Mahmoud Abu Hussein 1
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1 Mahmoud Abu Hussein 1
2 The White Book Review A Client s Perspective Contents The White Book Highlights The White Book Review (areas of concern/suggested amendments) Conclusion/Recommendations 2
3 The White Book Highlights FIDIC s Client/Consultant Model Services Agreement, Fourth Edition 2006 (the White Book ) is intended for use on an international basis to appoint consultants for a variety of services (e.g. pre-investment and feasibility studies, and design/management of construction projects) for both Employer-led and Contractor-led design set-ups. The WB can also be adapted for domestic use. FIDIC also publishes other related Agreements (e.g. Sub-Consultancy Services and JV Agreements) and Guides. The White Book comprises: - (Form of) Agreement. - Particular Conditions: (Part) A - References from GC s Clauses (= Contract Data), (Part) B - Additional or Amended Clauses (= Special Provisions), (Part) C - (4) Appendices 1 Scope of Services 2 Personnel, Equipment, Facilities and Services of others to be provided by the Client 3 Remuneration and Payment 4 Time Schedule for Services - General Conditions (8 Clauses). The White Book adopts Mediation as part of a multi-tiered DR process. 3
4 The White Book Highlights SoS Structure Appendix 1, Scope of Services (SoS) The Scope of the Consultant's Services, both Normal and Additional Services, as finally negotiated and agreed should be clearly expressed in Appendix 1. Clause Normal, Additional and Exceptional Services: Normal and Additional Services are those described as such in Appendix 1 [Scope of Services] Exceptional Services are those which are not Normal or Additional Services but which are necessarily performed by the Consultant in accordance with Clause 4.8. (Original) Normal Services Additional Services Exceptional Services (Cl. 4.8; 4.5 and 4.6) In case of FM or abandonment or suspension or termination Appendix 1 (SoS) / (additional) Variations (Cl. 4.3) Cl. 4.8: Necessary work or expense extra to Normal and Additional Services CD TFC EOT ATFC 4
5 Clause (Form of) Agreement, Clause Interpretation The White Book Review Analysis (emphasis added) 2 The following documents shall be deemed to form and be read and construed as part of the Agreement, namely: (a) any letter of offer by the Consultant; (b) any letter of acceptance by the Client; (c) this Client/Consultant Model Services Agreement; (d) the Appendices, namely: Appendix 1: Scope of Services Appendix 2: Personnel, Equipment, Facilities and Services of Others to be provided by the Client Appendix 3: Remuneration and Payment Appendix 4: Time Schedule for Services : The documents forming this Agreement are to be taken as mutually explanatory of one another. If there is a conflict between these documents, the last to be agreed shall prevail, unless otherwise specified in Part B of the Particular Conditions. Concern / Suggestion (Form of) Agreement: - No specific order of precedence clearly stated. - The whole WB is mentioned under (c) without precedence for the PC over the GC. Cl : the last to be agreed shall prevail, is this clear? Suggestion: (Form of) Agreement, Clause 2: - The following documents listed in their order of precedence shall be deemed to..., namely: ; and - replace the WB under (c) with the PC (Parts A and B) followed by the GC (numbering to be adjusted). Cl :. If there is a conflict between these documents, the order of precedence in which they are listed under Clause 2 of the (Form of) Agreement shall prevail, unless otherwise specified in Part B of the Particular Conditions. Mahmoud Abu Hussein 5
6 The White Book Review Clause Analysis (emphasis added) Concern / Suggestion 2.1 Information 2.2 Decisions 4.2 Commencement and Completion In order not to delay the Consultant..., the Client shall within a reasonable time give to the Consultant free of cost all information which may pertain to the Services On all matters properly referred to him in writing by the Consultant the Client shall give his decision in writing within a reasonable time so as not to delay the Services. The Services shall be commenced on the Commencement Date, shall proceed in accordance with the Time Schedule in Appendix 4 [Time Schedule for Services], and shall be completed within the Time for Completion, subject to extensions in accordance with the Agreement. - How reasonable is reasonable time? - No link with Appendix 4 [Programme] which should identify specific time(s) for the Client s provided information and the Client s decisions i.e. approvals/sign-offs? - No obligation to submit/comply with a Programme. - Despite the use of shall there is no clear obligation or liability on the Consultant to proceed expeditiously with or to guarantee the completion of the Services i.e. no LD s (see also Cl. 6.1). 4.4 Delays If the Services are impeded or delayed by the Client or his contractors so as to increase the scope, cost or duration of the Services: (a) the Consultant shall inform the Client of the circumstances and probable effects; (b) the increase in scope and/or costs shall be regarded as Additional Services; and (c) the Time for Completion of the Services shall be increased accordingly - Not addressing delays by the Consultant in completing the Services (other than broad obligations under Cl. 4.2); is this a balanced risk allocation? (b), increase in cost = Additional Services? - Absence of a clear link with Cl 4.3, Variations. No Time Bar or clear mechanism for notices or substantiation or how to valuate compensation/extension. Mahmoud Abu Hussein 6
