Since our last briefing in November 2017, FIDIC has launched the second editions of the Red, Yellow and Silver Books in the 1999 suite of contracts. The changes made to these FIDIC contracts for major works (the so-called "rainbow suite") are extensive, wide-ranging and cement the contracts' place as highly-valued standard forms for use on construction and engineering projects.
The amendments almost double the size of the contracts and bring more transparency, clarity and certainty to the provisions. FIDIC's key aims in making the changes were to: reduce the scope for disputes by focusing on dispute avoidance; reflect current international best practice; enhance project management tools and mechanisms; and address issues that have arisen over the years in relation to the 1999 editions.
The risk allocation and the underlying principles of balancing the risk sharing have not been affected fundamentally by the changes. However, the administrative burden on the parties has increased with more emphasis on the prescribed action that parties must now take. Detailed procedural steps are set out as well as the consequences of lack of action.
Key amendments, which are similar across the three new books, include the following:
- Changes are made to the terminology and formatting and to improve consistency across the suite. For example, the contracts distinguish between "claim" and "dispute" to emphasise the difference between dispute avoidance and resolution and the process of making a claim. "Notice" is now a defined term., "Review" is also a new term and there is a new provision on how to interpret the contract.
- Changes are made to avoid disputes about whether a party has given a proper notice under the contract, which is important given that 70 or so of the sub-clauses have notice requirements.
- Additional time limits have been added as have time-bars, which result in a loss of rights if not complied with. Five of the time-bars apply to the dispute resolution and claims processes.
- More detailed requirements in relation to the Programme are set out.
- The payment mechanism remains largely the same except for amendments to improve clarity in the provisions.
- Provisions dealing with bribery and corruption are included enabling contracts to be terminated or staff removed if found to be engaging in corrupt, fraudulent, collusive or coercive practices.
- Guidance notes have been included to address building information modelling and advise users of issues with which the contract should deal.
- Enhanced contractor's design obligations, changes to limits on liability and express terms to deal with concurrent delay are also included.
- Terms dealing with compliance with applicable health and safety laws and other such obligations as well as requirements in terms of quality management and compliance verification have been expanded.
- The claims process and the process for avoiding and resolving disputes are dealt with separately as a means to encourage the latter by negotiated settlement, for example, and to underline the difference between a claim under the contract and a dispute. Employers and contractors are now subject to the same claim process and this process is set out in detail.
- A dispute avoidance/adjudication board (DAAB) is set up – thereby placing the focus on dispute avoidance while retaining the option of amicable settlement. Failure to comply with a DAAB decision can be referred to arbitration under the contract.
- The amendments introduce FIDIC's "Golden Principles" (in the guidance notes), to which drafters must have regard when amending the general conditions of contract.