International Federation of Consulting Engineers (FIDIC) Contracts and Impact on Obligations of Contractor, Engineer and Employer

With the increasing movement of construction and construction projects, particularly large ones, which sometimes involve different nationalities among their boards and staff, international "FIDIC" contracts have been introduced, to close the legislative gap regarding any possible disputes between the parties to the construction contract. The "FIDIC" contracts regulate the conditions of the civil engineering contracts and the relations and obligations between the contractor, the engineer and the employer in a manner consistent with the nature of such obligations, which is a facilitation of relation between the parties of the construction process to continue in a coherent format that helps to carry out the construction projects smoothly and orderly. The FIDIC contracts create obligations for the employer and the contractor, as well as the architect responsible for the project, as summarized below:

I. Obligations of the Employer in FIDIC Contracts:

As the owner of the site, the employer has certain obligations to enable the contractor to perform its work as per the contract, as well as certain other matters necessary to ensure the continuity of the works within the enterprise, including:

1) Providing assistance to the contractor:

 The employer shall assist the contractor as requested. The forms of such assistance include but are not limited to, providing copies of the state’s applicable laws related to the contract, providing assistance in issuing permits related to construction and building works, and facilitating procedures for materials and machinery imported by the contractor. The employer is responsible for ensuring that its personnel and other contractors working on the site cooperate with the contractor. In its turn, the employer provides the contractor with information on the geographical nature and environmental phenomena of the project site.

2) Employer enables the contractor to access the site:

 To complete the works of the project, the employer shall allow the contractor to access the site and parts of the site for completion of construction works at such times as specified in the Contract Appendix. If no specific date has been set for the handover of the site, the employer shall grant the contractor access and acquire the site during the times that enable the contractor to complete the works according to the contract.

3) Financial obligation and payment of the contractor's dues:

 The employer is bound by many financial obligations to the contractor, the most important of which is the obligation to pay the fees specified in the contract. The employer does not pay the full value stipulated in the contract at once but rather divides that value into batches.   

The employer shall provide the contractor with an advance payment for mobilization, provided that the employer receives the prescribed guarantee, the value of which is equal to that of the payment. The guarantee shall be issued by an entity accepted by the employer. The contractor shall be paid within 42 days of the issuance of the acceptance letter or 21 days of the employer's receipt of the performance bond.   

The contractor then submits a statement of progress payment to the engineer at the end of each month, detailing the amounts that the contractor believes it is entitled to, along with the supporting documents and evidence. The employer shall pay the approved amounts within 56 days from the date of the engineer's receipt of the statement, supporting documents and evidence. The same case applies to the final installment. 

2. Obligations of the engineer during the execution of the FIDIC contract:

The FIDIC contracts define the engineer as: “A person appointed by the employer to act as the engineer for the contract.” From this definition, it is evident that “FIDIC” set a general definition for the engineer under which it can apply to all the engineers that the employer can use to complete the work necessary for the project. Hence, the engineer, whether in civil or other engineering fields, shall fall under the previous definition.

It is the engineer's responsibility to exercise many professional matters of independence, such as issuing payment or deciding on certificates, and granting a time extension as required to complete the works. The engineer shall undertake the following duties:   

1) Adherence to good faith during the execution of the contract:

 One of the engineer's obligations is that he shall perform the contract in good faith. This principle is one of the main principles to be adhered to during the execution of the contract. However, the “FIDIC" contracts emphasized it, as well as some of the matters in which this is reflected, including, but not limited to:   

a) The engineer must comply with the obligations specified in the contract.   

b) The engineer shall have the powers specified in the contract, or those are implicitly derived from the contract unless the engineer is required under the terms of his appointment by the employer to obtain the latter's consent before such authorities, in which case the engineer shall obtain such consent. 

c) The engineer shall not exempt the contractor from any contractual obligations unless the contract expressly provides so. 

2) Commitment to impartiality:

In addition to the engineer's commitment to good faith in the performance of the contract with the employer, the FIDIC added a second obligation to the engineer, namely the obligation of impartiality in all matters relating to the construction works of the employer.   

