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Jeremiah Torres
Jeremiah Torres

FIDIC Pink Book: An Overview of the MDB Harmonised Edition of the Red Book 1999


FIDIC Pink Book: The MDB Harmonised Edition of the Red Book




If you are involved in a construction project that is funded by one or more multilateral development banks (MDBs), you may have encountered the FIDIC Pink Book. But what is it exactly and how does it differ from the FIDIC Red Book 1999? In this article, we will explain what FIDIC is, what its contracts are, what the Pink Book is, how it compares with the Red Book 1999, and what are some practical tips for using it.




FIDIC Pink Book: The MDB Harmonised Edition of the Red Book.pdf



Introduction




FIDIC stands for Fédération Internationale des Ingénieurs-Conseils, which is French for International Federation of Consulting Engineers. It is a global organization that represents the interests of engineering and consulting firms in various sectors, including infrastructure, energy, environment, and water. FIDIC also develops and publishes standard forms of contract for different types of projects, such as design-build, turnkey, plant and design-build, etc. These contracts are widely used around the world by employers, contractors, consultants, lenders, and other parties involved in construction projects.


One of these contracts is the FIDIC Conditions of Contract for Construction (First Edition 1999), also known as the Red Book 1999. This contract is suitable for projects where the employer provides most or all of the design and where the contractor executes the works according to that design. The Red Book 1999 is based on traditional principles of contract law and aims to balance the rights and obligations of both parties.


However, some MDBs that fund construction projects in developing countries have found that the Red Book 1999 does not fully meet their specific requirements and policies. For example, some MDBs have stricter rules on procurement, environmental protection, social safeguards, anti-corruption measures, etc. Therefore, they have often modified or amended the Red Book 1999 to suit their needs and preferences.


To harmonize these modifications and amendments among different MDBs and to avoid confusion and inconsistency among users, FIDIC collaborated with eight MDBs to develop a special edition of the Red Book 1999 that incorporates these changes. This edition is called the FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by The Employer: Multilateral Development Bank Harmonised Edition (June 2010), also known as the Pink Book or MDB Harmonised Edition. The eight MDBs that participated in this initiative are:



  • African Development Bank (AfDB)



  • Asian Development Bank (ADB)



  • Black Sea Trade & Development Bank (BSTDB)



  • Caribbean Development Bank (CDB)



  • European Bank for Reconstruction and Development (EBRD)



  • Inter-American Development Bank (IDB)



  • International Bank for Reconstruction and Development (IBRD)



  • Islamic Development Bank (IsDB)



The Pink Book is intended to be used for projects that are funded by one or more of these MDBs, or by other institutions that adopt the same policies and procedures as these MDBs. The Pink Book aims to provide a clear, consistent, and comprehensive set of conditions that reflect the best practices and standards of the MDBs, while maintaining the general structure and philosophy of the Red Book 1999.


Comparison with the Red Book 1999




The Pink Book is largely based on the Red Book 1999, with some modifications and additions. The Pink Book has the same number of clauses as the Red Book 1999 (20), but some of them have been renumbered, reworded, or expanded. The Pink Book also has a new appendix called Appendix MDB Harmonised Particular Conditions, which contains some specific provisions that apply to MDB-funded projects.


The main differences between the Pink Book and the Red Book 1999 can be summarized as follows:



Issue


Pink Book


Red Book 1999


Contract administration


The Engineer is appointed by the Employer and acts as an impartial and independent professional who administers the contract fairly and impartially. The Engineer has the authority to issue instructions, determinations, certificates, approvals, etc. in accordance with the contract. The Engineer also has the duty to consult with both parties before making any determination that may affect their rights or obligations. The Engineer's determinations are binding on both parties unless they give notice of dissatisfaction within 28 days.


The Engineer is appointed by the Employer and acts as an agent of the Employer who administers the contract in accordance with its terms. The Engineer has the authority to issue instructions, determinations, certificates, approvals, etc. in accordance with the contract. The Engineer also has the duty to act fairly and impartially when making any determination that may affect the rights or obligations of either party. The Engineer's determinations are binding on both parties unless they give notice of dissatisfaction within 28 days.


Variations and adjustments


The Employer has the right to order variations to the works at any time during the execution of the contract. The Contractor has the right to claim for adjustments to the contract price and/or the time for completion as a result of such variations. The Engineer has the authority to instruct or approve variations and to determine their effects on the contract price and/or the time for completion. The Contractor also has the right to propose variations to the works for technical or economic reasons, subject to the approval of the Employer and the Engineer.


The Employer has the right to order variations to the works at any time during the execution of the contract. The Contractor has the right to claim for adjustments to the contract price and/or the time for completion as a result of such variations. The Engineer has the authority to instruct or approve variations and to determine their effects on the contract price and/or the time for completion. The Contractor also has the right to propose variations to the works for technical reasons only, subject to the approval of the Employer and the Engineer.


