Comparison of FIDIC and NEC Contracts - Essay Example

Introduction: In the international construction industry, one of the areas that construction workers find difficulty is on the issue of unfamiliar contracts. However, there are existences of international contracts, and amongst them is FIDIC. Bunni & Bunni (2005) explains that FIDIC initiated contracts are the leading contracts, in the field of international construction projects, and engineering. FIDIC began in 1913, with only three countries, and these countries are, Belgium, France, and Switzerland. NEC is another type of contractual standards. The NEC standards of contracts are used in United Kingdom, and other countries of the world, such as South Africa, New Zealand, Hong Kong, and Australia. This paper examines the fundamental differences that exist in the approaches that these two types of contracts that have the capability of attracting disputes. Inspection of Ground Condition: Under clause 2.1 of the FIDIC contracts, a contractor has the right of accessing the site for purposes of finding any useful information that can be used for purposes of executing the contract (Robinson, 2013). Furthermore, this clause denotes that the contractor has the power and the capability of taking possession of the site, for purposes of executing the provisions of the contract (Forward, 2003). However, the contractor can only access the site, after getting a letter of acceptance from the employer, and this is in accordance to clause 8.2 of the FIDIC contracts. The right of accessing the site is very mandatory to the contractor, basically because he is in charge of the security of his workers, while undertaking their duties. This is the major reason why a contractor has to undertake the ground inspections, and ascertain the nature of the ground before commencing work (Forward, 2003). This is the reason why some employer may be reluctant to employ a contractor who does not have insurance that covers his workers. The responsibility of the contractor, in regards to the security of his workers is found in clause 4.1 which denotes that it is the responsibility of a contractor to ensure the safety of all operations at the site (Rowlinson, 2011). This is an indication that the safety of his workers are in his hands, hence an employer ha s given him the work, therefore the contractor has the duty of seeking any information, that is not available from the ground site (Bunni & Bunni, 2005). This is for purposes of planning how he would undertake his work, in a secure method. Clause 4.10 of the FIDIC red-book mandates an employer to provide any information concerning the site to the contractor. This is before and after the contract has been approved. This fact was developed because of the limited time a contractor will have, in inspecting the site. The NEC standards require that an employer should provide the information and this information are provided within the contract (Jaeger & Hök, 2009). For instance, clause 33.1 denotes that an employer would provide the dates when a contract should access the site, and this is after the contract has been issued out. This means that when the contract is still at the tender stage, then the contractor does not have the power of accessing the site. Therefore, the employer has the duty of providing information in the contract that pertains to the quality of the ground failure to which, he or she would be liable for an offence of negligence. This situation is better depicted in the 2002 case of Cooperative insurance limited, vs. Henry Boot (Mitchell & Trebes, 2005). In this case, the judge was able to rule that it is the duty of an employer to provide details concerning the ground site, and some information can be implied. It is not mandatory for that information to be written. Physical Obstructions: Sub-clause 12.2 of the 3rd edition of the FIDIC red book was vulnerable, in the sense that there were a lot of disputes arising out of it (Jaeger & Hök, 2009). This is because of the uncertainties in regard to the interpretation of what formed an adverse artificial obstruction, and physical condition. For instance, contractors would consider events that happen in faraway lands, like government changes, wars, strikes, as examples of artificial obstructions. The argument of contractors was that in the event of their occurrence, chances are high that they could lead to the prevention of delivering materials to the site (Forward, 2003). This was considered as artificial physical obstruction, and hence there was a need of these risks factored in, in the contractual document. This was controversial in nature, basically because these risks were unforeseen. However, the 4th edition of the FIDIC red book was able to remove these uncertainties, and this is because clause 12.2 physically describes what a physical condition and obstruction is. For instance, in the third edition of the FIDIC red book, written in 1999, Sub-Clause 4.12 explains that a physical and natural condition and obstruction is manmade (Robinson, 2013). This is the reason most contractors were able to argue that wars, and government changes that made it difficult to access the site, was an example of a physical condition and obstruction (Forward, 2003). However, this changed with the enactment of the 4th edition of the FIDIC contracts. Sub Clause 4, 2 clearly identifies a physical obstruction and condition, as an event occurring within the site. Sub-clause 4.12 also affects the risks associated with physical conditions and obstruction s. Furthermore, this clause mandates a contractor to report any kind of unforeseeable condition to the engineer, or the employer (Mitchell & Trebes, 2005). This section is controversial in the sense that it allows an engineer