International (Construction)

Contract Management
comparison(differences) between
FIDIC RED, PINK, YELLOW, GOLD and SIVER Book
and their development direction

Graduate School of Global Railway

Woosong University
NamSeok(Kris) Kim
[email protected]

INDEX
Introduction of FIDIC
FIDIC Contract Publication
Brief for Major Construction Contract Form
Project Delivery Method
Comparison in General Conditions
Contract Documents
Where are the unique data specified for a project?
Who is responsible for Contract Administration?
Engineer’s Duties and Authorities
Time bar for claim and time limit in Determination
Design Responsibility/Contractor’s General Obligation
Allocation of major commercial contractual risks
Cost & Profit Structure
Sharing of profit on Value Engineering
Commencement
Limitation of Liability
Force Majeure v. Exceptional Risk
Compensation for Employer's termination by convenience
New provisions in Pink Book
New provisions in Gold Book
To be noted in Rainbow Suite Book

1
Introduction of FIDIC
FIDIC
Federation International Des Ingerieurs-Conseils (FIDIC)
International Federation of Consulting Engineers

Established in 1913.
The Office is located in Geneva, Switzerland.

Representing globally the consulting engineering industry.

Enhance the image of consulting engineers.
Cooperation with national associations and financial institutions.
Preparation of standard forms of contract and other documents

In principle, One member association in One Country.

Currently, there is 100 member associations.(2016)

Web site: http://www.fidic.org

FIDIC Contract Publication

FIDIC Contract form of Construction Work

2
FIDIC Contract Publications
Brief for Major Construction Contract Form
Red Book: Conditions of Contract for CONSTRUCTION
Works designed by the Employer
Design-Bid-Build
Measurement Contract, in principle
Specification and Drawing basis

Yellow Book: Conditions of Contract for PLANT and Design-Build

Works designed by the Contractor
Design – Build
Lump Sum Contract
Employer’s Requirement and the Contractor’s Proposal basis

Silver Book: Conditions of Contract for EPC/Turnkey Project

Works designed by the Contractor
The certainty of time and money(Privately Financed Project)
Employer’s Requirement and Contractor’s Proposal basis
Lump Sum Contract
* 4.10 the accuracy of Site Data, 4.12 Unforeseen Difficulties,
5.1 the error in Employer’s Requirements, 4.1 fit for purpose,

FIDIC Contract Publications

Brief for Major Construction Contract Form
Pink Book: Conditions of Contract for CONSTRUCTION
Works designed by the Employer
Design-Bid-Build
Measurement Contract, in principle
Specification and Drawing basis
* MDB harmonized version of Red Book is called as Pink Book.

Gold Book: Conditions of Contract for Design, Build and Operation

Projects
Works designed by the Contractor
Design – Build – Operate
20 year operation period
Adaption to green-field DBO
Lump Sum Contract
Employer’s Requirement and the Contractor’s Proposal basis

3
FIDIC Contract Publications
Brief for Major Construction Contract Form

Green Book: SHORT FORM of Contract, 1999

Short sentences and simple straightforward language,
Suitable when the work is uncomplicated.

The minor works form of contract was originally with capital value under
US$500,000,
A construction time of not more than six months,
Without the need for specialist subcontracts

For simple repetitive work,

there may be no upper limit to the contract sum

Briefs on FIDIC Contracts

Project Delivery Method vs. Selection of Applicable FIDIC Contracts

4
FIDIC CoC, Major differences and Development
Applicable Project Delivery Method
RED, PINK Traditional Design-Bid-Build

YELLOW Design-Build

SILVER EPC Turnkey(Privately Financed Project)

GOLD Design-Build-Operate

FIDIC CoC, Major differences and Development

Comparison in General Condition

5
RED(PINK) vs Yellow(GOLD) vs Silver
Contract Documents
Red Book: Yellow Book: Silver Book:
Contract Agreement Contract Agreement Contract Agreement
Letter of Acceptance Letter of Acceptance
Letter of Tender Letter of Tender
(Appendix to Tender)
Particular Conditions Particular Conditions Particular Conditions
Part A(Contract Data)
Part B(PC)
General Conditions General Conditions General Conditions
Specification Employer’s Requirements Employer’s Requirements
Drawings Schedules Tender
Schedules Contractor’s Proposal
Further documents listed Further documents listed Further documents listed
in the Contract Agreement in the Contract Agreement in the Contract
or in the Letter of or in the Letter of Agreement
Acceptance Acceptance Schedules of Payment

FIDIC CoC, Major differences and Development

Where are the unique data specified for a project?
RED Appendix to Tender,
Particular Conditions(PC)

PINK Contract Data, PC

YELLOW Appendix to Tender, PC

SILVER Particular Conditions

GOLD Contract Data, PC

6
FIDIC CoC, Major differences and Development
Who is responsible for Contract Administration?
RED, YELLOW, PINK: Engineer
SILVER, GOLD: Employer(Employer’s Representative)
Initiator and Address of notice and submittal
RED, YELLOW, SILVER, PINK, GOLD
As a general principle,
from Contractor’s side, any notice and submittal to Engineer, and
from Employer’s side, Engineer’s or Employer’s Representative’s has
generally the right and duty to initiate a notice to Contractor.
But sometimes there are some situation where the address of
Contractor’s documents and the initiator of Employer’s claim shall be
‘the Employer’.
For example,
a) Performance Security to the Employer,
b) Claim relating Performance Security by the Employer
c) Notice to Correct on SCL 15.1 and notice to Termination on
SCL 15.4 shall be done by the Employer.

