FIDIC TRAINING COURSE FIDIC CONTRACT MANAGEMENT

Transcription

1 FIDIC TRAINING COURSE FIDIC CONTRACT MANAGEMENT Trainer : Stephane Giraud FIDIC Accredited Trainer & DAB stephane.giraud@planjconsulting.com Baluwapati, Nagarkot, 26-27/09/2018 NEPAL

2 PROGRAMME 9:00 10:00 Introduction to FIDIC on HPP The FIDIC Conditions of Contracts - a general overview How to choose the right colour of FIDIC for a HPP project? Who is responsible for the Design? How does hydropower differ from other types of construction? Best Contracting types and strategy Integrating the employer s normal practices & potential conflicts 10:00-11:00 FIDIC Red, Yellow and Silver Book (Conditions of Contract for Construction 1999 and 2017 edition) Part 1 FIDIC Red, Yellow, Silver Books ( ) basic features, applicability Preparing for a FIDIC Contract under specific law of the Country The Structure of the Contract Conditions (Clauses and Sub-Clauses) the priority of Documents Is an interface agreement required? The Employer s Requirements : a Master Piece!

3 PROGRAMME 11:15-12:30 FIDIC Red, Yellow and Silver Book (Conditions of Contract for Construction 1999 and 2017 edition) Part 2 The Parties (Employer, Engineer, Contractor) and others stakeholders The role of the Engineer Site Data, Design, Plant, Materials and Workmanship, Tests), TOC, DNP The Time is of Essence (Commencement, Delays and Suspensions) 13:30-15:00 FIDIC Red, Yellow and Silver Book (Conditions of Contract for Construction 1999 and 2017 edition) Part 3 Payment (excl. financing) Variations and Adjustments Risks management Insurance, Force Majeure Suspension, Termination 15:15-17:00 FIDIC Red, Yellow and Silver Book (Conditions of Contract for Construction 1999 and 2017 edition) Part 4 Securities, Performance bonds Claims & Dispute, the Key Features : unforeseability of events Dispute Adjudication Board Arbitration (ICC)

4 What is FIDIC? FIDIC is a French acronym standing for Fédération Internationale des Ingénieurs-Conseils i.e. the International Federation of Consulting Engineers FIDIC is an organisation founded in 1913 More than 100 countries in professionnals FIDIC Web Site

5 5 FIDIC Organisation Executive Committee President ( ): Alain Bentejac, France FIDIC Secretariat Contracts Committee Other Committees (Business ethic, risk, sustainable dvpt, capacity building, young pro )

6 6 What is FIDIC? FIDIC is well know for publishing forms of construction contracts that: are balanced in risk allocation are used internationally (civil & common law) use common terminology New Ed. 2017

7 7 Common Law and Civil Law? Art 1134 Code Civil»Pacta sun servanda» «NY Convention 1958» Somes slides of this presentation are shown with the authorization of : Civil Law Common Law Customary Law Muslim/Sharia Law Mixed common law / civil law

8 8 What FIDIC contract to choose? 1. Who is responsible of the Design, the Employer or the Contractor? 2. What risk allocation between the Employer and the Contractor?

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10 10 Cost / Risk / Design relationship Contractor s risks Project cost RED BOOK YELLOW BOOK SILVER BOOK Employer s risks Employer design & construction control

11 11 FIDIC Red Book (RB) Vs. Yellow Book (YB) Clauses in all Books Ed.1999 (21 in 2017 Ed.) 2. Wording similar in all Books (Red, Yellow, and Silver) 3. 2 Clauses differing fully in Red and Yellow/Silver : Clause 5 DESIGN Clause 12 MEASUREMENT & EVALUATION

12 FIDIC Typical Structure

13 13 Role / Employer - Contractor & Engineer The Owner BANKS / LENDERS TECHNICAL ADVISOR The Employer DAAB FIDIC CONTRACT (RED, YELLOW, SILVER BOOK ) FIDIC WHITE BOOK Manages the FIDIC contract The Engineer The Contractor No contractual link! Contractual relationship Functionnal relationship Interface Agreement? Other Contractors