Claims and disputes


The Contractor has the right to claim for additional payment and/or extension of time for any event or circumstance that entitles him to do so under the contract. The Contractor must give notice of such claim within 28 days after he became aware or should have become aware of such event or circumstance. The Contractor must also submit a fully detailed claim within 42 days after giving such notice. The Engineer has the authority to determine any such claim in accordance with the contract. If either party is dissatisfied with any determination of the Engineer, it may refer the dispute to a Dispute Adjudication Board (DAB) within 28 days after receiving such determination. The DAB consists of one or three members who are appointed by mutual agreement of both parties or by an appointing authority agreed by both parties. The DAB must give its decision within 84 days after receiving a referral. If either party is dissatisfied with any decision of the DAB, it may give notice of its intention to commence arbitration within 28 days after receiving such decision. Arbitration is conducted under the rules of arbitration of the International Chamber of Commerce (ICC) by one or three arbitrators appointed in accordance with those rules.


The Contractor has the right to claim for additional payment and/or extension of time for any event or circumstance that entitles him to do so under Contractor must give notice of such claim as soon as practicable and not later than 28 days after he became aware or should have become aware of such event or circumstance. The Contractor must also submit a fully detailed claim as soon as practicable and not later than 42 days after giving such notice. The Engineer has the authority to determine any such claim in accordance with the contract. If either party is dissatisfied with any determination of the Engineer, it may refer the dispute to arbitration within 56 days after receiving such determination. Arbitration is conducted under the rules of arbitration of the International Chamber of Commerce (ICC) by one or three arbitrators appointed in accordance with those rules.


Suspension and termination


The Employer has the right to suspend the whole or part of the works for any reason, by giving a notice to the Contractor. The Contractor has the right to claim for an extension of time and/or additional payment for any costs incurred as a result of such suspension. The Employer also has the right to terminate the contract for any reason, by giving a notice of termination to the Contractor. The Contractor has the right to receive payment for any work done and any costs incurred up to the date of termination, plus a termination fee calculated as a percentage of the value of the works not executed. The Contractor also has the right to suspend or terminate the contract if the Employer fails to pay any amount due under the contract within 56 days after receiving a payment certificate from the Engineer, or if the Employer substantially fails to perform his obligations under the contract.


The Employer has the right to suspend the whole or part of the works for any reason, by giving a notice to the Contractor. The Contractor has the right to claim for an extension of time and/or additional payment for any costs incurred as a result of such suspension. The Employer also has the right to terminate the contract for any reason, by giving a notice of termination to the Contractor. The Contractor has the right to receive payment for any work done and any costs incurred up to the date of termination, plus a reasonable profit on the value of the works not executed. The Contractor also has the right to suspend or terminate the contract if the Employer fails to pay any amount due under the contract within 42 days after receiving a payment certificate from the Engineer, or if the Employer substantially fails to perform his obligations under the contract.


Force majeure and unforeseeable conditions


The contract defines force majeure as an exceptional event or circumstance that is beyond the control of both parties, that could not have been reasonably foreseen before entering into the contract, that could not have been reasonably avoided or overcome, and that is not substantially attributable to either party. If either party is prevented from performing its obligations under the contract by force majeure, it must give notice to the other party within 14 days after becoming aware of such event or circumstance. The affected party is entitled to an extension of time and/or additional payment for any costs incurred as a result of force majeure, subject to certain limitations and exclusions. The contract also defines unforeseeable conditions as physical conditions on site that are beyond what could have been reasonably foreseen by an experienced contractor before submitting his tender. If the Contractor encounters unforeseeable conditions that increase his costs or delay his progress, he must give notice to the Engineer within 28 days after becoming aware of such conditions. The Contractor is entitled to an extension of time and/or additional payment for any costs incurred as a result of unforeseeable conditions, subject to certain limitations and exclusions.


The contract defines force majeure as an exceptional event or circumstance that is beyond the control of both parties, that could not have been reasonably foreseen before entering into the contract, that could not have been reasonably avoided or overcome, and that is not substantially attributable to either party. If either party is prevented from performing its obligations under the contract by force majeure, it must give notice to the other party as soon as practicable after becoming aware of such event or circumstance. The affected party is entitled to an extension of time and/or additional payment for any costs incurred as a result of force majeure, subject to certain limitations and exclusions. The contract does not define unforeseeable conditions, but it provides that if the Contractor encounters physical conditions on site that are more adverse than those indicated in the contract or that could not have been reasonably foreseen by an experienced contractor before submitting his tender, he must give notice to the Engineer as soon as practicable after becoming aware of such conditions. The Contractor is entitled to an extension of time and/or additional payment for any costs incurred as a result of such conditions, subject to certain limitations and exclusions.


