ABSTRACT
Developments in the construction industry and the increase in the number of infrastructure and superstructure construction projects, which are both legally and technically complex, has led to updates in the standards with which they must comply. “Fédération Internationale des Ingénieurs Conceils” (International Federation of Consulting Engineers “FIDIC”) provides publications serving different purposes and standardized contract forms for use by the construction industry. These standard forms are preferred by the industry as they increase the credibility of a project and base the project on applications that everyone recognizes. FIDIC’s publications include Conditions of Contract for Construction (“the Red Book”), Conditions of Contract for Plant and Design-Build (“the Yellow Book”) and Conditions of Contract for EPC / Turnkey Projects (“the Silver Book”). These standard contract forms were renewed in 2017 with the purpose of highlighting their functions rather than the advantages they provide to the parties of a contract. This article reviews, in general terms, the regulations and updates in the Silver Book.
FIDIC is an international standards organization of national consulting engineers which acts as an authority regarding the application of foreign works for consulting engineers and construction work and encourages global developments for consulting engineers.
I. INTRODUCTION
FIDIC is an international standards organization of national consulting engineers which acts as an authority1 regarding the application of foreign works for consulting engineers and construction work and encourages global developments2 for consulting engineers.
FIDIC publishes standard contract forms for construction work for practical use in the construction industry. The use of standard forms, which have been applied for years3 all around the world, helps to frame the legal relationships between the various parties in a way that is universally recognized.
In 2017, FIDIC published updated versions of the Red Book, the Yellow Book, and the Silver Book, which is recommended as the standard form for use in complex construction works in a variety of projects. This article analyses the general features of the Silver Book, first published in 1999, and the 2017 updates to the standard form.
II .THE SCOPE OF THE SILVER BOOK
A. The Silver Book 1999
The Silver Book 1999 is recommended by FIDIC for projects such as energy plants, factories, and other such facilities or infrastructural work constructed as turnkey projects where:
- certainty of project timings, the total cost of the project, and the required performance level plays a vital role,
the contractor takes full responsibility for the design and application of the project with little involvement from the employer4.
The standard clauses in the Silver Book are designed for projects where the contractor fulfills all the engineering, supply, and construction works and delivers the facility fully equipped for operation (turnkey). The Silver Book expects the least involvement of the employer in a project and does not refer to the concept of engineer, which the Yellow and Red Book do. Instead, the Silver Book involves a representative of the employer and a more direct relationship between the employer and the contractor5.
Unlike a more balanced contract, in the Silver Book the contractor takes on most of the contract risks6. This standard risk allocation plays an essential role in the payment to the contractor.
B. The Silver Book 2017
Unlike the Silver Book 19997, the Silver Book 2017 is not suggested for works where a significant part of the construction will be carried out underground. The Conditions of Contract for Underground Works, also known as the Emerald Book, was published in May 2019 and is recommended for underground works since it provides a more balanced risk allocation.
Apart from the change in functionality, the Silver Book 2017 is recommended where the bidders, later to be contractors, are able to detect and control the needs of the employer or to perform the design of the works, to perform risk assessment or where the bidders have the required information or time to inspect the works; and where the employer does not intend to closely supervise or revise the construction drawings.
III. SIGNIFICANT CHANGES IN THE SILVER BOOK
A. Obligations of the Contractor
Under Silver Book 1999, Clause 4.1 titled “Contractor’s General Obligations” and remaining in force in the 2017 update, the contractor designs, fulfills, and completes the work according to the contract, repairs any defects that may arise and ensures the works comply with the purpose determined in the contract. Furthermore, the completion of the works is required to be completed in compliance with the needs of the employer as stipulated in the contract or to be completed in a manner that would establish the structural stability of the works, even if such requirement has not been stipulated in the contract.8 Besides, with the updates in the Silver Book 2017, it is stated that the works shall be appropriate to the general purpose of use in situations where no purpose is assigned9.
Besides, with the updates in the Silver Book 2017, it is stated that the works shall be appropriate to the general purpose of use in situations where no purpose is assigned.
B. Contract Data
The term “Contract Data” is introduced with the updates in the Silver Book, Red Book, and Yellow Book. Some subclauses in the Silver Book require the presence of information under the form of Contract Data,10 which includes a lot of vital information for the contract such as the identification of the employer’s representative, contract language, completion period, and the upper limit of payment in case of delay. Failure to complete the required information suggests that the documents required, the vital information, and the information required have yet to be completed. FIDIC points out that many contract documents including the Contract Data have been added to the contract as a result of the negotiation process and, therefore, the parties must agree on every aspect that has been added to Contract Data or not. In this regard, it can be stated that the inclusion of Contract Data is mandatory under EPC/turnkey contracts.
C. Contract Management
Contract management under the Silver Book is undertaken by the employer, unlike the Yellow and Red Book where it is the engineer’s responsibility.11 The employer’s representative,12 whose assignment was optional in the Silver Book 1999, could act on behalf of the employer. Following the updates in 2017, the Silver Book made it mandatory for the employer to assign a representative13. The Silver Book 2017 states that the employer’s representative may act on behalf of the employer. However, under the Determinations clause, which sets out the employer’s obligations and the procedure through which the employer’s representative must act in line with the claims stated under Clause 20.1, the employer’s representative cannot act on behalf of the employer.14 Under Silver Book 2017 Clause 3.5 “Determinations”,15 the employer’s representative is obliged to make a fair and reasonable determination by taking all the relevant facts into consideration. Under Clause 3.5, the employer’s representative is not a person acting on behalf of the employer, meaning the employer’s representative has a neutral role in maintaining an agreement between the parties in line with claims made under Clause 20.1. In this respect, the employer’s representative is more like the engineer in the Red and Yellow Book with regard to determination16.
