Mansoor Ali

FIDIC White Book - a brief overview Part 4

This is the final instalment of a four-part series on the FIDIC White Book. The previous posts have provided an overview of the White Book, an in-depth examination of changes from the 4^th to the 5^th edition, and a look at critical changes from 2006 to 2017. This post will complete the examination of critical changes in the 2017 edition.

Agreement Termination

• If the Consultant breaches a material term or condition, the Client may give Notice outlining the breach.
• If the Consultant fails to remedy the breach within 28 days of Notice, the Client may terminate the agreement with 14 days' notice.
• Immediate termination is possible if the Consultant becomes insolvent or breaches anti-corruption measures.
• In these cases, the Client assumes control of records and documents, claims reasonable costs from the Consultant, and withholds payment until the accomplishment of stated entitlement.

Additional Termination Rights for Client

• The Client has the discretion to terminate the agreement by giving the Consultant 56 days' notice, without intending to seek services elsewhere.
• Termination is also allowed if an exceptional event causes a suspension of services for more than 168 days. The Consultant will be paid an agreed remuneration in this case.

Termination Rights for Consultant

• The Consultant can terminate the agreement if the Client's suspension of service extends beyond 168 days, following a notice of 14 days.
• Non-payment can lead to termination if the Consultant does not receive payment within the due date plus 7 days of qualifying suspension plus 42 days after suspension, with a notice period of 14 days.
• Immediate termination is permitted if the Client becomes bankrupt, insolvent, or breaches anti-corruption measures.
• If the suspension of services due to an exceptional event surpasses 168 days, the Consultant can terminate the agreement with 14 days' notice.
• In all cases of the Consultant terminating the agreement, the Consultant is entitled to be paid for the loss of profit on the services not performed due to termination.

Payment Terms:

• The Client must pay within 28 days from the date the Consultant issues an invoice, covering service payment, variations, and exceptional costs.
• Exceptional cost bases are outlined in Appendix 3 (Remuneration & Payment).
• If rates and prices are not applicable, new rates should be agreed upon. In the absence of agreement within 14 days, reasonable rates and prices will apply.
• Delayed payment within 28 days will result in the payment of compensation (financing charges) at the rates stated in Appendix 3.
• If any item in an invoice is disputed by the Client as not properly due, the Client can give Notice of intention to withhold payment within 7 days, but must pay the remainder promptly.

Insurance Obligations:

• The Consultant must maintain professional indemnity insurance (PII), public liability insurance (PLI), works compensation insurance, employer's liability insurance, and other insurances required by applicable law.
• Professional indemnity insurance must be maintained for the specified liability period.
• If any of the required insurances are cancelled, the Consultant must promptly notify the Client.
• Additionally, the 5^th edition emphasizes the importance of placing such insurances with reputable international insurers.

Dispute Resolution:

• Once a dispute arises, the senior representatives of both parties shall meet within 28 days of receiving a written Notice to attempt an amicable resolution.
• If the dispute remains unresolved, adjudication should be initiated within a maximum of 56 days upon written request.
• If no further Notice is given within 28 days of the adjudication decision, the decision becomes binding.
• If no decision is reached within 28 days from the adjudicators or a Notice of Dissatisfaction (NOD) is issued within 28 days after the decision, both parties shall attempt an amicable settlement.
• Unless agreed otherwise, arbitration may commence after 28 days from the Notice, even in the absence of an attempt at an amicable settlement. International arbitration shall be pursued.
• If arbitration does not commence within 182 days from the Notice of Dissatisfaction, the NOD will lapse and become invalid.

In conclusion, the 2017 FIDIC White Book has substantially updated aspects of the contract, such as termination, payments, insurance obligations, and dispute resolution.

It is vital for both parties to understand and comply with these provisions to ensure a smooth and fair contractual relationship.

The previous three posts can be read here: part 1, part 2, and part 3.

If you would like all of these posts in a single PDF, please email hello@instituteccp.com with the subject line FIDIC White Book.

This guest post was written by Mansoor Ali, FICCP and Jishma Joy. Would you like to learn more about the FIDIC White Book? Check out this webinar.

Enjoying the ICCP’s articles? Why not sign up for our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

by Mansoor Ali

FIDIC White Book - a brief overview Part 3

This is the third post in a four-part series on the FIDIC White Book 2017 edition. In this instalment, we will discuss some of the critical points introduced in the updated contract.

