CONTRACTS: BASIC QUESTIONS QUESTION/ANSWER

REMEASUREMENT MODIFIED TO LUMP SUM

QUESTION

The following query is in relation to a situation which has occurred in the context of the
execution of a Lump Sum contract, regulated by a standard FIDIC (Red Book) terms and
conditions. The Specifications call for "Cast Iron" pipes, while the BOQ calls for "UPVC"
pipes. The Contractor and upon the approval of the Engineer, and without having any
instructions to do so, executed the Works in UPVC. Does this entitle the Employer to
request cost saving on this item? And on what basis? Your response to the above is highly
appreciated.

ANSWER

You say that you have a Lump Sum Contract. The FIDIC Construction Contract Book is a
remeasurement contract so the payment provisions must have been changed to provide for
the Lump Sum. The answer to your question will depend on the wording of these Lump
Sum provisions. I regret that FIDIC can only comment on questions which on the
interpretation of the FIDIC General Conditions, so we are unable to answer your question.
We fear that this is an indication of what happens if General Conditions are modified by
Special Provisions without due care.

SUBCONTRACTOR'S EXPERIENCE

QUESTION

I would like your advice on the definition of a subcontractor, and of the following tender
criteria: "subcontractors' experience and resources shall not be taken into account in
determining the bidder's compliance with qualifying criteria". In other words, does this
mean that if a bidder has worked as a subcontractor, he is not permitted to add that
experience as part of his qualification? I would like your clarification.

ANSWER

The FIDIC definition of a subcontractor is given at Sub-Clause 1.1.2.8 of the 1999

Contract for Construction as: "Subcontractor" means any person named in the Contract
as a subcontractor, or any person appointed as a subcontractor, for a part of the Works;
and the legal successors in title to each of these persons. Different clients have different
criteria when evaluating tenders. FIDIC would certainly expect that any client will want to
ensure that the tenderer has adequate experience as a main contractor and has not just
worked as a subcontractor. However, in FIDIC's opinion, this would normally be worded
as "Experience as a subcontractor ....". FIDIC has also known clients to be concerned that
tenderers have relied on a proposed subcontractor's experience and resources when
preparing a tender and then the named subcontractor is withdrawn and another, less
experienced, company is proposed after the tender has been accepted. However, for an
international tender, some clients require that a certain percentage of the Works must be
subcontracted to local companies. In this case the experience and resources of the
proposed subcontractors will be an important part of the tender. The client's criteria when
evaluating tenders depend on a number of different factors, including the past experience
of the particular client. In order to ascertain the exact intentions for evaluating your
particular tender you would need to raise the question with the client.

FREE-ISSUE MATERIALS

QUESTION

I have a question regarding Clause 69.1 for Default of Employer. We are executing a
Contract for a Project in Pakistan under FIDIC Fourth Edition, 1987. The Employer has
assigned The Engineer and also an Employer's Representative. The Employer's
Representative is form time-to-time acting like The Engineer and would like to physically
check the works at site. They are also applying deductions on the certificates of The
Engineer, such as retention money on escalation, and also Quantities, etc. The amount of
the unauthorized deductions are around 5 % of the total amount certificates issued by The
Engineer. We have served a notice under Clause 69.1 and 69.4, of the Conditions of
Contract to reduce the rate of work and furthermore, clarify that the Clause 69.1 explains
the default of the Employer, regardless of the quantum of amount in case of Employer's
failure to pay to the Contractor total amount due under any certificate of the Engineer. Do
you think that the above statement is true and it is a case of default of the Employer ?

ANSWER

Depending on what is written in the Contract and the Particular Conditions, generally
speaking you have a case against the Employer. The damages which the Contractor may
claim would include interest and/or financing charges. However, you must check the
provisions of the Sub-clause 2.1 Engineer's duties and authority ,to see what is mentioned
there. It is not very clear what is this Employer's Representative and what are his duties
under the Contract,. However, one would suspect that you have a case against the
Employer.

BOGUS CLAIMS

QUESTION

I request to give me clarification about the correct interpretation of Clause 60.6 Final
statement in the FIDIC Conditions of Contract 1987 revised in 1992. This is about
submission by the Contractor of final statement containing the following (a) 'the value of
all work done in accordance with the contract, and (b)any further sums which the
contractor considers to be due to him under the contract or otherwise'. I want clarification
with respect to (b) above. Does it include the Claims which the Contractor has never raised
during the currency of contract according to provisions of the contract? I am confronted
with a dispute In which the contractor for a value of total work of Rs 70 million has
submitted final accounts of Rs 280 millon by including various type of claims which he
never claimed during the contract period and now claims in the final statement and since
the Engineer/Employer failed to respond, the Contractor claims that the final account has
become final. I would request for an early response as to the true and intended purpose of
the sub-clause (b) of Clause 60.6 of the General Conditions of the above mentioned FIDIC
version for civil works construction. Should I include all bogus claims what I intend to
include for the purpose that if I claim USD 100 I would at least get USD 1. How I can rebut
this?
ANSWER

The provisions of Sub-clause 60.6 have to be read together with the provisions of Sub-
clause 60.5 and of course with the provisions of the Sub-clause 60.9. In order for the
Contractor to maintain any claim, he must include it in his Statement at Completion, if it
has arisen by then, and in his Final Statement. There are a number of incidences under the
contract when the Employer gives to the Contractor indemnities or is otherwise
responsible to the Contractor. Clauses in which this occurs and where the Contractor's
resulting claims against the Employer could arise for the first time after the Statement at
Completion or Final Statement have been submitted by the Contractor include the
following: Clause 19.2 (Employer's responsibilities) in relation to safety; Clause 21.3
(Responsibility for amounts not recovered); Clause 22.3 (Indemnity by Employer); Clause
24.1 (Accident or injury to workmen); Clause 25.4 (Compliance with policy conditions);
Clause 26.1 (Compliance with statutes, regulations); Clause 70.2 (Subsequent legislation);
and Clause 71.1 (Currency restrictions). In each of the above cases, it is conceivable that
the Contractor would wish to make a claim against the Employer after the date of the
Final Statement. Further, if the Contractor was made liable under the applicable law to a
third party in respect of design which had been carried out by the Engineer, the
Contractor would wish to bring a claim against the Employer to recover any damages paid
out. Sub-clause 60.9 in fact bars the claims not mentioned in the Statement at Completion
and in the Final Statement. The purpose of the sub-clause is sensible, namely to enable the
Employer to achieve a reasonable degree of certainty as to his ultimate liability.

APPOINTING AN ENGINEER

QUESTION

Is it recommended to have in a contract based on FIDIC's Electrical and Mechanical

Works Contract an external expert acting as the Engineer? Or is there no problem in
recruiting the Engineer from amongst the Beneficiary (in our case a "public" authority)?
We are signing a contract shortly. The Engineer is according to the Red Book, Clause 2.4
Part I bound to act impartially. The question is if there is an internal incompatibility in the
relationship to his Employer.

ANSWER

The basis upon which the 1987 Yellow Book and Red Book is written is that the Engineer
is appointed by the Employer, but that he is independent of both parties - i.e., he is an
independent third party. In many cases he is required to give impartial decisions - in fact
under Clause 2.4 of the Yellow Book he is required to act impartially at all times when
exercising his discretion. If the Engineer is an employee of the Employer - e.g., someone
from the Employer's Engineering Division - there is a big risk that he will not be in a
position to act impartially. Although he may be very experienced and capable from a
technical point of view, and able to handle all technical matters, he may not be free to
make decisions which involve financial arrangements, etc. in a fair and impartial manner.
It is not impossible, nor unknown, for the Employer to nominate himself or one of his own
staff as Engineer, but it is rare and certainly causes problems. The text of any clauses
referring to the impartiality of the Engineer will probably need revising at some stage, as
will the provisions for handling claims and disputes (Clauses 2 and 50). The principle of
using an employee of the Employer as Engineer would be more acceptable if a Dispute
Adjudication Board (DAB) was introduced to replace the principal provisions of Clauses 2
and 50.1 to deal with claims and disputes.
STANDARD LETTERS

QUESTION

I am a Civil Engineer, presently working as Contracts Manager. Foreign (non-British

nationality) engineers usually have an understanding of the contract document and the
associated entitlements/obligations, but always express difficulty in composing (or
responding to, if they are on "the other side" , correctly worded "standard" letters to the
RE, Engineer or Employer in compliance with the requirements of the various sub-clauses.
Do you have such a publication?

ANSWER

The only book which we can recollect is "Musterbriefe in Englisch" (ISBN 3-7625-2607-9)
although its standard letters are not such as we would prefer to endorse. Although we will
review the situation with regard to the new FIDIC Contracts Guide, FIDIC lack
enthusiasm for the very concept of standard letters, which seems to be tied up with the
concept of avoiding thinking about the situation. However, we do recognise the validity of
concerns expressed by those whose first language is not English. Thus, "Musterbriefe in
Englisch" has been republished as an electronic edition (it goes with the 1987 Red Book
civil works contract). An updated version for use with the Construction Contract 1st
Edition, 1999, the Red Book successor, will be published by FIDIC in 2009 (FIDIC has
acquired the copyright of Musterbriefe in Englisch). It should be noted that Edward
Corbett's book "FIDIC 4th "contains some standard letters. These have been incorporated
with permission in the electronic version of "Musterbriefe in Englisch" published by
FIDIC.

APPENDIX TO TENDER DATA MISSION (CONTINUED)

QUESTION

I believe this case does not constitute a question of mistake in contract to be decided under
the applicable law. The schedule of prices of labour and materials is a provision for the
tenderer to indicate his price (cost plus profit) on which he had based his Contract Price,
in order for the Engineer to ascertain the value of an item of work that had been executed
(possibly under a variation order) and for which, or for a similar item of work of which, no
price could be found in the Bill of Quantities (BOQ). Thus the schedule of prices of
materials and labour only assists the Engineer to determine the overheads and profits of
the Contractor, under the terms of the contract, that has to be added to the basic cost of
executing an item of work, which the Engineer can always readily determine. If provison
had been made in the contract for payment for price escalations, then such payments had
to be determined by reference to price escalation indices, published by an accepted
authority. As to which source or publication is to be used for this purpose, depends on
what would have been reasonably expected to be in the minds of the two parties at the time
of entering into contract.

ANSWER

We assume that this inquiry is about FIDIC 1999 Conditions of Contract where in the 199
Red Book Sub-Clause 13.8 it says: "13.8 (Adjustments for Changes in Cost) - In this Sub-
Clause, "table of adjustment data" means the completed table of adjustment data included
in the Appendix to Tender. If there is no such table of adjustment data, this Sub-Clause
shall not apply. If this Sub-Clause applies, the amounts payable to the Contractor shall be
adjusted for rises or falls in the cost of labour. Goods and other inputs to the Works, by
the addition or deduction of the amounts determined by the formulae prescribed in this
Sub-Clause. To the extent that full compensation for any rise or fall in Costs is not covered
by the provisions of this or other Clauses, the Accepted Contract Amount shall be deemed
to have included amounts to cover the contingency of other rises and falls in costs. The
adjustment to be applied to the amount otherwise payable to the Contractor, as valued in
accordance with the appropriate Schedule and certified in Payment Certificates, shall be
determined from formulae for each of the currencies in which the Contract Price is
payable. No adjustment is to be applied to work valued on the basis of Cost or current
prices. The formulae shall be of the following general type:
Pn=a+bxLn/Lo+cxEn/Eo+dxMn/Mo where: "Pn" is the adjustment multiplier to be
applied to the estimated contract value in the relevant currency of the work carried out in
period "n", this period being a month unless otherwise stated in the Appendix to Tender;
"a" is a fixed coefficient, stated in the relevant table of adjustment data, representing the
non-adjustable portion in contractual payments; "b", "c", "d", ... are coefficients
representing the estimated proportion of each cost element related to the execution of the
Works, as stated in the relevant table of adjustment data; such tabulated cost elements
may be indicative of resources such as labour, equipment and materials; "Ln", "En",
"Mn",... are the current cost indices or reference prices for period "n", expressed in the
relevant currency of payment, each of which is applicable to the relevant tabulated cost
element on the date 49 days prior to the last day of the period (to which the particular
Payment Certificate relates); and "Lo", "Eo", "Mo", ... are the base cost indices or
reference prices, expressed in the relevant currency of payment, each of which is
applicable to the relevant tabulated cost element on the Base Date. The cost indices or
reference prices stated in the table of adjustment data shall be used. If their source is in
doubt, it shall be determined by the Engineer. For this purpose, reference shall be made to
the values of the indices at stated dates (quoted in the fourth and fifth columns respectively
of the table) for the purposes of clarification of the source; although these dates (and thus
these values) may not correspond to the base cost indices. In cases where the "currency of
index" (stated in the table) is not the relevant currency of payment, each index shall be
converted into the relevant currency of payment at the selling rate, established by the
central bank of the Country, of this relevant currency on the above date for which the
index is required to be applicable. Until such time as each current cost index is available,
the Engineer shall determine a provisional index for the issue of Interim Payment
Certificates. When a current cost index is available, the adjustment shall be recalculated
accordingly. If the Contractor fails to complete the Works within the Time for Completion,
adjustment of prices thereafter shall be made using either (i) each index or price
applicable on the date 49 days prior to the expiry of the Time for Completion of the
Works, or (ii) the current index or price: whichever is more favourable to the Employer.
The weightings (coefficients) for each of the factors of cost stated in the table(s) of
adjustment data shall only be adjusted if they have been rendered unreasonable,
unbalanced or inapplicable, as a result of Variations." The clause is very clear and
unfortunately the question raised is not related to an interpretation of a Sub-Slause.