FIDIC CoC, Major differences and Development

PINK Book’s difference to RED Book and other Book
3.5 Engineer’s Duties and Authorities
(1) The Employer shall promptly inform the Contractor of any change to the
authority attributed to the Engineer.
(2) (d) any act by the Engineer in response to a Contractor’s request except as
otherwise expressly specified shall be notified in writing to the Contractor
within 28 days of receipt.
(3) The Engineer shall obtain the specific approval of the Employer before taking
action under the-following Sub-Clauses of these Conditions:
(A) Sub-Clause 4.12: agreeing or determining an extension of time and/or
additional cost.
(B) Sub-Clause 13.1: instructing a Variation, except;
(i) in an emergency situation as determined by the Engineer, or
(ii) if such a Variation would increase the Accepted Contract Amount
by less than the percentage specified in the Contract Data.
(C) Sub-Clause 13.3: approving a proposal for Variation submitted
by the Contractor in accordance with Sub Clause 13.1 or 13.2.
(D) Sub-Clause 13.4: specifying the amount payable in each of the applicable
currencies days of receipt.

7
FIDIC CoC, Major differences and Development
Time Bar in Contractor’s claim
RED, YELLOW, SILVER, PINK
“as soon as practicable as soon as practicable, and not later than 28
days after the Contractor became aware, or should have become aware,
of the event or circumstance.”
GOLD
“as soon as practicable as soon as practicable, and not later than 28
days after the Contractor became aware, or should have become aware,
of the event or circumstance
However, if the Contractor considers there are circumstances which
justify the late submission, he may submit the details to the DAB for a
ruling. If the DAB considers that, in all the circumstances, it is fair and
reasonable that the late submission be accepted, the DAB shall have the
authority to overrule the relevant 28-day limit and, if it so decides, it
shall advise the Parties accordingly.
* Same exception can be applied to 42 days’ requirement for detailed claim submittal.

FIDIC CoC, Major differences and Development

Time Bar in Employer’s claim
RED, YELLOW, SILVER
“as soon as practicable after the Employer became aware of the
event or circumstances giving rise to the claim“

PINK
“as soon as practicable and no longer than 28 days after the
Employer became aware, or should have become aware, of the
event or circumstances giving rise to the claim“

GOLD
“as soon as practicable after the Employer became aware, or
should have become aware, of the event or circumstances giving
rise to the claim“

8
FIDIC CoC, Major differences and Development
Time limit in Determination(SCL. 3.5 & 20.1)
RED, YELLOW, SILVER
The Engineer(the Employer) is required both (i) to respond with approval or
disapproval, and (iì) to consult the Parties(the Contractor) in an endeavour to
reach an agreement and, if no agreement is reached, to then make a fair
determination.
Under SCL 1.3, Approvals, certificates, consents and determinations shall not be
unreasonably withheld or delayed.

PINK
The Engineer is required both (i) to respond with approval or disapproval, and (iì)
to consult the Parties in an endeavour to reach an agreement and, if no
agreement is reached, to then make a fair determination, all within the 42-day
period.

GOLD
A different approach from all the other Books by removing the requirement for
the Employer’s Representative to respond to the Contractor’s claim with approval
or disapproval.
The Employer’s Representative must proceed in accordance with Sub-Clause 3.5
within 42 days after the Contractor has submitted a fully detailed claim (or any
requested further particulars), or within such other period as has been agreed
between the Employer’s Representative and the Contractor.

FIDIC CoC, Major differences and Development

Result of NO Engineer’s Response(SCL. 3.5 & 20.1)
RED, YELLOW, SILVER
The Engineer(the Employer) is required both (i) to respond with
approval or disapproval, and (iì) to consult the Parties(the
Contractor) in an endeavour to reach an agreement and, if no
agreement is reached, to then make a fair determination.

PINK, GOLD
If the Engineer fails either to respond or to proceed in
accordance with Sub-Clause 3.5 [Determinations] within the 42-
day period, namely “either Party may consider that the claim is
rejected by the Engineer and any of the Parties may refer to the
Dispute Board in accordance with Sub-Clause 20.4".

9
FIDIC CoC, Major differences and Development
Design Responsibility/Contractor’s General Obligation
RED, PINK mostly Design by Employer
Reasonable skill and care
exception: Contractor designed part

YELLOW, SILVER, GOLD

Design by Contractor
Fit for purpose
Scope: “implied in the Contract”

RED(PINK) vs Yellow(GOLD) vs Silver

Risk Allocation
RED(PINK) Yellow(GOLD) Silver
1.1.1.5 Specifications Employer’s Requirements Employer’s Requirements
1.9 Delayed Drawings or Errors in the Employer’s Confidentiality
Instructions Requirements
1.12 Confidential Details Same Additional C’s duty
2.1 Right to Access to the
Site
if no specific date in if no specific date in the
the Contract, be on Contract, be on
Programme. Commencement Date.
3.1 Engineer’s Duties and Employer’s
Authorities Representative
3.3 Instruction of the
Engineer
oral instruction No mention No mention
3.5 Determination
Dissatisfaction notice
within 14 days after
the receipt.

