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The Guide to Construction Arbitration

The Contract: the Foundation of Construction Projects

An introduction through history

Construction is one of the oldest industries; it is a pivotal industry[2] that has been entrusted throughout the generations with the task of transforming society's ideas and needs into workable infrastructure solutions.

Prior to the Industrial Revolution, each construction project[3] was undertaken by a master builder who was tasked with both design and construction;[4] and as far back as Babylonian times, the relationship between the owner and the builder was governed by a detailed code.[5]

The advent of specialisation and freedom of contract, brought about by the industrial revolution and documented by economists such as Adam Smith,[6] resulted in owners no longer relying solely on the master builder to take their project from concept to completion, but rather on a cadre of specialists.[7]

This development resulted in the owner having to enter into individual contracts[8] with each of the project participants - contracts that governed the specific role each would play in relation to project execution.[9]

This approach continues today, with the owner[10] weaving an interlaced mosaic of contracts that includes contracts with the financiers, designers, suppliers, insurance providers and, at the heart of this mosaic, the construction contract - the contract between the owner and the contractor.

The international construction contract

The terms ‘construction' and ‘contract' are defined in the United States Federal Acquisition Regulations[11] (FAR):

  • ‘contract' means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them; and
  • ‘construction' means construction, alteration or repair of buildings, structures, or other real property.

Contracts for construction, alteration or repair of buildings, structure or other real property must clearly articulate both the technical aspects of the construction and the legal relationships between the parties.

Construction projects can be differentiated from other projects, such as manufacturing, in that they have unique attributes. Such attributes include the following:

  • construction projects are unique one-off projects that are often carried out on-site in remote locations, while being exposed to environmental hazards;
  • taking a construction project from conception to completion brings together a myriad of organisations and individual specialisations through ‘virtual teaming'; and
  • construction projects have a development and execution life cycle that is generally measured in years.

These unique characteristics were clearly noted by an English civil engineer and barrister, EJ Rimmer, almost 80 years ago:

…contract works are to be constructed in or erected and fixed on to land, and cannot be rejected and sent back to the Contractor if they prove to be unsatisfactory; that the works are to be carried out in open air under unstable conditions with material and labour of varying quality; that the conditions of excavation and foundation cannot be entirely foreseen until the ground is opened up; that execution of the works may result in damage to property belonging to other persons; that works of specialists may have to be carried out concurrently with work done by the general contractor; that the period of the contract may extend over several years and the Employer may desire the use of completed parts of the work before final completion of the whole; and that the amount of money involved is often such as to imperil the financial resources of a contractor who has made an unwise tender.[12]

These characteristics result in construction projects being particularly sensitive to an extremely large spectrum of risks;[13] the spectrum is extended in the international arena.[14]

Hence, successful project execution dictates that this risk must be managed and that parties settle the issues associated with project risk through contract provisions.[15]

Management of project risk will require that the owner undertake a comprehensive and systematic approach in identifying, assessing and developing a risk mitigation strategy, which may include the transfer of risk to other parties.[16]

There is a close relationship between risk management and the characteristics of a construction contract:

One of the main areas where risk management can be applied is in developing the conditions of contract. A clear definition for the risks and their allocation provides incentive for the efficient management of risks as they occur during the construction process. Each party to the contract has clear understanding of their rights, duties and liabilities. For this to occur conscious decision must be made in the drafting of any new contract to appraise each party of the consequences of each risk occurring.[17]

As such, in a comparative look with other types of contracts, one will find that a construction contract contains more wording, provided to deal specifically with the risks that might arise.

Although it has been noted that, ideally, risks should be allocated to the party in the best position to handle this risk:

The ideal contract - the one that will be most cost effective - is one that assigns each risk to the party that is best equipped to manage and minimise the risk, recognizing the unique circumstances of the project…. This can be accomplished by assigning each risk addressed in the contract to the party that (1) has a comparative advantage in regard to the risk bearing ability; and (2) has control over the risk.[18]

Nael Bunni[19] states that, in addition to the general principles of control of the risk and ability to bear it, the allocation of the risks between the contracting parties should also consider: ‘(a) which party could best foresee that risk; and (b) which party most benefits or suffers when the risk eventuates'.