Defects liability and performance security


The Contractor is responsible for completing the works in accordance with the contract and correcting any defects that appear during the defects notification period, which is 12 months from the date of taking-over of the works or a section of the works, unless otherwise stated in the contract. The Employer has the right to withhold retention money from each interim payment certificate, up to a maximum amount stated in the contract. The Contractor has the option to provide a retention money guarantee instead of retention money. The Employer also has the right to require the Contractor to provide a performance security for the due performance of the contract, in the form and amount stated in the contract. The performance security must be issued by an entity approved by the Employer and must be valid until 28 days after the expiry of the defects notification period.


The Contractor is responsible for completing the works in accordance with the contract and correcting any defects that appear during the defects notification period, which is 12 months from the date of taking-over of the works or a section of the works, unless otherwise stated in the contract. The Employer has the right to withhold retention money from each interim payment certificate, up to a maximum amount stated in the contract. The Contractor has the option to provide a retention money guarantee instead of retention money. The Employer also has the right to require the Contractor to provide a performance security for the due performance of the contract, in the form and amount stated in the contract. The performance security must be issued by an entity approved by the Employer and must be valid until 28 days after the issue of the performance certificate.


Practical tips for using the Pink Book




If you are considering using the Pink Book for your project, here are some practical tips that may help you:



  • Make sure that your project is eligible for using the Pink Book. The Pink Book is designed for projects that are funded by one or more MDBs, or by other institutions that adopt the same policies and procedures as these MDBs. If your project is not funded by any of these entities, you may want to use another FIDIC contract that suits your needs better.



  • Read and understand the Pink Book carefully before signing it. The Pink Book contains many provisions that may differ from your usual practice or expectations. For example, the Pink Book gives more powers and responsibilities to the Engineer than some other FIDIC contracts, and it also imposes more obligations and restrictions on both parties regarding environmental and social issues, anti-corruption measures, etc. You should familiarize yourself with these provisions and make sure that you can comply with them.



  • Customize the Pink Book to suit your specific project needs. The Pink Book allows you to modify or supplement its provisions by using Particular Conditions. You should use this opportunity to tailor the Pink Book to your project's characteristics, such as scope, complexity, location, risks, etc. However, you should also be careful not to change or delete any provisions that are essential for the harmonization and standardization of MDB-funded projects.



  • Avoid common pitfalls and challenges when using the Pink Book. Some of the common issues that may arise when using the Pink Book are:




  • Lack of clarity or consistency in defining key terms or concepts, such as force majeure, unforeseeable conditions, variations, claims, disputes, etc. You should make sure that these terms or concepts are clearly defined and understood by all parties involved in the project.



  • Failure to comply with the notice requirements for claims or disputes. The Pink Book imposes strict time limits for giving notice of any claim or dispute that may arise under the contract. You should make sure that you follow these time limits and provide sufficient details and evidence to support your claim or dispute.



  • Failure to cooperate with the Engineer or the DAAB. The Pink Book relies heavily on the role of the Engineer and the DAAB to administer and resolve any issues that may arise under the contract. You should respect their authority and professionalism and cooperate with them in good faith.




Conclusion




incorporates the modifications and amendments that the MDBs have made to the Red Book 1999 to suit their specific requirements and policies. The Pink Book aims to provide a clear, consistent, and comprehensive set of conditions that reflect the best practices and standards of the MDBs, while maintaining the general structure and philosophy of the Red Book 1999. The Pink Book has some key differences from the Red Book 1999 in terms of contract administration, variations and adjustments, claims and disputes, suspension and termination, force majeure and unforeseeable conditions, defects liability and performance security. The Pink Book is intended to be used for projects that are funded by one or more MDBs, or by other institutions that adopt the same policies and procedures as these MDBs. If you are considering using the Pink Book for your project, you should read and understand it carefully before signing it, customize it to suit your specific project needs, and avoid common pitfalls and challenges when using it.


FAQs




Here are some frequently asked questions about the FIDIC Pink Book:



  • What are some examples of projects that have used the Pink Book?



Some examples of projects that have used the Pink Book are:


  • The Mombasa-Nairobi Standard Gauge Railway Project in Kenya, funded by China Exim Bank



  • The Upper Trishuli 3A Hydropower Project in Nepal, funded by ADB



  • The Kandahar-Herat Highway Rehabilitation Project in Afghanistan, funded by IDB



  • The Greater Beirut Water Supply Project in Lebanon, funded by IBRD



  • The Nacala Road Corridor Project in Mozambique, funded by AfDB



  • How does the Pink Book relate to other FIDIC contracts?



The Pink Book is a special edition of the FIDIC Red Book 1999 that incorporates the modifications and amendments that the MDBs have made to the Red Book 1999. The Pink Book is not part of the official FIDIC suite of contracts, but it is endorsed by FIDIC as a valid adaptation of the Red Book 1999. The Pink Book is similar to the Red Book 1999 in terms of its general structure and philosophy, but it has some key differences in terms of its specific provisions. The Pink Book is also different from the FIDIC Red Book 2017, which is an updated version of the Red Book 1999 that reflects the latest developments and trends in the construction industry.


  • What are some of the advantages and disadvantages of using FIDIC contracts in general?



Some of the advantages of us


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