10
RED(PINK) vs Yellow(GOLD) vs Silver
Risk Allocation
RED(PINK) Yellow(GOLD) Silver
4.1 Contractor’s General
Obligation
* reasonable skill and care Fit for purpose Fit for purpose
exception: Contractor
designed part “implied in the Contract” “implied in the Contract”
4.7 Setting Out 4.7 Setting Out
Who is responsible for Who is responsible for Who is responsible for
accuracy of setting out accuracy of setting out accuracy of setting out
data: Employer data: Employer data: Contractor
4.10 Site Data 4.10 Site Data 4.10 Site Data
Who is responsible for
accuracy of Site Data:
Employer Employer Contractor
4.12 Unforeseeable
Physical Conditions
Who is responsible?
Employer Employer Contractor

RED(PINK) vs Yellow(GOLD) vs Silver

Risk Allocation
RED(PINK) Yellow(GOLD) Silver
5.1 General Design
Obligation:
Who is responsible for
accuracy of Employer’s
Requirement? Employer Contractor

11
FIDIC CoC, Major differences and Development
Allocation of major commercial contractual risks
RED PINK YELLOW SILVER GOLD

5.1 Accuracy of
Employer’s Requirements E E E C E
(Drawings and Specifications)

4.7 Setting Out E E E C E

4.10 Site Data E E E C E

4.12
Unforeseeable
Physical Conditions(Difficulties) E E E C E

Note: C: Contractor
E: Employer

FIDIC CoC, Major differences and Development

Major Distinctions among FIDIC Rainbow Suite

Major Distinction between FIDIC

Contracts(Rainbow Suite) is based on:
– who does the design?
– who bears risk for change in quantities?
– who bears risk for the unforeseen physical
conditions?
– who bears risk for the accuracy of
Employer’s Requirements, Setting out and
Site Data provided by Employer?

12
FIDIC CoC, Major differences and Development
Cost & Profit structure
“Cost” means all expenditure reasonably incurred (or to be incurred) by
the Contractor, whether on or off the Site, including overhead and
similar charges, but does not include profit.
RED, YELLOW, SILVER:
Cost plus reasonable profit
Profit rate is not specified and no requirement to specify it
anywhere.
PINK
“Cost plus profit” requires to be one twentieth (5%) of this Cost
unless otherwise indicated in the Contract Data.
GOLD
“Cost Plus Profit” means Cost plus the applicable percentage
agreed and stated in the Contract Data.

Risk Management vs. Conditions of Contract

Allocation of Risks in FIDIC Red Book and others
Employer’s Commercial risk → Claim Mechanism
Item Causes
Sub-Clause 1.9 Delayed Drawings or Instructions if Engineer fails to instruct within notified reasonable time
Errors in Employer’s Requirements(YB)
Errors in Employer’s Requirements(SB, 5.1) – Contractor’s Risk
Sub-Clause 2.1 Right of Access to the Site if Employer fails to give right of access to Site as specified
Sub-Clause 4.7 Setting Out for errors in original setting-out points and levels of reference
In SB, Contractor’s Risk
Sub-Clause 4.10 Site Data If unforeseeable by SCL 4.12, C could have entitlement for claim.
In SB, Contractor’s Risk
Sub-Clause 4.12 Unforeseeable Physical Condition the loss due to physical conditions which are Unforeseeable
In SB, Contractor’s Risk
Sub-Clause 4.24 Fossils to deal with an encountered archaeological findings
Sub-Clause 7.4 Testing Normal: Contractor’s Scope
due to changes or additions on test method and location: Employer
Sub-Clause 8.4 Extension of Time
Sub-Clause 8.5 Delays caused by Authorities
Sub-Clause 8.9 Consequences of Suspension Compensation due to suspension of the Works
Sub-Clause 10.2 Taking Over of Part of the Works Compensation due to Employer’s Taking Over of the Part of Works
Sub-Clause 10.3 Interference with Test Completion if Employer delays a Test on Completion
Sub-Clause 11.8 Contractor to Search to search for cause of a delay for Contractor is nor responsible
Sub-Clause 12.4 Omissions compensation due to Omission by Variation
Sub-Clause 13.7 Adjustments for Changes in Legislation
Sub-Clause 16.1 Contractor’s Entitlement to Suspend Work
Sub-Clause 17.4 Consequences of Employer’s Risks
Sub-Clause 19.4 Consequences of Force Majeure

13
Risk Management vs. Conditions of Contract
Allocation of Risks in FIDIC Red Book
Contractor’s Commercial Risks – Bond, Retention,
Sub-Clause 15.2 Notice to Correct if not reasonable satisfied, might lose the Contract(15.2).
Sub-Clause 8.7 Delay damages Damage to late completion
Sub-Clause 8.6 Rate of Progress acceleration in Contractor’s delay
Sub-Clause 9.4 Failure to Pass Tests on Completion Compensation on failure to pass Test on Completion
Sub-Clause 11.4 Failure to Remedy Defects if Contractor fails to remedy defects.
Sub-Clause 15.4 Payment after Termination determine an amount on Employer’s claim (clause 2.5)
+ any losses and damages + any extra cost of completing the Work

<Employer’s Security when the Contractor’s breach of contract>

Sub-Clause 4.2 Performance Security
Sub-Clause 14.2 Advance Payment Guarantee
Sub-Clause 14.3 Retention Money

Risk, Indemnity and Insurance

Sub-Clause 17.3 Employer’s Risk same as Force Majeure(SCL 19.1)
Sub-Clause 17.1 Indemnity insurable
Sub-Clause 17.2 Contractor’s Care of the Works insurable
Sub-Clause 17.5 Intellectual and Industrial Property Right risk sharing
Sub-Clause 18.2 Insurance for Works and Contractor’s Equipment
Sub-Clause 18.3 Insurance against Injury to Person and Damage to Property
Sub-Clause 18.4 Insurance for Contractor’s Personnel

Risk Management vs. Conditions of Contract

Allocation of Risks in FIDIC Red Book
Force majeure, suspension and termination
Sub-Clause 19.1 Force Majeure the events beyond the Parties’ Control
Sub-Clause 15.2 Termination by Employer due to Contractor’s default, any losses and damages
Sub-Clause 15.5 Employer’s Entitlement to Termination payment on SCL 19.6(GB: 16.4)
Sub-Clause 19.6 Optional Termination, Payment and Release termination due to prolonged period of Force Majeure,
payment on SCL 19.6
Sub-Clause 16.2 Termination by Contractor payment on SCL 1.4
=(payment on SCL 19.6 + Any loss of profit or other loss or damage)
Sub-Clause 19.7 Release from Performance under the Law payment on SCL 19.6
<Normal Discharge>
Sub-Clause 10.1 Taking Over of Works and Sections normal
Sub-Clause 11.9 Performance Certificate normal

14
FIDIC CoC, Major differences and Development
Sharing of profit on Value Engineering(13.2)
RED, PINK 50% of the difference between the reduction in
contract value excluding adjustment
on legal change and cost change, and
reduction in value of the Works.

