Conference highlights international funders' use of FIDIC contracts

09 Dec 2021

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The third and final day of the Official FIDIC International Contract Users’ Conference on 9 December 2021 gave delegates the opportunity to meet FIDIC’s certified adjudicators, put the FIDIC contracts committee on the spot in a Q&A session, take a closer look at the newly launched and updated FIDIC Green Book and focus on FIDIC’s engagement with the multilateral development banks (MDBs).

Opening day three of the conference, which was sponsored by FIDIC global strategic partner, international law firm CMS and day sponsor Fenwick Elliott, Aisha Nadar, senior consultant specialising in infrastructure procurement and dispute management at Advokatfirman Runeland and a previous board member of FIDIC, outlined the agenda for the day. She said that attendees would hear from representatives from the multilateral development banks who will share their experiences of using FIDIC forms of contract and there would also be an opportunity to hear from the World Bank on their perspectives on the new 2017 Editions, including the DAAB role in strengthening prevention of gender-based violence.

The first session of day three saw a discussion on the new FIDIC Green Book chaired by James Perry, partner at PS Consulting, which looked at the main features of the newly updated 2021 FIDIC Green Book with a panel of industry experts that included the book’s drafters and representatives of contractors, employers and finance institution organisations.

Green Book in the spotlight

Vincent Leloup, founder and managing partner at Exequatur and chair of the FIDIC contracts committee, explained the background to the new Green Book, which he said was designed for use for projects where the perceived level of risk is low and/or where construction parties need a contract form that is simple to use and doesn’t require significant contract administration and management resources.

Pieter Mattelaer, deputy group leader at the CERN project in Switzerland, outlined their experiences of using FIDIC contracts and said that they were looking forward to using the new Green Book and welcomed the flexibility and ease of use of the FIDIC suite of documents. Richard Touroude, director of international affairs at the Fédération Nationale des Travaux Publics, thought that the Green Book could well be used for larger projects as well as the smaller ones for which it was designed and that the newly updated edition was “a great step forward” for the industry.

Alain X. Morel, principal country specialist at the Philippines country office of the Asian Development Bank, said that he thought that the Green Book was a good development that could be used on smaller contracts by the multilateral development banks. “The contract is based on a risk analysis approach and the discussions I have had with colleagues in our procurement teams indicate that there is likely to be interest in taking up the Green Book,” he said.

Reflecting on the updating of the Green Book, Mahmoud Abu Hussein, senior manager procurement and contracts UAE at Dolphin Energy, highlighted the significant industry consultation that had taken place during the development of the updated contract. The update Green Book includes provisions for employer’s or contractor’s design of the works as well as the appointment of an engineer to administer the contract, he said. Dispute resolution provisions were also updated, with two distinct contractual routes to handle claims and variations and provision made for the early appointment of an adjudicator who can provide dispute avoidance services on top of their regular dispute resolution services.

Hussein also highlighted some of the new features in the contract including the prolongation cost (PGC) mechanism which outlines a tabulated summary of contractor’s entitlement for employer’s risks. “The objective is to spare parties a lengthy disputes process and avoid the pain of protracted discussions when problems arise, but this mechanism needs to be used with care,” he said.

International finance institutions use of FIDIC contracts

The second session of day three focused on international finance institutions’ procurement and their use of FIDIC forms in the company of an expert panel including Evgeny Smirnov, associate director and policy advisor at the European Bank for Reconstruction and Development, Xavier Mesnard from the procurement support division at the Agence Française de Développement (AFD), Hisham Merghani, senior project procurement specialist at the Islamic Development Bank and Jenny Yan Yee Chu, procurement specialist at the Asian Development Bank.

The EBRD’s Evgeny Smirnov said that FIDIC contracts were the most common forms of contracts used on their construction contracts and have been used since the bank’s inception in 1991. Even though the contracts were well known in the marketplace, there are still challenges in getting clients (and consultants) to understand the benefits of using these standard contract forms. Smirnov said that he thought that greater effort was needed to promote FIDIC contracts more widely and raise awareness of the benefits of using them.

Xavier Mesnard from the Agence Française de Développement spoke about the AFD’s FIDIC-based standard bidding documents. He said that there had been extensive internal work to develop AFD-specific particular conditions and highlighted that FIDIC conditions of contract are often not well known in many countries where AFD finances projects and that this has led to some limitations to the role of the engineer. Overall, he said that the AFD was very satisfied with the use of FIDIC Conditions of Contract, but he made the point that contracting authorities needed more training and communication on FIDIC contracts to help raise awareness and understanding.

Hisham Merghani spoke about the Islamic Development Bank’s licence agreements that enable the bank to refer to the FIDIC Documents for projects that are financed in whole or in part by IsDB where the bank’s standard bidding documents are used. He highlighted some limitations on the right to vary the contracts and explained the rationale for this, which he said would see each contract assessed individually based on the level of uncertainty inherent in each project.

Jenny Yan Yee Chu from the Asian Development Bank spoke about the concept of sustainable public procurement principles. “Sustainable public procurement allows governments to meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole-life basis in terms of generating benefits not only to the organisation, but also to society and the economy, while remaining within the carrying capacity of the environment,” she said. Highlighting the pillars of sustainable procurement of economic, environmental, social and institutional, Chu explained that these had underpinned the development of ADB’s Sustainable Procurement Guidance Notes.

Key considerations in the guidance notes were to strengthen country system and capacity building, to offer tools to support incorporating sustainable procurement in projects and contracts and to outline sector or category key theme-based references and case studies. She said it was essential to consider sustainable procurement at the strategic planning stage and to use tools like whole-life consideration, functional specification, measuring and quantifying environmental/social impacts and importantly price and quality-based selection.

FIDIC contracts committee

Day three of the conference concluded with a Q&A session with the FIDIC contracts committee, chaired by Daduna Kokhreidze, general counsel of FIDIC. Contracts committee members in attendance included the chair Vincent Leloup, founder and managing partner at Exequatur, vice chairs Kiri Parr and Husni Madi, CEO of Shura Construction Management, Peter Collie, barrister, arbitrator and mediator at 3 PB Barristers and Adriana Spassova, partner at EQE Control OOD.

Committee members answered questions on a wide range of issues including the newly launched FIDIC Green Book, the key role of the engineer in FIDIC contracts, dispute avoidance and resolution, collaborative working, the cost of preparing claims under the contract, the continuing effects of the Covid pandemic on contract implementation and delivery, potential new FIDIC contracts in the pipeline, the FIDIC Golden Principles and much more.

Summing up the whole conference, FIDIC chief executive Dr Nelson Ogunshakin said that much had been covered over the past three days and he was delighted that FIDIC had been able to bring together its contract community to discuss key issues and developments. So many issues have been given an airing and it was clear that the discussions would continue in a spirit of collaboration, he said. He ended by thanking the FIDIC board, the contracts committee and also FIDIC’s global strategic partner, international law firm CMS, for their continuing support for FIDIC's Contract Users' Conference programme.

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