What are the main risks and benefits of using FIDIC contracts for international projects?

1 FIDIC contract types

FIDIC contracts are divided into different types, depending on the nature and complexity of the project, the level of risk and responsibility shared by the parties, and the degree of design and supervision required. The most widely used FIDIC contracts are the Red Book, the Yellow Book, the Silver Book, and the Pink Book. The Red Book is for construction works designed by the employer, the Yellow Book is for design-build works, the Silver Book is for turnkey projects, and the Pink Book is a harmonized version of the Red Book for multilateral development bank projects. Each contract type has its own clauses, conditions, and procedures, which need to be understood and applied correctly by the project manager.

3 FIDIC contract risks

However, using FIDIC contracts for international projects also entails some risks and challenges that need to be carefully managed and mitigated by the project manager. One of the main risks is that FIDIC contracts are often subject to different interpretations and applications by different legal systems and jurisdictions, which may create confusion and conflict among the parties. For example, some terms and concepts in FIDIC contracts may have different meanings or implications in civil law and common law countries, or may be incompatible with local laws and regulations. Therefore, it is essential to conduct a thorough legal review and analysis of the FIDIC contract before signing it, and to seek expert advice if necessary. Another risk is that FIDIC contracts are complex and comprehensive documents that require a high level of technical and contractual knowledge and skills to implement and administer them effectively. For instance, FIDIC contracts impose strict and time-bound obligations on the parties to submit and respond to various communications, notifications, and claims, which may be difficult to comply with in practice. Hence, it is important to have a well-trained and experienced project team that can handle the FIDIC contract requirements and procedures efficiently and accurately.

4 FIDIC contract management

In order to maximize the benefits and minimize the risks of using FIDIC contracts for international projects, the project manager should take a proactive and strategic approach to FIDIC contract management. This involves planning and preparing for implementation, monitoring and controlling performance, and resolving and preventing any issues or disputes that may arise during the project lifecycle. The project manager should review and understand the FIDIC contract clauses and conditions, identify any deviations or amendments needed to suit the project context and objectives, establish clear communication channels with the employer, contractor, and engineer, develop an administration system that can track all FIDIC contract activities, events, and transactions, assess and manage risks and opportunities, allocate contingencies, conduct risk analysis, apply risk transfer or sharing mechanisms, deal with any claims or disputes that arise during execution, and follow the dispute resolution procedures such as negotiation, mediation, or arbitration.

5 FIDIC contract best practices

In addition to the steps and actions outlined previously, the project manager should adhere to best practices and recommendations developed by FIDIC and other experts in international project management. This includes reading and studying FIDIC contract guidance notes and commentary books, attending and participating in FIDIC contract training courses and workshops, joining and networking with FIDIC contract associations and communities, as well as seeking out FIDIC contract experts and advisors for professional advice. These resources provide insight into the FIDIC contract clauses and conditions, offer interactive learning opportunities, supply valuable resources and support, and provide independent advice on matters of dispute.

6 Here’s what else to consider

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