FAIRNESS OF DEDUCTIONS

QUESTION

As our project is a lump-sum contract, the client has reduced some of the items and is
deducting suome of our payment amounts from the monthly certificate. Is it fair to deduct
an amount?
ANSWER

Although it is not for FIDIC to comment on the "fairness" of a particular circumstance, it

is the FIDIC philosophy to publish Conditions of Contract that adopt an approach of
fairness and balanced risk allocation between the parties as a primary focus. Further,
FIDIC can only comment in general terms on the interpretation of a FIDIC clauses, and it
should be noted that for the application of a clause to a particular problem situation, one
should always consult a specialist. With that being said, in general, the Sub-Clause entitled
Variations (Sub-Clause 52.1 in the 4th Edition or 13.1 in the 1999 Edition of the
Construction Contract) does provide the right for the Engineer to vary the work
downward; specifically the Engineer may decrease quantities or omit work, provided of
course that this work is not carried out the Employer or another contract. Further, Sub-
Clause 51.1 provides that such variations will be valued in accordance with the Clause 52,
in the case of the 4th edition or Clause 12 in the case of the 1999 editions. Both of these
clauses provide the rules for the valuation of these variations, which include the possibility
of reduction in price. Please note that the above represents a general answer only, and
specific advice to the particular facts surrounding your situation, we recommend you
consult a specialist.

LIQUIDATED DAMAGES

QUESTION

I am working as a Resident Engineer for Highways with consultants. A brief detail of our
project is as as follows: The project is a repair project and is divided in 3 sections. The
sections are of varying lengths with 150m for the shortest one and 1.5 Km for the longest
one. Completion date for the project has already elapsed early this year and no time
extension has been granted to the contractor owing to delay on his own behalf. Two
sections have already been completed (opened to traffic) and the 3rd section is near
completion. No separate times for completion have been provided in the contract for either
section. ·Clause 47.2 of FIDIC Conditions of Contract (4th edition) recommends the
reduction in penalty subject to taking over of different sections. As sated above, none of the
sections have been acquired by the client contractually. The referred clause also states that
the provisions of the sub clause shall only apply to the rate of liquidated damages and shall
not affect the limit thereof. What I infer from this part is that even after the reduction of
penalty, it shall be applicable from the original date of expiry of the contract. Is this the
right interpretation? My second query is regarding the reduction in liquidated damages.
Under the above circumstances where the sections have not been acquired, but opened to
traffic and general public, can the penalties be reduced contractually subject to mutual
agreement with the client? Thirdly, during the currency of the project, some savings have
been there (which couldn't be estimated at design stage due to repairing nature). The
savings are less than 15% (considering Clause 52.3). If penalties are applied and reduced
thereof, are they to be calculated on the original contract price or the revised one?

ANSWER

If understood correctly, your first question relates to sub-clause 47.2, specifically the last
sentence, which reads "The provisions of this Sub-Clause shall only apply to the rate of
liquidated damages and shall not affect the limit thereof." The meaning of this sentence is
that although this clause allows for the amount of liquidated damages to be reduced
proportionately to the work being handed over, if the work is handed over in parts, the
maximum limit of liquidated damages (as specified in the appendix to tender (see Sub-
Clause 47.1)) is not affected. In regard to your second question, Clause 47 should be read
in conjunction with Clause 48. In the background to your question, you stated that none of
the sections have been 'acquired by the Client contractually', yet earlier you state that '2
sections have already been completed (opened to traffic)'. In this light, we would suggest
that you may review both sub-clause 48.2 and 48.3, which, depending on the particular fact
pattern surrounding your contract, may be applicable. In answer to your third question,
liquated damages are not penalties. You are kindly referred to the verbiage contained in
Sub-Clause 47.1, which reads, in part "... and not as a penalty ...". As explained in the
Guide to the Red Book, Liquidated damages are an amount determined by the Employer,
before tenders are invited, as a reasonable assessment of the actual damages which he
would suffer in the event of delay in completion of the Works. Hence, in general,
Liquadated Damages should be calculated from the vantage point that will result in a
reasonable assessment of the actual damages.

VALUE ENGINEERING SUB-CLAUSE

QUESTION

In terms of the FIDIC 1987 Red Book, is the Contractor entitled to a portion of the saving
as provided for in the terms of Sub-Clause 13.2 (Value Engineering) in the 1999 Red
Book?

ANSWER

The FIDIC 1987 eRed Book does not have a similar provision as the one mentioned in the
FIDIC 1999 edition Value Engineering, Sub-Clause 13.2 However you may find in the 1987
Red Book a so called bonus for early completion.

ADDITIONAL WORKS

QUESTION

Being a project manager from the client side, I would like to know as per FIDIC can I
force a contractor to carry out additional works prior to approval of his financial claim?

ANSWER

The basic answer is YES, provided you follow the correct contract procedures. There are a
number of Sub-Clauses which are relevant including, from the 1999 Construction
Contract: a) S/Cl 3.1: The Employer may have imposed constraints on the Engineer's
authority in the Particular Conditions. b) S/Cl 3.3: The Contractor shall comply with
instructions given by the Engineer. c) S/Cl 13.1: The Contractor shall execute and be
bound by each Variation initiated by the Engineer. Subject to exceptions as stated in the
Sub-Clause. d) S/Cl 13.3: Procedures for the Engineer to value the Variation. The
Engineer may have asked for and accepted a proposal, or he proceeds as Clause 12.

NEW RATES

QUESTION
In a civil marine work contract of FIDIC conditions, disputes quite often occurs on fixing
of revision of rates. though clauses 51 and 52 of Fourth Edition - Red Book - clearly
provide causes for variation and valuation of rates, ambiguity still persists with respect to
adoption of revised rates for varied quantities only or for full quantity executed as long
asthere are no major changes in deployment of workmen, equipment and materials.
Leaving the decision to engineer may not give an appropriate solution as persons holding
the post of engineer may have different views and their decisions may not exactly match
with the views of FIDIC authors. Please clarify the situations when revised rates are
applicable for the entire quantity or for increased quantities only.

ANSWER

The decision whether a new rate applies to the total quantity of an item, or just to the
Variation quantity, will depend on the reason why a new rate is necessary. This may
depend on the reason and details of the change to the Contractor's cost. Sometimes the
original quantity will already have been executed and paid at the BQ rate, before the
Variation is ordered. However, sometimes the fact of the quantity being changed by the
Variation will change the circumstances and costs and makes it reasonable to pay the total
quantity at the new rate. The new rate may differ if it is being applied to the total quantity
or just to the Variation quantity. The Engineer will, of course, take all these factors into
account when calculating a new rate. You should also refer to the commentary on Clauses
51 and 52 in the FIDIC Guide to the Fourth Edition. The commentary emphasises the
importance of consultation with both the parties.

APPENDIX TO TENDER DATA MISSING

QUESTION

A contract was signed under the FIDIC Conditions of Contract which require that indices
for the skilled and unskilled labour should be filled by the Contractor in the relevant
Appendix while submitting the tender. This requirement including the source of the
indices was however not fulfilled by the Contractor. This fact was noted but employer
failed to get this requirement met and the contract was signed without this information.
The dispute arose when the contractor submitted escalation claim due change in prices of
the labour component according to relevant provision. The contractor insists the use
source indices issued by the local government for calculation of adjustment which is near
the place of the construction and because this condition is more profitable to contractor.
The Client insists that he will use the indices issues by a government office which are
normally used in government contracts. I am the Arbitrator in one such case and need
advice of FIDIC what will be the judicious coarse of action in this scenario. I however feel
that entire responsibility of not providing this information cannot be placed on the
Contractor and the Employer should have insured that Contractor provide this
information before signing of the contract. omission was made and the contract was signed
without this information (source of indices). I will be anxiously waiting for advice from
your expert what reasonable coarse of action should be adapted in this dispute resolution
as the Contractor has gone in dispute on this issue.

ANSWER

It seems that the Contractor made a mistake by not adding the information to the
Appendix to Tender. The Employer then accepted the Tender and the Parties signed a
Contract which included the mistake. Unfortunately you say that they cannot agree on the
information which should be added to the Appendix to Tender. To correct the mistake
requires a change to the signed Contract to add this information. Correcting a mistake in a
Contract is a legal question which must be studied under the applicable law. FIDIC cannot
comment on such legal questions.

ENGINEER'S DECISION

QUESTION

Our firm has a contract for consulting services with the Government of El Salvador for the
construction of major transportation infrastructure in the country. The project is divided
into three packages that are governed by FIDIC Conditions of Contract for Works of Civil
Engineering (Red book, 4th Ed. 1987). The construction of the first package of project,
which included two 400-meter bridges over the most important river in El Salvador, was
completed last April.The Contractor is a Joint Venture of firms that is now claiming
additional payments based on the contract documents. In order to have a clear
interpretation of the documents, we would like to clarify the following: Clause 67.1
Engineer's Decision - we would like to confirm if under this Clause the Contractor can
claim for matters that happened during the construction period, even after the Take-Over
Certificate has been issued and the Statement at Completion has been certified and paid.

ANSWER

Regarding Clause 67.1: if the Contractor is dissatisfied with an Engineer's evaluation of a

claim under Clause 53, he may refer the matter at any time (before or after completion) to
the Engineer under Clause 67.1 for an "Engineer's Decision". He can do this any time up
to his Final Statement and there is no time limit. The Engineer then has 84 days to
respond. The Contractor cannot submit a "new'" claim for normal determination under
this clause. The claim must first be processed under Clause 53, and only when a Clause 53
determination has been given which the Contractor finds to be unacceptable do we have a
"dispute" situation which can be handled under Clause 67.1.

CALCULATION OF CLAIMS

QUESTION

I would like to know if you can help me find information regarding the procedure and
calculation of claims (of any kind) arising out of a Civil Engineering Construction
contract.

ANSWER

FIDIC publishes guides to each of its forms of construction contract, which may provide
the guidance you require on the procedures for claims. You would need to order the Guide
for the use of whatever Conditions you are using. If your enquiry relates to October 2000.
FIDIC's guides do not elaborate on the calculation of claims, so you might need to consult
other publications. Personally, I am only aware of "Building and Civil Engineering Claims
in Perspective" by Geoffrey Arthur Hughes, which was first published by Longman in
1983. It may have been republished and fulfil your needs.

NOT IN PRE-HANDOVER LIST

QUESTION

I have the following problem and I can not find a solution in the FIDIC Red Book Fourth
Edition 1887. The problem is as follows: we have made a contract with a pre-hand over list
made, with the Engineer, in April 2000. A new contract, given to another company in the
same building was given in May 2000, it was an obligation for me to give the keys of the
building. As the Engineer is in Zimbabwe and the Building is in Burundi, no engineer was
there for the hand over of the inside of the building. Now, the Engineer asks us to repair
some things which were not on the pre-hand over list. Can you please tell me what I have
to do.

ANSWER

FIDIC does not undertake to proffer advice relating to every situation which may arise
under a FIDIC-based contract. However, it appears that the answer to your question
depends upon whether a Taking Over Certificate has been issued. If so, the pre-hand over
list presumably advised you of the work described in Sub-Clause 49.2(a), and the Engineer
has asked you to repair some things as described in Sub-Clause 49.2(b). If not, the
Engineer may be "specifying all the work which ... is required to be done ... before the
issue of such Certificate" under Sub-Clause 48.1. In either case, you have not indicated any
reason for not complying with the Engineer's instructions.

