The Deeming Provisions In The FIDIC 2017 Red, Yellow & Silver Books

November 29, 2019 | Silver Shemmings

The FIDIC Red, Yellow & Silver Books

The Federation Internationale des Ingenieurs Conseils (FIDIC) (International Federation of Consulting Engineers) published the first editions of the Red Book, Yellow Book and Silver Book in 1999.

There were prior versions of the Red and Yellow Books, which were published in 1957 (which was when the Red Book was first published), 1963 (which was when the Yellow Book was first published), 1977 and 1987. However, in 1999, FIDIC rewrote the Red and Yellow Books and published the Silver Book for the first time.

The Red Book (which is entitled “Conditions of Contract for Construction For Building and Engineering Works Designed by the Employer”) is used for construction projects where the employer is responsible for the design of the Works.

The Yellow Book is entitled “Conditions of Contract for Plant and Design-Build For Electrical and Mechanical Works And For Building and Engineering Works Designed by the Contractor”. It is frequently used where a project is procured as several work packages, where each of those work packages is designed and built by the relevant contractor; however, the employer is responsible for integrating those work packages for the delivery of the whole project. An example of where it might be used is a wind farm project, where there might be separate foundations, turbines and balance of plant work packages.

The Silver Book (which is entitled “Conditions of Contract for EPC / Turnkey Projects) is an EPC (“engineer, procure and construct”) / “turnkey” form of construction contract. It is used where a single contractor is responsible for delivery of the whole project; such that, upon completion of the project, all the employer has to do is turn the key, to begin operating the installation (for example, it might be used for a process plant project).

In 2017, FIDIC published the second editions of the red, yellow and silver books.

The Deeming Provisions In The FIDIC 1999 Red, Yellow & Silver Books

The FIDIC 1999 red, yellow and silver books contained several deeming provisions that were intended to give a party certain rights or to prevent a party bringing certain claims or raising certain defences to a claim. For example, the Contractor is deemed to have satisfied himself as to the correctness and sufficiency of the agreed contract price under clause 4.11.

Another type of deeming provision which was found in FIDIC 1999 was a provision which deemed something to have happened where a party had failed to take an action it was obliged to take within a prescribed period of time. These included:

• the Engineer being deemed to have approved a Contractor’s Document if he had failed to give, within 21 days, a notice either that it is approved or that it fails to comply with the Contract (clause 5.2(a)(iii) of Yellow Book);
• tests being deemed to have been made in the Engineer’s / Employer’s presence where the Engineer / Employer had failed to attend the tests at the agreed time and place (clause 7.4);
• the Engineer / Employer being deemed to have accepted test results where the Engineer / Employer had failed to attend the tests (clause 7.4);
• Tests on Completion carried out by the Employer’s Personnel, where the Contractor had failed to carry out the Tests on Completion within 21 days, being deemed to have been carried out in the Contractor’s presence (clause 9.2);

• a Taking-Over Certificate being deemed to have been issued where the Engineer / Employer’s Representative had filed to issue, or reject the Contractor’s application for, such certificate within 28 days (clause 10.1);
• the Employer being deemed to have issued a Taking-Over Certificate for a part of the Works which he had used before issuing a Taking Over Certificate (clause 10.2(a) of Yellow Book);
• the Employer being deemed to have taken over the Works where the Contractor had been prevented from carrying out the Tests on Completion for more than 14 days for a reason which is the Employer’s responsibility (clause 10.3);
• the Performance Certificate being deemed to have issued when the Employer had failed to issue it within the required time (clause 11.9 of Silver Book);
• Tests after Completion being deemed to have been made in the Contractor’s presence where the Contractor had failed to attend the tests at the time and place agreed (clause 12.1 of Yellow Book);
• where for a reason which is not attributable to the Contractor, a Test after Completion could not be completed during the Defects Notification Period, such Test after Completion being deemed to have been passed (clause 12.2 of Yellow Book and Silver Book); and
• where the Contractor had not received notice of a time convenient to the Employer for the Contractor to have access to the Works for the purpose of making adjustments or modifications thereto, to enable a Test after Completion to be passed, such Test after Completion being deemed to have been passed (clause 12.4 of Yellow Book and Silver Book).

Such deeming provisions are intended to assist administration of the contract, where timely action is required so as not to stall the attainment of important milestones for the completion of the Works.

It is this type of deeming provision which is now more ubiquitous in the 2017 editions of the FIDIC red, yellow and silver books.

The Additional Deeming Provisions In The FIDIC 2017 Red, Yellow & Silver Books

A significant change which has been made in the second editions of the red, yellow and silver books is the expanded use of deeming provisions. The deeming provisions which have been added include the following:

• if the Engineer / Employer had failed to respond within 7 days to the Contractor’s Notice questioning an instruction, communication or Notice given by a delegated person, the Engineer / Employer being deemed to have confirmed such instruction, communication (clause 3.4 of Red Book and clause 3.3 of Silver Book);
• if the Engineer / Employer had failed to respond within 7 days to the Contractor’s Notice that an instruction constituted a Variation, the Engineer / Employer being deemed to have revoked the instruction (clause 3.5 of Red Book and clause 3.4 of Silver Book);
• the Employer being deemed to have consented to the appointment of the Contractor’s Representative if the Employer had not responded within 28 days after receiving the Contractor’s submission for consent (clause 4.3);
• if the Employer had failed to give, within the Review Period, a Notice of No-objection or a Notice that a Contractor’s Document, as-built records or provisional O&M Manuals failed to comply with the Employer’s Requirements and/or the Contract, the Employer being deemed to have given a Notice of No-objection (clause 5.2 of Yellow Book and Silver Book) (NB: in the 1999 editions, such a deeming provision appeared only in the Yellow Book and only in respect of Contractor’s Documents, as noted above);