Thus, a construction contract will set the manner in which the project risks will be handled through provisions that allocate the project risks between the parties, and will offer specific remedies in the event of breach of contract or the occurrence of specified events.[20] They also provide for procedures that must be followed by parties wishing to avail themselves of such remedies.[21] In addition, in light of the possible change in design and technology, the construction contract may also provide the owner with the right to order changes and the mechanism for achieving them, in advance.[22]

The owner then selects a project delivery method and a contract type that mirror the risk profile of the project and are congruent with the risk allocation strategy. The construction contract signed between the owner and the contractor will be a reflection of both the project delivery method and contract type (see infra).

Project delivery methods and types of construction contract

In deciding on both the project delivery method and the contract type, the owner must consider who will undertake the essential functions required to take the project from concept to completion,[23] and how the project risk, including the risk inherent in valuing and paying for the work, will be handled.

Construction projects are becoming increasingly complex, and this challenge is met with innovation, including a proliferation of project delivery strategies.

One distinguishing factor between various delivery methods is who will carry the design responsibility. This concerns the level of the contractor's involvement during the design phase.[24]

The traditional method of construction contracting (‘design-bid-build') is the project delivery method in which design and construction are contracted for separately. The owner will carry out the design and only enter into a construction contract subsequent to the completion of the design. This type of project delivery typically involves a sequential process in which the contractor is selected by means of competitive tender that includes a fully detailed design. The resulting construction contract will only include the obligation for the contractor to construct the work designed by the owner in accordance with the owner's detailed specifications and drawings.

Alternatively, the owner may allocate the design function to the contractor. This method of project delivery is commonly referred to as the ‘design-build', when design and construction are combined in a single contract with a single contractor.

Design-build project delivery relies on a performance requirements-based contract - the intention is to tell the contractor what is needed, not how to achieve the desired product. The design is accomplished in accordance with performance requirements after the award of the construction contract, with the contractor given a broad leeway to design the job in an efficient manner.

The design-build family of project delivery includes the engineering, procurement and construction (EPC)/Turnkey type of project delivery, which endeavours to transfer greater functions, project controls and risk to the contractor. EPC/Turnkey contracting seeks to establish a single point of responsibility, achieving the necessary engineering and design work, procuring the equipment and materials identified within those designs and constructing a facility that is ready to be used by the owner at the ‘turn of a key'.

Once the owner has determined the delivery method, they must turn their focus to determining the type of contract. The choice of type of contract is intimately linked to the overall payment and pricing structure that will govern the transaction.

Contract types are grouped into two broad categories: fixed-price contracts and cost-reimbursement contracts. When placed on a continuum, the contract types can range from firm-fixed-price to cost-plus-fixed-fee. In fixed-price contracts, the cost risk is transferred to the contractor, with the contractor assuming full responsibility for the performance costs and resulting profit (or loss) in firm-fixed-price contracts. However, in cost-plus-fixed-fee type contracts the owner retains the cost risk, with the contractor assuming minimal responsibility for the performance costs, and the negotiated fee (profit) is fixed. In between are various derivative types of contracts, including the re-measurement type contract.

The three basic types of contract that are most commonly encountered in construction are:

  • fixed-price/lump sum;
  • re-measurement; and
  • cost-plus.

Fixed-price or lump sum contracts

These are contracts where the contractor is paid a pre-agreed sum of money when he or she has successfully performed all of his or her obligations under the contract. The contract sum is determined and specified in the contract agreement. Payment is made in pre-determined stages and the contractor assumes the risk for both performance and price. Entering a fixed-price contract requires that the contractor commit to complete the whole of the work for a specific sum, which will require that the contractor fully understands all of his or her future obligations and is able to price them during the tender phase. Entering into a fixed-price contract with a high degree of uncertainty at the tender stage will require the contractor to build a significant premium into his or her tender pricing. Fixed-price contracts, while providing the owner with a higher degree of cost certainty, demand a greater investment in preparing a complete tender documentation.

Re-measurement

During the tendering phase, the contractor is required to give a fixed price for each item of work in accordance with the owner's estimated quantities. During contract execution, the work completed by the contractor is measured and the amount that the contractor is paid is determined as a product of the measured quantities and the contractor's price for each item. With this type of contract, the employer assumes the risk for the quantity and the contractor assumes the risk for the pricing.

Cost-plus

Under a cost-plus contract, the owner retains the cost risk and the contractor is paid his or her costs including overheads and profit. Cost-plus is more flexible in that it does not require full information at the time of tender, but this flexibility comes with greater price uncertainty for the owner. This type of contract is particularly useful in cases where the scope of the work is not well defined at tender stage, or where the kinds of labour, material and equipment needed to meet the owners requirements are uncertain. Administration of cost-plus type contracting also comes at a high cost because complete records of all time and materials spent by the contractor on the work must be maintained and must be verifiable.

