ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK)

1999 EDITION

Submitted To:

Dr. Hadikusumo

Submitted By:

Suyog Krishna Shrestha (115573)

Takehiko Yamaji (115663)

Deeptara Luitel (115564)

Muhammad Afzal (115659)

LEGAL & CONTRATUAL RISK MANAGEMNT

ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Table of Contents

1.0 Introduction: .............................................................................................................................. 1

2.0 Management of the project risks by FIDIC: ............................................................................. 1
2.1 Project Time: ......................................................................................................................... 1
2.2 Project Cost: .......................................................................................................................... 6
2.3 Project Quality: ................................................................................................................... 10
2.4 Project Safety: ..................................................................................................................... 13
3.0 Project Risks of OWNER (How he can manage them): ........................................................... 14
4.0 Project Risks of CONTRACTOR (How he can manage them): ................................................. 18
4.0 FIDIC Timeline: ........................................................................................................................ 30
5.0 Claim, Suspension and Termination by the Contractor: ......................................................... 30
5.0 Claim, Suspension and Termination by the Contractor: ......................................................... 35
6.0 Clauses that can allow contractor to demand EOT/Additional Payment: .............................. 40
7.0 Conclusion: .............................................................................................................................. 41
Appendix I ..................................................................................................................................... 42
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

1.0 Introduction:
FIDIC (‘Fédération Internationale des Ingénieurs – Conseils) is an international
organization developed the brief and practical contract types for the international projects. FIDIC
Red book refers to the general conditions of contract for construction. In order to change/modify
any of the condition in the general conditions of FIDIC based of the specific conditions of the
project, we need to document that in the supplementary conditions of the contract.

In the following part of this report, we have tried to analyze the project risks based on
various perspective such as time, cost, owner, contractor as documented in the general conditions
of the contract of FIDIC RED BOOK (1999 Edition) etc. The analysis is in form of Questions as
stated below.

2.0 Management of the project risks by FIDIC:

FIDIC general conditions of contract provide the structure and guidelines to manage
project risks from various perspectives. Below is the detail of the respective clauses and
explanation of how the document is managing those particular risks.

2.1 Project Time:

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

Most of the terms defined are related with time for

1 1.1 Definitions example. The contract, commencement date should
be taken into account to make it on specified time.

It should be mentioned very clearly in the contract

2 1.2 Interpretation
during providing conditions.

1
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

For the approvals, certificates not to be delayed,

3 1.3 Communications communications must be made out by in writing or
delivered by hand, or sent by email or courier

The language for communications shall be that stated

4 1.4 Law and language
in the Appendix to Tender.

The documents should be in proper sequence i.e. The

Priority of
5 1.5 contract agreement, letter of acceptance, letter of
documents tender ,the particular conditions, etc.

The parties should go for contract agreement within

6 1.6 Contract agreement
28 days after the Letter of acceptance is awarded.

The contractor should give notice to the engineer for

Delayed drawings or
7 1.9 the extension of time for any delays concerning the
Instructions drawings and cost within the time

And payment of any cost plus reasonable profit.

The contractor should be provided reasonable

2.2 Permits, Licenses or assistance in getting copies of Laws of the country
8 relevant to the contract and also provided
Approvals

Permits, licenses or approvals for delivery of goods

and export of contractor’s equipment from site.

For variation that has been made, then the engineer

9 3.5 Determination will make the determination, whether to approve or
disapprove, where the determination

10 Site data Is binding, unless it is revised by DAB procedure.

2
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

The contractor should inspect the site and collect the

4.1O data required before submitting the tender including
all the form and nature of site

Including sub-surface conditions, hydrological

conditions, laws and labor practices of the country
and other contractor’s requirements.

The contractor should prepare material delivery

11 4.16 Transport of goods schedule and submit to the engineer so that he could
check the material delivery on site.

For the mobilization of the equipment, the contractor

Contractor's
12 4.17 needs the engineer's approval so that after use, it can
Equipment’s be removed from the site.

Any substandard material supplied for the work and

Employer’s made use of might negate the original design of the
13 4.20 Equipment and project. This could lead to failure of the project on
Free Issue Material completion. So, standard materials as specified in the
design must be purchased and applied.

The artifacts should be removed by the owner

through diplomatic arrangement with the community
14 4.24 Fossils to remove them or otherwise to make way for the
contract or to do his work. This done timely will go a
long way to check delay in the execution of work.

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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

Based on the specification of the designed project,

the monitoring or time to time inspection of the work
15 7.3 Inspection
with guarantee the job or work being alone according
to the designed standard.

Contractor should review testing method and

16 7.4 Testing standard in specification or in condition of contract if
they fail to pass test on completion

The Engineers duty amongst others is to ensure the

17 7.5 Rejection contractor complies and carry out the project
execution according to specification and schedule.

There should be good relationship between the

18 7.6 Remedial Work client/owner, the Contractor, the Sub-Contractor and
the nominated Sub-contractor

The owner in agreement with his Project Engineer on

Commencement of verification of claims by the Contractor should reach
19 8.1
Works away forward on time so as to avoid delay in the
work execution.

Contractor should ask for time extension before the

20 8.3 Program validity period expires. Providing detail explanation to
engineer/owner.

Any Circumstances that could lead to extension of

time must be notified within 28 days in writing to the
Extension of Time
21 8.4 Engineer who then act within a reasonable time. The
for Completion extension of time must be avoided by owner to avoid
the delay in completion.

4
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

If the access road Is the problem it should be

negotiated and provided early enough by the owner
before the commencement of the work; Natural
occurrence is not the fault of either and should be
integrated in the plan.

Variation in design may cause extension of time if

agreed upon by the contractor and the owner.

Where there is friction, the work can suffer a setback

22 8.7 Delay Damages time wise. This situation can be arrested by mutual
understanding engendered by the Engineer or and

The owner as much as possible should avoid a

situation such as this. The consequence of this act
23 8.8 Suspension of Work
leads to extension of time to which the contractor
can claim.

The project owner being conscious of the

consequences of acts that could lead to termination
of contract is to avoid it. An amicable resolution of
Consequences of
24 8.9 any issue in the contract terms can be a way out of
Suspension the situation. The cost of termination of contract can
be more costly than retendering for completion of
the project.

The payment issue is sensitive and therefore the

Payment for Plant
project owner should employ every possible means
25 8.10 and Materials in
to ensure that the contractor is settled so as not to
Event of Suspension degenerate to suspension

5
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

TIME

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

The project owner, with a good understanding can

settle this claim amicably with the contractor. He may
Prolonged
26 8.11 not allow it out of hand. The two parties could
Suspension negotiate unless otherwise, there will be more
dispute and delay.

Taking over by the employer is a critical phase as

defect notification period starts and responsibility of
the facility is being transferred to the employer by
Taking Over of the
27 10.1 this certificate. It is a critical point of potential claims
Works and Sections if could not handle properly. Fiddich entails this
clause with specific procedure, dates and deadlines
to manage the risks.

2.2 Project Cost:

MANAGEMENT OF PROJECT RISK BY FIDIC

Cost
S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

1 1.1 Definitions
Few terms related with cost for example, tendering, bill
of quantities, variation, money and payment should be
taken into consideration.

2 1.7 Assignment Either party may, as security in favor of a bank or

financial institution, assign its right to any moneys due,
or to become due, under contract.

6
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

Cost
S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

Employer's Use of
3 1.1O Contractor's The contractor should give the employer a non-
Documents terminable transferable non-exclusive royalty-free
license to copy, use and communicate the

Contractor’s documents including modifications.

