More words, fewer claims?

It is the season for new building and engineering contracts. FIDIC has produced the 2nd Edition of Conditions for Plant and Design Build (the Yellow Book) to be launched later this year with the Construction Contract (Red Book) and EPC/Turnkey (Silver Book) to follow. Although widely viewed as being for international projects, FIDIC contracts, especially the Yellow and Silver Books, are increasingly used for UK energy work.

A pre-release version was made available to the FIDIC users’ conference in December. Based on this, what changes will the new Yellow Book bring? Two of the big changes involve notices and claims, and what is contractually required by way of programme.

To be effective a notice will be required to state:

• That it is a notice on the face of it  The aim is to avoid the time consuming arguments about whether a notice is truly a notice. The notice under the new form is defined as “a written communication identified as a Notice and issued in accordance with sub-clause 1.3”.
• The sub-clause under which it is made  So, a contractor will have to identify the legal basis for a claim early. If not, it will be sensible for it to set out all possible sub-clauses that apply.

The time limit for issuing a notice of claim will remain 28 days from when the claiming party became aware or should have become aware of the event. The regime applies to contractor and employer claims. The engineer shall, within 14 days of receiving the notice of claim, advise if it is time barred. It is common for the engineer not to raise time bar issues until later, when it is the subject of a dispute. This sub-clause aims to avoid this. If the engineer fails to advise regarding time bar, the engineer must determine the claim. A fully detailed claim (which may be interim if the effect is ongoing) must be issued within a further 14 days, so 42 days from the event, or such longer period as is agreed. There are key parts of that detailed claim which must be issued within the 42 days or the engineer can give notice that the original notice of claim has lapsed.

What changes will the new Yellow Book bring? Two of the big changes involve notices and claims, and what is contractually required in programmes

The intention is to avoid late and stale claims. To give some relief, a clause is introduced called “waiver of time limits”. It provides that a failure to comply with a time limit can be referred to the dispute board appointed under the contract but, on a strict time limit of 14 days. This presumes a dispute board has been appointed – which is unlikely to happen in a 14 day window. In the UK, appointment of a dispute board is the provision that is often written out. Where that happens a substitute to provide for any relief may have to be put in its place.

In terms of programming, sub-clause 8.3 is the new programming clause. The existing sub-clause 8.3 had four essential requirements for a programme. The new proposed sub-clause has 11. As before, the contractor has an obligation to submit a revised programme which reflects actual progress whenever any existing programme is out of date.

The following will be new requirements for the original programme and any revised ones issued under this sub-clause:

• The first programme to be submitted is called an initial programme – within 28 days of notice to commence
• Programming software will be that specified in the employer’s requirements or, if not, specified, software “acceptable to the Engineer”
• This programme will include: the logic links showing earliest and latest start and finish dates; critical path and float; sequence and timing of remedial works for any revised programmes; holiday periods, including local holidays; and key delivery dates of plant and materials
• Every revised programme must also contain these essentials
• In the supporting report which accompanies a revised programme the contractor should include proposals to overcome the effects of any delays on the progress of the works and identify significant changes from previous programmes.

The intention is to avoid late and stale claims. To give some relief, a clause is introduced called ‘waiver of time limits’

The engineer has 21 days to review the initial programme and 14 days to review any revision. If the engineer rejects a programme as not reflecting actual progress the contractor only has 14 days to come up with another.

The new edition tries to tackle how concurrent delays are dealt with, where one is contractor delay, by providing that whether there will be an entitlement to an extension of time in these situations shall be assessed “in accordance with the rules and procedures stated in the Particular Conditions”.

It is common to see amendments to the standard form which seek to close down an entitlement to an extension of time in the event of a concurrent contractor culpable delay-not always successfully. This sub-clause is unlikely to change that.

It may be there will be some change to these conditions before publication, although word is that any major change is unlikely. So, programmers and engineers stand by; there will be lots to do, hopefully to good effect. And incidentally the new edition has 50% more words than the first.

Lindy Patterson QC is a partner and solicitor advocate in the construction team of CMS Cameron McKenna