ADDITIONAL PAYMENTS

QUESTION

Our firm has a contract for consulting services with the Government of El Salvador for the
construction of major transportation infrastructure in the country. The project is divided
into three packages that are governed by FIDIC Conditions of Contract for Works of Civil
Engineering (Red book, 4th Ed. 1987). The construction of the first package of project,
which included two 400-meter bridges over the most important river in El Salvador, was
completed last April.The Contractor is a Joint Venture of firms that is now claiming
additional payments based on the contract documents. In order to have a clear
interpretation of the documents, we would like to clarify the following: Clause 53.1 Notice
of Claims - it is important to confirm if the Contractor can invoke this Clause to claim for
additional payment owing to construction works that were performed before the Take-
Over Certificate, once this Certificate has been issued. In other words, if the Contractor
can claim for matters that happened during the construction period even after the Take-
Over Certificate has been issued.

ANSWER

Regarding the application of Clause 53.1. This clause requires the Contractor to give
Notice of a potential claim within 28 days of the event occurring. This establishes his right
to claim and he should then proceed to substantiate the claim according to Clause 53.3. He
can claim at any time - before or after Taking-over - if events occur (before or after taking-
over) which he considers entitle him to claim. The intention of Clause 53.1 is to try to make
sure claims are dealt with as and when they occur so that everyone is familiar with the
circumstances (thus the 28 day provision) - and not to leave them to the end - when people
have probably forgotten all the details. If he did this within the time limits, then the claim
should be evaluated according to the Contractor's submissions. If he did not - as would
appear to be the case - and has come in with a claim a considerable time after the event,
then we would suggest that you have two courses of action. Firstly you should perhaps try
to establish why he did not give notice within the 28 days. Either you can reject his claim
on the ground that he did not submit it within 28 days as required by Clause 53.1, or,
under Clause 53.4 you can make an assessment based on records which were kept at the
time. Normally I would suggest it depends on the circumstances. If the claim appears to be
frivolous and confused with no substantiation (possibly an event you knew nothing about)
you may well decide to reject it. But if it concerns an event of which you were aware which
you knew had disrupted the Contractor, then maybe you could consider it under Clause
53.4.

NEW RATES FOR REMEASUREMENT

QUESTION

I have a question regarding adoption of FIDIC Red Book Fourth Edition reprinted 1992.
The particular Contract contains Clause 51/52 "Variations" and also contains Clause 56
"Works to be Measured" and has BOQ. Design and Construct Services for Electrical and
Mechanical were tendered as diagramatic designs and are to be developed to the Approval
of Engineer as part of obligations under the Contract and have various BOQ items. This
Design Development for Mechanical/Electrical services is his obligation under the
Contract, and in this way would not seem to qualify as a Variation to the Contract.
However new items to the original BOQ have been necessitated by DD. Under which
Clause can new rates be established for the re-measure of these Works?

ANSWER

The Conditions of Contract for Works of Civil Engineering Construction (1992) do not
contain express provision for new rates being established for the re-measurement of non-
varied Contractor-design works, where new items to the original BoQ have been
necessitated by Design Development. Typically, Contractor-design works are priced on a
lump-sum basis, and are not subject to re-measurement after Design Development, so such
express provision would be inappropriate in the Conditions of Contract which FIDIC
intended to be suitable for Employer-design works.

TERMINATION BEFORE COMPLETION

QUESTION

Has Employer got an authority according to FIDIC to terminate the contract of Engineer
before completion of project and appoint another engineering company or continue with
its own resources? I know that that Employer cannot do this according to Red Book FIDIC
Clause 1.1 Definitions by referring to Part II of the contract. What should we do as a
contractor at this stage?

ANSWER

You appear to understand FIDIC's provisions, as summarised at the top of page 41 of the
Red Book Guide: "It should be noted that ... the effect of ... [1.1(a)(iv)] is to prevent the
Employer from changing the Engineer without the consent of the Contractor." In effect,
provided the legal person defined as "Engineer" continues to exist, such legal person
continues to be the Engineer for the purposes of the Contract, and the Employer has no
power to name someone else as Engineer. By "continues to exist", we mean does not (as a
natural person) die, or is not (as a company) dissolved. FIDIC cannot give specific advice
in respect to the actions a party should take, and only undertakes to clarify aspects of its
own provisions. You do not seem to need such clarification, but may need to obtain advice
from a lawyer with expert knowledge of construction law.

There is always a possibility that some aspect of the situation (which you have not
mentioned) would entitle the Employer to replace the Engineer under the law governing
the Contract. For FIDIC, it seems that you should first decide whether the replacement
"Engineer" is acceptable as such because, if not, you could inform the Employer
accordingly and seek to resolve the matter before it escalates into a major dispute.

EMPLOYER REPLACES THE CONTRACTOR

QUESTION

Regarding the correct application of the Red Book Contract, the Employer in compliance
with sub-clause 63.1, after giving written notice to the Contractor upon his contravention
of provision in sub-clause 4.1, enetered upon the site and the works, and terminated the
employment of the Contractor. The Employer wants to employ another Contractor, which
took second place in the initial, public tender, to complete the works. The further
procedure will be in compliance with sub-clauses 63.2, 63.3, 63.4 and 64.1.The questions is:
is this procedure in compliance with the General Conditions of the Red Book 4th Edition?

ANSWER

We refer to your query whether a proposed procedure complies with the fourth edition of
the General Conditions of Contract for Works of Civil Engineering Construction.

FIDIC cannot undertake to provide advice on actual circumstances, and is only prepared
to clarify and explain the meaning and purpose of the provisions it publishes in its
Conditions of Contract. In the case of serious matters such as termination, legal advice
should be sought.

However, we would make the following observations, without concluding whether the
Employer is entitled to proceed as you have described. For these purposes, we start by
assuming that the Employer's termination was valid by reason of the Contractor's breach
of sub-clause 4.1. Such validity may, of course, be challenged by the Contractor.

Following a valid termination, the Employer's options on employing another contractor

would not appear to be constrained by the General Conditions, other than under Clause 63
(with which you state the further procedure will comply), although they may be
constrained by the applicable law. You mention compliance with sub-clause 63.4, which
relates to assignment of subcontracts. Applicable law may constrain the Employer's rights
in respect of subcontracts which were associated with the Contractor's breach of sub-
clause 4.1.

You mention compliance with sub-clause 64.1, which relates to urgent remedial work
which the Contractor is unwilling or unable to do, prior to termination. After termination,
his previous unwillingness or inability would not seem to entitle the Employer to invoke
sub-clause 64.1. As regards employing a contractor which took "second place ... in the
initial public tender", this is not a matter to be decided by the General Conditions of the
Contract under which the termination was effected. The choice of replacement contractor
is a matter to be decided by the law relevant to the procurement procedures and any
constraints imposed by those providing funds for the project.

DELAYED PAYMENT

QUESTION

I am an Architect registered with the RIBA in the UK since 1978 and the UAE Authorities
in Abu Dhabi, UAE since 1981.

I have recently been Engineer under a FIDIC Red Book 4th Edition Building Contract
between a UAE Government Agency and a local Contractor, and Employer's
Representative/Adviser under a FIDIC Design and Build Contract, same Employer but
different Contractor.

Clauses of Particular Application have been prepared by a third party advising the
Employer direct in both cases, but largely ignored, the Employer paying late throughout,
not paying the final Interim Certificates on Taking Over the Works in either case,
threatening the imposition of Penalties by ignoring and/or rejecting the cases for
Extensions of Time in both cases, and not paying at all until forced agreement to reduced
amounts has been accepted by the Contractors through barter.

As you may know, there is very limited recourse to the law here, especially for foreigners.
Both Contractors are likely to weigh the costs of Courts and further Delay against the
benefit of any payment at all; one has already given in, but the other is still fighting, or
perhaps more realistically, negotiating.

What should I do, please: indeed, is there anything that can be done ? This is the worst
case of abuse of Contract I have come across in more than 20 years here, though the
amounts are relatively small.

ANSWER

Whilst we can sympathise with the situation described in the question, there is not a lot
FIDIC can recommend or that he can do as Engineer in this case.

The situation described is, unfortunately, not all that uncommon in some Middle East
countries and the ultimate decision of what to do lies with the Contractor. If he feels the
situation warrants extreme measures, then he can terminate under Clause 69.1 (unless of
course 69.1 has been changed - as it very often is in these countries). Otherwise there is not
a lot you can do.

Being fair and impartial the Engineer could (and perhaps should) write to the Employer
reminding him of the terms of the Contract - but he will probably bring down the wrath of
the Employer on his shoulders, and that may not help anybody.

You should perhaps also bear in mind that Contractors who choose to work in these
countries are usually (or should be) rather familiar with this situation and may well have
allowed something in their price to cover this sort of thing - especially, as the person asking
the question says, the amount is not very large.

EXPIRY OF DEFECTS LIABILITY PERIOD

QUESTION

For the Red Book, can the Engineer issue instructions under Clause 13.1 after the expiry of
the Defects Liability Period ?

ANSWER

After the Defects Liability Period expires, the Engineer may issue instructions under
Clause 49, and cannot rely upon Clause 13 as authority to issue other instructions.

PERFORMANCE SECURITY

QUESTION

Please inform us about the validity of the performance security if the duration of the
contract is 90 days.

ANSWER

These principles would probably apply whichever FIDIC document is being used.

PRIORITY OF TENDER DOCUMENTS

QUESTION

The question refers to FIDIC Conditions of Contract for Works of Civil Engineering
Construction (4th Edition 1987, reprinted 1988 with editorial amendments, reprinted 1992
with further amendments). I am an employer who is negotiating with the contractor now. I
have a trouble in using the FIDIC conditions, and ask for your help urgently. Sub-Clause
1.1 (b)(v) "Tender" means the Contractor's priced offer to the Employer for the execution
and completion of the Works and the remedying of any defects therein in accordance with
the provision of the Contract, as accepted by the Letter of Acceptance." And Sub-Clause
5.2 specifies the priority of the contract document, of which the Tender is listed as third.
Are those two "Tender" have the same meaning? Can we explain that the Tender only
refer to the document entitled letter of tender (maybe 1 or 2 pages, very short and simple
anyway), or all the documents submitted by the Contractor along with the letter of tender
as response upon the Bidding Document (a lot of documents, such as appendix to tender,
priced BOQ, technical proposal, evidence for construction experience and financial
capacity)?

ANSWER

The Tender at Sub-Clauses 1.1(b)(v) and 5.2(3) means the form of Tender which is given at
the end of Part 1 of the Red Book. The form of Tender, at paragraph 2, confirms that the
Appendix to Tender forms part of the Tender and Sub-Clause 1.1(b)(iv) confirms that the
priced bill of quantities forms part of the Tender. If the Employer requires other
documents to be included in the Contract as part of the Tender then he must state this
clearly in the Instructions to Tenderers and in the form of Tender.
OBTAINING CONTRACT DATA
QUESTION
Sub-Clause 11.1 tell us that the hired contracting party is responsible for the data
contained in his proposal based on the data supplied by the Contractor. Could you please
tell me how I can obtain the data?
ANSWER
The Contractor must have based his tender on information: 1) which was provided to all
tenderers by the Employer from the investigations which had been carried out by the
Employer; 2) which the Contractor obtained from his own inspection and examination of
the Site and its surroundings. Where the Contractor obtained this information will depend
on the circumstances but he must have satisfied himself that his tender was correct and
sufficient to meet his obligations under the Contract.
INTERIM CERTIFICATES
QUESTION
Sub-Clause 60.4 stipulates that the Engineer may correct any error in an interim
certificate in subsequent certificates. Are there any limitations in the application of this
provision?
ANSWER
You are referring to Sub-Clause 60.4 of the 1987 Contract for Civil Engineering Works.
There is a similar provision at Sub-Clause 14.6 of the 1999 Contracts. The Contract does
not put any limitation on this provision. However, under Sub-Clause 60.2 the Engineer has
previously certified the amount which he considered to be due and payable. If he has now
found an error and changed his mind he should explain the reasons for the change.
REFIXING OF RATE
QUESTION
I am interested in application of Clause 52.2 (Power of the Engineer to fix Rate). If
circumstances allow a refixing of rate, would it apply to the varied
quantity(increased/decreased) or to the entire quantity, i.e., quantities in the bid plus
increase/decrease?
ANSWER
You are referring to the 4th Edition 1987 of the Contract for Works of Civil Engineering,
Sub-Clause 51.1 (a) allows the Engineer to issue an instruction to increase or decrease the
quantity of any work included in the Contract. The rate which the Engineer agrees or fixes
under Sub-Clause 52.2 would only apply to the varied quantity (increased or decreased).
The original quantity is not part of the Variation and would be paid at the original rate.
RECOVERY OF COSTS
QUESTION
Working with 1987, 4th Edition, reprinted in 1992 FIDIC form of contract on a project
where Clause 70, whist being modified does permit the recovery of changes in the prices of
labour and materials. Are there any legal precidents which reflect the provision reflected
in the 1999 form of contract to allow the recovery of costs, post the stated contract
completion where the contractor has failed to complete the works in the specified time? Or
are there any precidents to reflect the recovery of costs per sec, post the contract
completion date? If there are any precidents, if there are in electronic, format, could you
forward them or, advise where they could be obtained.
ANSWER
FIDIC is unable to provide legal guidance or information on legal precedents. However, to
be helpful, the federation has asked an expert to comment so that your future research can
guided in the approriate direction. You are correct that the 1987 4th Edition does not
include specific provision for the recovery of price changes after the contract completion
date when the Contractor has failed to complete the work in the specified time. Alternative
clauses can be found in the FIDIC Guide to the 4th Edition and in the 1999 Contracts. The
problem with legal precedents is that no two dispute situations are ever exactly the same
and so need legal advice. Guidance and summaries of some arbitration awards can be
found in the international legal journals, newsletters from law firms and the publications
of the international arbitration centres such as the ICC Paris, the London Court of
International Arbitration and other centres in different parts of the world.

