comment 2012 slides fidic

This project is co-financed by the European

Union and the Republic of Turkey

REPUBLIC OF TURKEY

MINISTRY OF SCIENCE,

INDUSTRY AND TECHNOLOGY

Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın

Uygulanması için Kurumsal Kapasitenin Oluşturulmasına

Yönelik Teknik Yardım

Technical Assistance on Institutional Building for the

Implementation of RCOP in Turkey This project is co-financed by the European


SESSION – II

Introduction to FIDIC



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Session II

Introduction to FIDIC in General

FIDIC contract types and major differences

Fundamentals of FIDIC Red Book and Yellow Book

Hybrid Contracts

Main Parties to the Contract and Responsibilities

Contract Documents as per FIDIC

FIDIC Project Management Tools



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Introduction to FIDIC - 2

Stands for “Fédération Internationale des Ingénieurs Conseils”

French acronym for “International Federation of Consulting Engineers”

In Turkish: “Müşavir Mühendisler Uluslararası Federasyonu”

• Established in Switzerland in 1913, HQs is in Genève;

• First contract is printed in 1957;

• FIDIC represents Engineers and Consultants from

various countries;

• E&C Associations over 60 countries are FIDIC

members;

• Under this umbrella 30,000 firms and over 1,000,000

professionals are represented.

www.fidic.org

http://www.fidic.org/



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FIDIC is the international Federation of duly elected associations of consulting engineers, representing the profession in their respective countries. Membership in the Federation is restricted to one association for

each country;

Members comply with a code of ethics guiding their professional standards;

FIDIC works to promote the common interests of consulting engineers through seminars, conferences and regular discussions with the national associations and international financial institutions (such as the World Bank)

Preparation of standard forms of contract and other documents is a major activity



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ATCEA – Association of Turkish Consulting Engineers and Architects

(TMMMB - Türk Müşavir Mühendisler ve Mimarlar Birliği)

is the only representative body of FIDIC in Turkey;

Established in Ankara in 1980 and has over 200 members;

ATCEA is a member of FIDIC since 1987;

Sells and distributes its own publications as well as FIDIC’s

In EU funded projects, ATCEA is requested to appoint the DAB

www.tmmmb.org.tr / www.atcea.org.tr

http://www.tmmmb.org.tr/

http://www.tmmmb.org.tr/

http://www.atcea.org.tr/



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Introduction to FIDIC - 5 Standardisation both in technical and administrative matters is essential for

the successful completion of projects of civil engineering constructions;

FIDIC is known throughout the world for producing standard forms of contract for civil engineering construction, and mechanical and electrical plant to govern international contracts;

In 1999, FIDIC standardised its model contracts, with the publication of first editions of a new family of contracts comprising four new standard forms of contract:

Conditions of Contract for Construction (“Red Book”)

Conditions of Contract for Plant and Design-Build (“Yellow Book”)

Conditions of Contract for EPC/Turnkey Projects (“Silver Book”)

Short Form of Contract (“Green Book”)



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Why FIDIC’s Standard Forms of Contracts? BALANCED fair apportioning of risks, rights and obligations

between the parties

WELL TRIED long case history for earlier contracts

ACCEPTED known and recognised; in wide use for international contracts

SUPPORTED recommended or required by development banks, International Financial Institutions, large development funds, etc.

EFFECTIVE clear and complete conditions; time limits; provisions for adjudication



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Introduction to the FIDIC

Red Book and Yellow Book Conditions of Contract for Construction Designed by The Employer

Red Book:

Employer responsible for detailed design and thus, carries the risk of increased contract amount depending on the quality of design;

Partial Contractor design possible

Engineer, working for the Employer;

Bill of Quantities;

Payments based upon measurements of works done based on unit prices; but lump sum could be used;

Certification of payments by Engineer;



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Red Book and Yellow Book Conditions of Contract for Plant and Design Build

Yellow Book:

• Contractor responsible for detailed design in accordance with the Employer’s requirements, specifying the quality and scope of the completed work;

• Engineer, working for the Employer;

• Schedule of Payments with Lump sum pricing, but re-measurement possible;

• Payments according to progress (when the Contractor has completed defined stages/milestones in the project);

• Certification of payments by Engineer.



