Conference highlights Asian and Australasian experience of FIDIC contracts

13 Jul 2021

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The Official FIDIC Contract Users’ Conference (Asia and Australasia time zone event) took place online and delivered in-house by FIDIC from 13-15 July 2021, writes FIDIC communications advisor Andy Walker.

The event, sponsored by international law firm CMS, targeted the Asia and Australasia contract users’ community and offered a unique opportunity to share progress on the application and use of FIDIC contracts internationally and across the region and was attended by a range of stakeholders including MDBs, private sector organisations and clients, government, engineers, contractors, investors, consultants, and other stakeholders who have an interest in FIDIC contracts. 

Introducing the event in a video message to delegates, FIDIC president Bill Howard looked forward to a busy three conference days where experts will share their expert knowledge on FIDIC contracts. “FIDIC conditions of contract are critical to the health of our industry and we encourage the use of our Golden Principles to ensure that they are not adversely amended,” he said. While a good contract does not guarantee a successful project, a bad contract increases the possibility of a bad outcome dramatically,” Howard stated.

Standardisation leads to a consistent approach

Opening the first session of the conference, FIDIC president elect Anthony Barry spoke about FIDIC’s focus on business and the vital role that its contracts play in delivering on the organisation’s objectives. Barry highlighted the key role being played by the FIDIC contracts committee in maintaining what he called “a FIDIC contracts ecosystem” that underpins its work in the contracts’ arena. “The standardisation of our contracts means that we have a consistent approach that can be used by clients, contractors and consultants especially in the area of risk,” said Barry. Backed up by a range of guides and other information documentation and supported by many agreements with major multilateral banks and other global financial institutions, FIDIC contracts have become extremely influential documents that were enabling the industry to work better and more fairly,” Barry said.

The next speaker, FIDIC contracts committee chair Vincent Leloup, spoke about some of the new FIDIC contracts in the pipeline, including the new FIDIC Short Form of Contract (Green Book) 2nd Edition, due to be published towards the end of 2021. “The Green Book sits in the arena of small works but can also be used on higher value projects which are more straightforward and do not require significant contract administration and management resources,” said Leloup, who hoped that the new second edition would have a greater take up in the industry as a result of its ease of use and the wider scope of its remit.

Leloup also highlighted some of the new ‘boilerplate’ clauses included in the Green Book 2nd Edition including those for intellectual property, confidentiality, limitation of liability, testing provisions, date of completion, performance certificates, claim and variations, employer’s risks and liquidated damages provision. Leloup also updated delegates on the important work being undertaken on a Guide to the 2017 Suite of Contracts, which he said was scheduled for release at the end of 2021. Other work in FIDIC’s pipeline included new contracts on Collaborative Contracting, PPP Projects and EPCM, all of which are scheduled for release in 2022/23.

The second session of the conference, chaired by FIDIC contracts committee vice chair Kiri Parr, on best practice in procurement and contracting, took a regional view of developments and best practice tools in infrastructure procurement and how to effectively use FIDIC contracts in the procurement process.

The rise of the mega-project

First speaker in session two was Marion Terrill, transport and cities programme director of the Australian public policy think tank, the Grattan Institute, who spoke about the rising prevalence of mega-projects. “Bigger projects mean bigger contracts,” said Terrill who explained that $3bn contracts were on average 38% larger. She said that transport spending in Australia was higher than ever currently and that the pandemic had not affected this adversely. The rise of these mega-projects would have an impact on the way that contracting developed going forward and influence contracts in the marketplace, she said.

The next speaker, Sachin Mishra, legal and company secretary at Tata Consulting Engineers in India, who addressed the impact of the Covid pandemic on the Indian economy and the construction sector in the country, which Mishra said was still expected to be the third largest construction market in the world by 2022. He said that the SME sector had been particularly adversely affected by Covid and was still needing support to recover. Mishra also talked approvingly of the use of FIDIC forms for engineering, procurement and construction (EPC) contracts in India, with the Red, Yellow, Silver and Orange Books widely used.

