FIDIC (Fédération Internationale Des Ingénieurs-Conseils) is an international professional organisation made up of associations of consulting engineers. The standard contracts FIDIC has developed on the basis of its long experience are widely used in international projects because they bring uniformity to technical, operational and legal matters. The two best-known FIDIC contracts are the Red Book, under which the employer is responsible for design, and the Yellow Book, under which the contractor is responsible for design. FIDIC contracts became considerably more widespread after FIDIC introduced new model contracts giving the parties more flexibility for different needs and published updated versions allocating risks between the parties in a more balanced way. Today, FIDIC contracts are used in both international and local projects.
Parties wishing to use a FIDIC contract should first identify the contract type that best suits their needs and the features of the project. To do so, they should take into account (i) the scale and complexity of the project, (ii) which party is responsible for design, (iii) how potential risks are allocated, (iv) how the contractor will be paid and (v) the delivery method of the project. The most frequently used FIDIC model contracts are summarised below with particular reference to these criteria.
The Red Book
The Red Book is the Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer. In its early days, FIDIC recommended the Red Book for civil engineering projects such as pipelines, bridges and buildings. The words "civil engineering" were later removed from the title of the contract. Today, the choice of contract model turns on the procurement method rather than the nature of the works. Although the Red Book allows the contractor to design certain elements, it is better suited to projects in which the employer carries out the design. Under the Red Book, the contractor is usually paid on a measurement basis. The Red Book has a Multilateral Development Bank edition, also known as the Pink Book, which is generally used in the tender documents of projects financed by credit institutions. Under this edition, the banks are entitled to inspect the project, and the responsibilities of the engineer are limited accordingly.
The Yellow Book
The Yellow Book is the Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor. It was used mainly in building projects for the supply of electrical and mechanical plant and for equipment works. Once the focus moved to the procurement method and the words "electrical and mechanical works" were removed from its title, however, the Yellow Book became suitable for all types of construction works in which the contractor carries out the design. It is now frequently used both for the supply of electrical and mechanical plant and for the design and execution of building and engineering works. Under the Yellow Book, the contractor is paid on a lump sum basis.
The Silver Book
The Silver Book is the Conditions of Contract for EPC/Turnkey Projects. It is mostly used in turnkey projects for process and power plants and in private infrastructure works. Under the Silver Book, the contractor designs the project and bears all risks relating to the completion time, cost and quality of the works. Because the Silver Book places all project risks on the contractor, other than war, terrorism and force majeure, it is better suited to experienced contractors able to manage complex risks. The Silver Book gives the contractor more freedom to carry out the project as it sees fit, but the contractor must still meet the performance criteria set by the employer. Under the Silver Book, the contractor is usually paid on a lump sum basis.
The Green Book
The Green Book is the Short Form of Contract, General Conditions. It suits projects requiring relatively little capital (less than USD 500,000) and is recommended for repetitive, short-term or simple construction works. The Green Book is a flexible form containing administrative and commercial provisions, and it can easily be adapted to the needs of the parties.
The Gold Book
The Gold Book is the Conditions of Contract for Design, Build and Operate Projects. It is used in projects where the contractor undertakes design and construction as well as operation. The Gold Book is recommended for international projects with high capital requirements and long operation periods, such as 20 years.
Conclusion
When choosing the appropriate FIDIC contract model, the parties should carefully assess every aspect of the project, including which party is responsible for design, the allocation of risk, the duration of the project and the amount of capital involved.