Notices and Communications

Notices and communications can take any form of an agreed system of electronic transmission, as stated in the particular conditions. Notices and communications should be clearly stated, with reference to the relevant sub-clauses, and should not be unreasonably withheld or delayed.

Sub-Consultants and Sub-Contracts

When the appointment of a Sub-Consultant is included in the Consultant's offer or proposal, consent from the Client is not required. However, subcontracting part or all of the works requires written consent from the Client.

Intellectual Property

Under Sub-Clause 1.7 (Intellectual Properties), the Consultant shall grant the Client a royalty-free worldwide license to use and copy the foreground intellectual property for any purpose related to the project.

While information about the project can be used for commercial tendering, the publication of materials requires approval from the Client if it occurs within two years of the completion of the services or termination, whichever is earlier.

Anti-Corruption

Regarding anti-corruption, the Consultant must comply, at a minimum, with the FIDIC code of ethics and the FIDIC integrity management system. The Consultant should also immediately notify the relevant authorities if any public official requests illicit payments.

Financial Arrangements and Personnel

As in all the latest FIDIC suite of contracts, the Client must provide reasonable evidence of financial arrangements for timely payment within 28 days of a request from the Consultant. Another improvement is that the Consultant must arrange for an alternative supply of personnel at the Client's cost if the Client fails to provide their own personnel or if the Consultant is unsatisfied with their performance. The cost of replacement will be borne by the Consultant unless the replacement is requested by the Client. In such cases, the Client will be responsible for the cost.

Notices

A notice must be given by any party in the event of specific, actual, or probable future events or circumstances that may adversely affect or delay the services or lead to an increase in the cost of the services. As mentioned earlier, the Consultant has the right to an extension of time (EOT) if the delay is due to a variation to the services, delay caused by the Client or the Client's other Consultants, Contractors, or third parties, an exceptional event, or any other event entitling the Consultant to EOT under the agreement.

The 5th edition introduces the rate of progress. Sub-Clause 4.5 states that if the Consultant is not entitled to an EOT and if in the Client's opinion, the rate of progress is insufficient to ensure completion, the Client may give notice to the Consultant. The Consultant must then revise the programme by adding additional measures to complete the services within the specified time.

Exceptional Events

Exceptional events are detailed in Sub-Clause 4.6. If a party is unable to perform its obligations due to an exceptional event, a notice must be given within 14 days from when the party becomes aware of such an event. If this event leads to a mandatory change in the scope, delay in services, and results in a variation, the Consultant is entitled to claim an EOT. However, the obligation to make payments under the agreement will not be excused by an exceptional event.

Variations

Clause 5, which deals with variations, is very detailed. Variations can occur when there is an amendment to the scope of services, personnel, equipment, facilities, or services provided by the Client, omission of services no longer required by the Client, changes in the sequence or method of implementation, or when the agreement requires the issuance of a variation or a proposal submitted by the Consultant and accepted in writing by the Client. The Consultant must submit a Notice with details if an instruction or direction from the Client constitutes a variation. If accepted, the Client will issue a Variation Order.

However, if the Consultant notifies the Client within 14 days, providing evidence that they do not have the relevant resources to carry out the variation, or if the Consultant believes it will significantly change the extent of the services, they are free to abstain from the additional works. Otherwise, the Consultant is bound by each variation.

If the Client does not accept the variation, they must cancel the instruction by giving notice. In this case, the Consultant must comply with the notice unless they refer to it as a dispute under Clause 10 (Disputes and Arbitration) within 7 days of receiving the notice.

Suspension

While the Client may suspend the services for any reason by giving 28 days' notice to the Consultant, the Consultant may suspend the services in case of non-payment by the due date, and the Client has not provided a valid reason for non-payment. The Consultant must give the Client a 7-day notice in such cases or if there are exceptional events related to the safety and security of the Consultant's personnel or if the Client fails to satisfy the requirements of the Client's financial arrangements.

The Consultant must resume the services within 28 days of receiving a Notice from the Client instructing them to do so. In case of suspension initiated by the Consultant, they should resume the services as soon as reasonably practicable after the matters causing the suspension have ceased. During the suspension, the Consultant should not perform the services but ensure the security, maintenance, and custody of the services. If the Consultant incurs exceptional costs during the suspension and resumption, the agreed remuneration should be adjusted, and the time for completion should be amended. The Consultant must issue a notice regarding these exceptional costs.

