FIDIC (Fédération Internationale des Ingénieurs-Conseils) provides a set of widely recognized construction contracts that are used for large-scale and international projects. Each FIDIC book is designed for specific types of projects and provides a framework for managing construction works, responsibilities, payments, risks, and dispute resolution. Below are the key points of each major FIDIC contract book:
1. FIDIC Red Book (Construction Contract)
Key Points:
- Design by Employer: The client (or employer) provides the design, and the contractor is responsible for building according to that design. This contract is ideal for projects where the design has been mostly completed before construction begins.
- Responsibility of Contractor: The contractor is primarily responsible for executing the construction works as per the agreed specifications, quality, and standards.
- Supervision by Engineer: An independent engineer (often appointed by the employer) oversees the works to ensure that the contractor adheres to the agreed-upon standards.
- Dispute Resolution: The engineer acts as the first decision-maker for disputes. If disputes are unresolved, arbitration or other dispute resolution methods can be used.
- Payment Structure: Payment to the contractor is typically based on milestone completion, with interim payments made based on progress.
- Risk Allocation: Most risks are on the employer, as they provide the design. The contractor assumes responsibility for executing the project, managing time, and quality.
Best For: Projects where the client provides the design and the contractor is hired to carry out the construction based on these designs.
2. FIDIC Yellow Book (Design and Build Contract)
Key Points:
- Design and Build Responsibility: The contractor takes full responsibility for both the design and construction of the project. This contract is suitable for clients who prefer to hire a single entity for both design and construction.
- Innovation and Flexibility: The contractor has more flexibility and responsibility to propose design solutions and manage both the design and execution stages.
- Employer’s Requirements: While the contractor is responsible for the design, the employer typically outlines their specific requirements or performance specifications for the project.
- Dispute Resolution: Similar to the Red Book, disputes are first dealt with by the engineer, with arbitration available as a final step if issues remain unresolved.
- Payment Structure: Payments are often based on agreed milestones, and progress payments are made as work is completed.
- Risk Allocation: The contractor assumes more risk in this contract since they are responsible for both design and construction. The employer's role is more focused on setting the project requirements and monitoring progress.
Best For: Projects where the client prefers a single point of responsibility for both design and construction, often for time-sensitive or complex projects.
3. FIDIC Silver Book (EPC/Turnkey Contract)
Key Points:
- Full Responsibility of the Contractor: The contractor takes on full responsibility for the design, engineering, procurement, construction, and commissioning of the project. This is often referred to as a Turnkey project.
- Fixed Price Contract: The contractor is typically required to deliver the project for a fixed price, making this contract more suitable for projects where the scope and design are clearly defined at the outset.
- Performance Guarantee: The contractor is expected to meet specific performance criteria, and any failure to meet these criteria can lead to penalties.
- Dispute Resolution: Disputes are resolved through arbitration or other means if the issues are not resolved through the engineer’s input.
- Risk Allocation: The contractor assumes almost all risks in this contract, including those related to design, construction, and performance. The employer assumes less risk but retains responsibility for things like providing land or approvals.
- Completion Date: The contractor is required to complete the project by a fixed date. Penalties are applied for delays.
Best For: Large, complex, and highly detailed projects where the client wants a single contractor to be responsible for the entire project (from design to commissioning), and the project scope is well defined.
4. FIDIC Green Book (Short Form Contract)
Key Points:
- Simplified Contract: The Green Book is designed for smaller projects and is much simpler compared to other FIDIC contracts. It is a more straightforward, less complex contract option.
- Limited Scope: Suitable for projects where the scope of work is well defined and relatively simple, such as small civil works or building renovations.
- Reduced Administrative Burden: It involves less paperwork and fewer formal procedures than the larger FIDIC contracts. The role of the engineer is typically less involved.
- Shorter Timelines: Often used for projects with shorter timelines and more limited budgets.
- Dispute Resolution: Dispute resolution mechanisms are simpler, and the contract offers easier ways to handle conflicts with less formal arbitration processes.
- Risk Allocation: The risk is shared more equally between the contractor and employer but typically favors the employer slightly in the case of smaller projects.
Best For: Small projects that do not require extensive engineering oversight or a large, complex contract framework. Ideal for straightforward construction works with a limited budget and scope.
5. FIDIC White Book (Client/Consultant Agreement)
Key Points:
- Consultancy Agreement: This is not a construction contract but an agreement between the client and the consultant, who provides advisory services. It is used for projects where a consultant is needed for design and supervision.
- Defining Roles: It outlines the terms of engagement, duties, fees, and the scope of the consultant’s work, as well as how disputes will be handled.
- Payment Terms: Payments to the consultant are typically based on the services rendered and are outlined within the contract.
Best For: Projects where a client needs consultancy services, such as design supervision, project management, or technical advice.
Summary of Key FIDIC Books
| FIDIC Book | Main Focus | Risk Allocation | Best For |
|---|---|---|---|
| Red Book | Construction contract with employer-supplied design | Employer provides design; contractor responsible for construction | Projects with client-provided designs, construction-based |
| Yellow Book | Design and Build contract | Contractor responsible for both design and construction | Projects where client needs a single entity for design & construction |
| Silver Book | Turnkey/EPC contract (full responsibility for delivery) | Contractor responsible for all aspects (design, build, performance) | Large, complex, fixed-price projects with clear scope |
| Green Book | Simplified short-form contract | Shared responsibility, simple terms | Smaller projects with limited scope and budget |
| White Book | Consultancy agreement for design or management services | N/A | Projects requiring consulting, supervision, or project management |
Conclusion
Each FIDIC contract book is designed with specific project types and needs in mind, from large, complex projects to smaller, straightforward ones. Understanding the key features and differences between these books can help clients and contractors choose the right contract for their project, ensuring that roles, responsibilities, risks, and disputes are clearly defined and managed throughout the construction process.
