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Contracts of Public Works
Definition of Public Works
Art. 3244 (1)
“A contract of public works is a contract whereby a person, the contractor, binds himself in favor of an administrative authority to construct, maintain or repair a public work in consideration of a price”.
Unlike concessions, the specific service to be provided is described in contracts of public works. This undertaking on the part of the contractor is either to construct, maintain or repair a public work. Accordingly, when the undertaking is to simply supply materials for the purpose of carrying out a public work, then the contract will not be that of public works. (3244/2/). Generally contracts relating to the construction and development as well as the maintenance and repairing of buildings, housing, bridges, highways, water supply and sewage disposal facilities, dams and other power supply facilities form part of contracts of public works. What makes the contracts that of public works is their widespread affective dimension in the sense that their availability, use and administration involve the public at large.
The history of contracts of public works tells us one thing. That the contracts are made not only to enable the construction, maintenance and repair of the works, but also to generate employment prospects to the unemployed section of the society. This was partly the construction history of United States. It is now part of the contemporary history of Ethiopia.
The locality of J is to have a 31 km all weather road. It accordingly wants to allocate the work to an efficient construction company. In this case the contract to be concluded between J and the competent construction company will be a contract of public works. While J is called the client the company is called the contractor.
Types of Contracts of Public Works
Contracts of public works take different forms. The suitable type is determined based on the nature of the project. The normal type of contract is called measurement contract. Measurement contract goes by other different nomenclatures such as re-measurement contract, build-only contract, unit price contract and the traditional method contract. The other type of contract is the design and build contract. We have also other types of contracts such as management contract, construction management contract, turnkey contract, cost plus fee contract and partnering contract. The predominantly practiced types of contracts are the measurement contracts and the design and build contracts. While measurement contracts are highly practiced in developing countries the design and build contracts are very much practiced in developed countries. The specialization the countries take with this regard is attributable to the nature of each type of contracts. Measurement contracts are far less sophisticated than design and build contracts. Taken with the capacity of contractors in developing countries, authorities resort to measurement contracts which involve their intensive participation on the project. Let us briefly consider the two types of contracts:
Measurement Contract: under this type of contract the design is made by a person provided for this very purpose usually called a consultant engineer. The construction is carried out by another person. Such type of contract presupposes the impossibility of presenting a full-fledged design during the allocation of the work. The name measurement contract by itself implies the fact the work is measurable.
- Design and Build Contract: under this type of contract, the contractor undertakes to make the design and build the work. To this end, the contractor has full obligation to make the design and to build the work. Thus under this type of contract, the obligation is two fold. The degree of obligation is higher under design and build contract. Because of this, the cost of this contract is higher. This does not mean that the owner of the work has no say on the work. Far from it, the contractor must solicit the advice of experts on the work and the interest of the owner of the work on the design. To better express the interest of the owner of the work the same comes up with a conceptual design.
Because of the types of contracts of public works we have, different standards are being devised, drafted and distributed. These new standards try to preserve the contractual balance and distribute responsibility in a delicate way. The prominent standard form contract we have in the world is the Federation International Des Ingeniers Conseils’ (FIDIC) standard. Till now, we have five standard editions of FIDIC. In its kind, FIDIC is a measurement contract.
The FIDIC Contracts Guide is dated 2000 but actually became available mid-2001. It is the official guide to the 3 new FIDIC standard forms of Conditions of Contract dated 1999, viz.:
- Conditions of Contract for Construction (New Red Book)
- Conditions of Contract for Design-Build (New Yellow Book)
- Conditions of Contract for EPC/Turnkey Contracts (Silver Book)
It was decided at an early stage to have just one Guide for all the three New Books, which have been produced as a suite, instead of a separate guide for the individual Books, which was the case for the earlier Red, Yellow and Orange Books. Having one Guide for all three Books enables direct comparison of the differences between the Books, and saves repetition when the wording in the three Books is the same.
As it covers the 3 Books it has been necessary to use abbreviations for the 3 Books. So you will find throughout the Guide the following abbreviations:
- CONS: Conditions of Contract for Construction, which are recommended for building or engineering works where the Employer provides most of the design. However, the works may include some Contractor-designed civil, mechanical, electrical and/or construction works.
- P&DB: Conditions of Contract for Plant and Design-Build, which are recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. However, the works may include some Employer-designed works.
- EPCT: Conditions of Contract for EPC'/Turnkey Projects, which may be suitable for the provision on a turnkey basis of a process or power plant, factory, infrastructure or other type of project where (i) a high degree of certainty of final price and completion time is required, and (ii) the Contractor takes total responsibility for the design and execution of the project.
