What to expect from new Fidic contracts
01 May 2016
With Fidic working on rewriting its suite of contracts, STUART JORDAN tries to predict what user requirements the organisation could incorporate in its updates.
It is odd now to think that we still talk of the Fidic 1999 suite of contracts as “the new forms”.
Their longevity of use might be due to the quality and user-friendliness of the forms, maybe due to laziness on the part of Fidic (Fédération Internationale des Ingénieurs-Conseils, which in French stands for International Federation of Consulting Engineers)? Certainly in the Middle East, there has been no obvious drop-off in their popularity. Since 1999, almost all of the other major published contracts used internationally have been revamped more than once.
Updates are usually to keep up with the needs of users; whether technological change (such as building information modelling) or deal structure (such as project finance requirements) or trends in procurement, including build, operate, transfer (BOT) and other concession models.
Last time around, the Fidic 1999 updates were partly in response to market trends. In particular, the creation of the Conditions of Contract for EPC/Turnkey Projects (the Silver Book) was in response to market demand for stronger time and cost control in bank-funded projects. To a large extent, the new features in that contract matched the types of amendments parties were already making on large-scale privately-funded projects. Clearly, Fidic took the view that, if users were making substantial changes, then Fidic should take back some control over the way this was being done. It hasn’t stopped us amending it though!
So what can we expect this time around? And when will it all happen? Fidic has been looking at this task for a long time: it announced the formation of the Update Task Groups in December 2009! In fact, it has put together several task groups, each undertaking the updating of different parts of the suite. For our purposes, the most important are those which are updating the design and construction contracts. One task group (Number 6, I understand) is updating all three of the main contracts – Red, Yellow and Silver books.
If Fidic is going to follow its own precedent in reflecting user trends (common user amendments, new forms of procurement), it will be interesting to see whether it reflects usage in the Middle East. I suspect that in some important ways it won’t. We can try to make some predictions.
Fidic’s priorities
We don’t have the benefit of written updates from Fidic on this rewriting task but there are progress reports made annually to the Users’ Conference which are, in turn, summarised in Construction Law International, which kindly enabled us to see how Fidic’s stated priorities have developed. We also have some clues in the newer Conditions of Contract for Design, Build and Operate (the Gold Book) 2008. This has some new features which I expect to see in the new suite.
Looking back to 2009, we can see what drove the original decision to update the forms. Among the areas listed for attention were:
• Contract administration – Engineer or Employer’s Representative: The 1999 forms deal with this in different ways. Fidic’s preference may be for the independent and more powerful engineer but it did already cede to clear market trends in the Silver Book, which has no nominated engineer. I am confident that in the Middle East, users will continue to make sure that the employer decides everything himself, either directly or through his employer’s representative acting only as his agent.
• Better coverage of design responsibility: This would be welcomed. The forms cover almost nothing beyond mentioning a bare obligation to design. There needs to be some structure to the setting of requirements for designed works and contractor’s proposals for meeting those requirements. Also, we need some process for sequential submission and review of design information. Both are features of other forms and would do more than any other changes, to make these forms more suitable to handle design-build works as opposed to engineering projects. Without these features also, the forms are nowhere near being able to handle building information modelling (BIM) or similar design development platforms – which is a stated Fidic objective.
• Differentiating claims and disputes: It has been unfortunate that time and money claims have been lumped together in Clause 20 with the disputes process. This has caused genuine confusion with parties believing that following the contractual process to obtain their entitlements is not legitimate change control but is a hostile act. It also gives the impression that disputes do not arise other than as claims.
• Dispute Adjudication Board (DAB): This is also something which is dealt with differently across the 1999 forms. The big question is whether the DAB should be appointed at the outset and maintained as a standing resource, or be appointed ad hoc when there is a dispute. I suspect Fidic would like to harmonise towards the standing DAB (some self-interest there?) but I think users will continue to reject that. I see the benefits of this in large projects which can handle the cost, but in the Middle East, it will generally be struck out entirely as it is now.
It is difficult to predict whether the original priorities remain as the current ones. Certainly, a gap of seven years (and counting) is long enough for trends to have changed. Later progress reports do seem to remain true to these objectives.
Current progress
There has been some progress. A revised version of the Red Book was distributed last year to selected bodies for “friendly review”. So we can maybe expect publication this year.
Given the wide use of these forms in the Gulf region, these updates are of great importance. Will life change much? Maybe not. A lot of people will continue to specify the 1999 forms and we’ll continue to amend them heavily. We want what we want.
*Stuart Jordan is partner and co-head construction for the international law firm King & Wood Mallesons (KWM). Based largely in Dubai, UAE, he specialises in engineering and construction matters, cross border, both front end and disputes.