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Fundamentals of FIDIC Silver Book

Conditions of Contract for EPC (Engineer, Procure, Construct) Turnkey Projects Silver Book: • Contractor takes full design and execution

responsibility (Contractor to cover extra risks, so Employer pays more);

• No Engineer, but Employer may appoint a Representative;

• Lump sum Contract Price (but adjustments in limited specified cases);

• Payments according to progress; Employer’s Requirements usually a

‘performance specification’.



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Fundamentals of FIDIC Green Book Short Form of Contract Green Book: Simple and repetitive works ( < US$ 500,000

and twelve months duration); Design by either party; but commonly the

Employer takes over the design responsibility;

Balanced risk sharing; No Engineer, but Employer may appoint a

Representative; Payment on lump sum or any other basis

according to value of Works executed and Materials and Plant delivered to site;



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FIDIC Do Not Publish a Cost Reimbursable form

of contract



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Distinction between the Books is based on:

– who does the design?

– who bears risk for change in quantities?

EPC (Silver Book) provides for the Contractor taking almost all risks

Short Form (Green Book) deals with the wide demand for a simpler form of contract



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Max Owners Risk Min

Max Min

Cost Reimbursable (I Chem. E Green Book)

Short Form Contracts and Dayworks

Target Cost (I Chem. E Green Book)

Contractor's Risk

Owner's Flexibility Admeasurement (FIDIC Red or ICE 6th)

Plant and Design-Build (OB or New FIDIC Yellow)

EPC Turnkey (FIDIC Silver)

Min Max

Min Contractors Incentive Max

Which Format



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Red Book and Yellow Book

The 2 Main Contracts’ Features (Similarities & Differences)

Similarities:

General Conditions

Guidance for the Preparation of the Particular Conditions

Letter of Tender (Tender Form)

Contract Agreement

Dispute Adjudication Agreements (Dispute resolution procedure is: adjudication (DAB) >>> amicable settlement >>> arbitration

Twenty main clauses, covering similar matters



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Red Book and Yellow Book Exceptions:

Clauses 5 and 12:

Clause

For Construction

(Red Book)

For Plant and D-B

(Yellow Book)

5 Sub-contractors Design

12 Measurement Tests after Completion



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Introduction to FIDIC Hybrid Contracts Works designed by the Employer

with Partial Design by the Contractor; Payments: BoQ with Unit Prices and

Lump sum pricing;

Plant and Design-Build (design by the Contractor) with partial works designed by the Employer; Payments: combination of Lump

Sum (Schedule of payments) and Unit Prices;



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Under IPA Contracts needing a mix of Design-Build and Construct-Only format, must be let under a single contract either with Yellow Book or Red Book General Conditions. The ITT must state how bidders are to fill in the necessary BoQ and Schedules of Prices and how these are summated to give an Accepted Contract Amount.

Two separate Works Sections should be defined and may have different damages for late delivery, completion times and retention sums

More on Hybrids



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The Conditions of Contract consists of “General Conditions”, which form Part I of the “Conditions of Contract;

and Part II which includes amendments and additions to such General Conditions, referred as “Particular Conditions”;

so that Part I and Part II together comprise the conditions governing the rights and obligations of the Parties (the Employer and the Contractor) to the Contract.

and set out the legal/contractual arrangements that will apply to the Contract



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Introduction to FIDIC Management of FIDIC contracts is a broad and

complicated subject of study;

FIDIC knowledge improves by experiences and execution;

Studying, Implementation and continuous Monitoring are the keys to success.

The Engineer must be a 1st class administrator



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The Employer: The first party to the Contract and owner/sponsor of the

Works; gives the contractor right of access to, and possession of

the Site; makes the advance payment (if any) against a suitable

guarantee from the Contractor; makes payments to the Contractor as certified by the

Engineer to be due under the contract; takes over the Works following the issue of Certificates

by the Engineer;



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The Employer:

may authorise the Works to be completed by others if the Contractor is in default;

terminate the Contract in the event of the Contractor failing to perform or in certain other circumstances defined in, and subject to, the law governing the Contract;

In our contracts, the Employer also means CA and is “IPA Coordination and Implementation Directorate within the MoSIT”.



