim within 28 days after the end of the

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effects resulting from the event or circumstance, or within such other period
as may be proposed by the Contractor and approved by the Employer’s
Representative.

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The Contractor has 42 days after becoming aware of the events giving rise to his claim to
submit to the Employer’s Representative a fully detailed claim with all supporting particulars.
This is 42 days after becoming aware of the event, so it could be only 14 days after giving
Notice under paragraph (a).

CT
If the circumstances are such that the Parties agree that the time is insufficient for the
Contractor to make the submission, they may agree to extend the time, but, if the
Contractor fails to submit the details within the 42 days or the agreed time, then the
Notice given under paragraph (a) shall be deemed to have lapsed, and the claim will not

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be accepted or considered. However, if there are circumstances which the Contractor
considers would fairly entitle him to more time, he may in the first instance propose to the
Employer’s Representative an extended period of time. If the Employer’s Representative
does not approve such a proposal, the Contractor may make a submission to the DAB for
a decision to overrule the 42-day limit.
NT
It is important to note that what is required to be submitted by the Contractor within the said
42 days is “a fully detailed claim which includes full supporting particulars of the contractual
or other basis of the claim and of the extension of time and/or additional payment claimed.”
This is a far-reaching requirement which in most cases requires the setting out of a thorough
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analysis of the rights and obligations of the Parties in connection with the claim being made.
It is therefore not sufficient to simply make a brief reference to the Clause under which the
claim is being made.

If the event has an on-going effect, then the Contractor is required to send interim claims at
28 day intervals until the effect of the event is over, with a final claim “28 days after the end
of the effects resulting from the event or circumstance…” summarising the total situation.
OR

The purpose of the interim claims is to enable the Contractor to be paid at monthly intervals
rather than wait until the whole effect is known and summarised.

(d) Employer’s Representative’s response

Within 42 days after receiving a fully detailed claim or any further particulars
TF

requested by the Employer’s Representative, or within such other period as may

be agreed by the Employer’s Representative and the Contractor, the Employer’s
Representative shall proceed in accordance with Sub-Clause 3.5 [Determinations]
to agree or determine (i) the extension (if any) of the Time for Completion of Design-
Build (before or after its expiry) in accordance with Sub-Clause 9.3 [Extension of
Time for Completion for Design-Build], and/or (ii) the additional payment (if any) to
NO

which the Contractor is entitled under the Contract with detailed comments. He
may also request any necessary additional particulars, but shall nevertheless give
his response on the contractual or other aspects of the claim within the 42 days
after receiving the fully detailed claim from the Contractor.
If the Employer’s Representative does not respond in accordance with the
foregoing procedures and timetable, either Party may consider that the claim
has been rejected by the Employer’s Representative, and either Party may refer
the matter to the DAB in accordance with Sub-Clause 20.6 [Obtaining Dispute
Adjudication Board’s Decision].

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 Each Payment Certificate shall include such amounts for any claim as have been
reasonably substantiated as due under the relevant provision of the Contract.
Unless and until the particulars supplied are sufficient to substantiate the whole
of the claim, the Contractor shall only be entitled to payment for such part of the
claim as he has been able to substantiate.
If either Party is dissatisfied with the determination of the Employer’s
Representative, either Party may, within 28 days after receiving the determination,
issue to the Employer’s Representative and the other Party, a Notice of

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dissatisfaction, and thereafter proceed in accordance with Sub-Clause 20.6
[Obtaining Dispute Adjudication Board’s Decision]. If no Notice of dissatisfaction
is issued by either Party within the said 28 days, the determination of the

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Engineer’s Representative shall be deemed to have been accepted by both
Parties.
The requirements of this Sub-Clause are in addition to those of any other Sub-
Clause which may apply to a claim. If the Contractor fails to comply with this
or another Sub-Clause in relation to any claim, any extension of time and/or
additional payment shall take account of the extent (if any) to which the failure

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has prevented or prejudiced proper investigation of the claim, unless the claim
is excluded under the paragraph (a) of this Sub-Clause.

This paragraph describes how the Employer’s Representative should respond after receiving

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a fully detailed (or interim in the case of an on-going effect) claim from the Contractor. It
is important to note that the Employer’s Representative has firstly the duty to “give his
response on the contractual or other aspects of the claim within the 42 days after receiving
the fully detailed claim from the Contractor.”
NT
Secondly, he must, within 42 days “after receiving a fully detailed claim or any further particulars
requested by the Employer’s Representative”, follow the procedures described in Sub-Clause
3.5 to either agree or determine the amount due or the time extension to be awarded. The
fall-back provision if the Employer’s Representative fails to respond within the given time limit
is that the claim shall be deemed to be rejected. Although it may seem harsh that a failure
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by the Employer’s Representative shall result in the deemed rejection of the claim, it is in fact
opening the door for the Contractor to submit the matter directly to the DAB for a decision
without having to continue waiting for the Employer’s Representative’s determination.

The Employer’s Representative also has the right to ask the Contractor for ‘additional
particulars’ if he needs further information to enable him to properly assess the claim.
However, it is not intended that an Employer’s Representative should use this provision to
OR

unreasonably demand more and more information and so delay the procedure before giving
his determination. By Sub-Clause 1.3 [Notices and Other Communications]: Notices and
other communications (which includes determinations) shall not be unreasonably withheld
or delayed. If the Contractor felt that the Employer’s Representative was not acting in a
reasonable way, the door is open for him to submit the matter to the DAB for a decision.
TF

Finally, when the Employer’s Representative does give his determination, if either Party is
dissatisfied, it has 28 days to advise the Employer’s Representative and the other Party that
it is dissatisfied with the determination by means of a Notice of dissatisfaction. If no such
Notice has been issued by either Party within 28 days of receiving the determination, it is
deemed that both Parties have accepted the determination, thereby foreclosing either Party
NO

from referring the matter to the DAB at a later date.

If a Notice of dissatisfaction is issued by either Party, then the provisions of Sub-Clauses

20.3 onwards will become applicable.

