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By V R K Murty

FIDIC
(FEDERATION INTERNATIONALE DES INGENIEURS- CONSEILS)

History: 1909-1957 RIBA Form (Royal Institute of British Architects) 1945 - ICE Form (Institution of Civil Engineers) Domestic Contracts 1956 - 1991 ACE Form (Association of Consulting Engineers) 1957 Conditions of Contract (International) for works of Civil Engineering by FIDIC & FIEC Red Book 1st edition 1963 - JCT Form (Joint Contracts Tribunal) 1969 FIDIC 2nd Edition published 1977 FIDIC 3rd Edition published 1987 FIDIC 4th Edition published 1999 FIDIC 5th Edition published

The Romano-Germanic group Law (Present France, Belgium, Western Germany, north Italy) : The Law is based on the idea that the relationship between those who govern and those who are governed requires different approach from that required for the relationship between individuals, and that the interests of the individual cannot be given the same weight as those of the society. Essentially the lawyer interprets legislative provisions Public Law Administrative Law deals with relationship between the administration and public. This is used for Public works Contract

Private Law: A civil code for private contracts. It is based on the principle that a code should not attempt to provide rules that are immediately applicable to every conceivable concrete case, but rather an organized system of general rules from which a solution for any given problem may be deduced by as simple a process as possible. The written constitution is held at the highest point of Authority. The French law was codified by legislation ensuring justice freedom and dignity to the individual in 1789 after French revolution during rule of Napoleon.

Common Law Group: This law was mainly created by judges appointed by the crown in the 12th and 13th centuries. It is therefore judge made law, some times referred to as common law. There is no separation between Public and Private law. The Royal courts accessible to common citizens. The sources are: Judicial decisions when they are recognized as precedents Equity Legislation Regulations or subordinate legislation International treaties Custom

Publications:

1. Conditions of contract for construction 2. Plant design and build 3. EPC turnkey 4. Short form of Contract

GENERAL PROVISIONS MAIN PLAYERS IN A CONTRACT PERFORMANCE OF CONTRACT DEFECT LIABILITY VALUATION AND PAYMENTS DELAYS, SUSPENSION AND TERMINATION RISKS AND RESPOSIBILITIES AND FORCE MAJEURE INSURANCE CLAIMS DISPUTES AND ARBITRATION CASE STUDIES

General provisions: 1.1.1.7 Schedules- Entitled schedules compiled by the contractor and submitted with the letter of tender as included in the contract. They include bill of quantities, data, lists and schedules of rates or prices.

General provisions 1.1.1 Contract- contract agreement, the letter of acceptance, letter of tender, the conditions, the specifications, the drawings, the schedules or any other documents mentioned in the contract agreement or the acceptance letter

General provisions: 1.1.2.1 Party- Employer or contractor 1.1.2.2 Employer- Person named as employer in the appendix to tender and the legal successors in title to this person 1.1.2.3 Contractor- Named as contractor in the letter of tender and the legal successors in title to this person(s) 1.1.2.4 Engineer- Appointed by the employer to act as engineer for the purpose of the contract and named in the appendix to the tender or other person appointed from time to time by the employer and notified to the contractor

General provisions: 1.1.2.5 Contractors representativePerson named in the contract or appointed by the contractor from time to time 1.1.2.6 Employers personnel- The engineer, the assistants and all other staff, labour and other employees of the engineer and the employer

General provisions: 1.1.2.7 Contractors personnelContractors representative, and all personnel whom the contractor utilizes on site who may include the staff, labour and other employees of the contractor and of each of the sub contractor

General provisions: 1.1.2.7 Contractors personnelContractors representative, and all personnel whom the contractor utilizes on site who may include the staff, labour and other employees of the contractor and of each of the sub contractor

General provisions: 1.1.3.3 Time for completion- The time for completion of works or a section of works as stated in the appendix to the notice of tender( with any extension of time granted) calculated from the commencement date

General provisions: 1.1.3.7 Defects notification periodPeriod for notifying defects in the works calculated from the date on which the works or a section is completed 1.1.3.8 Performance certificate

General provisions: 1.1.4.1 accepted contract amount: The amount accepted in the letter of acceptance 1.1.4.2 Contract price: Accepted contract amount adjusted in accordance with contract agreement