ENGINEER'S INSTRUCTIONS

QUESTION

A FIDIC standard Contract for civil engineering (Red Book 4th Edition 1987) is basis of a
Contract for a Wharf and Approach Bridge Construction and Causeway Reclamation
project (The Contrac•). The Contract is a Lumpsum Agreement and the BOQ refers as
follows: All works in this section except Provisional Quantities will be paid for as
LumpSums. Quantities are estimates only. If the Contractor wishes, additional items may
be added to the Bill or quantities amended. Rates nominated will be used only to assess
variations (if any) to the Contract and to assess progress claims and payments. Provisional
Quantities and Items will be paid for as described in the Conditions of Contract. One of
the BoQ item was pertaining to Crane Rails to be provided by the Contractor. Later the
Company organized the Rails on their own and the Contractor is not required to provide
the Crane Rails as per the BoQ. In view of this the Crane Rail related Amount as stated in
the BoQ is proposed to be deducted out of the BoQ. Please confirm that this is proper
approach under Article 51 and 52 or any other conditions of FIDIC standard contract.

ANSWER

Under a FIDIC Contract, any change to add or omit work must be made by an instruction
from the Engineer under the appropriate sub-clause. You mention Sub-Clauses 51 and 52,
which are from the 1987 4th Edition of the Contract for Civil Engineering Works. Sub-
Clause 51.1, item (b) allows the Engineer to issue instructions to omit work, but this is
qualified by the statement in brackets "(but not if the omitted work is to be carried out by
the Employer or by another contractor)". Your proposal for the crane rails would appear
to contravene this requirement. Hence the change and price adjustment may need to be
negotiated between the Parties and would probably involve legal advice.

VARIATIONS EXCEEDING 15 PERCENT OF THE EFFECTIVE CONTRACT

SUM (CLAUSE 52.3)

QUESTION

We are in the process of preparing a claim under Clause 52.3 of the FIDIC Conditions of
Contract for Works of Civil Engineering Construction and are seeking clarification on the
application of the clause especially as regards to which amount do we apply the percentage
which is in excess of the 15%. Do we apply it to: - The effective contract sum; or, - The
difference between the amounts calculated using the actual percentage by which the
effective contract sum shall have been exceed by and the 15%. Please note that In this
particular contract, the majority of Preliminary and General Items were stated as
provisional sums (as stated in the Bill of Quantities by the Engineer) it is not easy for us to
accurately determine the contractor's on-costs. We have since acquired a copy of the
"Guide to the Use of Fidlic Conditions of Contract for Works of Civil Engineering
Construction" and the explanation given does not adequately cover us, refer page 117 of
the guide. Please advise us on how this clause is to be applied.

ANSWER

The precise problem is not clear and we can only comment in general terms on the
interpretation of Sub-Clause 52.3. The Sub-Clause allows the Contractor and Engineer to
discuss and agree a lump sum addition or deduction to the Contract Price when the
additions/deductions as described at (a) and (b) are more than 15% of the "Effective
Contract Price". It will be up to the Contractor to prove the changes to his Site and
general overhead costs. The details and calculation of the lump sum will dependant on the
reasons for the increase or decrease to the Contract Price.

UNIT RATES

QUESTION

1. The following addition has been made in Clause 52.2 (FIDIC 1987, Contract for Works
of Civil Engineering) in our contract by the Employer: "..Provided further that no change
in the Unit Rates or prices quoted shall be considered for any item in the Schedules to the
Bill of Quantities, unless such item individually accounts for an amount of more than 2
percent of the sum named in the Letter of Acceptance, and the original billed quantity by
more than 30 percent. Not withstanding above, for variation exceeding 10% in quantity of
any item of BOQ with respect to original BOQ quantities, the following shall apply to the
unit rate of that item: a) For rates quoted below CSR 2000 rates, no change in quoted unit
rate shall be allowed. b) For rates quoted above CSR 2000 rates, the quantity exceeding
10% from original BOQ quantity of the items shall be paid to the contractor as per NHA
CSR 2000 rates applicable in the relevant district. Provided further that for non BOQ
items appearing in NHA’s CSR 2000, CSR 2000 rates shall apply whereas the rates of non
CSR & non BOQ items shall be determined by the Engineer as stipulated in General
Conditions of Contract." 2. The Situation BOQ Item No.108b(i) Formation of
embankment from roadway excavation in Rock material (Hard Rock) and BOQ Item No.
106d(i) Excavate Surplus Rock material (Hard Rock) has increased up to 453 % and 77.8
% respectively from the Original Billed Quantity and these Items are individually
accounting for more than 2.55% and 4.99 % respectively of the sum named in the Letter of
Acceptance. Therefore, we desire to request the Employer/The Engineer that the Unit
Rates for the said items as quoted in the BOQ for the entire quantity be changed and till
the time new rates are fixed, the provisional rates or prices be determined in accordance
with CSR-2005 with 25% Premium to enable on-account payment. 3.Questions a) Will the
revision of rates be based on composite schedule of rates – 2005 (CSR- 2005) with 25%
premium as requested by us? b) Are “sub- paragraphs a and b of the addition made in the
said clause” (refer to para 1 above ) applicable to us as we consider that the said sub
paragraphs are not relevant to us because our variation is over 30%. c) Will Revised Rates
be applicable to the entire quantity or only on varied quantity? d) With so much variation,
is it alright to ask for determination of Provisional rates?

ANSWER

As a general principle, FIDIC expressly prohibits users of its contracts to add and adjust
Clauses in the General Conditions. Any adjustments and changes should be made in the
Particular Conditions. However, since your Organization may not be responsible for
misuse and breach of copyright we shall attempt to help you. But here again, FIDIC is able
to offer advice on interpreation of clauses, but of course only on the clause of the contracts
General Conditions, not on someone else's clauses. This said, once again, we shall try to be
helpful on the understanding that in future you try to impress on clients that they should
use the GCs correctly, and not risk legal action and contract invalidity owing to breach of
copyright. The changes to the GC mean that the interpretation of the FIDIC Sub-clause
52.2 may not be relevant to the amended contract. However the following may be helpful.
a) Impossible to answer because of the changes to the GC. b) Impossible to answer because
of the changes to the GC. c) Revised rates are normally only applicable to the additional
quantity but this depends on the circumstances and the make up of the revised rates. In
determining revised rates the Engineer should take all factors into consideration. d) The
Contractor is entitled to be paid for work done in accordance with Sub-Clause 60.2. If the
revised rates cannot be agreed in time for the next Interim Payment Certificate then the
Engineer should determine provisional rates as the last sentence of the first paragraph of
Sub-Clause 52.2. If the final rate is different to this provisional rate then Interim Payment
Certificates can be corrected as Sub-Clause 60.4.

ADDITIONAL SUM FOR REPLACEMENT COST

QUESTION

We are requesting a clarification of the intention of Clause 21.1 (b) Insurance of Works
and Contractor's Equipment of the FIDIC Civil Engineering Construction 1987 (4th
Edition) Part1. There appears to be a mixed Insurance market view as to whether the
additional sum of "15% of such replacement cost" for Professional Fees, Demolition and
Removal of Debris applies to: (1) each of these costs individually, or (2) as a combined
amount, and (3) whether this amount should be applied as a percentage of loss or a
percentage of the sum insured (contract value). Our Contractors are keen to have
clarification.

ANSWER

The wording of Sub-Clause 21.1 (b) should be clear. The insurance shall cover the full
replacement cost as (a), plus an additional 15% of that figure. This additional 15% is to
cover any additional and incidental costs, INCLUDING professional fees etc. This figure
may be changed in the Particular Conditions and you should also refer to the FIDIC Guide
to the 4th Edition, at page 72.

EXCESS QUANTITIES OF WORK (SUB-CLAUSE 52.3)

QUESTION

I am "The Engineer" of Project and have recommended re-rating of certain items of work
under the provisions of Clauses 52.2 of the Contract. I have however failed to understand
from the given provision is that: a) The Engineer shall evaluate at the time of Taking Over,
if the Contract Cost has increased or decreased (±) 15% of the original cost of contract, as
a result of: i) all work executed & measured is in excess of BOQ qualities. b) Then the
Engineer shall determine such further "Sum" that may be added or deducted from the
contract price, taking into regard the Contractor's site and general overhead costs of the
Contract based upon only the amount by which such additions/deductions will be in excess
of 15% of the Effective Contract price. In my opinion the Excess quantities of work have
been taken care of by re-rating under Clause 52.2 and no further Sum may be added to the
Contract. Does the Clause 52.3 intend to apply the re-rating on quantities that are more
than 15%of the BOQ quantities thus re-rated. I quote an example: let us assume the cost of
Contract as USD 100000. A BOQ item costing USD 20000 is increased to value USD 50000
at contract rates. Hence re-rating under Clause 52.2 becomes applicable. On re-rating the
value of (original + increased) qty of work becomes USD 55000. Now the total value of
contract, i.e., USD 55000. The value of work beyond 15% of contract price is $ 40,000. Is
the Contractor entitled to additional premium under Clause 52.3 for Executing work
beyond 15% of Contract price. Is this what is meant by the provision of the Clause 52.3?

ANSWER

Clause 52.2 refers to the re-rating of an individual variation. Clause 52.3 refers to the
situation when the total effect of all variations, plus the remeasurement of the approximate
quantities in the BoQ results in an increase or decrease of more than 15%. It is possible
that each individual variation did not have a significant effect on the Contractor's
overheads but the total effect of all variations and the remeasurement was significant. It is
necessary to consider the actual effect of the additional quantities on the Contractor's
overheads. For example, part of the allowance for overheads may be a fixed, or lump sum,
figure which is not related to the quantity of work which has been carried out. A
substantial increase in the total quantity of work may not increase this part of the
overheads. Hence, the overheads per unit quantity would decrease. The allowance for
overheads in the rates would need to be reconsidered. Any re-rating under Clause 52.2
would be taken into account when considering Clause 52.3. The Guide to the Fourth
Edition published by FIDIC gives useful guidance and examples at pages 115 and 117.

FREE HAULAGE

QUESTION

My inquiry is: are their any guidlines for maximum FREE HAULAGE distance ... for the
TERM BORROW materials to be engaged in EMBANKMENT CONSTRUCTION ....
sinilarly....what free distance limits are set/provided in FIDIC for any transportation of
material .... from BORROW, from the site of e.g., asphalt mixing or concrete mixing plant
to the site of accomodating the finished product in the road construction projects.

ANSWER

The FIDIC Conditions of Contract give the legal rights and obligations of the Parties to the
Contract. Matters such as the maximum free haulage distance will depend on the
requirements and details of the project. They will vary for different projects and should be
given in the technical specifications and/or bills of quantities.
ENFORCING A CLAIM

QUESTION

I am requesting an interpretation of Clause 63.2 and 63.3 of the FIDIC Red Book, 4th
Edition. a) When a Contractor has sums due to it arising out of a valuation under Clause
63.2 at the time of termination, and the Employer/ Engineer delays certification of possible
claims under Clause 63.3, how does FIDIC envisage that the terminated Contractor may
enforce its claim/obtain those sums certified by the Engineer as being due to it? b) Once a
new contractor has been engaged, is the date scheduled for completion under the new
contract relevant, and when is the new contractor liable for further delays to the
completion date? c) Is there a duty on the Employer or Engineer to inform the first
Contractor that the project has been completed? When the defects liability period is over?
d) Is there a duty on the Employer/Engineer to issue a certificate in accordance with
Clause 63.3 within a reasonable time? What may be considered a reasonable period for
issuing such a certificate? e) What are the possibilities for a Contractor to obtain the
monies due under Clause 63.2 if the Engineer fails to issue a certificate under Clause 63.3.?

