WHY FIDIC IS INTERNATIONAL BEST PRACTISE

MOHAMAD SHUKOR BIN ZULKIFLI (2010811788) SUBMIT TO :PN ZAINAB BT MOHMED ZAINORDIN

TABLE OF CONTENT

CHAPTER 1: INTRODUCTION OF FIDIC

1.0 1.1 1.2 1.3

Introduction..3 What is FEDIC.........3 Types of FIDIC and Its Used..................4 Advantages of International Standard Form of FIDIC...8

CHAPTER 2 : COMPARISON BETWEEN FIDIC AND MALAYSIAN STANDARD FORM

2.0 2.1

Introduction of Malaysia Standard Form.10 Provision for FIDIC Comparing to Malaysia Standard Form...10

CHAPTER 3 : CONCLUSION

3.0

Conclusion....16

REFERENCES....17

CHAPTER 1 INTRODUCTION OF FIDIC

1.0

Introduction.

The purpose of standard form of contract is to define the contractual relationship between the parties, setting out their responsibilities one to another and insofar as is practical allocating the risks associated with the project between the parties. In the contract for international engineering projects, the function of Conditions of Contract is of greatest importance providing the rights, obligation and responsibility for the parties concerned in the Contract execution. The provision of International form of Contract is created by the committees seek to represent a variety of interest and represent a kind of compromise.

1.1

What is FIDIC

According to G.M Beresford (1999), FIDIC is the international federation of national associations of independent consulting engineers. It founded in 1913 by the national associations of three European countries, now with membership from over 60 countries. Most of growth outside Europe has taken place since the Second World War, with developing countries particularly being encouraged to join them to be apart in FIDIC membership. During the past half century, the International Federation of Consulting Engineers (FIDIC) has devoted itself to the compilation of management documents for all kinds of projects, among which the FIDIC Conditions of Contract are of the highest influence and are the most popular application. FIDIC now represents most of the private practice consulting engineers in the world and its members comply with a code of ethics guiding their professional standards.

FIDIC works to promote the common interests of consulting engineers through seminars, conferences and regular discussions with the national associations and international financial institutions (such as the World Bank) where the preparation of standard forms of contract and other documents is a major activity.

1.2

Types of FIDIC and its used

a) The Red Book

The first edition of FIDIC Conditions of Contract for Works of Civil Engineering Construction (use Red Book in the following) was compiled in 1957, and later its second, third, and fourth edition were issued in 1963, 1977, and 1987 respectively. But these editions were mostly compiled in the reference of the related documents of the Institution of Civil Engineers (ICE).

The FIDIC and European International Contractors (EIC) entrusted the University of Reading in 1966 to summarize the experience and to draw lessons from the application of the former documents. With the investigation of the governments, employers, contractors and consulting engineers all over the world about their application of the Red Book, 204 findings reports were returned. According to the findings, the FIDIC Contract Committee organized a group of experts to compile the new Contract Condition models to be applied in the 21stcentury.

Red Book, The Construction Contract, more completely the Conditions of Contract for Building and Engineering Works Designed by the Employer. Needs of modern multidiscipline contracts recognised for first time. The Red Book is that it envisages two kinds of Conditions of Contract:

y y

The General Conditions, as printed in the book Particular Conditions for the project in hand.

The Red Book

There is a valuable section of 20 pages of guidance on the preparation of Particular Conditions and related matters. The guidance includes forms of bond and guarantee as well as guidance on detailed terms and suggestions for clauses which might usefully be amended for special purposes. Careful completion of Particular Conditions is probably as important as adopting the General Conditions in the first place.

b) The Yellow Book

The Yellow Book is for Plant and Design/Build Contract or the Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor. It was needs of modern multi-discipline contracts recognised. The Partial Employer design include in Employers Requirements. It applies to the lump sum contract project where the Contractor takes participation in the design work.

The Yellow Book

c) The Silver Book

The Silver Book is for EPC/Turnkey Contract or the Conditions of Contract for EPC/Turnkey Contracts. EPC stands for Engineering, Procurement and Construction, where the entire project is created by the Contractor as a turnkey project. It also applies to the turnkey projects of infrastructures or large-scale factories, where the Contractor takes on more work and risk while the Employers participation is small (private financing or government financing), but it is strictly defined upon the investment and construction period.

The Silver Book

d) The Green Book

The last in this group was the Short Form of Contract, often abbreviated to The Short Form, essentially for minor works where the full detail of the major forms would be inappropriate and the procedures clumsy or even unworkable in the time available. It usually can be used in all kinds of small-scale projects.

