FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS
The White Book Guide
with other Notes on Documents for
Consultancy Agreements
FIDIC is an international federation of national associations of consulting engineers.
FIDIC was founded in 1913 by three national associations of consulting engineers within Europe. The objectives of forming the federation were to promote in common the professional interests of the member associations and to disseminate information of interest to members of its component national associations.
Today FIDIC membership numbers more than 60 countries from all parts of the globe and the federation represents most of the private practice consulting engineers in the world.
FIDIC arranges seminars, conferences and other events in the furtherance of its goals: maintenance of high ethical and professional standards; exchange of views and information; discussion of problems of mutual concern among member associations and representatives of the international financial institutions; and development of the engineering profession in developing countries.
FIDIC publications include proceedings of various conferences and seminars, information for consulting engineers, project owners and international development agencies, standard pre-qualification forms, contract documents and client/consultant agreements. They are available from the secretariat in Switzerland.
© Copyright FIDIC 2001 Published by
Fédération Internationale des Ingénieurs-Conseils (FIDIC) All rights reserved P.O. Box 86
No part of this publication CH-1000 Lausanne 12 may be reproduced or Switzerland
transmitted in any form or Phone +41 21 654 44 11 by any means Fax +41 21 653 54 32 without permission of the E-mail [email protected] publisher. WWW http://www.fidic.org
FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS INTERNATIONALE VEREINIGUNG BERATENDER INGENIEURE FEDERACION INTERNACIONAL DE INGENIEROS CONSULTORES
The White Book Guide
with other Notes on Documents for
Consultancy Agreements
Acknowledgements
FIDIC wishes to acknowledge the efforts of those who have
contributed to the preparation of the succeeding editions of the White Book and the White Book Guide.
The development of the White Book started in early 1986 when Povl Ahm of Ove Arup and Partners was the Chairman of FIDIC's
Client/Consultant Relationships Committee, continued under the Chairmanship of Eigil Steen Pedersen of COWl, and completed and published in 1990 under the chairmanship of Mario Asin, Partner of Tippetts-Abbett-McCarthy-Stratton (TAMS).
Godfrey L. Ackers, formerly a Consultant to Mott Mc Donald, Ltd. and formerly a Partner of Sir Murdoch MacDonald and Partners, was the principal drafter of the 1st Editions of the White Book and of the Guide. Godfrey Ackers' wife, Wendy, typed many early drafts of these documents.
Mario Asin, assisted by Peter Batty, formerly TAMS, and now with Sheladia Associates, provided extensive reviews, comments and re-editing of the White Book and of the First Edition of the Guide.
Geoffrey Coates, formerly Chairman of Sir Alexander Gibb and Partners, Ltd., was FIDIC's Executive Committee Member in charge of overseeing the preparation of the 1st Editions of the White Book and of the Guide.
Mark Griffiths of Griffiths and Armour and Paul Taylor of Berrymans Lace Mawer provided liability insurance and legal advice during preparation of the two documents, and of all subsequent amendments including this 2nd Edition of the Guide.
Important comments on draft versions of the White Book were provided by the World Bank and the Asian Development Bank. In 1989, a particularly valuable and extremely thorough commentary on the semi-final draft was provided by a joint committee from the Arab Funds under the coordination of Ismael El-Zabri of the Arab Fund for Economic and Social Development.
Contents
1 Introduction 1
A Background 1
B General Approach 2
C Application to Types of Assignment 2 D Documents to Complete the Agreement 3 E Format of this Guide 4
2 THE WHITE BOOK
General and Particular Conditions 6
A Definitions and Interpretations 7
Clauses 1 i, ii & iii Projects, Works and Services 7 Clauses 1 iv & v Client and Consultant 7 Clauses 1 viii & ix Day and Month 8 Clause 1 x Currencies of Payment 8
Other Definitions 8
Clause 2 iii Document Precedence 9
B Obligations of the Consultant 9
Clause 5 i Skill, Care and Diligence 9 Clause 5 ii As Administrator of Contracts 10 Clause 6 Client’s Property 10
C Obligations of the Client 11
Clause 9 v Foreign Currency 11 Clause 10 Equipment and Facilities 11 Clause 11 & 12 Client’s Personnel and Services 11
of Others
D Personnel 11
Clause 13 Supply of Personnel 12 The Checklists of services have drawn heavily on the Conditions of
Engagement published by The Association of Consulting Engineers (United Kingdom), and on a checklist of environmental services prepared by Howard Schirmer in collaboration with FIDIC's former Environment Committee that was chaired by Iksan van der Putte of BKH Consulting. FIDIC is grateful for permission to make use of these documents.
The revision of the 1st Edition of the Guide to give this 2nd Edition was undertaken by the FIDIC Client/Consultants Relationship Committee under the chairmanship of Peter Batty. The Committee wishes to acknowledge important amendments from Mark Griffiths and Paul Taylor, and from Howard Schirmer of Transnational Associates.
a) Protection Provided b) Relevant Legislation
Clause 39 Copyright 26 Clause 40 Conflict of Interest 27
Clause 41 Notices 27
Clause 42 Publication 27
I Settlement of Disputes 27
Clause 43 Amicable Dispute Resolution 28 Clause 44 Arbitration 28
J Possible Additional Subject Matter 30
3 THE WHITE BOOK
Additional Discussion 31
A Definition and Interpretation 31
Clause 1 i, ii & iii Project, Works and Services 31 Clause 1 v The Consultant 31
a) Project Management b) Secondment of a Project Manager c) Technical Assistance d) An Individual as the Consultant e) Consortia, Associates and Joint Ventures
Clause 1 ix Agreed Compensation 37 Other Definitions 38 Clause 2 iii Document Precedence 39
B Liability and Insurance 39 a) Liability for Breach of
Contract and to the Public at Large b) International Funding
Agency Requirements Clause 14 Representatives 13
Clause 15 Changes in Personnel 14
E Liability and Insurance 14
Clause 16 Liability between the Parties 15 Clause 17 Duration of Liability 15 Clause 18.1 Limit of Compensation 16 Clause 18.2 Indemnity 16
a) Third Party Claims
b) Liability to Client’s Contractors Clause 18.3 Exceptions 17 Clause 19 Insurance for Liability and
Indemnity 17
Clause 20 Insurance of Client’s Property 18
F Commencement, Completion, Alteration and Termination 18 of the Agreement
Clause 21 Agreement Effective 18 Clause 22 Commencement and Completion 19
a) Time for Commencement b) Time for Completion
Clause 24 Further Proposals 20
Clause 25 Delays 20
a) Delay by Client
b) Delay by the Consultant
Clause 26 Changed Circumstances 21 Clause 27.2 i Due Date for Payment 22 Clause 28 Exceptional Services 22
G Payment 23
Clause 31 ii Time for Payment 24 Clause 32 Currency of Payment 24
H General Provisions 25
Clause 36 Languages and Law 25 Clause 37 Changes in Legislation 25
e
Clause 48 Patents and Inventions 53 Clause 49 Performance Evaluation 53 Clause 50 Severability 53
4 Appendix A: Scope of Services 55
1 General 55
2 Terms of Reference (TOR) 55 3 Classification of Requirements 55
4 Phases 55
5 Responsibilities 56
a) Task and Advice b) Training
6 Technology and Location 57 a) Location b) Headquarters Back-up 7 Administration 58 a) Programme b) Reporting c) Powers 8 Pre-Investment Studies 59 9 Feasibility Studies 61 10 Planning and Design Phases 61