YELLOW, SILVER, GOLD Not mentioned

FIDIC CoC, Major differences and Development

Commencement (SCL. 8.1)
RED, YELLOW, SILVER, (GOLD)
• a default Commencement Date of 42 days from the date of the Letter
of Acceptance(signing of Contract).
• The Engineer’s notice gives the contractor at least 7(14) days notice
of the Commencement Date.
• The contractor commences work “as soon as reasonably practicable”
after the Commencement Date, proceeding with works “with due
expedition and without delay”. (no GOLD)

PINK
• Contract signed by both parties.
• Receipt by the contractor of “reasonable evidence of
the Employer’s financial arrangements”.
• Site possession given to the contractor.
• Provision of any advance payment and corresponding guarantee/bond.

15
FIDIC CoC, Major differences and Development
Commencement (SCL. 8.1)
PINK
The Commencement Date shall be the date at which the following
precedent conditions have all been fulfilled and the Engineer’s
notification recording the agreement of both Parties on such fulfilment
and instructing to commence the Work is received by the Contractor:
1) Make the conditions precedent clear for Commencement.
- signature of Contract Agreement,
- financial arrangement evidence to the Contractor,
- effective access to and possession of the Site given to the Contractor
with written permission,
- receipt by the Contractor of the Advance Payment
with the corresponding guarantee
2) No Engineer’s instruction within 180 days of Letter of Acceptance can give
the Contractor the entitlement to terminate the Contract.
Comment on PINK Book amendment
The amended contract asserts the contractor’s option to terminate if these matters are not
dealt with within 180 days of the Letter of Acceptance, introducing additional complexity to
starting work and ignoring the possibility that site possession is not always necessary – or in
fact advisable – at the outset of contractor works.

FIDIC CoC, Major differences and Development

Force Majeure v. Exceptional Risks
RED, YELLOW, SILVER, PINK,
Force Majeure(Clause 19)
GOLD
Exceptional Risks(Clause 18)
"Exceptional Event" and/or “Force Majeure” means an event or
circumstance which is (a) beyond a Party’s control; (b) which the Party
could not reasonably have provided against before entering into the
Contract; (c) which having arisen, such Party could not reasonably have
avoided or overcome; and (d) which is not substantially attributable to
the other Party.

Exemplar events are almost same with slight different details.

16
FIDIC CoC, Major differences and Development
Limitation of Liability
Indemnity
RED, YELLOW, SILVER, PINK, GOLD
To indemnify the liability to other Party for
loss of use of any Works,
loss of profit,
loss of any contract or
for any indirect or consequential loss or damages
in connection with the Contract.

FIDIC CoC, Major differences and Development

Limitation of Liability(17.6 but GB 17.8)
Exclusion to LoL
RED, YELLOW, SILVER
SCL 16.4 [Payment on Termination];
SCL 17.1 [Indemnities];
PINK SCL 8.7 [Delay Damages];
SCL 11.2 [Cost of Remedying Defects];
SCL 15.4 [Payment after Termination];
SCL 16.4 [Payment on Termination];
SCL 17.1 [Indemnities];
SCL 17.4(b) [Consequences of Employer’s Risks] and
SCL 17.5 [Intellectual and Industrial Property Rights]
GOLD SCL. 10.6 [Delays and Interruptions during the Operation Service],
SCL. 16.4[Payment on Termination],
SCL. 17.9 [Indemnities by the Contractor],
SCL. 17.10 [Indemnities by the Employer] and
SCL. 17.12 [Risk of Infringement of Intellectual and I.P.R].

17
FIDIC CoC, Major differences and Development
Limitation of Liability
Exclusion to Cap of Total Liability of the Contractor
RED, YELLOW, SILVER, PINK

SCL 4.19 [ Electricity, Water and Gas ],

SCL 4.20 [ Employer's Equipment and Free-Issue Material ],
SCL 17.1 [ Indemnities ] and
SCL 17.5 [ Intellectual and Industrial Property Rights ],

GOLD No exclusions are specified

FIDIC CoC, Major differences and Development

Compensation for Employer's termination by convenience(15.5)
RED, YELLOW, SILVER
SCL. 15.7 After this termination, the Contractor ~ shall be paid in accordance with Sub-Clause
19.6 [ Optional Termination, Payment and Release ].
Remedies for the Contractor(19.6)
- amounts payable for any work carried out for which a price is stated in the Contract;
- the Cost of Plant and Materials ordered for the Works which have been delivered to the
Contractor and liable to accept delivery by Contractor
(title pass to Employer when paid);
- other Cost or liability which in the circumstances was reasonably incurred
by the Contractor in the expectation of completing the Works;
- Cost of removal of Temporary Works and Contractor’s Equipment from the Site;
and the return of these items to the Contractor’s works in his country;
- Cost of repatriation of the Contractor’s staff and labour employed wholly
in connection with the Works at the date of termination.
PINK, GOLD [SCls 15.5, 15.7 & 16.4]
(b) pay the Contractor in accordance with Sub-Clause 18.6 [ Optional Termination,
Payment and Release ]; and
(c) pay to the Contractor the amount of any loss of profit or other loss or damage
sustained by the Contractor as a result of this termination.

