FIDIC Contracts and Managing Interface Risk in Queensland

International Federation of Consulting Engineers (FIDIC) contracts are sometimes used in Queensland when managing interface risk for high value construction projects. Although FIDIC contract templates are used globally, there are no guideline principles but rather, the interpretation of FIDIC contracts is usually informed by the laws of the relevant jurisdiction, as Julian Bailey notes in Construction Law.[1] This article will look at how the FIDIC Conditions of Contract for Plant and Design-Build (“Yellow Book”) manages interface risk in Queensland with a particular focus on cl 4.6, “Co-operation”.

Clause 4.6 (Co-operation)

Interface issues between a contractor, engineer (superintendent), employer (principal) and other third parties are dealt with in the “Co-operation” section of the Yellow Book, which states the following:

“4.6 Co-operation

The Contractor shall, as specified in the Contract or as instructed by the Engineer, allow appropriate opportunities for carrying out work to:

(a) the Employer’s Personnel,

(b) any other contractors employed by the Employer, and

(c) the personnel of any legally constituted public authorities,

who may be employed in the execution on or near the Site of any work not included in the Contract.

Any such instruction shall constitute a Variation if and to the extent that it causes the Contractor to incur Unforeseeable Cost. Services for these personnel and other contractors may include the use of Contractor’s Equipment, Temporary Works or access arrangements which are the responsibility of the Contractor.

The Contractor shall be responsible for his constructions activities on the Site, and shall co-ordinate his own activities with those of other contractors to the extent (if any) specified in the Employer’s Requirements.

If, under the Contract, the Employer is required to give the Contractor possession of any foundation, structure, plant or means of access in accordance with Contractor’s Documents, the Contractor shall submit such documents to the Engineer in the time and manner stated in the Employer’s Requirements.”

Potential issues with Clause 4.6

The group, European International Contractors (EIC) has argued that cl 4.6 favours one party over the other because “no equivalent or corresponding obligation on the employer to secure that its directly employed ‘other contractors’ co-ordinate or co-operate with the Contractor.”[2] Additionally, according to EIC, the only requirement by the employer is to ensure that personnel and other contractors “co-operate with the Contractor’s efforts under sub-clause 4.6″ (cl 2.3), and it has been argued that the employer should assume “clear and reciprocal obligations.”[3]

It has also been noted that cl 4.6 may give rise to potential claims due to the fact that the employer will be liable for the costs of the contractor, which were not reasonably foreseeable by an experienced contractor by the date for submission of the tender.

To alleviate some of the risk that may be associated with cl 4.6, an employer may request a provision in their employer requirements that it and/or its contractors may require on site works to be conducted simultaneously with the contractor. Additionally, an outline of the general character of the works is also to be provided to ensure that the contractor is on notice if any risk that the works are disrupted or hindered by other contractors, need to be accounted for.

Perhaps one of the biggest shortcomings of the Yellow Book is that there are no mechanisms that exist which allows for evaluating and monitoring any issues related to interfaces between contractors and third parties, and this includes other responsibilities between the employer and contractor for other interfaces that includes:

• health and safety (cll 2.3(b), 4.8, 6.7);
• protection of the environment (cll 2.3(b),4.18);
• damage and nuisance to people and property resulting from pollution, noise or other results of their respective operations (cll 2.3(b), 4.18, 4.23);
• unnecessary or improper interference with the convenience of the public or access to and use of roads and footpaths (cl 4.14);
• access routes and rights of way (cll 4.13, 4.15);
• electricity, water and gas (cl 4.19);
• site security (cl 4.22);
• compliance with laws and regulations, including permissions, approvals, notices and taxes (cll 1.13, 2.2); and
• damage to the Works or other property and personal injury (cl 17).

The employer and contractor share concurrent and/or complimentary duties in respect of (a), (b), (c) and (h) above.

Recovery of interface losses of the Yellow Book

Clause 17.6 of the Yellow Book states that neither party may recover consequential loss save where:

• liability is caused by fraud, deliberate default or reckless misconduct;
• loss is payable for breach of an indemnity under cl 17.1; or
• the contractor terminates and the principal is required to make a payment to the contractor under cl 16.4.

In relation to cl 17.6, employers may be restricted when trying to recover any losses, and for larger interface losses, an aggregate cap on the liability of the contractor may affect an employer’s ability to recover any losses – with some exceptions.

Concluding remarks

When compared to some of the other Australian forms used within the construction industry, the Yellow Book addresses interface issues in a more comprehensive manner. Perhaps the best approach in relation to Yellow Book contracts is to anticipate the risks that may arise, especially when the project requires ongoing management, and implement a solution that effectively deals with interface risks for FIDIC contracts.

This article or the information contained therein does not purport to provide a full explanation of the law, give advice or any guidance to anyone in connection with the use of FIDIC contracts or any other issue and this article is not to be used by anyone to support their legal position or otherwise. For clarification purposes and further to the above this article does not purport to be advice in any regard. This firm cannot take responsibility for any action readers take based on this information. We would be happy to assist you with any construction and engineering, building, property, real estate, development or commercial related legal issues you may have, please get in touch via [email protected] or telephone our Brisbane office on (07) 3087 3463, Sydney office on (02) 9293 2546 or Sunshine Coast office on (07) 5413 9270 and one of our experienced lawyers will respond to you.

[1] Bailey J, Construction Law (Informa Law, 2011) p 125.

[2] EIC, “EIC Contractor’s Guide to the FIDIC Conditions of Contract for Construction (The New Red Book)” [2003] ICLR 53 at 64.

[3] Ibid.