Advice and Opinion

Updated construction contract to reduce common disputes

MDA Consulting Director, Odette Potgieter_examined the FIDIC White Book at Collective Wisdom on 21 September 2017.
MDA Consulting Director, Odette Potgieter examined the FIDIC White Book at Collective Wisdom on 21 September 2017.

The new FIDIC standard form contract documents are almost ready to be adopted by the International Federation of Consulting Engineers. The Rainbow Suite second edition has clarified the roles of engineers and takes a balanced approach to the roles and responsibilities of the main parties, as well as the allocation and management of risk.

One of the principal drafters of the FIDIC Yellow Book, Siobhan Fahey, a qualified engineer, attorney and adjudicator, was in South Africa last week to unpack the impact of changes to the FIDIC Rainbow Suite at MDA Consulting’s Collective Wisdom event. The FIDIC Rainbow Suite is commonly used in South Africa.

Fahey explained that imbalanced risk-sharing in FIDIC contracts typically results in higher tender prices; delays to completion; additional time and cost claims; and, in the worst cases, major protracted disputes leading to arbitration, and sometimes to contract termination.

No two projects are the same, so FIDIC acknowledges that special conditions will be required for project specific issues. Much like a three-legged stool, our contracts require employers, contractors and engineers to play their respective roles in reducing uncertainty for construction projects. The last update to the FIDIC suite of construction contracts was 10 years ago, so with this iteration we have addressed common issues gleaned from years of using the Rainbow Suite,” she says.

One of the most noteworthy changes is that contractors and engineers are expected to play more proactive roles in conveying information back and forth. Reciprocity is ingrained and employer’s requirements have been tightened up given that this has been the source of many disputes in the past.

Also at the event, Bahati Mbembe, a Tanzanian contract administration expert, highlighted aspects of the Red Book that are particularly applicable in African construction projects. “In African construction projects, contractors are often concerned about the neutrality of the engineer, who is often perceived to be personnel of the employer,” he says.

Another common issue in Africa is outlined in Clause 8.5 of the Red Book and deals with delays caused by authorities. “It could be that the processes of tax exemption, port clearance and permits take longer than anticipated, so my advice to contractors is to appoint someone to deal specifically with this issue,” says Mbembe.

MDA Consulting Director, Euan Massey, highlighted a number of specific clauses which primarily deal with time and money and clarify the roles of the employer and the engineer.

Dispute avoidance mechanisms have been introduced and there is an overarching bias towards trying to reach agreement between the parties,” he explains.