20.2 Employer’s Claims

If the Employer considers himself to be entitled to any payment under any Clause
of these Conditions or otherwise in connection with the Contract, the Employer or

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 the Employer’s Representative shall give Notice and particulars to the Contractor.
The Notice shall be given as soon as practicable after the Employer becomes
aware, or should have become aware, of the event or circumstances giving rise to
the claim.
The particulars shall specify the Clause or other basis of the claim, and shall include
substantiation of the amount to which the Employer considers himself to be entitled
in connection with the Contract. The Employer’s Representative shall then proceed
in accordance with Sub-Clause 3.5 [Determinations] to agree or determine the

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amount (if any) which the Employer is entitled to be paid by the Contractor.
If either Party is dissatisfied with the determination of the Employer’s Representative,
either Party may, within 28 days after receiving the determination, issue to the

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Employer’s Representative and the other Party, a Notice of dissatisfaction, and
thereafter proceed in accordance with Sub-Clause 20.6 [Obtaining Dispute
Adjudication Board’s Decision]. If no Notice of dissatisfaction is issued by either
Party within the said 28 days, the determination of the Engineer’s Representative
shall be deemed to have been accepted by both Parties.
The amount determined by the DAB may be included as a deduction in the Contract

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Price and Payment Certificates. The Employer shall only be entitled to set off against
or make any deduction from an amount certified in a Payment Certificate, or to
otherwise claim against the Contractor, in accordance with this Sub-Clause.

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If the Employer has any claim against the Contractor, he must follow the procedures given in
this Sub-Clause. He cannot simply deduct the amount which he considers to be due to him
from a Payment Certificate. It must first be certified by the Employer’s Representative who
is required to make a determination in accordance with Sub-Clause 3.5 [Determinations].
The Sub-Clause does not contain the same disciplines as are found in Sub-Clause 20.1
NT
[Contractor’s Claims], but the Employer is required to give the Contractor particulars of the
claim and substantiation of the amount claimed.

The matter will then be determined by the Employer’s Representative acting in accordance
with Sub-Clause 3.5 [Determinations], and the procedures in the event of dissatisfaction by
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either Party are the same as described under Sub-Clause 20.1 [Contractor’s Claims]. Once
the amount has been determined by the Employer’s Representative or the DAB, as the
case may be, the amount may be recovered from the Contractor by making an appropriate
deduction in the next Payment Certificate. Since the Employer must pay (“shall pay”, see
Sub-Clause 14.8 [Payment]) the amount certified in the Payment Certificate, he should not
make any uncertified deduction to recover the amount to which he is entitled. However,
if the Employer has any difficulty in recovering the amount due to him, he must proceed
OR

in accordance with Sub-Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision] to

obtain a decision from the DAB.

20.3 Appointment of the Dispute Adjudication Board

TF

Disputes arising during the Design-Build Period shall be adjudicated by a DAB

in accordance with Sub-Clause 20.6 [Obtaining Dispute Adjudication Board’s
Decision].
The Parties shall jointly appoint a DAB by the date stated in the Contract Data.
The DAB shall comprise, as stated in the Contract Data, either one or three suitably
qualified persons (“the members”). If the number is not so stated and the Parties do
NO

not agree otherwise, the DAB shall comprise three persons.

If the DAB is to comprise three persons, each Party shall nominate one member
for the approval of the other Party. The Parties shall consult both these members
and shall agree upon the third member, who shall be appointed to act as chairman.
However, if a list of potential members is included in the Contract, the members
shall be selected from those on the list, subject to their being able and willing to
accept appointment to the DAB.
The agreement between the Parties and either the sole member (“adjudicator”) or
each of the three members shall incorporate by reference the General Conditions of

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 Dispute Adjudication Agreement in these General Conditions, with such amendments
as are agreed between them.
The terms of the remuneration of either the sole member or each of the three
members shall be mutually agreed upon by the Parties when agreeing the terms
of appointment. Each Party shall be responsible for paying one-half of this
remuneration.
If at any time the Parties so agree, they may appoint a suitably qualified person
or persons to replace any one or more members of the DAB. Unless the Parties

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agree otherwise, the appointment will come into effect if a member declines to
act or is unable to act as a result of death, disability, resignation or termination of
appointment.

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The replacement shall be appointed in the same manner as the replaced person
was required to have been nominated or agreed upon, as described in this Sub-
Clause.
However the appointment of any member may only be terminated by mutual
agreement of both Parties, and not by the Employer or the Contractor acting alone.
Unless otherwise agreed by both Parties, the appointment of the DAB (including

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each member) shall expire upon the issue of the Commissioning Certificate under
Sub-Clause 9.12 [Completion of Design-Build] or 28 days after the DAB has given
its decision to a Dispute under Sub-Clause 20.6 [Obtaining Dispute Adjudication
Board’s Decision], whichever is the later.

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The DAB is considered to be a standing DAB acting during the Design-Build Period.
Disputes arising during the Operation Service Period are covered in Sub-Clause 20.10
[Disputes Arising during the Operation Service Period]. A standing DAB is chosen rather
than an ad-hoc DAB in order to take advantage of the facility of avoidance of disputes as
NT
set out in Sub-Clause 20.5 [Avoidance of Disputes].

The DAB is appointed at the start of the Contract by the date stated in the Contract Data.
The reason for providing this flexibility is to allow the Parties to set a time limit for appointing
the DAB which is appropriate to the nature of the Works being performed. For example it
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may not be necessary for the DAB to be appointed prior to the commencement of work on
Site, since it is unlikely for disputes to arise during the design stage whilst the Contractor
is preparing his own design. However, this provision is not intended to be used to delay
the proper and timely appointment of the DAB, and it is important to ensure that the date
entered into the Contract Data is appropriate.

It is recommended that the DAB shall comprise three persons, unless the Contract Data
OR

states otherwise (one person is the alternative). The fall-back provision is three persons,
and a one-person DAB should only be used on lower value or less complex projects
which cannot support a three-person DAB. The new role of the DAB in Sub-Clause 20.5
[Avoidance of Disputes] is now highlighted and fully incorporated (as compared with the
1999 documents). This provision also suggests that a three-person DAB will be more
TF

effective, not only in the resolving of disputes, but also in the prevention of disputes.

Each Party proposes one member for approval by the other Party and the two members
(and Parties) shall agree upon the third member who shall be chairman. Alternatively, if
the Contract contains a list of potential members, the DAB shall be selected from these
persons and duly appointed by the date stated in the Contract Data. If the Parties cannot
NO

agree upon the DAB, members shall be appointed by an independent appointing authority
in accordance with the provisions of Sub-Clause 20.4 [Failure to Agree Dispute Adjudication
Board].

The general terms of agreement between the Parties and the DAB are appended to the
General Conditions and may be amended if the Parties and the DAB member(s) so agree.
Replacement of members may only be done with the agreement of both Parties. The
procedural rules are also attached to the General Conditions, and these give the DAB wide
powers as to how to conduct their business and decide upon disputes.