General provisions: 1.1.4.7 Interim payment certificate: Payment certificate other than final payment certificate 1.1.4.10 Provisional sum: Sum which is specified for execution of any part of the work or for supply of plant, materials or services

General provisions: 1.1.4.11 Retention money: The accumulated retention money which the employer retains in interim certificates 1.1.6.6 Performance security: The performance security specified as per contract for satisfactory completion of the work

General provisions: 1.5 Priority of documents: a) The contract agreement b) The letter of acceptance c) The letter of tender d) The particular conditions e) The general conditions f) The specification g) The drawings h) The schedules and any other documents forming part of contract

General provisions: 1.6 Contract agreement: To enter into a contract agreement within 28 days after contractor receives letter of acceptance Based on the form annexed to the particular conditions Stamp duties imposed by law to be borne by the employer

General provisions: 1.7 Assignment: Neither party shall assign whole or part of work May assign whole or part of work with prior agreement of the other party at the sole discretion of the other party May as security in favour of a bank or financial institution assign its right to any moneys due

General provisions: 1.12 confidential details: Contractor shall disclose such confidential and other information as the engineer may reasonably require in order to verify contractors compliance with the contract

General provisions: 1.13 Compliance with laws: The employer to obtain planning, zoning or similar permission for permanent works and shall indemnify and hold contractor harmless The contractor shall give all notices, pay all taxes, duties and fees and obtain all permits, licenses and approvals as required by law and the contractor shall indemnify and hold the employer harmless against and from the consequences

General provisions: 1.14 Joint and several liability: The contractor constitutes a joint venture, consortium or other unincorporated grouping of two or more persons These persons shall be deemed to be jointly and severally liable to the employer for the performance of the contract These parties shall notify the employer of their leader who shall have the authority to bind the contractor and each of these persons The contractor shall not alter its composition or legal status without prior consent of the employer

MAIN PLAYERS IN A CONTRACT: The Employer The Engineer The Contractor The Sub Contractors Staff and labour

The Employer (Responsibilities and rights): 2.1 Handing over site: Right of access and possession to all parts of site to the contractor within the time specified Grants extension of time for any delay in handing over site Payment of any such cost plus reasonable profit which shall be included in the contract

The Employer (Responsibilities and rights): 2.3 Employers personnel: Employer responsible for ensuring that his personnel co-operate with the contractors efforts on safety procedures and protection of environment

The Employer (Responsibilities and rights): 2.4 Employers financial arrangements: Employer shall make financial arrangements and maintain them to make payment of contract price to contractor according to the terms of contract agreement

The Employer (Responsibilities and rights): 2.5 Employers claims: Employer if he considers himself entitled for payment from the contractor, the engineer shall give notice as soon as practicable in respect of: -- Determinations -- Extension of time -- Extension of defect liability period -- Notice not required in case of payment due for issue of materials, electricity, water and gas

3 The Engineer (Duties and Authority) The employer shall appoint Engineer who shall carry out duties assigned to him in the contract Whenever the Engineer exercises a specified authority for which employers approval is required the employer is deemed to have issued the approval The engineer shall have no authority to amend the contract

3 The Engineer (Duties and Authority): The engineer shall have no authority to relieve either party of their duties Any approval, check, certificate, consent, examination, inspection, instruction, notice, proposal, request, test or similar act by the engineer shall nor relieve the contractor from any of his responsibilities he has under the contract

The Engineer (Duties and Authority): 3.3 Instructions of the engineer: The instructions shall be given in writing If the engineer gives oral instruction, receives written confirmation from the contractor within two working days and does not reply by issuing written rejection within two working days after receiving the confirmation the confirmation constitutes written instruction of the engineer

The Engineer (Duties and Authority): 3.4 Replacement of the Engineer: The employer shall give not less than 42 days notice for replacing the engineer. The employer shall not replace the engineer with a person against whom the contractor raises reasonable objections in writing

The Engineer (Duties and Authority): 3.5 Determinations: The engineer shall consult with each party in an endeavour to reach an agreement or determination in a particular issue after issuing necessary notices. If agreement is not achieved he shall make a fair determination in accordance with contract.

