RUB-EIC Seminar. The EIC View on the FIDIC New Books. by Hakan Broman, NCC Interational St. Petersburg, Russia, 17 April 2008

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1 RUB-EIC Seminar The EIC View on the FIDIC New Books by Hakan Broman, NCC Interational St. Petersburg, Russia,

2 Structure of the Presentation FDIC New Books 1999 EIC Contractor s Guide to the FIDIC Red/Yellow/Silver Books ( ) MDB Harmonised Edition of the New Red Book (2006) EIC Position on MDB Harmonised Edition (not yet published) FIDIC DBO Contract (2008) EIC Position on FIDIC DBO Contract (not yet published) Joint RUB -EIC Seminar 2

3 FIDIC 1999 New Books First Editions Published 1999 Guide published Joint RUB -EIC Seminar 3

4 The EIC Contractor s Guides EIC Contractor s s Guides on the FIDIC New Books were produced between 2000 and 2003 and were all published in the ICLR. March 2000 March 2002 March 2003 EIC Blue Book on Sustainable Procurement was published in 2004 Joint RUB -EIC Seminar 4

5 EIC General Remarks Characteristics of the New Red & Yellow Books Characteristics of the Silver Book For traditional competitive tendering procedures Balanced risk sharing between the Parties Contract administration, supervision and certification is carried out by the Engineer Engineer is no longer impartial, but shall be deemed to act for the Employer Claims must follow strict procedure on both sides For innovative tendering procedures or negotiated contracts Unfair risk allocation in favour of the Employer Contract administration, supervision and certification is carried out by the Employer s Representative Engineer is no longer impartial, but shall be deemed to act for the Employer Claims must follow strict procedure on both sides Joint RUB -EIC Seminar 5

6 EIC Position on the FIDIC 1999 New Red/Yellow Books Improvements Employer s Financial Arrangements (Sub-Clause 2.4) Procedure for Employer s Claims (Sub-Clause 2.5) Engineer is agent of the Employer (Sub-Clause 3.1) Performance Security (Sub-Clause 4.2) Payment (Sub-Clauses 14.7 and 14.8) New concept of Force Majeure (Clause 19) Dispute Adjudication Boards (Clause 20) Joint RUB -EIC Seminar 6

7 EIC Position on the FIDIC 1999 New Red/Yellow Books Retrogressions Fitness for Purpose obligation (Sub-Clause 4.1) Errors in Setting Out (Sub-Clause 4.7) Completeness of Site Data (Sub-Clause 4.10) Unforeseen Physical Conditions (Sub-Clause 4.12) Termination for Convenience (Sub-Clause 15.5) Limitation of Liability (Sub-Clause 17.6) Time bar (28 days) on right to claim (Sub-Clause 20.1) Joint RUB -EIC Seminar 7

8 EIC Position on the FIDIC 1999 Silver Book From the beginning, EIC has strongly opposed the publication of an such unbalanced FIDIC standard form Contractor is asked to cover a wide range of risks, which leads to higher risk premiums EIC was successful in convincing FIDIC to provide for a health prescription in the Introductory Note Silver Book is not suitable for use under certain circumstances Read the Introductory Note (and convince Employer to use the New Yellow Book )! Joint RUB -EIC Seminar 8

9 EIC Position on the FIDIC MDB Harmonised Red Book Part of World Bank s Standard Bidding Documents for Major Works MDB Edition accommodates some of the EIC comments, such as Obtaining building permit is responsibility of the Employer Employer s Claims also under a risk of being time-barred Engineer has to make determination within 28 days Commencement of the Works only upon fulfilment of certain conditions Additional right to refuse a Variation Termination by the Contractor possible in case of economic imbalance Joint RUB -EIC Seminar 9

10 The new FIDIC DBO Contract FIDIC statements EIC statements Design + Construction + Operation in 1 single contract Green-field scenario Base case: Operation for 20 years Minimisation of delays and optimisation of activities Less risk of price overruns due to cost commitment carried by the Contractor Better quality since a Contractor has an incentive to design and build the facility well EIC welcomes the fact that FIDIC has addressed the DBO option DBO format opens the door for a competition based on quality rather than on price BUT: New Yellow Book + Annex for Operation a better option? One-size-fits-all approach? Performance Guarantee for 20 years contract life? Joint RUB -EIC Seminar 10

11 The new FIDIC DBO Contract Selected EIC Comments on specific clauses Sub-Clause 3.1: Engineer or Employer s Representative Sub-Clause 4.2: Split of the Performance Security into amount/percentage related to Design-Build and Operation Sub-Clause 8.7: Design life instead of residual life Clause 9: Clear delimitation between the obligations of the construction phase and the operation phase Sub-Clause 13.1: Limited rights for Variations after completion of the facility, i.e. during the operation phase Clause 14.18: Rebasing clause in order to provide for periodic updates of Asset Replacement Fund Joint RUB -EIC Seminar 11

12 Our experience on long-term projects Financiers: City of St. Petersburg, EBRD, NIB, NDEP, Finnish Ministry of Environment, SIDA Owner & Operator: SUE Vodokanal Contractor: SWTP Construction Oy (Jjoint venture of NCC, Skanska and YIT) Project Cost: appr. 180 mil. Project was timely completed and within budget and St. Petersburg Wastewater Treatment Plant Project a true international PPP! Joint RUB -EIC Seminar 12

13 EIC Contact Address: EIC Secretariat Kurfuerstenstrasse 129, D Berlin, Germany Phone: ++49 (0)30 / Fax: ++49 (0)30 / eicontractors@compuserve.com Internet: Joint RUB -EIC Seminar 13