18 years after the publication of the original editions, FIDIC released its Second Edition Red (Construction), Yellow (Plant and Design Build) and Silver Books (EPC / Turnkey Projects) at the FIDIC Users' Conference in London last week.
The philosophy behind the revised contracts is greater clarity and transparency with an emphasis on avoiding disputes and quickly resolving them when they do arise. We highlight some of the key changes within this note.
Revised claims procedure
Clause 20 deals with the notification of Claims (requests for an extension of time or additional payment) and their determination by the Engineer. An extensive procedure for notifying and determining Claims is set out, the most notable feature of this procedure being the inclusion of a number of time bars. By way of example, a Claim must be notified within 28 days of a party becoming aware, or when it should have become aware, of a relevant circumstance or event otherwise it is liable to be barred. Likewise, failure to provide the contractual or other legal basis of a Claim within 84 days of it arising renders the Claim susceptible in a similar way.
Contractors engaged under the new Second Editions should be aware of the multiple new time limits and ensure they have the resources available to meet them otherwise they risk losing entitlements to extra time and/or money.
Dispute Adjudication and Avoidance Board (DAAB)
Clause 21 covers the resolution of Disputes (the rejection of a Claim) and more specifically the DAAB. As the new name suggests, the DAAB has an increased role in helping the parties avoid disputes arising. Parties can now jointly request informal assistance or advice from the DAAB to resolve a Dispute. In addition, the standing DAAB is to visit the site regularly and meet with the parties throughout the duration of the contract and can invite the parties to refer a matter to it if it becomes aware of a potential dispute.
Role of the Engineer
The role of the Engineer has been updated. The Engineer is now under a duty to encourage discussions between the parties to reach an agreement on any Claims and is required to determine Claims in accordance with the detailed Claims procedure (referenced above).
Importantly, when seeking an agreement or making a determination, the Engineer must act "neutrally" and so, in such circumstances, is not deemed to be acting on behalf of the Employer. This neutrality is all the more important given that the Engineer can waive a failure to comply with a time bar, taking into account whether the other party would be prejudiced by acceptance of the late submission or had prior knowledge of the relevant matter.
Early warning procedure
Parties must now give one another early notice of any known or likely circumstances which may adversely affect the works.
Increased programming requirements
The Contractor is required to update the programme to reflect actual progress and provide proposals to deal with the effects of any delays. Whilst the programme is still not considered a formal contract document, the Engineer must review it to ensure its compliance with the other obligations of the contract.
To reduce potential disputes over whether something constitutes a 'notice', a notice sent under the Second Edition contracts must expressly state on its face that it is intended to be a "Notice".
The Second Edition of the FIDIC Rainbow Suite sets out more extensive procedures for parties to follow with the aim of encouraging dispute avoidance from an early stage. It will be imperative for those using the Second Editions to be aware of the changes, particularly with regard to the new time limits to avoid Claims becoming time-barred. The new provisions are likely to result in a greater administrative burden and parties should consider their ability to manage this burden if choosing to enter into one of FIDIC's Second Edition contracts.
Those in the tunnelling industry should also note that an Emerald Book for tunnelling and underground works is anticipated as an addition to FIDIC's suite of standard form contracts. The publication date of the draft contract has yet to be confirmed.