Quietly, in fact so quietly you may not have noticed, FIDIC has recently published its Conditions of Subcontract for Construction for use with the 1999 FIDIC Red Book1 . The test edition came out in 2009 with the formal version being released in October 2011. There have only been very minor changes between the two. The subcontract formally replaces the FIDIC Conditions of Subcontract for Works of Civil Engineering Construction, 1st Edition 1994.
In short the subcontract is intended to operate in the usual back-to-back basis, and, unsurprisingly, the subcontract provides for a direct total pass down of risk, with the subcontractor assuming the duties and obligations of the contractor under the main contract.
This includes, at sub-cl.4.1, a ! tness for purpose obligation in respect of any design work, something which is not in the 1994 version. This principle also applies to payment and one thing that will be of particular note to those familiar with operating in the UK market is inclusion of pay-when-paid conditions at sub-cl.14.6. These pay-when-paid provisions, of course, con" ict with the payment requirements of the Housing Grants Act. FIDIC has included guidance notes and particular sample conditions to assist parties working in the UK and other jurisdictions with similar legislation.
This is part of the general recognition on the part of FIDIC that while most of the clauses will be generally applicable, there may be some clauses which must, of necessity be amended to take account of the circumstances and locality of the Subcontract Works.
One of the sub-clauses which provided much comment under the test edition, and which has been retained here, are the programming obligations under sub-cl.8.3 and Annex F. Indeed, whilst the programming obligations of sub-cl.8.3 of the main contract are fairly extensive, they are much less detailed than the programming obligations under the FIDIC Subcontract 2011. These requirements are considerably more detailed both than those to be found in the 1994 version. This is even though sub-cl.8.5 notes that the Subcontractor monthly progress reports need only be in the same detail and format as the Contractor Reports. Annex F of the FIDIC Subcontract 2011 alone lists some 17 separate requirements, a-q. These include logically linking all activities, identifying the critical path and all " oat, as well as including sufficient " exibility to interface the Subcontractor’s activities with the Contractor. The Subcontract programme must be submitted to the Contractor within 14 days of receiving the Letter of Acceptance. Then the Contactor has 14 days to either approve or reject the programme. If the Contractor fails to respond then the initial programme becomes the Subcontract programme by default. The programme must be updated within seven days of the occurrence of one of six-listed events including the Subcontractor changing his methods or sequencing, there being any delay which impacts on the critical path or the Subcontractor receiving from the Contractor an instruction, pursuant to sub-cl.8.4 to accelerate where the Subcontractor’s progress is too slow.
Employers under the FIDIC Red Book 1999, may well, if they are not already, start requiring a similar level of detail from the Contractor.
As always, FIDIC has given considerable attention to the dispute resolution provisions. The subcontract contains its own dispute resolution procedures but as you would expect, the claims procedure for Subcontractors set out in the FIDIC Subcontract 2011 follows the scheme of the FIDIC Red Book 1999.
Indeed the Subcontract perfectly mirrors the Main Contract such that there is no condition precedent attached to the time in which a Contractor must bring a claim, but the equivalent requirements on a Subcontractor are expressed in this way, albeit that this is only done by cross- reference and so the Subcontractor would only know this by referring to sub-cl.20.1 of the FIDIC Red Book 1999. Therefore if the Subcontractor puts in his claim outside of the time limit, the right to bring the claim might be lost for good, however meritorious the claim might otherwise be. Any such notice must be given within 21 days, in order to give the Contractor the chance to give timely notice to the Employer, if appropriate. The remaining timescales are similarly shortened, such that the detailed claim must be submitted within 35 and not 42 days.
Then the Contractor is required to consult with the Subcontractor to try and reach agreement on the claim, failing which the Contractor must then, within 42 days after receipt of the detailed claim, go on to make a “fair determination” of the claim.
Sub-clause 20.3 of the FIDIC Subcontract 2011 notes that if by reason of any failure by the Subcontractor to follow the requirements set out in sub-cl.20.1 and 2, the Contractor is prevented from recovering any sum other than in respect of a Subcontractor claim then the Contractor, provided it follows the appropriate claims process itself, shall be entitled to deduct that sum from the Subcontract Price.
Subcontractor claims to the DAB
The general scheme under the 1999 Red book is this:
- A dispute is referred to the DAB;
- The DAB then has 84 days to reach its decision;
- A party then has 28 days to serve a Notice of Dissatisfaction otherwise that Decision becomes binding;
- There is then a 56-day period for amicable settlement; and if there is no settlement then
- A reference can be made to Arbitration.
The provisions of the FIDIC Subcontract 2011 take steps to try and ensure that disputes arising out of the Subcontract can be dealt with, without prejudicing the rights of either the Contractor (and therefore possibly the Subcontractor too) under the main Contract.
Sub-cl.20.4, provides that if the Contractor considers2 that the dispute raised by the Subcontractor is a dispute which involves an issue related to a dispute between the Contractor and Employer under the main Contract then, the Parties shall (a) defer referral of the dispute to the Subcontract for 112 days and (b) if the dispute has not been previously referred under the main Contract, the Contractor must refer the new dispute within 28 days. This is a positive obligation on the Contractor. The Subcontractor is understandably obliged to give the Contractor in good time any assistance that may be required3 during the hearing process.
Under sub-cl. 20.4 of the FIDIC Subcontract 2011, the Subcontractor will not be bound by the DAB Decision under the main Contract, but this should be checked as the particular conditions give an alternative cl.20 to be used where the Subcontractor is to be bound by a determination. If no notice is given by the Contractor that the dispute is a Related Issue then either party is entitled to refer the dispute to the Subcontract DAB.
This new Subcontract is a further step along the FIDIC road to standardisation and as such it is a welcome addition as it has been speci! cally drafted to comply with the Red and Pink Books. Of course, to fully understand the risks and liabilities, as with every subcontract, the onus will be on all parties to read the subcontract together with the applicable main Contract.