7 Clause 4.3 Variations; 3.2 Normal, Additional and Exceptional Services; 4.8 Exceptional Services [see also 4.2; 4.4; 4.5; and 4.6] The White Book Review Analysis (emphasis added) The Agreement can be varied on application by either Party by written agreement of the Parties If requested by the Client in writing, the Consultant shall submit proposals for varying the Services. The preparation and submission of such proposals shall be an Additional Service The Consultant shall not be required to commence the varied Services until such time as the Client has given his written approval of the fees associated with the varied Services Upon the occurrence of circumstances described in Clause 4.5 (FM) or abandonment or suspension or resumption of Services or upon termination of the Agreement.any necessary work or expense by the Consultant extra to the Normal and Additional Services shall be regarded as Exceptional Services The performance of Exceptional Services shall entitle the Consultant to extra time necessary for their performance and to payment for performing them. Concern / Suggestion - No clear time-bound procedure for the: submission of Variation Requests; or methodology of substantiation or valuation. - No link with Appendix 3 [Remuneration and Payment] or Appendix 4 [Time Schedule for Services]. - Proposal an Additional Service ; why? - written agreement / written approval : Does this limit the Client s right to omit parts of the Services? What about emergencies/delayed agreement on Fee; proceed (based on reasonable estimated Fee) pending subsequent agreement or settlement under Clause 8? - Use of varied Services vs. Additional Services - Cl. 4.8: no mention of how/when the Client will be informed of the impacts/costs. Suggestion: Consider an entirely different, simplified Services/Variation approach i.e. Services and varied/changed Services supported by elaborate Fee Schedule (incl. Unit Rates for adjustments/variations). Mahmoud Abu Hussein 7
8 Clause 3.3 Duty of Care and Exercise of Authority [See also 6.1, Liability and Compensation between the Parties; and 7.1, Insurance for Liability and Indemnity] The White Book Review Analysis (emphasis added) Notwithstanding anything else in this Agreement or any legal requirement of the Country or any other jurisdiction (including, for the avoidance of doubt, the jurisdiction of the place of establishment of the Consultant), the Consultant shall have no other responsibility than to exercise reasonable skill, care and diligence in the performance of his obligations under the Agreement (b) if authorized to certify, determine or exercise discretion to do so fairly between the Client and third party not as an arbitrator but as an independent professional exercising his judgment with reasonable skill, care and diligence; and Concern / Suggestion Clause 3.3.1: - Is this a balanced risk allocation? - At least amend the Clause to seek what s expected from an experienced Consultant for a scope of similar nature, complexity and magnitude. - No Fitness for Purpose ; what about projects comprising performance guarantees (e.g. power or process plants) especially in case of Contractor led design under the YB? - Add PI insurance to Clause 7.1 and PC, Part A. Clause (b): - Amend to emphasize the Consultant s impartiality in exercising his duties as the Engineer notwithstanding the fact that he is paid by the Client. Consider reinforcing reasonable skill, care and diligence with a professional/regulatory obligation (FIDIC Code of Ethics, Mahmoud Abu Hussein 8
9 FIDIC CODE OF ETHICS Membership in a FIDIC Membership Association is the assurance that the consulting engineer subscribes to a code of conduct on professional status, independence and competence, in accordance with FIDIC s code of ethics. The International Federation of Consulting Engineers recognises that the work of the consulting engineering industry is critical to the achievement of sustainable development of society and the environment. To be fully effective not only must engineers constantly improve their knowledge and skills, but also society must respect the integrity and trust the judgement of members of the profession and remunerate them fairly. All member associations of FIDIC subscribe to and believe that the following principles are fundamental to the behaviour of their members if society is to have that necessary confidence in its advisors. RESPONSIBILITY TO SOCIETY AND THE CONSULTING INDUSTRY The consulting engineer shall: - Accept the responsibility of the consulting industry to society. - Seek solutions that are compatible with the principles of sustainable development. - At all times uphold the dignity, standing and reputation of the consulting industry. COMPETENCE The consulting engineer shall: - Maintain knowledge and skills at levels consistent with development in technology, legislation and management, and apply due skill, care and diligence in the services rendered to the client. - Perform services only when competent to perform them. INTEGRITY The consulting engineer shall: - Act at all times in the legitimate interest of the client and provide all services with integrity and faithfulness. IMPARTIALITY The consulting engineer shall: - Be impartial in the provision of professional advice, judgement or decision. - Inform the client of any potential conflict of interest that might arise in the performance of services to the client. - Not accept remuneration which prejudices independent judgement FAIRNESS TO OTHERS The consulting engineer shall: - Promote the concept of Quality-Based Selection (QBS). - Neither carelessly nor intentionally do anything to injure the reputation or business of others. - Neither directly nor indirectly attempt to take the place of another consulting engineer, already appointed for a specific work. - Not take over the work of another consulting engineer before notifying the consulting engineer in question, and without being advised in writing by the client of the termination of the prior appointment for that work. - In the event of being asked to review the work of another, behave in accordance with appropriate conduct and courtesy. CORRUPTION The consulting engineer shall: - Neither offer nor accept remuneration of any kind which in perception or in effect either a) seeks to influence the process of selection or compensation of consulting engineers and/or their clients or b) seeks to affect the consulting engineer s impartial judgement. - Co-operate fully with any legitimately constituted investigative body which makes inquiry into the administration of any contract for services or construction. 9