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The Contractor:

The second party to the contract, who has the obligation to execute and complete the Works within the time specified in the contract;

provides the securities, guarantees and insurance policies and commences the Works;

prepares the construction programme, provides all necessary materials, Contractor’s Equipment, Temporary Works, management, superintendence and labour and selects the method of carrying out the Works;



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The Contractor: executes the Works to the specified quality within the

defined time for completion and remedy any defects therein in accordance with the Contract;

receives and complies with instructions from the Engineer acting on behalf of the Employer;

responsible for the quality, adequacy, stability and safety of all Site operations and methods of construction;

responsible for the care of the Works throughout the construction period until the Works are officially taken over by the Employer;



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The Contractor: responsible for his own staff and work force and for

taking out social and other insurances in respect of his personnel and taking safety measures;

complies with all applicable laws, by-laws and regulations;

responsible under the Contract for each sub-contractor’s work and behaviour;

In the event of default by the Employer, the Contractor may suspend progress of the work and claim an appropriate extension of time and/or additional payment.



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The Engineer’s Power of ” Determination”

The Engineer:

Although the Engineer Represents the Employer, under sub-clause 3.5 he/she has the right to act as a judge in the resolution of disputes. If the Contractor does not accept the Engineer’s determination he can move towards dispute adjudication.



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The Engineer:

Not a party to the Contract between the Employer and the Contractor but his terms of engagement are set out in a Service contract with the Employer who appoints him to administer the Contract.

Although the Engineer is not a party to the Contract, he plays an important role in the development process of the Works

his job is primarily to supervise and monitor the work in strict accordance with the Contract;



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The Engineer: issue of information and instructions to the Contractor as the Works

proceed; comment on the Contractor’s proposals for carrying out the works; ensure that quality of materials and workmanship are as specified; agree measurements/percentages of work done; check interim and final payment statements of the Contractor and

issue to the Employer the interim and final payment certificates; give instructions relating to management of the Contract and changes

in the nature and extend of the work, the cost thereof and the time for completion (subject to the authorisation by the Employer as stated in Part II);



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The Engineer: give or refuse approval or consent, approve works, issue certificates; make fair determination in accordance with the contract, taking due

regard of all relevant circumstances; In administration of the Contract, all communications with the

Contractor pass through the Engineer, thus avoiding possible confusion and misunderstanding;

His objective is to ensure that the Employer receives the works at completion in accordance with the requirements of the Contract and that the Contractor is suitably rewarded for the work he carries out.



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Relationships in a EU-funded Project: Employer – Contractor

FIDIC Conditions of Contract

Employer – Engineer Service Contract as per EU Service contract condition (General and

Special)

Engineer – Contractor FIDIC Conditions of Contract

Engineer supervises the construction and administers / manages the project in compliance with FIDIC Conditions of Contract with limited authority



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FIDIC Site Roles



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Contract Documents as per FIDIC Contract Agreement (Contract Form) Letter of Tender (Tender Form) Appendix to Tender Conditions of Contract Specifications (Red Book) / Employer’s Requirements

(Yellow Book) Drawings Bill of Quantities (Red Book) / Schedule of Payments

(Yellow Book) Any other document forming part of the Contract

(Addenda, Q/A)



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Contract Agreement (Contract Form):

standard form of contract signed by both parties, properly recording all the terms agreed, including the documents listed as forming part thereof.

Legally binding document, and thus must be carefully prepared to comply with the requirements of the relevant law

Letter of Tender (Tender Form):

standard form of tender completed by the Contractor and includes the signed offer to the Employer for the Works;

tenderer (the Contractor) confirms that he has read and understood the requirements of the tender documents and states his undertaking and fulfilling all his obligations under the Contract.



