International Federation of Consulting EngineersFIDIC

NACEC & FIDIC in Russia

Agenda

• International investment and construction• International best practice tools• FIDIC conditions of contract

FIDIC International Experience in Executing Investment and Construction Projects

Aisha Nadar, BSEE, MBA, LL.M.

Aisha acts as arbitrator, mediator, adjudicator and expert witness and is retained regularly by parties, party counsel as consultant in matters relating to international construction arbitration. She advises parties on non-contentious

procurement management (contracts, procurement strategy and program management), including dispute prevention. Aisha also advises the International Finance Corporation on the promotion of the mediation in the Egyptian construction industry Aisha is an adjudicator on the FIDIC’s

President’s list and currently serves as an officer in the International Construction Projects Committee of the International Bar Associations and a member of FIDIC’s Update Task Group for the 1999 Suite.

For 30 years, Aisha has been involved in all phases of the implementation of large-scale cross-border infrastructure and defence programs; including RFP development, source selection, development, test and deployment. Aisha’s procurement and international

contract management experience includes holding senior level positions in the US and the Middle East.

International Investment and Construction

• Private sector more involved in the supply of infrastructure assets and services – An emphasis on investment and service provision by

private sector– Risk transfer from government to private sector

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International Investment and Construction

• Governments provides:– Good laws – Good institutions – Strong partnership with industry

• Industry provides – Sound management practices– Strong risk assessment/mitigation– Strong project management

5

FIDIC Experience: Best Practice Tools

• Available FIDIC best practice tools– How to choose the right project

• Correct investment choice– How to choose a consulting engineer

• Quality based selection (QBS)– How to ensure ethics and integrity in the industry

• FIDIC’s integrity management system (FIMS)– How to choose the right project delivery method

• FIDIC Procurement Procedures Guide– How to efficiently and effectively balance project risk

• FIDIC conditions of contract

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FIDIC Procurement Procedures Guide

• Covers the path from identifying a need to appointing a contractor– Establishing what is to be procured– Deciding on a procurement strategy– Soliciting and evaluating tenders

• Consultant• Contractor

– Awarding contracts

The Agreement with the Consultant

• Typically negotiated contract– Recruited on service rather than commodity basis– Financial stability, other factors critical– Sometimes have design competition– Don’t want to push too low:

• Poor design• Poor personnel• No time for double double-check

• Contrast– Price of design has small impact on overall price– Quality of design has big impact on overall price

FIDIC White Book

• For pre-investment and feasibility studies,

• For designs • Both for Employer-led

design teams, and for Contractor-led design teams under Design and Build procurement

• For administration of construction and project management

• International and domestic

The White Book: Underlying Principles

• Even handed between the client and consultant• Use language that is simple and more reliable to translate• Avoids legal jargon and terms used only in particular

geographical area• Help parties to consider the risk and responsibilities each will

assume, – rather than to simply focus on technical content of the

assignment• Capable of wide application• Promotes cooperation and mutual trust and avoid promoting

adversarial attitudes

The White Book: Underlying Principles

Mutual trust and confidence fostered and maintained between Client and Consultant

•Consultant agrees to perform the Services in conformity with the provisions of the Agreement

– SC 3.3.1 “…the Consultant shall have no other responsibility than to exercise reasonable skill, care and diligence in the performance of this obligations under the Agreement”

•Client agrees to pay in a timely manner

•Variations by application by either Party (SC 4.3)– Proposal preparation at Client’s expense– Commencement not required without written approval of fees

associated

FIDIC on Procurement of Works

• Irrespective of the size of the project, the employer will look for a procurement strategy that results in contractual arrangements that will provide a defect-free project, that is fit for purpose and completed in a timely fashion and within budget.– The strategy should take into account the need for

economic whole-life operating and maintenance costs

• This requires: A procurement package that is properly and fully prepared by experienced staff, and includes the correct standard form of FIDIC’s conditions of contract

FIDIC’s Conditions of Contract: The History

• First standard form of contract published in 1957– The “original” Red Book– Developed for civil engineering works in the international

field– Two party Contract [Employer, Contractor]