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 Unless otherwise agreed, and unless an on-going dispute is under consideration, the DAB
shall expire upon the issue of the Commissioning Certificate. If there is an on-going dispute
at that time, the DAB shall expire 28 days after giving its decision in respect of the dispute.
This period allows either Party to give a Notice of dissatisfaction, which according to Sub-
Clause 20.6, must be delivered to the other Party and copied to the chairman of the DAB
within 28 days of receiving the DAB’s decision.

Selection of DAB Members

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When selecting persons to be DAB members, it is very important to select persons
of experience and integrity who understand the need to act fairly and independently

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irrespective of which Party nominated them. If a Party is unsure of whom to nominate, or
does not know a suitable person, FIDIC publishes a President’s List of Approved Dispute
Adjudicators including the discipline in which the named persons are experienced. The
persons on the List are experienced adjudicators and have been specially assessed and
selected by FIDIC for inclusion on the List.

CT
Alternatively a Party can nominate persons known to it as experienced and competent
adjudicators. However, the principal criterion is the ability to act impartially and fairly, and if a
nominated person has any connection to or interest in either of the Parties, he must declare
that interest at the time he is nominated.

20.4
RA
Failure to Agree Dispute Adjudication Board

If any of the following conditions apply, namely:

(a) the Parties fail to agree upon the appointment of the sole member of the DAB
NT
by the date stated in the first paragraph of Sub-Clause 20.3 [Appointment of the
Dispute Adjudication Board];
(b) either Party fails to nominate a member (for approval by the other Party), or fails
to approve a member nominated by the other Party, of a DAB of three persons
by such date;
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(c) the Parties fail to agree upon the appointment of the third member (to act as
chairman) of the DAB by such date, or
(d) the Parties fail to agree upon the appointment of a replacement person within
42 days after the date on which the sole member or one of the three members
declines to act or is unable to act as a result of death, disability, resignation or
termination of appointment,
then the appointing entity or official named in the Contract Data shall, upon the
OR

request of either or both of the Parties and after due consultation with both Parties,
appoint this member of the DAB. This appointment shall be final and conclusive.
Each Party shall be responsible for paying one-half of the remuneration of the
appointing entity or official.
TF

There are various reasons why the Parties may not be able to agree on the appointment of a
member or members to the DAB. Firstly a Party may not be able to find a suitable person to
nominate. Or a Party refuses to accept the person nominated by the other Party (either for
good reason or for no good reason simply to delay or hinder the setting up of the DAB). Or
a Party or a nominated member refuses to sign the Dispute Adjudication Agreement. Very
often it is simply because the one Party is suspicious of the alleged independence of any
NO

person nominated by the other Party. In any such case and for whatever reason agreement
cannot be reached, the first step is for either one or both Parties to request the appointing
entity or person named in the Contract Data to make the appointment. If no person or
entity is named, then the President of FIDIC (or a person nominated by him) will make the
appointments, usually selecting a person from the President’s List of Approved Dispute
Adjudicators. If the Employer wishes to name another appointing entity in the Contract Data,
he must make sure that the named person or entity is in fact willing to act in that role if called
upon to do so, and also that such person is able to make an independent and appropriate
appointment.

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 If all reasonable attempts have been made to set up the DAB without success, either
Party may, by reference to Sub-Clause 20.11 [Expiry of Dispute Adjudication Board’s
Appointment], refer the matter directly to arbitration in accordance with the provisions
of Sub-Clause 20.8. However it is likely that if a Party deliberately tries to mis-use the
procedures for setting up a DAB in order to go directly to arbitration, the arbitration tribunal
will refuse to consider the matter and instruct the Parties to proceed in accordance with
the Contract to set up the DAB, and any party obstructing such a contractual requirement
would probably suffer in any subsequent award.

E
If there is a challenge to the continuing independence of a DAB member by either Party or
by the other DAB members (in the case of a three-person DAB), then, according to Article

US
3 of the General Conditions of Dispute Adjudication Agreement, the matter shall in the first
place be referred to the appointing entity named in the Contract. The appointing entity may
either deal with the matter himself or refer the matter to an independent professional person
or body to assess the challenge. If the challenge is upheld the member concerned shall be
immediately removed from the DAB and a new member appointed.

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20.5 Avoidance of Disputes

If at any time the Parties so agree, they may jointly refer a matter to the DAB in
writing with a request to provide assistance and/or informally discuss and attempt

RA
to resolve any disagreement that may have arisen between the Parties during the
performance of the Contract. Such informal assistance may take place during any
meeting, Site visit or otherwise. However, unless the Parties agree otherwise, both
Parties must be present at such discussions. The Parties are not bound to act upon
any advice given during such informal meetings, and the DAB shall not be bound
NT
in any future Dispute resolution process and decision by any views given during the
informal assistance process, whether provided orally or in writing.
If a Dispute of any kind whatsoever arises between the Parties, whether or not any
informal discussions have been held under this Sub-Clause, either Party may refer
the Dispute in writing to the DAB according to the provisions of Sub-Clause 20.6
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[Obtaining Dispute Adjudication Board’s Decision].

“Prevention is better than cure”, and the DAB is entrusted also with the role of providing
informal assistance to the Parties at any time in an attempt to resolve any disagreement.
However, the approach to the DAB in this connection must be made by both Parties, and
the nature of the assistance is wide and flexible. The Parties can approach the DAB on any
OR

matter at any time, whether it is to ascertain the right to claim, to discuss a determination
by the Employer’s Representative or to seek clarification regarding a DAB decision. Neither
Party is bound to act on advice received in these informal discussions, nor is the DAB
bound in any future dispute by any advice it may or may not have given, or by any views
expressed. Notwithstanding any such informal discussions held with the DAB, either Party
TF

is entirely free to submit any matter, including technical issues, to the DAB for a formal
decision at any time in accordance with the provisions of Sub-Clause 20.6 [Obtaining
Dispute Adjudication Board’s Decision].