14 14 FIDIC Red & Yellow Book Ed.1999 Main Clauses CONTRACTOR S TENDER CLAUSE 3 The Engineer CLAUSE 2 The Employer FIDIC CLAUSE 4 The Contractor CONTRACT CLAUSE 1 General Provisions CLAUSE 17 Risk and Responsability CLAUSE 18 Insurance CLAUSE 19 Force Majeure COST CLAUSE 12 Measurement/Evaluation CLAUSE 13 Variations CLAUSE 14 Contract Price / Payment Other Contractors CLAUSE 5 Design of the Contractor CLAUSE 6 Staff and Labour CLAUSE 7 Plant, Materials and Work. CLAUSE 9 Tests on Completion CLAUSE 10 Employer s Taking-Over CLAUSE 10A O&M Agreement? CLAUSE 11 Defect liability CLAUSE 12 Test after Completion COSTS CLAIMS & DISPUTES Sub-Clause 2.5 Employer s Claim CLAUSE 15 Termination by Employer CLAUSE 16 Termination by contractor Sub-Clause 20.1 Contractor s Claim Sub-Clause 20.4 Adjudication DAB Sub-Clause 20.6 Arbitration CLAUSE 8 Commencement, Delays QUALITY TIME

15 FIDIC Red & Yellow Book Ed.2017 Main Clauses Clause 3 The Engineer 8 Sub-Clauses Sub-Clause 3.7 Agreement or Determination Clause 2 The Employer 6 Sub-Clauses Clause 4 The Contractor 23 Sub-Clauses Clause 1 General Provisions / Definitions / Law Sub-Clause 1.15 Limitation of Liability Clause 17 Care of the Works and Indemnities Clause 18 Exceptionnal Events Clause 19 Insurance Clause 5 Design Clause 6 Staff and Labour Clause 7 Plant, Materials and Workmanship Clause 9 Tests on Completion Clause 10 Employer s Taking Over Clause 11 Defect after Taking Over Clause 12 (YB) Tests after Completion Clause 15 Termination by Employer COST + COSTS CLAIMS & DISPUTES Clause 12 (RB) Measurement & Evaluation Clause 13 Variation and Adjustments Clause 14 Contract Price and Payment Clause 16 Susp. Termination by Contractor Clause 20 Employer s and Contractor s Claim Sub-Clauses 20.1 => SC 3.7 Determination Clause 21 Dispute and Arbitration Sub-Clauses 21.2 to DAAB Sub-Clause Arbitration CLAUSE 8 Commencement, Delays, Suspension Sub-Clause 8.3 Programme Sub-Clause 8.4 Advance Warning QUALITY TIME

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17 FIDIC sayings FIDIC can help you to success but not save you from disaster (Kjell) & FIDIC never leaves you alone!

18 18 General provisions Clause 1 Definitions SC 1.1 Words written with a Capital letter are defined words 58 Definitions in the standard FIDIC Defined terms : new ones?

19 SC Employer s Requirements (1/3) Definition of the location of the site Definition and purpose of the works Scope, design and other technical criteria Applicable technical standards, codes and regulations Quality and performance criteria Permissions being obtained by the employer Customs requirements Proposed or required time programme Phased possession of foundations, structures, plant or means of access.

20 SC Employer s Requirements (2/3) Other contractors (and others) on the site Setting-out points, lines and levels of reference lnvolvement of third parties Environmental constraints Access constraints: road, rail, air and sea Electricity, water, gas and other services available on the site Employer's equipment and free-issue material Criteria for design personnel Contractor's documents required, and whether required for information, review and/or approval, and number of copies

21 SC Employer s Requirements (3/3) Facilities for the employer, the engineer and his representative, as wel as for the contractor's personnel Samples, Testing during manufacture and/or installation and construction Tests on completion Damages for failure to pass tests on completion Operational training for the employer's personnel O&M manual, As-built drawings and other records of the works Tests after completion & Damages for failure to pass tests Provisional sums

22 22 General provisions Interpretation SC 1.2 «reasonable Profit» =?% Communication SC 1.3 Specific software? but not unreasonably withheld Law and Language SC 1.4 English as communication language?