Standard form contract

Globalisation requires optimisation in the allocation of resources and the facilitation of international trade.[25]

Standard forms of contracts are used by every industry to aid in reducing costs, both by reducing costs that would result from the development of a contract and the cost of uncertainty as to what their bargain contains.

Standard forms of contract have a deep history of use in the construction industry. They provide for lower transaction costs, and clarity and consistency of terms.[26]

Standard form contracts, for use in the domestic construction market, have been published by professional institutions as far back as the 19th century. In 1888, the American Institute of Architects (AIA)[27] published their first standard contract; this was followed in 1903 by the Royal Institute of British Architects.[28] The first standard form of contract, designed for use in international construction transactions, was published by the International Federation of Consulting Engineers (FIDIC) in 1957.[29]

Rameezdeen and Rodrigo[30] identify the following as advantages of using a standard form of contract in construction:

  • it can be used for various types of projects and client requirements;
  • it embodies industry practices and customs;
  • parties can be comfortable with the fact that it has been tried and tested over a long period of time;
  • fair allocation of risks between parties;
  • in a competitive tendering environment, it provides a uniform basis for pricing without the fear of hidden costs;
  • the tendered price is likely to be lower as contractors do not have to price additional risks associated with interpretation of bespoke contracts or clauses;
  • the transaction cost involved in negotiating a contract is reduced; and
  • it looks at three dimensions together; namely, the wider legal context through statutes and case law, other documents forming the contract and areas of possible disagreement between parties.

Today, there is a wide spectrum of standard forms available for both domestic[31] and international[32] transactions that are published by national and international professional associations, including:

  • FIDIC;[33]
  • the Institution of Civil Engineers;[34]
  • the Institute of Chemical Engineers;[35]
  • the Joint Contracts Tribunal;[36]
  • the Engineering Advancement Association of Japan;[37]
  • the Civil Engineering Contractors Association;[38]
  • the AIA;[39] and
  • the Design Build Institute of America (DBIA).[40]

Standard contracts provide a risk allocation solution of general purpose for items such as differing site conditions, site investigations, unusually severe weather, permits and responsibilities, and changes. They assign responsibilities and liabilities to each contracting party regarding job performance, organisation, time frames, guarantees, insurance, errors and payment.

Each standard contract seeks to reflect a specific philosophy with regard to the allocation of project risk, and to capture best practice with regard to dealing with change, termination, payment and the contract administration role. [41]

Professional associations endeavour to update their standard forms of contract at fairly regular intervals in an attempt to keep pace with the developments in the industry, both in terms of best practice and legal concepts.

Underpinning the choice of standard form of contract are issues of project delivery method; risk allocation; cost, schedule and performance trade-offs; security arrangements; level of owner involvement in the design and construction process; liberty of owner to direct change during contract execution; approach to dispute management; and resolution and familiarity.[42]

Essential elements of the construction contract

Regardless of the owner using standard or bespoke conditions of contract, construction contracts must include the principle documents that identify and allocate the project risk and describe the whole of the works. The principle documents in a construction contact will include:

  • the conditions of the contract, general and specific;
  • technical documentation;[43]
  • schedules;
  • programmes; and
  • bills of quantities.

The contract sets forth the basic terms under which the parties are doing business together - price and payment terms, commencement date, completion date, description of scope of work, allocation of risks of loss, insurance, change order procedure, suspension and abandonment of the project, termination, breach, liquidated damages, alternative dispute resolution and indemnification provisions.

The general conditions (including any supplemental conditions) are a set of rules that cover problems - such as claims, disputes, subcontracting, changes, time, warranties, protection of property, insurance, remedies and termination - that routinely arise in construction contracts.[44]

Drawings

The drawings include the plans prepared by the architect, by the surveyor and by the consulting engineers (i.e., site plans, structural plans, mechanical plans and electrical plans), as well as more detailed drawings prepared by the contractor, subcontractor or supplier called ‘shop drawings' that have been submitted to and approved by the owner or project design professional. A material deviation from these plans will constitute a ‘defect.'