20.6 Obtaining Dispute Adjudication Board’s Decision

NO

If a Dispute (of any kind whatsoever) arises between the Parties in connection with,
or arising out of, the Contract or the execution of the Works during the Design-Build
Period, including any Dispute as to any certificate, determination, instruction, opinion
or valuation of the Employer’s Representative, either Party may, within 28 days of
issuing a Notice of dissatisfaction under Sub-Clause 20.1(d) [Contractor’s Claims]
or Sub-Clause 20.2 [Employer’s Claims], refer the Dispute in writing to the DAB for
its decision, with copies to the other Party and the Employer’s Representative. Such
reference shall state that it is given under this Sub-Clause. The other Party shall then
have 21 days to send a response to the DAB with copies to the referring Party and

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 the Employer’s Representative. If the dissatisfied Party has not formally referred the
matter to the DAB within the said 28-day period, the Notice of dissatisfaction shall
be deemed to have lapsed and no longer be considered to be valid.
For a DAB of three persons, the DAB shall be deemed to have received such
submissions on the date when they are received by the chairman of the DAB.
Both Parties shall promptly make available to the DAB all information, access to the
Site, and appropriate facilities, as the DAB may require for the purposes of making
a decision on such Dispute. The DAB shall not act as arbitrator(s).

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Within 84 days after receiving the other Party’s response or, if no such response is
received, within 105 days after receiving the reference, or within such other period
as may be proposed by the DAB and approved by both Parties, the DAB shall give

US
its decision in writing to both Parties and the Employer’s Representative, which shall
be reasoned and shall state that it is given under this Sub-Clause. The decision
shall be binding on both Parties and the Employer’s Representative, who shall
promptly comply with it notwithstanding that a Party gives a Notice of dissatisfaction
with such decision as described below. Unless the Contract has already been
abandoned, repudiated or terminated, the Contractor shall continue to proceed with

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the Works in accordance with the Contract.
If either Party is dissatisfied with the DAB’s decision, then either Party may, within 28
days after receiving the decision, give Notice to the other Party of its dissatisfaction.
If the DAB fails to give its decision within the period prescribed in this Sub-Clause,

RA
then either Party may, within 28 days after this period has expired, give Notice to
the other Party of its dissatisfaction. In either case, the dissatisfied Party shall send
a copy of the Notice to the chairman of the DAB.
In either event, this Notice of dissatisfaction shall state that it is given under this Sub-
Clause, and shall set out the matter in Dispute and the reason(s) for dissatisfaction.
NT
Except as stated in Sub-Clause 20.9 [Failure to Comply with Dispute Adjudication
Board’s Decision], neither Party shall be entitled to commence arbitration of a
Dispute unless a Notice of dissatisfaction with respect to that Dispute has been
given in accordance with this Sub-Clause.
If the decision of the DAB requires a payment by one Party to the other Party, the
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DAB may require the payee to provide an appropriate security in respect of such
payment.
If the DAB has given its decision as to a matter in Dispute to both Parties, and
no Notice of dissatisfaction has been given by either Party within 28 days after it
received the DAB’s decision, then the decision shall become final and binding upon
both Parties.
OR

It is very important that all persons and Parties involved in a Dispute which is to be
submitted to the DAB for a formal decision, follow the provisions and procedures contained
in this Sub-Clause. Failure to do so, or missing a time limit, could jeopardise the outcome
and affect the decision of the DAB.
TF

Secondly, it is very important that the Parties are in fact in dispute, and that is why the
definition 1.1.31, clearly defines what constitutes a Dispute as opposed to a disagreement.
The route to submitting a Dispute to the DAB is via Sub-Clauses 20.1 [Contractor’s Claims]
and 3.5 [Determinations], if it is in respect of a Contractor’s claim, and Sub-Clauses 20.2
and 3.5 [Determinations] if it is in respect of an Employer’s claim. In either case, a Party
must have given a Notice of dissatisfaction within 28 days of the determination being
NO

given by the Employer’s Representative. Furthermore, the route for submitting a Dispute in
respect of a Variation to the DAB is through Sub-Clause 13.3 [Variation Procedure] and 3.5
[Determinations].

The dissatisfied Party is required to formally refer the matter to the chairman of the DAB,
with copies to the other Party and the Employer’s Representative. The other Party then has
21 days in which to prepare and submit its response with, if it so wishes, a counter-claim
against the claimant. This is also sent to the chairman of the DAB and copied to the referring
Party and the Employer’s Representative.

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 The DAB then has a fixed time in which to consider the submission and the response – 84
days after receiving the response, or if there is no response, 105 days from receiving the
reference from the claimant.

During this time, it is up to the DAB as to how they conduct their business and how they
reach their decision. However, it is likely that each Party will be asked to produce supporting
evidence in respect of their submissions, and also be asked to attend Hearings and answer
questions from the DAB.

E
When the decision of the DAB is ready, it is given to both Parties and the Employer’s
Representative in writing and the Parties have 28 days to decide whether they are prepared

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to accept the decision or whether they intend to take the matter further to attempt amicable
settlement and arbitration. If they are dissatisfied with the DAB’s decision, they must issue
a Notice of dissatisfaction within 28 days of receiving the decision, otherwise the decision
will be final, and no submission to arbitration will be permitted.

Whether or not a Party chooses to submit the matter to arbitration, the decision of the DAB

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is immediately binding on the Parties until such time as it may be changed by an agreement
between the Parties or by arbitration, and each Party is required to give immediate effect to
the DAB’s decision. This is whether or not they are satisfied with it, and whether or not they
plan to submit the matter to amicable settlement and arbitration, and monies decided by

RA
the DAB must be certified and paid and time extensions must be granted. This requirement
for immediate compliance is reflected in Sub-Clause 9.3 [Extension of Time for Completion
of Design-Build] regarding time extension, Sub-Clause 14.7 [Issue of Advance and Interim
Payment Certificates] regarding certification by the Employer’s Representative, and Sub-
Clause 14.8 [Payment] in respect of payment by the Employer.
NT
20.7 Amicable Settlement

Where Notice of dissatisfaction has been given under Sub-Clause 20.6 [Obtaining
Dispute Adjudication Board’s Decision], both Parties shall attempt to settle the
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Dispute amicably before the commencement of arbitration. However, unless both

Parties agree otherwise, arbitration may be commenced on or after the twenty-
eighth day after the day on which Notice of dissatisfaction was given, even if no
attempt at amicable settlement has been made.

If a Notice of dissatisfaction has been issued and one of the Parties intends to go to
arbitration, the Parties must first try to settle the matter to their mutual satisfaction and
OR

amicably. They do not have to follow the decision reached by the DAB: they can agree
on any settlement they like provided it is not against public policy, and the Contract does
not say how or in what form they should attempt to reach agreement. Unless the Parties
agree otherwise, they have 28 days in which to reach a settlement. If they do not manage
to reach agreement within the 28 days, the dissatisfied Party is free to refer the matter to
TF

arbitration in accordance with the provisions of Sub-Clause 20.9 [Failure to Comply with
Dispute Adjudication Board’s Decision].