ANSWER

This is really a legal question, but the key seems to be that the first sentence of Clause 67.1
says that it continues after termination. A few additional comments may be helpful. One
assumes the enquiry is referring to the Fourth Edition, amended 1992, without any
significant amendments. Matters arising from termination under Clause 63.1 will depend
on the provisions of the applicable law as well as FIDIC Contract Clauses. Most legal
systems include requirements for the termination of a contract and also contain provisions
based on the concept of "good faith" which may be applicable. Any comments based on
the FIDIC Contract must be reviewed in relation to the applicable law, but some general
comments may be helpful. a) Clause 67.1, first sentence, says that it continues after
termination. b) Clause 63.1 enables the Employer to "terminate the employment of the
Contractor". The Clause is clear that this does not release the Contractor from any of his
obligations or liabilities. So does the law require that the Employer also is not released
from his obligations? If so then other Clauses will also be relevant. c) The new contractor
is presumably liable for delays which he causes and which are not attributable to the
previous contractor. d) Clause 1.5, final sentence, requires that any consent, approval,
certificate or determination shall not unreasonably be withheld or delayed. e) Clauses 60.6
and 60.8 give time periods for the Contractor's Final Statement and the Engineer's Final
Payment Certificate. Clause 63.3 requires the Engineer to issue a certificate, without
stating a time period. By reference to Clause 1.5, this must be issued in a reasonable time.
Reasonable might be based on the Clause 60.6 and 60.8 time periods unless there are
special circumstances. f) It certainly seems necessary for the Contractor to be informed, or
his questions to be answered, in order that he knows when the construction and Defects
Liability Periods are completed. g) The Contractor's rights and procedures for obtaining
payment are covered by Clause 67 and the applicable law.

NEW RATE OR PRICE

QUESTION

We are a consulting firm providing Contract Administration Services to Contractors in

Pakistan. While seeking assistance from the FIDIC website FAQ Section, we have come
across the advice upon Sub-Clause 52.2 of Red Book 4th Edtion Conditions of Contract
Part II stating therein that: the rate which the Engineer agrees or fixes under Sub-Clause
52.2 would only apply to the varied quantity (increased or decreased). The original
quantity is not part of the Variation and would be paid at the original rate. The rationale
being used in construing the Sub-Clause 52.2 in terms that the Revised Rates under Sub-
Clause 52.2 will be applied to the varied quantity only has created much confusion in some
of the on-going projects with the National Highway Authority, Pakistan. As per the advice
of FIDIC Secretariat FAQ Section, if for instance, a Contractor's original BOQ work
increases from 100m3 to 140m3 , then he shall be paid for 100m3 as per original rates and
for the remaining 40m3, revised rates shall be applicable. If we apply the same logic in a
case where the Contractor's original BOQ work decreases from 100m3 to 60m3, then he
shall be paid for 100m3 as per original quantity of work. Whereas, for the decreased
quantity, he should be paid at the revised rates (although he shall be actually executing
60m3 work.). The same is true for the case when total executed quantity exceeds by more
than 30% and the new rate shall be applicable to the total executed quantity. The same
Clause cannot be construed differently. If this does not happen, then it shall cause
prejudice to the interest of the Contractor.

ANSWER

Under Sub-Clause 52.2, the Engineer only fixes a new rate or price when the BOQ rate or
price has become inappropriate or inapplicable for a particular Variation. In fixing the
new rate or price he will consider the reasons why the original rate or price should be
changed. He will not fix a new rate or price until he knows whether it involves an increase
or decrease in quantity. The new rate or price will probably be different for a decrease to
that for an increase. It may be different for a large increase to a small increase. The
anomalies which you mention should not occur because the Engineer will have considered
these situations before he fixes the new rate or price.

NEW BOQ RATES

QUESTION

A contract was drawn up for a specific length of highway. Re-alignment was required
which increased the length by a few kilometers. Should this additional work be included in
a variation order as per Clause 51 or should a seperate contract be floated. The contractor
is asking for single variation order with two different refixed rates (for the same item of
BoQ ), one for the variation in the original work and second for the additional work. I
differ with his views. I feel that if one variation order is considered for the whole work
then only only one refixed rate for varied quantity can be given. I require your advice on
this issue.

ANSWER

If both the change to the original work and the additional work came from the same
change of requirement and instruction then it would be usual to issue a single variation
order. However, it is also quite normal for the price calculations for a variation order to
include different rates for the same BoQ item. The contractor's costs and the reasons why
the BoQ rates are inappropriate may be different for the varied work and for the
additional work. It is then fairer and more transparent, to the benefit of both parties, to
negotiate different new rates.
NEW VARIATION ORDER

QUESTION

A contract was drawn for a specific length of highway. Re-alignment was required which
increased the length by few kilometers.should this additional work be included in a
variation order as per Clause 51 or should a seperate contract be floated. The contractor is
asking for single variation order with two different refixed rates (for same item of
BoQ),one for the variation in the original work and second for the additional work. I differ
with his views. I feel that if one variation order is considered for the whole work then only
only one refixed rate for varied quantity can be given.irequire your advice on this issue.

ANSWER

If both the change to the original work and the additional work came from the same
change of requirement and instruction then it would be usual to issue a single variation
order. However, it is also quite normal for the price calculations for a variation order to
include different rates for the same BoQ item. The contractor's costs and the reasons why
the BoQ rates are inappropriate may be different for the varied work and for the
additional work. It is then fairer and more transparent, to the benefit of both parties, to
negotiate different new rates.

INSTRUCTIONS TO VARY THE WORKS

QUESTION

We are executing a construction works project (18-floor tower), now there is an addition of
two more floors. I would like to know ... this addition would be dealt as a variation or
separate contract required, where we will have the liberty to revise the price, since this two
floor's addition is less than the 25 percent of the contract value, hence we dont have right
to increase the price, incease if we deal it by variation. please clarify.

ANSWER

Clause 51.1 allows the Engineer to issue instructions to vary the Works. Your question is
whether the additional two floors are just a change to the quantity of the work which is
included in the Contract, as Clause 51.1(a), or are outside the scope of the Works, which
should be defined in the Contract. The answer to your question therefore depends on the
exact wording of the Contract Agreement, the other contract documents and perhaps also
the Tender Documents. It will also depend on the interpretation of this wording in
accordance with the applicable law. This is not something which FIDIC can answer and
you should obtain specialist advice.

FIXING OF A NEW RATE (RED4: 52.2)

QUESTION

We requested for the clarification regarding replies to a couple of questions which appear
at the FAQ Section of FIDIC website. Reply to the first question illustrates that under Sub
Clause 52.2, Engineer may fix a new rate or a price if the BOQ rate becomes inappropriate
or inapplicable for a particular variation, keeping in view the reasons for the change. In
reply to the second question, FIDIC says that the original quantity is not a part of the
variation and cannot be paid at the revised rate. Replies to the questions as noted above
are contradictory to each other and we think that the matter should further be clarified.
Our elaborate note, which was submitted to this effect constitutes of our understanding of
the Clause 52.2 of the Red Book 4th Edition. The definition of the varied work trickles to
the Clause 52.2 from the Clause 51.1, which gives the definition/scope of the varied work as
following: (a) increase or decrease the quantity of any work included in the Contract, (b)
omit any such work (but not if the omitted works is to be carried out by the Employer or
by another contractor), (c) change the character or quality or kind of any such work, (d)
change the levels, lines, position and dimensions of ay part of the Works, (e) execute
additional work of any kind necessary for the completion of the Works, (f) change any
specified sequence or timing of construction of any part of the Works. The given definition
thus holds that the varied work may not essentially comprise of only the change in the
quantity of certain item included in the contract. Varied work may also arise out of the
virtue of other reasons as noted above. Hence, restricting the definition of variation only to
the change in quantity may not be appropriate. The reply given at the FIDIC website to
the first question, as has been referred above, seems to hold the same view by the virtue of
which the decision to this effect has been left to the Engineer. However, the reply to the
second question forwards rather a restrictive interpretation of the Clause 52.2 by saying
that a new rate would apply only to the increased/decreased quantity. Such an
interpretation falls in contradiction to the definition of the varied work as well as the open
ended spirit of the FIDIC Document in general and that of the Clause 52.2, read in
conjunction with the Clauses 51.1, 51.2 and 52.1 there-before, as well as that of the Clauses
52.3 and 52.4 thereafter. ..... FIDIC's initial reply: FIDIC can only comment in general
terms on the interpretation of a FIDIC clause. If you require a more detailed opinion on
the application of a clause to a particular problem situation then you should consult a
specialist. The examples in your letter illustrate the wide range of situations which may
arise on a project and result in the application of Clause 52.2. For this reason, the clause
cannot restrict the Engineer in the way he calculates a new rate. The Engineer is aware of
the exact situation and so can make the appropriate decision to suit the wording and
application of the Variation. A Variation normally, but not always, only applies to work
which has not yet been executed. If somew ork has already been carried out on the same
basis as was envisaged for the original bill rate then that work would normally be valued
at the bill rate. However a particular Variation, such as a decrease in quantity,may be
worded in such a way as to require a different approach. ........ Your reply also narrates
that our understanding of the issue falls closely to a certain project specific legal opinion.
We believe that such a concurrence on the matter has become evident only because of the
proper understanding of the rationale. This particularly holds when we also consider the
possibility of variation because of the decrease in the quantity of certain items of work. No
logic would allow that the decreased quantity which is not executed may be paid at some
revised rate fixed by the Engineer. The revised rate would certainly apply to the quantity
executed. The rationale thus demands the same treatment for fixing of the rate by the
Engineer in case of variation in the quantity of certain items of the work because of an
increase, giving an obvious reason of our understanding of the matter in line with the legal
opinion in the similar context. Your reply dated 7th June 2007 further seems to
acknowledge that the exact situation under such a case may only be determined by the
Engineer through an appropriate decision, as has been provided under the spirit of the
FIDIC Document. However, the comments thereafter, once again seem to restrict the
definition of variation. So, to continue: regarding fixing of a new rate (Red4: 52.2)
Regarding our query regarding re-rating of the varied quantity. We seek the clarification
regarding the opinion of FIDIC on re-rating of the varied quantity, as shown in the FAQ
Section of the FIDIC website. Our debate/discussion as appended with our query is only
meant to express our understanding that the Sub-Clause 52.2 only talks of the "varied
work" and not the "varied quantity", which, however, remains subservient to the
definition of "varied work". The actual intention of our query thus remains to seek the
clarification in light of the Sub-Clause 52.2 of Civil Works contract 4th Edition, 1987. To
this effect, it may be deemed appropriate that the writers of this particular clause or the
related backup material may be consulted so that the ambiguity or the confusion, as has
arisen regarding the varied work through the opinion of FIDIC in the FAQ section, may
be removed and the prestige of the organization like FIDIC, which is considered as an apex
body in contract administration, would be maintained.

ANSWER

Thank you for your more detailed explanation of your query. Our replies to previous
questions were in response to particular questions, whereas your question is rather
different. You are, of course, correct that Variations under Sub-Clause 52.1 can cover a
wide range of situations, including changes to the nature as well as to the quantity of an
item of work. For this reason, Sub-Clause 52.2 must be general to cover the wide range of
potential situations. It is then for the Engineer to assess the particular situation and to
agree or fix an appropriate rate. In deciding the quantum, and also the application, of this
rate the Engineer would take into account the consequences of a change in nature as well
as a change in quantity. You should also note the explanatory remarks in the FIDIC Guide
to the use of the FIDIC Conditions of Contract for Works of Civil Engineering
Construction. Sub-Clauses 52.1 and 52.2 are reviewed at pages 114 and 115 of the Guide
and include the statement: If the nature or amount of the work involved differs so much
from that included in the original Contract that the rates and prices are rendered
inapplicable, it is the Engineer's task to agree appropriate rates and prices with the
Contractor, or, if agreement cannot be reached, to fix the rates and prices. We trust this
further explanation will answer your query. Any further comments would require details
of the specific contract and problem, which FIDIC could not consider.