Specifications

The specifications - typically written and supplied by the project design professional with the plans - provide even more detail as to the materials to be used, the performance requirements for aspects of the project and the methods or techniques of construction to be employed. The specifications fill in the necessary information that is not evident from the drawings and includes materials and workmanship clauses, schedules to provide positional information and prime cost and provisional sums if required.

Employer's requirements[45]

‘Employer's requirements' is the term used by FIDIC[46] to denote the document that defines the purpose, scope and design and technical criteria of the works in design-build contracts. As explained by Nael Bunni,[47] the employer's requirements are the main source of information for the general obligations of the contractor and should be drafted in a balanced manner so as to effectivly specify the employer's needs, while not limiting the contractor's flexibility in design to meet those needs, and must clearly state the purpose for which the works are intended.

Bill of quantities

The bill of quantities, as used in a remeasurement contract, is a list of the materials and their estimated quantities against which the contractors provide their rates during the tender phase. The agreed prices are then used for periodic valuation of the works that have been executed.

Notes


[1]    Aisha Nadar is a senior consultant at Advokatfirman Runeland AB.

[2]    World Trade Organization Council for Trade in Services, ‘Construction and Related Engineering Services, Background Note by the Secretariat', 8 June 1998 (www.wto.org/english/tratop_e/serv_e/w38.doc) states:

     With its close link to public works and hence the implementation of fiscal policy, it has always been considered as a strategically important industry for creating employment and sustaining growth. For the developing economies, the construction sector carries particular importance because of its link to the development of basic infrastructure, training of local personnel, transfers of technologies, and improved access to information channels.

[3]    J.R. Turner, The Handbook of Project-based Management: Improving the Processes for Achieving Strategic Objectives, Second Edition, McGraw-Hill (1999), defines a construction project in the following manner:

     [A]n endeavor in which human, material and financial resources are organized in a novel way; to undertake a unique scope of work of given specification, within constraints of cost and time, so as to achieve…the delivery of quantified and qualitative objectives.

[4]    S.G. Bernard, Men at Work: Public Construction, Labor, and Society at Middle Republican Rome, 390-168 B.C. (2012), p.110. And see James O'Brien, ‘Managing Construction Projects', Project Management Quarterly, March 1975 (www.pmi.org/learning/library/managing-construction-projects-major-roles-5776).

[5]    N.G. Bunni, Risk and Insurance in Construction, Second Edition, Spoon Press, London (2003). Also, see the Hammurabi records: ‘an entire body of laws, arranged in orderly groups, so that all men might read and know what was required of them. The code was carved upon a black stone monument, eight feet high, and clearly intended to be reared in public view.' Source: Charles F Horne, avalon.law.yale.edu/ancient/hammint.asp.

     Law Code of Hammurabi (1780 B.C.) relating to construction

     228.    If a builder build a house for some one and complete it, he shall give him a fee of two shekels in money for each sar of surface.

     229.    If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death.

     230.    If it kill the son of the owner the son of that builder shall be put to death.

     231.    If it kill a slave of the owner, then he shall pay slave for slave to the owner of the house.

     232.    If it ruin goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means.

     233.    If a builder build a house for some one, even though he has not yet completed it; if then the walls seem toppling, the builder must make the walls solid from his own means.

     234.    If a shipbuilder build a boat of sixty gur for a man, he shall pay him a fee of two shekels in money.

     235.    If a shipbuilder build a boat for some one, and do not make it tight, if during that same year that boat is sent away and suffers injury, the shipbuilder shall take the boat apart and put it together tight at his own expense. The tight boat he shall give to the boat owner.

[6]    R. Pound, ‘Liberty of Contract', Yale Law Journal 18 (1909) pp. 454-487.

[7]    See P.L. Bruner, ‘The Historical Emergence of Construction Law', William Mitchell Law Review 34(1) (2007) Article 6 (citations omitted):

     Beginning in 1857, the founding of the American Institute of Architects (AIA), which championed the practice of architecture as a specialised profession distinct from construction contracting, heralded the eclipse of the architect's historic role as ‘master builder' - the single person in charge of design and construction. Following the founding of the AIA, engineering associations were formed to promote engineering as a profession, separate from both architectural design and construction contracting. In turn, these associations championed recognition of a number of professional engineering sub-specialties -electrical, mechanical, structural, civil, and geotechnical - to address emerging technical disciplines. Professional specialization accelerated after legislative enactment of state design-professional registration laws, beginning with the state of Illinois in 1897. By the mid-twentieth century, the architectural profession was perceived as having abandoned its age-old role as ‘master builder'.