20.8 Arbitration

Unless settled amicably, and subject to Sub-Clause 20.9 [Failure to Comply

NO

with Dispute Adjudication Board’s Decision], any Dispute in respect of which the
DAB’s decision (if any) has not become final and binding shall be finally settled by
international arbitration. Unless otherwise agreed by both Parties:
(a) the Dispute shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce;
(b) the Dispute shall be settled by three arbitrators appointed in accordance with
these Rules; and
(c) the arbitration shall be conducted in the language for communications defined in
Sub-Clause 1.4 [Law and Language] unless otherwise stated in the Contract Data.

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 The arbitrator(s) shall have full power to open up, review and revise any certificate,
determination, instruction, opinion or valuation of the Employer’s Representative,
and any decision of the DAB, relevant to the Dispute. Nothing shall disqualify the
Employer’s Representative from being called as a witness and giving evidence
before the arbitrator(s) on any matter whatsoever relevant to the Dispute.
Neither Party shall be limited in the proceedings before the arbitrator(s) to the
evidence or arguments previously put before the DAB to obtain its decision, or to
the reasons for dissatisfaction given in its Notice of dissatisfaction. Any decision of

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the DAB shall be admissible in evidence in the arbitration.
Arbitration may be commenced prior to or after completion of the Works. The
obligations of the Parties, the Employer’s Representative and the DAB shall not be

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altered by reason of any arbitration being conducted during the progress of the Works.

Provided that a Party has complied with the requirements of Sub-Clauses 20.6 [Obtaining
Dispute Adjudication Board’s Decision] (and given a Notice of dissatisfaction within 28 days
of receiving the decision from the DAB), and 20.7 [Amicable Settlement] (and failed to reach
any agreement with the other Party within the relevant period after issuing the Notice of

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dissatisfaction), that Party is free to proceed to international arbitration for a final resolution.

FIDIC has chosen the International Chamber of Commerce (ICC) as the arbitral institution
whose rules shall be used and followed during the arbitration, and the number of arbitrators
shall be three.
RA
If the Employer wishes to use the rules of a different institution, there are many to choose
from such as UNCITRAL, which is the United Nations Commission on International Trade
Law, or other recognised international arbitral institutions such as the London Court of
NT
International Arbitration, or the Arbitration Institute of the Stockholm Chamber of Commerce,
etc. However, the choice should be one which will guarantee independence and fairness.

It is also important to choose a language for the arbitration which is fair to both Parties, and
the Contract requires this to be the language for communications stated in the Contract
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Data (Sub-Clause 1.4 [Law and Language]). It is permitted to name another language in
the Contract Data (Sub-Clause 20.8 [Arbitration]), but if this option is chosen, it is important
that the selected language is one which can be understood by the parties involved in the
arbitration.

Although the arbitrators will be following the ICC Rules, they are given wide authority under
the Contract to open up, review and, if necessary, revise any certificate, determination,
OR

instruction, opinion or valuation of the Employer’s Representative, or any decision of the DAB.
Furthermore the decision of the DAB may be used as evidence in the arbitration which makes
it even more important that the decision of the DAB is well reasoned and well presented.

Arbitration may be commenced during the progress of the Works or after its completion.
TF

However, if it is during the progress of the Works, the Parties must continue to perform the
Works as per the Contract, notwithstanding the on-going arbitration.

The award or awards of the arbitrators will be notified to the Parties in accordance with
the procedures contained in the ICC Rules. If a Party fails to comply with an arbitral
award, enforcement of the award internationally may be facilitated by the 1958 New
NO

York Convention for the Enforcement of Foreign Arbitral Awards especially if the place of
arbitration was in a country which has ratified the Convention. However legal advice and
assistance is available when considering enforcement of an arbitral award.

20.9 Failure to Comply with Dispute Adjudication Board’s Decision

In the event that a Party fails to comply with any decision of the DAB, whether
binding or final and binding, then the other Party may, without prejudice to any
other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.8

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 [Arbitration] for summary or other expedited relief, as may be appropriate. Sub-
Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision] and Sub-Clause
20.7 [Amicable Settlement] shall not apply to this reference.

If a decision of the DAB has become binding, i.e., immediately upon its issue, or final and
binding after 28 days with no Notice of dissatisfaction being issued by either Party, and a
Party has failed to comply with the decision, then the other Party can refer the failure to
arbitration. In such a case there is no requirement to obtain a further decision from the DAB

E
under Sub-Clause 20.6 or attempt to settle the matter amicably according to Sub-Clause
20.7 [Amicable Settlement].Unless the applicable Law provides otherwise, a Party cannot
challenge a DAB decision after it has become final and binding as provided for in Sub-

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Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision].

20.10 Disputes Arising during the Operation Service Period

Disputes arising during the Operation Service Period which cannot be resolved
between the Parties shall be settled by a one-person DAB (“Operation Service

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DAB”). Such person shall be jointly agreed and appointed by the Parties at the time
of issue of the Commissioning Certificate.
If the Parties cannot agree on the person who shall be the Operation Service DAB,
then the person shall be appointed according to the provisions of Sub-Clause 20.4

RA
[Failure to Agree Dispute Adjudication Board].
Such person shall be appointed for a term of five years. At the end of each five-year
period, a new Operation Service DAB shall be agreed and appointed. If both Parties
and the previously appointed person agree, the same Operation Service DAB may
be re-appointed for a second (or third or fourth, as the case may be) five-year term.
NT
The agreement between the Parties and the Operation Service DAB shall incorporate
by reference the General Conditions of Dispute Adjudication Agreement contained
in these General Conditions, with such amendments as are agreed between them.
The terms of remuneration of the Operation Service DAB shall be mutually agreed
upon by the Parties when agreeing the terms of appointment. Each Party shall be
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responsible for paying one-half of this remuneration.

The procedure for obtaining a decision from the Operation Service DAB shall be in
accordance with the provisions of Sub-Clause 20.6 [Obtaining Dispute Adjudication
Board’s Decision], and the DAB shall give its decision no later than 84 days after
receiving the other Party’s response or, if no such response is received, within 105
days after receiving the reference and the supporting documentation from the Party
referring the Dispute.
OR

The appointment of the Operation Service DAB shall expire five years after the date
of its appointment unless such appointment is extended for a further five years as
aforementioned.
If either Party is dissatisfied with the decision of the Operation Service DAB, the
provisions of Sub-Clauses 20.6 [Obtaining Dispute Adjudication Board’s Decision],
TF

20.7 [Amicable Settlement], 20.8 [Arbitration] and 20.9 [Failure to Comply with
Dispute Adjudication Board’s Decision] shall apply.