or an employer to review the conditions of thee building, for purposes of identifying if the building was in good condition, than could have been predicted before (Forward, 2003). This is with the intention of making a claim to the contractor, so that the contractor may not benefit, more than what was envisioned in the contractual documents. Clause 4.10 of the FIDIC standards denotes that it is the responsibility of the contractor to verify the physical condition of the building, and an engineer’s does not have any role or responsibility in this process (Williams & Sargent, 2007). This therefore means that the contractor is liable for any difficulties that are foreseen, and their costs. This position is reinforced in clause 2.12 which clearly stipulates the liabilities of the contractor, in regard to physical conditions, and obstructed buildings (Bunni & Bunni, 2005). The price of the contract would not be adjusted, for purposes of taking into consideration the emergence of these risks. This is completely different, from the clause that explains physical obstructions and buildings, under the clauses of NEC. Clause 60.1 explains what physical obstructions and conditions are (Robinson, 2013). It explains that they are found within the site, and they are not affected by the weather patterns or conditions. This clause denotes that a contractor can claim for compensation, for any risks emanating from the unforeseen physical obstructions and conditions. This is a completely different approach from the clause 4.12 of FIDIC, which explains that a contractor cannot claim for compensation for any unforeseen physical damaged and conditions (Mitchell & Trebes, 2005). Clause 60.2 explains the process that a contractor can use in claiming for compensation on the risks that emanates because of physical obstructions and conditions. This includes provision of information about the site, any public information regarding the site, and information obtained after verifying the effects of the obstruction or physical condition. This is directly different from clause 4.10 of the FIDIC 4th edition red book, which explains that it is the engineer who can verify the conditions of the buildings, for purposes of claiming any overstatement of the condition of the buildings, and hence claim for a refund (Weddell, 2006). Powers of the Engineer: The FIDICs sub clause 3.1 and 3.2 explain the role of an engineer in approving the work of a contractor. Sub Clause 3.1 denotes that an engineer does not have the power and capability of amending the contract that has been issued out to a contractor. Based on this fact, this sub clause explains that an engineer would only approve the work of a contractor, based on the contracts issued out (Jaeger & Hök, 2009). Sub clause 3.3 and 3.5 explains that the extent of approving the work by an engineer by giving of instructions, and approval of the quality of work undertaken by a contractor. Another extent is determining the extent of the certification of the contractor, and determining whether he qualifies to undertake the work under consideration (Weddell, 2006). Furthermore, under FIDIC contracts, sub clause 3.2 explains that an engineer has the duty of determining any additional claim or payments that a contractor may bring forward (Rowlinson, 2011). Under clause 50.1 of the NEC standards, it is the duty and role of an engineer to assess the amount that an employer owes to the contractor. Furthermore, clause 50.1 gives an engineer the power to certify all the payments that an employer owes to the contractor (Bunni & Bunni, 2005). This is upon verifying that the work undertaken is correct, and fulfills all the contractual obligations of the engineer. Under clause 60.1, an engineer has the capability and power of monitoring the progress of the contractor, and reviewing the designs of their work. Summary of the Clauses: FIDC Clauses NEC Clauses Ground Inspection and the contractor 2.1, 8.2, 4.1, 4.10. 33.1, 33.3, 33.4 Risks associated with physical Obstructions 4.2, 4.12, 12.2, 4.10, 2.12 60.1, 60.2, 60.3 Powers of the engineer 3.1, 3.2, 3.3, 3.5 50.1, 60.1. Conclusion: The NEC and the FIDIC contracts have very many differences, in regards to the manner which they resolve disputes between a contractor and an engineers, and the manner which they are able to determine the relationship between these two parties. The NEC contracts began earlier, and it is used in more than 90 countries of the world. The NEC contracts on the other hand, began later, and they are widely used in New Zealand, South Africa, and United Kingdom. The use of these standards varies, depending on the country where an individual is coming from. Bibliography: BUNNI, N. G., & BUNNI, N. G. (2005). The FIDIC forms of contract the fourth edition of the Red Book,1992, the 1996 Supplement, the 1999 Red Book, the 1999 Yellow Book, the 1999 Silver Book. Oxford, UK, Blackwell Pub. Top of Form FORWARD, F. (2003). The NEC compared and contrasted. London, Telford. JAEGER, A. V., & HÖK, G.-S. (2009). FIDIC a guide for practitioners. Heidelberg, Springer. Top of Form MITCHELL, B., & TREBES, B. (2005). NEC: managing reality. Book 1, Book 1. London, Thomas Telford. Top of Form ROBINSON, M. D. (2013). A contractors guide to the fidic conditions of contract. Hoboken, N.J., Wiley. Bottom of Form Bottom of Form Bottom of Form ROWLINSON, M. (2011). A Practical Guide to the NEC3 Engineering and Construction Contract.Chichester, West Sussex, UK, Wiley-Blackwell. Top of Form WEDDELL, B. (2006). Choosing the right NEC contract. London, Thomas Telford. Bottom of Form Top of Form WILLIAMS, N., & SARGENT, J. S. (2007). NEC Q and A: questions and answers on the national electrical code. Sudbury, MA, Jones and Bartlett Publishers. Read More