18
FIDIC CoC, Major differences and Development
New Provision in GOLD Book
4.25 Changes in the Contractor’s Financial Situation
• If the Contractor becomes aware of any change in the Contractor's
financial situation which will or could adversely affect his ability to
complete and fulfil all his obligations under the Contract, he shall
immediately give Notice to the Employer with detailed particulars.
Within 28 days of receiving such Notice, the Employer shall advise
the Contractor of what action he intends to take and/or what action
the Employer requires the Contractor to take.
• In any event, the Contractor shall provide the Employer annually with
his audited financial statements and reports.
• If Contractor could not responded properly, the Employer can
terminate the Contractor[15.2(h)]

FIDIC CoC, Major differences and Development

New Provision in GOLD Book
9.13 Failure to Complete
Should the Contractor fail to complete the Design-Build prior to the Cut-Off Date, the
Employer may, at his sole option, either:
(a) permit the Contractor to continue the Design-Build for a further named period, with an
absolute right to re-apply this Sub-Clause in the event that the Contractor fails to
complete the Design-Build within the extended period; or
(b) terminate the Contract in accordance with Sub-Clause 15.2 [Termination for
Contractor's Default] and, if he so chooses, complete the work and subsequently
execute the Operation Service himself or by engaging others.
In either case, the Employer will be entitled to recover from the Contractor any direct loss
incurred, including any loss resulting from the delayed operation of the Works, subject to
the limitations contained in Sub-Clause 9.6 [Delay Damages Relating to Design-Build] and
Sub-Clause 17.8 [Limitation of Liability].

15.2 Termination for Contractor's Default

(h) fails to complete the Design-Build by the Cut-Off Date stated in the Contract Data or, if
no such date is given, then a period of 182 days after the Time for Completion of
Design-Build.

19
FIDIC CoC, Major differences and Development
New Provision in GOLD Book & Update advice
(a) Sub-Clause 20.4 - Insert the following as a new penultimate paragraph:
‘If the decision of the DAB requires a payment by one Party to the other Party,
the DAB may require the payee to provide an appropriate security in respect of
such payment’
(b) Replace Sub-Clause 20.7 in its entirety with:
In the event that a Party fails to comply with any decision of the DAB, whether
binding or final and binding, then the other Party may, without prejudice to any
other rights it may have, refer the failure itself to arbitration under Sub-Clause 20.6
[Arbitration] for summary or other expedited relief, as may be appropriate.
Sub-Clause 20.4 [Obtaining Dispute Adjudication Board’s Decision] and Sub- Clause
20.5 [Amicable Settlement] shall not apply to this reference.’
(c) Sub-Cl 14.6 – Insert the following at the end of the last sentence of the first para.:
‘, and shall include any amounts due to or from the Contractor in accordance with
a decision by the DAB made under Sub-Clause 20.4 [Obtaining Dispute
Adjudication Board’s Decision]’
(d) Sub-Clause 14.7, paragraph b – insert the following before ‘; and’:
‘including any amounts due in accordance with a decision by the DAB which have
been included in the Interim Payment Certificate’
* Result from [CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK
[2011] SGCA 33]

What is PINK Book?

Conditions of Contract for Construction
MDB HARMONISED EDITION
FOR BUILDING AND ENGINEERING WORKS DESIGNED BY THE EMPLOYER
A Harmonised edition of FIDIC RED Book
which reflects the requirements into General Conditions of FIDIC
Red Book.
Such requirements are naturally from regular practices of MDB.
Before publication of MDB version, MDBs prepared the additional
clauses for Particular Condition of RED Book for a new project.
But these provisions in bid documents, including the additional clauses
contained in the Particular Conditions, varied between the MDBs, and
this created inefficiencies and uncertainties amongst the users of the
documents, and increased the possibilities for disputes.
These inefficiencies and uncertainties caused FIDIC and MDBs make
MDB version.

20
What is MDB?
Multilateral Development Bank
ㆍAn institution, created by a group of countries, that
provides financing and professional advising for the
purpose of development.
ㆍMDBs have large memberships including both
developed donor countries and
developing borrower countries.
ㆍMDB’s finances projects in the form of
long-term loans at market rates,
very–long-term loans(known as credits)
below market rates, and
through grants.

What is IFI?
International Financial Institutions
ㆍFinancial Institutions that have been established (or
chartered) by more than one country, and hence
are subjects of international law.
ㆍThe owners or shareholders are generally national
governments.
ㆍMany of these are
Multilateral Development Bank(MDB)s

21
Differences between RED and PINK Book
Contract Documents
Red Book: Pink Book:
Contract Agreement Contract Agreement
Letter of Acceptance Letter of Acceptance
Letter of Tender Letter of Bid(Letter of Tender)
(Appendix to Tender)
Particular Conditions Particular Conditions
Part A(Contract Data), Part B
General Conditions General Conditions
Specification Specification
Drawings Drawings
Schedules Schedules
Further documents listed in the Further documents listed in the Contract
Contract Agreement or in the Letter of Agreement or in the Letter of Acceptance
Acceptance

Differences between RED and PINK Book

Different Terms
Red Book: Pink Book:
Appendix to Tender Contract Data
Dispute Adjudication Board Dispute Board
Reasonable Profit Profit
Bank,
Borrower
Particular Conditions Particular Conditions
Part A(Contract Data), Part B
Letter of Tender Letter of Bid(Letter of Tender)
Schedule of Payment Currencies

22
FIDIC CoC, Major differences and Development
New Provision in PINK Book
6.7 Health and Safety
HIV-AIDS Prevention requirement is added.