D. Dispute Prevention and Resolution
The dispute resolution procedure in the Silver Book was to apply to the Dispute Adjudication Board (“DAB”) when a dispute arises, following the specific FIDIC standard contracts procedure. Clause 20, titled “Claims, Disputes and Arbitration” in the 1999 edition of Silver Book, has been separated into “Claims” under Clause 20, where both the employer’s and contractor’s claims must be included, and “Disputes and Arbitration” under Clause 21, where the DAB is replaced with the Dispute Adjudication/Avoidance Board (“DAAB”)17. The structure and the function of the DAB, as a dispute resolution procedure specific to FIDIC standard contracts, has been altered so that DAB no longer applies only after a dispute has arisen but now has a defensive structure, following the 2017 update18. The DAB suggests a mechanism only after a dispute has arisen while the DAAB structure provides the establishment of DAAB after the conclusion of the contract19. In this regard, the term of DAAB expires either upon the full and final settlement of all money due to the contractor under the contract has been confirmed20 or DAAB establishes its decision regarding all disputes (whenever arise later)21.
E. Golden Principles
The Red, Yellow, and Silver Books’ 2017 editions22 recommend taking into consideration a set of Golden Principles. These are as follows:
- The duties, rights, obligations, roles and responsibilities of the parties of the contract should comply with the general terms and the requirements of the Project.
- Special terms should be written clearly and without causing any ambiguity.
- Special terms should not change the risk or money distribution balance that is provided by general terms.
- All periods in the contract should be applicable for both parties to fulfill their obligations.
All official disputes should take a temporarily binding decision from the DAAB as a precondition of commencing the procedure of arbitration.
FIDIC recommends that the Golden Principles should be taken into consideration for any contract structure to be in the line with a FIDIC standard form23, be compatible with the relevant law, and also be compatible with the certain properties of the site and the project. Although the Golden Principles are not legally binding, they are considered relevant arguments that parties can resort to for a contract to be regarded as a standard form of FIDIC24.
IV. CONCLUSION
FIDIC publications, the standard contract form in the construction industry, were updated in 2017. Four key changes were made to the Silver Book: the Silver Book is no longer recommended for underground constructions; it is envisaged by the Contract Data that the information provided by the employer shall comply with a specific form; the contract management structure of the Silver Book has been made similar to the Red and Yellow books; and dispute resolution is now structured as a defensive mechanism rather than a mechanism only to be applied once a dispute has arisen. The Golden Principles, a set of criteria determining whether a contract is a FIDIC standard form or not, were added to the Silver Book as a set of principles guiding agreement for the contracting parties: they are not legally binding.
BIBLIOGRAPHY
ELLIS BAKER / ANTHONY LAVERS / REBECCA MAJOR, Introduction to the
FIDIC, Suite of Contracts (Suite of Contracts), Ocak 2020.
FIDIC, Conditions of Contract for EPC/Turnkey Projects, 1999.
FIDIC, Conditions of Contract for EPC/Turnkey Projects, 2017. FIDIC, Statutes and By-Laws, International Federation of Consulting Engineers, September 2015.
MELIS ŞEREMET, “İnşaat Sözleşmeleri ve FIDIC”, İstanbul Barosu Dergisi, Vol. 80, Issue. 4, İstanbul 2006.
NAZLI TÖRE, FIDIC Kurallarının Karşılaştırmalı Hukuktaki Yeri, Ankara 2011.
FOOTNOTE
1 FIDIC, Statutes and By-Laws, International Federation of Consulting Engineers (English) (By-Law), September 2015, Art.2, para.3.
2 FIDIC, By-Law, Art.2, para.4.
3 Melis Şeremet, “İnşaat Sözleşmeleri ve FIDIC”, İstanbul Barosu Dergisi, Vol. 80, Issue. 4, İstanbul 2006, p. 1551.
4 FIDIC, Conditions of Contract for EPC/Turnkey Projects, 1999 (Silver Book 1999), Foreword.
5 Nazlı Töre, FIDIC Kurallarının Karşılaştırmalı Hukuktaki Yeri, Ankara 2011, p. 11.
6 Ellis Baker/ Anthony Lavers/ Rebecca Major, Introduction to the FIDIC Suite of Contracts (Suite of Contracts), January 2020, p. 5.
7 FIDIC, Conditions of Contract for EPC/Turnkey Projects, 2017 (Gümüş Kitap 2017), Notes.
8 FIDIC, Silver Book 1999, Cl.4.1.
9 FIDIC, Silver Book 2017, Cl.4.1.
10 FIDIC, Silver Book 2017, Particular Conditions Part A – Contract Data, p. 2.
11 FIDIC, Silver Book 1999, Cl.3.1.
12 FIDIC, Silver Book 1999, Cl.3.1.
13 FIDIC, Silver Book 2017, Cl.3.1.
14 FIDIC, Silver Book 2017, Cl.3.5.
15 FIDIC, Silver Book 2017, Cl.3.5.2.
16 Baker/ Lavers / Major, Suite of Contracts, p. 5.
17 FIDIC, Silver Book 2017, Cl.21.
18 FIDIC, Silver Book 2017, Cl.21.3.
19 FIDIC, Silver Book 2017, Cl.21.1.
20 FIDIC, Silver Book 2017, Cl.14.12.
21 FIDIC, Silver Book 2017, Cl.21.1. the first para.
22 FIDIC, Silver Book 2017, Particular Conditions Part B – Special Provisions, p. 8.
23 FIDIC, Silver Book 2017, Particular Conditions Part B – Special Provisions, p. 8.
24 Baker / Lavers / Major, Suite of Contracts, p. 6.
