FIDIC DBO Contract

FIDIC DBO Contract


DBO Contract

Conditions of Contract for

Design, Build and Operate Projects

First Edition 2008

Contents of Contract Book

_ General Conditions

_ Particular Conditions

_ Sample Forms




Following publication of the Orange Book in 1995 and the Red, Yellow and Green Books in 1999 it became clear that there was a growing need for a contract combining a design-build obligation with a long-term operation commitment.

The approach and layout of the DBO contract is more similar to the FIDIC Silver book than any other contract within the FIDIC suite.

The DBO contract adopts a “green-field” DBO scenario with a 20 year operation period and a single contract awarded to a single contracting entity (which will almost certainly be a consortium or joint venture) to optimise the coordination of innovation, quality and performance, rather than award separate contracts for design-build and for operation.

Under the DBO contract the Contractor has no responsibility for either financing the project or for its ultimate commercial success.

The DBO contract, as written, is not suitable for contracts which are not based on the traditional DBO sequence, or where the Operation Period differs significantly from the 20 years adopted.

The document is recommended for general use where tenders are invited on an international basis.

The contract attempts to include all conditions of a general nature, which are likely to apply to the majority of DBO contracts, as General Conditions.

The demand for public infrastructure, which includes facilities like roads, bridges, water treatment plants, and energy plants, has increased significantly over the years. However, the public purse strings are often tight, making it challenging for the public sector to finance and deliver such complex facilities.

Furthermore, the lack of public sector expertise in delivering complex infrastructure facilities, coupled with the increasing demand for such facilities, has led to the involvement of the private sector in the procurement and operation of public infrastructure.

The private sector’s involvement in public infrastructure procurement and operation can take various forms, such as public-private partnerships (PPPs) and build-operate-transfer (BOT) models. In such arrangements, private companies provide the necessary funding, construction expertise, and operational management to deliver and operate the public infrastructure facility.

One formula that is often used to measure the effectiveness of PPPs is the Value for Money (VfM) formula. The VfM formula compares the cost of delivering a public infrastructure facility through a PPP to the cost of delivering the same facility through traditional public procurement.

VfM formula: VfM = (NPV (PPP) – NPV (public procurement))/NPV (public procurement) x 100

Where NPV is the net present value of the project.

For example, suppose a government agency wants to build a water treatment plant, and the estimated cost of the project is $100 million over 30 years. If the government decides to procure the project through traditional public procurement, the NPV of the project would be $100 million.

However, suppose a private company offers to deliver the same project through a PPP. In that case, the total cost of the project might be $120 million over 30 years. The NPV of the PPP project would be $80 million, assuming a discount rate of 10%.

Using the VfM formula, we can calculate the value for money of the PPP as follows:

VfM = ($80 million – $100 million)/$100 million x 100 VfM = -20%

In this example, the negative VfM indicates that delivering the project through the PPP is more expensive than through traditional public procurement. Therefore, the government might decide to go for the public procurement option instead.

In conclusion, the lack of public sector expertise in delivering complex infrastructure facilities, coupled with the increasing demand for public infrastructure, has led to the involvement of the private sector in the procurement and operation of such facilities. The VfM formula is one way to measure the effectiveness of PPPs and other private sector involvement models in delivering public infrastructure.

Design Build Operate (DBO) is a procurement model for public infrastructure projects that involves the private sector taking responsibility for the design, construction, and operation of the project. This model can be used for a variety of infrastructure projects, but it is particularly popular for water treatment plants.

In a DBO arrangement, the private sector entity is responsible for designing and building the infrastructure, as well as operating and maintaining it for a specified period of time. The public sector entity retains ownership of the infrastructure, but the private sector entity assumes most of the risk associated with the project.

The main advantage of the DBO model is that it can help to ensure that the project is completed on time and within budget. Because the private sector entity is responsible for the entire project, it has a strong incentive to ensure that the project is completed efficiently and effectively. Additionally, the private sector entity may be better equipped to handle the technical and operational aspects of the project, which can help to ensure that the infrastructure is built to the required standards.

One common formula used to determine the success of a DBO project is the difference between the expected return on investment (ROI) and the actual ROI. The expected ROI can be calculated using the following formula:

Expected ROI = (Projected Revenue – Projected Costs) / Projected Costs

The actual ROI can be calculated using the following formula:

Actual ROI = (Actual Revenue – Actual Costs) / Actual Costs

If the actual ROI is greater than the expected ROI, the project is considered successful. If the actual ROI is less than the expected ROI, the project is considered unsuccessful.