a) Planning b) Design c) Terminology
d) Payment and Level of Design e) Development of Design Responsibilities f) Site Investigation 11 Procurement 64 12 Implementation 65 a) General
b) Duties in Respect of Contracts
c) The Consultant as Contract Administrator
13 Operation 68
14 Sub-Consultants 69
15 Project Cost Estimating 69 c) Cost of Insurance for
Breach of Professional Duty d) Limit of Liability for Breach
of Professional Duty e) Third Party Liability
Insurance
f) Objectives of the White Book’s Liability and Insurance Provisions
Clause 16 Liability between the Parties 45 a) Division of Responsibilities
between Consultants b) Consequential Damages Clause 18 Limit of Compensation and
Indemnity 47
Clause 19 Insurance for Liability and
Indemnity 48
a) Continuity of Insurance b) Project Insurance
C Commencement, Completion, Alteration and Termination 49 of the Agreement
Clause 22 Commencement & Completion 49 a) Time for Commencement b) Time for Completion
D General Provisions 50
Clause 39 Copyright 50
E. Possible Additional Subject Matter 51
Clause 45 Payments to Contractors, etc. 51 Clause 46 Participation of IFA* 51 Clause 47 Performance Guarantee and
Payment Security 52
* Abbreviation: in this Guide, “IFA” means International Funding Agency (or
5 Technical Assistance 90 6 Administration of Contracts 90 7 Expenses 91 a) In Foreign Currency b) In Local Currency 8 Currency 93 9 Price Variation 94 a) Rates of Exchange b) Prices
10 Recovery of Import Duties 95
11 Taxation 96
12 Contingencies 96
Annex 1 Common Payment Terminology 97
1 Advance 2 Advisory Services 3 Budget Cost 4 Ceiling Cost 5 Contractor 6 Cost 7 Emoluments 8 Expenses 9 Multiplier
10 Qualified Technical Staff 11 Stage or Interim Payment 12 Task Services
13 Tender Dossiers
Annex 3 Lump Sum Fees 100
Annex 2 Staff - Time Based Fees 101
1 Named Staff 2 Unnamed Staff
3 Substitutes for Named Staff 4 Salary Reviews
5 Discussion 6 Time
7 Typical Clauses
Annex 1 Services of the Consulting Engineer in Relation to 70 Civil/Structural Engineering Projects
A Typical Normal Services 70 B Typical Additional Services 75
Annex 2 Checklist/Menu of Environmental Services 75
1 Waste Management Facilities 2 Landfill Services
3 Landfill Engineering
4 Pollution Remediation/Brownfields Redevelopment 5 Environmental Services
6 Fisheries Services 5 Forensic Services 7 Potable Water
8 Wastewater Studies and Design 9 Water Resources Study and Design 11 Industrial Wastewater
11 Construction Services for Environmental Works 12 Operation and Maintenance for Environmental
Works
5 Appendix B: Personnel, Equipment, Facilities & Services 83 of Others to be Provided by the Client
6 Appendix C: Remuneration and Payment 84
1 Introduction 84
2 Terms of Payment 85
a) Definitions b) General c) Options
3 Advances and Stage Payments 86 4 Methods of Payment
a) Letter of Credit
b) Direct Disbursement by IFA c) Other Systems
d) Sub-Consultants e) Typical Clauses
1
Introduction
A
Background
The White Book has been prepared in three stages. The objective of the first stage was to edit FIDIC's International General Rules of Agreement (IGRA) 1979 D&S document into simpler language and a more logical order, and to develop it into a format consistent with the FIDIC style traditionally adopted for its other standard forms of conditions of contract. See References (13) to (19) in Chapter VIII.
In the second stage, alterations were made in principle to take account of written comments received on IGRA 1979 D&S and to accord with current practice and the intent of drafts of sample documents for consulting services prepared by International Funding Agencies (IFA).
The last, more difficult, stage was to refine the provisions for liability, insurance and indemnity.
A draft version of the White Book was reviewed by the World Bank, the Asian Development Bank and a joint committee from the Arab Funds. Many comments resulting from these reviews were incorporated into the final document.
The purpose of the White Book Guide is twofold, namely:
- to assist those who wish to draft Consultancy Agreements using the White Book as published or as the main reference; and
- to provide some insights into the rationale for the White Book's provisions and the content of the Guide dealing with completing an Agreement based on the White Book
In 1998, the White Book was updated to the 3rd Edition and this Guide reflects the amendments made.
Annex 4 Fees as a Percentage of Cost of Works 107
7 Terms of Reference and their Preparation 109
A Terms of Reference 108 B General Principles for Preparing Proposals and 109
Agreements
Particular Conditions and the Appendices, including questions of the legal admissibility of all terms in local, applicable law and legal systems.
D
Documents to Complete the Agreement
Clause I (vii) of the White Book defines the documents forming the Consultancy Agreement namely:
- General Conditions
- Particular Conditions
- Appendix A Scope of Services - including Checklists of both normal Consulting Engineering Services and specialist Environmental Services
- Appendix B Personnel, Equipment, Facilities and Services of Others to be Provided by the Client
- Appendix C Remuneration and Payment
It is recommended that Clients' initial invitations be analyzed under the above headings and that proposals be prepared to fit into this format because this will facilitate making agreed amendments without oversight arising from inconsistent treatment of the original.
The Particular Conditions of the White Book provide in Section A for entering particulars necessary to complete the General Conditions, and in Section B for entering additional clauses of a general and commercial nature appropriate to the particular assignment. This would cover such matters as joint ventures, powers of a manager in a management consultancy, liquidated damages, etc. Chapters II and III in this Guide deal with some of these matters, giving suggestions for wording some of the provisions.
Although the recital in the Agreement Form refers to the Consultant's proposal having been accepted, it will be noted that the proposal is not included in the printed list of agreement documents. This is
B
General Approach
As far as practicable, the construction of the White Book took note of a number of underlying general precepts, namely that:
- it should be even-handed between Client and Consultant;
- it should be capable of wide application;
- its language should be simple and therefore more reliably translatable;
- it should promote cooperation and mutual trust and avoid promoting adversarial attitudes;
- it should recognize the realities of international commerce and take account of the circumstances and difficulties peculiar to
consultancy assignments;
- legal jargon or other terms and expressions which are common only to particular geographic regions should be avoided; and
- it should cause the parties to consider the risks and
responsibilities each will assume rather than merely the technical content of the assignment.
C
Application to Types of Assignment
As indicated in its foreword, the General Conditions of the White Book provide general rules common to most consultancy agreements. Therefore, it omits some of the detail included in the documents which it now supersedes, namely IGRA 1979 D&S, IGRA 1979 PI and IGRA 1980 PM. It is one of the objectives of these Notes to indicate what material may be needed to complete the commercial, non-technical, part of an agreement for particular circumstances and types of assignment.