In conclusion, the FIDIC White 2017 edition introduces various critical points that need to be understood. These points cover areas such as notices and communications, sub-consultants, intellectual properties, publication of materials, anti-corruption measures, financial arrangements, replacement of personnel, variations, exceptional events, and service suspension. Familiarity with these provisions is essential for both the Consultant and the Client to ensure smooth project execution and contractual compliance.

The final post in this series will complete the examination of critical changes in the 2017 edition. The previous posts can be read here and here.

This guest post was written by Mansoor Ali, FICCP and Jishma Joy. Would you like to learn more about the FIDIC White Book? Check out this webinar.

If you would like all of these posts in a single PDF, please email hello@instituteccp.com with the subject line FIDIC White Book.

Enjoying the ICCP’s articles? Why not sign up for our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

by Mansoor Ali

FIDIC White Book - a brief overview Part 2

This is the second in a multi-part series on changes to the FIDIC White Book 5th Edition published in 2017. The previous post provided an overview of changes. In this post, a clause-by-clause comparison will examine the difference between the 2006 and 2017 editions.

Detailed Differences in Each Clause - 2006 Vs 2017 Editions

Clause 1 (General Provisions). Although there were 10 Sub-Clauses in the 4th edition, the 2017 edition has 16 Sub-Clauses. While Communications and Notices were two separate Sub-Clauses earlier, in the 5th edition, the two have been combined as with the entire 2017 FIDIC Rainbow Suite.

The new Sub-Clauses include Confidentiality, Relationship of Parties, Agreement Amendment, Severability, Non-Waiver, and some important additions like Priority of Documents and Good Faith. Copyright in the previous edition has been changed to Intellectual Property –copyright is one form of intellectual property. The new sub-clause is much broader and covers four items: patents, trademarks, copyright and trade secrets.

Clause 2 (The Client). The sub-clauses in both editions are generally the same although the latest edition is more detailed. However Sub-Clause 2.9 (Payment of Services) in the 4th edition has been omitted from the latest edition.

Clause 3 (The Consultant) has 7 Sub-Clauses in the 4th edition, whereas in the new edition, there are 9 Sub-Clauses with the additional two being Sub-Clause 3.8 (Safety & Security of Consultant’s Personnel) and Sub-Clause 3.9 (Construction Administration). Minor changes are there in the names of Sub-Clauses in the two editions as highlighted in the presentation, but more than that the contents have been refined in the latest edition. This analysis is a high-level one and we will try to go into details as we move along.

Clause 4 has been updated from 2006 (Commencement, Completion, Variations & Termination) and separated in the 5th edition into Clause 4 (Commencement & Completion) with new Sub-Clauses of Programme and Rate of Progress of Services. Two new clauses have been created: Clause 5 (Variation to Service) and Clause 6 (Suspension of Services & Termination of Agreement) where the effects of suspension and effects of termination and its procedures are more detailed.

(Payment) has similar sub-clauses in both editions except it is Clause 5 in the previous edition and Clause 7 in the latest edition. Similarly, you can see changes in Liabilities & Insurances apart from the clause numbering. As for Dispute & Arbitration, as with the entire Rainbow Suite of the 2017 edition, Adjudication has been added and its consequences for failure to comply with such decisions have been added as separate Sub-Clauses and are well-detailed in the 5th edition.

Although the structure between the 4th and 5th editions are similar, the latest edition has more elaborated clauses making them more convenient for implementation compared with the previous edition. Variation & Termination have been separated from Commencement and Completion and Rules for Adjudication have all been added to the 5th edition. Additionally, a new obligation on the parties has been included - to act in good faith and in the spirit of mutual reliance.

Now a clear order of precedence for documents is established within the form of agreement making it more clear that Particular Conditions take precedence over the General Conditions.
Another refinement in the new edition is the guidance to complete Appendix 1 (Scope of Work) with a detailed description covering:

• exclusions,
• function & purpose of the services,
• additional information relied upon by the Consultant in the discharge of the services that cannot be reviewed by the Consultant for accuracy and sufficiency (for example, sub-surface or hydrological conditions), and finally,
• the construction administration requirement to be fulfilled by the Consultant and identify the interface management between the services and services provided by others, etc.

