Day two of contract users’ conference focuses on client experience

14 Jul 2021

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The second day of the Official FIDIC Contract Users’ Conference (Asia and Australasia time zone event) on 14 July 2021 focused on the multilateral development banks (MDBs) and their use of FIDIC contracts across the Asian and Australasia region, writes FIDIC communications advisor Andy Walker.

Day two’s theme for the event, which was delivered online by FIDIC, was "Where are the clients and the Contractors in the ASPAC region and what are they doing? Best Practices". The conference, sponsored by FIDIC global strategic partner, international law firm CMS, was attended by MDBs, private sector organisations and clients, government, engineers, contractors, investors, consultants, and other stakeholders who have an interest in FIDIC contracts.

Opening the first session of day two, Liu Luobing, board member and vice-president of FIDIC, hailed the benefits of the digital technology that had enabled delegates to gather online for the conference and the industry to continue during the pandemic. He also highlighted the leading role of FIDIC contracts in delivering projects across the region and around the world.

Multilateral development banks’ use of FIDIC contracts

The first session looked at the MDB’s Use of FIDIC contracts in the region and was chaired by FIDIC board member James Mwangi. He introduced opening speaker, Michino Yamaguchi, director of the Japan International Cooperation Agency (JICA), who gave an overview of the agency’s work and purpose. Yamaguchi highlighted JICA’s standard bidding documents and their use of FIDIC contracts, making the point that the agency promoted the use of the FIDIC Golden Principles to ensure contract integrity on projects.

Referring to dispute resolution issues, Yamaguchi (pictured above) said that JICA’s standard bidding documents for large contracts include provisions for a standing dispute board. And for contracts amounting to three billion yen or more, a standing dispute board consisting of one or three members should be established in principle. She said that JICA strongly recommended a standing dispute board from the point of view of both dispute avoidance and resolution and also stressed JICA’s stipulation that “borrowers shall use the appropriate standard bidding documents of the latest version issued by JICA with minimum changes acceptable to JICA, as necessary to address project-specific conditions.”

The next speaker was Jeff Taylor, director of procurement division 1 at the Asian Development Bank (ADB), who gave an overview of the bank’s $10.3bn dollar procurement portfolio. Taylor outlined the ADB’s role in procurement which was to review the borrower’s procurement procedures, documents, bid evaluations, award recommendations and contracts to ensure that the procurement process is carried out in accordance with the agreed procedures. “Quality has become an increasingly important dimension for ADB and this offers a greater opportunity to achieve value for money,” he said.

Taylor also spoke about the ADB’s standard bidding documents, contract forms and users’ guides and said that these were all freely available for download online from the ADB website. Highlighting the key role of FIDIC in the bank’s standard documents, Taylor said: “We recognise the strength of FIDIC contracts as the pre-eminent international standard forms for the industry.”

Dispute resolution and capacity building

On disputes, Taylor said that the dispute resolution mechanisms in FIDIC contracts were under-utilised due to a variety of reasons including access to training and dispute resolution, the fact that the ‘independent’ role of the engineer is not well understood and that incomplete contracts (ad-measurement) were poorly understood. He also highlighted the ADB’s Annual Procurement Report and encouraged delegates to download it from the bank’s website.

Ian Nightingale, procurement advisor at the Asian Infrastructure Investment Bank (AIIB) spoke next and gave a brief overview of the bank’s procurement policies and procedures. Nightingale highlighted the increasing importance of contract management and said that the bank required evidence of a contract management plan from those clients it lends to. Nightingale also highlighted the key importance of FIDIC contracts to the AIIB and said that the bank strongly aligned with FIDIC principles. “The majority of contract forms in our operations are FIDIC," he said.

In the discussion, session chair James Mwangi asked the speakers about their commitment to capacity building, an important area in ensuring that contracts are properly run and undertaken. All the speakers reported that they made an allowance for training and capacity development on their projects and were looking to do more. The discussion also covered the issue of dispute boards and their use in contracts, with speakers reporting that in some cases the use of these boards was patchy and more work needed to be done in this area.

Session two of the conference, chaired by FIDIC contracts committee chair Vincent Leloup, focused on ADB and World Bank projects across Asia. First speaker Uzma Sadaf, senior procurement specialist at the World Bank, highlighted the use of the FIDIC forms in the bank’s procurement processes. Sadaf gave delegates a comprehensive overview of the bank’s standard bidding documents and procurement approach and referred to some of the salient features that the bank requires from clients. She mentioned the contract mechanisms that specified the scenarios triggering referral to dispute boards regarding procedures for making decisions, escalation to emergency arbitration and the subsequent determination by the bank.

