The document describes a case study involving the joint administration of two FIDIC contracts - a Red Book contract for civil works and a Yellow Book contract for electrical and mechanical works - on a hydropower project. The E&M contractor fell behind schedule, impacting the civil works contractor (CIV). To recover the delay, the Engineer had CIV construct some temporary works to help E&M, then sought reimbursement from E&M for CIV's costs following the proper procedures in both contracts. This involved issuing notices, submitting claims and counterclaims, and making determinations, while ensuring all actions complied with the relevant clauses in the Red and Yellow Books.

1. by
Khalil T. Hasan
Construction Solutions (www.cspk.org)
Joint Operation/Administration of
multiple FIDIC Forms – A Case Study

2. While administration of any single FIDIC form of contract
requires a dedicated discussion, this case study presents
the joint and interrelated operation / administration of two
different FIDIC forms; the Red Book and the Yellow Book.
A short description of these forms in the context of this
case study is;
- Red Book: Construction of Works design by the Employer or ‘build
only’ contract forms.
- Yellow Book: Construction of Works design by the Contractor or
‘Design-Build’ contract forms.

3. This case study relates to a Hydropower Project involving
construction of, amongst others, a Power House. The Power House
construction was carried out jointly by two separate entities
(contractors):
– Civil Works Contractor (“CIV”): Administered under the FIDIC Red Book
(1999 edition), requiring construction of the civil works of the power house,
which were designed by the Employer (or his personnel, namely, the
Engineer)
– Electrical and Mechanical Works Contractor (“E&M”): Administered under
the FIDIC Yellow Book (1999 edition) requiring design and construction of
the electrical and mechanical works for the power house, such as, the
generators and turbines required for power generation.

4. E&M was in delay in carrying out his obligations in respect of his contract
Programme. Delay to some of the key obligations of E&M had a bearing on
the works of CIV.
Therefore, the Engineer issued several reminders and slow progress notices
to E&M to ensure timely delivery and construction of some of the key
elements of the Power House.
Notwithstanding disagreement by the E&M, the Engineer and the Employer,
after coordination with CIV proposed several alternative recovery plans. One
of the recovery plans required the construction of certain temporary civil
works for E&M, which were meant to help improve the progress of E&M
and also CIV.

5. E&M was not required to undertake any civil construction under his
contract and had no equipment, establishment or work force to execute
such works. E&M was therefore instructed by the Engineer to arrange a
3rd party, at his own cost, to carry out the required additional temporary
civil works.
E&M, in principle, was in disagreement in respect of the scope of his
obligations and did not agree that he was responsible for any delay to the
CIV or his own works.

6. Implementation of the recovery plan was therefore itself subject to delay due
to the refusal of E&M to undertake any additional measures, including the
construction of additional temporary civil works.
The Engineer, in order to make progress and to help alleviate the delays,
instructed CIV to construct the required additional temporary civil works as
part of the recovery plan.
CIV, immediately and forthwith, undertook the additional temporary civil
works so as to facilitate E&M to recover some of the accrued delay to the
project.

7. On completion of the additional temporary civil works, E&M was instructed
by the Engineer to proceed with the erection of the electrical and mechanical
equipment with the aid of the temporary civil works.
E&M, although still disputing any liability whatsoever in connection with
the recovery plan, continued with his obligations and as a result, helped
alleviate some of the accrued delay to project.

8. Meanwhile CIV presented a request for payment of circa 0.5m dollars, to the
Engineer. This was for the additional services carried out in respect of the
recovery plan.
The Engineer agreed that CIV should be reimbursed for the additional
services. Therefore in the first instance, instructed E&M to directly
coordinate with CIV and to ensure that the matter was fairly resolved by way
of payments made directly by E&M to CIV.

9. E&M refused to reimburse CIV for the additional temporary civil works.
In view of the dispute on this matter, the Engineer took the following actions
to ensure that the 0.5m dollars should be reimbursed to CIV from the
account of E&M.
It was important that the Engineer’s actions were within the ambit of the
provisions and procedures set out in the FIDIC Red and Yellow books and
discussion on these matters forms the basis of this case study.

10. STEP 1 - RECOVERY OF 0.5M DOLLARS FROM E&M – WITHIN THE
AMBIT OF THE FIDIC YELLOW BOOK
The Engineer in the first instance ruled out the possibility of a direct deduction from
the progress payments which were due to E&M. This was in view that there was no
provision within Sub-Clause 14.6 of the FIDIC Yellow Book (issue of an Interim
Payment Certificate (“IPC”) by the Engineer), which give him the authority take this
action.
Therefore, pursuant to Sub-Clause 2.5 of the Yellow Book, E&M was given a notice of
an Employer’s Claim. As permitted by the mentioned provision, the notice was given
by the Engineer on behalf of the Employer.

11. QUESTION NO. 1
The Engineer considered that he was not authorized to make a direct
deduction of the amount in dispute from the IPC of E&M and that this
required following the procedure for an Employer’s Claim (pursuant to Sub-
Clause 2.5 of the Yellow Book). Was the Engineer correct?
(a) Yes
(b) No
(c) Direct deduction was permitted only if authorized by the Employer

12. • The notice given by the Engineer advised E&M that the Employer
considered himself to be entitled to recover 0.5m dollars for the
temporary civil works carried out by CIV to facilitate E&M in carrying
out his obligations.
• E&M was advised that the particulars related to this Employer’s Claim
would be submitted in due course by the Engineer or the Employer.
• In the meantime, E&M was given one more opportunity to directly
reimburse the due amount to CIV.