10 Clause 4.6 Abandonment, Suspension or Termination [See also 4.5, Changed Circumstances; and 4.7, Corruption and Fraud] The White Book Review Analysis (emphasis added) Suspension/Termination by the Client (for convenience): The Client may suspend all or part of the Services or terminate the Agreement by giving at least 56 days' notice to the Consultant, and Termination by the Client (for Consultant s default): - Notice of correction of the Consultant s default stating the grounds for the notice. - If no satisfactory response received within 21 days the Client may by a further notice (within 35 days of the former notice) terminate the Agreement Termination by the Consultant (for the Client s default): - the Consultant may, by a notice of at least 42 days (further to an initial notice of at least 14 days), terminate the Agreement, or at his discretion, suspend or continue suspension of the Services in whole or in part for: (a) non-payment of undisputed invoice (28 days after the due date for payment); or (b) Suspension of the Services either under Clause 4.5 or Clause for more than 182 days. Concern / Suggestion - There is no Clause headed Termination for Convenience to clearly set out its consequences (other than what s broadly set out under Cl. 4.8) and differentiate it from termination for Consultant s default under Cl Amend Cl to allow immediate termination for specific cases of Consultant s default (e.g. bankruptcy and corruption) with reciprocity. - Set out clearly the compensation mechanism following termination in each case (b) and 4.6.1: amend to allow termination by either Party if suspension (under Cl. 4.5, FM) exceeds the limit of 182 days? 4.6.3: Create link with Cl. 2.4 to entitle Consultant to suspend/terminate in case of material change to the Client s Financial Arrangements (ref. Rainbow Suite). Mahmoud Abu Hussein 10
11 The White Book Review Clause Analysis (emphasis added) Concern / Suggestion 6.1 Liability and Compensation between the Parties The Consultant shall only be liable to pay compensation to the Client arising out of or in connection with the Agreement if a breach of Clause is established against him. - Consultant not liable for delays; nor for termination for default? - How to establish breach of Cl (reasonable skill, care and diligence)? - Is this a balanced risk allocation? 6.4 Indemnity 7.1 Insurance for Liability and Indemnity So far as the law governing this Agreement permits, the Client shall indemnify the Consultant against the adverse effects of all claims including claims by third parties which arise out of or in connection with the Agreement including any made after the expiry of the period of liability referred to in Clause 6.2, except insofar as they are covered by the insurances arranged under the terms of Clause At the written request of the Client the Consultant shall make reasonable efforts to: a) insure against his liability under Clause 6.1 ; or b) increase his insurance against liability under Clause 6.1 over that for which he was insured.; or c) insure against public/third party liability; or d) increase his insurance against public/third party liability over that for which he was insured.. ; and e) insure or increase any other insurance required by the Client. - Survival Clause (in addition to Clause 6.3, Limitation of Compensation, as set out under Cl ). - Such broad indemnity is not reciprocal! - Is this a balanced risk allocation (ref. Cl ; 6.1.1; and 7.1.1)? - Amend to emphasize the Consultant s insurance obligations (including PI) - ref. Cl and Cl Amend the Particular Conditions, Part A to state the Consultant s insurance obligations and their respective limits, duration and conditions. Mahmoud Abu Hussein 11
12 The White Book Review Employer/ Client Consultant Contractor Insurers 12
13 The White Book Review Conclusion/Recommendations The White Book doesn t adequately demonstrate FIDIC s balanced risk allocation approach. The low take-up of the WB (compared to the Rainbow Suite) needs to be addressed. FIDIC to is not only capable to influence and regulate the Consulting Engineering profession through its Member Associations but also is capable to interact with and guide all other main stakeholders including Employers/Clients, Contractors, Authorities, Financiers and Insurers. The WB has been updated by FIDIC (UTG4B) including addressing the Users concerns and feedback. The new Edition is almost ready to be published. FIDIC to further the alignment between the WB and the Rainbow Suite to target having the WB as the Contract Form of choice for appointing the Engineer or the Design Consultant/Subcontractor by Clients/ Employers/Contractors alike. FIDIC to work with its Member Associations to promote FIDIC s Code of Ethics. Consider enforcing the Code and introducing professional/regulatory disciplinary measures? Mahmoud Abu Hussein 13
14 The White Book Review Thank You! Mahmoud Abu Hussein +971 (0)
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