What are FIDIC contracts and why should they be used in the construction field? Bucharest, 01 April 2015 Note: this editorial has been published in Arena Constructiilor magazine on 31 March 2015 and may be visited at the following web-site address: http://www.arenaconstruct.ro/ce-sunt-contracte-fidic-si-de-ce-artrebui-folosite-in-domeniul-constructiilor/ FIDIC contracts represent agreements in the construction and installation field, used as standards in the international arena. These contracts have been drafted by the International Federation of Consulting Engineers (commonly known as FIDIC, acronym for its French name Fédération Internationale Des Ingénieurs-Conseils) founded in 1915 by three European states (Belgium, France and Switzerland). With reference to the construction agreements, the main purpose of FIDIC was to create standard contracts that may be used for a variety of construction and installation projects, considering that, in essence, constructing any project around the world have as foundation the same main principles (leaving aside the technical and geographical specificities). These standard agreements cumulate an experience of decades in construction and installation projects and represents documents that take into account, in a balanced manner, the interests of both parties involved. Page 1 of 3 In 1999, FIDIC has issued a series of standard construction and installation agreements that may be used based upon the specificities of the project had into account. Three of the most well-known standard agreement are “red” FIDIC, “yellow” FIDIC and “green” FIDIC, named as such based upon the color given to the cover of the document under which such have been published. “Red” FIDIC [“Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer”] (the construction contract), whose first edition has been drafted in 1956 is used for works in which the design (almost entirely) is made by the employer. The risks undertaken by the parties are balanced, and the payment of the works is made based upon the monthly bill of quantities or based on the lump sums for items of works. “Yellow” FIDIC [“Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant and for Building and Engineering Works, Designed by the Contractor”] (the plant and design/ build contract). This type of agreement is used in construction works in which the design is ensured by the contractor, such undertaking, at the same time, an increased level of risks. This represents a lump sum contract in which the payments are made based upon the certification by the engineer (like the “red” FIDIC, the engineer administers the contract). “Green” FIDIC is used, in general, for low value projects (by virtue of example, under $ 500,000) or developed over a short period of time (by virtue of example, under 6 months), regardless if the design is made by the contractor or by the employer. There is no engineer and payments are made on a monthly basis. In addition to the above mentioned three standard agreements, FIDIC has also drafted other standard contracts based upon the specificities of the construction projects (by virtue of example, banks’ financed projects, “turnkey” projects, projects involving not only the construction, but also the operation by the contractor). In Romania, the importance of these contracts has been completely understood in 2008 when the legislation provided the obligation for the authorities to use the “red”, “yellow” and “green” FIDIC in the public procurement projects (G.O. no. 34/2006). Unfortunately, the legal regulation based on which these contracts have been approved has been repealed in 2009. Page 2 of 3 Starting with 2011, the “red” and “yellow” standard FIDIC agreements have been reintroduced in the transport infrastructure investment works of national importance, financed out of public funds, performed by all units under the authority of the Transportation and Infrastructure Ministry and only for projects with a value of over Euro 5 million. As all standard agreements, the professionalism and dedication of the legal consultant has a paramount importance for the way in which these FIDIC agreements are adapted (through the Particular Conditions), based upon the project’s technical, commercial and legislative characteristics. In the international arena, “red” FIDIC contracts represent the most widely used standard agreement for construction and installation projects designed by the employer. Page 3 of 3
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