UNDUE DELAY FOR CLAIMS

QUESTION

Can you please identify what is meant by "without undue delay" under Red Book 4th
Edition clause 44.3 considering that the Contractor and the Engineer have mutually
agreed, under cl. 44.2(b), to submit detailed particulars every first week of the month and
noting that every month the contractor is submitting the same. What is the duration
needed by engineer to provide his interim/final determination of extension of time claims
under this clause?

ANSWER

Your question refers to Sub-Clause 44.3 in the Red Book, Fourth Edition 1987. Sub-Clause
44.2 has imposed time limits for the submission of information by the Contractor, which
you say have been agreed. FIDIC does not impose a time limit on the Engineer because the
actual time needed for him to make his determination will depend on the circumstances
and the details in the information provided by the Contractor. However the "without
undue delay" emphasises the need for the determination to be made as soon as possible.
Sub-Clause 1.5 also requires that any determination "shall not unreasonably be withheld
or delayed". This gives the Contractor the opportunity to raise a query if he needs the
determination in order to plan his work.
PAYMENT ON A CLAUSE 63.2 VALUATION

QUESTION

Concerning Clause 63.2 and 63.3 of the FIDIC Red Book 4th Edition . The Contract was
terminated by the Employer pursuant to Clause 63.1 (this is undisputed). It was agreed
that the additional costs to the Employer of executing the works by an alternative
contractor has to be deducted from the value of the works executed by the first
Contractor. The wording of Clauses 63.2 and 63.3 was not changed or amended.
Contractor now requests a payment from the Employer calculated pursuant to a Clause
63.2 valuation. In addition Contractor states that the whole of the Works has not
completed and, therefore, the Defects Liability Period has not expired, which is a
precedent to any certification of Employer's costs under Clause 63.3. Therefore, an
Employer's application for Clause 63.3 costs is premature, cannot be considered and
Contractor is entitled to request a payment based on the calculated Clause 63.2 valuation
without any deduction pursuant to Clause 63.3. a) Is a contractor entitled to ask for a
payment based on a Clause 63.2 valuation, since an employer is not obliged to make any
further payment until the expiration of the Defects Liability Period? b) Is it correct to
interpret that Contractor's request for payment based on Clause 63.2 is not (currently)
justified also in cases, where a completion of the project was delayed due to circumstances
caused by an alternative contractor or the employer, if the terminated and requesting
Contractor itself has formally and explicit pleaded that the whole project is not completed
without complaining the delay of completing the project caused by the alternative
contractor or the employer? c) Can the Contractor simultaneously refer to and request a
Clause 63.2 calculated claim and reject (alleged) unmatured Employer's Clause 63.3 costs,
if both clauses were agreed?

ANSWER

This is a complex technical/legal question arising from a specific request by the Contractor
on your project. FIDIC can only answer general questions of interpretation and cannot
comment on specific requests or claims. The FIDIC Guide to the Fourth Edition states at
page 146 for Sub-Clause 63.3: "If the Employer terminates the Contractor's employment,
he is not liable to pay the Contractor any further amounts (including damages) until the
expiration of the Defects Liability Period and the certification by the Engineer of the cost
of execution and remedying of any defects, damages for delay in completion (if any) and
other expenses incurred by the Employer as a result of the Contractor's default."

WHEN IS PAYMENT MADE

QUESTION

We are seeking a defintion as to when payment is actually made by the employer to the
contractor. Is it when the employer issues his payment instruction to his bank, or is
payment deemed to be made once the monies are received in the contractor's bank
account. Are there FIDIC guidelines on this matter?

ANSWER

your query is really a general legal question about when a payment is "made", rather than
a question of interpretation of a FIDIC contract. The answer may be different under
different jurisdictions. You should consult a lawyer with experience of the applicable law.
STATUTORY DECLARATION

QUESTION

My firm is executing a Contract with FIDIC terms and conditions and I require a
Statutory Declaration document for international use (Project location is Madagascar).
Can you please advise where I can find this in your documentation, or better yet can you e
mail me the appropriate document.

ANSWER

Your Statutory Declaration would seem to conflict with the principles of the FIDIC
Contracts. Progress payments are referred to as 'interim', which suggests that they are
provisional and not final. EPCT Sub-Clause 14.6 allows the Employer to make corrections
or modifications to previous amounts considered due, which suggests that the Contractor
can request modifications to a previous valuation. It is only the requirement for the
Application for the Final Payment, as Sub-Clause 14.11, which uses words indicating
finality. The Contractor then confirms the finality by his Discharge, as Sub-Clause 14.12.
The equivalent provision in the 1987 Red Book was Sub-Clause 60.7. The Standard Letter
for that Sub-Clause merely repeated the wording of the Sub-Clause. However, this was a
contractual letter and not a Statutory Declaration. A Statutory Declaration will
presumably be issued by the Government and will depend on the requirements of the
applicable law, which will vary for different countries.

FINAL AND BINDING DAB DECISION

QUESTION

In the 1992 reprinted version of the 1987 FIDIC Conditions as well as in the 1999 FIDIC
Conditions it is, in the relevant DAB Clauses, stated that the Contractor, Employer and
Engineer shall give effect forewith to every decision of the Board unless and until the
decision is revised in an amicable settlement or an arbitrational award. On the other hand
it is stated that a Board decision becomes FINAL and BINDING unless either party gives a
notice of dissatisfaction within 28 days after receiving the Board decision. A very basic
legal principle is that only final and binding decisions are enforceable. Are the FIDIC
conditions really based on the very unusual principle that the Employer has, on basis of un
unbinding Board decision, to pay to the Contractor a compensation with the consequence
of running the risk of never being able to recover the paid amount from a foreign
contractor when the revised arbitration award is issued (long) after the completion of the
works. Please clarify whether the Employer has to pay a monetary compensation on basis
of a Board decision, which is NOT FINAL AND BINDING.

ANSWER

Sub-Clause 20.4 of the 1999 Contracts is clear that both parties shall promptly give effect
to the DAB Decision. The Employer must pay any sum awarded to the Contractor
although the sum to be paid may be changed by a later amicable settlement or arbitration.
If a Notice of Dissatisfaction has been issued then the dispute, not the DAB decision, may
be reopened and finally determined by the Arbitral Tribunal. The sum to be paid may
then be increased, or decreased, and additional money may need to be paid, or money may
need to be repaid. An Arbitral Award, including such further payment or repayment,
would be Final and Binding and would be covered by arbitration law and the New York
Convention. It is normal practice that a DAB or Adjudicator's Decision is Binding and so
must be paid, but is not Final and so may be changed in this way. If no Notice of
Dissatisfaction has been issued then the DAB Decision becomes Final as well as Binding
and the dispute cannot be reopened.

LUMP SUM CALCULATION

QUESTION

Can you please advise how to calculate the lump sum to be added or dedcuted to the
contract price when the effective contract price execceds 15%. In addition, please advise
on when do we deduct, and when do we add such amount.

ANSWER

Commentary at page 117 of the FIDIC Guide to the 4th Edition is recommended. The
Guide explains that some of the Contractor's overhead costs are included in the rates for
items of work and others are included in separate items in the Bill of Quantities. Changes
to the actual quantities may mean that the overhead content of items which have paid is
not appropriate to the actual overhead costs incurred by the Contractor. In order to
calculate any adjustment the Engineer will need to obtain information from the
Contractor, or would have to make his own assessment. Any calculation must take into
account any adjustment which has already been made under another Sub-Clause and only
applies to any increase or decrease in excess of 15% of the Effective Contract price. The
Sub-Clause starts with a reference to the situation "on the issue of the Taking-Over
Certificate for the whole of the Works". It is also necessary for the value of variations and
other adjustments to have been agreed in order to make the Sub-Clause 52.3 calculations.
Any additional payment or deduction would then be made in the next payment certificate
after the figures have been agreed or determined.

NEW RATE FOR AN INCREASED QUANTITY

QUESTION

I am "The Engineer" for a road construction project. A difference of opinion has arisen on
the applicability of new rates fixed by the Engineer on the quantities, i.e whether the new
rate will be applicable only on the enhanced quantity beyond the original BoQ quantity,
Oor it shall apply on the entire quantity. To explain this further, the BoQ quantity for piles
was 2000 cu m. The designer increased the number of piles so that the quantity became
3000 cu m. The Engineer fixed a new rate for pile work from X to Y. Will Y rate be
applicable to enhanced quantity of 1000 cu m , or should it apply to 3000 cu m?

ANSWER

FIDIC can only comment in general terms on the interpretation of a FIDIC clauses, and it
should be noted that for the application of a clause to a particular problem situation, one
should always consult a specialist. With that being said, in general, Sub-Clause 52.2 gives
the power to the Engineer to fix new rates and states the conditions when such new rates
may be fixed, but Sub-Clause 52.2 does not indicate a calculation method or the
applicability for new rates. The reason for this is because Sub-Clause 52.2 must allow for
covering a wide range of potential situations. So, although it is true that revised rates are
normally only applicable to the additional quantity, it is for the Engineer to assess the
particular situation and circumstances surrounding, and to take all factors into
consideration in making his determination regarding the quantum and applicability of the
new rates fixed under Sub-Clause52.2. For reference, see page 127-128 of the FIDIC Red
Book Guide to the use of the FIDIC Conditions of Contract for Works of Civil Engineering
Construction, and please note that the above represents a general answer only, and specific
advice to the particular facts surrounding your situation, we recommend that you consult
a specialist.

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CONTRACTS: ADVANCED QUESTIONS GENERAL QUESTION/ANSWER
FINAL CERTIFICATE AND DUE PAYMENT DATE
QUESTION
I need some help for the interpretation of Contract Clauses, especially for the Final
Certificate and due payment date.
ANSWER
We should point out that FIDIC is prepared to give some guidance about FIDIC contracts
if problems mainly concern interpretation of a contract document. If you seek more
detailed advice that relates to actual contracts, then we recommend you discuss the matter
with experts whom FIDIC can recommend, on the understanding that they or a colleague
would seek remuneration once you entered into detailed discussions. Essentially, you do
not seem to be requesting guidance about FIDIC contracts, and your problems do not seem
to concern the interpretation of a contract document. Rather, your question seems to be:
what do we do next? You give no details whatsoever of the form of contract, FIDIC or
otherwise. Based on the presumption that your contract incorporates FIDIC's 1992
Conditions of Contract for Works of Civil Engineering Construction, you seem to be
referring to a request for the Engineer's decision under Clause 67, following the lapse in
the Clause 60 procedures. In that case, you should be mindful of other procedures
described in Clause 67, particularly of the period within which to issue a notice of intention
to commence arbitration. If that period has already passed, you may wish to consider
taking legal advice.

Arbitration is a lengthy and expensive procedure, so you may wish to consider alternative
methods of dispute resolution, as an attempt at amicable settlement under Sub-Clause
67.2. We would be pleased to assist you in these endeavours, if appropriate commercial
arrangements can be concluded. Alternatively, an epert proposed by FIDIC could be
jointly appointed by the Contractor and Employer, either as a conciliator or as a member
of a dispute board (either the sole member or one of three members).

APPOINTING AN ENGINEER

QUESTION

Is it recommended to have in a contract based on FIDIC's Electrical and Mechanical

Works Contract an external expert acting as the Engineer? Or is there no problem in
recruiting the Engineer from amongst the Beneficiary (in our case a "public" authority)?
We are signing a contract shortly. The Engineer is according to the Red Book, Clause 2.4
Part I bound to act impartially. The question is if there is an internal incompatibility in the
relationship to his Employer.

ANSWER

The basis upon which the 1987 Yellow Book and Red Book is written is that the Engineer
is appointed by the Employer, but that he is independent of both parties - i.e., he is an
independent third party. In many cases he is required to give impartial decisions - in fact
under Clause 2.4 of the Yellow Book he is required to act impartially at all times when
exercising his discretion. If the Engineer is an employee of the Employer - e.g., someone
from the Employer's Engineering Division - there is a big risk that he will not be in a
position to act impartially. Although he may be very experienced and capable from a
technical point of view, and able to handle all technical matters, he may not be free to
make decisions which involve financial arrangements, etc. in a fair and impartial manner.
It is not impossible, nor unknown, for the Employer to nominate himself or one of his own
staff as Engineer, but it is rare and certainly causes problems. The text of any clauses
referring to the impartiality of the Engineer will probably need revising at some stage, as
will the provisions for handling claims and disputes (Clauses 2 and 50). The principle of
using an employee of the Employer as Engineer would be more acceptable if a Dispute
Adjudication Board (DAB) was introduced to replace the principal provisions of Clauses 2
and 50.1 to deal with claims and disputes.