• Three Party execution– Employer– Contractor– Engineer

» Employed by Employer» Designer» Impartial, quasi-arbitral role during contract execution

FIDIC’s Conditions of Contract: Updates

• Continual focus on keeping with industry state of the practice– 1963 Yellow book, Conditions of Contract for Mechanical

and Electrical Works– 1987 4th edition of Red Book and 3rd edition of Yellow

book– 1994 Update task force established to update Red and

Yellow books– 1995 Orange book, Conditions of Contract for Design-

Build/Turnkey• Engineer replaced with Employer’s Representative• Dispute Adjudication Board (DAB) introduced

FIDIC’s Conditions of Contract: Updates

• 1999 publication of FIDIC Rainbow Suite• 2005 Multilateral Development Bank Harmonized

edition (2005, updated 2010)• 2008 publication of Gold Book• 1999 Suite currently undergoing update

FIDIC Conditions of Contract: The 1999 Suite

Red Book◦ Conditions of Contract for Construction for

Building and Engineering Works Designed by the Employer, 1st Edition 1999

Yellow Book◦ Conditions of Contract for Plant and Design

Build, for Electrical and Mechanical Plant, and For Building and Engineering Works, Designed by the Contractor, 1st Edition 1999

Silver Book◦ Conditions of Contract for EPC/Turnkey

Projects, 1st Edition 1999

The 1999 Suite of Contracts

Comparative Advantage•Prepared by engineers, reviewed by legal advisors

– ‘Manuals of good engineering practice’

•Clearly defined risk allocation•Prepared for ‘international’ and domestic use

– Suitable for use in both common law and civil law jurisdictions

• With adaptation• Local legal due diligence required pre-contract signature

The 1999 Suite of Contracts

Comparative Advantage•Harmonized in form, wording and definitions, to extent practicable

– Focus on clarity and consistency in wording– Each of the Books is in three parts:

• General Conditions – 20 Clauses• Guidance for the Preparation of the Particular

Conditions• Forms

– Readily adaptable

Differentiating Features•Allocation of:

– Design responsibility– Project risks – Contract administration role

The 1999 Suite of Contracts

Allocation of Design Responsibility

• Red book– Employer responsible for detailed design

• Yellow and Silver books– Contractor responsible for detailed design

• “4.1 The Contractor shall design, execute and complete the Works in accordance with the contract…When completed, the works shall be fit for the purposes for which the Works are intended…” (emphasis added)

FIDIC Risk Allocation Philosophy

• Balanced risk allocation– Risk is allocated to the party that is best able to

• Control the risk• Manage the risk• Sustain the consequence

• Silver book is the exception– New for FIDIC

• Employer pays higher price to transfer more risk– Based on commercial practice where projects where

privately funded

Contract Administration

• Red and Yellow books– Two party contract – Three party execution

• Employer• Contractor• Engineer

– Sub-Clause 3.1 [Engineer’s Duties and Authority]– ”…(a) whenever carrying out duties or exercising authority,

specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer..”

• Silver book– Two party contract -- Two party execution– Less day-to-day employer involvement during progress of

works

Dispute Avoidance and Resolution

• Multi-tier dispute resolution– Engineer (binding) – Employer’s Representative (not binding)

– DAB– Amicable settlement– International Arbitration (ICC Rules)

FIDIC Conditions of Contract

Adopting the Right Form

Global Usage of FIDIC Contracts

• Geographic locations– High levels of activity in Eastern Europe, South East Asia

and South America– Predominant standard form in the majority of the Middle

Eastern/North Africa– Widely used in Africa, esp. East and Southern Africa

• Sectors– Construction (Red Book) – Power industry (Yellow & Silver Books)– Wind farms (Yellow & Silver)– Oil and gas industry: little usage due usage of mainly

bespoke

29 March 2016 26 LEGAL ISSUES AND LIABILITIES IN THE RECRUITMENT CYCLE

Aisha NadarSenior ConsultantAdjudicator, FIDIC President’s List

Advokatfirman Runeland ABSturegatan 12SE-11436 StockholmSwedenT: +46 725 765 510E: aisha.nadar@runelandlaw.se

ADVOKATFIRMAN RUNELAND