The Silver Book

1.3 Advantages of International Standard Form of FIDIC

The FIDIC Conditions of Contract raised a higher requirement to the parties concerned in the area of contract management. Altogether, these Contract Conditions can be applied to nearly every kind of project, expect for that of managing contracting or simply consulting or designing is needed. The advantages of the International form of FIDIC are:

a) High-quality Provisions and Logical Clause Sequencing

The New Red Book has 163 clauses, nearly 40% being freshly compiled. An additional 40% were modified and given supplements. Only 20% were kept intact. The old edition adopted ICEs disorderly style bit in the clause sequence, while in the new edition, the related sub-clauses are put into one clause when possible, and convenient to the users.

b) Changes in the Preparing Style

General Conditions in the former edition were fairly concise of some recommendable clauses were given Particular Conditions. While in the new edition, there is a way around the regulations being that the General Conditions are relatively comprehensive and detailed. An example would be advanced payment and adjustment formula. The new edition writers believe that it is more convenient for the users to delete the clauses they do not need than to write them in the Particular Conditions by themselves.

c) Concise Language

The language and sentence structures in the new edition are rather easy to understand, and a great help to the people whose native language is not English.

d) Wider Application

When these new Conditions of Contract were drafted, FIDIC tried its best so the Conditions could be applied under not only the Customary Law (i.e. Anglo-American Law System), but also Civil Law. To pursue this, the contract working group had an attorney present to review the clauses, so that they could be applied under the two laws noted above. The new edition also shows more flexibility and adaptability. For example, in the old edition, the conditional performance guarantee was necessary, which the World Bank had different opinions of. While in the new edition, the guarantee forms were set by Particular Conditions which can be applied giving the employers better flexibility. e) Unification of Terms and Clause

The new edition was drafted as the New Red Book, the New Yellow Book and the Silver Book by a workgroup under the leadership of the FIDIC Contract Committee. The contract form was not influenced by the former ICE framework, which was included in all 20 clauses. So if the clauses content could be unified, it would be under the same titles and expressions. In these three books, more than 80% of the content was consistent, and 85% of the definitions and expressions were the same. It is of great help for the users to understand them completely, saving study time.

CHAPTER 2

COMPARISON BETWEEN FIDIC AND MALAYSIAN STANDARD FORM

2.0 Introduction of Malaysia Standard Form

Standard form can be defined as written agreement for contracting parties, client and also the consultant. According to Robinson and Lavers (1988), standard form of construction contract is required to perform as the evidence of legal relationship between parties. In Malaysia, there are several types of Standard Form of Contract available to use in construction, such as PWD 203A, PAM, CIDB, IEM and etc. The PWD forms of contract are the standard forms of contraction contract used by the Malaysian public sector. In fact, these have been in recent years increasing usage of the PWD forms with amendments by the private sector as well, especially in civil engineering construction. The PAM standard form of building contract was very widely used in the private sector

In Malaysia, PAM forms, PWD 203A forms, etc. PAM has introduced as a new set of standard form entitled PAM 2006 to replace the PAM 1998 to suit the current situation. It is the same with the PWD 203A form where the PWD 203A (Rev. 10/83) has been replaced by the PWD 203A (Rev. 2007). Both standard forms have its own provisions under contract.

2.1 Provision for FIDIC Comparing to Malaysia Standard Form.

The comparison will be made by focusing the international FIDIC form for Red Book with the Malaysian Standard Form, which is PWD 203A and PAM. This comparison purpose is to analyze why the FIDIC form is the best practice form for the international level trough the clause in the standard form.
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a) Authority Instructor

In the FIDIC form, clause 3 mentions that, the engineer has the authority attributable under the contract. When Engineer exercises specific authority then Employer is deemed to have given Approval. This clause gives the right to the engineer in giving instruction and makes the determination. The conditions provide that the Engineer shall proceed in accordance with sub-clause 3.5 to agree or determine any matter:

the Engineer shall consult with each Party in an Endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances

It was different compared to the PWD 203 form, where the Superintendant Officer (S.O) is the eligible person to give the instruction in this contract like mention in clause 5. While, in the PAM 2006 form, an architect is the person that qualified to hold that position like what mention in Architect Instructor (AI )in clause 2.

b) Delay/ Extension of time Clause 8 deals with Commencement, Delay and Suspension. Sub-clause 8.3 sets out the manner in which the Contractor should provide programmed showing how he proposes to execute the works. For example the programmed must be supported by a report describing the methods which the Contractor is to adopt. The extension of time provisions is clear. By sub-clause 8.4:

the Contractor shall be entitled ... to an extension of the Time for Completion if and to the extent that completion ... is or will be delayed by any of the following causes

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Figure: Procedures Extension of Time in FIDIC form Sources: FIDIC Condition for Contract Construction 1999, Edition 4

The contractor shall be entitled subject to an extension of the time for Completion if and to the extent that completion for the purposes is or will be delayed by a variation or other substantial change in the quantity of an item of work included in the contract, a cause delay giving an entitlement to extension of time under Sub-Clause of these Conditions and exceptionally adverse climate conditions.