It is recommended that legal counsel be taken at an early stage during preparation of an Agreement, on all terms but especially on the
5
Chapter 7 contains a few general comments on Terms of Reference (TOR) and on their preparation.
Chapter 8 lists the details of publications referred to in the other chapters of the Guide.
because experience indicates that proposals are often amended to such a degree during subsequent negotiations that it is better to prepare the Agreement incorporating terms as finally agreed and following the prescribed format.
Clause 1 (vii) of the White Book, however, permits inclusion of the proposal by reference in the Particular Conditions. In such cases, if a formal agreement is also required, paragraph 2 of the Agreement Form should be extended to include it, e.g.
“d) The Consultants proposal dated .…”
The Agreement Form provides for a two-party agreement. If other parties are to be joined in the Agreement, the wording will need to be altered. Two circumstances, at least can give rise to this:
a) When the Consultant is a Joint Venture; see Clause I (v) (e) in Chapter 3 of this Guide;
b) When the Client is not the ultimate beneficiary, e.g. the Client is the "National Planning Commission" and the beneficiary is the "Roads and Bridges Public Corporation".
E
Format of this Guide
Chapter 2 is devoted to the subject matter of the General Conditions of the White Book and to related matters for consideration in
completing Section A and compiling Section B of the Particular Conditions.
Chapter 3 includes additional discussion on a selected number of those White Book Clauses presented in Chapter 2.
Chapters 4, 5 and 6 include comments relevant to compiling
Appendices A (Scope of Services, including checklists of both normal and additional Consulting Engineering Services and of specialist Environmental Services), Appendix B (Personnel, Equipment, Facilities and Services of Others) and Appendix C (Remuneration and Payment) of the Agreement, respectively.
A
Definitions and Interpretation
Clauses 1 i, ii & iii: Project, Work and Services
Separate definitions are required for Project and Works.
The definition of Works is consistent with that of the "Permanent Works" in the Red Book, but not entirely with that of "Works" in the Yellow Book. See References (13) and (14) in Chapter 8. The definition has one application in the General Conditions, namely in Clause 42 with regard to publicity. It lends itself to defining the extent of Services for design and contract administration in Appendix A and for use in Appendix C if fees are to be related in some way to the construction cost of the Project.
The definition of Services does not necessarily link them to the Works, which permits the application of the General Conditions to such aspects of Project requirements as investigation, training, or research not directly connected with the Works.
For further details, please refer to Chapter 3 under the same heading.
Clauses 1 iv & v: Client and Consultant
Note that neither the Client nor the Consultant is named in the General Conditions or Section A of the Particular Conditions. They are named in the Agreement Form, or in the absence of a formal Agreement can be named in Section B of the Particular Conditions as follows:
“With reference to Clause I (iv) of the General Conditions the Client is …... of ..…”.
“With reference to Clause I (v,) of the General Conditions the Consultant is .… of .…”
The term "Consulting Engineer" previously used in the superseded IGRA documents, is now replaced by "Consultant". This accords
THE WHITE BOOK
2
The General and Particular Conditions
The following are notes arising from aspects of the text of the White Book. Subtitles in this chapter closely conform with the relevant clause numbers in the General Conditions of the White Book. Readers may refer to the actual clauses of the White Book.
The Particular Conditions of the White Book comprise:
- Section A where material necessary to complete the clauses of the General Conditions is to be inserted; and
- Section B where additional clauses can be added if necessary.
Accordingly, the completion of Section A is necessary to give effect to any Agreement incorporating the General Conditions. The comments below include reference to this where applicable.
In some cases texts are suggested and in others there are introductory discussions which may also have a bearing on the Appendices of the Consultancy Agreement. Additional discussion on a select number of White Book clauses is given in Chapter 3.
9
Clause 2 iii: Document Precedence
If the order of precedence, or other rules for resolving conflicts between the provisions are not specified, then, in accordance with Clause 2 (iii), the Particular Conditions rule over the General Conditions, and the documents will govern in reverse chronological order.
For further details, please refer to Chapter 3 under the same heading.
B
Obligations of the Consultant
Clause 5 i: Skill, Care and Diligence
The Consultant's responsibility is to exercise reasonable skill, care and diligence. Many attempts have been made to clarify this, e.g, by reference to best professional practice, recognition by reputable representative international professional bodies, employment of appropriate advanced technology and sound practices, etc.
These attempts all introduce further terms which are subject to further dispute, e.g., What is the best professional practice? What is an appropriate professional body, and what happens if two such disagree? Why should an advanced technology be appropriate (when a primitive one may be better), etc? It should be left to the courts or arbitration to decide according to the applicable law.
However, detailed attention is needed where the TOR include or imply a requirement that the Consultant has a higher duty of a different kind, e.g., what is sometimes called a guarantee of fitness for purpose or of product performance to a guaranteed duty. In this case, Section B of the Particular Conditions needs to include appropriate amendments to this Clause and to the Liability and Insurance Clauses; expert advice is recommended; these Notes do not give it.
with the general practice of Clients and permits other professionals to use the document. This wider use should be encouraged, for example, when Consulting Engineers are contributing to proposals by firms of other disciplines.
Terms such as master and servant, principal and agent are avoided. "Independent professional firm" is the desired description of the Consultant's status for FIDIC members. A firm is expected; where the Consultant is a single person or a joint venture, additional and amending provisions are required in the Particular Conditions.
For further details, please refer to Chapter 3 under the heading "The Consultant".
Clauses 1 viii & ix: Day and Month
Although definitions are given for both "day" and "days" only are used in the General Conditions. It is recommended that this practice be followed wherever practicable. However, "month" is defined in anticipation of its use in Appendix C for fees based on staff time.
The definition of day specifies midnight to midnight to conform with most banking and insurance practice. Where some question arises on how to treat parts of a day, that is for Appendix C (or the Particular Conditions) to specify. The question usually arises in connection with payment terms and can be overcome by defining an hourly rate or by specifying that a part of a day shall be treated as a day.
Clause 1 x: Currencies of Payment
The definitions of local and foreign currencies are self-explanatory and provisions dealing with them are included under Clause 32 below.
Other Definitions
Please refer to the appropriate section in Chapter 3 under the same heading.
them and for recovering the cost against his fee or some arbitrary allowance. Supply by the Client on demand by the Consultant involving accountability by the Consultant should be avoided. One only has to think of fuel and its potential use and abuse to realize the strength of this recommendation.
C
Obligations of the Client
Clause 9 v: Foreign Currency
See Clause 32 below regarding currency problems.
Clause 10 Equipment and Facilities
This Guide does not attempt to examine in detail the possible scope of Appendix B to the White Book. Attention must be given to the problems of a division between responsibility for provision and accountability for cost. Moreover, provisions for backup options should be considered, especially where the matter is fundamental to satisfactory performance (e.g., accommodation and transport).
Clauses 11 & 12 Client’s Personnel and Services of Others
These Clauses do not anticipate what the other services are, or what the personnel are supplied for. There are many categories, e.g. drivers, clerical staff, in-line staff who are neither experts nor counterparts, trainees, even Client departments or local firms.The General Conditions of the White Book cover none of these matters, except that seconded personnel take instructions in connection with the Services only from the Consultant, and that the Consultant shall cooperate with (which is not the same as coordinate) suppliers of other services.