6.12 Foreign Personnel

6.13 Supply of Foodstuffs
6.14 Supply of Water
6.15 Measures against Insect and Pest Nuisance
6.16 Alcoholic Liquor or Drugs
6.17 Arms and Ammunition
6.18 Festival and Religious Customs
6.19 Funeral Arrangements
6.20 Forced Labour
6.21 Child Labour
6.22 Employment Records of Workers
6.23 Workers’ Organisations
6.24 Non-Discrimination and Equal Opportunity

Differences between RED and PINK Book

Pink Book’s difference to Red Book
1. Change in Definition
Bank
Borrower
Appendix to Tender
Dispute Adjudication Board → Dispute Board
Form of LOA is added.
Tender → Bid
1.2 reasonable profit → profit to be 5 %
1.8 “of a technical nature” is deleted.
1.12 Confidential Details
One-sided provision in Red Book is reasonably modified.
1.13 Compliance with Laws
~ zoning, building permit,
unless the Contractor is impeded to accomplish these actions
and shows evidence of its diligence.

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
1.15 Inspection and Audit by the Bank is added.
“The Contractor shall permit the Bank and/or persons appointed by the Bank to inspect
the Site and/or the Contractor’s accounts and records relating to the performance of the
Contract and to have such accounts and records audited by auditors appointed by the Bank if
required by the Bank.”
2.2 Permits, Licences or Approvals
“such reasonable assistance as to allow the Contractor
to obtain properly:” is added.
2.4 Employer’s Financial Arrangements
a. “The Employer shall submit, before the Commencement Date
and thereafter within 28 days after receiving any request
from the Contractor,”
b. Bank’s notice to Borrower of any details for suspension of
payment shall be duly transferred to the Contractor
thru the Engineer.
2.5 Employer’s Claim
The notice shall be given as soon as practicable and no longer than 28 days after
the Employer became aware, or should have become aware, of the event or
circumstances giving rise to the claim.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
3.5 Engineer’s Duties and Authorities
(1) The Employer shall promptly inform the Contractor of any change to the
authority attributed to the Engineer.
(2) (d) any act by the Engineer in response to a Contractor’s request except as
otherwise expressly specified shall be notified in writing to the Contractor
within 28 days of receipt.
(3) The Engineer shall obtain the specific approval of the Employer before taking
action under the-following Sub-Clauses of these Conditions:
(A) Sub-Clause 4.12: agreeing or determining an extension of time and/or
additional cost.
(B) Sub-Clause 13.1: instructing a Variation, except;
(i) in an emergency situation as determined by the Engineer, or
(ii) if such a Variation would increase the Accepted Contract Amount
by less than the percentage specified in the Contract Data.
(C) Sub-Clause 13.3: approving a proposal for Variation submitted
by the Contractor in accordance with Sub Clause 13.1 or 13.2.
(D) Sub-Clause 13.4: specifying the amount payable in each of the applicable
currencies days of receipt.

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
4.1 Contractor’s General Obligations
“~ shall have their origin in any eligible source country
as defined by the Bank.”
4.2 Performance Security
Performance Bond annexed to MDB version under this sub-clause is
some different from Performance Surety Bond in Red Book.
- not subject to “Uniform Rules for Contract Bond.
- when the Contractor in default, Employer shall declare it.
- Surety can choose to discharge his obligation
either by completing the Contract
or becoming involved in any re-tendering as necessary.
4.3 Subcontractors
- to give fair and reasonable opportunity for contractors
from the Country to be appointed as Subcontractors.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
4.12 Unforeseeable Physical Conditions
“The Engineer shall take account of any evidence of the physical conditions
foreseen by the Contractor when submitting the Tender, which shall be made
available by the Contractor, but shall not be bound by the Contractor’s
interpretation of any such evidence.

Modifying the last paragraph make the Engineer surely to take account of any
evidence by the Contractor but there is no change to the ultimate meaning.

4.13 Rights of Way and Facilities

First paragraph in Red Book is replaced as:
“ Unless otherwise specified in the Contract the Employer shall provide effective
access to and possession of the Site including special and/or temporary rights-
of-way which are necessary for the Works.”

4.15 Access Route

To add “at Base Date” at the end of first paragraph gives a certainty in case of
dispute.

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
4.18 Protection of the Environment
Change in second paragraph of “and” with “or” serves to strengthen the
requirements.
“~shall not exceed the values stated in the Specification or prescribed by
applicable Laws.”

6.1 Engagement of Staff and Labour

The paragraph is added to encourage to employ local people.
“The Contractor is encouraged, to the extent practicable and reasonable, to
employ staff and labour with appropriate qualifications and experience from
sources within the Country.”

Differences between RED and PINK Book

Pink Book’s difference to Red Book
7.7 Ownership of Plant and Material
(a) when it is incorporated in the Works; ~delivered to the Site
(b) when the Contractor is paid the corresponding value of the Plant and
Materials under Sub-Clause 8.10 [Payment for Plant and Materials in Event of
Suspension]. ~entitled to be paid.

8.1 Commencement of Works

1) Make the conditions precedent clear for Commencement.
- signature of Contract Agreement,
- financial arrangement evidence to the Contractor,
- effective access to and possession of the Site given to the Contractor
with written permission,
- receipt by the Contractor of the Advance Payment
with the corresponding guarantee
2) No Engineer’s instruction within 180 days of Letter of Acceptance can give
the Contractor the entitlement to terminate the Contract.

26
Differences between RED and PINK Book
Pink Book’s difference to Red Book
8.4 Extension of Time for Completion
“on the Site” is removed at the end of (e).
“(e) any delay, impediment or prevention caused by or attributable to the
Employer, the Employer’s Personnel, or the Employer’s other contractors
(on the Site).”

