FIDIC Yellow Book
FIDIC Yellow Book
Conditions of Contract for
Plant and Design-Build
For electrical and mechanical plant, and for
building works, designed by the Contractor
First Edition 1999
The Yellow Book provides conditions of contract for construction works where the design is carried out by the Contractor. The current Yellow Book bears little resemblance to its predecessors. The current edition drops the words “electrical and mechanical works” from the title and in line with the rest of the FIDIC suite the focus is now more on type of procurement rather than the nature of the works.
The Yellow Book is therefore applicable to the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. Under the usual arrangements for this type of contract, the Contractor designs and provides the works in accordance with the Employer’s requirements which may include any combination of civil, mechanical, electrical and/or construction works.
Administration of the project and supervision of the works is carried out by an Engineer who is employed by the Employer. The Engineer is responsible, amongst other things, for issuing instructions, certifying payments and determining completion.
Interim payments of the lump sum Contract Price are made as work proceeds, and are typically based on instalments specified in a schedule Where the engineer is required to determine a matter or settle a claim he is required to consult with each of the parties to try and reach an agreement. If agreement cannot be reached the engineer must make a fair determination taking due regard of all relevant circumstances. If an engineer’s determination is not agreed by either of the parties then the dispute will be referred to a Dispute Adjudication Board for a decision. The DAB is formed of one or three people who are jointly appointed by the parties. If the decision of the DAB is not accepted by any of the parties then the final step will be resolution via an international arbitration.
The General Conditions and the Particular Conditions together comprise the Conditions.
Guidance is provided for the preparation of Particular Conditions should it be necessary to modify the General Conditions. The Guidance also contains various forms of security such as parent company guarantee, advance payment bond and a retention guarantee which can be selected as applicable.
What are the most popular forms & the FIDIC approach to risk allocation?
The most well known forms of FIDIC Contract are The Red Book (traditional conditions), The Yellow Book (D&B conditions) and The Silver Book (EPC/turnkey conditions).
The FIDIC approach to risk allocation is a commonly used method in the construction industry to allocate risks among project participants. There are several popular forms of this approach, including the Red, Yellow, and Silver Books.
The Red Book is often used for construction contracts, the Yellow Book is used for design-build contracts, and the Silver Book is used for turnkey contracts. Each of these forms has its own unique risk allocation provisions and are tailored to specific types of projects.
In general, the FIDIC approach to risk allocation involves identifying potential risks and assigning responsibility for managing those risks to the party best able to control or mitigate them. This may involve allocating risks to the employer, the contractor, or other project participants based on their expertise, resources, and level of control over the relevant aspects of the project.
Some common examples of risks that may be allocated under the FIDIC approach include:
- Force majeure events, such as natural disasters or political unrest
- Design and engineering risks, such as errors or omissions in the project design
- Construction risks, such as delays or defects in the construction process
- Operational risks, such as maintenance or operational issues that arise after the project is completed
One formula that may be used in the FIDIC approach to risk allocation is the following:
R = P x L
Where R represents the level of risk, P represents the probability of the risk occurring, and L represents the potential loss or impact of the risk. By assigning a value to each of these variables, project participants can assess the overall level of risk associated with a particular aspect of the project and determine the appropriate risk allocation strategy.
For example, if a project involves a high probability of delays due to weather conditions, the contractor may be allocated a greater share of the risk associated with these delays, since they are best able to control the construction process and mitigate the impact of weather-related delays. On the other hand, if the risk involves a potential design error that could result in significant safety hazards, the employer may be allocated a greater share of the risk, since they have ultimate responsibility for ensuring the safety of the project.
In summary, the FIDIC approach to risk allocation is a widely used method for assigning and managing risks in construction projects. By identifying potential risks and assigning responsibility for managing those risks to the party best able to control or mitigate them, project participants can minimize the overall level of risk and ensure the successful completion of the project.
The contract structure is generally the same:
- General provisions (Clause 1)
- The Employer, Employer’s Administration or Engineer, Contractor, Nominated Subcontractors OR Design (Clauses 2-5)
- Staff and labour, Plant, materials and workmanship (Clauses 6-7)
- Commencement, delays and suspension, Tests on completion, Employer’s taking over, Defects Liability, Tests after completion (Clauses 8-11/12)
- Measurement and Evaluation OR Variations and Adjustments, Contract Price and Payment (Clauses 12-14)
- Termination by Employer, Suspension and Termination by Contractor (Clauses 15-16)
- Risk and Responsibility (Clause 17)
- Insurance (Clause 18)
- Force Majeure (Clause 19)
- Claims, Disputes and Arbitration (Clause 20
- The 1999 Red Book is globally the most commonly used standard form contract for construction and engineering works where most or all the works are designed by, or on behalf of, the employer.
When profiling risk, FIDIC has historically allocated risk based on which party is best placed to assume the risk; in contrast, The Silver book adopts a market practice approach, placing the majority of risk on the contractor, primarily including design and design co-ordination, along with any employer design.
With The The Yellow Book, the employer takes on risks such as unforeseeable ground conditions, unforeseeable operations of the forces of nature, Force Majeure (such as acts of war, terrorism and natural disasters) planning and environmental permits, and changes to the law. The party who prepares the design takes on the responsibility for its defects.
