The fellow readers are aware of the Rainbow suites of FIDIC contract forms, latest updated on 2017. FIDIC forms of contracts are relevant because they provide a universally accepted form of Construction contract template with a fairly assessed and acceptable risk allocation along the primary stakeholders, those are the Employer, the Engineer and the Contractor.
FIDIC Emerald book is the form of Contract derived from the FIDIC Yellow suite of books, and it is dedicated to the construction works conducted underground or tunneling. We need to appreciate that in the substantially urbanized world, we are ought to foresee an increased reliability on underground modes of transportation, modes of movement and modes of storage. The underground/ tunneling nature of works have a requisite of technical expertise, specialized equipment, restricted access and possibly not an all-weather working period. Under these constraints, the Contractor is burdened to foresee all possible constraints. To absorb such deniability from Employer, the Contractor will very likely quote a higher costing and will also prepare for claims thereafter (not as an opportunity, but as a necessity).
Similarities and Differences
FIDIC Emerald carries forward the spirit of FIDIC Yellow, it remains a design and build form of contract, with measurements based on lumpsum and item wise. Herein, the Employer is enshrined with the obligation of accuracy and ownership of the details disclosed in his Geotechnical Baseline Report (GBR). Thereby, the conditions not expressively defined or implied suitably in the report can be considered as “unforeseeable”. Therefore, such provisions modify the limits of unforeseeable activities and shifts the ownership of accuracy of data with the Employer. Such alteration is suitably established in the root clause 4.12 of FIDIC Yellow 2017 Contract.
Adjustment of Time and Cost
However, the risk sharing cannot be justified without enabling a reward mechanism. This form of Contract also provides provision for adjustment of time in line with the adjustment of Contract Price, in line with the original Clause 13.8 of FIDIC Yellow 2017 Contract. The provision of time adjustment is subject to the foreseeable factors defined in the GBR. Suppose the Contractor faces harsher soil conditions than prescribed in the GBR. Therefore, the Contractor will incur lower productivity in running meters of tunneling/ day as per the submitted Baseline Schedule. In an alternate scenario, the Contractor may also face more comfortable soil strata to work with and can achieve a higher productivity per day. Accordingly, subject to these alterations and variations in productivity, the duration of the activity is subject to increase or decrease. Such foreseeable alteration is not to be considered as Contractor’s entitlement as per applicable Clause 20.1 of FIDIC Yellow 2017 Contract.
Furthermore, the pre-defined schedule of payment also has provisions for time-based items in the Bill of Quantity. These time-based items define the costs incurred by the Contractor daily based on the Baseline Schedule of works. if the Contractor achieves a higher productivity, then the contract value shall shrink as per the time-based item multiplied with the reduced duration. It is to be understood that these works endure high initial investment from the Contractor in the form of specialized equipment, preparation and maintenance of access and specialized manpower. Therefore, an early completion of works at higher productivity is of benefit to the Contractor. It is also to be noted that the variation in productivity shall only be influenced by the Geotechnical parameters mentioned in the GBR. Under influence of other parameters, such adjustment to the Contract price cannot be made. Likewise, the Contract price is also to be adjusted and increased in value if the productivity goes down. Such variation in price of the works are to be taken in line with the Price adjustment clause 13.8 of the FIDIC Yellow 2017 contract.
In this form of Contract, under Contractor’s obligations, there is a new pre-requisite of risk register and maintenance of risk management plan. Such provisions are to be considered as early warning measures to initiate preparedness and lower possibility of unforeseeable for both the Contractors and the Employer. Such introduction is new to the set of FIDIC Forms of Contracts, as absence of such risk register guarantees possibilities of claims and prevents ambiguity, ownership of known constraints and settlement of claims. It is to be understood that the risk register gives an opportunity to the Contractor to undertake the unforeseen but early warnings by value engineering, or to notify the Engineer as per applicable clauses of variations.
A fair Agreement to share the risks
In today’s world, the commercial aspects of all economies have incurred a substantial halt in the cash flow. This has also raised the requirement of further influx on development of infrastructure. The global financial banks and forums have led a superior role in financing such infrastructure push across all emerging economies. Under such avenues, the FIDIC forms of contract establish themselves as the most endorsed form of Contract by all global financing banks. I hope you have found this bird’s view assessment useful. Please do share with those who may also find it relevant.
Happy Hunting!
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