Introduction In October 1999, FIDIC produced a totally new set of standard forms of contract alongside those that were

in use at that time. The new set comprises the following four contract forms: 1. The Construction Contract (Conditions of Contract for Building and Engineering Works, Designed by the Employer) General Conditions, Guidance for the Preparation of the Particular Conditions, Forms of Tender, Contract Agreement, and Dispute Adjudication Agreement, referred to in this text as the 1999 Red Book; 2. The Plant and Design-Build Contract (Conditions of Contract for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor) General Conditions, Guidance for the Preparation of the Particular Conditions, Forms of Tender, Contract Agreement and Dispute Adjudication Agreement, referred to in this text as the 1999 Yellow Book; 3. The EPC and Turnkey Contract (Conditions of Contract for EPC Turnkey Projects) General Conditions, Guidance for the Preparation of the Particular Conditions, Forms of Tender, Contract Agreement and Dispute Adjudication Agreement, referred to in this text as the 1999 Silver Book; and 4. The Short Form of Contract Agreement, General Conditions, Rules for Adjudication and Notes for Guidance, referred to in this text as the 1999 Green Book. The old set is divided into the Red and Yellow forms on the basis of the type of the project to be constructed. The new forms are divided on the basis of who designs the project. Whilst the 1999 Red, Yellow and Silver books are similar in many areas, they are in fact three separate and distinct forms of contract. The 1999 forms differ on the basis of the allocation of the design function and the existence of an engineer: the 1999 Red Book for a project designed by the employer (or designed on his behalf) with an engineer in place; and the 1999 Yellow Book for a project designed by the contractor with an engineer in place. The Silver Book was drafted for a project designed by the contractor but with no engineer in place; as the Silver Book eliminates the formal role of the engineer altogether and replaces it by that of the employer himself. There is also a time limit under sub-clause 20.1 for the engineer under the 1999 Red and Yellow Books, and the employer under the Silver Book, to respond to the notification of a contractors claim. The DAB in the 1999 Yellow and Silver Books is appointed by the date 28 days after a party gives notice of its intention to refer a dispute to a DAB, sub-clause 20.2, while the DAB in the 1999 Red Book is appointed by the date stated in the Appendix to Tender, which proposes 28 days after the commencement date. It is worth noting here that the Silver Book is totally new and, to a large extent, forms a departure from FIDICs established policy of providing standard forms of contract with balanced risk allocation. The risks in the Silver Book are mostly allocated to the contractor. This imbalance would obviously cause a large

increase in the cost of the project, but perhaps a more stable final cost figure. The Silver Book can be distinguished from the other forms of contract by the absence of the function of the Engineer. The distinguishing characteristics of the Silver Book should not be taken as a criticism of its concept and application. In particular, the Silver Book was conceived in response to the need created by those who favored the use of private finance for infrastructure projects, and grew as a result of the demands associated with BOT or BOOT projects and with the new ideas of mixing together design, construction and operation. This entailed demanding a fixed, lump-sum contract price with little or no risk of an increase if and when unexpected events took place. Of course, privately financed projects require financial viability with an assured return on the funds advanced. Therefore, although demanding a fixed, lump sum contract price means that the employer would be paying a higher price for the construction of the project, he would not normally object to having to do so if he were assured of an acceptable return on his total investment that would compensate for this additional cost. FIDICs 1999 Red, Yellow and Silver Books are very similar in format. They each contain 20 clauses, 17 of which have common titles and all of which have similar wording where the concepts match. The three clauses that carry different titles are: Clause 3 The Engineer in the 1999 Red and Yellow Books is changed to The Employers Administration in the Silver Book; Clause 5 Nominated Subcontractors in the 1999 Red Book is changed to Design in the 1999 Yellow and Silver Books; and Clause 12 Measurement and Evaluation in the 1999 Red Book is changed to Tests after Completion in the 1999 Yellow and Silver Books. Although the number of clauses in each of these three forms of contract has been drastically reduced from 72 in the Fourth Edition of the Red Book, and 51 in the Third Edition of the Yellow Book, the number of words in each of the new forms has largely increased. However, the wording is simpler and clearer than in the older Books. The sentences are shorter and express fewer ideas, making them easier to understand.

