We have all been presented with what appears to be a FIDIC form of contract, but when we study its contents or the Particular Conditions, we notice that it has been modified considerably:

  • Clauses affecting the Contractor’s rights and remedies have been removed.
  • Other clauses which are often punitive toward the Contractor have been added.
  • The re-measurable Red Book has somehow become a lump-sum contract.
  • Time frames have been altered – reduced for the Contractor and extended (or omitted entirely) for the Engineer and Employer.
  • Changes and amendments are often poorly drafted and the final version contains ambiguities and conflicts.

What we end up with no longer meets FIDIC’s stated purpose of ‘allocating risks fairly to the party that is best able to bear and control that risk’.

Obviously, these changes are an attempt to minimise the Employer’s and Engineer’s responsibility and transfer risk onto the Contractor in the mistaken belief that this will bring about a lower contract price and give higher certainty of the final cost. It doesn’t.

This only drives up the tender price, as Contractors will factor in the risk allocated to them under the contract. These changes can also increase the likelihood of contract claims and disputes.

In FIDIC’s words ‘The brand of FIDIC, amongst other things, represents fair, balanced and well recognised forms of construction and engineering contract and agreement forms. FIDIC GCs [General Conditions] are based on fair and balanced risk/reward allocation between the Employer and the Contractor and are widely recognised as striking an appropriate balance between the reasonable expectations of these contracting Parties. Accordingly, a contract recognised as a FIDIC Contract has real commercial value to both the Employer and the Contractor, both at the tendering stage, and during execution of the Contract.

It is their position that if the contract is altered to the extent that it does not adhere to the principles adopted when it was drafted by FIDIC, the contract may no longer be regarded as a FIDIC contract.

In an attempt to control the situation, FIDIC have published The FIDIC Golden Principles in order ‘to identify which contractual principles of each form of FIDIC contract FIDIC considers to be inviolable and sacrosanct.’ These are:

  • ‘GP1: The duties, rights, obligations, roles and responsibilities of all the Contract Participants must be generally as implied in the General Conditions, and appropriate to the requirements of the project.
  • GP2: The Particular Conditions must be drafted clearly and unambiguously.
  • GP3: The Particular Conditions must not change the balance of risk/reward allocation provided for in the General Conditions.
  • GP4: All time periods specified in the Contract for Contract Participants to perform their obligations must be of reasonable duration.
  • GP5: Unless there is a conflict with the governing law of the Contract, all formal disputes must be referred to a Dispute Avoidance/Adjudication Board (or a Dispute Adjudication Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.’

Further guidance and the reasoning behind each principle is provided in The FIDIC Golden Principles.

FIDIC does not specify remedies against parties that ignore these principles. Indeed, as long as legal jurisdictions support freedom of contract, it is difficult to imagine any form of regulation that could be asserted. This means that if a party signs a contract that is unfair or unclear, it’s no use trying to seek compensation if things don’t go your way or the contents of the contract don’t match the intent of the drafters of the original version.

Whilst I welcome FIDIC’s acknowledgment of the situation, Employers and Engineers who simply don’t wish to provide a balance of risk when drafting their contracts are unlikely to be swayed by these principles.

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