[8]    J. Sweet, ‘Standard Construction Contracts: Academic Orphan', 31 Construction Law 38 (2011). In this piece, the author states:

     Those who design, usually architects or engineers, make contracts with those for whom they work, such as their clients, as well as those entities who work for them, such as consultants. Builders, usually called contractors, make contracts with those who engage them, called owners; those who work for them, such as subcontractors; and those who provide materials, called suppliers.

[9]    See, generally, Vera Van Houtte, ‘The Role and Responsibility of the Owner'.

[10]   Many different terms are used internationally to denote the parties to a construction contract. The owner can be referred to as ‘employer', ‘client'or ‘purchaser' and the contractor may be referred to as the ‘constructor' or the ‘client's contractor party', but throughout this work, the parties will be referred to as the owner and the contractor.

[11]   FAR 2.101. The FAR specifically states that for purposes of this definition, the terms ‘buildings, structures, or other real property' include, but are not limited to, improvements of all types, such as bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, cemeteries, pumping stations, railways, airport facilities, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, canals, and channels. Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing or assembling of vessels, aircraft, or other kinds of personal property (www.acquisition.gov/far/html/Subpart%202_1.html).

[12]   As quoted by Christopher R Seppälä, in his paper delivered at the FIDIC/ICC International Construction Contracts and Dispute Resolution conference in Cairo, Egypt, 17 March 2005.

[13]   N.G. Bunni, The FIDIC Forms of Contract, Third Edition, Blackwell Publishing (2005) pp. 94-95. Also, see Footnote 5, Chapter 3 for a comprehensive review of the risk exposure in a construction project.

[14]   See P.L. Bruner, ‘Allocation of Risks in International Construction: Revisiting Murphy's Law, the FIDIC Conditions and the Doctrine of Force Majeure', International Construction Law Review 259 (1986):

     International construction presents the greatest business risks (and presumably rewards) in the world. In undertaking to construct massive monuments to mankind's ingenuity in distant cities, jungles, desserts, mountains and seas, international contractors confront a multitude of risks: (1) management of multi-national parties; (2) language barriers to communication; (3) variations in the availability, productivity, and skill of labor; (4) foreign customs and practices; (5) potential political and economic instability; (6) uncertainties of weather; (7) unexpected geological conditions; (8) extended lines of communications and supply; (9) differing quality and suitability of building materials; (10) currency fluctuations and restrictions; (11) unfamiliar forms of disease, plants, insects and animal life; (12) different civil and criminal laws; (13) possible arbitrary government regulation; (14) difficulties in obtaining adjudication of claims and enforcement of contract rights.

[15]   See John Burrows, The Principles of the Law of Contract: ‘We must not expect too much of the law of contract, particularly in complex transactions such as those in the construction industry.' And see the UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of Industrial Works (1987), p. 1:

     Contracts for the construction of industrial works are typically of great complexity, with respect both to the technical aspects of the construction and to the legal relationships between the parties. The obligations to be performed by contractors under these contracts normally extend over a relatively long period of time, often several years. In these and other ways, contracts for the construction of industrial works differ in important respects from traditional contracts for the sale of goods or the supply of services. Consequently, rules of law drafted to govern sales or services contracts may not settle in an appropriate manner many issues arising in contracts for the construction of industrial works. It may be desirable or advisable for the parties to settle these issues through contract provisions.

 

[16]   Risk Analysis and Management for Projects (RAMP), Third Edition, Institute of Civil Engineers and the Actuarial Profession (2014).

[17]   P.H. McGowan et al., ‘Allocation and Evaluation of Risk in Construction Contracts (1992, Chartered Institute of Buildings),' Occasional Paper No. 52 of The Charted Institute of Building, as quoted in K. Pickavance, Delay and Disruption in Construction Contracts, LLP Reference Publishing (1997) pp. 13-14.

[18]   See, for example, R.J. Smith, ‘Risk Identification and Allocation: Saving Money by Improving Contracts and Contracting Practices', International Construction Law Review (1995) 40.

[19]   See Footnote 5, supra.

[20]   N.G. Bunni, ‘A Comparative Analysis of the Claim and Dispute Resolution Provisions of FIDIC's 1999 Major Forms of Contract Against its Earlier Form', an unpublished paper delivered dated January 2006. The remedy usually includes time or money, but can also extend to suspension and even termination.

[21]   Ibid.

