Session 3 New FIDIC Contracts

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1 Climb to the Top! DRBF 18 th Annual International Conference Tokyo 2018 Session 3 New FIDIC Contracts Moderator: James Perry Speaker: Mathias Fabich Dispute Resolution Board Foundation 2018

2 PORR at a glance One of the leading construction companies in Austria and Europe Tradition dating back more than 147 years Headquarter in Vienna, Austria Listed on the Vienna Stock Exchange since 1869 Run by shareholders More than 19,000 staff members Production output 3.9 bn Europe and Middle East FIDIC experience in Albania, Bosnia, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland, Qatar, Romania, Serbia, Slovakia, Turkey and UAE

3 European International Contractors (EIC) Foundation: Founded in 1970, since 1984 autonomous association registered in Germany Mission: EIC is a European industrial lobbying association with the mandate to (1) Represent the international interests of the European construction industry vis-à-vis the EU Institutions, the World Bank, the OECD and key non-governmental stakeholders (e.g. FIDIC, CoST, etc.); and to (2) Provide a Networking platform for European contractors working internationally

4 European International Contractors (EIC) Membership: Full Members are construction trade federations from 15 European countries to which around 200 internationally active contractors are affiliated; Associated Members are companies from construction-related sectors Board: Board Members are internationally experienced contractors representing the senior executive level of the leading European construction companies.

5 European International Contractors (EIC) Activities: EIC Positions are elaborated by specific Working Groups for topics such as: Africa, Contract Conditions, Corporate Responsibility, Export Credits, World Bank Procurement

6 Key Clause Amendments Clause 8 Commencement, Delays and Suspension Clause 13 Variations and Adjustments Clause 20 Employer s and Contractor s Claims

7 Clause 8 Commencement, Delays Sub-Clause 8.3 [Programme] and Suspension» Has been expanded to include significantly more detail concerning the Contractor s programme.» This Sub-Clause is very detailed and will create an enormous amount of work with every update.

8 Clause 8 Commencement, Delays and Suspension» Out of the detailed list of requirements to the PoW, the following requirements are new and need specific attention: Sub-Clause 8.3 (f) requires to show the programming of remedial works. Sub-Clause 8.3 (g) requires to show the float. This is of special interest in connection with Sub-Clause 8.5 [Extension of Time for Completion] and the treatment of concurrent delay.

9 Clause 8 Commencement, Delays and Suspension Sub-Clause 8.3 (j) requires to assess the actual progress for each activity. Progress should be identified properly and well documented as this assessment will helpful for evaluating extension of time claims.

10 Clause 8 Commencement, Delays and Suspension» The Contractor owes the Completion of the Works within the Time for Completion. The PoW is a tool for supervising the progress to the benefit of both Parties. Not every project requires all details listed in the new draft.» EIC supports the remark in the Guidance Notes that the Employer should reduce the requirements for the PoW for less complex projects.» Under a Design-Build type of project, the Contractor is in principle free to organize the Works and is free to determine to what extent and how detailed the Contractor displays these.

11 Clause 8 Commencement, Delays and Suspension Sub-Clause 8.3 [Programme]» Float should be clarified in the Contract in order to reduce legal uncertainty.»contractors should be aware that nothing in the Programme or any report might be construed to be a Notice (e.g. under 20.1). The Notice requirements must be followed separately.

12 Clause 8 Commencement, Delays and Suspension Sub-Clause 8.4 [Advance Warning]» Requires each Party to notify the other and the Engineer of any known or probable future events or circumstances which could adversely affect the work of the Contractor s Personnel or the performance of the work when completed.» EIC generally welcomes that the Sub-Clause refers to both Parties and the Engineer.» This is a dispute avoidance tool.

13 Clause 8 Commencement, Delays and Suspension Sub-Clause 8.5 [Extension of Time for Completion]» Now includes the "concurrent delay test" according to the Particular Conditions. It is unknown and not predictable what rules the Employers will introduce through this back door.» Contractors and Employers are advised to seek clarifications for this in the tender phase.» EIC objects that there might exist concurrency for extension of Time for Completion. Concurrency is, if at all, an issue of monetary compensation.

14 Clause 13 Variations and Adjustments Sub-Clause 13.3 [Variation Procedure] The contractor shall be bound by each Variation instructed under Sub-Clause [Variation by Instruction] and shall execute the Variation with due expedition and without delay, unless the Contractor gives a Notice to the engineer stating (with detailed supporting particulars) that:»the varied work was Unforeseeable having regard to the scope and nature of the Works described in the Employer s Requirements

15 Clause 13 Variations and Adjustments»the Contractor cannot readily obtain the Goods required for the Variation, or»it will adversely affect the safety or environmental protection,»it will have an adverse impact on the achievement of the Schedule of Guarantees, or»it may adversely affect the achievement of fitness for purpose. Notwithstanding any objections raised by the Contractor, the Engineer may still confirm his instruction.

16 Clause 13 Variations and Adjustments FIDIC has introduced a structure which opens two pathways to a Variation:» Variation by Instruction» Variation by Request for Proposal EIC welcomes that there are now rules for determining a new rate or price as part of Sub-Clause [Variation by Instruction], either through the tender rates and prices or based on Costs Plus profit (if no rates or prices are relevant for the derivation of a new rate or price).

17 Clause 13 Variations and Adjustments EIC also welcomes the cash-flow positive provision that: until such time as the adjustments under sub-paragraph (ii) are agreed or determined, the Engineer shall assess a provisional rate or price for the purposes of Interim Payment Certificates.

18 Clause 20 Employer s and Contractor s Claims Two time bar provisions:» 28 days for a Notice» 84 days for a fully detailed claim Sub-Clause [Fully Detailed Claim]» Includes a sanction that the Claimant s Notice will lapse should it not provide a, statement of the contractual and/or other legal basis of the Claim.

19 Dispute Avoidance under FIDIC 2017 Early Warning under Sub-Clause 8.4 Clear Notices required Reciprocal rights Employer/ Contractor PoW enhanced provisions: details/ updates Engineer shall act neutrally under Sub-Clause 3.7 Determination Engineer s Consultation

20 Dispute Avoidance under FIDIC 2017 Claim procedure changed:» active management required» but additional cause for disputes? Claim Clause 20 separate from Dispute Clause 21 DAAB: standing DAAB and Avoidance of Disputes Clause 21.3 Communication is key to less disputes.

21 Summary Exceptionally prescriptive drafting, such as new definitions and step-by-step procedures, resulting in a greater administrative burden on the Contractor and, in principle, additional costs for the Employer. New time limits which if not met, trigger deeming provisions Symmetry between the Contractor s and the Employer s rights and obligations Enhanced (and separate) claims and disputes provisions, including the introduction of the new standing Dispute Avoidance / Adjudication Board

22 THANK YOU FOR YOUR ATTENTION Dispute Resolution Board Foundation 2018