The engineer may also entrust any of the assistants with some construction works", such as supervising the execution of construction works and ensuring the quality of materials used in construction and giving approval thereon. He may also delegate to one or more of these assistants some of the powers conferred upon him by the contract and may at any time revoke such assignment or authorization. Decisions issued by assistants shall be considered as if they were made by the engineer, within such assignment or authorization. However, it should be noted, that the appointment of assistants or granting them certain powers is subject to two basic conditions:   

First:

The assistants shall have competence, as well as the authority to perform their assigned duties, as well as familiarity with the language of communication predetermined in the tender documents.   

Second:

The engineer's decision to appoint or authorize assistants shall be in writing. Not only this, but the parties to the contract shall receive a written copy of the decision.   

It should be noted that the delegation of the engineer's powers to assistants does not impair his authority to modify the decisions of his assistants based on the authorization. The engineer still has the authority to modify the assistant's decision either by consent or by refusal, or to issue instructions to rectify certain situations whenever he finds, or based on the objection of the contractor that there is an error in the assistant's decision.

3) Authority to issue instructions to the contractor  :

The engineer may issue all additional or amended instructions or drawings to the contractor, whenever necessary to carry out the construction works or repair any defects. Instructions issued by the engineer or one of his duly authorized assistants shall meet certain requirements as follows:   

1. The instructions shall be issued in writing.  

2. The instructions shall not violate any provision of the contract.

3. Contractor’s Obligations in FIDIC Contracts:

A contractor means a person selected and named in the tender award letter after the employer's approval. The contractor also includes his legal successors. The role of the engineer is different from that of the contractor. While the engineer mainly carries out intellectual works, which is to building and construction design, the contractor's work is of a material nature, which is reflected in the execution of the construction. As in all reciprocal contracts, the contractor has certain rights and obligations under the contract with the employer. Also, the contractor is the most obligated party, considering the contractor to be involved in construction work from commencement to completion. The contractor is always the party receiving instructions and orders from the employer or the engineer. The most important of these obligations are:   

1) Meeting all the requirements to start the project:

The construction project at its commencement needs some requirements that will help start work on the site, which also indicates the contractor's seriousness towards the performance of the contract. 

 The requirements to be met by the contractor include:

 A) Preparing designs as stipulated in the contract.

 B) Submitting the equipment and documents specified in the contract.

C) Providing the necessary staff to complete the contract.

D) Providing all manpower, equipment and materials, whether permanent or temporary, for the design, implementation and completion of the works, including the rectification of defects.

E) Incurring responsibility for the adequacy, stability and safety of all site operations. The contractor shall also provide the engineer with details, arrangements and work execution methods to be proposed by the contractor to follow in completing the contract milestones if requested.

2) Providing performance bond:

To achieve as much stability as possible in the contract between the contractor and the employer, and to ensure the full conduct of construction works, The "FIDIC" instructed the contractor to provide the employer with a performance bond against the contract. The contractor shall provide the performance bond in the form of a "Letter of credit" or "letter of guarantee" issued by a bank in a state and to be approved by the employer, issued within 28 days of the receipt of the acceptance letter by the contractor. The performance bond shall remain valid until the contractor's work is completely performed without defects. If there are any defects, the contractor shall rectify them. Also, the performance bond shall be of the same value and type of currency as specified in the main contract.

3) Obligation to inform and keep updated the employer:

The contractor has a contractual obligation to inform the employer of the technical aspects of the construction process, both in terms of the risks involved in construction operations and the quality of the used materials. This obligation also falls similarly on the engineer concerning the design of the construction process.

It should be noted that the contractor may not be released of its responsibility by committing itself to inform by claiming to carry out its tasks under the engineer's supervision, as it should be an expert and professional in the field of construction and enjoys professional independence in the execution of his duties and responsibilities, both against the employer and the engineer. This is also due to the contractor's experience enabling him to discover any defects in the designs and drawings.