Each of the above 3 New Books comprises three sections, viz.:
- General Conditions, which are intended for inclusion unchanged in any contract, and where the clauses hopefully apply to the great majority of contracts of the relevant type;
- Guidance for the Preparation of the Particular Conditions ('GPPC'), which provides some basic guidance on what (if any) provisions may be appropriate for the contract's Particular. Conditions, including some example texts that are not repeated in the Guide;
- forms for Letter of Tender, Contract Agreement and Dispute Adjudication Agreements.
The General Conditions recognize that provisions in tender documents for a particular project may differ from the standard 'General Conditions', and the intention is that changes and added or deleted provisions should be made in the Particular Conditions.
The Guide is therefore intended to provide general guidance and comment concerning the clauses FIDIC has included in these 3 standard forms, where applicable to indicate why any given provision has been included, and what its intention was. The Guide also is intended to indicate circumstances where a provision in the General Conditions should not be used, or should be amended, and it includes guidance and sometimes text of how a provision should be modified.
As we go through the Guide, you will see that it also includes a wealth of other useful information - far beyond simple commentary on the standard clauses - for those involved in procurement of construction projects and in preparing and dealing with contract documentation.
FIDIC contract is build by eight documents arranged in a hierarchical order as
- The contract agreement
- The letter of acceptance
- The tender
- The conditions of Contract Part II(Particular Conditions)
- The conditions of Contract Part I(General Conditions)
- The specifications
- The Drawings, and
- The Priced Bill of Quantities.
If we start at page 4 we see a practical and useful comparison of the main features of the 3 Books.
- Selection of the appropriate Book is critical to the success of a project, and the 'Introduction' on page 5 leads into FIDIC's way of answering the question, "Which Book should be used for my project?" On pages 6-8 are set out a series of questions, the answers to which should indicate which is the appropriate Book to use.
- Pages 9-12 entitled 'Project Procurement' contain a useful commentary on the basic questions of procurement strategy. The commentary indicates the importance of reviewing alternative procurement options before selecting the appropriate strategy for the project in question, and thereafter selecting the appropriate FIDIC Book. It concludes on page 12 with a list of circumstances when FIDIC definitely does not recommend and warns against the use of the EPCT Book (the P&DB Book should normally be used instead).
- Pages 13-16 entitled 'Recommended Procedures' contain a series of charts (taken from the FIDIC publication 'Tendering Procedure' 1994) showing the recommended procedures: for prequalification of tenderers, obtaining tenders, and opening and evaluating tenders. These charts basically apply to tendering for CONS (Red Book) contracts. For P&DB and EPCT contracts the processes are somewhat different as tenderers usually have to submit details of design proposals, which have to be examined and assessed, and the design remains the responsibility of the Contractor.
- Pages 17-20 entitled 'Procurement Documentation' contains an instructive commentary on the documentation required for the prequalification and tendering procedures. It concludes with some good advice about managing the whole tendering procedure.
- Pages 21-40 contain, first, an example form for the 'Letter of Invitation to Tender', then - more importantly - a set of example forms for the complete 'Instructions to Tenderers' for use with each of the 3 New Books. These example forms are intended as a model to assist those preparing the 'Instructions' for any particular contract.
You will realize by now that this Guide is far more than just a commentary to the Clauses in the New Books. It is, in fact, a rather comprehensive 'procurement manual', giving the 'best recommended practice for the procurement of international construction projects'. Peter Booen liked to call it, a 'procurement-learning book', and, indeed, it gives instruction on nearly everything one should learn and know about procurement of such projects.
All of a sudden, at page 41, the commentary on the Sub-clauses of the FIDIC New Books actually begins! As mentioned, it would have been useful if markers or tabs could have indicated the various sections and Clauses, but perhaps one can attach one's own. The text of the 3 Books, followed by the commentary on each Sub-clause, continues all the way to page 317. Thereafter, pages 318-338, follows the text and commentary on the 'Appendix' to the New Books, i.e. the 'General Conditions of Dispute Adjudication Agreement' and its Annex, the 'Procedural Rules'.
We will return to the commentary, but a brief look at two remaining useful sections of this 'monumental' Guide:
- Pages 339-346 contain a glossary of words and phrases used in the fields of construction, consultancy, engineering and associated activities. One or two of the definitions may be slightly controversial, but the list should prove most useful to many in the industry, particularly newcomers and those from countries where English - as spoken in Europe - is not their home language. These definitions are not necessarily those found in the 'Definitions' at the beginning of the New Books.
- Finally, pages 347-353 contain a useful index to where subjects and terms can be found in the Sub-clauses in the 3 Books, in which Book and in which Sub-clause as well as on which page of the Guide.