4 1.12 Confidential details
The contractor should disclose all confidential to verify
the compliance with the contract.

The contractor should give the notice regarding all

payments of taxes, duties and fees and obtain all
Compliance with permits, licenses and approvals
5 1.13
laws
As required by the laws in relation to the execution and
completion of the works and remedying of the any
defects.

Joint and Several

6 1.14 If partner cannot finish, then engineer should be able
liability
to take the responsibility in case of joint venture.

Right of Access to Before contractor enters the site, he must submit

7 2.1 performance bond about 10% to prevent the delay of
Site
the works.

Employer's financial Reasonable evidence regarding financial arrangements

8 2.4
arrangement should be made out to pay contract price and should
be submitted within 28 days.

After receiving any request from the contractor and

contractor should always be aware of the financial
status of his contract.
9 2.5 Employer's claims

The contractor should be informed by the employer

after he finds any even and any circumstances so that
engineer could make determination.

7
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

Cost
S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

And the notice is related with the extension of the

Defects Notification Period that is made before expiry
of such period.

Delegation by the Contractor should clarify with the engineer in some

10 3.2
Engineer communications about the claim and the Interim
payment certificate.

Performance Contractor need to buy this bond as insurance to make

11 4.2
Security sure for the commitment by the contractor to the
works.

Assignment of
12 4.5 benefits of Once the benefit gets transferred to owner, then
subcontract responsibility directly goes to owner for material
supply equipment operation.

13 4.6 Cooperation Contractor must identify the price of cooperation or

can be taken as an instruction if not mentioned in the
contract.

Unforeseeable The experienced contractor, during the period of

14 4.12 tender, should consider these unforeseeable
physical conditions
conditions and should notify the engineer within 28
days.

Rights of way and Contractor should find additional ways to access to the
15 4.13
facilities site and use the other areas not provided and specified
by owner.
When fossils, coins, antiquity or archeological artifacts
are found, the owner, on report by the contractor, acts
16 4.24 Fossils immediately to avoid delay.

8
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

Cost
S.No. CLAUSE No. CLAUSE RISK MANAGEMENT
To ensure quality work, the owner’s staff shall at all
reasonable times have full access to the site for which
the Project is going on. The contractor shall give the
owner’s personnel full opportunity to carry out their
17 7.3 Inspection
assigned duties without hindrance.

Review testing method and standard in specification or

18 7.4 Testing in condition of contract.

The contractor has to establish the quality insurance

system in his company to control the quality of work.
19 7.5 Rejection

The system monitored shall assist in the desired quality

20 8.7 Delay Damages work and should be audited from time to time.

Conduct site visit before tendering to gather as much

information as possible about site condition.
Contractor should incorporate such conditions in
Consequences of contract and to have good comparison later when such
21 8.9
Suspension conditions are encountered.

The detail report on why the payment is delayed

should be given to contractor.eg.it is because of the
Payment for Plant unsatisfactory work and part of payment is delayed
22 8.10 and Materials in until rework is carried out
Event of Suspension

The failure of test has additional cost and delay risk,

Failure to Pass Tests folic managed the risk as to specify the party
23 9.4 (contractor, if under his responsibility) liable of
on Completion
repeating the test until successful or the contract price
can be reduced to cover reduced value to the
employer.

9
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

Cost
S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

There is a risk for the deciding the quantity and price

24 12.3 Evaluation for the item of work, folic guides to decide those.
Moreover, it guides on the items of work not specified
in the contract.

2.3 Project Quality:

MANAGEMENT OF PROJECT RISK BY FIDIC

QUALITY

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

Term related with quality egotist after completion is

1 1.1 Definitions
carried out according to the particulate conditions.

The contractor shall keep the copy of contract

Care and Supply of documents on the site, named Specification and the
2 1.8
documents drawings and the specifications should be in custody
and care of the employer.

The employers shall retain the copyright and the

Contractor's use of
intellectual property rights in the Specification, the
3 1.11 Employer's
drawings and other documents made by the
Documents Employer.

Engineer's Duties and The engineer has the right to issue variations which
4 3.1
Authority may include omissions i.e. Cancellation of the works.

If the contractor should solve the matter regarding

the additional costs due to instruction with the
Instructions of the engineer and if not possible, then the contractor
5 3.3
Engineer should send a claim notice, and the instruction should
not be given directly to the contractor or
subcontractor.

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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

QUALITY

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

To replace the engineer, not less than 42 days,

Replacement of the
6 3.4 employer should give the notice to the contractor,
engineer with supporting particulars.

Contractor should appoint the representative on site

Contractor's
7 4.3 who is fluent in the language mentioned in the
representative contract.

The contractor and the subcontractor should transfer

8 4.4 Subcontractors
their benefits to the owner.

Contractor is responsible for setting out work like

positioning, dimensioning of all parts of the works ND
9 4.7 Setting out also should rectify them and if errors occurs, then
should notify to the engineers so that he may ask for
the additional payment and time.

The contractor must develop quality manual and plan

10 4.9 Quality assurance and Audit should be carried out by engineer or should
be mentioned in particular conditions.

Sufficiency of the The contactor must fulfil all the requirements so that
11 4.11 accepted contract the correctness and the sufficiency of the accepted
amount contract amount can be easily met.

Quality of materials and equipment supplied must be

Employer’s gauged each by the unit cost (Price) and agreed by
12 4.20 Equipment and Free the engineer. The BOQ is used as part of quality
Issue Material performance Qualitative and cost effective material
are pointer to the quality of work.

The monthly report properly guided would help in the

13 4.21 Progress Reports
desired quality control for greater performance.

Contractor's Implement method statement and quality insurance

14 6.8
Superintendence system very strictly.

11
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

QUALITY

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

Having experienced and committed team members.

Contractor’s
15 6.9 Having work method statement for each work and
Personnel executing work under supervisor.

The Engineer shall instruct the Contractor submit

Testing Plan for all project. The Contractor has to
submit Testing document that including testing
16 7.2 Samples
method/ procedure, standard, form for the Engineer
consideration before testing. The Engineer has to
check progress of work.

It is suggested that the quality of work being done is

being gauged through inspection beginning from
17 7.3 Inspection materials used and the skills employed. The
inspection report should guide the contractor and
sub-contractor.

Contractor should review testing method and

18 7.4 Testing standard in specification or in condition of contract if
they fail to pass test on completion

The Engineer has to instruct the Contractor submit

19 7.5 Rejection shop drawing by compare drawing with survey data
of construction site for approval before starting.

Completion of This clause clearly makes contractor liable for the

works remaining and the repair of the works of poor
Outstanding Work
20 11.1 quality. So, the risks of re-work will make the
and Remedying contractor to maintain his quality during the
Defects execution of the work.

12
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

2.4 Project Safety:

MANAGEMENT OF PROJECT RISK BY FIDIC

SAFETY

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

1 2.3 Employer's Personnel Safety procedures and Protection of the environment

is required.

The contractor should be responsible for all

2 4.1 Contractor's Obligations contactors documents, temporary works and design
of each plant and materials to be accordance within
the contract and should be able to take responsibility
for adequacy, stability and safety of all Site
operations.

The contractor should be responsible for all

3 4.8 Safety procedures
contactors documents, temporary works and design
of each plant and materials to be accordance
temporary works like fencing, guarding etc. So, need
to make safety manual and safety plan.