While the 4th edition does contain a Termination for Convenience clause, it does not differentiate the effect of it from other forms of termination. However, the 5th edition clarifies that if the agreement is terminated by the Client for convenience, then the Consultant shall be entitled to be paid the loss of profit that would otherwise have been earned on the services not performed due to the termination.

The 5th edition allows for termination by either party, the Client or Consultant, immediately, on defaults like bankruptcy and corruption. The Consultant’s right to terminate for suspension of work is now reduced to a shorter time frame – down from 182 days to 168 days.

One other improvement in the 2017 edition is that the Consultant has the right to suspend services 7 days after Notice has been given from the date of non-payment, whereas the 4th edition only permitted suspension following 28 days of non-payment.

Variation is now a separate clause in the 5th edition, with clear time limits for the submission of variation requests and the proper method of valuation. In short, according to the 5th edition, a variation may be issued if either:

• there is an amendment to scope of services and personnel, equipment & services provided by the Client or
• an omission of part of the services which is no longer required for the Client or changes in the specified sequence or timing of the performance of service or changes in the method of implementation of services

The 5th edition includes for a detailed exceptional event procedure, which shares the risk of an event between the Client and Consultant. Also, a new provision for variation has been added: Where an exceptional event gives rise to an unavoidable change in the scope of services, then a variation shall be issued by the Client.

While a standard of reasonable skill, care and diligence only applies to the performance of the services according to the 5th edition, it has now raised the standard of care to the works to be expected from a Consultant experienced in the provision of services for projects of a similar size, nature, and complexity.

A comprehensive adjudication procedure including the appointment of an Adjudicator, his payment, etc. has been amended to the dispute resolution provisions and set forth in a new appendix of the 5th edition. Thereby, prior to any referral to arbitration, any disputes not resolved amicably will first need to be referred to adjudication

The 5th edition includes a new provision: if the Consultant is providing construction administration in relation to the services to be carried out under a works contract. Under these provisions, the Client shall indemnify the Consultant against any and all claims made by the Contractor against the Consultant arising out of the works contract. If an ambiguity or discrepancy is found between the Consultant’s obligations under the agreement and the Consultant’s duties, the Consultant shall give notice to the Client indicating the same and if necessary Client shall issue a variation to the services.

In the 5th edition, Appendix 4 now details what is to be included in the schedule. Within 14 days of the commencement date, the Consultant shall submit its programme which shall include as a minimum:

• the order and sequence of services,
• key dates for performance or delivery of parts of the services, and
• key dates when decisions, consents, approvals, or information from the Client or third parties, are required to be given to the Consultant.

However, the new book does not impose a liability to reimburse as delay damages if the services are not completed within the time for completion.
In the 5th edition, the Consultant may, upon 7 days’ notice, revoke any intellectual property license granted in the event that the Client is in default of payment of any amounts due under the agreement. This is a fairly clear incentive to ensure that the Client does not unreasonably withhold payment.

Through the 5th edition, the Client has a new responsibility to accept that the Consultant will rely on the accuracy, sufficiency, and consistency of all the information provided by the Client or by others on behalf of the Client. Equally, the Consultant has an obligation to review such information to the extent achievable using the standard of care, to ensure that there is no manifest error, omission, or ambiguity in the information and to promptly give notice to the Client of any adverse findings.

So, the 5th edition White Book seems to have addressed many of the former problematic areas recognized in the 4th edition. Because of these changes, the parties will be in a good position to realize and manage their risk allocation.

The previous post in this series provided an overview of changes. The next post in this series will detail the new additions to the 2017 edition of the White Book.

This guest post was written by Mansoor Ali, FICCP and Jishma Joy. Would you like to learn more about the FIDIC White Book? Check out this webinar.

If you would like all of these posts in a single PDF, please email hello@instituteccp.com with the subject line FIDIC White Book.

Enjoying the ICCP’s articles? Why not sign up for our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

by Mansoor Ali

FIDIC White Book - a brief overview Part 1

This is the first in a four-part series on the FIDIC White Book. In this instalment, we will consider the major differences between the 2006 4th Edition and the 2017 5th Edition.