Any delay, impediment or prevention caused by or attribute to the Employer, the Employer Personnel or the Employer other contractor. delay cause unforeseeable shortage in the availability of personnel or Good caused by epidemic or governmental action.

If the Contractor considers himself to be entitled to an extension of time for completion, the contractor shall give notice to the engineer in accordance contractors claims. When determining each extension of time the engineer shall review previous determining and may increase, but shall not decrease, the total extension of time.

It Different with PWD 203(clause 43) with FIDIC form, where the PWD form need time provisions preserve the contractors obligation to complete within a specified time and in
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doing so the provisions preserve the employers right to liquidated damages, when by prevention, he has delayed the contractor and is responsible in part for late completion. It is common to provide an express power for the EOT for completion and if an extension has been granted it operates wholly or partially as a defence to a claim for liquidated damages from the original completion date. If there is no express power to extend for a delay which is not the fault of the employer, the contractor takes the risk of that delay and will not avoid liquidated damages.

In PEM 2006 (clause23), If Contractor delayed in completion of work, the Contractor should write noticed. To apply of EOT to the Architect and the causes shall related the relevant event in within 28days from date of Architect Instruction at commencement Relevant Event, if fails to submitted, the contractor shall be deemed not delay the Completion of Works beyond Completion Date. Within 28 days should provide further particulars in writing and then issue of Certificate of EOT before or after date of completion

c) Payment

FIDIC form defined in the clause of payment (clause 14) how to handle the problem when the Employer has the payment delayed. If the Contractor does not receive payment (in accordance with the Interim Payment Certificate) within 56 days after submitting monthly statement to the Engineer at the beginning of the month, the Contractor shall be entitled to receive interest compounded monthly on the amount unpaid during the period of delay. These financing changes shall be calculated at the annual rate of 3 percentage points above the discount rate of central bank in the country of the currency of payment. If the Contractor does not receive payment within 42 days after the expiry of the above 56 days, he shall be entitled to terminate the Contract.

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Figure: Procedures of Payment in FIDIC form Sources: FIDIC Condition for Contract Construction 1999, Edition 4

FIDIC form also define that there is no power therefore for the engineer to negotiate an acceleration agreement for the employer. It also requires the contractor to process in accordance with programme, subject to his other obligation under the contract. This form gives the engineer power to instruct the contractor to submit a revised programmed with revised method to expedite progress and complete within the time for completion. the power arises if the actual progress is too slow to complete within for completion, or if the progress has fallen or will fall behind the programme.

There is one of the matters which entitle the contractor to an extension of time. The contractor is required to adopt the revised methods which are stated to include increase in the working hours and or increase in resources and or good. The revised method is at the contractors cost and risk he is liable for employers additional costs insured in addition to any delay damages.

In PAM 2006, the application and Issuance of Architect Certificate have some mention about items in final accounts. Contractors submit payment application with complete details and particulars. Then Quantity Surveyor considered the amount to be included. If

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failures submit payment application, the contractor waived his contractual. The Contactor is unable to issue Interim Certificate.

For Public Work Department (PWD) the question which troubles a contractor most now is the question of non-payment or delayed payment by the Employer. All the standard forms discussed that if the Employer does no pay, the contractor is entitled to bring the contract of his employment under contract to an end.

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CHAPTER 3

CONCLUSION

The new edition has many advanced ideas and regulations such as standardizing of the Contract words and expressions, clearer and stricter claim procedure, and emphasis on the protection of intellectual property rights The traditional project management mode, which is universal in the world, has been applied in most of the engineering project management cases in the world. We also can conclude the FIDIC form is much fairer and balanced to both parties where risk is allocated to the party that is best able to bear and control that risk. Recompense and time extension allowed when uncalculated hindrances occur. The engineer job is to supervise and monitor the work in strict accordance to the satisfaction of the engineer with formal Engineers Decision. Engineer is no longer stated to beimpartialbecause he shall be deemed to act for the Employe, except when fair determinations are required.

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LIST OF REFERENCE

1. Malaysian standard forms of contract: i. PAM Form of Building Contract (1998 & 2006) ii JKR/PWD Form of Contract (203A - Rev 10/83)

FIDIC (1999) Guide to the use of FIDIC Conditions of Contract for Civil Engineering Construction Fourth Edition)

Lim Chong Fong. (2004). The Malaysian PWD Form of Construction Contract. Thomson Asia Pte Ltd.

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