Clause 5 ii: As Administrator of Contracts
This sub-clause provides for the situation where the Consultant is administrator of an implementation contract. The following two points are noted:
a) The Consultant, in estimating the extent and cost of his Services, will have to assume what duties he will be expected to exercise and the effect of any restraints on him. Clearly much of the uncertainty can be removed by reference in the
Agreement to the duties as expressed in the relevant FIDIC Conditions of Contract: see Chapter 4, Paragraph 12.
b) Sub-Clause 5 (ii) (b) requires the Consultant to act fairly when administering implementation contracts - see Clause 3.5 of the Conditions of Contract for Construction, 1st Edition (1999), Reference (15) in Chapter 8.
However, to harmonize with what is thought to be almost universal practice, there is a restraint in Sub-clause 5 (ii) (c) on the
Consultant's power to order important changes without the Client's approval. This may be given more specific detail in Appendix A, and in any case the provisions should be repeated in the terms of any subsequent implementation contract; see Clause 3.1 in the of the Conditions of Contract for Construction, 1st Edition (1999), Reference (15) in Chapter 8.
The Red Book is still widely used (at the time of publication of this 2nd Edition). However, the Red Book and the Yellow Book have been replaced by the four FIDIC publications listed as References 15 - 18 in Chapter 8 of this Guide. In the case of Reference 15, which are the current Conditions of Contract most similar to the Red Book, the Consultant's duties requiring fair judgment are described in Clause 3.
Clause 6 Client’s Property
With regard to the Consultant's consumables, it is to be preferred that the Client be responsible for supplying and monitoring them. Otherwise, the Consultant should be responsible for obtaining
13
assessing payment for providing what the Client fails to supply; see also Clause 28 below. Attention may also have to be given to the requisite contingency budgets, because what the Client may have planned to fund in Local Currency may now require Foreign Currency. It is important that the matter be dealt with in writing so that the extent of agreement and disagreement, and of the related services, is clearly set out.
Clause 14 Representatives
This clause refers to the individuals who are the points of contact for the parties under the Agreement.
If it is a requirement of the Client that the Consultant should have a local representative with delegated authority to act on behalf of the Consultant in matters pertaining to the Agreement (as distinct from the Services), an appropriate clause must be completed in the Particular Conditions. Such a Clause should expressly allow the representative to refer a delegated duty back to the
Consultant.
The Consultant may, himself, think it desirable or necessary to have the facility to delegate, in which case a clause should be provided as follows.
“The Consultant may from time to time delegate any of the duties and authorities vested in the Consultant to personnel approved by the Client and he may at any time revoke such delegation. Any such delegation or revocation shall be in writing and shall not take effect until a copy of it has been delivered to the Client”.
“The Consultant's delegate may at his discretion choose not to exercise any such delegation and can refer to the Consultant for any necessary action”
Note that if the individual is delegated with administrative duties in a contract where the Consultant is named administrator (the Engineer in the Red Book), Reference (13) in Chapter 8, that contract will require the relevant delegations to be separately advised to the contractor.
D
Personnel
Clause 13 Supply of Personnel
Approval by Client
The first paragraph of this Clause deals with personnel supplied by the Consultant, recognizing that inevitably in most cases the Client will wish to approve individuals, notwithstanding that it is the Consultant who is responsible for performing the task, except when he is seconding staff to the Client.
It also recognizes the usual requirement for fitness to be certified, but uses the term "physically examined and found fit". If the Client wishes to see the certificate, the provision can be made in the Particular Conditions.
Finally, the first paragraph confines these requirements for approval and fitness to personnel visiting the country of the Project. These requirements should not be extended to other locations of the Consultant's staff, since compliance in the Consultant's home country would likely represent a breach of employment and/or anti-discriminatory laws.
Client Cannot Supply
The second paragraph is important, because it sets out what happens if the Client finds himself unable to supply, as promised, the personnel or services of others. The "services of others" refers back to Clause 12, not to Clause 9 Assistance, or 10 -Equipment and Facilities, instancing another occasion when consistency of phraseology is important. If they are, by
agreement, still required, it is the obligation of the Consultant to provide them as an Additional Service, but, obviously,
discussions between the Consultant and the Client would be expected to precede the Consultant's mobilization or
procurement.
Clause 16 Liability Between the Parties
The provisions are even-handed. The word "compensation" is used instead of the more usual string of legal terms, because it is financial compensation that is envisaged, and the conditions governing its assessment are defined in Clause16.3.
Sub-clause 16.3 (iii) is intended to prevent a party bearing the whole liability if another or third party is partly responsible but unavailable (e.g., no longer trading).
Division of Responsibilities between Consultants
Apart from Clause 16.3 (iii) there are no express provisions to cover those circumstances when there may be divided
responsibility between different Consultants engaged by the Client for different phases of the Project. It is important that at the time of entering the Agreement both parties address the question so that the Consultant knows what responsibilities he is undertaking and can price for them.
Please refer to the appropriate section in Chapter 3 for further details.
Clause 17 Duration of Liability
For a claim by one party against the other to be valid, formal notice must be given within the period stipulated in the Particular Conditions. The degree of formality is not specified in the White Book as it will depend on the applicable law. In some cases a Clause 41 notice may be sufficient; in others it may need to be given by a process of law.
While there is, superficially, no difficulty in choosing a duration for liability, the applicable law may prescribe it with or without options or modify it for some or all risks. In the absence of a clear
indication under the applicable law, it is suggested that 10 years is a figure both reasonable and likely to be accepted in a number of jurisdictions.The principal difficulty is how to put some finality on the risk by specifying when duration begins to elapse. One of the more certain entries could be:
Clause 15 Changes in Personnel
The cost of replacing personnel at one party's justifiable request is at the cost of the other party if the reason is misconduct or inability to perform. Both items are open to subjective
interpretation. It has not been thought helpful to elaborate. If the parties have good relationships they will be able to agree; if they have bad relationships, further definition will not help.
The provisions of clauses, frequently seen, requiring observance of the law and respect for customs are unnecessary because no one is above the law and disrespect would constitute misconduct.
E
Liability and Insurance
The White Book provides for reciprocal liability in contract for breach of contract duty [Clauses 16.1 & 2]. This liability is to be discharged by way of financial compensation for reasonably foreseeable loss or damage [Clause 16.3 (i)], limited in amount [Clause 18.1] and to the proportional responsibility in case of joint liability with others [Clause 16.3 (iii)].
Liability is limited in time [Clause 17]. The Consultant is indemnified by the Client against all claims out of time and which are not covered by insurance [Clause 18.2], but neither limit nor indemnity apply if the Consultant is wilfully or recklessly in default [Clause 18.3].
The Consultant is expected to take out insurance cover, if available at reasonable commercial rates, for breach of contractual duty and breach of duty to the public at large (non-contractual and statutory duty) all as may be required by the Client. This will be at the Client's expense to the extent that it exceeds the normal cover (if any) carried by the Consultant [Clause 19].
