Hello fellow reader! As the title says, this article will be of help you to appreciate a better awareness and diligent implementation of the Golden Principles on the FIDIC forms of Contract. These principles define the limits of alteration one party should tolerate or allow in a #FIDIC contract.
Considering the asymmetric conditions of constructions, FIDIC set of contracts strive to provide an environment for fair and obliging agreements. FIDIC brings along with it a universal language of common understanding, thereby giving all parties the best value for money. However, continued interference and attempts of alteration by implementing authorities has always challenged the success of projects.
What are the #Golden Principles (GPs)?
These principles are prescribed by FIDIC as follows:
1. GP1: The duties, rights, obligations, roles and responsibilities of all the Contract Participants must be generally as implied in the General conditions, and appropriate to the requirements of the project.
2. GP2: The Particular conditions must not change the balance of risk/reward allocation provided for in the General Conditions.
3. GP3: All time periods specified in the Contract for Contract participants to perform their obligations must be of reasonable duration.
4. GP4: All time periods specified in the Contract for Contract Participants to perform their obligations must be of reasonable duration.
5. GP5: Unless there is a conflict with the governing law of the Contract, all formal disputes must be referred to a Dispute Avoidance/ Adjudication Board (or a Dispute Arbitration Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.
How should we implement these GPs?
These GPs help balance the allocation of risk against which each party is being paid for. Furthermore, a Contractor firm should rigorously implement these principles while subcontracting the works to a Sub-Contractor. For you to enforce your thoughts with these principals, you should seek the way a good detective thinks, or to fancy your thoughts, how Batman thinks:
Which party can best foresee the risks/ Consequences?
A party can foresee the risks/ consequences only when the party is effectively able to understand and comply with the requirements of tests at commissioning and post-commissioning stage. The Golden Principles help the Contract to channel the risks / rewards to the promising party at these two critical points of works.
Among them, which party can best deal with the risks/ consequences?
We should understand that a party which promises to be capable to foresee the risks/ consequences, therefore shall be well aligned to make the cost of works most predictable. If a party can make the task predictable and promise optimized performance, such streamlined operation shall definitely lead to highest value for money. The Golden Principles ensure that each party is obliged with the fundamental share of responsibility, keeping in mind the type of FIDIC Contract.
Which party benefits or suffers the most when such risks comes up?
This is where each party try to outsmart the other. The reader should understand the key hidden plot holes in the Contract, the Technical Specifications and the addenda of the Contract. A party will always envisage to off shoot the scope of works and reverse risks to the other party in these sections of Contract.
These questions represent a philosophy called Abrahamson Principle. However, the solutions and approaches to exercise these questions and the Golden Principles can be manifold. The Golden Principles help restore the absolute ownership of each obligation/ risk/ reward with the likely responsible party, that is either the Contractor/ Employer. To better understand the FIDIC Contracts, or any contract for that matter, we have to assess every flow of obligations and risks with certain fluidity, like that of a vibrant river. It is the role of an efficient investigator to understand and to act like a dam (Contractor), channel the flow of river to generate power (opportunities) and irrigate the low lands (Effective sub-contracts). Thereby, keeping the promising the prosperity from the river (Employer), a value for money.
Happy Hunting!
P.S.: This article was first posted by the Contributor on Linkedin.com
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