Fidic yellow vs silver

FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY

Fidic Yellow vs SilverFidic Yellow vs Silver

Weero KosterPartnerNorton Rose LLPFebruary 2012

Weero KosterPartnerNorton Rose LLPFebruary 2012

General application• Yellow Book: design/build contract electrical/mechanical

works, including plant supply and construction works; allocation of risk on basis of insurability, project management principles and ability to foresee and mitigate

• Silver Book: fixed-price, date-certain, lump-sum turn-key contract:• Little risk of price increase (but higher price) or delay

for Employer• Shift of risks to Contractor: design and execution

General risk profile: Shift of risks

• Employer’s Engineer is Employer’s Representative• Employer’s ‘determinations’• Setting Out• (No) Unforeseeable difficulties & verification/

interpretation of Employer data (incl. sub-surface, hydrological and Employer Requirements)

• General design obligations, design error

Shift of risks, cont’d

• No extension of Time for Completion for:• exceptionally adverse climatic conditions

(except FM) • unforeseeable shortages in personnel or goods

by epidemic or government actions• Errors in Employer’s Requirements• Setting Out• Unforeseeable physical conditions

Shift of risks, cont’d

• Employer’s Risk excludes:• Use of works by Employer,• Design of works by Employer’s personnel,• Unforeseeable operation of forces of nature

General risk profile: key employer issues

• Contractor fully responsible for design and design coordination (including Employer design)

• Full ground condition risk to Contractor• Employer to retain influence over project• Right to Variations• Limited scope for Contractor claims for time/money;

Contractor will:• Price these risks, so increase initial Contract Sum• Do extensive due diligence to mitigate, leading to

delay in execution

Payment & security: key employer issues

• Fixed price lump sum payments against schedule of payments & Performance Certificate

• Long payment period• No claim for additional time or money for e.g.

Variations/innovations, ‘in country” Force Majeure, Unforeseen ground conditions, setting out or discovery of fossils

• Robust security package: advance payment bond, performance bond, retention of money

• Warranty bond after Taking Over (> 2yrs)

Programme/delay: key employer issues

• Liquidated Damages for delay (10 – 20 %, > ?)• Limited rights for extension of Time for Completion• Suspension by Employer entitles Contractor

extension of time/ costs

Testing and defects, insurance: key employer issues• Suitable testing regime• Employer technical advisors to set

performance/reliability standards and regime for testing/ performance guarantee levels

• Liquidated Damages for performance (10 – 20 %, > ?)• Defects liability period (1 – 2 yrs): default is 1 yr• Liability cap, sub-caps and ‘carve-outs’• Project specific insurance provisions; all insurance

monies go in separate insurance proceeds account for benefit Employer

Permits, change in law, FM: key employer issues• Employer planning, environmental/ Contractor

construction and transport: permit schedule• Change in law after contract signing/ in force,

EH&S developments• Exhaustive FM list ?• Location of FM, “in country” FM: costs in addition

to EOT ?

FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY