The contractual provision providing for compensation for 'Disruption' under FIDIC Red BOOK 2017

As stated in the SCL Protocol, 2nd ed. (2017), Guidance Part B, para.18.4:

“[M]ost standard forms do not expressly address recovery for disruption, although they do address some of the specific events that could lead to disruption, such as unforeseen ground conditions and untimely approvals or instructions from the [Engineer]”.

Thus, it is imperative that each and every contract (even if it is based on a standard form of contract) be thoroughly studied in order to determine the grounds of legal entitlement for pursuing a disruption claim. This applies equally to claims based on either local or cumulative impact.

In general, standard form of contracts have a tendency to establish the contractor's legal entitlement to compensation by taking the following approach:

1. In cases when the disruption event can be framed as a change in the works, the variations provision may be applicable; and
2. Either of the following approach is used to address non-variation disruption events:

• A standalone clause providing for compensation that internally identifies all the disruption events which trigger legal entitlement.
• There are provisions scattered across the contract, each of which establishes the legal entitlement of the contractor to compensation for individual non-variation disruption events.

The following paragraphs and table provide an overview of the approach utilized by the FIDIC Red Book 2017 Standard form of Contracts.

The relevant regime for disruption events that can be framed as Variations is outlined in Clause 13 of the FIDIC Red Book 2017. For these intents, a "Variation" means "any change to the Works" instructed by the Engineer as a variation under Sub-Clause 1.1.86.?Under Sub-Clause 3.5, if an instruction from the Engineer is not identified as a "Variation," but the Contractor considers it to be so, the Contractor may notify the Engineer immediately to that effect, and if the Engineer does not confirm, reverse, or vary the instruction within seven days, the Engineer's Instruction is deemed revoked. Therefore, as part of the Variation valuation, a claim can be made for the loss of productivity brought on by a Variation, especially the local impact.

The FIDIC Red Book 2017 takes the second approach to the legal entitlement outlined earlier, which is that the legal entitlement of the Contractor for each type of event is contained in a different provision. This is in reference to the non-variation disruption events that can occur during the course of a project. Under the terms of the contract, the Contractor can pursue a claim against the Employer in the event that any of the following disruption events, amongst others, take place, causing the Contractor to incur additional "Cost": (It should be noted that these non-variation employer-culpable events are similar to those in the FIDIC Red Book 1999.)

If one of the above non-variation events occurs and the Contractor's legal entitlement to submit a claim is triggered, the Contractor is entitled to recover either its "Cost" (for risks such as unforeseeable physical conditions and changes in laws) [of those events listed above, this applies to Clause 4.12, 4.15, 4.23, and 18.4] or its "Cost Plus Profit" (for risks that are closer to being within the Employer's control).