According to Sub-Clause 20.3 [Appointment of the Dispute Adjudication Board], the

appointment of the DAB which has been in place during the Design-Build Period, expires
upon the issue of the Commissioning Certificate unless there is an on-going Dispute under
NO

consideration by the DAB at the time.

In order to deal with Disputes arising during the Operation Service Period it is necessary
to appoint another Dispute Adjudication Board which is more experienced in the operation
of a facility than with its design and construction. The Contract allows for this DAB to be
a single-person DAB which is to be appointed at the time of issue of the Commissioning
Certificate. This means that the person to be appointed has to be agreed in advance and
the Parties should agree on the appointment in good time before the Commissioning
Certificate is issued.

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 The Contract allows for the appointed person to serve for 5 years, but if the Parties and the
appointed person agree, this can be extended for a further period.

The role of the Operation Service DAB is similar to the role of the DAB acting during the
Design-Build, and the provisions for obtaining its decision in any matter of Dispute during
the Operation Service Period is similar to that described in the preceding sub-clauses of
Clause 20 [Claims, Disputes and Arbitration].

E
20.11 Expiry of Dispute Adjudication Board’s Appointment

If a Dispute arises between the Parties in connection with, or arising out of, the

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Contract or the execution of the Works and there is no DAB in place, whether by
reason of the expiry of the DAB’s appointment or otherwise:
(a) Sub-Clause 20.6 [Obtaining Dispute Adjudication Board’s Decision] and Sub-
Clause 20.7 [Amicable Settlement], or Sub-Clause 20.10 [Disputes Arising
during the Operation Service Period], as the case may be, shall not apply; and
(b) the Dispute may be referred directly to arbitration under Sub-Clause 20.8

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[Arbitration].

If a Dispute arises either during the Design-Build Period or during the Operation Service
Period and there is no DAB in place, the Dispute may be referred directly to arbitration.

RA
However, this provision applies only if the appointment of the DAB has expired or if the DAB
is incapable of acting due to death or incapacity, etc.

The provisions of this Sub-Clause should not be used to avoid the contractual requirement
of appointing the DAB in accordance with Sub-Clause 20.3 [Appointment of the Dispute
NT
Adjudication Board] or Sub-Clause 20.10 [Disputes Arising during the Operation Service
Period]. However, the use of the word “otherwise” in the Sub-Clause will probably enable
the Dispute to be referred directly to arbitration if the appointment of the DAB is being
blocked, as described in the commentary to Sub-Clause 20.4 [Failure to Agree Dispute
Adjudication Board] above.
CO
OR
TF
NO

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6 Particular Conditions Part A – Completing the
Contract Data

The Contract Data is essential information and data relating to the Project which must be
provided in order to establish and record key facts upon which tenderers will prepare their
tenders and which will be incorporated in the terms of the Contract between the Employer

E
and the Contractor.

It is normally the case that the requirements contained in the Contract Data are provided

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by the Employer, and the DBO document, as written, assumes that all items (except the
address of the Contractor under Sub-Clause 1.3 [Notices and Other Communications])
will have been completed by the Employer before the tender documents are issued to
tenderers.

If the Employer requires tenderers to complete any of the Contract Data before submitting

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their tenders, this must be clearly stated in the tender invitation so that tenderers know
exactly what they are required to complete and submit.

Examples of data which Employers could ask tenderers to complete in Part A are:

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Sub-Clauses 1.1.78 and 9.2: Time for Completion of Design-Build
It may be that the Employer cannot know or judge this requirement which could depend
on the tenderer’s chosen method of planning and working. It may also be an element
of the competition according to which the award will be made.
NT
Sub-Clause 9.2
Similarly, the way in which tenderers plan to carry out the Works could affect the way
the Works are to be divided into Sections.
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Sub-Clause 14.6
The Employer may wish tenderers to list the Plant and Materials for which they require
payment under Sub-Clauses 14.6(b)(i) and 14.6(c)(i).

If the tender document contains a list of potential DAB members, the Employer may require
tenderers to select or delete names of persons they wish or do not wish to be Dispute
Adjudication Board members.
OR

The Contract Data should not contain any punitive or inappropriate requirements, and the
provisions should reflect the fair and balanced nature of the General Conditions as a whole.

Both Parties should check that there are no items in the Contract Data which have not
TF

been completed or agreed upon prior to signing the Contract Agreement. If any data
or information is missing, then either the fall-back provisions to be found in some of the
Sub-Clauses will be deemed to apply, or the Contract will be incomplete with important
information missing.
NO

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7 Particular Conditions Part B – Preparing Special
Provisions

Where it is necessary or desirable to amend or add to the General Conditions, such

amendment or addition must be provided in Part B of the Particular Conditions. The
structure of the FIDIC contract documents does not allow for such amendments or

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additions to be made by changing the text of the General Conditions. This must remain
unchanged so that readers and users of the document can easily identify where changes
have been introduced.

US
There are various reasons why it may be necessary to change or amend the General
Conditions, and the following are some examples:

(a) Where the wording in the General Conditions indicates that alternative wording may
be included, for example in Sub-Clause 8.1 [Commencement Date] regarding the

CT
Commencement Date.
(b) Where there is a requirement to change the basic provisions given in the General
Conditions, for example, if the insurance provisions given in Clause 19 [Insurance] are
to be changed.

RA
(c) If there are legal or other requirements affecting the performance of the Contract which
are not reflected in the General Conditions.
(d) If there features of the project which render the provisions of the General Conditions
inappropriate or unacceptable.
NT
The DBO contract document contains some Guidance Notes and Examples of clauses
and sub-clauses which commonly require amending. However, the examples given are not
complete and the example text should be read very carefully to see whether or not it meets
the needs of a particular contract.
CO

If and when new text is required in the Particular Conditions Part B, great care must be
taken when drafting new text to ensure that it reflects the basic strategy and philosophy
contained in the FIDIC General Conditions. It is strongly recommended that expert help is
engaged when preparing the new text.
OR
TF
NO

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8 Structure of the Dispute Adjudication Board

Disputes arising during the Contract are resolved in accordance with the procedures
outlined in Clause 20 of the General Conditions of the DBO Contract.