Sadaf also talked about the bank’s support for better contract management. She said that their Project Procurement Strategy for Development optimises contact packaging and a contracting strategy based on market assessment and highlighted that at all times the bank’s standard procurement documents ensure a consistency of application in fitness for purpose approaches and value for money. The bank’s support also included a requirement for contract management plans with clear KPIs, prior reviews, implementation support and trainings and clinics for lenders, she said.

Good procurement and contract management

Next speakers were Alain Morel, principal country specialist at the Asian Development Bank (ADB) and Dharmesh Mahendra Dawda, procurement specialist at ADB, who talked about the use of the FIDIC Gold Book on ADB projects. Morel highlighted the bank’s approach to DBO projects which included ensuring the durability of investments as too many projects suffer from a lack of maintenance, he said. Both Morel and Dawda said that creating space for innovation, enhancing value for money and creating opportunities for capacity building to encourage knowledge transfer during the operational service period were all key focuses for the bank on DBO projects. He also encouraged delegates to read the ADB’s standard bidding documents and users’ guide on the bank’s website.

The final session on day two of the conference, chaired by Husni Madi, vice-chair of the FIDIC contracts committee, reviewed a number of case studies on the employers’ and contractors’ use of FIDIC contracts across the region.

The first speaker, Oliver Wee, vice chairman of the conditions of contract committee at the International Federation of Asian and Western Pacific Contractors’ Associations (IFAWPCA), gave an overview of the use of FIDIC contracts in Asia. Wee highlighted the standard form of contracts available in Malaysia and also the FIDIC contracts used in the country. He reported that FIDIC forms were often amended as there was not full understanding in the local industry of the contracts. Most projects were using the architects’ PAM forms as a result, said Wee.

Referring to disputes and the rising number of cases in the courts, Wee said that “legal battles always lead to a long and painful journey” and needed to be avoided. To that end, he said that mediation needed to be a contract condition precedent to arbitration.

Key importance of FIDIC Golden Principles

Next, delegates heard an employer’s perspective on the use of FIDIC conditions of contract in Indonesia from Weddy Sudirman, executive vice president of the State Electricity Corporation, Indonesia, who used the example of the Peusangan 1 & 2 Hydroelectric Power Plant construction project in Aceh Province in Sumatra. He highlighted the use of FIDIC contracts on the project and also the application of the Golden Principles, which he said were not fully complied with. Sudirman reported that FIDIC’s contract form was applied widely on the project but because the Golden Principles were often complied with this created an unbalanced contract. “The employer will always intend to protect himself by exploiting the changes in the particular conditions, especially for a state-owned company or the government, which is bound by ‘heavy’ regulation or the necessity to appoint other parties to the contract,” he said. Such a situation, said Sudirman, would at some point unbalance the contract, creating problems.

Dona Alisyah Siregar, vice president for contractual matters of PT Hutama Karya, gave a contractor’s perspective on the use of FIDIC contracts. Using a series of case studies she highlighted the benefits of using FIDIC MDB contracts, particularly stressing harmonised conditions, fairly balanced risk allocation, the robust procedural framework and the ever-important area of dispute avoidance.

Finally, Wang Xin ping, managing director at STEC/SUCG India Regional Centre of SUCG International Engineering Co, gave a contractor’s perspective on the use of FIDIC Contracts in India. He said that he benefits of using FIDIC forms included providing a uniform code or format of construction contract that safeguarded the rights of sub-contractors, helping to reduce litigation in a country with overworked courts and a tremendous backlog of cases by disputes and claims and providing clear stipulations for individual project-based needs. “The use of FIDIC contracts can also unite the industry as a whole - domestically and internationally – and should be used widely,” said Wang.

Closing the final session of the conference, Sudhir Dhawan, president elect of FIDIC’s Asia Pacific regional group ASPAC, thanked all the speakers for their contributions and also the delegates for taking part in an nteresting and informative event.

FIDIC would like to express its thanks to the conference strategic sponsor, international law form CMS, for their continued support of the Official FIDIC Contract Users’ Conference series

Day three of the Official FIDIC Contract Users’ Conference (Asia and Australasia time zone event) takes place on Thursday 15 July 2021 starting at 2pm Singapore Time. Click here to book a place to attend.

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