23 23 General provisions Priority of Documents SC 1.5 Beware that ambiguities is the cause of disputes Beware of EMPLOYER S REQUIREMENTS! Delayed Drawings or Instructions SC 1.9 (RB) No reference to drawings, but to Employer s specifications (similar to RB?) Error in the Employer s design SC 1.9 (YB / SB) Similar to SC 1.9 from the YB

24 24 General provisions Yellow Book Errors in the Employer s Requirements SC 1.9 This is in essence a 3-step process Tender stage Errors to be raised to the Employer Scrutiny period under SC 5.1 Error spotted by an experienced contractor? Variation SC 1.9 Yes No Claim No entitlements

25 25 The Employer - Clause 2 Access to Site SC 2.1 What is the Site for each Contractor? Access dates have been introduced See next slide

26 26 What is the Site? Variation if the Contractor suffers from unforeseeable Cost Possession of Site not exclusive to the Contractor co-operation foreseen under SC 4.6 (Interface Agreement) Site Possession and Right of Access SC 2.1 Rights-of-way, additional facilities (warehouses, office, etc) SC 4.13 Contractor 2 Contractor 1 Contractor 3 Other Contractors... Getting to the Site = Contractor s responsibility SC 4.15

27 27 The Employer - Clause 2 Financial Arrangements SC 2.4 Risk for the Employer Employer s Claim SC 2.5 Similar as RB or YB : don t forget to use it! Especially for SC 8.7 Delay Damages No Time Bar for the Employer until 2017 version!

28 28 The Engineer Clause 3 Any actions with impact on Time and Price => Employer s approval? Engineer s authority => increase the Employer s workload FIDIC s spirit = Do now, Argue later. Instructions =>Variations and/or claims

29 29 The Engineer Clause 3 SC 3.3 : Instruction is binding? SC 3.5 / 3.7 : The Engineer shall make fair determinations but act with prior approval of the Employer => breach of obligation of fairness of the Engineer? Binding effect!

30 30 The Contractor Clause 4 SC 4.1 : Fitness-for-purpose v. remeasurement contract SC 4.2 : Perfomance Bond = 10% of Accepted Contract Amount generally. To be negociated SC 4.4 : Sub-contractors Not subcontract the whole of he Works Direct payment possible SC 4.6 : Cooperation Interface agreement?

31 31 The Contractor Clause 4 SC 4.7 : Topography : level and positionning. Who controls? SC 4.10 : Information on Site conditions : INPUT DATA! sub-soil, hydrology, topography, weather conditions => Which Party bears these risks? (i.e. color of FIDIC)

32 EMPLOYER SC 2.5 Site Data & Items of Reference SC 4.7 Setting Out / SC 4.10 Use of Site Data Red & Yellow Book BASE DATE CONTRACTOR SC 2.5 SC 4.7 OK =>SC 4.7 Setting Out on Site with original points ITEMS OF REFERENCE (responsibility Employer) VERIFY Not OK (error) =>SC 3.7 Agreement or Determination SC 5.1 (d) (Silver Book) Except for SILVER BOOK and SC SC 20.2 Variation Claim SITE DATA (for information only) INTERPRET SC 4.10 RISKS Topography Hydrological Sub-Surface Environmental Surroundings / Site Laws To the extent which was practicable (cost&time) Variation OPTIONAL See also SC 4.12 Notice Claim

33 RCC DAM IN ALGERIA (2013) SUB- SURFACE CONDITIONS HYDROLOGICAL CONDITIONS TUNNEL

34 Extract from FIDIC Silver Book SC 4.10 : The Employer shall have made available to the Contractor for his information ( ) all relevant data ( ) on subsurface and hydrological conditions at the Site, including environmental aspects. The Contractor shall be responsible for verifying and interpreting all such data. The Employer shall have no responsibility for the accuracy, sufficiency or completeness of such data, except as stated in Sub-Clause 5.1 [ General Design Responsibilities ].»

