FIDIC 2017 Employer's risk events and new claim terms

20 Changes in the FIDIC 2017 Editions From a Claims Perspective

I have just returned from the FIDIC International User’s Conference in London, attended by roughly 400 delegates and speakers, all there to hear about the new editions of the Red, Yellow and Silver FIDIC Forms of Contract. In this blog, I have highlighted 20 changes that are of particular relevance to claims practitioners. They include a number of new terms, including ‘Exceptional Events’ to replace ‘Employer’s risk’ and ‘force majeure’ events and many more:

20 Key Points:

  1. The Red Book now has 106 pages of General Conditions. This contrasts with the 1999 Edition which had 62 pages. The Yellow and Silver books have been similarly increased. The increased volume is said to bring greater clarity. It allows for the inclusion of more procedures to be followed as a matter of contract.
  2. The word “Claim” is defined as ‘a request or assertion by either Party to the other Party for an entitlement of relief under any Clause of these Conditions or otherwise in connection with, or arising out of, the Contract or the execution of the Works.
  3. There is a provision to include a percentage in the Contract Data (formerly the Appendix to Tender). If no percentage is stated, the percentage shall be 5%.
  4. The term “No-objection” has been introduced and defined.
  5. “Notice” is defined as ‘a written communication identified as a Notice and issued in accordance with Sub-Clause 1.3 (Notices and Other Communications)’.
  6. There are many more requirements for parties to submit Notices.
  7. A “Notice of Dissatisfaction” may be issued by either Party. This arises if they are dissatisfied with an Engineer’s determination.
  8. There are more detailed requirements for the Contractor’s Programmes, including programmes to show actual progress.
  9. A provision is included for including rules and procedures to deal with concurrent delay.
  10. Advance warning provisions have been included.
  11. The procedures for evaluating and agreeing Variations and much more prescriptive.
  12. The type of risk events previously included under Employer’s Risks and Force Majeure clauses have been consolidated into a single clause – Exceptional Events.
  13. Both Employer’s and Contractor’s Claims are now dealt with under Clause 20 (Employer’s and Contractor’s Claims).
  14. The provisions of dealing with disputes have been separated into a new Clause 21 (Disputes and Arbitration). This reflects the fact that claims only become disputes if a Party gives a Notice of a dispute.
  15. Specific provisions of the requirements of a claim submission are included under Sub-Clause 20.2.4 (Fully Detailed Claim).
  16. Under Sub-Clause 20.2.4 (Fully Detailed Claim), the claim submission period has been extended from 42 days to 84 days. However, submission has now become a condition precedent to entitlement.
  17. Under Sub-Clause 3.7 (Agreement or Determination), if the Engineer does not give Notice of agreement of rejection of a claim within 42 days, the Engineer shall be deemed to have given a Notice rejecting the claim.
  18. The Dispute Adjudication Board (DAB) is now referred to as the Dispute Avoidance/Adjudication Board (DAAB). This reflects enhanced requirements for the DAAB to be proactive in dispute avoidance.
  19. All DAABs are standing boards.
  20. There are many more ‘deeming’ provisions. Under these, if a party does not act in accordance with an obligation, then the provisions will state that a specific action is deemed to have taken place.

Conclusions

On the face of it, the 2017 forms of contract require more contract administration to comply with claim procedures. However, if we think about things for a moment, this is not necessarily the case.  Many of the changes have been introduced because the parties simply did not do things as the 1999 versions required. For example, Contractors did not submit claims within 42 days of the event. Engineers did not respond to claims within 42 days. But there were no consequences for failure to do so. Claims often waited until the end of the project. In many cases they then became hard to resolve and often resulted in disputes which required additional and costly resources to manage matters.

Isn’t it better to put the necessary resources in place from the beginning of a project? Manage the risk early? This avoids things reaching this situation and allows settlement of claims as the project proceeds? You may think that this is an expensive option, but if we consider that the costs of arbitration may risk reaching US$ 500,0000 or much more, I think not.