4 The contractor (Obligations and rights): 4.1 The contractor shall design (to the extent specified), execute and complete the works in accordance to contract and with engineers instructions and shall remedy any defects The contractor shall provide the plant, personnel, goods, consumables and services

4 The contractor (Obligations and rights): 4.1 contd. Stability and safety of site operations Submit details of arrangements and methods of execution Submit design (To the extent specified), drawings, documents, as built documents, Operation and maintenance manuals

4 The contractor (Obligations and rights): 4.1 The contractor shall design (to the extent specified), execute and complete the works in accordance to contract and with engineers instructions and shall remedy any defects The contractor shall provide the plant, personnel, goods, consumables and services

4 The contractor (Obligations and rights): 4.1 contd. Stability and safety of site operations Submit details of arrangements and methods of execution Submit design (To the extent specified), drawings, documents, as built documents, Operation and maintenance manuals

4 The contractor (Obligations and rights): 4.2 Performance security: The contractor shall deliver performance security within 28 days after receiving letter of acceptance in the form, currency, amount specified and valid and enforceable until the contractor has executed and completed the works and remedied all defects

4 The contractor (Obligations and rights): 4.11 Sufficiency of accepted contract amount 4.12 Unforeseeable physical conditions 4.13 Rights of way and facilities 4.14 Avoidance of interference 4.15 Access route 4.16 Transport of goods- 21 days notice 4.17 Contractors equipment- Shall not remove from site without consent of engineer

4 The contractor (Obligations and rights): 4.18 Protection of environment 4.19 Electricity, water and gas 4.20 Employers equipment and free- issue materials 4.21 Progress reports 4.22 Security of site 4.23 Contractors operations on site 4.24 Fossils

5. Nominated sub contractors: 5.1 Who is stated in the contract as being nominated 5.2 Objection of contractor to nomination if the contractor does not agree due to lack of competence, resources and financial strength 5.3 Payments to nominated subcontractors as certified by engineer 5.4 Evidence of payments to nominated sub contractors before issuing payment certificate

6. Staff and labour: 6.1, 6.3 Contractor shall engage the labour as required. He shall not employ staff and labour from employers personnel 6.2, 6.4, 6.5 Labour laws of the land shall be followed. Working hours and days of rest locally recognized unless otherwise specified

6. Staff and labour: 6.6, 6.7 Facilities like accommodation, welfare and precautions first aid health, safety to staff and labour 6.8 Contractors superintendence 6.9, 6.11 Contractors personnel shall be appropriately qualified, skilled. They will be removed/ replaced if not suitable and as directed by the engineer

Administration of Contract: 1. Handing over site the site shall be handed over to the contractor by the employer within the period stated in the contract. Employer gives extension of time and compensation for loss of profit and any other losses in case of delay in handing over site. (2.1) 2. Financial Arrangements Employer shall make necessary financial arrangements and maintain them for making payments against contract price as per conditions of contract within 28 days of acceptance of contract (2.4)

Administration of Contract: 3. Performance security The contractor shall deposit performance security within 28 days of acceptance of contract valid and enforceable till all works are satisfactorily completed and all defects rectified . The amount of performance security shall be in form and currency specified in the contract (4.2) 4. Commencement of work: The employer shall give at least 7 days notice to commence work after issue of letter of acceptance. The contractor shall commence work within 42 days of acceptance of contract. (8.1)

Administration of Contract: 5. Programme for construction The contractor within 28 days of acceptance of contract shall give a detailed programme for sequence and stages of completion, methods of construction, procurement, materials and testing consistent with period of completion. Revised programme shall be furnished whenever it is found that the earlier programme submitted is not consistent with the period of completion (8.2) 6. Details of temporary works - The contractor is responsible for safety and stability of site operations. He shall submit methods of execution. He designs the works to the extent specified in the contract. (4.1)

Administration of Contract: 7. Extension of time for completion: The contractor shall be eligible for extension if Variations and substantial changes ordered by the employer Due to employers actions causing delays that give rise to entitlement of extension of time Adverse climatic conditions affecting progress of work Non availability of goods and personnel due to unforeseeable Government actions (8.4)

7.

Administration of Contract: Extension of time for completion: Extension of time will be granted by the employer if the following conditions exist: a) Contractor diligently followed all procedures stipulated by legally constituted authorities and delay in progress of work was unavoidable b) These authorities delay or disrupt the progress of the work which was unforeseeable c) Any other conditions disrupting the work which were beyond the control of the contractor (8.5)

8.