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Appendix to Tender: includes summary of the information originating from the Particular

and General Conditions of Contract. prepared as a summary table and Includes Financial, Administrative

and Contractual Information, such as: Contact Details of Parties / Law and Language of the Contract; Contract Duration / Disputes and Arbitration; Amounts for Securities and Guarantees / Delay damages; Advance Payment and repayment amortization; Retention Money (percentages for deductions and limits); Minimum amount of Interim Payments; Insurance provisions / DAB applications



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Conditions of Contract: Part I: General Conditions of Contract (Standard Red or Yellow Book) Part II: Particular Conditions of Contract

Particular Conditions changes / replaces / revises / deletes the Clauses of the General Conditions;

Particular Conditions should be in line with the local law and law of the contract;

Particular Conditions of Contract prevail the General Conditions; Clauses in Particular Conditions should not be conflicting with the

clauses of the General Conditions; Change only where change is necessary as any revisions / additions /

omissions done by the Particular Conditions should be based on rational reasoning.



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Conditions of Contract:

Clause 1.5 of PCs; «Priority of Documents» is important and should be re-addressed for every project.

Specimens for Performance Security, Advance Payment and Retention Guarantees provided;



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Specifications:

Defines:

the scope, general and the technical requirements of the Contract;

materials standards and quality of workmanship;

details of samples to be provided and tests to be carried out;

methods of executing the works;

provisions of access or space for other contractors



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Contractor is responsible for

Design

Specification of Mechanical and Electrical Equipment

(In the cases of water and wastewater works)

Process Commissioning

Operations & Maintenance Manual

Operator training

There are two sets of Tests. “Tests on completion” and “Tests After

Completion" of the Works

Yellow Book can easily be configured in fixed-price format

Basis of FIDIC Yellow Book



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In the Yellow Book the Contractor bids: Against a set of performance criteria Against a set of detailed specifications

The Contractor undertakes to meet the performance criteria and does not get paid fully until he proves the performance criteria have been met

Fulfillment of performance measured in pre-established Tests On and Tests After completion.

Payment is made against a Schedule of Payments* * There is no section on measurement and evaluation in FIDC 1999 Yellow

Book!

Basis of Yellow Book



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The Yellow Book can be used in conjunction with guarantee from the Contractor on the performance of his design.

The minimum performance will be specified by the Employer.

The performance may be tested both in the Test on Completion (9.1) and the Test After Completion 12.4(b)

Should the Contractor fail the performance tests penalties shall be applied as specified in the contract. Penalties shall be deducted from payments due.

PERFORMANCE GUARANTEES



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In the Foreword of the contract, FIDIC recommends that:

Payments under a 1999 Yellow Book are instalments within a lump sum Contract Price *

* Need not be related to actual progress (14.1 (d))

1999 FIDIC YELLOW BOOK



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Yellow Book & Employer’s Requirements

In addition to above, “Employer’s Requirements” defining Performance criteria for the works to be designed by the Contractor.

The requirements, parameters, functions, scope and the quality of the completed works should be defined;

All the existing information, relevant technical & administrative regulations and standards should be listed to enable the Contractor to carry out a proper design

Precise instructions on the preparation of design drawings and the standards to which they must comply.



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Drawings (Design documents):

sufficiently detailed in conjunction with the Specifications, the BoQ and the nature and scope of works included in the Contract;

on most contracts supplementary drawings will be issued as the works proceed. However, it should not delay the progress as planned (Work Programme)

In the case of Yellow Book: Draft Layouts and conceptual/indicative design drawings are thought to be sufficient.



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Introduction



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1. Normally against monthly measurement but lump sum payments or mixture of lump sums and re-measurement possible.

2. Contractor does measurement of work to date and plant and materials delivered to site.

(Normal practice for the contractor to do this in conjunction with a representative of the Engineer.)

Payment Under FIDIC Red Book



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1. This is embedded in the 1999/2005 FIDIC RB and YB, and has to be “particularised out” if not required.