• if the Employer had failed to respond within 14 days to the Contractor’s submission of the names and particulars of proposed Key Personnel, the Employer being deemed to have consented (clause 6.12);
• if the Engineer / Employer had not responded within 14 days to the Contractor’s proposal for remedial work in respect an item of Plant, Materials, design or workmanship which the Engineer / Employer had previously notified as being defective or otherwise not in accordance with Contract, the Employer being deemed to have given a Notice of No-objection (clause 7.5);
• if the Engineer / Employer had not within 21 days after receipt of the initial programme or within 14 days after receipt of a revised programme given a Notice stating that the programme was non-compliant or did not reflect actual progress or was otherwise inconsistent with the Contractor’s obligations, the Engineer / Employer being deemed to have given Notice of No-objection (clause 8.3);
• if the Engineer / Employer had failed to give a Notice of non-compliance within 14 days requiring the Contractor to revise his proposed test programme accordingly, the Engineer / Employer being deemed to have given a Notice of No-objection (clause 9.1);
• if the Engineer / Employer, following Review of a certified report of the results of the tests provided by the Contractor, had failed to give a Notice of results not complying with Contract within 14 days, the Engineer / Employer being deemed to have given a Notice of No-objection (clause 9.1);
• regarding further tests during the Defects Notification Period, if the Employer had failed to respond within 14 days to the Contractor’s Notice of proposed repeated tests after remedying the relevant defect or damage, the Employer being deemed to have agreed (clause 11.6 of Silver Book);
• if the Employer had failed to respond within 7 days with a Notice giving consent or proposing reasonable alternative dates, following the Contractor’s Notice for access to remedy defects or damage, the Employer being deemed to have given consent (clause 11.7); and

if the Engineer / Employer had failed to respond within 7 days to a quotation for a Provisional Sum submitted by the Contractor, having been requested by the Engineer / Employer, the Contractor being entitled to accept such quotation (clause 13.4).

The NEC 3 EEC & NEC 4 EEC Deeming Provisions

Deeming provisions feature prominently in NEC 3 EEC and NEC4 EEC standard forms. This is unsurprising given the emphasis in those forms on proactive project management and the resolution of issues as and when they occur.

The NEC 3 EEC / NEC 4 EEC standard forms contain the following deeming provisions:

•  if the Project Manager fails to notify within 2 weeks acceptance or non-acceptance of a programme submitted by the Contractor, the Contractor may notify the Project Manager of that failure. If the failure continues for a further week after such notification, then it is treated as acceptance by the Project Manager of the programme (clause 31.3 of NEC 4 EEC);
• if the Project Manager fails to notify the Contractor within a week or an agreed longer period that the Project Manager has decided that an event notified by the Contractor arises from a fault of the Contractor, has not happened or is not expected to happen, has no effect on the Defined Cost, Completion Date or Key Dates or is not a compensation event, then the Contractor may notify this failure. If the failure continues for a further 2 weeks after such notification, then it is treated as acceptance by the Project Manager that the event is a compensation event and an instruction to submit quotations (clause 61.4 of NEC 4 EEC and NEC 3 EEC);

• if the Project Manager does not reply to the Contractor’s quotation for a compensation event within 2 weeks, the Contractor may notify this failure. If the failure continues for a further 2 weeks after such notification, then it is treated as acceptance by the Project Manager of the quotation (clause 62.6 of NEC 4 EEC and NEC 3 EEC);
• if the Project Manager does not assess a compensation event within the time allowed, the Contractor may notify this failure. If the failure continues for a further 2 weeks after such notification, then it is treated as acceptance by the Project Manager of the quotation the Contractor submitted for the compensation event (clause 64.4 of NEC 4 EEC and NEC 3 EEC);
• the Project Manager may instruct the Contractor to submit a quotation for a proposed instruction stating the date by which it may be given. The Contractor is required to submit the quotation within 3 weeks. If the Project Manager does not reply to the quotation by the date by when it was to be given, the quotation is not accepted (clause 65 of NEC 4 EEC); and
• the Project Manager is required to review the records on Defined Cost provided by the Contractor and within 4 weeks accept the cost as correct or notify the correct assessment of that part of the Defined Cost. If the Project Manager does not notify a decision within that time, the Contractor’s assessment is treated as correct (clause 50.9 of NEC 4 EEC Option C, D, E and F).

Conclusion

It is apparent from the above, that the deeming provisions which have been added in the FIDIC 2017 Red, Yellow and Silver books far outweigh the use of such provisions in the NEC 3 EEC and NEC 4 EEC forms, despite the latter’s focus on proactive project management contracts.

Moreover, unlike the NEC 3 EEC and NEC 4 EEC forms, the FIDIC 2017 forms do not contain the safeguard of requiring the Contractor to submit a further notice following a failure by the Employer / Engineer to respond when required, before something is deemed to have happened. The absence of a further notice requirement increases the risk that, due to an inadvertent administrative error, the Employer / Engineer may fail to take an action when required, but with significant consequences.

Employers should therefore be extremely vigilant when administering contracts based on any of the FIDIC 2017 Red, Yellow and Silver books.

Author Chidi Egbochue is a Partner with Silver Shemmings Ash and has over 12 years’ experience of providing primarily non-contentious advice on major construction projects across several sectors, including rail, airport and other infrastructure, energy, oil and gas, and office, residential and mixed use developments, both domestically and internationally. He gained much of this experience at a large worldwide law firm and a magic circle law firm. Prior to which, he worked as a disputes lawyer at a niche construction law practice for 4 years.

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters. The purpose of these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considerable lack of training in such areas for companies and this is an issue which we are looking to address.