FAQ

1. The extent of Conditions of Particular Applications submitted by an investor is 20 pages long. What is the usual extent of them in practice?

There is no general instruction or recommendation for the extent of the Conditions of Particular Applications. The extent is specific for each individual construction project, in some cases, however, it is only due to lack of experience and insecurity of the selection procedure submitter. For a contractor an important part is primarily taking into account these conditions for an offer tender and price determination during the selection procedure. The extent of approx. 10-20 pages for Conditions of Particular Applications is about normal.

2. An agreement, based on FIDIC Conditions, version 1999, contains a large number of appendices. What is their validity, obligation and hierarchy from the point of view of the agreement?

Under FIDIC Conditions is an agreement significantly shorter and usually covers 2-4 pages of text, by which it fundamentally differs (minimally by content) from our contracts for work, written according to the Commercial Code. Relationship and hierarchy of the agreement itself is determined by the Article 5.2. of FIDIC Conditions (priority of documents) and not by our customs or a recommendation of a lawyer. Frequent requests by contracors, possibly law offices, to change the agreement and include appendices into the "short" text of the agreement itself does not make sense, and fundamentally opposes this practice. In such case the contractor only shows that he/she does not have any experience with FIDIC Conditions. This is valid for all FIDIC Conditions versions and also for the ones published previously.

3. The investor uses older FIDIC Conditions, version 1987. Why the newest Conditions from 1999 are not used? Are the older version still valid?

A choice of agreement conditions is up to the client. The newest Conditions, especially version from 1999, so called New Yellow and Red Books, correspond more to the latest developments in building industry of the world. For this reason is using of the older versions a step back. The reason for this decision on the investor´s side is, among other things, lack of practical experience with the newer versions. However, the older Conditions versions are still valid, and publishing of the newer versions does not change this. However, with use of the older versions (1987 issue) usually increases the extent of Conditions of Particular Applications.

4. The lawyer´s office offers that they shall negotiate a submitted FIDIC agreement with the investor. Is such offer usual abroad?

A possibility of negotiating of the submitted agreement is related to a selection procedure and a type of agreement used by the investor. If the tenderer uses so called negotiated contract, then its negotiating with the investor is basically possible, even though the extent of contractor´s suggestions that shall be taken into account during the negotiations, is not definitely going to be large. This has more a character of ‘cosmetic changes´ for the conditions rather than a fundamental one.

In case of so called tendered contract any contractor´s suggestions are practically eliminated and the agreement text is a part of selection procedure conditions. By submitting of filled in offer the offering party agrees with agreement text, submitted by tenderer, without reservations. Even though a possible negotiation of the contract between an investor and contractor can limit a scope of contractor´s requests during an execution of the works, this type of agreement is used by investors more and more.

5. A subcontractor and design engineer request closing of agreements based on the Commercial Code, even though the agreement with an investor comes out of FIDIC Conditions. Is it advisable to close the agreement with the subcontractor based on the Commercial Code?

An agreement based on the Commercial Code is not fundamentally sufficient for larger and more complex projects, especially in case when it contains contractor´s design work. Even though the negotiations of an agreement based on the Commercial Code are easier for a contractor, and subcontractors usually argue with smaller amount of work and responsibility, such agreement cannot cover all risks that stem for the contractor out of FIDIC Agreement Conditions.

In this case it is possible to use a standard FIDIC version for subcontractor work. This means that unless the building contractor does not close an identical back-to-back contract with the subcontractor, i.e. so called 1:1 contract, he/she cannot transfer all the risks that arisen from the FIDIC Conditions agreement he/she closed with the investor, to the subcontractor. The contractor is then himself/herself liable for these risks, without even considering that in case of more subcontractors, his agenda also increases.

This is valid also in case of contracts for project works that are supported by a project engineer for the general bulding contractor, who performs the work based on FIDIC Conditions, D-B. Closing of an agreement based on the Commercial Code or ČKA or ČKAIT compensation rules becomes sooner or later a source of disagreements and disputes between the general contractor and the project engineer.

6. ´effective contract date´ is not specified in the agreement. Does it mean that the agreement is not OK?

In this case both FIDIC Conditions and our commercial practice differenciate between validity and effectiveness of the signed agreement. Applied FIDIC Conditions differentiate between a contract date and effective contract date. If the contract does not specify the effective contract date, then it is the same as the contract date. This applies to the agreement only, not to the date when building works commence.

7. What are competencies of an engineer based on FIDIC Conditions?

FIDIC Conditions state in the Articles 3.1. - 3.5. the engineer competencies. Depending on specific characteristics that determine the project character, extent of requested construction and assembly work, way the project is managed, etc. the extent of the engineer competencies can be extended in Conditions of Particular Applications - S.C.C. His/her appointment is usually specified in a Letter of Acceptance. There are also cases, when the engineer cooperates with the investor even before a contractor agreement signing, for example, during the selection procedure, etc.