For example, let’s say that a private sector entity is contracted to design, build, and operate a water treatment plant for a public sector entity. The projected revenue for the project is $10 million, and the projected costs are $8 million. Based on these figures, the expected ROI is:

Expected ROI = ($10 million – $8 million) / $8 million = 0.25, or 25%

After the project is completed and operated for a specified period of time, the actual revenue is $12 million and the actual costs are $9 million. Based on these figures, the actual ROI is:

Actual ROI = ($12 million – $9 million) / $9 million = 0.33, or 33%

Since the actual ROI is greater than the expected ROI, the project is considered successful.

In summary, the Design Build Operate (DBO) procurement model is a popular approach for public infrastructure projects, particularly for water treatment plants. This model involves the private sector entity taking responsibility for the design, construction, and operation of the infrastructure, while the public sector entity retains ownership. The success of a DBO project can be determined by comparing the expected ROI to the actual ROI using the formulas provided.

For information on variations of the DBO structure, see Practice Notes: Infrastructure projects—project structure and BOT contracts.

DBO involves a government (often in the form of a government body or local authority) engaging a single contractor to:

  1. design and build the infrastructure facility
  2. operate the facility for a period (typically between 10–30 years)


EOT under FIDIC DBO Contract

Under a FIDIC DBO (Design, Build, Operate) contract, EOT stands for Extension of Time. It refers to the additional time given to the contractor to complete the construction project due to unforeseen circumstances or events that are beyond their control.

EOT is a crucial part of the contract as it helps to ensure that the contractor is not held responsible for delays caused by external factors such as weather conditions, changes in regulations, or unexpected ground conditions. It is also important for the contractor to apply for EOT promptly and with valid reasons, as failure to do so may result in penalties.

The formula for calculating EOT under FIDIC DBO contract is as follows: EOT = [A + B + C + D + E] – F – G

Where: A = Time for Completion (TfC) B = Adjustments for Adverse Climatic Conditions C = Adjustments for Unforeseeable Physical Conditions D = Adjustments for Employer Delay E = Adjustments for Force Majeure F = Time already taken for completion G = Time for taking over the completed works

To illustrate this formula, let’s say that a contractor is working on a project with a TfC of 365 days. However, due to unforeseen physical conditions and employer delays, the contractor has lost 45 days. Additionally, the contractor has been delayed by adverse climatic conditions and force majeure events for 20 days. The completed works have not yet been taken over, and no time has been taken for completion yet.

Using the formula: EOT = [365 + 0 + 45 + 45 + 20] – 0 – 0 EOT = 475 days

Therefore, the contractor is entitled to an extension of 475 days to complete the project. It is essential to note that the application of EOT is subject to the approval of the engineer, who is responsible for assessing the validity of the reasons given by the contractor for the delay.

Tips to avoid disputes under a FIDIC DBO Contract

To avoid disputes under a FIDIC DBO Contract, there are several tips that can be followed. These include:

  1. Clear Communication: Communication is key in any project, and it is especially important in a DBO Contract. All parties involved should have a clear understanding of their roles and responsibilities, as well as the scope of the project. This can be achieved through regular meetings and progress reports.
  2. Proper Documentation: All aspects of the project should be properly documented, including the project scope, specifications, design, and any changes or variations. This documentation should be kept up-to-date throughout the project to avoid any misunderstandings or disputes.
  3. Adherence to the Contract: All parties should adhere to the terms of the contract and any relevant laws or regulations. Failure to do so can result in disputes and legal action.
  4. Dispute Resolution Mechanisms: The contract should include clear and effective dispute resolution mechanisms, such as mediation, arbitration, or litigation. These mechanisms should be agreed upon by all parties prior to the start of the project.
  5. Risk Allocation: Risks should be allocated fairly among all parties involved in the project. This can be achieved through risk assessments and the use of risk-sharing mechanisms such as insurance or contingency funds.

As for formulas, there are no specific formulas for avoiding disputes under a FIDIC DBO Contract. However, there are some relevant formulas that can be used in the context of such contracts, including:

  1. Cost of Variation = Quantity of Variation x Unit Rate This formula can be used to calculate the cost of any variations or changes to the project scope.
  2. Time for Completion = Time Allowed for Completion + Extensions of Time – Time for Delay This formula can be used to calculate the time required to complete the project, taking into account any extensions of time or delays.


Suppose a DBO Contract is signed for the construction of a new highway. The contract specifies that the project must be completed within 18 months at a cost of $50 million. However, during the course of the project, several variations are requested by the client, which result in an additional cost of $2 million. The contractor is also delayed due to unforeseen weather conditions, resulting in a delay of 2 months. Using the formulas above, we can calculate the following:

Cost of Variation = 400,000 cubic meters x $5 per cubic meter = $2 million Time for Completion = 18 months + 3 months – 2 months = 19 months

In this example, the cost of the variations and the delay are properly documented and calculated, helping to avoid any disputes between the parties involved.


Permanent link to this article: