FIDIC explained


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For further information, please contact David Weare, Partner, Fladgate LLP (dweare@fladgate.com)


 

FIDIC is the acronym for Fédération Internationale des Ingénieurs-Conseils, which is the French language name for the International Federation of Consulting Engineers. FIDIC has been around for 101 years and is principally an organisation which acts in the interests of, and educates and informs, its members. Each member is the national association of consulting engineers in the relevant territory. For example, in the UK, it is the Association for Consultancy and Engineering, in Korea it is the Korea Engineering and Consulting Association, in Singapore it is the Association of Consulting Engineers Singapore, and in Malaysia it is the Association of Consulting Engineers Malaysia.

As part of FIDIC’s drive to promote its vision to “improve the business climate in which we operate and enable our members to contribute to making the world a better place to live…”, starting in 1957 FIDIC has produced a number of construction contracts which were, and still are, intended to be used on international and substantial engineering projects. The most famous of these is the ‘Red Book’, imaginatively named because of the colour of its front cover. The most recent edition is a suite of contracts, named the ‘Rainbow Suite’ (again due to the varied colours of the covers), which includes the following principal contracts:

  • The Red Book – Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer.
  • The Yellow Book – Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor.
  • The Silver Book – Conditions of Contract for Engineering Procurement and Construction/Turnkey Projects.
  • The Green Book – Short Form of Contract.

There are a number of other specialist contracts, such as a dredging contract, a consultant’s contract and a version of the Red Book specifically for bank funded contracts. The latter contract had specialist input from multilateral development banks such as the World Bank and the Asian Development Bank amongst others. As this demonstrates, the FIDIC contracts are often used on the most high profile infrastructure projects throughout the world and can act as a benchmark for contracting parties to work from.

Dispute adjudication boards

A pertinent feature of the FIDIC contracts, which it has helped in no small way to promote, is that they incorporate provisions regarding the formation and operation of a project dispute adjudication board (DAB). A DAB is, in effect, a one to three member panel of informed and independent professionals who can deal with a wide range of issues or disputes on the project without having to resort to a formal arbitration. A DAB will deal with disputes, or potential disputes, as and when they arise on a project, rather than waiting until the project has completed or an issue has irrevocably escalated.

Depending on which form of FIDIC contract is used, the DAB board members can be appointed at the outset of the project for its duration (the Red Book), or on an ad hoc basis as and when a dispute arises (Silver and Yellow Books). Appointing at the outset can be particularly useful, as rates for the DAB members can be agreed at the start of the project and are generally not reviewed for 24 months. This gives both parties a better idea of the cost of getting an issue or dispute resolved as the project progresses, which can increase the likelihood of issues being aired and resolved efficiently. Often disputes are not referred to third parties until both parties are fully entrenched in their positions and concerned about unknown costs of arbitrators, lawyers and venues.

Under the FIDIC contracts, disputes on which a DAB can be engaged include almost any issue which could arise on a construction project, including disputes over certificates, determinations, instructions, opinions or valuations under the contract. Notices and certificates can be opened up, reviewed and revised by the DAB if appropriate. An especially useful aspect of a DAB is that it does not have to be used solely as a dispute resolution tool, but can also be asked for an opinion on an issue before a dispute has escalated. This early intervention can prove vital in preventing disputes from escalating, as contracting parties have the benefit of a third party’s insight and experience. If an independent engineer, surveyor and/or lawyer can state early on what it would expect an expert or arbitrator’s decision to be, then this will go a long way to preventing parties from relying on an incorrect interpretation of the facts, correct engineering practice or the law.

Despite the differences in approach and procedure of the different FIDIC contracts, DABs can be set up in any of the FIDIC contracts with simple initial amendments to provide an approach that suits both of the contracting parties.

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