2. In specified currency and can be different for different Works Sections.

3. Typically paid back over the first 5 or 6 interim payments.

4. Is always bonded.

5. Needs sensible use in combination with retention money!

Advanced Payment



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Normally: 1. Designers produce detailed Bills of Quantities to a standard

form. 2. These have a preliminary costing to build up a cost estimate

(i.e. A “budget price”) 3. Bidders complete the Bills of Quantities to get the “Accepted

Contract Amount” 4. The Contractor uses his bid rates for items as a basis for

payment for additional items under the contract. 5. Claims for payment are monthly on the basis of work done

(and possibly for plant & materials delivered)

RB Measurement & Payment Basis



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In the absence of a standard method of measurement the BoQ must be preceded by a Preamble which sets down how things are to be measured. Note: It has become traditional that the Preamble to BoQ also contains advice on how bidders should fill in the BoQ but this information is more correctly placed in the Instructions to Tenderers.

Preamble to BoQ



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Payment Cycle



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In FIDIC Works Contracts, the Works is owned by the

Contractor until a defined taking over date and monthly payments do not imply any transfer of assets.

It follows that monthly payments (whilst being as accurate as possible) can be adjusted in the next interim payment if the previous month’s payments was found too high or too low.

The only Contractor's statement and payment which needs to

be strictly correct is the final payment. (At 14.6 A Payment Certificate shall not be deemed to indicate the Engineer's acceptance, approval, consent or satisfaction)

Ownership & Acceptance



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1. Contractor produces 6 copies of monthly statements (IPS).

Submitted together with a progress report.

2. Large number of additions and deductions from statements given in 14.3 (a) to (g)

3. Under 14.5 80% of plant delivered to site but not incorporated can be paid for if items are listed in Appendix to Tender. (Can be particularized)

4. Upon approval by Engineer the IPS becomes an IPC

Interim Payment Statements



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The Schedule of Payments should be preceded by a Preamble which sets down the scope of works within each payment installment Note: It has become traditional that the Preamble to BoQ also contains advcie on how bidders should fill in the BoQ but this information is more correctly placed

in the Instructions to Tenderers.

Preamble to Schedule of Payments



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Normal to pay the Contractor against predefined milestones for all works as

set down in the schedule of payments.

Also possible to make advance payments under 14.5 for items either

delivered to site or ready for collection at a manufacturer. State Inco terms.

EXW EX WORKS (named place)

CIF COST, INSURANCE AND FREIGHT (named port of

destination)

DDP DELIVERED DUTY PAID (named place of destination)

1999 FIDIC Yellow Book

http://www.iccwbo.org/incoterms/preambles/pdf/EXW.pdf

http://www.iccwbo.org/incoterms/preambles/pdf/CIF.pdf

http://www.iccwbo.org/incoterms/preambles/pdf/CIF.pdf

http://www.iccwbo.org/incoterms/preambles/pdf/DDP.pdf



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Alternatively: 1. Tender Preparers make a list of lump sums payments which will become due

when certain activities or Works sections are complete. (The % breakdown of

the lump-sums is not alterable by bidders)

2. Bidders price these lump sums

3. The successful bidder receives payment when the lumps sum activities are

achieved (in any order)

4. No payments are due for semi-completion of lump-sum activities. (e.g. not

possible to receive 50% payment for 50% achievement of lump-sum). If

target for a lump sum payment is missed the Contractor submits a “Catch-up”

programme

*Has become popular payment method for 1999 Yellow Book

Payment Basis



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Provisional Sums 1.1.4.10 Funds set aside for use at the Engineer’s Discretion to undertake

pre-defined items of the Works which may become necessary. (Note: Provisional sums are part of the Accepted Contract Amount

but do NOT become part of the Contract Price until committed under 13.5)

Contingency Sums These do not exist in FIDIC, but are commonly given in Tender

dossiers to allow funding of variations for Unforeseeable circumstances. In IPA contracts (unusually!) they form part of Accepted Contact amount and unless equated to provisional sums always form part of the Accepted Contract Amount.

Generally the contingency sums may exist only within a client’s budget line to which contractor is not privy.