A general discussion covering this topic is provided in the appropriate section of Chapter 3.
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b) Liability to Client's Contractors
It would be as well, when approving the duties of the Engineer under a contract between the Client and a third party such as a construction contractor, to remove any questions of liability of the Consultant to the third party by inserting in the relevant documents a disclaimer to the following effect:
“Neither the Engineer nor any of his staff nor the Engineer's representative nor any of his staff shall be liable in any way to the Contractor for their acts or omissions in the Performance of their duties under the Contract.”
Clause 18.3 Exceptions
To comply with prevalent current practices, the limits of liability and indemnity do not apply if liability results from deliberate default or reckless misconduct. After considerable debate this phrase was chosen in substitution for such phrases as "gross negligence" or "willful misconduct", because gross negligence is believed to have a special meaning in some jurisdictions but is meaningless in others, and willful misconduct confuses deliberate default with recklessness.
The Yellow Book, Reference (14), combined both into "gross misconduct" defining it as "any act or omission in violation of the most elementary rules of diligence which a conscientious
contractor in the same position and under the same circumstances would have followed". Whether this was helpful remains to be proved. The applicable law will ultimately decide whether a default is such as to negate the limits of liability and indemnity.
The Consultant's liability is not limited under the White Book other than in connection with the performance of obligations under the Agreement.
Clause 19 Insurance for Liability and Indemnity
Clause 19 requires the Client to fund any increase in cover over that normally carried by the Consultant or for the cost of such cover if the Consultant is not already insured for the particular risk.
“such date as is prescribed by the applicable law but not later than the completion or termination of the Services”.
It is recommended that whenever possible a lawyer or broker, specializing in insurance under the applicable law, be consulted.
Clause 18.1 Limit of Compensation
The text allows for possible pre-agreed compensation over and above the limits set here; delayed payment Clause 31 (ii) provides an example. This aspect needs to be remembered when fixing others, e.g. for delayed performance.
The text allows for possible pre-agreed compensation over and above the limits set here; delayed payment Clause 31 (ii) provides an example. This aspect needs to be remembered when fixing others, e.g. for delayed performance.
"Agreed Compensation" is used where "liquidated damages" or "interest" would be more familiar expressions to some. This is to facilitate translation and to promote wider application. See, also Clause 25 below.
Clause 18.2 Indemnity
a) Third Party Claims
The limit of the cover required to be insured and terms (e.g., in joint names) for third party liability should be set or agreed by the Client. However, the TOR may not state exactly what amount is required to be taken out by the Consultant, and, if urgency prevents inquiry, it would be prudent to name in the proposal the amount for which the Consultant is normally insured. No express Provision is made in Section A of the Particular Conditions.
Some IFA* take exception to the inclusion of a specific indemnification as stipulated in Clause 18.2
orders or by the law. In case of doubt, there are two solutions:
- to obtain the Client's confirmation whether or not a formal agreement is required;
- to obtain a written undertaking from the Client, before starting the Services, that the Client will perform his obligations, including those of payment pending execution of any formal agreement that may subsequently be required.
Clause 22 Commencement and Completion
a) Time for Commencement
There are many possible approaches to completing the entry required in the Particular Conditions of which the following are examples:
“within "x" days after:
- the date when the Agreement is effective”;
or
- receipt by the Consultant of the first payment due under the Agreement”;
or
- confirmation by the Consultant's bankers that an irrevocable letter of credit has been established in accordance with the Agreement”.
“The Services will be deemed to have commenced on the date of arrival in (name of country) of the first member of the Consultant's staff which shall be on or before (specified date)”.
b) Time for Completion
Completion will usually be expressed as within so many days after commencement, but it may be necessary to sub-divide the The Consultant is not entitled to separate or direct reimbursement
for the cost of his insurances normally carried.
Generally, the Consultant must obey the applicable law, and unless otherwise specified it will be his duty to acquaint himself with, and comply with, any legal obligations to insure the personnel working under his direction, and vehicles and accommodation, etc. used by him and by those working under his direction.
For the avoidance of doubt, the Consultant should disclose in his proposal or at the time of Agreement the amounts and renewal dates of his current insurances so that the Client can consider what extra may be required.
Further details on this topic are provided in the appropriate section of Chapter 3.
Clause 20 Insurances of Client’s Property
It is the purpose of Clause 20 to cover the circumstances when the facilities are provided by the Client for the Consultant's use but remain the Client's possessions.
F
Commencement, Completion, Alteration and
Termination of the Agreement
Clause 21 Agreement Effective
It is not recommended that the effectiveness of the Agreement should be subject to approval of an IFA. The Consultant has no control over the pace of any Client/IFA negotiations and is at risk while this continues. It should be the duty of the Client to obtain any necessary third party approval to the draft Agreement before the parties sign.
Clause 21 of the White Book does not cover the problems which may arise if the Consultant receives a letter of acceptance and an instruction to proceed, but is subsequently denied payment because a formal agreement has not been executed as required by standing
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low by comparison with any likely loss or damage due to delayed performance, the Consultant himself should consider carefully whether or not an Agreed Compensation should be stipulated.
For example, if a high limit of compensation to the Client is prescribed under Clause 18.1 and the direct consequences of a delay might lead to claims on or by the Client for loss of valuable production, it might be sensible to limit the damage for delay to a reasonable amount by stipulating an Agreed Compensation and the fact that no other damages will be payable for delay. By the first paragraph of Clause 18.1 this would be an extension to the limit of liability under Clause 18.1. Such a provision could be included in Part II along the following lines:
“Further to Clause 25 in the General Conditions, where in
Appendix A the Services or any part of them are to be completed within a specified time, and they are not so completed for reasons which are solely the responsibility of the Consultant, the Client shall be entitled to agreed compensation at the following rates per day of delay in completion which is the responsibility of the Consultant, and no other damages or compensation will be payable for delay.
Services Rate/Day ... ... ... ...
The total of such agreed compensation shall not in any event exceed ....”
The rates per day should be capable of being supported by calculations made before the date of the Agreement, however imprecise the estimates have to be.
Clause 26 Changed Circumstances
The concept of Clause 26 comes from Paragraph 88 in the United Nations Guide for Drawing up International Contracts on
Consulting Engineering, Publication No. ECE/TRADE/I 45. 1983; Reference (1) in Chapter 8.
Services for completion by stages, especially where administration of contracts is involved.
Care should be taken in the wording of this entry if there is no intention of making an Agreement where time is a fundamental condition ("of the essence"). The presence of an "Agreed
Compensation" clause in Section B of the Particular Conditions for delayed performance will support such a condition, as might some performance or payment condition in Appendix A or C.
For further details, please refer to Chapter 3 under the same heading.
Clause 24 Further Proposals
As projects progress, the Client's perceptions of his needs
sometimes change, whether arising from the Consultant's findings, from policy, or from funding limitations. This Clause provides expressly for payment to the Consultant for what can often be substantial extra work involved in preparing proposals for the changed content of his Services. Clause 26 may also give some protection, since the requirement to prepare proposals would stem from a changed circumstance, but it was not designed for this type of circumstance, and it was thought best to have an express provision.