Husni Madi, vice-chair of the FIDIC contracts committee, spoke next and using a case study he described the risk profile highlighted in some of the different FIDIC contracts. “There are two types of risks – employer and contractor,” said Madi, who looked at these two risk types and what happened when they were shifted. “If you allocate a risk to the contractor then you will be paying for it whether that risk takes place or not,” he said.

The final speaker in session two was Aston Consult director Julian Hemms, who highlighted the Australian experience of procurement and contracting. Hemms spoke about the disparity between regional government assertions and aspirations and what they were doing in practice. Highlighting the benefits of using FIDIC contracts, he said that they offered the benefit of being ensured and endorsed by private funding which was the opposite of the bespoke form contracting that was rife in certain areas of Australia. FIDIC contracts also led to a significant reduction (around 20 -24 weeks) in a tender process, Hemms said, who believed that there was an opportunity for FIDIC to fill a gap in the market.

FIDIC contracts committee in the spotlight

The final session of the first day of the conference was an ‘Ask the FIDIC Contracts Committee’ open Q&A on FIDIC contracts chaired by FIDIC’s general counsel Daduna Kokhreidze.  She was joined by FIDIC contracts committee members Vincent Leloup, Kiri Parr, Husni Madi, Eoin Cullinane and Siobhan Fahey for a wide-ranging discussion. Introducing the session, Kokhreidze highlighted the key role of the committee which was to “identify and anticipate market needs, strategically position FIDIC and develop FIDIC’s approach to contracts”.

The session addressed a range of issues including the impact of the pandemic on the industry and consequently on the use of FIDIC contracts. Husni Madi highlighted that FIDIC contracts had clauses within them to help address events like Covid and to deal with uncertainty and change and while he said that the pandemic could no longer be described as “an unforeseen event”, these clauses did enable parties to a contract to navigate their way through current challenges.

Kiri Parr spoke about the new FIDIC Collaborative Contract, work on which was now underway. She said that FIDIC had assembled a highly knowledgeable team to work on this contract and she was excited to be working with them. “Delivering projects successfully is embedded in strong relationships between the parties to a contract and what might have worked in the past might not necessarily work in the changing world we now find ourselves in,” Parr said. In due course FIDIC would be going out to the market to gain feedback to ensure that this new collaborative initiative addresses the needs of the industry and she appealed for delegates to assist in that process by getting involved in FIDIC’s consultation work.

As ever, the FIDIC Golden Principles were mentioned during the session as being fundamental in assisting FIDIC contract users in maintaining the integrity of contracts. “The Golden Principles are not just important, they are imperative,” said Husni Madi, who highlighted the tendency of some in the industry to “butcher and mutilate” FIDIC contracts. In the post-Covid era, all parties to a contract need to be striving for a ‘win-win’ outcome and avoid disputes at all costs, he said.

Building on this point, Kiri Parr spoke about the important role of FIDIC contracts in dispute avoidance and adjudication, highlighting the contracts’ stipulation of the use of standing dispute adjudication and avoidance boards (DAABs). Siobhan Fahey said that standing DAABs helped to avoid disputes and the benefits of their inclusion in contracts far outweighed any costs incurred. “The use of DAABs helps to prevent polarisation when disputes arise as they help contract parties to find a solution that works for everyone,” Fahey said.

Closing the final session of the conference, FIDIC president elect Anthony Barry reflected on an interesting and informative first day of the conference which had covered a lot of ground and looked ahead to the remaining two days of the event. He also thanked the conference strategic sponsor international law firm CMS for their support of the Official FIDIC Contract Users’ Conference series.

Day two of the Official FIDIC Contract Users’ Conference (Asia and Australasia time zone event) takes place on Wednesday 14 July 2021 starting at 2pm Singapore Time. Click here to book a place to attend.

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