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Diving deeper into FIDIC for contract management
Anyone dealing with contract management in the architecture, engineering, construction, and operations (AECO) industry is likely to work with FIDIC contracts at some point.
Created by the International Federation of Consulting Engineers (FIDIC), these contract agreements are considered to be the international standard and are widely used throughout the global AECO industry. Developed and refined over fifty years by industry experts, FIDIC contracts provide an internationally recognised foundation for any engineering or construction project, streamlining the contract management process and making it easier to work across borders. These contracts are trusted worldwide thanks to their balanced approach to roles, responsibilities, and risk management.
Why use FIDIC contracts?
Simply put, FIDIC contracts are the trusted international industry standard for a reason. The FIDIC suite provides contract templates that can be applied to almost any project in the AECO industry, and their effectiveness has been tested on countless projects throughout the world over the years. They are designed to be well-balanced for all parties involved and cover all of the key aspects that need to be outlined and agreed upon prior to commencing a construction project.
Standard FIDIC contracts will include an in-depth outline of topics such as roles and authority, labour conditions, delays caused by authorities, procedure for dispute settlement and resolution, and defect liability as well as liability for errors, for proving access to and on the site, for obtaining permits and approvals, and for unforeseeable physical conditions.
To uphold the integrity of FIDIC contracts, there shouldn’t be too many deviations. Doing so could risk higher tender prices, additional disputes and claims, delays, and even contract termination. However, each project is unique so there is a little flexibility built in to ensure that each contract is perfectly suited to the project. All FIDIC contracts provide guidance on how to add project-specific provisions called Particular Conditions and examples of when these might be needed.
Who uses FIDIC contracts?
FIDIC contracts are used by AECO companies of all sizes around the world. Thanks to their suite of standard agreements, FIDIC contracts can easily and effectively be applied to the majority of construction and engineering projects and are trusted by many international bodies and jurisdictions.
The International Federation of Building and Public, International Federation of Asian and Western Pacific Contractors Association, Inter-American Federation of the Construction Industry, Associated General Contractors of America, Multilateral Development Banks and more have all ratified FIDIC contracts.
How to manage FIDIC contracts
Essentially, FIDIC contracts provide a common contract language for the world’s AECO companies. While these contracts are a great starting point for collaboration, using cloud-based construction contract management software has the power to streamline communications, strengthen relationships and ensure contract compliance.
Types of FIDIC contracts
Though they are the standard, FIDIC has continuously improved upon its own contracts since they were introduced over fifty years ago to ensure that they are up-to-date with the latest contracting needs and provide a standard for various use cases throughout the AECO industry. These standard agreements are sometimes referred to as the ‘Rainbow Suite’ thanks to each contract type having a different colour associated with its cover.
The most commonly used FIDIC contracts are:
- The Construction Contract (Red Book) – The most popular FIDIC contract, the Red Book is suitable for construction projects where the responsibility of design rests primarily with the employer.
- The MDB Construction Contract (Pink Book) – The Pink Book is a version of the Red Book that is suitable for bank-financed projects
- The Plant and Design-Build Contract (Yellow Book) – The Yellow Book is suitable for construction projects where the majority of the design responsibility falls to the contractor
- The EPC/Turnkey Contract (Silver Book) – The Silver Book is most appropriate for turnkey projects.
- The Short Form (Green Book) – The Green Book is suitable for projects that have a small capital value.
How can CEMAR help?
CEMAR is a contract management solution designed to support seamless execution and management of FIDIC contracts and provide flexible framework for tracking and recording progress, managing change, risk and schedule and administering monthly payments.
Risk management
Risk management is covered under FIDIC framework through the Advance Warning notices maintained in CEMAR for both the Contractor and the Engineer in a single register.
Change management
Separate modules are built in to manage Variations and Contractor’s Claims. For example, under Clause 20.2 of the FIDIC contract, the Engineer must give response to any claim within the specified period. CEMAR supports this requirement, however there are flexible provisions for bespoke amendments in the situations where a form of contract deviates from standard period allowed for this. As well as Claims, Variations workflow is built in CEMAR in accordance with the contract, with the relevant clause reference, set of replies and reasons for Variations.
These are just few examples how our contract management solution can automate and simplify day to day activities performed by a contract administrator. As a result, compliant data is generated, supported by letters with electronic signatures and audit trail.
Contract management at Thinkproject
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