Provisional Sums & Contingency



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(carried out incidental to Contract Work)



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Original Definition

Works performed at a daily, reimbursable rate for each element of a job (plant, labour, fuel, etc. performed)

Common usage

Works performed incidental to Contract Work on a cost reimbursable basis, where work elements are broken down into Labour, Plant and Materials.

IPA contracts include the sum of a Dayworks Schedule within the tender comparison price but NOT with the Accepted Contract Amount

Dayworks



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Dayworks Clauses in FIDIC

• Green Book (10.2(e))

• 1999 FIDIC Red (13.6)

• 1999 FIDIC Yellow (13.6)

• 1999 FIDIC Silver (13.6)



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Use in 1999 FIDIC

“Engineer may instruct that a Variation shall be

executed on a daywork basis ...”

“Work shall then be valued in accordance with the daywork schedule in the contract”



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Use in 1999 FIDIC

“Contractor shall submit a quotation before ordering…….” . When applying for payment, the Contractor shall submit

invoices, vouchers and accounts or receipts for any Goods………and ...

names, occupations and time of personnel identification, type and time of equipment the quantities and types of plant and materials used. . “Payment to Contractor is with next statement…..” (i.e. in next interim payment)



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Bill of Quantities (Red Book):

BoQ is a list of items giving descriptions and estimated quantities of Works to be executed under the Contract;

The Red Book assumes a remeasurement form of contract, although that does not preclude the inclusion of a number of lump sum items in the BoQ, provided their scope is adequately defined;



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Schedule of Payments (Yellow Book):

A schedule which contains a Breakdown of the Lump Sum defining the components of the Works, filled in by the Contractor at the tender stage;

Interim payments are made on the basis of defined percentages/milestones for the works completed.



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Project Management, Tools & Milestones



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Before Contract Signature:

Employer gives award notice to the successful tenderer;

Contract Negotiations are done (if necessary);

Priority of documents is re-arranged if necessary due to contract

negotiations or clarifications during tender period;

Contract is signed by the Employer (and endorsed by EUD);

Contractor submits the required documents (e.g. performance

security) to the Employer together with the signed Contract;



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Before the Construction Works Commence - 1:

Upon the signature of the Contract certain procedures need to completed before the Contractor can commence the works; Cl. 18.2 Submission of All Risk Insurance;

Cl. 20.2 Identification of DAB (Dispute Adjudication Board) member(s). – Sometimes identification is done on «Ad hoc» bases;

Cl. 3.1 If not already in the Contract, the Employers informs the Contractor about the details of the Engineer;

Communication lines and rules are established;



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Before the Construction Works Commence - 1: Cl. 1.8 & Cl. 1.9 Supply of Drawings and Instructions;

(RED Book) Drawings should be an integral part of the Contract and should be provided based on a well structured calendar.

Cl. 3.2: The limits of the authority of the Engineer and its staff should be defined

The authority of the Engineer is limited in projects funded by EU.

The personnel of the Employer, the Contractor and the Engineer to be deployed on the project site are identified. (Cl. 4.3 - Contractor’s Representative)

The limits of authority of each personnel are identified and a line of communication is drafted.



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Before the Construction Works Commence - 2: Clause 2.1 Right of Access to Site

Employer should give the right to access and possession of the site to the Contractor after the Contract Signature.

Employer should complete his responsibilities and should give the possession of the site free of problems.

Delays in this task may cause extensions in the contract duration and increases in the contract price.

1.13 Contractor should complete all the necessary local procedures and obtain the necessary permits to start construction works.

Clause 8.1 unless otherwise stated in PCs the commencement date is within 42 days after the contract signature (“30 days after Signature of Contract” in some of the IPA Projects);

Engineer shall give the notice not less than 7 days before the Commencement Date.



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Before the Construction Works Commence - 2: Clause 1.3 - Communications:

The rules stated in this clause should be followed.

Payment certificates, approvals, certifications and similar requests should be processed within the durations stated in the Contract.

A copy of the notices should be shared by the Engineer.

Clause 1.9 - Delayed Drawings and Instructions

Delays which will cause claims should be avoided as much as possible

Clause 3.3 - Instructions of the Engineer

Engineer should issue instructions in line with its Authority.