As government has restrictions for allowance of size

5 4.15 Access Routes of vehicles passing the roads and the bridges, so the
contractor must consider these things in tendering
and if in case, any damages occurs, then contractor
himself has to handle these problems related with the
local authority.
Investigation productive in project. Revise scheduling
of project. Make details planning of critical works.
6 4.21 Progress Reports

13
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

MANAGEMENT OF PROJECT RISK BY FIDIC

SAFETY

S.No. CLAUSE No. CLAUSE RISK MANAGEMENT

The Engineer shall instruct the Contractor submit

Safety Plan for all project. The Contractor has to
7 6.7 Health and safety submit Safety document that including Safety
method/ procedure, standard, form for the Engineer
consideration. The Engineer has to check progress of
work for consideration whether the Contractor can
Safety Plan is efficient or not. Arrange site meeting to
monitoring status of Safety and construction
progress.

8 7.3 Inspection Making testing plan and submit to the Engineer.

Review testing method and standard in specification
or in condition of contract

3.0 Project Risks of OWNER (How he can manage them):

The Following table shows the risks borne by the owner according to FIDIC and
suggestions to manage these risks.

RISK ON PARTIES (FOR OWNER)

S.No. CLAUSE No. CLAUSE RISK FOR OWNER RISK CONTROL

These terms should be
clearly stated in the
Risk related with contract contract as the
1 1.1 Definitions
price, site ,etc. responsibility for running
works on site and the cost
related to owner.

14
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (FOR OWNER)

S.No. CLAUSE No. CLAUSE RISK FOR OWNER RISK CONTROL
The marginal words and
Risk related with different other headings shall not be
2 1.2 Interpretation terms like 'Agreement’, taken into consideration in
‘Written or in writing etc. the interpretation of these
conditions.
The contract agreement
should be done within 28
days after contractor
Contract Risk related with the time, receives the LOA and the
3 1.6
agreement cost ,quality and safety contract agreement shall
be based upon the form
annexed to the particular
conditions.
The owner shall give the
Right of access to contractor right of access
4 2.1 Risk of delay
the site to the site stated in
appendix to tender.
The employers shall
provide assistance to
contractor by obtaining
Permits, licenses copies of laws of country
5 2.2 Risk of compliance
or approvals for delivery of good s and
export of contractor’s
equipment when removed
from the site.
The employer should
Risk related with safety
Employer's ensure the personnel and
6 2.3 procedures and protection
Personnel other contractors on the
of environment
site (cooperation).
The employer should
Employer's submit within 28 days after
Risk of suspension and
7 2.4 Financial receiving any request from
termination
arrangement the contractor with
detailed particulars.
Once the benefit gets
Assignment of
transferred to owner, all
8 4.5 benefits of Risk of risk transfer
the responsibility goes to
subcontract the owner.

15
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (FOR OWNER)

S.No. CLAUSE No. CLAUSE RISK FOR OWNER RISK CONTROL
Because of delay of
specified items, the
contractor will claim and
after getting the notice,
9 4.7 Setting out Risk of claim by contractor
engineer should go
through sub clause
3.5(determination) to
agree or determine.
The owner should set out
unforeseeable
the reasons why
10 4.12 physical Risk of claim by contractor
contractors considers them
conditions to be unforeseeable
For the mobilization of
equipment after use, the
consent is needed from
Contractor's
11 4.17 Risk of claim by contractor engineer and if delay
equipment occurs in providing
consent, then contractor
will claim.
Employer’s The Employer shall, at his Enforcing the engineers
risk and cost provide these to get all the necessary
Equipment and
12 4.20 materials at the time and permits approved before
Free Issue place specified in the the work commence at
Material Contract the site.
Contractor’s Claims (a) an
Detail survey of the site to
extension of time for
check if such ground
13 4.24 Fossils completion (b) payment of
condition exists all over or
any such Cost plus
just in a single spot.
reasonable profit
Contractor’s Claims (a) an
extension of time for Define clearly the liability
14 7.4 Testing completion (b) payment of of Test on Completion in
any such Cost plus contract.
reasonable profit
The Employer shall be Conduct a check list of
entitled to employ and pay all the activities to be
15 7.6 Remedial Work
other persons to carry out performed before the
the work signing the contract.
Enforcing contractor to
Contractor’s Claims for an
Extension of Time prepare shop-drawing and
16 8.4 extension of time for
for Completion getting approved before
completion
every construction

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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (FOR OWNER)

S.No. CLAUSE No. CLAUSE RISK FOR OWNER RISK CONTROL
Having good relation and
regular communication
with the consultant is vital.
Work as per the
specification and approved
drawings
Contractor’s Claims (a) an
Owners Should have
extension of time for
Suspension of evidence like pictures, test
17 8.8 completion (b) payment of
Work report before suspending
any such Cost plus
the work.
reasonable profit
Contractor’s Claims (a) an
Owners Should have
extension of time for
Consequences of evidence like pictures, test
18 8.9 completion (b) payment of
Suspension report before suspending
any such Cost plus
the work.
reasonable profit
Owner should force the
After the application, owner
Application for engineer to confirm the
has to take the responsibility
19 14.11 Final Payment value of all work done in
of the product in spite of the
Certificate accordance with the
detection of deterioration.
contract.
If the exchange rate
Using bank consulting,
Currencies of negatively changes, actual
20 14.15 appropriate insurance
Payment payment become bigger
should be applied.
than contract price
Appropriate insurance is
In the stated particular necessary. Additionally, if
conditions, owner has to the foretaste is found,
21 17.3 Employer's Risks
care the damage from the owner should make the
issue. decision how to treat the
issue as soon as possible.
Insurance has the exclusion
Insurance for statement. If the causing loss By using particular
Works and or damage is classified condition, how to
22 18.2
Contractor's exclusion, owner has to indemnify should be
Equipment discuss with contractor who decided in the contract.
should indemnify.
Appropriate insurance is
In the stated particular necessary. Additionally, if
Consequences of conditions, owner has to the foretaste is found,
23 19.4
Force Majeure care the damage from the owner should make the
issue. decision how to treat the
issue as soon as possible.

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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (FOR OWNER)

S.No. CLAUSE No. CLAUSE RISK FOR OWNER RISK CONTROL
At first, owner should
mitigate the predictable
risk in the contract. And
after contracting, owner
If dispute is judged by
should monitor the project
arbitration, owner must
24 20.6 Arbitration risk. And once problems
receive any result. And it
and risks causing, owner
becomes the final result.
should make decision
quickly with
communicating with
stakeholders.

4.0 Project Risks of CONTRACTOR (How he can manage them):

The Following table shows the risks borne by the contractor according to FIDIC and suggestions
to manage these risks.

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
The contractor
Risk related with the variation, should carry out
1 1.1 Definitions materials, temporary these works so
worksheet. clearly mentioned
in the contract.
The marginal
words and other
headings shall not
Risk related with different
be taken into
2 1.2 Interpretation terms like 'Agreement’,
consideration in
‘Written or in writing' etc.
the interpretation
of these
conditions.
The notice should
be sent by email or
Risk related with issuing
delivered by hand,
3 1.3 Communication approval, certificates,
courier or other
consents and determination.
reliable medium to
prevent delay.