MODEL TERMS OF APPOINTMENT OF A DAB

QUESTION

What we are wishing to locate is the model terms of appointment published by FIDIC,
which are referred to in Clause 20.3(a) of FIDIC's "Conditions of Contract for Design-
Build and Turnkey": First Edition 1995. Please could you clarify this reference. If it is a
separate publication, we need to get hold of it.

ANSWER

Model Terms of Appointment for a Dispute Adjudication Board under the Orange Book
were issued as a loose-leaf insert and reproduced at pages 151-163 of the Guide. FIDIC has
moved on since then, and the best approach would be to base Terms hereafter on those
published within the 1999 First Editions of the ne FIDIC Contracts.

BASIS FOR ADVICE

QUESTION

Under what basis does FIDIC offer advice?

ANSWER

As a matter of policy, FIDIC does not give any official interpretation in respect of any
wording in the various documents which it publishes, nor any ruling concerning the rights
or wrongs of any actions taken by any parties operating under the terms of a particular
Contract. If there is any disagreement or potential dispute between the parties which
cannot be settled amicably between them, it will normally be a legal interpretation based
on the law of the Contract which will prevail.

HOW TO GET ADVICE

QUESTION

To what extent will FIDIC offer advice on its Contracts and Agreements? And how can I
get help?

ANSWER

In general, FIDIC, the International Federation of Consulting Engineers, expects that

people using FIDIC Contracts for bids and tenders are fully conversant with the
documents. It is generally necessary to prepare Special or Particular Conditions to
accompany General Conditions (which remain unchanged). For this one needs to be
experienced in drafting contracts. It is not something that can be done by casual readers.

DEFINITION OF UNFORSEEABLE

QUESTION

Reference is made to the definition of unforseeable (Sub-clause 1.1.6.8), how can a time
limit or date be specified for an event or circumstance that is unforeseeable? Surely what is
unforeseeable before submission of the Tender remains so after it, especially when referred
to sub-clause 4.12. It would surely be appropriate to eliminate the seemingly superfluous
last part of the sentence, namely ..by the date...?

ANSWER

We refer to the question "How can a time limit or date be specified for an event or
circumstance that is Unforeseeable? Surely what is unforeseeable before submission of the
Tender remains so after it, especially when referred to sub-clause 4.12." If additional data
(on sub-surface or hydrological conditions at the Site) becomes available on or after the
Tender submission date, it might well be possible thereafter to foresee (based upon such
additional data) something which was unforeseeable before the Tender submission date
(based upon the data available at the Base Date). Therefore, it is essential to define the
time at which the question of foreseeability is to be judged.

ROLE OF THE ENGINEER

QUESTION

Please let me know the FIDIC regulations about the role of the Engineer, namely, the
terms involving the Designing Engineer of a dam project during the construction period,
where the supervision of Construction has been assigned to a different Consulting
Engineer. Please note that the International Commission of Large Dams guidlines were
significantly involved during construction to ensure that the design intent was met.

ANSWER

The FIDIC contracts usually involve "the Engineer", who has a defined role to play during
construction - and we assume this is the "different Consulting Engineer" referred to. The
"Designing Engineer" could be an engineer engaged by the Employer just to design the
Works (with the other Engineer taking over to supervise the Works during construction) -
or he could be an engineer engaged by the Contractor if it is a design-build or turnkey type
project. In the first case, presumably he would be engaged under the FIDIC White Book
(or something similar) and his terms of reference under that should define his role (if any)
during the construction period. In the second case (if he is engaged by the Contractor), he
will presumably be considered to be a part of the Contractor's organisation carrying, in
effect, the Contractor's responsibilities in the Contract for design.
EXTENSION OF TIME

QUESTION

Please assist us in understanding the Extension of Time (EOT): a) Is it necessary for the
Engineer to determine the EOT prior to the date of completion; b) If the EOT is not
granted within the currency of the contract does it render the time at large and
enforcement of liquidated damages as redundant; c) What will be relevance and validity of
EOT if the Engineer does not assign any reason for the grant of EOT. What happens to
prolongation costs.

ANSWER

Regarding your recent enquiry regarding Extension of Time and asked me to send you a
short reply. Normally, an event causing a delay will occur before the contractual Time for
Completion and the Contractor must make his claim within a given time of the event
occurring (Red Book Clause 44.2, Yellow Book Clause 26.1). The Engineer must then
respond with a given time (or a reasonable time) - he cannot wait until completion to see if
the Contract actually needs the time extension. If the event occurs after the contractual
time for completion and the Contractor is running late, he may still be entitled to an
extension if the circumstances have caused him even more delay (and it was not his fault).
If the Engineer does not grant a time extension (or reply to the Contractor's claim) within
the currency of the Contract, it would depend very much on the circumstances, and I
would suggest that he cannot call liquidated damages until he has replied to the
Contractor's claim and definitely rejected it. Normally the Engineer will only grant an
extension of time if the Contractor applies for one so I cannot see an Engineer granting an
extension "for no reason" - normally it would be in response to the Contractor's claim.
The question of costs will depend on the circumstances. If the Contractor can prove he has
suffered extra cost, then maybe he is entitled to reimbursement - but it is not an automatic
right and will depend on the circumstances.

As you will see, any matters concerning extensions of time depend very much on the
circumstances at the time and it is very difficult to give general answers. The intention of
the FIDIC Conditions is that the matter shall be dealt with as quickly as possible so that
the Contractor knows if he will get an extension and so that he can then plan the rest of his
works accordingly. If the Contractor is of the opinion that the Engineer is unreasonably
delaying the matter, he should read Clause 5.1 (both books) and see if this can help.
STANDARD LETTERS
QUESTION
I am a Civil Engineer, presently working as Contracts Manager. Foreign (non-British
nationality) engineers usually have an understanding of the contract document and the
associated entitlements/obligations, but always express difficulty in composing (or
responding to, if they are on "the other side" , correctly worded "standard" letters to the
RE, Engineer or Employer in compliance with the requirements of the various sub-clauses.
Do you have such a publication?
ANSWER
The only book which we can recollect is Musterbriefe in Englisch (ISBN 3-7625-2607-9)
although its standard letters are not such as we would prefer to endorse. Although we will
review the situation with regard to the new FIDIC Contracts Guide, FIDIC lack
enthusiasm for the very concept of standard letters, which seems to be tied up with the
concept of avoiding thinking about the situation. However, we do recognise the validity of
concerns expressed by those whose first language is not English.

DEFINITION OF COST REIMBURSABLE

QUESTION

I am the legal adviser to an oil company. This company has contracted, using FIDIC
Conditions of Contract, with a construction company to perform certain construction
works during a refinery shutdown period. A portion of the contract is "cost reimbursable"
and I am seeking some definition of this phrase as the costs which are to be reimbursed
have caused the contract price to increase by 100% due to lack of management by the
contractor. Is there an element of "reasonableness" in a cost reimbursable contract or is
the contractor entitled to every penny spent by him?

ANSWER

We refer to your fax to FIDIC, describing how a portion of the contract is "cost
reimbursable" and that you are seeking some definition of this phrase. We regret to advise
you that FIDIC is unable to give advice on specific contracts, although it is prepared to
give some elaboration of its publications. It seems to us that your enquiry solely relates to
provisions drafted for the particular contract, and not to provisions published by FIDIC.
You pose the question "Is there an element of 'reasonableness' in a cost reimbursable We
would have thought that such a question cannot be answered in isolation, but must depend
upon the detailed provisions of the contract, the law governing it, the reasons for any
alleged overspend, and (possibly) other matters.

REQUIREMENT FOR A CPM SCHEDULE

QUESTION

We are interested in whether or not the FIDIC documents include a contractual

requirement for the contractor to submit a CPM schedule (or programme) to the project
owner. If so what are those requirements? For example, in Canada the Federal
Government's Public Works Department (PWGSC) includes in its specifications Division
01014 which sets out in detail the schedule requirements for the project. Are you aware of
anything similar to this in Europe?

ANSWER

FIDIC's General Conditions Of Contract typically include a requirement for the

Contractor to submit (and keep up-to-date) a detailed time programme which includes:

a) the order in which the Contractor intends to carry out the Works, including the
anticipated timing of each stage of design, Contractor's Documents, procurement,
manufacture, inspection, delivery to Site, construction, erection, testing, commissioning
and trial operation,

(b) the periods for reviews ... and for any other submissions, approvals and consents
specified in the Employer's Requirements,

(c) the sequence and timing of inspections and tests specified in the Contract, and
(d) a supporting report which includes:

(i) a general description of the methods which the Contractor intends to adopt, and of the
major stages, in the execution of the Works, and

(ii) details showing the Contractor's reasonable estimate of the number of each class of
Contractor's Personnel and of each type of Contractor's Equipment, required on the Site
for each major stage.

These are the basic requirements, and users (project owners) are expected to put any
particular requirements in their own Special Conditions, Specification or Employer's
Requirements. Their particular requirements may, of course, include CPM.

FIDIC's General Conditions of Contract are the most widely accepted form in use
internationally. They are used for contracts undertaken by a wide variety of contractors,
and for a wide variety of types of work. It would therefore be inappropriate for FIDIC's
General Conditions of Contract to specify CPM, particularly for contractors who do not
have staff who are fluent in its use, and also for work for which linear programming is
more appropriate.

ENGINEER'S RESPONSE

QUESTION

What is the relationship between the Engineer's response to the Contractor's claim within
42 days stated in Sub-clause 20.1 and Engineer's Determination, also stated in Sub-clause
20.1 and defined in Sub-clause 3.5. I am little bit confused how the Engineer should
perform these two tasks, i.e., the response and determination, in case the Contractor's
claim is related to additional cost and/or time extension. If his response and determination
are identical, "Engineer's endeavour to reach agreement" should be a precursor to his
response? Or, if his response is required prior to the determination, the response can be
made at only his discretion and when and on which basis he should make determination?

ANSWER

Firstly, please bear in mind that the Engineer's (first 42-day) response to the Contractor's
claim will usually be to comment and to detail what matters the Contractor should take
into account in his further particulars to the Engineer. Thus, there may be quite a few
sequences of "Engineer's response" / "Contractor's further particulars" before the
Engineer can make a determination.

Eventually the Engineer will have no further comment and will be ready to make a
determination in accordance with Sub-Clauses 1.3 & 3.5. Before making a determination,
the Engineer consults with both Parties in an endeavour to achieve their agreement.
Consultation may take such time, so we haven't constrained it to six weeks but merely
forbid unreasonable delay (1.3).

One would usually expect the Engineer's (final 42-day) response to express his detailed
comments immediately prior to commencing consultation under Sub-Clause 3.5. If the
Engineer commenced such consultation with the Parties before making his (final 42-day)
response, the Parties wouldn't have his detailed comments and wouldn't know whether
they were agreeable.
One cannot see how the Engineer's (final 42-day) response can be the determination,
unless it is the Engineer's "approval" of the claim and he has obtained the Employer's
agreement also. The response is specified to be either "approval" or "disapproval and
detailed comments", but not "determination".

Sub-Clause 20.1 sets out a detailed framework for resolving each claim unless it becomes
impossible to do so. However, it should be regarded as a practical framework, essentially
comprising:

(a) "Contractor's claim" / "Engineer's response"

(b) "Contractor's further particulars" / "Engineer's response"
(c) maybe another "Contractor's further particulars" / "Engineer's response"
(d) possibly another "Contractor's further particulars" / "Engineer's response"
(e) rarely, yet another "Contractor's further particulars" / "Engineer's response"
(f) "consultation" / "agreement or Engineer's determination".

Frankly, one would think that competent/experienced personnel should be adopting such
a practical framework without it being detailed in the General Conditions. FIDIC has put
it in so as to assist others and to discourage procrastination.

PAYMENT BY A THIRD PARTY

QUESTION

The purpose of this message is to seek clarification as regards an on-going Contract under
the am procedures which presents a peculiarity. Trying to keep it simple:

The Employer is not being payed directly the Contractor;

European Commission is financing this Project and consequently paying the Contract
price to the Contractor, without being a contracting party;

There is a procedure for suspending works to be commenced;

Now my question is which provision if any, regulates such a case where the Employer is
not paying the Contractor?

ANSWER

The direct answer is that the FIDIC General Conditions contain no provisions regulating
payment by a third party. It is the Employer who is required to pay the Contractor, and
who has to set up procedures for making payment. Such procedures typically involve a
commercial bank, but may also involve other third parties (for example, the European
Commission). Before suspending works, legal advice may be desirable.

