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HomeContract ManagementFive Golden Principles of FIDIC Contracts

Five Golden Principles of FIDIC Contracts

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FIDIC is known for publishing ‘General Conditions (GCs) for contract that are recognized and used in construction projects all over the world. FIDIC contract conditions are based on fair and balanced risk/ reward allocation between the employer and the contractor. FIDIC contracts are therefore very useful for employer as well as contractor right from the tendering stage and during execution of the contract. It has been observed that while using the FIDIC conditions, substantial changes are being made in the conditions, through the ‘Particular Conditions of Contract, (PCs)’, that the final contract no longer FIDIC contract and thus misleading tenderers and the public.

On FIDIC’s request, the contract committee established a special Task Group (TG15) to identify the principles of FIDIC which are inviolable. These principles are known as ‘FIDIC Golden Principles (GPs)’.

The General Conditions are prepared from a wide perspective for a wide range of projects which are supplemented by the Particular Conditions (PCs) of Contract. If there is a need to customize the contract as per site conditions and according to a particular contract, then, the changes in PCs are made accordingly. The PCs are changed as per the governing law of the country.

Provided that such modifications are limited to those necessary for the particular features of the Site and the project and the Employer’s preferences do not violate the GPs, the Contract is recognizable as a FIDIC Contract.

To keep in view, the above, the golden principles of the FIDIC contracts were formulated to guide the users while using the FIDIC documents.

The Golden Principles of FIDIC are as follows:

Five Golden Principles of FIDIC Contracts

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.

The meaning of this golden principle is that the duties, obligations, roles and responsibilities of the contract participants (i.e., Employer, Contractor, Employer’s Representative, Dispute Avoidance/Adjudication Board, Subcontractors, etc.) are more or less fixed as stipulated in ‘General Conditions of Contract, (GCs)’, and should not be changed in ‘Particular Conditions of Contract (PCs)’.

GP2: The Particular Conditions must be drafted clearly and unambiguously.

This golden principle requires that the clarification to the meaning of tender document together with answers to tenderers’ inquiries made during the Tender period by the Employer should be well-organized, inherently consistent, and refer specifically to the Contract documents to avoid conflicts with other contractual provisions. Further, their place in the precedence of Contract documents must be defined to avoid ambiguity in the precedence of Contract documents by a PCs Sub-Clause to amend GCs Sub-Clause 1.5.

In the PCs, all changes to the GCs must be clearly identified by reference to specific Sub-Clause numbers. Additionally, the PCs Sub-Clauses must clearly indicate the relationship between the newly introduced text and the corresponding GCs Sub-Clauses’ original text e.g. addition to the original text, omission of the original text, replacement of the original text, amendment to the original text, etc.

GP3: The Particular Conditions must not change the balance of risk/reward allocation provided for in the General Conditions.

This golden principle is closely linked with the GP1 and it mentions that the roles, obligations, rights, duties and responsibilities as defined in GCs should not be changed significantly as it will alter the fair and balanced risk/ reward allocation under the contract.

GP4: All time periods specified in the Contract for Contract Participants to perform their obligations must be of reasonable duration.

According to this golden principle, the duration of the activities defined in GCs should not be significantly changed in PCs, unless the wordings like “unless otherwise agreed” or similar wordings are not mentioned in the GCs. This is consistent with the fair and balanced risk/reward allocation principle of GP3.

This is important to follow because FIDIC believes that each time period mentioned in GC is based on experience and is reasonable for the particular matter to which it belongs. Even if the wordings like “unless otherwise agreed” are written in the GCs, the changes in the PCs should be justified.

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.

This is the only GP that can be expressed in explicit terms: if the Contract provides for a Dispute Avoidance/Adjudication Board (DAAB) or a Dispute Adjudication Board (DAB), then it complies with GP5 if permitted by the applicable Laws. If there is no Dispute Avoidance/Adjudication Board or Dispute Adjudication Board provided for, it does not comply with GP5.

Summary

The golden principles are made so that the contracts should not be significantly changed from the provisions as expressed in the GCs and the spirit of FIDIC contracts should be maintained. The users, should therefore follow these GPs to ensure that the contracts they are entering into, is balanced and there is a fair risk/ reward allocation in the contract.

References:

  1. https://fidic.org/sites/default/files/_golden_principles_1.pdf
  2. https://ahmedmohd.com/when-is-a-fidic-contract-no-longer-fidic-introducing-the-golden-principles-of-fidic-2017/

Disclaimer

The content of this article is only for education purpose and awareness. Only, the brief description of ‘Golden Principles’ is given in this article from the perspective of the general understanding of the principles. Please refer to reference no.1 mentioned above for more details on ‘Golden Principles’.

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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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