Clause 25 Delays
a) Delay by Client
This Clause provides for delays which are the responsibility of the Client. If there are any, it provides that the Consultant has a duty to advise the Client. See, also, Clauses 13 and 23 above.
b) Delay by the Consultant
Where time is a fundamental term of the Agreement, the Client may require a provision for compensation for delayed
while other expenses are recoverable net. This has two consequences on Appendix C:
- if the Agreement is a lump sum Agreement, there should be a priced schedule for staff time; and
- any provisions in Appendix C for a mark-up on the net cost of reimbursable expenses to cover administration and financing charges will not be applicable.
It is considered that the above arrangements give some measure of fairness when misfortune strikes both parties.
G
Payment
It is important to distinguish the difference between:
- terms of payment;
- method of payment; and
- liability for payment.
At the same time it is necessary to consider security for payment.
Terms and Method of Payment
The terms and method of payment are a matter for Appendix C; see Clause 30 and Chapter 6.
Liability
If the inclusion of any provision, such as a possible IFA type clause (as shown under Clause 46 in Chapter 3), is likely to raise doubts about liability for payment, the following clause can be inserted in the Particular Conditions:
“Notwithstanding any agreed method of payment the Client shall be, and shall remain, responsible for making payments to the
Both ECE/TRADE/145 and IFA sample forms provide elaborate and specific provisions for serving notices after the Force Majeure occurrence, in default of which the Consultant would be in breach and lose protection provided by the clauses. These are exactly the circumstances when it may be physically impossible to serve such notices. Clause 26 requires prompt "dispatch" of a notice only.
Also, the Clause is not only applicable when a circumstance is not the responsibility of the Consultant and such as to prevent him performing his obligations, but also applies if continued
performance, although possible for the time being, is irresponsible; for example, when the Consultant as an employer of his staff would be considered negligent in exposing them to possible danger, after his government has advised evacuation. In such circumstances the Consultant would then be liable for damages for staff subsequently injured or would be likely to breach the terms of an insurance policy.
This Clause also provides the basis for the Consultant to suspend, and ultimately discontinue, his services if the Client declines to adapt measures reasonably considered to be essential to comply with environmental requirements.
Another aspect of the Clause is that, unlike many Force Majeure clauses, it recognizes the often available possibility of continuing performance for a part of, or all, the Services, albeit more slowly. as an alternative to suspension.
Clause 27.2 i: Due Date for Payment
The phrase "due date for payment" should be read in the context of Clause 31 (i) and (ii) and the period stated in Part II.
Clause 28 Exceptional Services
Exceptional Services, consequent on changed circumstances as defined by Clause 26, are recoverable so far as staff time is concerned at the commercial rates applicable to the Agreement,
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H
General Provisions
Clause 36 Languages and Law
The law to which the Agreement will be subject should be given full consideration. It will generally be the law of the country where the Project will be implemented, or the country of the Client.
This is important since the law will generally overrule any conflicting provisions of the Agreement. In particular, any
substantive issues in dispute which, according to the Agreement are to be referred to arbitration, will be decided upon in conformity with the law to which the Agreement is subject
In light of the above, it is essential that the Consultant should make himself aware of the relevant law. Time spent on this may be more important than the same amount of time devoted to fine tuning the Agreement itself. If the law of the country concerned is not clearly defined, consideration should be given to nominating the law of a third country.
It should be noted, however, that the arbitration proceedings themselves, in matters such as submission of evidence, rules of cross-examination, etc., are more likely to be governed by the law of the country in which the arbitration proceedings are conducted.
Clause 37 Changes in Legislation
a) Protection Provided
This Clause provides for the impact (up and down) of changes in legislation outside the Consultant's own country; this protects local as well as foreign consultants when local consultants take the lead and import (i.e., subcontract) services which they themselves cannot supply.
b) Relevant Legislation
Clients should be encouraged to make prospective consultants
Consultant in accordance with his entitlement under the Agreement and shall be liable for any default in such payment. Such liability shall be in addition to any liability under Clause 16 (of the White Book).”
Clause 31 ii: Time for Payment
It is suggested that in most cases Local Currency payments should be made within 42 days, but Foreign Currency payments may need longer, say, 56 days, especially when the method of payment involves applications by the Client through another department of Government to an IFA.
The percentage of Compensation for overdue payment can be entered as a numeral or by reference to some institutional
published rate; the White Book provides that Compensation will be compounded monthly, unless express provision is made
otherwise.
Clause 32 Currency of Payment
Clause 32 anticipates that all rates and sums of money will be first expressed in one currency, namely the currency of the Agreement, which will usually be that of the Client's country, but in certain circumstances may be that of the funding agency or of the Consultant's country. Provision is then made for insertion in Section A of the Particular Conditions of the rate(s) of exchange applicable to the amount(s) to be paid in other currencies. See discussion in Chapter 6, paragraphs 8 and 9.
The White Book provision stipulates that, unless otherwise stated, there should be no restraints on currency movements and requires that details of any such restraints be included in Appendix C.
Sub-clause 32 (ii) attempts to deal with currency problems which may arise, but for which Clause 37 is inapplicable when the applicable law fails to recognize them.
Clause 40 Conflict of Interest
Earlier version of the White Book included as Clause 40 a simple "Conflict of Interest" provision. In answer to calls to eliminate corrupt practices from the award and conduct of public works contracting, the 1998 version has a new Clause 40 therefore supports the imposition of sanctions in case the Consultant is found to have:
- resorted to corrupt practice to secure its assignment, or
- misrepresented facts.
The new Clause 40, therefore supports the imposition of sanctions to prevent or discourage corruption.
Clause 41 Notices
The Consultant's records of delivery of notices and other material requiring the Client's attention should be systematically recorded, preferably after delivery by hand against the written receipt of the Client's authorized registry.
Clause 42 Publication
Clause 42 requires an express condition in the Particular Conditions if their provisions need to be varied in respect of any particular matters arising from the performance of the Services.
I
Settlement of Disputes
Earlier versions of the White Book provided for any dispute between the Parties to be resolved, in the first place, by discussion between the Parties and, failing resolution, by binding arbitration.
The 1998 version, Reference (23) in Chapter 8,provides for the intervention of a neutral mediator, if direct discussion between the Parties fails to resolve the dispute, before any matter is referred to aware, at the invitation stage, of relevant legislation, particularly
with regard to taxation, insurance, employment, exchange controls, imports and exports.
However, unless there is a warranty from the Client or indemnity such as a provision that Clause 37 applies to the information supplied by the Client, prospective consultants should perform whatever investigations they feel are necessary to satisfy themselves concerning relevant legislation.
Clause 39 Copyright
In principle, FIDIC's position is that the Consultant should retain the power to re-use the expertise and non-confidential products of his Services for the benefit of economic pricing and application of skill to future users of his services. There may be occasion when the Client has a legitimate interest in retaining control of some special product, which would generally be of a unique nature, such as some artistic or architectural feature or treatment, where the emphasis will be more on denying the right to copy than on the right to re-use.
In the latter circumstances there should be little difficulty in modifying Clause 39 to cover some identifiable exclusion from the general provision.
