08 Jan 2018

New FIDIC Rainbow Suite 2017

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What you need to know

The new FIDIC Rainbow Suite of Contracts 2017 was officially launched at the FIDIC Contract Users' Conference which took place in London in December 2017.

The main aim of the revised suite of contracts is increased clarity and certainty. Underpinning this aim has been the desire to reduce the likelihood of disagreements about the interpretation of the terms of the FIDIC contracts.

FIDIC has altered the contract provisions of the Red, Yellow and Silver Books by making the provisions more prescriptive and by setting out more clearly what is expected from the Employer, the Contractor and the Engineer during the life and performance of the contracts. This, together with the introduction of enhanced step-by-step project management and procedural mechanisms, puts a greater administrative burden on users and makes knowledge of the detailed contract provisions even more important.

Main new features

  • Specified time limits: Provisions for the timing of the Contractor's, Employer's and Engineer's respective obligations are more prescriptive. Where specified time limits are not met, approvals or actions are deemed to have occurred. For example, a Performance Certificate shall be deemed issued by the Engineer on the expiry of 28 days of the latest Defects Notification Period. Another example is in relation to the Final Payment Certificate. If the Contractor does not make a claim or referral to the DAAB within 56 days, acceptance of the Final Payment Certificate is deemed. Parties need to take care not to miss deadlines or face decisions being made for them by default.
  • Reciprocity between the parties: The suite now creates greater reciprocity between the rights and obligations of the Employer, Contractor and Engineer. For example, there is equal treatment of each party's confidential information and of the Employer's and Contractor's claims. The Contractor is also obliged to provide assistance to the Employer in obtaining permits and there is a mutual entitlement to compensation for both parties if the other party fails to assist.
  • Parties' collaboration: The suite contains new provisions designed to promote increased collaboration between the parties. There is a new clause requiring the parties to discuss matters in connection with the works. A new 'advance warning' clause provides that the parties must advise each other and the Engineer (and vice versa) in advance of any known or probable future event or circumstance which may adversely affect the work of the Contractor's Personnel or performance of the works when completed, increase the Contract Price and/or delay the execution of the works. This suggests that FIDIC has been influenced by the approach taken in the NEC suite of contracts.
  • Design and Review: There are more explicit requirements in relation to the general design obligations. For example, designers must be qualified, experienced and competent, and entitled under applicable laws to design the works. There is also a step-by-step procedure for the Engineer's review of the Contractor's design, with the review period being 21 days unless otherwise stated in the Employer's Requirements.
  • Tests on Completion: There is a new requirement for the Contractor to submit to the Engineer a detailed test programme showing the intended timing and resources required for the tests. This detailed test programme must be submitted not less than 42 days before the Contractor intends to commence the Tests on Completion. In addition, as soon as the works have passed the Tests on Completion (in the opinion of the Contractor), there is a new requirement for the Contractor to submit a certified report of the test results to the Engineer. This will reduce the need for Employers to amend the contracts to ensure a robust testing regime is put in place.
  • Measurement, Payment and Valuation: The provisions around payment and valuation of the works include more prescribed steps. For example, if the measurement of the works is not agreed or if an 'appropriate rate or price' is not agreed, the Engineer shall proceed with the default provisions in the Contract. The periods for payment will be as stated in the Contract Data but there are default periods, which will apply in the absence of express terms. This emphasises the need for parties to ensure that Contract Data is properly completed and incorporated into the contract or be subject to FIDIC default settings.
  • Role of the Engineer: Whilst the Engineer continues to have primary responsibility for the administration of the contracts, there have been some changes to the nature of the Engineer's role. Overall the Engineer's authority and autonomy have been reduced and the scope of responsibility of the Engineer towards the Employer has changed. The manner in which the Engineer is required to administer the contract has become significantly more prescriptive. This may ensure greater consistency of approach from project to project.
  • Insurance: The default position under the contracts is that the Contractor is responsible for maintaining the required insurances: the insurance for the works; insurance for the Contractor's equipment; professional indemnity insurance; third party liability insurance; employer's liability insurance; and any other insurances required by law. Where the Contractor fails to take out the required insurances, the Employer may do so and then make deductions from payments due to the Contractor to cover the cost of doing so. It is the responsibility of Contractors to ensure that the contract reflects the insurances they hold to avoid deductions from the Contract Price.
  • Variations: The variations procedure in the revised suite has now been split into two parts. The first procedure is a Variation by Instruction; the Engineer may instruct a Variation by giving a Notice to the Contractor and the Contractor must submit a proposal. The second procedure is a Variation by Request for Proposal procedure. This is essentially the same as the variations procedure in the 1999 contract; the Engineer may request a proposal, prior to instructing a Variation, by giving a Notice to the Contractor and the Contractor must submit a proposal or give reasons as to why it cannot.

Conclusion

The updates to the FIDIC Rainbow Suite of Contracts 2017 make for a more detailed, clear and certain suite of contracts, with more prescriptive provisions than ever before. In this way, the revised suite of contracts should operate as a more effective project management tool. However, the more prescriptive nature of the suite of contracts will also mean a greater administrative burden on the parties to understand the detail in the contracts; a failure to meet time frames, for example, will have serious consequences. Ultimately, it will be interesting to see whether users find the revised, more prescriptive suite of contracts create greater certainty or, in fact, greater confusion between parties.

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KEY CONTACT

Graeme Barton

Graeme Barton
Partner

T:  +44 20 7809 2355 M:  +44 7875 611 475 Email Graeme | Vcard Office:  London

Ron Nobbs

Ron Nobbs
Partner

T:  +44 20 7809 2280 M:  +44 7831 245 682 Email Ron | Vcard Office:  London

Paul Thwaite

Paul Thwaite
Partner

T:  +44 20 7809 2341 M:  +44 7881 913 246 Email Paul | Vcard Office:  London

Charlotte Lilley

Charlotte Lilley
Associate

T:  +44 20 7809 2099 M:  +44 7557 742 604 Email Charlotte | Vcard Office:  London