FIDIC Contracts Guide 2000 - Rockwell Eng

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The FIDIC Contracts GuideCONDITIONS OF CONTRACT FOR CONSTRUCTIONCONDITIONS OF CONTRACT FOR PLANT AND DESIGN-BUILDCONDITIONS OF CONTRACT FOR FOR EPC/TURNKEY PROJECTSFirst Edition 2000ISBN 2-88432-022-9FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILSINTERNATIONAL FEDERATION OF CONSULTING ENGINEERSINTERNATIONALE VEREINIGUNG BERATENDER INGENIEUREFEDERACION INTERNACIONAL DE INGENIEROS CONSOLTORES

AcknowledgementsThe Fédération Internationale des Ingénieurs-Conseils (FIDIC) extends specialthanks to its Contracts Committee: Michael Mortimer-Hawkins (Chairman),Consulting Engineer, UK; Axel-Volkmar Jaeger, Schmidt Reuter Partner,Germany; Christopher Wade, SWECO-VBB, Sweden, Peter L Booen (PrincipalDrafter), GIBB Ltd, UK; with Special Advisers (and former Chairman of theContracts Committee), John B Bowcock, Consulting Engineer, UK, and K B(Tony) Norris, Consulting Engineer, UK, and Legal Adviser Christopher RSeppala, White & Case, France.The Contracts Committee, and FIDIC, would like to especially acknowledge theextraordinary effort of Peter L Booen, the Principal Drafter of the Guide, as well as beingthe Principal Drafter of the 1995 Conditions of Contract for Design-Build and Turnkey(informally titled “The Orange Book”), the “Orange Book Guide”, and the three “majorNew Books” of 1999, Conditions of Contract for Construction, Conditions of Contractfor Plant and Design-Build and Conditions of Contract for EPC/Turnkey Projects. Theprodigious effort offered by Peter Booen to FIDIC, and to the the Consulting EngineeringIndustry, by these principal draftsman tasks, is impossible to evaluate, but is extremelyhigh. Peter shares, with his colleagues on the Task Groups and Contracts Committee,the gratitude of FIDIC, for these Task Group efforts. Members of the above ContractsCommittee and Advisers, however, wish to acknowledge the nearly “single handed”effort of Peter Booen in drafting this FIDIC Contracts Guide, which was reviewed andcommented upon by them all.About the Principal DrafterPeter L Booen FICE FCIArb is a civil engineer who started his career with a contractor(1965-72) before joining Sir Alexander Gibb & Partners (later GIBB Ltd) consultingengineers, UK. He has written and administered many engineering and constructioncontracts, both nationally and internationally, including those involving financialinstitutions. He has acted as adjudicator, conciliator, expert witness, and on disputeboards. He has been actively involved in FIDIC since 1993, as principal drafter of theOrange Book and its Guide, and the three major 1999 Books (Construction, Plant andDesign-Build and EPC/Turnkey). He is a member of FIDIC's Contracts Committee andChair of FIDIC’s Assessment Panel for Adjudicators. FIDIC 2000

ContentsForeword and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Introduction to the Use of FIDIC's Conditions of Contract . . . . . . . . . . . . . . 5Project Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Procurement Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Example Forms for the Letter of Invitation and Instructions to Tenderers . . . 21Clause 1General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Clause 2The Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74Clause 3CONS/P&DB: The Engineer;EPCT: The Employer's Administration . . . . . . . . . . . . . . . . . . . 81Clause 4The Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94Clause 5CONS: Nominated Subcontractors . . . . . . . . . . . . . . . . . . . . 132Clause 5P&DB/EPCT: Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137Clause 6Staff and Labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150Clause 7Plant, Materials and Workmanship . . . . . . . . . . . . . . . . . . . . . 158Clause 8Commencement, Delays and Suspension . . . . . . . . . . . . . . . 168Clause 9Tests on Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183Clause 10 Employer's Taking Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188Clause 11 Defects Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Clause 12 CONS: Measurement and Evaluation . . . . . . . . . . . . . . . . . . . 205Clause 12 P&DB/EPCT: Tests after Completion . . . . . . . . . . . . . . . . . . . 211Clause 13 Variations and Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . 217Clause 14 Contract Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . 232Clause 15 Termination by Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258Clause 16 Suspension and Termination by Contractor . . . . . . . . . . . . . . 264Clause 17 Risk and Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270Clause 18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280Clause 19 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291Clause 20 Claims, Disputes and Arbitration . . . . . . . . . . . . . . . . . . . . . . 299AppendixGeneral Conditions of Dispute Adjudication Agreement . . . . . 318Glossary of Contract Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339Index of Sub-Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 FIDIC 2000