35 Extract from FIDIC Silver Book SC 4.12 : «a) the Contractor shall be deemed to have obtained all necessary information as to risks, contingencies and other circumstances which may influence or affect the Works; b) by signing the Contract, the Contractor accepts total responsibility for having foreseen all difficulties and costs of successfully completing the Works; and c) the Contract Price shall not be adjusted to take account of any unforeseen difficulties or costs.»

36 Possible avenues for more balanced risks sharing Split of the Silver Book Contract Price with a lump sum part and a remeasurable part, mainly related to civil works induced by unforeseen geological risk, Capping of the re-measurable part of the Silver book, so that the Contractor assumes a limited risk, and above that, the risk is born by the Employer

37 New SC 4.12 (special drafting requested) SC 4.12 UnforeseeableDifficulties(part ii) Except as otherwise stated in the Contract: a) the Contractor shall be deemed to have obtained all necessary information as to risks, contingencies and other circumstances which may influence or affectthe Works; b) by signing the Contract, the Contractor accepts total responsibility for having foreseen all difficulties and costs of successfully completing the Works, provided that if and to the extent that the Contractor encounters adverse physical conditions, during excavation for the tunnels, caverns, accesses, and the switchyard surface excavation, the effects of which delay the completion of the underground and surface works beyond the time foreseen in its Offer, then the Contractor shall be entitled to an Extension of Time for any such delay, if completion is or will be delayed, under Sub- Clause 8.4 [Extension of Time for Completion], the extent of which shall be established in accordance with the methodologies set out in Annex X to these Particular Conditions, and c) the Contract Price shall not be adjusted to take account of any unforeseendifficulties or costs.

38 38 The Contractor dealing with SC 4.12 HARD PHYSICAL CONDITIONS? UNFORESEABLE? No NO EXTRA COST NO EoT Yes NOTICE FROM CONTRACTOR INSTRUCTION TO CONTRACTOR Yes VARIATION? SC 13.1 Yes EXTRA COST + PROFIT EoT No CLAIM ON COSTS & TIME? Yes CLAIM SC 20.1 No

39 39 The Contractor Clause 4 SC 4.9 QA system and CVS SC 4.8, 4.22 and 6.7 / SC 4.18 HSE Protection of the environment, and link with SC 4.23 (PPSPS ) SC 4.21 Monthly progress reports; link with SC 14.3

40 CONTRACTOR SC 4.9 QUALITY MANAGEMENT AND COMPLIANCE VERIFICATION SYSTEM ENGINEER 28 days from Commencement Date As per details in the Employer s Requirements SC 4.9 QUALITY MANAGEMENT SYSTEM Review by The Engineer AUDIT (internal or external) (a) NOTICES TRACED (b) INTERFACES MANAGED (c) DESIGN REVIEW ORGANISED REVISION OF NON-COMPLIANCE QM System maybe to be reviewed by Eng. 21 days Report / Notice COMPLIANCE VERIFICATION SYSTEM COMPLIANCE VERIFICATION SYSTEM Design Materials Employer-supplied Materials Plant Work Workmanship Method for reporting the Tests (SC 7.5)

41 41 Design Clause 5 SC 4.1 Contractor s General Obligations Fitness for purpose vs. due care, skill and diligence SC 5.1 General Design Obligations Scrutiny period (link with SC 4.7) Design review required : to which extent? SC 5.2 Delay in approving design documents?