WHERE TO START TO FIND OUT ABOUT FIDIC CONTRACTS

QUESTION

I am a junior lawyer working at Bangkok, Thailand. I am very interested in the legal area
of Project Financing. I have learnt that the FIDIC Form of Contracts have been used
worldwide in the field of construction.I am wondering, therefore would like to ask you
some questions that which book of contracts published by FIDIC I should read first, e.g.
the Red Book or Orange Book or some guideline?

ANSWER

A good place to start is the "Which Contract?" text on the FIDIC website. If you then go
to the Contracts and Agreements resources you can find many articles and presentations.
Then maybe consider buying the 1999 suite of contracts (Construction, Plant and EPC-
Turnkey). Descriptions are online (Construction, Plant, EPC/Turnkey). Then you should
consider buying the FIDIC Contracts Guide.

FIDIC CONTRACTS ARE COPYRIGHTED

QUESTION

Please advice whether contracting parties can make use of the standard form of FIDIC
contracts, amending portions of the Conditions of Contract and which terms and
conditions apply to the use of FIDIC standard form agreements. I am particularly
concerned about questions of copyright.

ANSWER

The FIDIC approach is to leave the General Conditions unaltered and to place all
amendments and additions in Particular Conditions. FIDIC copyrights the entire contract,
but grants legitimate users the right to make use of Guidance for Particular Conditions
that is included in a section of the published contract. So when you receive a FIDIC
contract as a printed docuement or as an electronic whole-document, you incorporate the
General Conditions "as is", (by say printing out the General Conditions part from an
electronic version, or by adding to tender documents the entire bound contract supplied by
FIDIC). You also draw up your Particular Conditions, possibly by copying text provided
by FIDIC in the Guidance for Particular Conditions. This Guidance material is
copyrighted, but is made available to purchasers of authenicated FIDIC contracts. The
printed and electronic contracts also contain forms. Once again, these are subject to
copyright, but are made available to authorised users of the contracts (i.e., those that have
purchased an electronic or printed document). I hope we have not been tedious, but it is
perhaps important to understand the situation since FIDIC guarantees the authenticity of
its General Conditions.

I WOULD LIKE TO SCAN A FIDIC CONTRACT

QUESTION

I would like to know if the electronic version of the Plant and Design-Build Contract 1st
Ed (1999) can be converted from PDF to the Microsoft Word. The reason why I am asking
this is that we are thinking of using the electronic file as sort of model form for drafting a
contract for customers, but I heard a scanned PDF file cannot be converted to another file.

ANSWER

We are afraid that what you propose is 100% illegal, and not advised. FIDIC's PDF
contracts are encrypted, and indeed you could print and scan them, but you are then
infringing copyright. However, FIDIC would consider agreeing to licence your firm to
adapt the contract. The fee would depend on the planned usage. It would be at least USD
1000. In general terms, the General Conditions of a FIDIC contract should not be
modified. The Special Conditions are for the changes, and the contract gives guidance that
you can copy, if you purchase a contract.
DIFFERENCES BETWEEN CONTRACTS
QUESTION
I would like to know about FIDIC based contracts: what are they about and their
diffrences with other contracts.
ANSWER
It is suggested that you read the articles kept in the resources site under
http://fidic.org/node/149.
PHOTOCOPYING
QUESTION
To order to turn a FIDIC contract such as the EPC/Turney Contract into a form of a
contract for a contractor, I do not want to include certain clauses (minimal), and I do not
want to include the Part called "Guidance for the Preparation of Particular Conditions".
Are we allowed to photocopy the EPC/Turnkey Contract with an appendix for the
Particular Conditions but excluding the "Guidance for the Preparation of Particular
Conditions", or may we obtain an electronic copy (from which we would print up to five
copies with certain minimum amendments) and again exclude the Guidance portion? I
have read the explanations at the FIDIC.org Bookshop web-site but I am not clear on
extracting the electronic copy (but I can get help in this task) and I am concerned about
breach of copyright.
In short, I want to turn out a well prepared contract agreement, dispute adjudication
agreement, General Conditions and Particular Conditions in a bound form that would
keep the FIDIC logo and full name.
ANSWER
Normally, for a contract based on a FIDIC Conditions of Contract you would leave the
General Conditions untouched, and simply include Particular Conditions and relevant
appendices. For maximum effect, we would urge you to purchase an electronic copy so that
you can print out a PDF file that includes the General Conditions. You are authorised to
include this print out of the General Conditions in your own document. There is no
copyright infringement if you have purchased and installed an authorised, encrypted
version of a FIDIC contract. Under the terms of the users aggreement for an electronic
version of a FIDIC contract, you can also print out forms and appendices which are
supplied as a PDF file and/or in word processing formats.
ACCUSATIONS OF IMPARTIALITY
QUESTION
Can you please advise what action can be taken with FIDIC where there is no dispute
between the Contractor and the Employer, but the Engineer (a FIDIC member engaged
and funded by a third party on behalf of the Employer) has acted with apparent (but
unrequested) partiality, but whose actions are leading the Employer towards needless
expense and probable arbitration.
ANSWER
It is not whether the question originated from someone who is likely to be the Contractor,
or from someone who is likely to be the Employer/Client. One should bear in mind that
serious allegations are being made, which may not be valid. If the question seems to have
originated from a Contractor, the appropriate course of action would be for a very, very
senior member to request a meeting with a very, very senior member of the Employer, so
that the allegations may be discussed in confidence. If the question seems to have
originated from an Employer (which seems unlikely), if he is a member of a Member
Association, the Association would be consulted. The Contractor's Contract MAY (or may
not) constrain the Employer from replacing the Engineer. In either case, NO ACTION
CAN BE TAKEN WITH FIDIC, because the Engineer is not a member of FIDIC as such.
If an IFI (e.g., the World Bank) is providing funds for the project, they could also be
appraised of the situation.
PRIME COST ITEMS
QUESTION
I want to ask a question regarding the prime cost items in the tenders which are supposed
to be used by clients. In Dubai the clients asks the consultants to insert the prime cost
against some items espcially for the finishes.
I would like to know the following: for a lumpsum teder where the BOQ is to be prepared
by the contractor based on the quantities worked out from the tender drawings.
The floor tile p.c. rate specified in BOQ is 30.00 per m2 ( for supply only ) and contractor
had quoted 50.00 per m2 for supplying fixing the tiles considering supply rate of 30.00 for
suppose 2500 m2 of tiles worked out from the tender drawings ( this quantity might be the
adjusted quantity and may not represant the exact quantity).
Now if the client supplies it @at 25.00 per m2, the contractor has to offer a saving for the
item. What is the criteria for submiting the saving to the client.
a) It is on the BOQ quantity, actual quantity or ordered quantity, which includes the
wastage?
b) At what rate the savings is to be submitted? Is it the difference between the p.c. rate
specified and the supplied rate, i.e. 30.00 - 25.00 = 5.00.
ANSWER
The FIDIC Conditions of Contract do not include provision for prime cost items. If an
Employer wishes to include a pc item in the Contract then it is necessary to explain
suitable procedures in the contract documents.
LIEN CONTRACTOR
QUESTION
Does a FIDIC contract have a clause about lien contractor?
ANSWER
The question is not clear what is meant by a 'lien contractor'.This is not a phrase which is
used in FIDIC Contracts.
EXTENSION OF TIME

QUESTION

I would like to ask a question related with a time extension to be given to the contractor as
per Clause 44.1 of the Red Book 4th Edition contract. One of our contractors due to his
default has not completed his works in the contractual time. The contractor has applied us
for an extension of time due to adverse weather conditions occured in the delayed period
by stating that if time extension is not given to him he will be double penaltized due to his
own costs in the prolongation period and penalty deductions.

ANSWER

Clause 44.1 does not specifically refer to further delay causes which may occur after the
expiry of the Time for Completion. The Engineer should consider all the circumstances,
including the Contract and the applicable law, consult with the Employer and the
Contractor and decide whether the circumstances are such as fairly to entitle the
Contractor to an extension of time. If no extension is granted then the Contractor is
correct to say that he will be liable for Liquidated Damages/Penalties in addition to his
own costs.

FAILURE DURING THE MAINTENANCE PERIOD

QUESTION

What is responsibility of contractor if a structure like a bridge iha partially failed after 3
years of maintinace period.

ANSWER

You refer to the situation when there has been a partial structural failure, 3 years after the
end of the maintenance period. The Contractor has completed his work under the
Contract, it has been accepted by the Engineer and Employer and the Defects Liability
Certificate should have been issued. If the Employer thinks that the Contractor is, in some
way, to blame for the failure then his only recourse is through the liability provisions and
procedures under the applicable law.

SUBCONTRACTOR CONTRACT

QUESTION

We are employed as main contractor to carry out a 40 story building. The contract used by
the Employer is FIDIC Conditions of Contract 1st edition 1999. The employer has now
nominated the MEP works and instructed us to use the same conditions of contract to
administor the subcontractor. Can you pls advise the legal and administration implications
of using the conditions of contract to administor the subcontractor. The employer is
represented by an establised uk based company.

ANSWER

The FIDIC Conditions of Contract are intended to be used for Contracts between the
Employer and the Main Contractor. The wording is not suitable for use as a Subcontract
and a considerable number of carefully prepared Particular Conditions would be
necessary. For example the powers and duties of the Engineer are not appropriate for a
Subcontract. The legal postion under the applicable law, which is presumaby UAE Law,
would also need careful consideration. FIDIC can not comment on legal matters or on the
preparation of Particular Conditions.

ROLE FOR SUPERVISION CONSULTANT OR CONSTRUCTION MANAGER

QUESTION

In a FIDIC contract with supplementary conditions, there is a role for supervision

consultant for all technical matters, and a role for construction manager for administrative
matters. can we say that the SC is the "The Engineer", although some of his duties and
responsibilities were given to a costruction manager (CM)? This situation arises in a few
cases in the middle-east.

ANSWER

FIDIC The FIDIC position stated in a draft position paper is clear, and clearly the best. It
says: "Some people say that the system (a separate CM) works well, but this is probably a
matter of personalities rather than organisation. There are obvious potential problems of
divided responsibility, with consequences for the efficient management of the project,
particularly if there are claims to be considered. The FIDIC system of an Engineer in
charge, with suitably qualified assistants, must be preferable when the project only has a
single construction contract." It says that making the SC the "Engineer" is the best if
there are the are a SC and a CM. But the role of the CM must be clear, and the
SC/Engineer must have all the responsibilities specified in the contract. The SC can of
course delegate. How this delegation of duties to a CM is best done is unclear. One way is a
separate Client-Consultant Agreement with the Client for specified services, and the main
contract refers to this. ........................ QUESTION I still have some ambiguity about the
issue. The client needed the services of the Construction manager ( CM ). In fact, the client
already signed an agreement with the CM. the role of the CM is clearly stated in his
contract with the owner, as to take care of the administrative issues, scheduling and
monitoring and cost control and budgeting, also all correspondence shall be through the
CM. The CM shall monitor the coordination between all T.C's ON SITE. Conduct
progress meetings. Furthermore, the client needed the services of the consultant ( Design &
Supervision ), and signed an agreement with an engineering firm. The responsibilities of
the DC and SC are clearly mentioned in this contract agreement; responsible for quality
and technical issues and review & comment and approval of shop drawings and other
responsibilities, with a clear emphasis that there will be a CM with specific role(as
specified earlier). Still, the consultant raises the issue of WHO IS THE ENGINEER"? My
question: is this a valid issue? If the special contract agreement specifies the scope of
responsibilities of the consultant during design and supervision phases, which are
somewhat different than what is defined in FIDIC as ENGINEER, is this a legal defect in
the contract between the client and the consultant? ........................ FIDIC Any separation
of the duties of the Engineer would need to be thought through very carefully. If the
project only includes a single construction contract then there seems to be no benefit in a
separation of duties. However, if the project includes a number of simultaneous
construction contracts, then there are important issues of co-ordination of contracts.
Different designers, and even different Engineers, may have been appointed for the
different construction contracts, so an overall manager is necessary. If it is desired to
separate the roles then the exact responsibilities and authorities of the different
organizations would need to be decided by the Employer and clearly defined in the
Contracts between the Employer and each Party, including the Contracts with the
Contractors. The drafter would also need to consider any statutory supervision
requirements in the applicable law. All this would have implications for a number of
different clauses in the FIDIC Contracts and would certainly require very careful drafting
to avoid problems during construction and dispute resolution.