Overview of FIDIC
FIDIC contracts have been developed for over 50 years as the international standard for the consulting industry. They are recognized and used globally in many jurisdictions, on all types of construction projects. The key component of the success of the FIDIC contracts as industry standard lies in their balanced approach to the roles and responsibilities of the main parties, as well as the allocation and management of risk. For this reason, the fundamental principle behind the FIDIC contracts is the use of General Conditions of Contract, deemed to be suitable in all cases, as evidenced by thousands of successful projects around the world (FIDIC: Why Use FIDIC Contracts?).
The primary purpose of an FIDIC contract is to protect the interests of the public when dealing with construction projects that involve home construction and ownership. These contracts are also used to help with title issues and prevent any potential problems with legal ownership and contract disputes (Everything You Need to Know about FIDIC Contracts).
FIDIC in the United States
Although 3% of the FIDIC contracts sales are attributed to the United States, FIDIC contracts remain underused in the region. Cases in which FIDIC contracts are being used by the US parties have involved projects where the engineering and other professional services will be primarily performed by a US firm but constructed in other countries or for private company owners who do not have extensive experience with US industry contract forms (Kromann Reumert, FIDIC: International Standard Forms of Contracts). The lack of use of FIDIC forms in the US and Canada is attributed to the fact that most government agencies have their own forms available and that private clients tend to use either their own forms or one of the other industry forms (FIDIC Conference Spotlights USA, Canada, and Caribbean Use of FIDIC Contracts).
Although the exposure of American construction lawyers to FIDIC contracts has been quite limited so far, it is important to increase awareness of FIDIC contracts in the US given the potential benefits of utilizing their fair balance of risk / reward. Indeed, one of FIDIC’s Golden Principles recommends that the parties to FIDIC contracts do not change the balance of risk / reward allocation in the contract. Moreover, being originally based on the English legal system, which is known for its tradition of detailed regulation, FIDIC contracts are suitable and well-tailored to serve the US construction market (Kromann Reumert, FIDIC: International Standard Forms of Contracts).
FIDIC vs. American Institute of Architects
The question arises as to how the US industry contract forms differ from the FIDIC contracts. The A-201 General Conditions and other forms published by the American Institute of Architects (AIA) are probably the most widely used in local government and private construction projects in the US. See, e.g., M. Maged Hegazy, Major Differences between FIDIC-JCT-NEC (May 2021). It is worth comparing the terms of payment, suspension of work, and termination by the contractor under the AIA and FIDIC sets of contracts given the importance of these provisions for the performance of construction contracts.
“Payment” Clause. For the payment, FIDIC sub-clause 14.7 indicates that the employer must pay the contractor’s financial dues from the contractor’s submission of payment documents, review, and approval by the Engineer within eight weeks, while the AIA section 9.6.1 provides that the time period for payment will be determined by the contract. For the delayed payment, the AIA section 9.6.1 provides that the contractor will be compensated for the delay with a rate mentioned in the contract or with the legal rate prevailing in the project place, while FIDIC sub-clause 14.8 indicates a constant rate that the contractor should gain for his delayed dues in currencies that constitute the value of the contract.
“Suspension of Work” Clause. FIDIC sub-clause 8.9 indicates that in the event of a suspension by the employer, (s)he must compensate the contractor either by increasing the project time or adjusting the cost in addition to a reasonable profit with the inclusion of these amendments in the contract, provided that the Engineer determines what is owed to the contractor. Sections 4.3.6 and 4.3.7.1 of the AIA refer to the contractor submitting a claim for additional costs if the employer suspends the works, and if there is a claim to increase the time, cost, and the effect of the delay on the progress of works.
“Termination by the Contractor” Clause. Sub-clause 16.2 of the FIDIC indicates that the period for the contractor to send a notice of the termination of contract to the employer is 14 days, while the same period under AIA section 14.1.3 is 7 days. Sub-clause 16.2 of the FIDIC and AIA sections 14.1.1 and 14.1.2 indicate that the contractor should be compensated for the work performed, in addition to fair overheads, profits, and damages. See FIDIC, Construction Contract (2nd ed., 2017 Red Book); AIA Contract Documents (AIA Contract Documents).