Details As discussed above, the new Silver Book is a newcomer to the field. To understand the philosophy and reasons behind its conception, it is best to quote from the authoritative paper written by the chairman of FIDICs Contracts Committee and leader of the Task Group that prepared the FIDIC 1999 Conditions of Contract. Not only is it a fact of life that many employers have always demanded fixed, lump sum contract prices, and that FIDIC did not have a suitable standard form to cater for such demand, but in recent years the trend has been towards private financing (not only of private investment and speculative projects, but also of public infrastructure projects). The prerequisites for obtaining private finance for a project are vastly different from those of obtaining government or other public money. Private financing requires that the project is independently viable in financial terms, and that there will be, so far as possible, an assured return on the finance provided. The lenders on a BOT or similar project will do their calculations showing the outlay over the construction period and the income over the succeeding operation period. For the return to be reasonably assured, the bases for their calculations will have to be

as firm as possible. If the construction work costs more than reckoned (inclusive of any contingency allowance), then the calculations will not hold. If the construction time is longer than planned, then the income will not begin to come in on time, and the calculations will not hold. Therefore, such lenders have to ensure that the risks of cost and time overruns of the construction contract are limited as far as humanly possible. Such lenders are aware that contractors will have to charge a premium for carrying the additional risks necessary to provide the required greater security of construction cost and time. The premium in certain cases may reasonably be large. However, they would rather accept such premium and include it in their calculations before embarking on the project, than discover later on that the project is no longer viable and that they are incurring an overall loss. Thus, the Silver Book has been and is intended to be used for special projects. It is worthwhile to note that although the format is the same in all three books, the 1999 Red, Yellow and Silver Books, the Silver Book can be distinguished by the absence of the Engineer and by its imbalanced allocation of the risks, a shift of a wide range of risks to the contractor. These distinguishing characteristics of the Silver Book should not be taken as a criticism of its concept and application. In particular, the Silver Book was conceived in response to the need created by those in favour of using private finance for infrastructure projects, and grew as a result of the demands associated with Build, Own and Transfer (BOT), or Build, Own, Operate and Transfer (BOOT) projects, and with the idea of mixing together design, construction and operation. This response entailed demanding a fixed, lump-sum contract price with little or no risk of an increase in cost if and when unexpected events took place. Of course, private finance requires a financially viable project with an assured return on the funds advanced. Although demanding a fixed, lump-sum contract with most of the risks being allocated to the contractor means that the employer would be paying a higher price for the construction of the project, he would not normally object to having to do so if he were assured of an acceptable return on his total investment outlay. In essence, under the Silver Book, the contractor has to take on board not only strict liability for design and the fitness for purpose standard of performance and liability, but he is also allocated the risk of any error, inaccuracy or omission of any kind in the employers requirements. As in the Yellow Book, the employers requirements are set out in a document by that name specifying the purpose, scope, and/or design, and/or other technical criteria, for the works. The Silver Book, if and when used, ought to be entered into with the utmost care, with all eyes open, focusing on the risks that have been shifted, from a balanced contract between the parties to one where the risks are mostly allocated to the contractor. It is intended for projects where extensive negotiations are entered into prior to the award of contract. The method of procurement has to be adopted to suit that concept. The criteria for risk allocation of control over the risk and/or its consequences is not used in the Silver Book. These risks are spread over a number of the sub-clauses of the Silver Book: 3.1, 3.5, 4.7, 4.12, 5.1, 5.8, 8.4, 17.3 and 20.1, which are dealt with below.

The 1999 Silver Book: the shifted risks:

The Silver Book is closer in content to the 1999 Yellow Book than to the 1999 Red Book, mainly because of the allocation of the design function to the contractor in both the Silver and Yellow Books. By a comparison with the 1999 Yellow Book, the following sections identify the risks that have been traditionally allocated to the employer and now allocated to the contractor. Sub-clause 3.1: The Employers Administration The Employers Representative