When owners and contractors begin discussions on the form of EPC contract they propose to use, they (as well as other investors and lenders) would agree that the form must be “pro-clarity” whether or not the form is otherwise regarded as “pro-owner” or “pro-contractor”. Even as they will inevitably be modified by the parties, contract templates that are clear, direct, and avoid ambiguities will often result in faster, less expensive, and less contentious negotiations and more productive working relationships.
In December 2017, the International Federation of Consulting Engineers (“FIDIC”) launched the second editions of its Red Book (owner-designed), Yellow Book (contractor design-build) and Silver Book (turnkey project) model conditions for EPC contracts. Since 1999, the first edition of these model forms have been frequently used worldwide.
The 2017 forms may be more clear than their predecessors; however they are, on average, nearly double the length of the 1999 forms. Simplification was not a FIDIC priority: FIDIC has stated that it would not be appropriate to simplify the 2017 forms given FIDIC’s essential goal of fair and balanced risk allocation. Instead, the new editions are meant to promote clarity, encourage the parties to exchange information more easily and settle disputes more quickly, and resolve various ambiguities and omissions in the 1999 forms. As parties consider whether to work with the 2017 forms, what important new provisions should they be mindful of? What critical issues are still open or unresolved?
We highlight some key changes between the 1999 Yellow Book form and the 2017 Yellow Book form. This is not a complete list of changes, and as the 2017 forms are used by market participants, additional points and disputes will certainly arise. Parties are still free to modify the 2017 forms as necessary in the particular conditions and schedules. However, owners and contractors should carefully consider and discuss with counsel the legal consequences of using and modifying any of the 2017 forms for a specific project.
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