42 Extract from FIDIC Silver Book SC 5.1 : «( ) The Employer shall not be responsible for any error, inaccuracy or omission of any kind in the Employer's Requirements as originally included in the Contract and shall not be deemed to have given any representation of accuracy or completeness of any data or information. However, the Employer shall be responsible for the correctness of the following portions of the Employer's Requirements : (a) portions, data and information which are stated in the Contract as being immutable or the responsibility of the Employer (d) portions, data and information which cannot be verified by the Contractor»

43 43 Staff & Labour Clause 6 SC 6.1 to 6.7 covers usal requirements for the Contractor to comply with regarding his labour SC 6.9 Rather extensive power from the Engineer to have a Contractor s Personnel removed. Beware abuse. SC 6.10 Records of Contractor s Personnel & equipment mobilized. (typically with the SC 4.21)

44 44 Plant, Materials and Workmanship Clause 7 SC 7.1 Reference to Good practice; FAT? SC 7.4 Testing variations : Clause 13 may be called SC 7.7 Ownership of the Plant : when?

45 45 Time / Delay Damages Clause 8 SC 8.1 Commencement Date QUESTION What is the Time for Completion? SC 8.3 Programme : To be approved?

46 46 Time / Delay Damages Clause 8 SC 8.4 EoT for climatic conditions? SC 8.6 as acceleration clause? SC 8.7 Delay Damages, Capped 15%-10%? Who owns the float? Delay Liquidated Damages Vs Performance Liquidated Damages Incentive Scheme i.e. early generation of power in FIDIC?

47 47 Time Management / Delay Damages / EoT Note that FIDIC cover partially issues (Ed. 2017) such as: Programme software to be used (Primavera, MS Project, others) Form of programme, Critical Path Method Delay analysis As-Built-But-For, Time Impact Analysis or others Concurrency of delays For instance SCL Delay & Disruption Protocol

48 48 Tests on Completion Clause 9 SC 9.1 As-built documentation and O&M manuals (if any) have been submitted to the Contractor. SC 9.1 Tests + commisionning FIDIC Contracts to be updated / redrafted to match these requirements

49 49 Taking-Over of the Works Clause 10 SC 10.1 Taking Over of Works and Sections As-built & O&M documents to be delivered TOC of Sections => impact on LDs? TOC with any minor outstanding work and defects which will not substantially affect the use of the Works or Section for their intended purpose SC10.2 Taking Over of Parts of the Works? not necessarily How to Take-Over part of the Works?

50 50 Defects Liability - Clause 11 SC 11.1 Remedy punch list / snag list items from TOC and remedy any defect during DNP (2 years). SC 11.3 Extension of DNP only if Works unfit for purpose SC 11.4 Failure to remedy defects => Employer can employ others, at the Contractor s cost (SC 2.5) but not risk SC 11.9 Performance Certificate

51 51 Measurement and Evaluation Clause 12 SC 12.1 Measurement by the Engineer with involvement of the Contractor, based on BoQ SC 12.3 New Rates : different conditions Widely applied methods of measurement internationally (UK):

52 52 Variations Clause 13 SC 13.1 : VARIATION MECHANISM Right to vary : Instruction or Value-Engineering EMPLOYER S PRIOR APPROVAL? Binding effect of a Variation Vs. Claim

53 53 Adjustments for Changes in Cost SC Pn variations - Examples Labour Index Steel Index Pn Base Date Month 1 Month 10 Month P n = a + b L n L 0 + c S n S 0 Generally filled in by Employer Generally filled in by Contractor a, b, c = 1 Example P n = 0,7 + 0,15 L n L 0 + 0,15 S n S 0

54 54 Contract Price and Payment Clause 14 SC 14.1 : Contract Price Measured quantities : BoQ unit rates under the Red Book Lump sum payment under the Yellow Book = FIXED PRICE? SC 14.3 /14.6 : Interim Payment Certificate IPC to be approved fairly by Engineer and Employer SC 14.7: Payment Obligation of the Employer! Payment in 56 days upon Schedule otherwise SC 14.8

55 55 Payment Clause 14 SC 14.3 Contractor issues a Statement, together with supporting document which shall include a monthly progress report under SC days max SC 14.6 Engineer to issue an Interim Payment Certificate (IPC) to the Contractor, certifying amount he fairly determines to be due 56 days max SC 14.7 Employer pays the IPC Possible set-off only for Employer s claims under SC 2.5

56 56 Termination by Employer Clause 15 SC 15.1 Notice to correct If the Contractor fails to carry out any obligation under the Contract, the Engineer may by notice require the Contractor to make good the failure and to remedy it within a specified reasonable time SC 15.2 Grounds for Employer s termination Time Quality (ref SC 7.5 d) 9.4 b) 11.4 c)) Others

57 57 Termination by the Contractor Clause 16 Suspension / Reduction of rate of progress Late IPC / SC 14.6 Late payment / SC 14.8 If Termination, Cost plus reasonable profit and EoT entitlements for the Contractor through a claim process SC 16.4 Termination is favorable for the Contractor?