Instructions can only be issued by the Engineer or its representative.

RED Book includes verbal instructions by written confirmations.



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Before the Construction Works Commence - 2:

Clause 4.21- Progress Reports

Unless otherwise stated, the Contractor should issue progress reports in certain intervals. Usually as attachments to the interim payment certificates.

Reports compare the physical and financial realization with the planned and propose programmes for the remaining duration.

Reports should be supported by pictures and test results.

Reports should include information about the production, delivery and assembly schedules of the permanent works

Clause 6.10 - Records of Contractor’s Personnel and Equipment

Contractor should keep daily site records. The records should include site activities as well as weather conditions.

Such information should be summarized in the progress reports.



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Before the Construction Works Commence - 2: Clause 2.5 Employer’s Claims and 20.1 Contractor’s Claims

Progress reports should list the Claims of both Parties; The contractor should give notice in 28 days after he became aware of the event

or the circumstances. And shall submit a detailed claim in 42 days; Engineer shall respond within 42 days after receiving a claim. If not agreed with the Engineer’s decision, parties may refer the case to DAB

Dispute resolution procedure is: adjudication (DAB) >>> amicale settlement >>> arbitration

Clause 14 - Contract Price and Payment Progress reports should include sufficient level of information about cash flows,

to allow the Employer to make proper planning for funding.



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Certificates: Clause 10 – Employer’s Taking Over

Contractor may apply for Taking Over Certificate 14 days before the works are completed (Notice).

Engineer within 28 days after receiving the application (a) issues the certificate or (b) rejects the application.

Clause 11 – Defects Liability Upon the full completion of Contractor’s duties and

responsibilities under the contract and within 28 days after the expiry of the Defects Notification Period; Engineer issues the Final Acceptance Certificate.



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Financial Management Tools: Clause 12 Measurement and Evaluation (RED Book) Clause 13 Variations and Adjustments Clause 14 Contract Price and Payment Clause 12 Measurement and Evaluation (Only valid for RED Book

Contracts) For Clause 12, YELLOW Book has «Tests After Completion». The ways and methods of measurement and evaluations for Works are defined; Measurements are done jointly by the Engineer and the Contractor. In certain

circumstances records are used instead of measurements. Payments are usually based on net measurements. Clause 12.3 defines the procedures for defining new rates.



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YELLOW Book; Payment Conditions: Usually lump-sum contracts; Sub items are defined for interim payments. Payments are

based on completion ratios (percentages); Sub items should be arranged carefully in order not to

harm the Contractor’s cash flow. Unfair or unreasonable payment conditions are always reflected to the work progress;

Cl. 14.4 - Schedule of Payments and the Schedule of Payments in Volume 4 should be in line with each other.



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YELLOW Book; Payment Conditions: Clause 13 - Variations and Adjustments

13.1 Engineer can instruct a variation or request the Contractor to submit a proposal

13.2 Value Engineering

13.3 Variation Procedure

13.8 Adjustments for Changes in Cost: Formula for price increases based on the costs for material, labour, fuel, energy etc.). Not implemented in EU funded projects.



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YELLOW Book; Payment Conditions:

Clause 14 Contract Price and Payment:

14.1 Contract Price Procedures for Contract Price variations should be clearly defined.

And relevant clauses should be drafted accordingly.

14.2 Advance Payment Advance payment and deductions should be in line with the nature

of the works.

Payment conditions should not put the Employer under risk, but at the same time should not harm the cash flow of the Contractor.



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CLAIMS DISPUTES AND ARBITRATION (ARTICLE 20)

20.1 Contractor’s Claims

20.2 Appointment of the Dispute Adjudications Board

20.3 Failure to Agree Dispute Adjudication Board

20.4 Obtaining Dispute Adjudication Board’s Decision

20.5 Amicable Settlement

20.6 Arbitration

20.7 Failure To Comply With Dispute Adjudication Board’s Decision

20.8 Expiry of Dispute Adjudication Board’s Appointment

APPENDIX General Conditions of Dispute Adjudication Agreement

ANNEX Procedural Rules



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