FIDIC (Federation International des Ingenious-Conseils)

FIDIC (Federation International des Ingenious-Conseils) FUNDAMENTALS IN CONSTRUCTION CONTRACT FORMS/CONDITIONS : DETERMINANTS, PECULIARITIES AND EFFECTS ON EVENTUAL PROJECT OUTCOME.

PART 1

The main purpose of this ARTICLE, is not limited to: but awakens and links Supply Chain Management/Procurement Professionals, to Construction, Quantity Surveyors and Architects into a broad spectrum within the built environment industry. The built environment which deals with international construction projects requires skilled and advanced Procurement Professionals in executing and facilitating the Request For Bid (RFB) process in capital projects which are FIDIC, NEC3 and our very own local JBCC contracts. This process requires that we ensure the compilation of accurate tender specifications, tender documents and facilitate the entire tender process until conclusion with precision. The construction industry is complex, involving multiple parties, long timelines, and significant risks. A well-drafted contract is essential to manage and fairly allocate these risks, preventing disputes, inflated pricing, penalties and project failures.

In Contract awarding from a Procurement perspective mastering Contracts helps Protect and Grow Your Business, as contracts are the backbone of business, shaping transactions and safeguarding relationships. Understanding contract law is essential to mitigate risks, foster trust, and make informed decisions that drive success. Contracts turns intentions into commitment that both parties can count on. Empower your business by mastering key contract terms and streamlining your contracting processes. When I entered this Construction industry sphere, I had to hit the ground running and be ready to optimise my approach and upkeep with knowledge of knowing JBCC, NEC and FIDIC.

Public sector procurement frameworks are?established to ensure transparency, fairness, and value for money in public spending. They are also aimed at promoting competition among suppliers, which helps to drive innovation, improve the quality of goods and?services?procured, and reduce costs. However, it is an imperative to know the form of contracts which are mostly used for the implementation of Infrastructure Delivery and Procurement Management through the:

a) Project processes for infrastructure delivery management, and

b) Infrastructure procurement gates.?

Public Sector Legislative Frameworks

1. The Constitution

2.? SCM guidelines and the Broad-Based Black Economic Empowerment (BBBEE) Act, 2003 (Act 53 of 2003).

3. Preferential Procurement Policy Framework Act, 2000

4. Public Procurement Act 28 of 2024

5. PFMA

6. 1999 Treasury Regulations and National Treasury Notes

7. Municipal Public-Private Partnership (PPP) Framework

8.? Municipal Finance Management Act (MFMA)

FIDIC Definition

Today we will focus and share on the general meaning of FIDIC: it is an international body that provides standard forms of contract for construction projects.This is a French abbreviation which means (Fédération Internationale Des Ingénieurs-Conseils) loosely translated in English stands for International Federation of Consulting Engineers. FIDIC was established on 22 July 1913 by three countries France, Belgium and Switzerland, after a meeting of 59 consulting engineers at a World Exhibition in Ghent, Belgium.?The meeting was called to discuss the possibility of forming a global federation of consulting engineers.?The founding principles of FIDIC were quality, integrity, and sustainability. In 1949 the United Kingdom announced its intent to join FIDIC, currently they have 60 country members.

However, FIDIC itself does not directly prescribe specific methods or details for construction cost estimation, but it does set out guidelines and procedures in its contracts that indirectly relate to cost estimation, especially in terms of claims, variations, and payment. FIDIC is known for its secondary activities of producing standard form contracts for the construction and engineering industries over a period. After all, overloading risk onto one party - like making a contractor fully responsible for unforeseen site conditions - leads to higher bids and inefficiencies. Instead, contracts should balance risk allocation based on who can best manage it. Ultimately, a contract is more than a legal document. It’s a risk management tool.

In 1957, FIDIC published its first contract, titled " The Form of Contract for Works of Civil Engineering Construction. As the title indicates, this first contract was aimed at the Civil Engineering sector, and it quickly became known for the colour of its book cover, hence to date it is called "The Red Book". It is a common feature to refer to FIDIC contracts in popular jargon by the colour of its book covers.

Purpose

The primary aim of FIDIC contracts is to standardize contractual agreements in the construction industry, thereby reducing disputes and ensuring smoother project execution. They facilitate clear communication and understanding among various stakeholders, including contractors, employers, and engineers. FIDIC contracts are designed to maintain a fair and balanced allocation of risks and responsibilities between the Employer and the Contractor.

Forms of FIDIC Design and Build Contracts and their uses

Since 1999, FIDIC has published a range of standard form construction contracts, commonly known as FIDIC books, each tailored for different types of projects and contractual relationships. Here we will name eight (8) of them.

1. FIDIC Red Book (Conditions of Contract for Construction): For projects where the employer provides the design, making it suitable for traditional construction contracts.

• Usage: Primarily used for building and engineering works designed by the employer.
• Payment Basis: Measure and pay (re-measurement) or lump sum with unit rates.
• Risk Allocation: More risk is borne by the employer, particularly in terms of design and specifications

2. Yellow Book (Conditions of Contract for Plant and Design-Build): For projects where the contractor is responsible for both design and construction.

• Risk Allocation: The contractor assumes greater risk, especially in design and technical performance
• Payment Basis: Lump sum or fixed price.
• Usage: Suitable for projects where the contractor designs and builds the works.

3. Silver Book (Conditions of Contract for EPC/Turnkey Projects): For engineering, procurement, and construction projects, where the contractor assumes a high degree of risk and minimal employer involvement.

• Usage: Typically used for turnkey projects, including process plants and power stations, where the contractor takes on a high level of responsibility
• Risk Allocation: Most risks are transferred to the contractor, who must deliver a fully operational facility
• Payment Basis: Lump sum.

4. Green Book (Short Form of Contract): A simplified contract for smaller projects or less complex works.

• Usage: Suitable for relatively simple or repetitive work of short duration with a small contract value.
• Payment Basis: Can be adapted for lump sum or re-measurement.
• Risk Allocation: Simpler allocation of risks, reflecting the straightforward nature of the projects it covers.

5. Gold Book (Conditions of Contract for Design, Build, and Operate): For projects that combine the design, construction, and operation phases into a single contractual arrangement.

• Usage: Combines design, build, and operate responsibilities, typically for long-term infrastructure projects.
• Payment Basis: Often based on a mix of lump sum for construction and a fixed fee for operation
• Risk Allocation: The contractor takes on design, construction, and operational risks.

6. Blue Book (Dredging and Reclamation Contract): Designed for dredging and reclamation works, as well as ancillary construction projects.

• Usage: Tailored for dredging and reclamation projects.
• Payment Basis: Can be lump sum, unit rate, or cost plus
• Risk Allocation: Reflects the specific nature of dredging projects, with specific clauses on risks like adverse physical conditions

7. White Book (Client/Consultant Model Services Agreement): Used for agreements between clients and consultants, such as architects or engineers.

• Usage: A model form for agreements between a client and a consultant, not directly related to construction works.
• Payment Basis: Fee-based, time-based, or lump sum
• Risk Allocation: Primarily concerns professional liability and performance standards

8. Pink Book (MDB Harmonized Edition): A version of the Red Book adapted for Multilateral Development Bank-financed projects.

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