FIDIC Yellow Book is a construction contract commonly used in international projects. It is published by the International Federation of Consulting Engineers (FIDIC) and is widely recognized as a standard form of contract in the construction industry.
The FIDIC Yellow Book is primarily designed for use in the design-build process where the contractor is responsible for both the design and construction of the project. It can also be used for projects that are more traditional in nature, where the employer provides the design and the contractor is responsible for the construction.
The contract is structured around three main parts:
- General Conditions of Contract: This part includes the general terms and conditions that are applicable to all contracts under the FIDIC Yellow Book. It covers areas such as the obligations of the parties, the payment and variation mechanisms, the contract price and currency, and the dispute resolution procedures.
- Particular Conditions of Contract: This part is specific to each individual project and includes the details of the scope of work, the contract price, the completion date, and other project-specific requirements.
- Forms of Contract: This part includes the standard forms and templates that are used throughout the contract, such as the letter of acceptance, the performance security, and the notice of termination.
The FIDIC Yellow Book also includes specific provisions for measuring the contractor’s performance, including the following formula for calculating the Contractor’s Delayed Performance:
𝑇𝐶𝑃 = (𝑇𝑀 − 𝑇𝐷) / 𝑇𝑀 × 100%
- TCP: Contractor’s Delayed Performance
- TM: Time for Completion
- TD: Time for Completion Delay
This formula measures the percentage of delay caused by the contractor’s performance against the total time for completion of the project. For example, if the time for completion is 12 months and the contractor caused a delay of 2 months, the Contractor’s Delayed Performance would be:
TCP = (12 – 2) / 12 x 100% = 83.33%
In addition to this formula, the FIDIC Yellow Book also includes provisions for measuring the quality of the contractor’s work, such as the defects liability period and the contractor’s obligations for remedying defects.
EOT under the FIDIC Yellow Book
EOT stands for Extension of Time and is a contractual provision under the FIDIC Yellow Book, which is a standard form of contract used for construction projects.
The EOT under FIDIC Yellow Book allows the contractor to request an extension of the completion date for the project if certain events occur that are beyond their control. These events are known as “Employer’s Risks,” and they include things like changes in the scope of work, unforeseeable site conditions, and delays caused by the Employer.
The formula for calculating the Extension of Time is as follows:
EOT = (P x C)/T
- EOT is the Extension of Time in days
- P is the percentage of delay caused by Employer’s Risks
- C is the value of the work affected by the delay caused by Employer’s Risks
- T is the daily rate of progress for the work affected by the delay caused by Employer’s Risks
For example, let’s say that a construction project has a completion date of January 1, 2023, and the daily rate of progress for the work affected by the delay caused by Employer’s Risks is 10 days. If the percentage of delay caused by Employer’s Risks is 50%, and the value of the work affected by the delay caused by Employer’s Risks is $100,000, then the Extension of Time would be calculated as follows:
EOT = (50 x $100,000)/10 EOT = $500,000/10 EOT = 50 days
Therefore, the new completion date for the project would be February 20, 2023.
It is important to note that the Extension of Time does not automatically entitle the contractor to additional costs or compensation. This would need to be separately negotiated between the parties, typically through a variation order or a claim under the contract.
We are always delighted to provide you with further advice in relation to FIDIC!
To provide a detailed technical explanation, we can start by defining FIDIC, which stands for the International Federation of Consulting Engineers. FIDIC provides standard contract templates and guidelines for the construction industry. These templates and guidelines aim to promote best practices, fairness, and transparency in construction contracts.
Now, when we talk about advice in relation to FIDIC, we are essentially referring to the interpretation and application of these templates and guidelines in specific situations. This advice can be sought by contractors, clients, engineers, and other parties involved in a construction project.
To provide advice in relation to FIDIC, we need to have a thorough understanding of the relevant FIDIC documents, such as the Red Book, Yellow Book, and Silver Book, which are used for different types of construction projects. We also need to have knowledge of the relevant laws and regulations in the jurisdiction where the project is taking place.
In terms of formulas or equivalent formulas, we can refer to the various clauses and provisions in the FIDIC contracts. For example, the Red Book includes clauses related to the engineer’s duties and obligations, the contractor’s duties and obligations, the employer’s duties and obligations, and dispute resolution procedures. An example of a formula could be the calculation of the contract price, which is based on the rates and prices specified in the contract.
To provide an example of how advice in relation to FIDIC may be provided, let’s consider a situation where a contractor is experiencing delays in the project due to unforeseen circumstances. The contractor may seek advice on how to properly notify the employer of the delay and how to claim for additional time and costs under the relevant FIDIC provisions. A table could be used to outline the relevant clauses and the steps that need to be taken to properly notify and claim under the contract.
In summary, providing advice in relation to FIDIC requires a thorough understanding of the relevant FIDIC documents, as well as the laws and regulations in the jurisdiction where the project is taking place. Formulas and clauses within the FIDIC contracts can be used to provide guidance and advice on specific situations, and examples can be provided to illustrate how this advice may be applied in practice.