Foreword and AbbreviationsIn 1999, Fédération Internationale des Ingénieurs-Conseils (“FIDIC") published thefollowing four forms of contract, the first three of which are covered by this Guide andreferred to as "CONS", "P&DB" and "EPCT":"CONS": Conditions of Contract for Construction,which are recommended for building or engineering works designed by theEmployer or by his representative, the Engineer. Under the usual arrangements forthis type of contract, the Contractor constructs the works in accordance with adesign provided by the Employer. However, the works may include some elementsof Contractor-designed civil, mechanical, electrical and/or construction works."P&DB": Conditions of Contract for Plant and Design-Build,which are recommended for the provision of electrical and/or mechanical plant,and for the design and execution of building or engineering works. Under theusual arrangements for this type of contract, the Contractor designs andprovides, in accordance with the Employer's requirements, plant and/or otherworks; which may include any combination of civil, mechanical, electrical and/orconstruction works."EPCT": Conditions of Contract for EPC/Turnkey Projects,which are recommended for the provision on a turnkey basis of a process orpower plant, and which may also be used where one entity takes totalresponsibility for the design and execution of a privately financed infrastructureproject which involves little or no work underground. Under the usualarrangements for this type of contract, the entity carries out all the Engineering,Procurement and Construction ("EPC"): providing a fully-equipped facility, readyfor operation (at the "turn of the key").Short Form of Contract,which is recommended for relatively simple or repetitive work, or for work of shortduration or of small capital value. The Short Form of Contract is not coveredby this Guide.In this Guide to the use of CONS, P&DB and EPCT, the word "Books" (with capital letter)is used when referring to the three publications: CONS, P&DB and EPCT. These Bookswere initially published as Test Editions in 1998, and the many reactions to them werereviewed before the First Editions were published in 1999.These three Books were prepared by FIDIC's Update Task Group comprising:Christopher Wade (Group Leader), SWECO-VBB, Sweden; Peter L Booen (PrincipalDrafter), GIBB Ltd, UK; Hermann Bayerlein, Fichtner, Germany; Christopher R Seppala(Legal Adviser), White & Case, France; and José F Speziale, IATASA, Argentina. Thesepublications were prepared under the general direction of the Contracts Committee,which then comprised John B Bowcock, Consulting Engineer, UK; Michael MortimerHawkins, SwedPower, Sweden; and Axel-Volkmar Jaeger, Schmidt Reuter Partner,Germany; together with K B (Tony) Norris as Special Adviser.1 FIDIC 2000

This Guide was written by Peter L Booen and reviewed by the Contracts Committeewhich now comprises Michael Mortimer-Hawkins (Chairman), Christopher Wade, AxelVolkmar Jaeger and Peter L Booen; together with John B Bowcock as Special Adviserand Christopher R Seppala as Legal Adviser. The commentary on Clause 18 was alsoreviewed by Mark Griffiths, Griffiths & Armour, UK.FIDIC wishes to record its appreciation of the time and effort devoted by all the above.Each of the three Books is in three parts:-General Conditions, the part which is intended to be incorporated (by reference) intoeach contract, and whose Sub-Clauses are often referred to in this Guide without theuse of the word "Sub-Clause" (for example: "CONS 1.1");-Guidance for the Preparation of the Particular Conditions, the part which is referredto in this Guide as "GPPC", which commences by proposing suitable wording toincorporate the appropriate General Conditions into a contract, and which concludeswith annexed example forms of securities; and-Forms of Letter of Tender, Contract Agreement and Dispute Adjudication Agreement,the part which is referred to in this Guide as "the Example Form(s)".In this Guide, the texts in the Books are reproduced in a three-column layout. The textsshould be identical to the corresponding texts in the Books, but the reader should referto the Books in order to determine the necessary authentic wording in case of anydiscrepancy.For the convenience of those who are familiar with the General Conditions of Contractcontained in FIDIC's previous publications, the reference numbers of their sub-clauseswhich cover similar subject-matter are included within an insert box after these threecolumn texts reproduced from the Books, the sub-clause reference numbers beingrelated to:-"RB": Conditions of Contract for Works of Civil Engineering Construction 4th edition1987 amended 1992 (which was commonly referred to as the Red Book)-"YB": Conditions of Contract for Electrical and Mechanical Works 3rd edition 1987amended 1988 (which was commonly referred to as the Yellow Book)-"OB": Conditions of Contract for Design-Build and Turnkey 1st edition 1995 (whichwas commonly referred to as the Orange Book).In each Contract, the Conditions of Contract governing the rights and obligations of theparties will comprise the appropriate General Conditions together with ParticularConditions. It will be necessary to prepare the Particular Conditions for each individualcontract, taking account of the comments in this Guide and the appropriate GPPC. It isessential that all these drafting tasks, and the entire preparation of the tenderdocuments, are entrusted to personnel with the relevant expertise, including thecontractual, technical and procurement aspects.2 FIDIC 2000