8.5 Rate of Progress

“Additional costs of revised methods including acceleration measures,
instructed by the Engineer to reduce delays resulting from causes listed
under Sub-Clause 8.4 [Extension of Time for Completion] shall be paid
by the Employer, without generating,
however, any other additional payment benefit to the Contractor.”

The Contractor is entitled to payment for the cost of acceleration measure

but not for the payment of any profit.
8.12 Resumption of Work
Addition of “after receiving from the Engineer an instruction to this effect
under Clause 13 [Variations and Adjustments].” makes the Contractor to be paid
when instructed by Engineer to do so.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
11.3 Extension of Defect Notification Period
Addition of “or by reason of damage attributable to the Contractor.”
to first sentence make clear that the extension is possible
in case of an attributable cause to the Contractor.

11.11 Clearance of Site

In second paragraph “the Employer receives a copy” is replaced by “receipt by the
Contractor”.

It makes clear that the activities required under this Sub-Clause shall start after
the receipt by the performing Party.

12.1 Works to be Measured

“~the quantities and other particulars detailing the amounts which he considers
to be entitled under the Contract.”
This makes clear that the Contractor to clearly identify quantities applied and
the Engineer is to focus upon Contractor’s Application
“~certify the payment of the undisputed part.”
This makes clear that undisputed parts shall be certified
remaining any arenas for potential dispute.

27
Differences between RED and PINK Book
Pink Book’s difference to Red Book
12.3 Evaluation
1) The threshold value in (a) (i)<change in quantity> and
(ii)<change in Accepted Contract Amount> is changed from 10 % and 0.01%
to 25% and 0.25%.
This seems to be pro-Employer change as the increase in the threshold
amount is of no benefit to the Contractor.
2) “Any item of work included in the Bill of Quantities for which no rate or price
was specified shall be considered as included in other rates and prices
in the Bill of Quantities and will not be paid for separately.”
This clearly makes the Contractor responsible for any additional costs caused
by the omission.

13.1 Right to Vary

Addition of “(ii) such Variation trigger a substantial change in the sequence or
progress of the Works” is more background for the Contractor
to object the Variation.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
14.1 The Contract Price
“Notwithstanding the provisions of sub-paragraph (b), Contractor’s Equipment,
including essential spare parts therefor, imported by the Contractor
for the sole purpose of executing the Contract shall be exempt
from the payment of import duties and taxes upon importation.”
* Onshore vs Offshore Contract
Wrap-up Contract
When import duties are exempted by Law and the presence of local company
is needed by Law.

14.2 Advance Payment

1) Start of repayment: 10% → 30%
2) time limit for repayment: 90% Accepted Contract Amount

14.7 Payment
The sentences are added, which allows the Employer some time extension to
make payment in the limited circumstances, namely when the loan credit is
suspended.

28
Differences between RED and PINK Book
Pink Book’s difference to Red Book
14.9 Payment of Retention Money
MDB version(Pink Book) has the provision that 50% of Retention money after
Taking-Over Certificate can be released upon submission of Retention Bond and
that Retention Bond can be exempted in case of Performance Guarantee is
of a demand guarantee.

14.11 Application for Final Payment Certificate

“~further information ,within 28 days from receipt of said draft.”
To impose time limit to the Contractor,
but no limit for the Employer to consider that information.

14.13 Issue of Final Payment Certificate

“(a) ~which is fairly determines finally due, and:”

15.5 Employer’s Entitlement to Termination

“to avoid a termination of the Contract by the Contractor under 16.2.”
“~paid on 16.4 Payment on Termination not on 19.6 Optional Termination,
Payment and Release so that the Contractor has the right to “loss of profit or
other loss or damages sustained”.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
15.6 Corrupt or Fraudulent Practices
1) Corruption activities by the Contractor:
Termination
2) Corruption activities by Contractor’s employees:
Removal
This Sub-Clause varies depending on a specific MDB.

16.1 Contractor’s Entitlement to Suspend Work

In case of Bank’s suspension on disbursement and no alternatives funds are
available, the Contractor can suspend Work or reduces rate of progress, not less
than 7 days after Borrower’s receipt of Bank’s suspension notification.

16.2 Termination by Contractor

(d) Employer’s failure to perform his obligation in such manner as to materially
and advertently affect economic balance and/or the Contractor’s performing
ability.
(h) In case of non-payment due to Bank’s suspension on loan or credit
(i) No instruction from the Engineer receiving the agreement
on fulfillment of commencement conditions.

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
16.4 Payment on Termination
Deleting “of profit or other losses” makes the Contractor
to seek to recover any loss occurred.

17.1 Indemnities
“unless and to the extent that any such damage or loss is attributable to any
negligence, wilful act or breach of the Contract by the Employer, the Employer’s
Personnel, their respective agents, or anyone directly or indirectly employed by
any of them.” Rink

“is attributable to any negligence, wilful act or breach of the Contract by the
Contractor, the Contractor’s Personnel, their respective agents, or anyone directly
or indirectly employed by any of them.” Red

The obligation has been extended and now applies to all damages and loss,
however caused, unless that damages is caused by the negligence, wilful act or
breach of the Contract by the Employer
17.3 Employer’s Risk
“insofar as they directly affect the execution of the Works in the Country”

“sabotage by persons other than the Contractor’s Personnel”

Differences between RED and PINK Book

Pink Book’s difference to Red Book
17.6 Limitation of Liability
“~other than as specifically provided in Sub-Clause 8.7 [Delay Damages];
Sub-Clause 11.2 [Cost of Remedying Defects]; Sub-Clause 15.4 [Payment after
Termination]; Sub-Clause 16.4 [Payment on Termination]; Sub-Clause 17.1
[Indemnities]; Sub-Clause 17.4(b) [Consequences of Employer’s Risks] and Sub-
Clause 17.5 [Intellectual and Industrial Property Rights].”