The FIDIC White Client/Consultant Model Agreement was last updated in 2017. FIDIC also published the 2nd edition of the Sub-Consultancy Agreement to be in line with the new White Book. Through this book, a fair balance of risk is provided between the Client and the Consultant and intends to cover the minimum requirements of a typical appointment contract between Client & Consultant. As you all know, the Consultants get engaged in bankable documents, feasibility studies, detailed design, tender engagement and /or site supervision and project management works for traditional Employer-designed projects or DB projects or EPC and lately in DBO project–FIDIC White Book is suitable for any of these services and is very much used preparing agreements between Client & Consultant.

The story of the White Book starts in 1990 when the first edition was published. Subsequently, the second edition was launched quickly in 1991, followed by the third edition which was published in 1998. The fourth edition of 2006 was a popular one; however, the latest edition of 2017 is the most perfect Client/Consultant model services agreement with a fair balance of risk between the two parties.

Let’s look into the contents of the 2017 5th edition FIDIC White Book, which contains, like any other previous version of the form of agreement, the particular conditions which has two parts: part A is references from clauses in the general conditions and part B is additional or amended clauses.
The 2017 edition has 5 appendices, including the scope of services, personnel, equipment, facilities and services of others to be provided by the Client, remuneration & payment, programme. The fifth appendix which is Rules for Adjudication is newly added in 2017. The last part of the FIDIC White Book is general conditions.

Major Differences in Clauses - 2006 Edition Vs 2017 Edition

The most important thing to note is that the 2006 edition had only 8 clauses with Commencement, Completion, Variation & Termination all within Clause 4. These are properly separated in the 2017 edition into Commencement & Completion, Variation to Services, and Suspension of Services & Termination of Agreement are each separate clauses for a total of 10 clauses in the 2017 edition versus 8 clauses in the 2006 edition.

Clause by Clause Comparisons

While Clause 1 in both editions is General Provisions, there are many new Sub-Clauses like Intellectual Property, Relationship, Amendment of Agreement, Good Faith, etc. added in the 5th edition.

Clause 2 is The Client in both editions where the structure is similar. However, all the Sub-Clauses are elaborated in more detail in the 5th edition. Additionally, Sub-Clause 2.9 (Payment for Services) has been removed from the new version, as it is covered in the payment clause.

Clause 3 is The Consultant in both the 2006 and 2017 editions. However, in the 5th edition, this is enhanced by adding new Sub-Clauses like Safety & Security of the Consultant’s Personnel and Contract Administration.

Clause 4 of the 2006 edition is Commencement, Completion, Variation & Termination packaged together, while in the 5th edition, Clause 4 only deals with Commencement & Completion. In the latest edition, Variation to Services is Clause 5 and has added the impact of variations and the procedure for agreeing the value of variation. Clause 6 in the 5th edition is Suspension of Services & Termination of Agreement: where the newly added sub-clauses Effect of Suspension & Effect of Termination makes it easier for the parties to understand the consequences of such events.

Due to the separation of 2006’s Clause 4 into 2017’s Clauses 4, 5, and 6, the subsequent clause numbers have changed. Clause 5 in the 2006 edition is Payment, whereas it is Clause 7 in the 2017 edition. Although the structure and content are the same in both editions, more time constraints are specified precisely in the 5th edition.

Liabilities is Clause 6 in the 4th edition and Clause 8 in the 5th edition. They are generally similar in structure but the Indemnity Sub-Clause has been replaced in 2017 with Clause 9 as Indemnity Insurance.

Clause 7 of 2006 and Clause 9 of 2017 are Insurance. Insurance of Client’s property was detailed as a Sub-Clause in the 4th edition but this is better explained within the one Sub-Clause of Insurance in the 5th edition.

The final clause is Clause 8 in the 4th edition and Clause 10 in the 5th edition - Disputes & Arbitration. Adjudication is added in the latest edition, reorganizing the dispute & arbitration clause.

Appendices

The previous edition had 4 appendices, whereas the 5th edition has an additional appendix - Rules for Adjudication.

The next post in this series will thoroughly detail the differences between the 4th and 5th editions of the FIDIC White Book clause by clause.

This guest post was written by Mansoor Ali, FICCP and Jishma Joy. Would you like to learn more about the FIDIC White Book? Check out this webinar.

If you would like all of these posts in a single PDF, please email hello@instituteccp.com with the subject line FIDIC White Book.

Enjoying the ICCP’s articles? Why not sign up for our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

by Mansoor Ali