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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
It should be
according to what
Risk related with the
4 1.4 Law and language has been stated in
communication
the Appendix to
the tender.
To avoid delay, the
documents should
be in the proper
sequence for the
purpose of
5 1.5 Priority of documents Risk related with the delay interpretation and
if any ambiguity or
difference found,
then instruction
should be issued
by the engineer.
The contract
agreement should
be done within 28
days after
contractor
Risk related with the time, receives the LOA
6 1.6 contract agreement
cost ,quality and safety and the contract
agreement shall
be based upon the
form annexed to
the particular
conditions.
If both parties
agree, then
7 1.7 Assignment Risk related with bankruptcy another
subcontractor can
be assigned.
The contractor
shall keep on the
site the copy of
documents so that
employer's
Care and supply of
8 1.8 Risk with the specification personnel can see
documents
these documents
at all reasonable
times and check
the variations and
specifications.
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ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
The contractor
should give notice
Delayed Drawings or Risk with the delay of works to engineer if any
9 1.9
Instructions or disruption necessary drawing
or instructions is
not issued.
The contractor
shall disclose all
Risk with the compliance of such confidential
10 1.12 Confidential Details
contractor with contract and other
information as the
engineer.
The contractor
should comply
with applicable
laws otherwise
contractor shall
Risk in performing the give notice, pay all
11 1.13 Compliance with the laws
contract taxes, duties and
obtain license and
approvals for
execution and
completion of the
works.
The contractor
shall not alter his
composition or
12 1.14 joint and several liability Risk with legal status legal status
without prior
consent of the
employer.
The contractor will
be noticed by the
13 2.5 Employer's Claim Risk of claim employer after any
circumstances or
event is found.

20
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
The contract must
follow what has been
stated in contract,
responsibility of
adequacy, stability and
14 4.1 Contractor's obligations Risk related with works safety of all site
operations should
submit all details of all
arrangements and
method of execution.

Performance
security is
required by owner
15 4.2 Performance security Risk of claim as a risk control to
ensure contractor
will perform the
contract.
The contractor is
required to obtain
Risk of termination by prior consent of
16 4.4 Subcontractor
employer the engineer to
subcontract parts
of the works.
The Contractor
must identify the
17 4.6 Cooperation Risk of price variation
price of
cooperation.
The contractor
needs to make
safety manual and
Risk of obtaining taking over
18 4.8 Safety procedures project safety plan
certificate
that comply with
govt. safety
regulation.
The contractor
should provide all
the data’s required
while executing
19 4.1O Site data Risk of claim
site works, also
mention site
conditions
,geography etc.

21
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
The contractor
should not disturb
the convenience of
20 4.14 Avoidance of interference Risk for damages and losses
public and must
negotiate with
local authority.
The contractor
should prepare
and update
Risk of claims arising from the material delivery
21 4.16 transport of good
transport schedule and that
schedule must be
submitted to the
engineer.
Conduct site visit
before tendering
to gather as much
information as
possible about site
The Contractor shall, at his
condition.
risk and cost, provide any
Contractor should
apparatus necessary for his
22 4.19 Electricity, Water and Gas incorporate such
use of these services and for
conditions in
measuring the quantities
contract and to
consumed.
have good
comparison later
when such
conditions are
encountered.
Owner/Engineer
should provide
details inspection
The Contractor shall be report if
responsible for each item of contractor fail to
Employer's Equipment whilst remedy defect.
Employer’s Equipment and
23 4.20 any of the Contractor's Contractor should
Free Issue Material
Personnel is operating it, check again to
driving it, directing it or in make sure it is a
possession or control of it fault of contractor
or some external
factors like
environment.

22
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
Having
experienced and
committed team
If appropriate, the
members. Having
Contractor shall then appoint
24 6.9 Contractor’s Personnel work method
(or cause to be appointed) a
statement for each
suitable replacement person.
work and
executing work
under supervisor.
Contractor should
review testing
method and
standard in
If the Contractor fails to
25 specification or in
give the notice, he shall if
condition of
and when required by the
contract if they fail
7.3 Inspection Engineer, uncover the work
to pass test on
and thereafter reinstate and
completion
make good, all at the
Implement
Contractor's cost.
method statement
26 and quality
insurance system
very strictly.
Making testing
plan and submit to
the Engineer.
Review testing
method and
standard in
specification or in
The cost of carrying out this condition of
Variation shall be borne by contract.
27 7.4 Testing the Contractor, Inform the
notwithstanding other Engineer about
provisions of the Contract. incur cost and
extra time to
extend the
contract if he want
additional test
which does not
follow standard in
specification.

23
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
Submission Plant,
Material and
Workmanship to
the Engineer for
approval before
working.
Making testing
plan and submit to
the Engineer.
Review testing
method and
standard in
specification or in
If the Engineer requires this
condition of
Plant, Materials or
contract.
workmanship to be retested,
Inform the
the tests shall be repeated
Engineer about
under the same terms and
incur cost and
condition. If .the rejection
28 7.5 Rejection extra time to
and retesting cause the
extend the
Employer to incur additional
contract if he want
costs, the Contractor shall
additional test
subject to Sub-Clause 2.5
which does not
[Employer's Claims] pay
follow standard in
these costs to the Employer.
specification.
Submission Plant,
Material and
Workmanship to
the Engineer for
approval before
working.
Making testing
The Contractor shall comply
plan and submit to
with the instruction within a
the Engineer.
reasonable time, which shall
Review testing
be the time (if any) specified
29 7.6 Remedial Work method and
in the instruction, or
standard in
immediately if urgency is
specification or in
specified under subparagraph
condition of
(c).
contract.

24
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
Inform the
Engineer about
incur cost and
extra time to
extend the
contract if he want
additional test
which does not
follow standard in
specification.
Submission Plant,
Material and
Workmanship to
the Engineer for
approval before
working.
Having good
relation and
regular
communication
Contractor’s Claims for an
Extension of Time for with the
30 8.4 extension of time for
Completion consultant is vital.
completion
Work as per the
specification and
approved
drawings
Unless the Engineer notifies Investigation
otherwise, the Contractor productive in
shall adopt these revised project.
methods, which may require Revise scheduling
31 8.6 Rate of Progress increases in the working of project.
hours and/or in the numbers
Make details
of Contractor’s Personnel
planning of critical
and/or Goods, at the risk and
works.
cost of the Contractor
Damages to the Employer. Investigation
These delay damages shall be productive in
the sum states in the project.
Appendix to Tender, which Revise scheduling
32 8.7 Delay Damages shall be paid for every day. of project.
However, the total amount
Make details
shall not exceed the maximum
planning of critical
amount of delay damages
works.
stated in the Appendix to
25
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
Tender.

Investigation
The Engineer may also notify productive in
the cause foe the suspension. project.
If and to the extent that the Revise scheduling
33 8.8 Suspension of Work
cause is notified and is the of project.
responsibility of the Make details
Contractor planning of critical
works.
The Contractor shall not be Investigation
entitled to an extension of productive in
time for, or to payment of project.
the Cost incurred in, making Revise scheduling
good the consequences of of project.
Consequences of the Contractor’s faulty
34 8.9
Suspension design, workmanship or
materials or of the Make details
Contractor’s failure to planning of critical
protect, store or secure in works.
accordance with Sub-Clause
8.8 [Suspension of Work]
Investigation
productive in
project.
Payment for Plant and The Contractor shall be
Revise scheduling
35 8.10 Materials in Event of entitled to payment of the
of project.
Suspension value
Make details
planning of critical
works.
Investigation
The suspension under sub- productive in
clause 8.8, the Contractor can project.
request the Engineer’s Revise scheduling
36 8.11 Prolonged Suspension
permission to proceed if the of project.
suspension has continued for Make details
more than 84 days. planning of critical
works.