Although this Guide may include useful material for the training of personnel inprocurement, it is not intended to provide complete training material for the expertiserequired for the preparation of tender documents. The comments in this Guide areintended to assist users of the Books who have such expertise, such users being thosewho write or administer building and/or engineering contracts.The comments in this Guide are not exhaustive and are only intended to provide generalguidance. They should not be relied upon in a specific issue or situation. Expert legaladvice should be obtained whenever appropriate, and particularly before entering into orterminating a contract. Neither FIDIC nor the persons named in this Guide accept anyresponsibility or liability arising from any use of this Guide or of any other publicationnamed herein.FIDIC receives requests from time to time to assist in the interpretation of individualcontracts which are based upon conditions of contract incorporating FIDIC publications.However, as the international federation of consulting engineers, FIDIC cannot undertaketo give legal advice. For this reason, and because the legal interpretation of a contractwill depend upon such matters as the precise wording of the various documentscomprising the particular contract, as well as upon the governing law, FIDIC cannotassist in the interpretation of individual contracts.3 FIDIC 2000

Comparison of the main features of the three BooksCONS: Conditions of Contractfor ConstructionP&DB: Conditions of Contract forPlant and Design-BuildEPCT: Conditions of Contract forEPC/Turnkey ProjectsRecommended for building andengineering works if most (or all) ofthe works are to be designed by(or on behalf of) the Employer.Recommended for the provision ofelectrical and/or mechanical plantand for building and engineeringworks if most (or all) of the worksare to be designed by (or on behalfof) the Contractor.Suitable for a process or powerplant, a factory or similar facility, or aninfrastructure project or other type ofdevelopment, if (i) a higher degree ofcertainty of final price and time isrequired, and (ii) the Contractortakes total responsibility for thedesign and execution of the project.The Contract typically becomeslegally effective when the Employerissues the Letter of Acceptance tothe Contractor.The Contract typically becomeslegally effective when the Employerissues the Letter of Acceptance tothe Contractor.The Contract typically becomeslegally effective in accordance withthe Contract Agreement.Alternatively, there may be no suchLetter, and the Contract becomeseffective in accordance with theContract Agreement.Alternatively, there may be no suchLetter, and the Contract becomeseffective in accordance with theContract Agreement.The Letter of Tender may beworded so as to allow for thealternative of the Contract becomingeffective when the Employer issuesa Letter of Acceptance.The Contract is administered by theEngineer who is appointed by theEmployer. If disputes arise, they arereferred to a DAB for its decisions.The Contract is administered by theEngineer who is appointed by theEmployer. If disputes arise, they arereferred to a DAB for its decisions.Alternatively, Particular Conditionsmay specify Engineer's decisionson disputes, in lieu of a DAB.Alternatively, Particular Conditionsmay specify Engineer's decisionson disputes, in lieu of a DAB.The Contract is administered bythe Employer (unless he appointsan Employer's Representative) whoendeavours to reach agreementwith the Contractor on each claim.The Contractor designs (but only tothe extent specified) and executesthe works in accordance with theContract (which includes theSpecification and Drawings) andthe Engineer's instructions.The Contractor provides plant, anddesigns (except as specified) andexecutes the other works, all inaccordance with the Contract,which includes his Proposal andthe Employer's Requirements.The Contractor provides plant, anddesigns and executes the otherworks, ready for operation inaccordance with the Contract,which includes his Tender and theEmployer's Requirements.Interim and final payments arecertified by the Engineer, typicallydetermined by measurement of theactual quantities of the works andapplying the rates and prices in theBill of Quantities or otherSchedules.Interim and final payments arecertified by the Engineer, typicallydetermined by reference to aSchedule of Payments.Interim and final payments aremade without any certification:typically determined by reference toa Schedule of Payments.Other valuation principles can bespecified in Particular Conditions.The alternative of measurement ofthe actual quantities of the worksand applying the rates and pricesin a Schedule of Prices can bespecified in Particular Conditions.The alternative of measurement ofthe actual quantities of the worksand applying the rates and pricesin a Schedule of Prices can bespecified in Particular Conditions.The General Conditions allocate therisks between the parties on a fairand equitable basis: taking accountof such matters as insurability,sound principles of projectmanagement, and each party'sability to foresee, and mitigate theeffect of, the circumstancesrelevant to each risk.The General Conditions allocate therisks between the parties on a fairand equitable basis: taking accountof such matters as insurability,sound principles of projectmanagement, and each party'sability to foresee, and mitigate theeffect of, the circumstancesrelevant to each risk.Disproportionately more risks areallocated to the Contractor under theGeneral Conditions. Tenderers willrequire more data on hydrological,sub-surface and other conditions onthe Site, to the extent that this data isrelevant to the particular type ofworks, and more time to review thedata and evaluate such risks.4If disputes arise, they are referredto a DAB for its decisions. FIDIC 2000

