Kaj Möller, FIDIC Exec. Comm. 2011 – 2015. Liasion FIDIC Contracts Committee

Vilnius April 16th, 2015

Latest Developments and Trends of the FIDIC Contract Activities

FIDIC Presentation

Founded in 1913 Headquarters in Geneva

Mission: Work closely with

stakeholders to improve the business

climate in which members operate and

enable them to contribute to making

the world a better place to live in, now

and in the future

Vision: Enabling the development of

a sustainable world, as the recognised

global voice for the consulting

engineering industry

Introduction to FIDIC

Representing 1.5 million CE professionals in 97 countries

Introduction to FIDIC

ASPAC – Asia-Pacific Group

GAMA – Group of Africa Member Associations with a FIDIC Regional Office in Dar es Salaam, Tanzania

AFRICA ASIA-PACIFIC

Groups of Member Associations

Regional Federations

FEPAC

EFCA

Pan American Federation of Consultants

European Federation of Engineering Consultancy Associations

FIDIC Strategic Objectives

Be the authority on issues relating to business practice Promote the development of a global and viable consulting engineering industry

Represent globally the consulting engineering industry Enhance the image of consulting engineers

Promote quality Actively promote conformance to a code of ethics and to integrity Promote commitment to sustainable development

What FIDIC does

What FIDIC offers the industry

What are FIDIC’s governing principles

Procurement & Business

Quality of Construction Informed Purchaser Consultant Selection Tendering Procedures Conflict of Interest Scope of Services Definitions Reviewing the Work of Others Project Delivery HIV-AIDS Consultants in Design-Build & PFI Provision of OMS Services Project Cost Estimates Quality Management Risk Management Project Sustainability Management Professional Liability Insurance Insurance of Large Projects Dispute Resolution

To be the Authority on Procurement and Business Practice

FIDIC Contracts and Agreements

FIDIC publishes internationally recognised forms of contract for infrastructure works.

Model agreements for professional services:

• Client/Consultant • Joint Venture • Sub-Consultant • Representative

Form of contract for works: • Construction and Sub-

Contractor • Construction (MDB) • Plant, Design & Build • Turn Key (EPC) • Dredging • *Underground works

Form of contract for works and operations:

• Design, Build & Operate (DBO)

• *Operate, Design and Build (ODB)

More than 40,000 copies supplied each year

Its about efficiency for investors/employers Thus, FIDIC produces forms that are:

.

• COMPLETE, FLEXIBLE • Range covers most needs. • Readily adaptable to fit

requirements

• RECOGNISED • Positive FIDIC image. • World-wide acceptance • Tested for more than 50 years.

• CLEAR, COHERENT • Essential clauses. • Detailed definitions. • Consistent structure.

• FAIR, EQUITABLE • Essential clauses. • Detailed definitions. • Consistent structure

• THIRD PARTY

• Drafted by consulting engineers who design and manage projects.

FIDIC Contract and Agreement forms

Guiding, training and networking

.

Contract Guides and Policy Papers.

Conferences, Work-shops and Training.

Close contact with key -users and partners to fine- tune and improve quality.

FIDIC Contract and Agreement forms

Procurement & Business Practice – Capacity Building

Business Practice Training Manual - Training modules with resource kits - Applicable in developed and developing countries International Training Programme - Events co-organised with Member Associations - Based on Guide to Practice manuals

Accredited Trainer Development Programme - Trainers available locally and international - International standards Training Suppliers - Recognised Training Centres: China, India, Jordan - Accredited Training Suppliers

FIDIC Adjudicators

FIDIC President’s List of Approved Dispute Adjudicators - For appointments to Dispute Adjudication Boards (DABs) - DABs mandatory for the MDB Harmonised Construction Contract FIDIC organises: - Assessment Workshop - Recommended Training Courses - Appointments from List FIDIC National Lists of Dispute Adjudicators FIDIC organises: - Guidelines to Member Associations for establishing and maintaining lists. - www.fidic.org links. - Development of accredited national training courses and accredited trainers.

www.fidic.org

On the drawing board in the Contracts Committee:

• Task Group 4A – Update of Joint Venture Model Agreement and Sub-

Consultant Model Agreement;

• Task Group 4B – Update of Client / Consultant Model Agreement (White Book);

• Task Group 6 – Update of 1999 Rainbow Suite (Red, Yellow and Silver

book); • Task Group 7 – Update of Dredgers Contract; • Task Group 9 – New Yellow Book / Silver Book Sub-contract Forms • Task Group 10 – New Tunnelling/Underground Contract; • Task Group 11 – New Operate, Design & Build (ODB) Form of Contract; • Task Group 12 – New Contract & Agreement - Glossary of Terms;

FIDIC Contract and Agreement forms

Observations from the Marketplace

What trends do I personally see 1(2):

• Undoubtedly, fair and balanced contracts generate healthy project completions. But, there is mixed understanding by the Clients of the potential. Experienced procurement vis-à-vis “New moneys”;

• With less and less time for construction (from investment

decision to start of pay-off) the need for accurate project programing is greater than ever;

• The trend for a Turn Key strategy is slowly swinging back to “A choice of contract = project characteristics”. But there are still many projects with questionable programming;

• Employers wants stronger focus on “Fit for its purpose” and

thus, amongst other reasons, operations liability contract (e.g. DBO) are more and more preferred;

What trends do I personally see 2 (2):

• Over-tweaking of FIDIC based contracts, where the

intention of the forms are lost. Yet, still claimed to be FIDIC contracts. Golden Clauses together with authentications of FIDIC based contracts & agreements may be the solution?

• A need for more forms available in multiple languages;

• Health & Safety, Sustainability, Information Management (e.g. BIM) and Integrity are areas of interest which are given more and more attention by the Employers.

• FIDIC´s dispute resolution process from ”The Engineer” through Mediation and DAB´s to final and binding Arbitration gets more recognition.

Observations from the Marketplace

The main characteristics of this case-project were: - Design and Construction of a mega-sized green

field project over 4 years;

- First ever commercial application of the core process technology;

- Significant and crucial public permits needed, adaption to national regulation crucial;

- The project represents a crucial, hazardous risk to society if implemented incorrectly;

Yet, the project was procured with an EPC delivery method and with Lump Sum payment method. Claims and counter claims at app 100 % of contract price. Arbitration since 2008. Current completion forecast 7 years late and 300 % over budget.

A few discouraging examples

Choice of Contract is crucial for project success

Observations from the Marketplace

Choice of Contract is crucial for project success A few discouraging examples The main characteristics of this case-project were: - An 8.7 km long tunnel in unknown, but very challenging,

geological conditions. Planned time for completion, 5.5 years;

- Procured on an EPC Lump sum contract bases with very poor tests and studies of ground conditions;

- 1st EPC contractor bankrupt after 4 years due to sever progress problems and engineering difficulties. Released from the contract against an LD penalty of 60 % of the initial contract value;

- 2nd EPC contractor suspended year 6 by environmental authorities due to work-methods in breach against national env. legislations. Eventually terminated;

- 3rd contractor procured on a quantity based compensation model with new tunnel drive method.

Project completion planned for 23 years after commencement at a final cost at 1 100 % over budget.

Observations from the Marketplace