26
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
There is a risk of failure of the
contractor to carry out the The contractor can
tests in time or within 21 days control the
of the notice of the engineer. delayed test risks
If he fails, he has to bear two as: 1.
37 9.2 Delayed Tests consequences: Preparing proper
1. Bear the cost of the test Testing Schedule.
carried out by someone else 2. Notifying and
on discretion of the engineer. Conducting Tests
2. He has to accept the results at Proper time.
of the test.
Contractor need to
According to the FIDIC, improve its
contractor is liable to productivity, so
complete outstanding and that the
Cost of Remedying remedying defects (Sub-clause outstanding works
38 11.2
Defects 11.1). So, the risk and cost is can be completed
to be incurred by the in time as well as
contractor for the repair and his workmanship
remedying of the works. to avoid re-work
of the defects.
Contractor should
carefully see if the
extension is due to
the suspension of
the works by the
employer then the
Extension of Defects liability is not on
39 11.3 A risk of Employer's Claim.
Notification Period contractor for the
delay. Contractor
need to correct
the defects within
time and at most
within defect
liability period.
The Contractor
should carry out
the work by
himself and if he
A risk of Cost claim by the
40 11.4 Failure to Remedy Defects sense he cannot
Employer
then he should
subcontract the
work by the
approval of the
27
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
Employer to avoid
the claim. (A cost-
efficient option

Contractor must
prepare the
If contractor cannot receive taking-over
the final payment certification procedure, Or if
because of his lack, taking- contractor find
Application for Final
41 14.11 over date will be delayed. And serious
Payment Certificate in the worst case, the deterioration, as
contractor cannot receive the soon as possible
performance security. they have to treat
it before taking
over.
Using bank
If the exchange rate
consulting,
negatively changes, actual
42 14.15 Currencies of Payment appropriate
payment become smaller than
insurance should
contract price
be applied.
The contractor
should understand
the clause's
particular
conditions of
In the stated particular
termination. And
conditions, contractor has the
43 15.2 Termination by Employer they must avoid
probability of termination of
causing these
the contract.
conditions. Good
communication
will help to get the
support of
engineer.
The practice of
Before the TOC, contractor proper project
has the responsibility of the management
44 17.1 Indemnities property. And they also have (safety
the responsibility of the management,
damage of staffs. construction
management and

28
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
so on) will prevent
the property
damage and
human resource
damage.

The practice of
proper project
management
From the project's (safety
commencement to TOC, management,
Contractor's Care of the contractor has the construction
45 17.2
Works responsibility of the management and
damage/loss of works and so on) will prevent
goods. the property
damage and
human resource
damage.
Insurance has the exclusion
By using particular
statement. If the causing loss
condition, how to
Insurance for Works and or damage is classified
46 18.2 indemnify should
Contractor's Equipment exclusion, contractor has to
be decided in the
discuss with owner who
contract.
should indemnify.
If the foretaste is
Applying force majeure to found, contractor
Force Majeure Affecting subcontractor, constructor should make the
47 19.5
Subcontractor must take the responsibility of decision how to
the damage/loss. treat the issue as
soon as possible.
At first, contractor
should mitigate
the predictable
risk in the
contract. And after
If dispute is judged by
contracting,
arbitration, contractor must
48 20.6 Arbitration contractor should
receive any result. And it
monitor the
becomes the final result.
project risk. And
once problems
and risks causing,
contractor should
make decision

29
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

RISK ON PARTIES (CONTRACTOR)

CLAUSE
S.No. CLAUSE RISK FOR CONTRACTOR RISK CONTROL
No.
quickly with
communicating
with owner and
engineer.

4.0 FIDIC Timeline:

Kindly refer to the Attached diagram on the proceeding page.

5.0 Claim, Suspension and Termination by the Contractor:

This portion of the document elaborates the clauses of FIDIC that can favor the
contractor to put claim, or to suspend or terminate the contract because of the action or lack of
action of the employer. The employer is in sensitive condition in these clauses and he needs to
consider these carefully. The clauses are:

30
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

CONTRACTOR
CLAUSE WHAT NEED TO BE DONE BY PROJECT
S.No. CLAUSE CONSEQUENCES BEAR BY CONTRACTOR
No. OWNER

Claim by a contractor. The contractor

should give notice to engineer if works
likely to be delayed if any necessary
drawings and instructions get delayed.
Delayed It’s because of the failure of engineer to
After receiving the notice, these matters
1 1.9 drawings or provide notified drawings. So,
should be determined and agreed.
Instructions contractor will claim for extension of
time plus additional amount of
contractor will claim for extension of
time plus additional amount of
reasonable profit.Subclause-20.1

Claim by contractor The employer shall

give right of access to the site to
After receiving the notice, it must be
contractor to proceed in accordance
Right of preceded in accordance with Sub clause
2 2.1 with the programme. But if contractor
access to site (determination) to agree or to determine
suffer or incurs cost, then contractor will
these matters.
claim for EOT plus additional amount of
reasonable profit.
Claim by contractor for the extension of
After receiving this notice, it should be
time for any kind of delay plus
preceded in accordance with sub clause
3 4.7 Setting out additional amount of reasonable profit
(determination) to agree or to determine
that one should be included in the
these matters.
contract price.
Claim by contractor after the contractor
Unforeseeable The engineer shall set out the reasons
encounters adverse physical conditions,
4 4.12 physical why the contractor considers it as
obstructions etc. Claim is for EOT plus
conditions unfired seeable.
additional payment.
· Error in design may entitle
Contractor to claim time/money
· Extension of time (EOT) available
for a variation, delay or impediment
Extension of
of the Employer, exceptionally, adverse
5 8.4 Time for Claim for additional pay mint
weather conditions, shortages of goods
Completion or personnel.
· On a project-financed deal, the
Employer and Funder/Sponsor usually
require the deletion of these EOT rights.

31
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

CONTRACTOR
CLAUSE WHAT NEED TO BE DONE BY PROJECT
S.No. CLAUSE CONSEQUENCES BEAR BY CONTRACTOR
No. OWNER
Extension of time (EOT) available for
a variation, delay or impediment of
Delay Caused
6 8.5 Claim for extension of time the Employer, exceptionally, adverse
by Authorities weather conditions, shortages of goods
or personnel.
If the contractor suffers delay and /or
incurs Cost from complying with the
Engineer’s instructions under sub-Clause
8.8[Suspension of Work] and/or from
resuming the work, The Contractor hall
give notice to the Engineer and shall be
Suspension of entitled subject to Sub-Clause 20.1
7 8.8 Claim for additional payment [Contractor’s Claims] to:
Work
(a) An extension of time for any such
delay, if completion is or will be delayed.
Under sub-clause 8.4 [Extension of Time
for Completion], and
(b) Payment of any such Cost which shall
be included in the Contract Price.

If the Contractor suffers delay and/or

incurs Cost from complying with the
Engineer’s instructions under Sub-Clause
8.8[Suspension of wok] and h/or from
Consequences
8 8.9 Claim for additional payment resuming the work, the Contractor shall
of Suspension give notice to the Engineer and shall be
entitled subject to Sub-Clause 20.1
[Contractor’s Claims] to claim for time
extension and payment of any such Cost.