13. The Engineer is permitted to give a notice of an Employer’s Claim, and
related claim particulars, on behalf of the Employer?
(a) Yes
(b) No
(c) Only after authorization given by the Employer
QUESTION NO. 2

14. • E&M did not react positively, and in fact, wrote back challenging
the notice itself.
• The Engineer, therefore, after consultation with the Employer,
submitted the Employer’s claim particulars which provided a
chronological justification of why the Employer was entitled to
recover the sum of 0.5m dollars from E&M.
• All requisite procedural, contractual and substantive reasoning
was set out in the claim particulars.

15.  E&M was advised that the Employer had requested that an Engineer’s
Determination, pursuant to Sub-Clause 3.5 of the FIDIC Yellow Book,
should be carried out by the Engineer to close this matter.
 E&M was reminded of the provisions of Sub-Clause 3.5 of the FIDIC
Yellow Book, which required, as a first step, to attempt to consult the
claim particulars with E&M and aim to reach an agreement between the
Parties.
 In the event that the Parties did not reach an agreement, the Engineer was
obliged and authorized to issue a fair determination of the Employer’s
Claim.
 E&M was therefore permitted a few weeks and requested to revert back
with his agreement in respect of the Employer’s Claim.

16. E&M did not revert back positively within the next few weeks and
therefore, the Engineer, after having completed his obligation to
consult the claim particulars with both Parties, issued an Engineer’s
Determination (“ED”) pursuant to Sub-Clauses 2.5 and 3.5 of the
FIDIC Yellow Book. The ED concluded that;
 E&M was liable for all costs (0.5m dollars) associated with the
Employer’s Claim; and
 Sub-Clause 3.5 required that both Parties give effect to the ED and
E&M was requested to comply therewith.

17.  E&M was once again permitted to directly coordinate the matter with CIV
and to agree the terms in respect of payment of the claimed amount
directly to CIV.
 Alternatively, if there was no confirmation received from CIV, within a
reasonable period of time, that the amount had been settled, the Engineer
will carry out a deduction of the due amount from the next IPC of E&M.
 E&M did not comply with the ED and therefore the Engineer, in the next
IPC of E&M, deducted the 0.5m dollars.

18. QUESTION NO. 3
The Engineer, having given the notice of an Employer’s Claim and the
submission of the related claim particulars, both on behalf of the
Employer, carries out an Engineer’s Determination of the Employer’s
Claim which he has himself processed. Is this fair and reasonable and
permitted under the Yellow Book?
(a) Yes
(b) No
(c) Only after specific approval is given by the Employer

19. STEP 2 - REIMBURSEMENT OF 0.5M DOLLARS TO CIV – WITHIN THE
AMBIT OF THE FIDIC RED BOOK
In the meantime, several months elapsed and CIV, after several
reminders to the Engineer, gave a notice of claim pursuant to Sub-
Clause 20.1 of the FIDIC Red Book.
Following the notice of claim, CIV submitted the related claim
particulars, also pursuant to the same provision of the FIDIC Red
Book.
The Engineer, following receipt of the claim particulars from CIV
was obliged to carry out an assessment and to issue an Engineer’s
Determination (“ED”) related to the claim from CIV.

20. The Engineer, therefore, after consultation with the Employer, pursuant to
Sub-Clauses 20.1 and 3.5 of the FIDIC Red Book, issued an ED, which
concluded that;
 The Employer was liable for the reimbursement of the claimed amount to CIV,
who was entitled to additional payment in the amount of 0.5m dollars; and
 CIV was advised to apply for payment of the determined amount in his next
payment application; and
 The Engineer on receipt of the payment application, will certify the determined
amount of 0.5m in the next IPC due under the CIV contract; and
 The Engineer concluded that after certification of the determined amount, the
Employer will be discharged from all liability (past, present and future) in
connection with the claim.
 The determined amount was then certified by the Engineer in the next IPC of CIV.

21. QUESTION NO. 4
Although it was, in principle, accepted by the Employer and the
Engineer that the due amount should be reimbursed to CIV, but the
Engineer considered he had no authority to directly certify this amount
in the IPC of CIV without following the procedures set out in the
contract, such as by way of the issue of a Variation Order or alternatively
a Claim submission from CIV.
Was the Engineer’s understanding correct?
(a) Yes
(b) No
(c) Was possible with a specific approval given by the Employer

22. FIDIC and Construction Solutions
Thank you for your attendance
and contribution.
We wish you all Good Luck.

23. This Lecture was delivered by the Managing Partner of Construction Solutions
(www.cspk.org), Mr. Khalil Tayab Hasan. For any queries and clarifications,
please feel free to contact Mr. Hasan at;
khalilhasan@cspk.org / khalilhasan@hotmail.com
+971 50 8861709 / +974 30483280 / +92 345 8500195