[22]   J. Burrows, The Principles of the Law of Contract:

     There is of course much practical sense in having a single administrator and decision-maker. But what this also achieves is the advance prescription and objective certainty the law requires. The contract provides in advance for the possibility of variation, and provides a single mechanism removed from the parties for achieving it.

[23]   Taking a construction project from conception to completion involves a number of essential functions, including planning and feasibility studies, design, construction, management, commissioning, and operation.

[24]   ‘Design' is the process of defining the construction requirement, producing the technical specifications and drawings, and preparing the construction cost estimate. See footnote 11.

[25]   While the global construction industry does not enjoy the same economies of scale as does manufacturing, reduction of transaction costs is still paramount. In manufacturing, efficient allocation of resources requires making sure that the right goods are at the right place, at the right time, to support production requirements, while economies of scale are achieved when the production batch size is sufficiently large as to allow distribution of your fixed costs over more products sold - the larger your market, the larger number of products that can be produced in one run without retooling, hence the cheaper the cost of producing each individual item (fixed costs can be divided over a larger number of items). See J.B. ReVelle, Manufacturing Handbook of Best Practices: An Innovation, Productivity, and Quality Focus, CRC press (2002) for an in-depth explanation of supply chain management.

[26]   J. Sweet, ‘Standard construction contracts: academic orphan', 31 Construction Law 38 (2011).

[27]   The AIA first published the Uniform Contract for use between an owner and a contractor in 1888. See ‘The history of AIA contract documents' at www.aiacontracts.org/contract-doc-pages/21531-the-history-of-aia-contract-documents.

[28]   In 1903, a standard form was produced ‘under the sanction of the RIBA and in agreement with the Institute of Builders and the National Federation of Building Trades Employers of Great Britain and Northern Ireland'. See Joint Contracts Tribunal Website, Our History, at http://corporate.jctltd.co.uk/about-us/our-history/.

[29]   N. Bunni, The FIDIC Forms of Contract, Third Edition, Blackwell Publishing (2005) p. 6.

[30]   R. Rameezdeen and A. Rodrigo (2014) ‘Modifications to standard forms of contract: the impact on readability', Australasian Journal of Construction Economics and Building, 14(2) (2005) pp. 31-40.

[31]   In domestic transactions it is not uncommon for parties to select nationally produced standard contracts. For an overview of the forms available in the US domestic market, see J. Sweet, ‘Standard construction contracts: some advice to construction lawyers', 40 SCL Review (1988) p. 823, available at: http://scholarship.law.berkeley.edu/facpubs/955. Also, see DLA Piper ‘Industry forms of agreement' at www.dlapiperrealworld.com/law/index.html?t=construction&s=forms-of-contract-procurement-methods&q=industry-forms-of-agreement.

[32]   World Bank standard bidding documents include the FIDIC standard forms of contract. Also, see African Development Bank and Asian development bank standard bidding documents. Also, the PLC Cross-Border Construction and Projects Handbook 2010/11 looks at the types of contract used for national and international construction and engineering projects in each of the 18 jurisdictions covered by the guide.

[33]   See www.fidic.org.

[34]   See www.ice.org.uk.

[35]   See www.icheme.org.

[37]   See www.enaa.or.jp.

[38]   See www.ceca.co.uk.

[40]   See www.dbia.org.

[41]   It is often said by the FIDIC that their contracts are ‘made by engineers for the use of engineers'.

[42]   It is often assumed that choosing a standard contract form will help to reduce transaction costs, but choosing a form that is unfamiliar to the potential offerors can increase the tendering time and cost as well as creating additional administrative burdens for the parties.

[43]   The technical documents that are to be included in the tender package will be driven by the project delivery method. In the case of design-bid-build project delivery, the specification is the document in which the consulting engineer will specify the project requirements for all matters not covered by the conditions of contract or shown on the drawings - in the case of a design-build project delivery method, the technical requirements for the completed works in terms of performance.

[44]   J. Sweet, ‘Standard construction contracts: some advice to construction lawyers', Construction Law Journal, 7 (1991).

[45]   ‘Employer's requirements' is the term used by FIDIC to denote the technical requirements for design-build project.

[46]   See subclause 1.1.1.5, ‘Employer's Requirements', in FIDIC Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant and for Building and Engineering Works Designed by the Contractor: The Plant and Design-Build Contract (Common known as FIDIC Yellow Book), 1999.

[47]   Footnote 29, supra, p. 476.

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