E
The Dispute Adjudication Board (DAB) to act during the Design-Build Period is appointed
by joint agreement of the Parties by the date stated in the Contract Data. Unless the
Parties agree otherwise, the DAB shall comprise three “suitably qualified persons”. The

US
alternative is to have one person. However, unless the project is of an extremely simple
and straightforward nature – which is unlikely in the case of a DBO project – it is likely that
the perceived benefits in cost of having a one-person DAB will be greatly exceeded by the
benefits of a three-person DAB. Not only will the broader experience of three persons be an
advantage in covering the various disciplines which may need to be considered in a dispute
situation, but also, quite simply, the decision of a three-person DAB will be a fairer and

CT
better reasoned decision which is less likely to give rise to dissatisfaction (i.e., a Notice of
dissatisfaction) being issued by either Party. There will also be less risk of favouritism or bias.

The Contract presupposes that the DAB will be appointed soon after the Contract comes

RA
into force, and that it will be a ‘standing’ DAB which remains in force until the issue of the
Commissioning Certificate, or, if it is considering a dispute from either Party at that time,
then 28 days after it has given its decision in respect of such dispute. This is to allow
either Party, should it be dissatisfied with the decision, to submit a copy of the Notice of
dissatisfaction to the chairman of the DAB as required under Sub-Clause 20.6 [Obtaining
NT
Dispute Adjudication Board’s Decision].

The alternative to the ‘standing’ DAB is the ‘ad hoc’ DAB. This is not recommended for DBO
projects. One of the functions of the DAB in the DBO Contract is, in accordance with Sub-
Clause 20.5 [Avoidance of Disputes], to take positive action if so required by the Parties to
CO

prevent a disagreement becoming a Dispute. This is a very important role for the DAB which
requires that the DAB is familiar with the project and the events which may have contributed
to the disagreement arising. Such familiarity is not possible with the ‘ad hoc’ DAB, and the
Parties are strongly advised not to adopt this approach.

Upon Commencement of the Operation Service Period, i.e., upon issue of the Commissioning
Certificate and termination of the Design-Build DAB, the Parties are required to agree upon
OR

a one-person DAB to act during the Operation Service Period. This appointment shall be
for a term of five years, and at the end of the five year period, either the Parties must agree
upon a new person to act as DAB for the next five years, or, if the two Parties and the DAB
member so agree, the DAB member can be re-appointed for a second (or third or fourth)
term, as required.
TF

The procedure is clearly described in Sub-Clause 20.10 [Disputes Arising during the
Operation Service Period] of the General Conditions.

The role of the DAB (Design-Build or Operation Service) in Dispute prevention is expanded in
Sub-Clause 20.5 [Avoidance of Disputes]. This is the first time that this has been recognised
NO

within Clause 20 [Claims, Disputes and Arbitration], and even if DABs in the past have acted
in some (often informal) way to promote agreement and understanding between the Parties,
the provisions of Sub-Clause 20.5 [Avoidance of Disputes] give some formality and order
to the way the Parties shall act if they require assistance from the DAB to prevent potential
Disputes from materialising. In particular it should be noted that the Parties can refer any
matter to the DAB under this Sub-Clause ‘at any time’.

This means at any time during the duration of the Contract and could be, for example;
in connection with a Party’s understanding of its rights in a given situation; in connection

© FIDIC 2011
143
 with a determination of the Employer’s Representative given under Sub-Clause 3.5
[Determinations]; an informal view as to whether an event was unforeseeable or not; or any
other situation arising at any time to see whether or not such a situation warrants further
action possibly leading to a formal submission to the DAB.

E
US
CT
RA
NT
CO
OR
TF
NO

© FIDIC 2011
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9 Index of Clauses and Sub-Clauses

This index shows all the Clauses and Sub-Clauses referred to in the Guide in alphabetical
order.

E
CLAUSE/Sub-Clause Page
Access Route 4.15 101
Adjustments for Changes in Legislation 13.6 87

US
Adjustments for Changes in Technology 13.7 88
Adjustments for Changes in Cost 13.8 88
Advance Payment 14.2 90
Advance Warning 8.4 59
Amicable Settlement 20.7 137
Application for Advance and Interim Payment Certificates 14.3 91

CT
Application for Final Payment Certificate Design-Build 14.11 98
Application for Final Payment Certificate Operation Service 14.13 100
Appointment of the Dispute Adjudication Board 20.3 132
Arbitration 20.8 137
As-Built Documents
Asset Replacement Fund
Asset Replacement Schedule
Assignment
RA 5.5
14.18
14.5
1.8
50
103
93
22
Avoidance of Disputes 20.5 135
NT
Avoidance of Interference 4.14 40

Care and Supply of Documents 1.9 22

Cessation of Work and Removal of Contractor’s Equipment 16.3 111
Cessation of Employer’s Liability 14.16 101
CO

Changes in the Contractor’s Financial Situation 4.25 45

CLAIMS, DISPUTES AND ARBITRATION 20 128
COMMENCEMENT DATE, COMPLETION AND PROGRAMME 8 58
Commencement Date 8.1 58
Commencement of Design-Build 9.1 62
Commencement of Operation Service 10.2 68
Commissioning Certificate 11.7 77
OR

Commissioning of Parts of the Works 11.6 77

Completion of Design-Build 9.12 67
Completion of Operation Service 10.8 73
Completion of Outstanding Work and Remedying Defects 12.1 80
Completion of the Works and Sections 11.5 76
TF

Compliance with Laws 1.14 23

Confidential Details 1.13 24
Consequences of the Contractor’s Risks resulting in Damage 17.7 116
Consequences of the Employer’s Risks of Damage 17.6 116
Consequences of an Exceptional Event 18.4 120
Consequences of Suspension 9.8 65
NO

Contract Agreement 1.6 21

Contract Completion Certificate 8.6 60
CONTRACT PRICE AND PAYMENT 14 89
Contract Price The 14.1 89
CONTRACTOR, THE 4 31
Contractor’s Claims 20.1 128
Contractor’s Documents 5.2 47
Contractor’s Entitlement to Suspend Work 16.1 110
Contractor’s Equipment 4.17 41

© FIDIC 2011
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 Contractor’s General Obligations 4.1
Contractor’s Operations on Site 4.23
Contractor’s Personnel 6.9
Contractor’s Representative 4.3
Contractor’s Risks during the Design-Build Period 17.2
Contractor’s Risks during the Operation Service Period 17.4
Contractor’s Superintendence 6.8
Contractor’s Undertaking 5.3

E
Contractor’s Use of Employer’s Documents 1.12
Contractor to Search 12.6
Co-operation 4.6

