Construction projects are complex in nature as there are several issues in the construction contracts. Involvement of a number of stakeholders make construction projects more complicated. Successful delivery of construction projects is therefore a challenge sometimes. A good contract having provisions to handle issues and unforeseen risks is very instrumental in successful completion of the construction projects. FIDIC standard forms of contract and documents aim to achieve this objective.
Organizations and professionals related to construction industry all over the world, therefore look for a standard contract document which is recognized across the globe, having balanced provisions for employer as well as contactor and which is capable of handling all the potential issues of a typical construction assignment.
The FIDIC contracts come in picture in such situations. FIDIC contract documents are model contract documents recognized internationally having clear scope of works, rights & obligations of the parties into the contract and these documents have balanced provisions for both the employer as well as the contractor.
Index
About FIDIC
FIDIC stands for Fédération Internationale des Ingénieurs – Conseils, which means International Federation of Consulting Engineers. FIDIC is the global representative body for national associations of consulting engineers and represents over one million engineering professionals and 40,000 firms in more than 100 countries worldwide.
FIDIC was Founded in 1913 and it promotes and implements the consulting engineering industry’s strategic goals on behalf of its Member Associations. FIDIC also publishes international standard forms of contracts for works and for clients, consultants, sub-consultants, joint ventures and representatives, together with related materials such as standard pre-qualification forms.
FIDIC also publishes business practice documents such as policy statements, position papers, guidelines, training manuals and training resource kits in the areas of management systems (quality management, risk management, business integrity management, environment management, sustainability) and business processes (consultant selection, quality based selection, tendering, procurement, insurance, liability, technology transfer, capacity building).
Historical Background
UK Engineers first issued a standard forms of contract called ‘Institution of the Civil Engineers London form of contract’ in 1956. This was the origin of FIDIC. In 1957, FIDIC adopted published its first edition of a standard form of contract which is called the “Red Book” for civil engineering works. Since then, FIDIC has regularly updated its standard forms of contract.
FIDIC Objectives
The key objectives of FIDIC are mentioned as below:
- To promote sound and effective project management practices for engineering works.
- Publish standard forms of contract and other related documents like standard pre-qualification form, performance guarantee form, letter of acceptance, etc.
- Promote and assist the worldwide development of viable consulting engineering industries.
- Promote and enhance the leading position of FIDIC’s forms of contract.
- Promote and encourage the development of young professionals in the consulting engineering industry as they represent the future of the industry.
FIDIC Standard Forms of Contract
FIDIC publishes and consistently improves standard forms of contract (“FIDIC Model Contracts”) in the field of consulting engineering industry. The main purpose of the FIDIC Model Contracts is to define the contractual relationship between the parties and distribute the risks fairly to the parties.
FIDIC has drafted Standard Forms of Contracts for different type of projects. The Forms of Contracts are differentiated by different color codes, each color representing a type of project like EPC, Plant & Design- Built, etc.
The table below gives a brief overview of FIDIC Contracts:
Use of FIDIC Contracts in Indian Context
The FIDIC standard forms of contact are used all over the world for complex projects. In India also these conditions are extensively being used for the projects funded by multi-lateral development banks such as the World Bank, Asian Development Bank (ADB), etc., and also in some other projects like the mega power projects, railways, telecommunications, airports, highways, ports, etc.
Consulting Engineers Association of India (CEAI) is the apex body of consulting engineers in India. CEAI is the only Member Association from India representing the Indian Engineering Consultancy profession at the FIDIC. Individual consulting engineers working independently, private and public sector engineering consulting firms and the engineering consultancy firms are the members of CEAI.
The contract documents used by the Ministry of Road Transport and Highways for highway projects are however different FIDIC contracts. These are based on Engineering, Procurement and Construction (“EPC”) contract scheme laid down by the National Highway Authority of India (“NHAI”) guidelines. Under EPC contracts, the contractor is generally responsible for the design, construction and commissioning of a facility.
Comparison between MORTH Contract Document and FIDIC Contract Documents
Summary
FIDIC standard contract documents are internationally accepted and widely used contract documents. There are different FIDIC documents for different type of projects. The advantages of using FIDIC standard contracts is that the organizations and professionals do not have to appoint lawyers for drafting contracts and they can focus on other aspects like the technical part of the project without going into the nitty- gritty of legal aspects of the project. The organizations can manage risks easily by using these contracts because detailed provisions to handle all issues and potential causes of disputes is covered in these documents. The FIDIC documents allow increased bid lists and encourages more price competition amongst bidders, therefore, ultimately they provide value for money. The FIDIC Model Contracts are ready to use drafts, which enable the contractor as well as client to expedite the discussion and negotiations on the terms and conditions of the contract. The contractors do not have to appoint the specialist, which will result in more savings in terms of cost and time. There is less risk of disputes and litigations as the FIDIC guide, other FIDIC publications and published papers provide a broad explanation of the FIDIC Model Contracts and the particular provision of each clause. Another advantage of the FIDIC Model Contracts is that these are fair and neutral. There are balance provisions regarding the obligations and duties of the parties, as they are not drafted in favor of one party and protects the interest of both parties.
There is however, lack of awareness regarding FIDIC contracts among local bidders, therefore using FIDIC standard documents may discourage them from taking part in the bidding process, reducing local competition and increasing their bid time and price. The governments and organizations therefore should therefore make extra efforts to enhance education and awareness of these contracts among local contractors and professionals.
References:
- www.fidic.org
- https://www.fidic-for-practitioners.com/A-FIDIC-Overview.html
- https://www.linkedin.com/pulse/what-fidic-contracts-why-should-used-construction-field-moreanu/
- https://blog.ipleaders.in/need-know-fidic-contract/