Introductionto the use of FIDIC’s Conditions of ContractStandardisation, both in technical and administrative matters, is desirable for thesatisfactory execution of many types of commercial projects. Major projects, whetherthey are predominantly building, civil engineering, chemical engineering, electricalengineering, mechanical engineering, or any combination, are frequently complex. Withthe resulting increased complexity of contract conditions, it is becoming increasinglyimportant for them to be based upon a standardised form of contract with which thecontracting parties and financial institutions are familiar.In the majority of cases, the contracting parties will react favourably to such astandardised form of contract, which should lessen the likelihood of unsatisfactoryperformance, increased costs and disputes. If the contract is to be based on standardconditions of contract, tenderers should not need to make financial provision forunfamiliar contract conditions. The widespread use of standard conditions alsofacilitates the training of personnel in contract management, reducing the need for themhaving to work with ever-changing contract conditions.The object of this Guide is to assist personnel involved in contracts based upon any ofFIDIC's three Books:-Conditions of Contract for Construction, which are recommended for building orengineering works designed by the Employer or by his representative, the Engineer.However, the works may include some elements of Contractor-designed civil,mechanical, electrical and/or construction works.-Conditions of Contract for Plant and Design-Build, which are recommended for theprovision of electrical and/or mechanical plant, and for building or engineering worksdesigned by the Contractor.-Conditions of Contract for EPC/Turnkey Projects, which may be suitable, where (i) ahigher degree of certainty of final price and time is required, and (ii) the Contractortakes total responsibility for the design and execution of the project, with littleinvolvement of the Employer.These Books were prepared as a "matching set", with each topic being covered insimilarly-worded provisions in each Book except where otherwise necessary. However,adoption of similarly-worded provisions may occasionally be considered to have resultedin the inclusion of a provision which is only applicable in a few of the contracts for whichthe Book will be appropriate.The Books are all intended to be flexible in use, recognising the wide variety of users'requirements. Where a sub-clause deals with a matter on which different contract termsare likely to be applicable for different contracts, the sub-clause was drafted inanticipation of alternative possibilities: including it not being required, or it beingamended in Particular Conditions.5 FIDIC 2000

These aspects are clarified in the Guide for each Sub-Clause, so as to assist in thepreparation of tender documents. When preparing the Conditions of Contract for

arrangements for this type of contract, the entity carries out all the Engineering, Procurement and Construction ("EPC"): providing a fully-equipped facility, ready for operation (at the "turn of the key"). Short Form of Contract, which is recommended for relatively simple or repetitive work, or for work of

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