Engineer’s determinations under the new 2017 FIDIC standard contracts
A new edition of the suite of FIDIC contracts was published during the International FIDIC Users’ Conference in London on 5 December 2017. The publication includes new approaches to issues such as filing claims and procedural aspects of the engineer’s role in their evaluation.
The FIDIC conditions of contract have undergone a significant expansion. In many instances, the new regulations also appear to be more formal. Most of the contract forms have been redrafted rather than simply modified, but the names and numbering of clauses have largely been maintained.
The drafters of the FIDIC standard form contracts were well aware that the procedures for adjudication of claims and dispute resolution set out in the FIDIC forms have a large impact in the implementation phase of projects. This part of the new conditions of contract has been the subject of particularly intense debate since the publication of the consultation version in December 2016.
Some of the most significant changes have come in the area of the engineer’s responsibilities once one of the parties files a claim.
Under clause 3.5 of the 1999 FIDIC standards, following a contractor’s claim (under clause 20.1), the engineer was to “consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.” The deadline for the engineer to approve or disapprove the claim was 42 days from receiving the claim (unless otherwise agreed by the contractor).
The new FIDIC 2017 forms of contract significantly expand the regulations regarding the engineer’s determination. The 1999 version’s two paragraphs have been replaced with more than two pages of detailed provisions.
One of the key points of emphasis is that in making a clause 3.7 determination related to one of the party’s claims, the engineer is to act “neutrally” and his or her actions shall not be considered to be carried out on behalf of the employer. The previous regulations simply mandated that the engineer’s determination be “fair” and made no reference to his or her employment status with the parties. The forms of contract do not define any of the above terms, making it difficult to assess their future impact on how engineers carry out their responsibilities. However, it is clear that the drafters of the FIDIC 2017 forms of contract intended to ensure that the engineer enjoy the trust and confidence of both parties.
Under the new standards, the engineer’s determination of claims has been split into two stages. The first one involves an attempt to resolve the claim through agreement between the parties. Under clause 3.7.1, the engineer “shall consult with both parties jointly and/or separately” and the engineer’s primary task is to “encourage discussion between the parties in an endeavour to reach agreement.” A determination through this process shall be reached within 42 days of the engineer receiving the claim.
If no agreement can be reached, the engineer should proceed to make a fair determination of the claim “taking due regard of all relevant circumstances.” This regulation provides another 42 days to make a determination. As a result, the engineer’s final decision, reached following an attempt to have the parties reach an agreement, can be issued 84 days (nearly three months) after the filing of a claim by one of the parties. The engineer’s failure to issue a determination within this time will be deemed a rejection of the claim, and the dispute will be referred to the Dispute Avoidance and Adjudication Board (DAAB)—which has replaced FIDIC 1999’s Dispute Adjudication Board (DAB).
Another addition to the determination procedure is the requirement that a party which disagrees with the engineer’s determination is required to file a Notice of Dissatisfaction (NOD) with the engineer’s determination. Under FIDIC 1999 the NOD requirement only applied to DAB decisions. The deadline for filing a NOD is 28 days. Failure to file a NOD causes the engineer’s determination to become final and binding. The new provisions also allow NODs to be filed in reference to a specific part of the engineer’s determination.
Clause 3.7.4 provides further clarification when the engineer’s determination creates an obligation for payment by one party to the other. These payments are to be included by the contractor in the next statement and by the engineer in the next payment certificate.
Significantly, all of these guidelines for the engineer’s actions apply to both contractor’s and employer’s claims. Unlike the previous version of the FIDIC standard forms, FIDIC 2017 uses the same procedures to evaluate claims by either party (e.g. providing identical time limits for filings). This uniform approach is a new feature, as FIDIC 1999 applied clauses 20.1 and 3.5 to contractor’s claims while the separate clause 2.5 was used for claims by the employer. One of the main differences was that clause 2.5 did not set out a time limit for employer claims, while the contractor’s claims were time-barred after 28 days.
Hanna Drynkorn, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