Payment for
The Contractor shall be entitled to
Plant and
Claim for extension of time and payment of the value (as at the date of
9 8.10 Materials in
additional payment suspension) of Plant and/or Materials
Event of which have not been delivered to site.
Suspension
The employer should be much careful in
There is a possibility that, after taking using the partially completed facility as
Taking Over of over, the contractor may bear extra cost this might pose a claim against him. If no
10 10.2 Parts of the in completing the works due to the other option, then taking over should be
Works partial use of the facility by the much specified and employer need to be
employer. careful that it might not interfere with
the on-going contractor works.
32
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

CONTRACTOR
CLAUSE WHAT NEED TO BE DONE BY PROJECT
S.No. CLAUSE CONSEQUENCES BEAR BY CONTRACTOR
No. OWNER
It is obvious that the contractor has a
The employer should be in proper
tight schedule and any delay in the
Interference communication with the engineer and
works by the actions of the employer
11 10.8 with Tests on contractor to inform his availability on
will lead in extra cost borne by the
Completion the test on completion date, to avoid
contractor and ultimately claims from
Contractor claims.
the Employer.

It is duty of the contractor to remedy the

Any job requested to the contractor defects (Sub-clause 11.3) in defects
Contractor to beyond the scope of the contract shall notification period. The engineer should
12 11.8
Search be claimed by the contractor as he be competent in the preliminary and
incurs extra cost for that. final inspection to highlight the defects
before taking over certificate.
The employer should try to make the
scope of the project very clear and fidic
The omissions are considered as contract clauses (General condition)
variations in the tender. The contractor should be further refined according to
13 12.4 Omissions
will claim the cost he incurs as a result the project situation in the particular
of the omission beside his profit. conditions to avoid any major omission
that can result in potential claim by the
employer.
This clause refers to the proposal of the
efficient design or construction by the
The employer should encourage the
contractor in the benefit of the
value engineering aspect of the
Value employer. As the contractor is working
14 13.2 contractor, but the proposal should be
Engineering for the cost efficiency of the project at
carefully analyzed before approval to
his own cost so, if the proposal results in
avoid future dispute.
cost saving then contractor should be
given benefit of the saving.

The change in the government rules and To avoid such claims, the employer
regulation can affect the contractor should mention a range in the particular
Adjustments
directly (change in construction laws) or conditions for keeping him flexible of
15 13.7 for Changes in
indirectly (material price change). Such price escalations. If the escalations go
Legislation changes will affect the cash flow n beyond that, he should compensate the
performance of the contractor. contractor for the increased risk.

33
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

CONTRACTOR
CLAUSE WHAT NEED TO BE DONE BY PROJECT
S.No. CLAUSE CONSEQUENCES BEAR BY CONTRACTOR
No. OWNER
Delay in the payment clearly hinders the
contractor from performance of his The employer should decide a practical
Delayed work and he will be entitle to claim the payment plan in the contract agreed by
16 14.8
Payment financing charges (interest) on the loans both the parties and abide by that during
he took from bank to maintain his cash the execution of the project.
flow to execute the project.

Lack of the engineer's issuing

certifications or others which are
Contractor's Owner and engineer should response
allowed as engineer's right to ask
17 16.1 Entitlement to the contractual contractor's request
engineer in the contract causes the
Suspend Work properly.
contractor's claim (EOT, additional
payment).

If termination of contract happens,

owner has to pay contractor's finished Owner has to decide this condition
Payment on
18 16.4 work. Contractor will claim the carefully with the consideration of
Termination maximum amount of payment by predictable termination cases.
according to the contract.
If contractor's personnel receive the
damage or loss by thee employer, Owner should manage his/her personnel
19 17.1 Indemnities
contractor becomes to be entitle to to prevent causing those issues.
claim indemnity.
Consequences Delay of response against the Owner and engineer should response
20 17.4 of Employer's contractor's request coming from clause the contractual contractor's request
Risks "employer's risk" causes EOT properly.
If engineer doesn't give notice against Proper response to the contractor's
Intellectual contractor's claim within 28 days, claim and request is necessary.
and Industrial contractor becomes to get the right to Additionally, if there is important
21 17.5
Property take any goods and work in the site. And goods/works in site, owner should
Rights no notice finally causes protect this property by using particular
ambition/litigation. condition.

If owner/owner's personnel/engineer
General
don't follow insurance policy and cause Owner side should understand and keep
22 18.1 Requirements
damage/loss, contractor can claim the insurance policy.
for Insurances owner to indemnify them.

34
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

CONTRACTOR
CLAUSE WHAT NEED TO BE DONE BY PROJECT
S.No. CLAUSE CONSEQUENCES BEAR BY CONTRACTOR
No. OWNER
To making contract, owner should
If the external force causes the review the condition of clause. And if
Consequences
damage/loss, contractor will try to apply there are predictable issues (for
23 19.4 of Force
this clause as much as possible to claim example: flood in Thailand), using
Majeure the indemnity. particular condition, owner should
mitigate these risk.

Optional If termination of contract happens, Owner has to decide this condition

owner has to pay contractor's finished carefully with the consideration of
Termination,
24 19.6 work. Contractor will claim the predictable termination cases.
Payment and maximum amount of payment by Additionally, owner should exclude
Release according to the contract. predictable issue from force majeure.

Engineer should estimate the

When owner applies this clause to
Release from performance by confirming contractor's
adjust the payment appropriately,
25 19.7 Performance submissions and existing property. And
contractor will claim and try to secure
under the Law engineer must make accurate
their benefit.
estimation.
Engineer has to inform these condition
to owner correctly to prevent future
Contractor's According to this condition, contractor
26 20.1 owner's misunderstanding. And owner's
Claims becomes to be entitled to claim.
understanding will help project
controlling to avoid contractor's claim.

5.0 Claim, Suspension and Termination by the Contractor:

This portion of the document elaborates the clauses of FIDIC that can favor the employer
to put claim against the contractor (multiple reasons), or to suspend or terminate the contract
because of the non-performance of the contractor. The contractor is in sensitive condition in
these clauses and he needs to consider these carefully. The clauses are:

CLAIM, SUSPENSION AND TERMINATION

OWNER

35
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAUSE WHAT NEED TO BE DONE BY

S.No. CLAUSE CONSEQUENCES BEAR BY OWNER
No. PROJECT CONTRACTOR
If the employer considers himself
to be entitled to any payment
under any of the conditions or
Employer's connected with the contract or any The amount may be included in the
1 2.5
claims extension of defect notification contract price and price certificates.
period, then employer should give
notice and particulars to the
contractors.
If the agreement end
inconclusively, then the engineer
must give notice to both parties of
determination and each party shall
Contractor need to follow clause
give the determination and unless
2 3.5 Determination 20.1if he considers himself entitled
and until revised under clause20
for the additional payment and time.
(Claims, disputes and
arbitration).This determination is
binding unless revised by DAB
procedure.
The employers will not make a
claim under the performance
security, except for amount to
which the employer is entitled
under the contract if failure by the
contractor to extend validity of
performance security and the
failure by the contractor to pay the Contractor should deliver the
Performance performance security and the performance security to the
3 4.2
security failure by the contractor to pay the employer within 28 days after
employer an amount due, or the receiving the letter of acceptance.
circumstances which entitle the
employer to termination under
sub clause15.2(termination by
employer) i.e. mistake by
contractor occurs then employer
will take the bond after
termination of contract.
The Contractor shall, at his risk
and cost, provide any apparatus
Electricity,
4 4.19 Claim for damage necessary for his use of these
Water and Gas services and for measuring the
quantities consumed.
Employer’s The Contractor shall be responsible
for each item of Employer's
Equipment and
5 4.20 Claim for damage Equipment whilst any of the
Free Issue Contractor's Personnel is operating
Material it, driving it, directing it or in
36
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

OWNER
CLAUSE WHAT NEED TO BE DONE BY
S.No. CLAUSE CONSEQUENCES BEAR BY OWNER
No. PROJECT CONTRACTOR
possession or control of it

