3 (F) THE CONTRACTOR IS ENTITLED TO REASONABLE PROFIT ON ACTUAL COS...
17.3 (f) the contractor is entitled to reasonable profit on actual costs incurred
where he has suffered cost consequences as a result of the employer ’ s use or
occupation of the permanent works, and to an extension of time to the extent
that he has suffered a delay.
Many people regard the Red and Yellow Books as seeking to strike a fair
balance of risk between employer and contractor. The contractor benefits
because he need not price for risks which are hard to evaluate at the outset of
the project; while the employer enjoys a lower contract price, and incurs extra
cost only where certain defined risk-events actually occur. This even-handed
approach to risk was followed in earlier editions of the Red and Yellow Books,
and maintained in the current (1999) edition.
3
However, with the increasing importance of privately-financed turnkey
projects driven by the need to satisfy the demands of financing institutions,
such as banks, for certainty of cost, the more balanced approach of the tradi-
tional forms was no longer suitable. Before the introduction of the Silver Book
it was not unusual for the parties to a turnkey project who wished to use or
adapt a FIDIC form simply to modify the terms of the Yellow Book by placing
on the contractor all the risks which had been divided between contractor and
employer. This was felt to be unsatisfactory, and the FIDIC Silver Book was
the result.
We shall shortly be looking in more detail at the Silver Book, but first we
should describe the kinds of project for which it was intended.
3
In May 2005, FIDIC issued a new version of the Red Book, following consultation with
development banks to ensure harmonisation of bidding documents in projects financed by
them. The FIDIC
Conditions of Contract for Construction (for Building and Engineering
Works Designed by the Employer), Multilateral Development Banks Harmonised Edition is for
use under licence by participating banks and (though an important contract form) is there-
fore not in general use. It was revised in 2006 and 2010.