FIDIC in the Caribbean and Latin America
Despite the lack of reliable statistics on the use of FIDIC contracts in the Americas, the research suggests that FIDIC contracts have been used for many years in the English common law jurisdictions of the Caribbean. For example, Trinidad & Tobago is known for using FIDIC’s Red Book (hospital project) and Pink Book (water project). More recently, in June of 2024, FIDIC has renewed and expanded a major agreement with the Caribbean Development Bank (CDB) that will see CDB adopting the use of 12 FIDIC standard contracts for the next five years. The suite of contracts covered by the agreement with FIDIC covers a wide range of international construction and infrastructure works, and the CDB’s move represents a further key endorsement for FIDIC contracts from a major international funding organization, following similar agreements signed with the World Bank and many other multilateral development banks around the world (FIDIC, Caribbean Development Bank Renews and Expands Agreement to Use FIDIC Standard Contracts for Another Five Years).
An example of another such agreement is from a few years ago, when the World Bank and the Inter-American Development Bank signed an agreement with FIDIC, whereby the international funding organizations adopted the use of the 2017 FIDIC set of standard contracts for the five-year term. Without a doubt, the endorsement of FIDIC contracts by these two major international organizations will cause an increase in the use and presence of FIDIC contracts in the region. Additionally, some other international organizations, like the United Nations Office for Project Services (UNOPS) and Fondo del Milenio El Salvador (FOMILENIO), have been using FIDIC contracts extensively in the Central America for some years with very positive outcome. See DRIVER TRETT, Trends in the Use of International Standard Forms of Contracts in the Latin American Market (July 1, 2022).
The FIDIC contracts are also being used increasingly in Latin America. Examples include Argentina (Yellow Book, water project), Brazil (mainly Silver Book for mining, sewage, airports, energy, ports, metro and logistics projects), Chile (Silver Book, two run-of-river hydropower projects; Red Book, construction of the pier; Yellow Book, hydropower plant), Colombia, Ecuador (Pink Book, Quito metro), El Salvador (Red Book, highways and bridges; Yellow Book, water plant), Honduras (Red Book, highways and bridges), Panama (Yellow Book, Panama Canal expansion; Silver Book, hydroelectric project contract and tunneling contract), Paraguay (Pink Book, highways), and Peru (Pink, Silver and Yellow Books for at least nine projects including, among others, an airport, a pavilion, a hydroelectric plant, and a hospital). See FIDIC Contract Users’ Conference (May 16-17, 2022).
Concluding Remarks
With the formation of FIDIC North America in 2021, it becomes more likely that FIDIC contracts will make their way into the construction industry of the US, Canada, and Mexico. The coming together of the American Council of Engineering Companies (ACEC), Association of Consulting Engineering Companies Canada (ACEC-Canada) and the National Chamber of Consulting Companies Mexico (CNEC) under the umbrella of FIDIC North America is a major step for FIDIC and one that will strengthen cooperation between all the engineering organizations throughout the region.
The objectives of the memorandum of understanding signed by the three member associations of FIDIC North America include identifying mutual interests, promoting networking opportunities and exchange of information on market conditions, facilitating cooperation and collaboration between member firms, sharing of business best practices, and providing platforms for exchanging published information between the three associations for use by member firms. See ACEC Signs Memorandum of Understanding with Engineering Associations in Mexico and Canada, ACEC (May 14, 2021).
The establishment of FIDIC North America creates cautious optimism that FIDIC contracts will be adopted by the regional contractors and engineers as an alternative to domestic standard contract forms.
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Author, Madina Lokova is a New York and Washington, D.C.-based litigation
associate at Victor Rane. Her work involves handling various commercial and
aviation-related litigations in state and federal courts across the United
States. Madina is an active member of the American Bar Association,
currently serving in the leadership roles in the ABA Young Lawyers Division,
International Law Section, and Section of Dispute Resolution. She is a Member
of the Chartered Institute of Arbitrators. Prior to her practice in the United States, Madina
had practiced law with several global and national law firms and at a major
asset-management company in Russia and Switzerland.
Editor Thanh Do, Ph.D., PE, is a Structural Forensic Engineer and Forensic Visualization Manager with Thornton Tomasetti, Inc. As a technical expert, he specializes in investigations of construction/design defects and collapses, standard of care assessment, and visualization/storytelling for litigation.