Each subcontract should include

provisions that would entitle
employer to require the
The contractor and the
subcontract to be assigned to the
6 4.4 Subcontractors subcontractor should transfer their
employer under sub clause 4.5 or
benefit to the owner.
in the event of termination under
sub clause 15.2(termination of
employer).
If appropriate, the Contractor shall
Contractor’s then appoint (or cause to be
7 6.9 claim for change the personnel
Personnel appointed) a suitable replacement
person.
If the Contractor fails to give the
notice, he shall if and when
required by the Engineer, uncover
8 7.3 Inspection Claim for damage , re-do of works
the work and thereafter reinstate
and make good, all at the
Contractor's cost.
The cost of carrying out this
Variation shall be borne by the
9 7.4 Testing Claim for damage , re-do of works
Contractor, notwithstanding other
provisions of the Contract.
If the Engineer requires this Plant,
Materials or workmanship to be
retested, the tests shall be
repeated under the same terms
and condition. If .the rejection and
10 7.5 Rejection Claim for damage
retesting cause the Employer to
incur additional costs, the
Contractor shall subject to Sub-
Clause 2.5 [Employer's Claims] pay
these costs to the Employer.
The Contractor shall comply with the
instruction within a reasonable time,
which shall be the time (if any)
11 7.6 Remedial Work Claim for damage
specified in the instruction, or
immediately if urgency is specified
under subparagraph (c).

37
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

OWNER
CLAUSE WHAT NEED TO BE DONE BY
S.No. CLAUSE CONSEQUENCES BEAR BY OWNER
No. PROJECT CONTRACTOR
Retention amount and performance
12
bond to be used for the test
Unless the Engineer notifies
otherwise, the Contractor shall
adopt these revised methods,
which may require increases in the
13 8.6 Rate of Progress Claim for damage
working hours and/or in the
numbers of Contractor’s Personnel
and/or Goods, at the risk and cost of
the Contractor
Unless the Engineer notifies
otherwise, the Contractor shall
adopt these revised methods,
Suspension of which may require increases in the
14 8.8 Claim for damage
Work working hours and/or in the
numbers of Contractor’s Personnel
and/or Goods, at the risk and cost of
the Contractor
The Contractor shall not be
entitled to an extension of time
for, or to payment of the Cost
incurred in, making good the
Consequences of consequences of the Contractor’s
15 8.9 Claim for damage
Suspension faulty design, workmanship or
materials or of the Contractor’s
failure to protect, store or secure
in accordance with Sub-Clause 8.8
[Suspension of Work]
Payment for
Plant and
The Contractor shall be entitled to
16 8.10 Materials in Claim for damage
payment of the value
Event of
Suspension
Failing to pass the tests can have
critical consequences if the
The contractor needs to clearly
employer needs to put the facility
understand the project
Failure to Pass in operation. Before
specifications and work with
17 9.4 Tests on commissioning, he could not do
acceptable quality in order to
Completion that and it might affect his plan of
prevent himself from the risk and
bringing facility in service. Or if the
claim of failure of facility at test.
test fails and owner has to accept
the reduced value facility.
38
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

OWNER
CLAUSE WHAT NEED TO BE DONE BY
S.No. CLAUSE CONSEQUENCES BEAR BY OWNER
No. PROJECT CONTRACTOR
Failure of the contractor to repair The contractor should do the work
the defect will result in the hiring correct in first the first time. And for
of another contractor by the specialized works, he should
Failure to
18 11.4 employer for remedying the subcontract to a competent sub-
Remedy Defects defects. This will incur extra cost contractor to avoid defects in
which employer will claim from specialized works that are complex
the contractor. to rectify.
There is the probability of addition Contractor should confirm the all
of particular condition about this conditions of termination. And if
Termination by
19 15.2 clause for mitigate owner's risk. there is unfair condition, contractor
Employer And owner will terminate the has to negotiate the correction of
contract in particular condition. condition.
If termination is applied, engineer
start to estimate the contractors Contractor manages the project
Valuation at
achieving works, property and properly. And they have to eliminate
20 15.3 Date of
delay from master schedule. And it the difference b/w actual progress
Termination strongly affects payment after and reporting progress.
termination.
Using this clause, owner decides
the payment for the work after
termination. Therefore, if there is Contractor had to confirm whether
Payment after
21 15.4 particular condition which cancels particular condition mitigate owner's
Termination owner's payment after payment.
termination, contractor has to
cover the site recovery cost.

If owner's personnel receive the

Contractor should manage his/her
damage or loss by the contractor
22 17.1 Indemnities personnel to prevent causing those
side, owner becomes to be
issues.
entitled to claim indemnity.
Delay of response against the
Intellectual and owner's/engineer’s request Contractor should response the
23 17.5 Industrial coming from clause "owner's risk" contractual contractor's request
Property Rights causes litigation/arbitration in the properly.
worst case.
If contractor doesn't use
Contractor should understand the
General appropriate insurance, it will cause
condition of insurance correctly. And
24 18.1 Requirements the owner's/engineer's claim. And
they must get correct type of
for Insurances if the case is serious, owner will
insurance.
use termination of contract.

39
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

CLAIM, SUSPENSION AND TERMINATION

OWNER
CLAUSE WHAT NEED TO BE DONE BY
S.No. CLAUSE CONSEQUENCES BEAR BY OWNER
No. PROJECT CONTRACTOR

Insurance for If contractor doesn't use

Contractor should understand the
appropriate insurance, it will cause
Works and condition of insurance correctly. And
25 18.2 the owner's/engineer's claim. And
Contractor's they must get correct type of
if the case is serious, owner will
Equipment insurance.
use termination of contract.
Contractor has to decide this
Optional If termination of contract happens, condition carefully with the
owner has to pay contractor's consideration of predictable
Termination,
26 19.6 finished work. So owner will claim termination cases.
Payment and the minimum amount of payment Additionally, contractor should
Release by according to the contract. negotiate the clause's condition to
remove serious risk.
Contractor should confirm
Release from When owner applies this clause to engineer’s estimation. And if they
27 19.7 Performance adjust the payment, owner will try find underestimation of payment,
under the Law to minimize the payment. contractor should claim correct price
with evidence.

6.0 Clauses that can allow contractor to demand EOT/Additional

Payment:

EOT / ADDITIONAL PAYMENT

S.No. CLAUSE No. CLAUSE
1 1.9 Delayed drawings or Instructions

2 2.1 Right of Access to the Site

3 4.7 Setting out

4 4.12 Unforeseeable Physical Conditions

5 8.4 Extension of Time for Completion

6 8.5 Delay Caused by Authorities

7 10.2 Taking Over of Parts of the Works

40
ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

EOT / ADDITIONAL PAYMENT

S.No. CLAUSE No. CLAUSE

8 10.3 Interference with Tests on Completion

9 11.8 Contractor to Search

10 12.4 Omissions

11 13.2 Value Engineering

12 13.7 Adjustments for Changes in Legislation

13 14.8 Delayed Payment

14 19.4 Consequences of Force Majeure

Optional Termination, Payment and

15 19.6
Release
16 20.1 Contractor's Claims

7.0 Conclusion:

This report has been developed by a profound study of the FIDIC general conditions of
contract (1999 Edition). By study of the document we go to know that, FIDIC unequivocally
elaborates the project risks considering multiple practical scenarios and assumptions. One
interesting thing worth mentioning here is that though the contract conditions clearly highlight
project risks with respect to the employer and the contractor perspectives. But the clauses that
pose the risk on the contractor are much more than those of the contractor. So, Contractor needs
to much careful while working in the FIDIC Arrangement.