58 FIDIC Principles Clause 17 Risk Responsibility Liability Indemnity Insurance

59 FIDIC Contracts philosophy for risk allocation Whenever a risk eventuates: which is not attributable to any of the Parties, and which is not insurable FIDIC Contracts will generally allocate the risk of loss and damage to the Works to the Employer, as being the Party having the higher long-term interest in the project This is typically the case for Force Majeure events, which explains why they are listed under Sub-Clause 17.3 of the FIDIC RB/YB 2016

60 60 Care of the Works Clause 17 SC 17.2, the Contractor is liable from Commencement Date until the Taking-Over Certificate is issued for all losses and damages, SC 17.3 g) : Design liability for the Employer (YB) SC 17.5 Intellectual Property Rights : claim within 28 days SC 17.6 : Caps : to be negotiated Usually at 100% of the Works?

61 61 Risk insurance Clause 18 Types of insurances Insurance for Works and Contractor s Equipment (SC 18.2) Insurance against persons / damage to property (SC 18.3) Insurance for Contractor s personnel (SC 18.4) This Clause is regularly amended so as to reflect each project requirements (CAR Contractor s All Risks insurance, freight insurance, motor insurance, etc.)

62 62 Force Majeure Clause 19 SC 19.1 Beware of the jurisdiction / 4 conditions precedent? SC 19.4 compensates the Contractor for the costs and delay incurred during the time he cannot perform his obligations because of a Force Majeure event

63 63 Claims and Dispute Clause 20 Contractor s Claim process SC 20 => SC 21 TIME BAR OF 28 DAYS NOTICE OF CLAIM STATING IT IS ONE CONTEMPORARY RECORDS ENGINEER S DETERMINATION

64 SC 20.2 Claim process - Summary Days 1 SC Event giving rise to the Claim SC Claiming Party keeps contemporary records to substantiate the Claim 28 max Time bar 1 SC Notice of Claim by the claiming Party 14 days max SC Deemed valid Notice of Claim but can be challenged by the other Party No Same possible challenge and remedies as in SC SC Challenge by the Engineer for late Notice? Yes SC Fully detailed Claim with: a) Description of the Claim event b) Contractual and/or legal basis of the Claim c) Contemporary records d) Quantum / EOT-ext DNP sought SC Max* Time bar 2 Claim time-barred but claiming Party can object in fully detailed Claim Only if SC 3.7 Agreement / Determin. process Interim fully detailed Claim in case of continuing effect *: unless otherwise proposed by the claiming Party and agreed by the Engineer

65 65 Dispute resolution Main assets of DAAB: DAA + Procedural Rules Prompt decisions on disputes 84 days Decisions are binding Dispute prevention (site visits) Private meetings : recommanded?

66 66 Dispute Resolution Procedures Public Law France (Civil Law) Private Law UK (Common Law) FIDIC First instance court Tribunal Administratif (TA) Tribunal de Commerce (TC) Tech and Construction Court (TCC) Engineer Second instance court (BINDING) Cour d Appel (CA) Cour d Appel (CA) Court of Appeal (CA) Adjudication (DAAB) Last instance court (FINAL & BINDING) Conseil d Etat (CE) Cour de Cassation (Cass.) Supreme Court (SC) Arbitration (ICC)

67 THANK YOU FOR YOUR ATTENTION! Trainer : Stéphane Giraud FIDIC Accredited Trainer & DAB stephane.giraud@planjconsulting.com