Certain items, such as delay damages, are not covered by the limitation of
liability set out in the Sub-Clause.

“resulting from the application of a multiplier (less or greater than one) to the
Accepted Contract Amount, as stated in the Contract Data, or (if such multiplier
or other sum is not so stated) the Accepted Contract Amount.”

It makes a calculation more simpler.

17.7 Use of Employer’s Accommodation/Facilities

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
18.1 Insurance
The Contractor shall be entitled to place all insurance relating to the Contract
(including, but not limited to the insurance referred to Clause 18) with insurers
from any eligible source country.

18.2 Insurance for Works and Contractor’s Equipment

being held or allocated to the Party actually bearing the costs of rectifying the
loss or damage
being held or allocated between the Parties for the sole purpose of rectifying the
loss or damage,

(d) shall also cover, to the extent specifically required in the bidding documents
of the Contract, loss or damage to a part of the Works

18.4 Insurance for Contractor’s Personnel

The sentence is added to clearly state the Employer shall be indemnified against
any personal injury type claim, which the Contractor be responsible for.

Differences between RED and PINK Book

Pink Book’s difference to Red Book
19.1 Force Majeure
Added: sabotage by persons other than the Contractor’s Personnel,

Deleted: (iii) riot, commotion, disorder, strike or lockout by persons other than
the Contractor’s Personnel and other employees of the Contractor
and Subcontractors,

19.2 Notice of Force Majeure

~ performing its substantial obligations(any of its obligation)

19.4 Force Majeure Affecting Subcontractor

1) ~ performing its substantial obligations(any of its obligation)
2) Added at the end of (b)
“including the costs of rectifying or replacing the Works and/or Goods damaged
or destroyed by Force Majeure, to the extent they are not indemnified through
the insurance policy referred to in Sub-Clause 18.2 [Insurance for Works and
Contractor’s Equipment].”

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Differences between RED and PINK Book
Pink Book’s difference to Red Book
19.5 Optional Termination, Payment and Release
Added “and necessarily” to the end of (c).
The costs must not only have been incurred and they must also have been
necessarily incurred.

20.1 Contractor’s Claim

1) While Red Book requires the Engineer to respond the claim with approval or
disapproval within 42 days after receiving a claim, Pink Book requires the
Engineer to proceed the his obligation in accordance with SCL 3.5
[Determination].
2) If the Engineer does not respond within time frame defined in this Sub-Clause,
the Party may consider that the claim is rejected by the Engineer and
the Parties may refer to Dispute Board.

20.6 Arbitration
Open to select the arbitration institute other than ICC and
to select UNCITRAL rule

Differences between RED and PINK Book

To be noted in Red Book
• It is important to ensure neither party
introduces additional or non-agreed terms
into either the Letter of Tender or the Letter
of Acceptance.
• The content of these letters clearly has
contractual effect.

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FIDIC CoC, Major differences and Development
To be noted in Rainbow Suite Book
It is also important to check employer requirements and
specifications interface with contractual terms as envisaged by
FIDIC. The following clauses rely either on the content of the
specification or generally cross-refer to the specification:
• Definition of ‘Employer’s Equipment’ (clause 1.1.6.3)
• Permissions obtained by Employer (clause 1.13(a))
• Opportunities for works by others (clause 4.6)
• Values for emissions and discharges (clause 4.18)
• Details of employer’s equipment and free-issue materials
(clause 4.19)
• Criteria for designers (Yellow Book – clause 5.1)
• Technical documents to be included in contractor’s documents
and language for contractor’s documents
(Yellow Book – clause 5.2)

FIDIC CoC, Major differences and Development

To be noted in Rainbow Suite Book
• Contractor’s documents to be submitted for review and/or
approval (Yellow Book – clause 5.3)
• Other standards for compliance (Yellow Book – clause 5.4)
• Training to be provided for employer’s personnel
(Yellow Book – clause 5.5)
• Numbers and types of copies of as-built drawings
(Yellow Book – clause 5.6)
• O&M manuals (Yellow Book – clause 5.7)
• Arrangements for staff and labour (clause 6.1)
• Facilities for staff and labour (clause 6.6)
• Payment of royalties (clause 7.8)

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FIDIC CoC, Major differences and Development
To be noted in Rainbow Suite Book

Unless otherwise stated in the Contract,

Unless otherwise stated in the Particular Conditions,
Unless otherwise stated in the Appendix to Tender,
Unless otherwise stated in the Specification,
unless otherwise stated in this schedule:
With the procedure specified in the Contract.
under the Contract or otherwise.

Where such wording is found in the Contract,

it is recommended to fill up the blank form and
to consider the alternative for better position under the Contract.

FIDIC CoC, Major differences and Development

To be noted in Rainbow Suite Book(Project Scope Management)
Implied works?
Sub-Clause 4.1 of the Yellow, Silver and Gold Books to inc1ude:
• any work necessary to satisfy the Employer’s Requirements,
Contractor’s Proposal and Schedules;
• any work implied by the Contract; and
• all work which (although not mentioned in the Contract) is necessary
for stability for the completion, or safe and proper operation,
of the Works.

The inclusion in this definition of works which are to be implied by the express
provisions of the contract should not be underestimated.
For example, the contract may set out in detail the technical requirements for each
of two connected elements but omit to give any detail as to the connection between
them. The text quoted above means that the contractor will be expected to design
and construct such a connection, and to have included for it in his tendered price,
although no reference is made to it in the contract documents, of which the
employer’s requirements is the most relevant.

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 Thank you!!

NamSeok Kim
TEL: 010-3398-0177
E-mail: [email protected]

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