An illustration of the illogicality of the position that copyright should belong to the Client is that strict application of such provisions would mean that a Consulting Engineer, having performed
Services in one assignment financed by an IFA, would be unable in a subsequent assignment to use any of that library of type
designs, standard design details and model specifications, which it had developed over years of practice and had used in the former assignment.
The copyright provisions of Clause 39 may not always be acceptable to Client or IFA. Any amendment should go into the Particular Conditions.
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“the Rules of Arbitration of the International Chamber of Commerce", Reference (2) in Chapter 8.”
It is possible to qualify this matter further, e.g., by stipulating the number of arbitrators, or to substitute some other administration. E.g., the London Court of International Arbitration, Reference (3) in Chapter 8.
For ad hoc arbitrations:
- “the UNCITRAL Arbitration Rules", Reference (4) in Chapter 8.
In this case it is desirable to complete four other requirements, namely:
- The appointing authority shall be ....”
This can be the International Chamber of Commerce, Reference (5) in Chapter 8, or the Chief Justice of the Client's country., or the President of some professional institution (including FIDIC), etc.
- The number of arbitrators shall be ....”
Normally one or three.
- The place of arbitration shall be ....”
Care is needed in choosing this to ensure enforceability of the award. Regard should be given to whether the countries of the parties are signatories to any of the bilateral or multilateral conventions on enforcement of arbitral awards.
- The language to be use in the arbitral proceedings shall be ....”
This can cause difficulties depending on the likely nature of oral and written evidence, but normally the ruling language of the Agreement is the first choice.
Doubtless there are other positions. arbitration. This reflects the general success achieved in curtailing
the cost of dispute resolution when mediation is used.
Clause 43 Amicable Dispute Resolution
This Clause specifies the requirement for the Parties to make a good faith attempt to resolve any disputes between themselves. It further stipulates that, failing direct resolution, the dispute will be referred to a neutral mediator.
The Clause further specifies a time schedule for mediation to avoid excessive delay resulting from the requirement for
mediation, but allows that the schedule may be modified if both parties agree.
Sub-Clauses 43.6 and 43.8 provide for the situation where mediation fails to resolve the dispute, while Sub-Clause 43.7 stipulates that the Parties will each bear their own costs involved in mediation, unless the mediator finds that one Party has initiated the mediation frivolously or vexatiously, when that Party will be assessed the costs by the mediator.
It may be advisable to stipulate in the Particular Conditions who will pay the mediator.
Clause 44 Arbitration
a) Waiver of Appeal at Law
Note that whatever system and rules are adopted the parties intend the arbitration to result in finality without recourse to law so far as the applicable law permits. This accords with the practice of the International Chamber of Commerce's Rules of Arbitration [Reference (2) in Chapter 8].
b) Selection of Rules for Arbitration
Two options are given below:
THE WHITE BOOK
3
A
dditional Discussion
A
Definitions and Interpretation
Clause 1 i, ii & iii: Project, Works and Services
Special provisions will be required in the Particular Conditions or (i) & (iii) Appendix A of the White Book if any of the Services in respect of the Works are:
- limited to a part only of the Works;
- to include design responsibility for temporary works.
Note that "comprise" and "include" have different meanings, although draftsmen often use the former when the latter is more appropriate. Under a lump sum agreement, however, it would be wise to use " comprise", thus carefully defining the limits for application of the Services; "include" on the other hand is an adequate abbreviation for the phrase "include but are not limited to"
“The Works as described in Section A of the Particular Conditions comprise/include the following: ....”
Clause 1 v: The Consultant
It is important to distinguish clearly between what the Consultant is, i.e. between what constitutes him and what he is to do.
- He may be an individual, a firm (partnership or company), a consortium or joint venture.
- He may have to study, design, administer contracts, manage, or operate, even perhaps arrange finance
Each of the latter performance requirements is matter for the Scope of Services and, generally, does not warrant changes in the
J
Possible Additional Subject Matter
Section E of Chapter 3 provides a discussion of the additional contractual clauses that may need to be incorporated in an Agreement for Professional Services.
33
but it is not necessary.
In any event, it would seem good practice not to use the term "Project Manager" for the head of the Consultants' team. A better title would be "Services Manager" or "Services Director".
b) Secondment of a Project Manager
If the Consultant is to supply an individual to act under the Client's direction and overall management as Project Manager, the terms of that secondment will need to be defined; in particular it will be necessary to specify the relationship between the Consultant and the Project Manager concerning supply, servicing, supervision and replacement, and also concerning supplying technical advice and Services.
It may be desirable to include in Appendix A or in Section B of the Particular Conditions certain general provisions governing the Project Manager, and suggestions for this are given below:
“The Project Manager seconded by the Consultant to the Client as part of the Services shall take instructions concerning the Project only from the Client.”
“The Project Manager shall for the purposes of the Project:
1. arrange for the provision of expert and professional services as may be required but in so far as such services are part of the Services in the Agreement shall obtain them from the
Consultant;
2. have authority to enter into contracts on behalf of the Client but only after having the Client's written approval for each such contract;
3. be subject to the provisions of the following clauses in respect of his services as if he were the Consultant in respect of them: (e.g., White Book Clauses
General Conditions or additions in the Particular Conditions unless those Services extend beyond the advisory function to the function of incurring liability for final cost or duration of the Works
themselves, for example: to the direct employment of labour or contractors or the direct purchase of materials etc. or to having discretion for the placing of orders and executing of contracts as agent of the Client.
a) Project Management
The title Project Manager encompasses a wide range of applications. At one extreme he (whether an organization or an individual) is completely responsible for delivering a constructed project in response to the Client's wishes. At the other extreme he merely acts as a conventional consultant advising the Client and performing administrative duties.
In the latter case, no changes or additions are required in the White Book. It is beyond the scope of these Notes to consider the former case, but it is not on the face of it difficult to specify terms covering any well defined departures, e.g., for making a site investigation or for the purchase of required materials or equipment, other than by procuring contractors for the Client, while still retaining liability only for skill, care and diligence in the performance of his Services. This is the touchstone.
If liability is to extend beyond this, e.g. to liability for fitness, performance, cost or timely delivery of a product (the Works), then that is a different matter altogether for which the White Book and other common forms of Consultancy Agreements are not suitable.
Thus, whether the Consultant is called the Project Manager, or whether one of his Services is to supply an individual to be called the Project Manager, perhaps heading the Client's in-house team, nothing further needs to be said in the Particular Conditions about the Consultant, provided that the Consultant's responsibility remains that of exercising skill, care and diligence. One could, perhaps, say:
“In the General Conditions delete the word "Consultant" wherever it appears and substitute the words "Project Manager"”
- supply of personnel to assist the Client in the preparation or administration of a Project in an advisory capacity; and
- supply of personnel to assist the Client in training.
For further comment see Paragraphs 52 to 55 in the United Nations Guide, Reference (1) in Chapter 8.
d) An Individual as the Consultant
The important point here is to ensure that the Agreement is what is sometimes known as a "personal" contract, that is to say one for personal services where only the person concerned is intended to perform them.
