International Federation of Consulting EngineersFIDIC
Project Management in the context of FIDIC Conditions of Contract
EIC Annual Meeting – Belfast 2014
Svend PoulsenProject Director, Atkins – Chairman FIDIC Updates Task Group
The FIDIC Rainbow SuiteThe FIDIC Rainbow Suite
FIDIC publishes internationally
recognised forms of contract
for infrastructure works.
More than 40,000 copies supplied each year
EIC Annual Meeting – Belfast 2014
Sharing the Project RiskEmployer's Risk and Control
Employer Specified Project
Employer Requirements
Risk allocation under Risk allocation under FIDICFIDIC
Contractor's Risk and Control
Requirements for Plant, Design –Build
EPC/Turnkey
EIC Annual Meeting – Belfast 2014
The FIDIC Risk Allocation Philosophy• Balanced risk allocation
• Risk is allocated to the party that is best able to• Control and Manage the risk• Sustain the consequences
• Silver book is the exception• New for FIDIC
Risk allocation under Risk allocation under FIDICFIDIC
• New for FIDIC• Employer pays higher price to transfer more risk
• Based on commercial practice where projects where privately funded
• Contractual mechanism allows for only paying for risks that eventuate
EIC Annual Meeting – Belfast 2014
Why an Engineer and not a PM?
Role of the Engineer under Role of the Engineer under FIDICFIDIC
The principle of the FIDIC Conditions of Contract is to engage an Engineer that has a sufficient relevant technical background to run a project and to make fair determinations for the benefit of the projectThe role of the Engineer can be considered as three-fold:1. To act on behalf of the Employer, as his agent;2. To administer the contract as it is written or can be interpreted.
EIC Annual Meeting – Belfast 2014
2. To administer the contract as it is written or can be interpreted. (That would include within any limitations imposed on his duties and authority through the contract, typically through Particular Conditions of Contract Sub-Clause 3.1 [Engineer‟s Duties and Authority]);
3. To make decisions and determine on various matters in accordance with the contract
Defining the Role of the Engineer
RED Book Sub-Clause 1.1.2.4
‘Engineer’ means the person appointed by the Employer to act as theEngineer for the purposes of the Contract and named in the Appendixto Tender, or other person appointed from time to time by the Employerand notified to the Contractor under Sub-Clause 3.4 [Replacement ofthe Engineer].
Role of the Engineer under Role of the Engineer under FIDICFIDIC
As per Sub-Clause 1.1 Introductory
‘...the word ‘person’ can mean a company, so the Engineer may e.g. benamed as a firm of Consulting Engineers rather than an individual. Ifthe Engineer is a company then the company should designate anindividual to carry out the role of the Engineer.’
EIC Annual Meeting – Belfast 2014
The Engineer shall act fairly and in accordance with theContract whenever he or she carries out any of theassigned duties and responsibilities under the Contract.
These assigned duties may include:
Role of the Engineer under Role of the Engineer under FIDICFIDIC
General obligations
These assigned duties may include:• any approval, check, certificate, consent, examination,
inspection, instruction, notice, proposal, request, test, orsimilar act
EIC Annual Meeting – Belfast 2014
Arguably one of the most important but alsomisunderstood duties of the Engineer. It is describedunder Sub-Clause 3.5 [Determinations]:
Whenever these Conditions provide that the Engineer
Role of the Engineer under Role of the Engineer under FIDICFIDIC
Determinations
Whenever these Conditions provide that the Engineershall proceed in accordance with this Sub-Clause 3.5 toagree or determine any matter, the Engineer shall consultwith each Party in an endeavour to reach agreement. Ifagreement is not achieved, the Engineer shall make a fairdetermination in accordance with the Contract, taking dueregard of all relevant circumstances
EIC Annual Meeting – Belfast 2014
Arguably one of the most important but alsomisunderstood duties of the Engineer. It is describedunder Sub-Clause 3.5 [Determinations]:
Whenever these Conditions provide that the Engineer
Role of the Engineer under Role of the Engineer under FIDICFIDIC
Determinations
Whenever these Conditions provide that the Engineershall proceed in accordance with this Sub-Clause 3.5 toagree or determine any matter, the Engineer shall consultwith each Party in an endeavour to reach agreement. Ifagreement is not achieved, the Engineer shall make a fairdetermination in accordance with the Contract, taking dueregard of all relevant circumstances
EIC Annual Meeting – Belfast 2014
There is no apparent time-limit for theEngineer to act in accordance with cl. 3.5….
….However, with reference to Sub-Clause 1.3 [Communications] this is put into
Determinations under FIDICDeterminations under FIDIC
Determinations
Clause 1.3 [Communications] this is put intoperspective:
Approvals, certificates, consents and determinations shall not be unreasonably withheld or delayed.
EIC Annual Meeting – Belfast 2014
““Dispute” means any situation where (a) one Party makes a claim
against the other Party; (b) the other Party rejects the claim in
whole or in part; and (c) the first Party does not acquiesce,
provided however that a failure by the other Party to oppose or respond
Dispute resolution under FIDICDispute resolution under FIDIC
Claims = Disputes?
provided however that a failure by the other Party to oppose or respond
to the claim, in whole or in part, may constitute a rejection if, in the
circumstances, the DAB or the arbitrators(s), as the case may be,
deem it reasonable for it to do so.”
Ref. FIDIC Design, Build, Operate Conditions of Contract (2008)
EIC Annual Meeting – Belfast 2014
“…. Major projects give rise to major risks, which have to be dealt with if they occur ....In these events, the claims procedures are specified so as to provided the degree of formality considered
Dispute resolution under FIDICDispute resolution under FIDIC
FIDIC Guide, pp. 88-89
to provided the degree of formality considered necessary for the proper administration of a…project .
Complying with these procedures and maintaining a co-operative approach to the determination of all adjustments should enhance the likelihood of achieving a successful project.”
EIC Annual Meeting – Belfast 2014
Dispute Boards under FIDIC
• DAB method adopted by FIDIC – Red, Yellow, Silver and Green – Gold and Blue
Project Project Management Management under FIDICunder FIDIC
• Standing v. Ad-hoc– Standing DAB
• Red and Gold
– Ad-hoc• Yellow, Silver, Green and Blue
EIC Annual Meeting – Belfast 2014
DB - Lessons Learned• Expectations and process must be managed by DB
– Define and document process early– Help to minimize procedural posturing during hearings
• No counsel present at hearings – parties manage– Help avoid frivolous claims and preserve relationships
Project Project Management Management under FIDICunder FIDIC
– Help avoid frivolous claims and preserve relationships• Contractor should not be "claims minded"• Employer should not be "claims frightened"• Facilitate cooperation & positive working relations
– DB internally– Employer/Contractor
– Well reasoned decisions helps promote positive process
EIC Annual Meeting – Belfast 2014
• Choose correctly– Standing v. ad-hoc– Composition of DB
• Ensure understanding of process
Project Project Management Management under FIDICunder FIDIC
DB - Lessons Learned
• Ensure understanding of process • Ensure compliance with applicable legal system• Jointly define procedures
– Rules
– Establishing a ‘common culture'
EIC Annual Meeting – Belfast 2014
Project Project Management Management under FIDICunder FIDIC
Svend PoulsenProject Director Project and Construction Management
Atkins Danmark A/SArne Jacobsens Alle 17
EIC Annual Meeting – Belfast 2014
Arne Jacobsens Alle 17DK-2300 Copenhagen SDenmarkT: +45 5251 [email protected]