More guidance ‘could support greater use of FIDIC contracts’

Rob Morson of Pinsent Masons said that while standard form contracts developed by the International Federation of Consulting Engineers (FIDIC) can be adapted for use on construction projects globally, the standard forms do not – and cannot – provide a solution for every type of contractual issue that might arise for every type of project in every part of the world. This is why more guidance to promote their use in the context of different types of projects, different markets, and emerging risks, would be useful, he said.

The FIDIC forms from 1999 and, increasingly, 2017 have been applied on a widespread basis since their introduction, forming the basis for the negotiation of contracts for a wide range of infrastructure projects in many parts of the world. Despite their popularity, however, the FIDIC forms are not always used and nor are they always applied the same way – approaches vary depending on the geographic market or type of project, as well as local cultural attitudes towards things like new technologies, the ESG agenda, and regulation.

For global construction contractors, this lack of standardisation means a lot of time and money can be spent trying to understand the approach of counterparties and agreeing on a fair allocation of risks when negotiating contracts.

To support standardisation on evolving issues in major infrastructure projects, FIDIC already develops some guidance. An example is the carbon management framework it has produced to help project teams manage carbon emissions during an infrastructure asset’s entire lifecycle. In an article published by Infrastructure Global, the platform funded by FIDIC, Morson said that the global construction industry would benefit from further “guidance notes” that are focused on helping parties adapt standard form construction contracts to new or specific project risks.

Morson said: “FIDIC contracts are the most flexible, adaptable, internationally appropriate suite of contracts in the world. They can be fit for any construction project of any type – whether it’s for offshore wind or data centres – in any geographic market. That’s the reason they’re used the most. However, it is not possible to develop a standard contract that meets the requirements for every type of construction project in every part of the world. It is the flexibility of FIDIC contracts – the ability for parties to adapt the provisions to their needs – that makes them fit for purpose.”

“What organisations like FIDIC could do, though, is issue guidance notes more regularly around how parties should reflect new and emerging issues or technologies, or those that are specific to geographic markets, in their contracts. This would avoid the unenviable task of trying to develop separate, bespoke standard forms for, say, data centre projects and battery storage projects, but rather give parties a steer on how to meaningfully adopt the existing forms for use on such projects,” he said.

“While we are not in the same world of globalisation that we were in in the 1990s or 2000s, the prospect of more guidance to help FIDIC contracts be adapted for specific projects is preferable to the alternative scenario where global construction companies have to familiarise themselves with bespoke contracts for every project or even country-specific standard forms,” Morson added.