Administration of Contract: Rate of progress of work: The contractor shall pay for any loss incurred by the employer if any time: a) Actual progress of work is too slow to complete the work within the contract period b) Progress of work has fallen behind the contract programme c) The contractor is required to employ additional resources and employ new methods for construction as approved by the engineer involving additional cost to the employer to complete the work (8.6)

8.

Administration of Contract: Delay damages: The contractor shall pay delay damages for every day of delay but not exceeding the sum specified in the contract usually not more than 10% of contract sum (8.7) Suspension of work: Up to 28 days - Engineer may order suspension giving the reasons for suspension. During suspension contractor shall protect the site and materials. The contractor shall be entitled for extension of time and any such cost. (8.8)

8.

Administration of Contract: Suspension of work: Beyond 28 days up to 84 days - The contractor shall be entitled for extension of time and payment of any such cost thereof and cost of work of plant and machinery (8.10) Prolonged suspension - If the suspension exceeds 84 days, the contractor shall ask the engineer to allow him to proceed with the work. If the engineer fails to give permission to proceed within 28 days after being requested, the contractor by giving notice may treat suspension as omission of the affected portion of work. (8.11)

Administration of Contract: 9. Tests on completion: Contractor shall give 21 days notice to the engineer and carry out tests on completion within 14 days. (9.1) Delayed tests: If the engineer delays attending tests extension of time shall be granted. If the contractor in spite of 21 days notice fails to carry out tests, the engineer shall carry out the tests at the risk and cost of the contractor. (9.2) Retesting: The engineer may order retesting if the tests do not pass, and the contractor shall carry out the retesting at his cost. (9.3)

12. Measurement and evaluation: 12.1Works to be measured: Whenever the engineer requires measurement to certain part of work he will give notice to the contractor and contractor shall promptly attend or depute his representative Supply any particulars required by the engineer

12. Measurement and evaluation: 12.2 Works to be measured: Measurement shall be made of the net actual quantity Method of measurement shall be in accordance with BOQ and other applicable schedules

12. Measurement and evaluation: 12.3 Evaluation: Rate shall be appropriate rate for such item in the contract and if no rate exists a new rate appropriate to the item of work if: a) The measured quantity of an item is changed by more than 10% of BOQ b) The change in quantity multiplied by such specified rate exceeds 0.01% of the contract amount

12. Measurement and evaluation: 12.3 Evaluation: c) The change in quantity directly changes the cost per unit quantity by more than 1% d) The item is not specified in the contract as fixed rate item e) The item is ordered as variation, no rate is specified in the contract and no rate is appropriate because the item of work is not similar in nature

12. Measurement and evaluation: 12.3 Evaluation: f) New rate shall be derived from any relevant item in the contract, otherwise it shall be derived from actual cost of work, together with reasonable profit

13.Variations and adjustments: 13.2 Value engineering: d) The proposal shall be prepared at the cost of the contractor and design it if necessary e) The engineer will determine fee @ 50% between reduction of contract value and reduction in value in quality, life and operational efficiency

13.Variations and adjustments: 13.3 variation procedure: Engineer requests for a proposal for variation The contractor responds in writing either by giving reasons why he cannot comply or submits Description of proposed work and a programme, time for completion & valuation

13.Variations and adjustments: 13.3 Variation procedure: The engineer as soon as practicable respond with approval or disapproval or comments with instructions to carry out the variation with any requirements of costs

13.Variations and adjustments: 13.4 Payment in applicable currencies: If the contract provides for payment in different currencies; The amount payable in each of the currencies Expected currency proportions of the cost of varied work with reference to the proportions specified in the contract

13.Variations and adjustments: 13.5 Provisional sums: Provisional sum shall be used only for supplies or services for which the provisional sum relates Actual amount paid by the contractor Percentage to cover overheads and profit as stipulated in the contract

13.Variations and adjustments: 13.6 Day work: The engineer may order day work basis for incidental or minor works or for which no standard data is available. The contractor shall submit daily reports of quantities of plant and materials used, contractors personnel, type and time of contractors equipment and temporary works employed and priced statements of these resources.