The White Book is not drawn up with this in view. However, IGRA (D&S) 1979 included certain relevant provisions which, in an edited form, are partly given below for inclusion in the Particular
Conditions. Other provisions, notably relating to insurance and indemnity, may need to be altered.
“With reference to Clause 1 (v) in the General Conditions, the Consultant is not a firm but an individual, and with reference to Clause 26 in the General Conditions, if his own circumstances are altered such that he himself is disabled from performing the Services, the Agreement shall terminate without prejudice to the accrued rights of either party against the other. In that case the Client shall pay the Consulting Engineer or his successors and assigns, upon surrender of any available documents necessary for the continuation of the Services, such outstanding
remuneration as corresponds to the state of the Services at disablement.”
The wording suggested above does not expressly provide for the reimbursement of direct costs from contracts already entered into in respect of the Agreement. If the White Book is used, it is necessary to set out in Appendix C the terms of reimbursement for such contracting, if any, in the event that they become accrued rights in this context.
- 5. Duty of Care and Exercise of Authority
- 40. Conflict of Interest
- 42. Publication);
4. not be required to make payments on behalf of the Client to contractors;
5. be indemnified by the Client against all claims against him for loss or damage arising from a breach of his duty in the performance of his services and from any instruction error or omission by the Client, or employees or contractors of the Client.”
See Footnote 1.
c) Technical Assistance
Technical assistance should be distinguished from:
- seconding personnel for executive duties, e.g., as Project Manager; and
- the supply of Services to the Client as an independent task.
Where the Project is itself a training project, and the Consultant's task is to train, the Services may or may not include technical assistance.
It is recommended that Technical Assistance be used in two senses:
1 In as much as he takes directions only from the Client there is little need to specify his services (as opposed to those of the Consultant) unless the Consultant's remuneration for them is not on a time charge basis. However, a description of them is desirable so that the Consultant can appoint a suitably qualified person where not already named in the Agreement. Such a description should go in Appendix A. See also paragraph 12 in Chapter 4.
37
as the lead firm, to act on their behalf in all matters in connection with or arising out of the Agreement."”
In this case all Members must sign the Agreement.
The Client will usually want an express undertaking for joint and several liability and, especially at the proposal or prequalification stage, may wish to see a power of attorney and the joint venture agreement. Many Consultants are of the opinion that the non-technical arrangements between the Members should be
confidential but that the Client has a justifiable interest in how the Services will be allocated. The allocation can best be set out in Appendix A, subject to a proviso that:
“reallocation is at the discretion of the joint venture should it prove necessary for the performance of the Services in accordance with the Agreement.”
The joint and several liability is most convincingly expressed by a term in the Particular Conditions (Joint Venture agreements between Members can be changed by agreement!)
“The Members of the joint venture undertake together and
individually (jointly and severally) the obligations of the joint venture under the Agreement”,
again with all Members signing the Agreement".
One word of caution: Clients sometimes require that all payments to the joint venture are made through the lead firm (for subsequent distribution in accordance with the joint venture agreement). This can cause dire problems if the lead firm is a firm in a country with restraints on holding and exporting foreign exchange; see also paragraph 4 (d) in Chapter 6 and FIDIC's Guide to the Joint Venture and Sub-Consultancy Agreements, Reference (22) in Chapter 8.
Clause 1 ix: Agreed Compensation
It will be noted that there is no definition of cost or expense in the General Conditions.
e) Consortia, Associates and Joint Ventures
There is some variety in the use of these words. It is suggested that, at least for the purposes of the Particular Conditions, they should be distinguished as follows:
- An association or consortium is an ad hoc arrangement between two parties (an association) or more (a consortium), each to contribute his part to the Services and to be liable to the Client only for his part. The association or consortium would have some agreement on the definition of their several activities and administrative arrangements for their coordination.
- A joint venture is a formal arrangement between two or more parties, jointly at risk, to provide the Services, not always expressly formed for a particular Project.
The former class is unlikely to be acceptable in most projects of the sort for which the White Book is primarily designed. Joint Ventures, however, are increasingly common, and clauses would then be required in the Particular Conditions.
The following text may assist:
“With reference to Clause I (v) of the General Conditions the Consultant is not a firm but a joint venture of the following Member firms:
A an independent firm of Consulting Engineers B (etc., as appropriate)
C (etc., as appropriate) “
Some administrative arrangements ought to be covered. These will depend partly on whether the joint venture is itself a registered legal entity or whether it is merely the sum of its parts. In the former case nothing else needs to be done to the White Book. In the latter case the Client will require some line of management to be set up in the Agreement. This might take the form:
Particular Conditions can define sub-consultant, and Appendix A should list those sub-consultants who are approved when making the Agreement and the Services to be performed by them.
Clause 2 iii: Document Precedence
It is important to avoid the likelihood of conflict which arises when the TOR issued by the Client are incorporated in the Agreement as well as the agreed Scope of Services, generally an expansion of the TOR. The whole should be rewritten as one mutually consistent document (Appendix A).
Even if a prescribed order of precedence of documents is included in the Particular Conditions, one difficulty which remains is that the last amendment to one of the documents may well be in conflict with an item in the same document. Similarly, a late amendment to one document, which will be the intent of the parties, may well be in conflict with a specified precedent document.
If no order of precedence is given and the documents are to govern by reverse chronological order, it may be difficult to establish their chronological order unless the method of drawing up the final agreement is to date each amendment, modification or clarification made a part of the Agreement.
B
Liability and Insurance
The most important risks involved in project development can be summarized as follows:
- Faulty studies and designs detected prior to implementation, which require re-performance of the Consultant's services.
- Faulty designs only detected during implementation leading to delays and additional costs including those of possible dismantling and reconstruction of parts of the Works.
- Faulty designs only detected after implementation which result in uneconomic or unserviceable projects, or in potential or "Cost" is used in the White Book:
a) in Clauses 7, 10, 11 and 12 in the context of free of cost to the Consultant, where definition is unimportant;
b) in Clauses 15, 18 (1), 19 and 20 in a sense where reimbursement by one party to another may be involved.
"Expense" is used in Clauses 19, 20, 28 and 35.
See Annex I to this Guide for possible definitions.
Other Definitions
Definitions of other terms abound in documents and sample documents prepared by others, e.g.,
a) "The Bank", naming some funding agency. This is not
necessary as, unless they are the Client, they are not a party to, or administrator of, the Consultancy Agreement. However, if the Client is under some restraint from an "IFA" in the execution of his obligations under the Agreement, that restraint should be noted in the Particular Conditions, and provisions as necessary made in Appendix C for any financial effect, e.g. of delayed approvals, or suspension of payments; see Paragraph 4 in Chapter 6.
b) Effective Date and Starting Date. The General Conditions defines these in Clause 21 and, by reference to the Particular Conditions, in Clause 22, respectively; see Clauses 21 and 22 in Chapter 2.
c) Personnel, Special Definitions of Personnel (e.g., by categories for payment or for training) should be kept to the appropriate Appendix. The General Conditions, Clauses 13 to 15, cover the general requirements.
d) Sub-contractor in the sense of a sub-consultant can cause confusion. The General Conditions avoids the term "sub-contractor": see Clause 38 in Chapter 2. If appropriate, the