41
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Appendix I

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

1 GENERAL PROVISION
1 1 Definitions
1 2 Interpretation
1 3 Communications
1 4 Law and Language
1 5 Priority if Documents
1 6 Contract Agreement
1 7 Assignment
Care and Supply of
1 8
Documents
Delayed Drawings or
1 9
Instructions
Employer's Use of
1 10 Contractor's
Documents
Contractor's Use of
1 11
Employer's Documents
1 12 Confidential Details
1 13 Compliance with Laws
Joint and Several
1 14
Liability
2 THE EMPLOYER
Right of Access to the
2 1
Site
Permits, Licences or
2 2
Approvals
2 3 Employer's Personnel
Employer's Financial
2 4
Arrangements
2 5 Employer's Claims
42
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

3 THE ENGINEER
Engineer's Duties and
3 1
Authority
Delegation by the
3 2
Engineer
Instructions of the
3 3
Engineer
Replacement of the
3 4
Engineer
3 5 Deteminations
4 THE CONTRACTOR
Contractor's General
4 1
Obligations
4 2 Performance Security
Contractor's
4 3
Representative
4 4 Subcontractors
Assignment of Benefit
4 5
of Subcontract
4 6 Co-operation
4 7 Setting Out
4 8 Safety Procedures
4 9 Quality Assurance
4 10 Site Data
Sufficiency of the
4 11 Accepted Contract
Amount
Unforeseeable Physical
4 12
Conditions
Rights of Way and
4 13
Facilities
Avoidance of
4 14
Interference

43
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

4 15 Access Route
4 16 Transport of Goods
Contractor's
4 17
Equipment
Protection of the
4 18
Environment
Electricity, Water and
4 19
Gas
Employer's Equipment
4 20 and Free-Issue
Material
4 21 Progress Reports
4 22 Security of the site
Contractor's
4 23
Operations on Site
4 24 Fossils
NOMINATED
5
SUBCONTRACTORS
Definition of
5 1 "nominated
Subcontractor"
Objection to
5 2
Nomination
Payments to
5 3 nominated
Subcontractors
5 4 Evidence of Payments
6 STAFF AND LABOUR
Engagement of Staff
6 1
and Labour
Rates of Wages and
6 2
Conditions of Labour
Persons in the Service
6 3
of Employer
44
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

6 4 Labour Laws
6 5 Working Hours
Facilities for Staff and
6 6
Labour
6 7 Health and Safety
Contractor's
6 8
Superintendence
6 9 Contractor's Personnel
Records of Contractor's
6 10 Personnel and
Equipment
6 11 Disorderly Conduct
PLANT, MATERIALS
7
AND WORKMANSHIP
7 1 Manner of Execution
7 2 Samples
7 3 Inspection
7 4 Testing
7 5 Rejection
7 6 Remedial Work
Ownership of Plant and
7 7
Materials
7 8 Royalties
COMMENCEMENT,
8 DELAYS AND
SUSPENSION
Commencement of
8 1
Work
8 2 Time for Completion
8 3 Programme
Extension of Time for
8 4
Completion
8 5 Delays Caused by
45
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

Authorities
8 6 Rate of Progress
8 7 Delay Damages
8 8 Suspension of Work
Consequences of
8 9
Suspension
Payment for Plant and
8 10 Materials in Event of
Suspension
8 11 Prolonged Suspension
8 12 Resumption of Work
TESTS ON
9
COMPLETION
Contractor's
9 1
Obligations
9 2 Delayed Tests
9 3 Retesting
Failure to Pass Tests on
9 4
Completion
EMPLOYER'S TAKING
10
OVER
Taking Over of the
10 1
Works and Sections
Taking Over of Parts of
10 2
the Works
Interference with Tests
10 3
on Completion
Surfaces Requiring
10 4
Reinstatement
11 DEFECTS LIABILITY
Completion of
11 1 Outstanding Work and
Remedying Defects

46
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

Cost of Remedying
11 2
Defects
Extension of Defects
11 3
Notification Period
Failure to Remedy
11 4
Defects
Removal of Defective
11 5
Work
11 6 Further Tests
11 7 Right to Access
11 8 Contractor to Search
Performance
11 9
Certificate
11 10 Unfulfilled Obligations
11 11 Clearance of Site
MEASUREMENT AND
12
EVALUATION
12 1 Works to be Measured
Method of
12 2
Measurement
12 3 Evaluation
12 4 Omissions
VARIATIONS AND
13
ADJUSTMENTS
13 1 Right to Vary
13 2 Value Engineering
13 3 Variation Procedure
Payment in Applicable
13 4
Currencies
13 5 Provisional Sums
13 6 Daywork
Adjustments for
13 7
Changes in Legislation
47
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

Adjustments for
13 8
Changes in Cost
CONTRACT PRICE AND
14
PAYMENT
14 1 The Contract Price
14 2 Advance Payment
Application for Interim
14 3
Payment Certificates
14 4 Schedule of Payment
Plant and Materials
14 5
intended for the Works
Issue of Interim
14 6
Payment Certificates
14 7 Payment
14 8 Delayed Payment
Payment of Retention
14 9
Money
Statement at
14 10
Completion
Application for Final
14 11
Certificate
14 12 Discharge
Issue of Final Payment
14 13
Certificate
Cessation of
14 14
Employer's Liability
14 15 Currencies of Payment
TERMINATION BY
15
EMPLOYER
15 1 Notice to Correct
Termination by
15 2
Employer
Valuation at Date of
15 3
Termination
48
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

Payment after
15 4
Termination
Employer's Entitlement
15 5
to Termination
SUSPENSION AND
16 TERMINATION BY
CONTRACTOR
Contractor's
16 1 Entitlement to Suspend
Work
Termination by
16 2
Contractor
Cessation of Work and
Removal of
16 3
Contractor's
Equipment
Payment on
16 4
Termination
RISK AND
17
RESPONSIBILITY
17 1 Indemnities
Contractor's Care of
17 2
the Works
17 3 Employer's Risks
Consequences of
17 4
Employer's Risks
Intellectual and
17 5 Industrial Property
Rights
17 6 Limitation of Liability
18 INSURANCE
General Requirements
18 1
for Insurances
18 2 Insurance for Works
49
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

and Contractor's
Equipment
Insurance against
18 3 Injury to Persons and
Damage to Property
Insurance for
18 4
Contractor's Personnel
19 FORCE MAJEURE
Defenition of Force
19 1
Majeure
Notice of Force
19 2
Majeure
19 3 Duty to Minimise Delay
Consequences of Force
19 4
Majeure
Force Majeure
19 5 Affecting
Subcontractor
Optional Termination,
19 6
Payment and Release
Release from
19 7 Performance under the
Law
CLAIMS, DISPUTES AND
20
ARBITATION
20 1 Contractor's Claims
Appointment of the
20 2 Dispute Adjudication
Board
Failure to Agree
20 3 Dispute Adjudication
Board
Obtaining Dispute
20 4
Adjudication Board's
50
 ANALYSIS OF THE FIDIC CONDITIONS OF CONTRACT (RED BOOK) 1999 EDITION

Claim, Suspension&
Project Risks Management Project Risks
Termination

EOT/Additional
No Title
Payment
Time Cost Quality Safety Owner Contractor Contractor Owner

Decision
20 5 Amicable Settlement
20 6 Arbitation
Failure to Comply with
20 7 Dispute Adjudication
Board's Decision
Expiry of Dispute
20 8 Adjudication Board's
Appointment

51