13.Variations and adjustments: 13.7 Adjustments for changes in legislation: The contract price shall be adjusted to take into account any increase or decrease in cost resulting from changes in the laws of the country made after the base date. The contractor is entitled to an extension of time for any such delay

13.Variations and adjustments: 13.8 Adjustments for changes in cost: Contract amounts payable shall be adjusted for rises or falls in rates of labour, goods or other inputs to the works by the following formula: Pn = a + b Ln + c En + d Mn + L0 E0 M0

13.Variations and adjustments: 13.8 Adjustments for changes in cost: Pn Adjustment multiplier to be applied to estimated contract value a Fixed coefficient stated in the relevant table of adjustment data representing non adjustable portion in contractual payments

13.Variations and adjustments: 13.8 Adjustments for changes in cost: b, c, d are coefficients representing the estimated portion of each cost element related to the execution of work Ln, En, Mn are the current cost indices L0, E0, M0 Are the base cost indices on the base date

13.Variations and adjustments: 13.8 Adjustments for changes in cost: Notes: If currency of index is not the relevant currency of payment each index shall be converted into relevant currency at selling rate of central bank Engineer shall determine provisional index for interim payments

13.Variations and adjustments: 13.8 Adjustments for changes in cost: Notes: If the contractor fails to complete work within stipulated time the price index shall be considered on the date 49 days prior to expiry of the time for completion or the current index which ever is favourable to the employer

14.Contract price and payment: 14.1 The contract price: Contract price shall be agreed or determined and be subject to adjustments in accordance with the contract The contractor shall pay taxes, duties and fees required to be paid by him under the contract and contract price shall not be adjusted except for changes in legislation

14.Contract price and payment: 14.1 The contract price: Quantities shown in bill of quantities are not to be taken as actual quantities The contractor shall submit proposed breakdown of each lump sum within 28 days after commencement of work

14.Contract price and payment: 14.2 Advance payment: (Mobilization advance) Employer shall make an advance payment as interest free loan for mobilization when the contractor submits a guarantee by an entity within a country approved by the employer The advance payment shall be repaid by the contractor through deductions from interim payments due >10% of contract sum

14.Contract price and payment: 14.2 Advance payment: (Mobilization advance) Deductions shall be made at the amortization rate of 25% of the amount of each payment certificate If the advance is not paid prior to issue of taking over certificate/ termination the whole of balance shall become due

14.Contract price and payment: 14.3, 14.4 Application for interim payment certificates & schedule of payments: Contractor shall submit a statement in 6 copies at the end of each month in the approved form showing amount due, progress report and other supporting documents.

14.Contract price and payment: 14.3, 14.4 Application for interim payment certificates & schedule of payments (Details to be attached) Estimated contract value of the works executed Any amounts to be added or deducted due to changes in legislation Retention money

14.Contract price and payment: 14.3, 14.4 Application for interim payment certificates & schedule of payments: (Details to be attached) Any amounts to be added/ deducted for advance payment/ repayment Any amounts to be added/ deducted for plants & materials intended for the work Any other additions/ deductions (claims)

14.Contract price and payment: 14.3, 14.4 Application for interim payment certificates & schedule of payments: (Details to be attached) Deduction of amounts certified in all previous payments The contractor shall submit within 42 days after commencement estimated installments of payment in each quarter

14.Contract price and payment: 14.5 Plant and materials intended for works: The contractor shall submit / maintain: Satisfactory records of orders, receipts, costs and use of plant and materials Shipped bill of lading, evidence of shipment, payment of freight &insurance charges, bank guarantees Proper storage of plant & materials at site

14.Contract price and payment: 14.6 Issue of interim payment certificates: The engineer shall within 28 days after receiving statement issue a interim payment certificate. Cost of rectification/ non conforming work/ material shall be withheld 14.7 The employer shall pay the contractor first installment of advance payment within 42 days after issue of letter of acceptance or within 21 days after receipt of statement

14.Contract price and payment: 14.7 Issue of interim payment certificates: Each interim payment certificate within 56 days after engineer receives the statement Final payment certificate within 56 days after receipt of payment certificate by the employer

14.Contract price and payment: 14.8 Delayed payment: If the contractor does not receive the payment within specified time he will be entitled for financing charges at 3% above central bank rate 14.9 Retention money: After issue of taking over certificate 50% of retention money shall be paid, balance after expiry of defect notification period and after withholding rectification cost of defects