2 THE ‘TRADITIONAL’ APPROACH TO RISK PROBABLY THE MOST TRADITIONAL O...

Probably the most traditional or conventional project structure involves an

employer who instructs a consultant to design certain work and to administer

the contract. The contractor tenders against the designs and specifications

prepared by the employer ’ s consultant. If his tender is successful, he enters

into a contract by which he undertakes to carry out the works in accordance

with those designs and specifications. The engineer or architect acts as the

employer ’ s agent and certifies milestone stages and payments in accordance

with the terms of the contract, as well as deciding such matters as the contrac-

tor ’ s entitlement to extensions of time or additional payment should there be

variations, delays or disruption to the work. The contract price will typically

be on a firm basis, normally a lump sum, or on the basis of unit prices with

provision for re-measurement; provisional sums for items of work which can-

not be fixed or defined at the outset might also be included. There will be

provision also for assessing the value of any variations duly instructed in

accordance with the contract.

The FIDIC Red Book has closely matched this traditional form of project.

The Red Book is recommended for building or engineering works designed

by the employer or by his representative, the engineer. The contractor is to

construct the works in accordance with a design provided by the employer,

although the works could include some elements of contractor-design. The

engineer is appointed to carry out traditional roles of administration and cer-

tification of the contract, acting as the employer ’ s agent.

The Yellow Book differs from the Red primarily in that the Yellow Book is

intended for use where the contractor is responsible for the design of the

work. Reviewing earlier editions of the two Books, FIDIC took the view that

the decision whether to use the Red or Yellow Book should rest upon which of

the parties was mainly responsible for design, rather than the type of work to

be carried out. The Red Book, published in its present form in 1999, was

developed to be suitable for building and civil and other engineering works

designed by the employer or the engineer, and the Yellow Book was to be suit-

able for plant and for building and engineering work designed by or on behalf

of the contractor. In both cases, the engineer was to perform traditional

administration and certifying roles.

In the Red and Yellow Books, the contractor usually bears the risk of delay

and additional cost, if he is able to control the relevant events. For example,

where physical conditions cause delay or additional cost, the contractor will

bear the risk of both if the conditions were reasonably foreseeable; however, if

the physical conditions (including ground conditions) were not reasonably

foreseeable then the contractor will be entitled (subject to complying with the

requirements for making a contractor ’ s claim under clause 20.1) to additional

time and cost resulting from the unforeseeable conditions (clause 4.12).

Where damage or delay to the works results from war or civil commotion,

on the other hand, under the Red and Yellow Books the employer bears the

risk of delay to the contract and additional costs to the contractor, by clause