US
Cost of Remedying Defects 12.2
Currencies of Payment 14.17

DEFECTS 12
Definitions 1.1
Delays Caused by Authorities 9.4

CT
Delay Damages 8.5
Delay Damages relating to Design-Build 9.6
Delayed Payment 14.9
Delayed Tests on Completion of Design-Build 11.2

RA
Delayed Tests Prior to Contract Completion
Delays and Interruptions during the Operation Service
Delegation by the Employer’s Representative
Delivery of Raw Materials
11.10
10.6
3.2
10.4
DESIGN 5
NT
DESIGN-BUILD 9
Design Error 5.7
Determinations 3.5
Discharge 14.14
Disorderly Conduct 6.11
CO

Disputes Arising during the Operation Service Period 20.10

Duty to Minimise Delay 18.3

Electricity, Water and Gas 4.19

EMPLOYER, THE 2
Employer’s Claims 20.2
Employer’s Financial Arrangements 2.4
OR

Employer’s Personnel 2.3

EMPLOYER’S REPRESENTATIVE, THE 3
Employer’s Equipment and Free-Issue Materials 4.20
Employer’s Representative’s Duties and Authority 3.1
Employer’s Risks during the Design-Build Period 17.1
TF

Employer’s Risks during the Operation Service Period 17.3

Employer’s Use of Contractor’s Documents 1.11
Engagement of Staff and Labour 6.1
Errors in the Employer’s Requirements. 1.10
EXCEPTIONAL RISKS 18
Exceptional Risks 18.1
NO

Expiry of Dispute Adjudication Board’s Appointment 20.11

Extension of Time for Completion of Design-Build 9.3

Facilities for Staff and Labour 6.6

Failure to Agree Dispute Adjudication Board 20.4
Failure to Complete 9.13
Failure to Comply with Dispute Adjudication Board’s Decision 20.9
Failure to Pass Tests on Completion of Design-Build 11.4
Failure to Pass Tests Prior to Contract Completion 11.11

© FIDIC 2011
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 Failure to Reach Production Outputs 10.7
Failure to Remedy Defects 12.3
Fossils 4.24
Further Tests 12.4

GENERAL PROVISIONS 1
General Design Obligations 5.1
General Requirements (Operation Service) 10.1

E
General Requirements (Insurance) 19.1

Handback Requirements 8.7

US
Health and Safety 6.7

Indemnities by the Contractor 17.9

Indemnities by the Employer 17.10
Independent Compliance Audit 10.3
Inspection 7.3

CT
Instructions of the Employer’s Representative 3.3
INSURANCE 19
Insurances to be provided by the Contractor during the
Design-Build Period 19.2

Operation Service Period

Interpretation
RA
Insurances to be provided by the Contractor during the

Issue of Advance and Interim Payment Certificates

19.3
1.2
14.7
Issue of Final Payment Certificate Design-Build 14.12
NT
Issue of Final Payment Certificate Operation Service 14.15

Joint Inspection Prior to Contract Completion 11.8

Joint and Several Liability 1.15
CO

Labour Laws 6.4

Law and Language 1.4
Limitation of Liability 17.8
Maintenance Retention Fund 14.19
Manner of Execution 7.1
Materials, Free Issue 4.20
OR

Nominated Subcontractors 4.5

Notices and Other Communications 1.3
Notice to Correct 15.1
Notice of an Exceptional Event 18.2
TF

Obtaining Dispute Adjudication Board’s Decision 20.6

Operating Licence 1.7
Operation and Maintenance Manuals 5.6
OPERATION SERVICE 10
Optional Termination, Payment and Release 18.5
Ownership of Output and Revenue 10.9
NO

Ownership of Plant and Materials 7.7

Payment 14.8
Payment in Applicable Currencies 13.4
Payment for Plant and Materials in Event of Suspension 9.9
Payment for Plant and Materials intended for the Works 14.6
Payment of Retention Money 14.10
Payment after Termination for Contractor’s Default 15.4
Payment after Termination for Employer’s Convenience 15.7

© FIDIC 2011
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 Payment on Termination 16.4
Performance Security 4.2
Permits, Licences or Approvals 2.2
Persons in the Service of Employer 6.3
PLANT, MATERIAL AND WORKMANSHIP 7
Priority of Documents 1.5
Procedure for Tests Prior to Contract Completion 11.9
Programme 8.3

E
Progress Reports 4.21
Prolonged Suspension 9.10
Protection of the Environment 4.18

US
Provisional Sums 13.5

Quality Assurance 4.9

Rate of Progress 9.5

Rates of Wages and Conditions of Employment 6.2

CT
Records of Contractor’s Personnel and Equipment 6.10
Rejection 7.5
Release from Performance under the Law 18.6
Remedial Work 7.6
Removal of Defective Work
RA
Replacement of the Employer’s Representative
Responsibility for Care of the Works
Resumption of Work
12.5
3.4
17.5
9.11
Retesting of the Works 11.3
NT
Retesting Prior to Contract Completion 11.12
Right of Access to the Site 2.1
Rights of Way and Facilities 4.13
Right to Vary 13.1
RISK ALLOCATION 17
CO

Risk of Infringement of Intellectual and Industrial

Property Rights 17.12
Royalties 7.8

Safety Procedures 4.8

Samples 7.2
Schedule of Payments 14.4
OR

Security of the Site 4.22

Setting Out 4.7
Shared Indemnities 17.11
Site Data 4.10
STAFF AND LABOUR 6
TF

Subcontractors 4.4
SUSPENSION AND TERMINATION BY CONTRACTOR 16
Suspension of Work 9.7
Sufficiency of the Accepted Contract Amount 4.11

Termination by Contractors Default 15.2

NO

TERMINATION BY EMPLOYER 15
Termination for Employer’s Convenience 15.5
TESTING 11
Testing of the Works 11.1
Training 10.5
Transport of Goods 4.16
Technical Standards and Regulations 5.4
Testing 7.4
Time for Completion 8.2

© FIDIC 2011
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 Time for Completion of Design-Build 9.2

Unforeseeable Physical Conditions 4.12

Unfulfilled Obligations 8.8

Valuation at Date of Termination for Contractor’s Default 15.3

Valuation at Date of Termination for Employer’s Convenience 15.6
Value Engineering 13.2

E
VARIATIONS AND ADJUSTMENTS 13
Variation Procedure 13.3

US
Working Hours 6.5

CT
RA
NT
CO
OR
TF
NO

© FIDIC 2011
149
 E
US
CT
RA
NT
CO
OR
TF
NO

International Federation of Consulting Engineers (FIDIC)

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