On December 5, 2017, the Fédération Internationale des Ingénieurs-Conseils (FIDIC) launched the second edition of the FIDIC Rainbow Suite of Contracts 2017 at the FIDIC International Users’ Conference in London.
The FIDIC 1999 Yellow Book (Conditions of Contract for Plant and Design-Build), the FIDIC 1999 Silver Book (Conditions of Contract for EPC/Turnkey Projects), and the FIDIC 1999 Red Book (Conditions of Contract for Construction) have been in widespread use for nearly two decades. The much-awaited Second Editions contain extensive amendments and take a user- friendly approach to preserving the fundamental principles of risk sharing between the Employer and the Contractor. As a result, most of the changes to a Book also appear in the other Books.
FIDIC also launched the “Five Golden Principles” directed to Employers, Contractors and all drafters.
Although some of the changes to the Books are more cosmetic in order to make them more user-friendly, there are also significant changes in terms of contract management, claims and dispute resolution provisions, including an increased number of “deeming” provisions and time- bar clauses. While 1999 Editions deal with the question “What is expected?” in procedures, the new Books are more prescriptive, aimed at answering the questions “When is it expected?” and “What are the consequences for non-compliance?”
The Second Editions are comparatively longer, seek to reflect developments in the construction industry, mostly in respect of the developing technology and its use in construction projects, and seek to reflect user feedback. They also seek to increase certainty by fleshing out how clauses on variations, terminations etc. are to operate and impose stricter consequences for failure to comply. The Engineer (and in the Silver Book, the Employer’s Representative) has also been given a much more enhanced role throughout the project with the new Books.
Another noteworthy change is that the Second Editions now contain 21 clauses, instead of the previous 20. The old clause #20 has been split into two: the new clause #20 deals with notification of claims and their determination by the Engineer, whereas clause #21 with disputes and arbitration, including the procedure relating to the Dispute Avoidance and Adjudication Board (DAAB – the new name for the Dispute Adjudication Board). This latter component reflects the key theme of the Second Edition in terms of the increased emphasis on dispute avoidance.
Other key changes include:
- Provision permitting an increase/decrease in the Performance Security value where Contract Price changes by 20% (clause 4.2);
- Employer’s financial arrangements to be detailed in the Contract Data and Contractor entitled to request evidence regarding such financial arrangements (clause 2.4);
- Imposition of stricter requirements as regards communications and also deemed receipt of electronic transmissions described in the Contract Data the day following transmission, where a non-delivery notification is not issued (clause 1.3);
- The term “Notice” has now been defined, and a Notice must be identified as such;
- Introduction of a timeline for Engineer determinations (clause 3.7);
- Additional grounds for Contractor objections to Variation instructions;
- With regards to the routes to the DAAB, deeming of dispute and referral to DAAB where a party raises a matter (which is not a claim) and the Engineer does not give its determination;
- Deemed execution of the DAAB agreement upon a party’s refusal to sign the DAAB Agreement within 14 days;
- All Books contain a standing dispute board;
- Amendment of the arbitration clause to refer to the appointment of “one or three arbitrators,” mirroring the ICC Rules; and
- Comprehensive redrafts of the limitation of liability provisions with new “carve-outs”.
The new FIDIC Rainbow Suite has introduced important changes impacting many of the core clauses, provides for more substantive provisions, and aims to strike a balance between Employer and Contractor interests.
For further information or advice on the revised FIDIC Books or more generally, please contact us.