8. A construction engineer refuses to pay IPC invoice, since the contractor did not submit a monthly report on work progress. Is this in agreement with FIDIC Conditions?

The described procedure corresponds to FIDIC Conditions. In accordance with the Article 4.21. of Conditions, the contractor is obliged to present the monthly report on work progress, and the construction engineer can stop contractor´s payment.

9. An investor refused a claim, submitted in agreement with a FIDIC Conditions agreement, as unsubstantiated. Does it really mean that we do not have right to have the extra work paid?

In principle a claím refusal does not mean that the contractor does not have a right to get paid for the extra work. A problem and a focus of this dispute with the investor is an avaluation, whether the performed work is actually the extra work in accordance with the agreement. It is then above all important to keep a formal side of this complicated agenda called Procedure for Claims that is contained in the Article 20.1. of FIDIC Conditions (version 1999), or Articles 53.1. - 53.4. (version 1987). However, the fact is that in construction practice, outside of not adhering to a formal side of this agenda, a large amount of contractor requests is not legitimate, since they come out of ignorance of basically different agreement practice. Investor´s or building engineer´s work is then simplified, since they return submitted contractor´s work as unauthorized. Prerequisites for submitting of any contractor request after closing of an agreement, its acknowledgement and payment by an investor, are above all a perfect knowledge of agreement conditions and creation of submitted prices in the selection procedure.

10. In case of an ISPA project, version of agreement FIDIC, D-B, 1999, are works valued by aggregated items. How does a contractor submit extra work requests?

Valuation of work by aggregated items significantly simplifies work for the author of selection procedure materials, on the other hand, this is insufficient material for valuation, or execution of changes during construction, independently on their origin.

The principle of the aggregated items is valuation of work or a delivery by one price, even if this would present significantly more items in our country. This specific way can be recommended only in cases, when the projected work is practically at the end, and changes in projected part are not expected, not even during the work execution.

This is not suitable especially in cases, when the investor performs work for final users (shopping centers, administrative buildings), where a lot of changes can occur, whose valuation is hard not only for a contractor, but also for the investor, and is very hard to figure out for the end user. This cannot be recommended even in cases of agreements of D-B type, where a building contractor is responsible for project documentation and alternate solutions or building-technological procedures are a usual standard. Valuation of any change during construction is, in such cases, hard, and every submitted contractor´s different specification price is high and inadequate for the investor. This is valid especially because the prices cannot be calculated based on the current items or by their interpolation, they must be, in most cases, individually calculated.

11. Within a selection procedure based on FIDIC D-B Conditions, we have obtained documentation for a building permit, however, without the building permit. Are these materials sufficient for creation and submission of an offer?

A goal of submitting construction work based on D-B conditions is an effort to save time for an investor; overlapping of project and construction work occurs, sometimes to a large extent. The second reason for this, for us unusual procedure, is an effort to transfer responsibility for project work and results of project activities onto a building contractor, even if under our conditions, this is the responsibility a project documentation author.

Usually, under D-B Conditions, during a selection process, the contractor obtains the building permit documentation, sometimes without the valid permit, and he/she shall write the operational documentation it his/her own cost. From the contractor´s point of view this offers, above all, explicitness of the documentation, which does not always correspond to our customs, especially by its extent and content. On the other hand, the exact technical specifications of materials, deliveries and work become a part of a selection procedure documentation.

The contractor must realize especially these facts during the offer submission, and perform a detailed check of submitted project materials and technical specifications. However, the contractor is not responsible for conclusions or requests of authorities, provided that they were not a part of selection procedure documentation. An often used argument of an investor is that a contractor should have assumed such conclusions, since they are customary at the site of execution, and should include their costs into offer prices.

12. Is it possible to determine an extent of extra work that an investor shall accept based on a FIDIC Conditions agreement?

The extent of extra work that a contractor can obtain after submitting requests by a form of a claim is abroad significantly lower than under our conditions, and usually is in the range of 3-5% of the total agreement price. This is the effect of agreements in use that thoroughly promote investor´s requirements, and also detailed technical specifications in a form of statements, assessments and descriptions of required work that in effect basically eliminate the extent of extra work. A prerequisite for a payment for the extra work is always its record in accordance with the methodology required by the agreement.

A large extent of submitted extra work does not mean, however, that all of it is really warranted. Also evaluation of extra work by comparison of submitted and by investor accepted and paid extra work is misguiding. If contractor prices, determined and based on a selection procedure, are incorrect, the prices for extra work paid by an investor cannot significantly increase profit of this business venture. Extra work then cannot be an extra source of contractor´s finances during construction. Philosophy of some contractors, who assume that they shall offer lower prices at a selection procedure, and then increase profits through extra work during construction, comes out of lack of experience with construction abroad. This way of profit increase is not practically possible.