The updated second edition of the practical guide to international construction contract law The revised second edition of International Construction Contract Law is a comprehensive book that offers an understanding of the legal and managerial aspects of large international construction projects. Aimed at a global market so not oriented to any particular legal system, the book is useful to readers throughout the world-- About the Author xxiii Foreword xxvSvend Poulsen Acknowledgments xxvii Introductory Remarks xxixShuibo Zhang Introductory Remarks xxxiRobertWerth Introductory Remarks xxxiiiIlya Nikiforov 1 International Construction Projects 1 1.1 The unique nature of the construction industry 1 1.2 Individuality of construction projects 1 1.3 Roles and relationships 2 1.4 Contract administration:The Engineer 4 1.5 Further important aspects of construction projects 11 1.6 Typical contractual relationships 12 1.7 Motivation for international business 15 1.8 Managerial analysis 20 1.9 Hazards and risks 21 1.10 Hazard identification 21 1.11 Risk analysis 22 1.12 Anti-risk measures 22 1.13 Typical hazards in the international construction business 23 1.14 Risk allocation in contracts 35 1.15 Form of Business Organization 42 2 Civil Law and Common Law 55 2.1 Specifics of the governing law 55 2.2 Common law versus civil law:Differences and interconnections 55 2.3 Delay damages (liquidated damages) versus contractual penalty 59 2.4 Substantial completion versus performance 76 2.5 Binding nature of adjudication awards 78 2.7 Lapse of claim due to its late notification (time bars) 79 2.8 Allocation of unforeseeable and uncontrollable risk to the contractor 80 2.9 Contract administration (the Engineer s neutrality and duty to certify) 90 2.10 Termination in convenience 90 2.11 Time-related issues 93 2.12 Quantification of claims 94 2.13 Statutory defects liability 95 2.14 Performance responsibility: Reasonable skill and care versus fitness for purpose 95 2.15 Common law, civil law, and Sharia interconnections 96 3 Common DeliveryMethods 102 3.1 Common delivery methods: Main features 102 3.2 General contracting 104 3.3 Design-build 105 3.4 Construction management 131 3.5 Multiple-prime contracts 138 3.6 Partnering 138 3.7 Alliancing 140 3.8 Extended delivery methods (PPP, BOT, DBO) 143 3.9 Further aspects of delivery methods 153 4 Specifics of EPC and EPCM 172 4.1 EPC and EPCM 172 4.2 Engineer procure construct (EPC) 172 4.3 Bespoke EPC contracts 177 4.4 Turnkey EPC contracts 185 4.5 Front end engineering design 188 4.6 Engineer procure construction management (EPCM) 192 4.7 EPC versus EPCM 200 5 Unification and Standardization in International Construction 215 5.1 Unification of contracts 215 5.2 Unification per law, principles, and sample documents 215 5.3 Lenders and their influence on unification 220 5.4 Standard form of contract in a governing law context 222 5.5 Purpose of sample documents in construction projects 222 5.6 Standard sample forms as a source of law 224 5.7 Lex causae 224 5.8 Interpretation 225 5.9 Trade usage and business custom 229 5.10 Lex constructionis principles 232 5.11 The use of lex constructionis 240 6 Price 244 6.1 Contract price 244 6.2 Bid pricing methods 247 6.3 Methods of contract price determination 248 6.4 Re-measurement 249 6.5 The lump sum 252 6.6 Cost plus 252 6.7 Guaranteed maximum price 253 6.8 Target price 253 6.9 Payment 254 6.10 Contract price under FIDIC forms 261 6.11 Cost overruns 263 6.12 Abnormally low tender (ALT) 264 6.13 Claims as part of contract price 273 6.13.1 Limitation and prescription periods for claims 273 6.14 Public procurement law limitations 273 7 Time 280 7.1 Time in construction 280 7.2 Delay 280 7.3 The United Kingdom society of construction law delay and disruption protocol 282 7.4 Time program 283 7.5 Ownership of floats 285 7.6 Time at large and extension of time (EOT) 298 7.7 Concurrent delay 300 7.8 Disruption 302 7.9 Time for completion under FIDIC forms 303 7.10 Time program under FIDIC forms 304 7.11 Delay and suspension under FIDIC forms 306 7.12 Contract termination under FIDIC forms 309 8 Variations 313 8.1 Variation clauses 313 8.2 Variations under FIDIC forms 315 8.3 Claims related to variations 319 8.4 Acceleration 329 8.5 Proving the acceleration claim 340 8.6 Substantial change 342 9 Claims 364 9.1 Claims 364 9.2 Contractor s claims under FIDIC forms 368 9.3 Employer s claims under FIDIC forms 369 9.4 Lapse of claim 377 9.5 Cause of the claim 378 9.6 Limits of the lapse of claim 379 10 ClaimManagement 395 10.1 Claim management 395 10.2 Claims for extension of time (EOT) 396 10.3 Claims for additional payment 398 10.4 Claims resulting from delay and/or disruption under the provisions of the contract 399 10.5 Claims resulting from governing law 424 10.6 Global claims 425 10.7 Contractor s claim management under FIDIC forms 429 10.8 Employer s claim management under FIDIC forms 431 10.9 Intercultural aspects 432 10.10 Claim management implementation 436 11 Construction Dispute Boards 442 11.1 Construction disputes 442 11.2 Dispute boards 444 11.3 Contractual adjudication: The use of DAB in FIDIC forms 454 11.4 Enforcement of dispute board decisions 465 11.5 Statutory adjudication 471 12 FIDIC 485 12.1 FIDIC expansion 485 12.2 FIDIC 487 12.3 FIDIC s influence on the construction industry 488 12.4 FIDIC membership 488 12.5 Networking activities 489 12.6 FIDIC forms of contract 523 12.7 The structure of the contract under FIDIC forms 527 12.8 Conditions of contract for construction (CONS) 1999 Red Book 530 12.9 Conditions of contract for plant and design-build (P&DB) 1999 Yellow Book 536 12.10 Conditions of contract for EPC/Turnkey projects (EPC) 1999 Silver Book 537 12.11 Short form of contract Green Book 538 12.12 Construction subcontract 538 12.13 Conditions of contract for design, build, and operate (DBO) Gold Book 540 12.14 Other FIDIC standard forms 548 12.15 Risk allocation under FIDIC forms 554 12.16 Design responsibility under FIDIC forms 567 13 Other Standard Forms of Construction Contracts: NEC, ICC, ENNA, IChemE, Orgalime, AIA, VOB 580 13.1 Common standard forms of construction contracts 580 13.2 The NEC (New Engineering Contract) 580 13.3 FIDIC forms versus NEC3 594 13.4 ICC forms of contract 597 13.5 ENAA forms of contract 597 13.6 IChemE forms of contract 598 13.7 Orgalime forms of contract 599 13.8 AIA forms of contract: U.S. standard 600 13.9 VOB: German standard 608 14 Risk and Insurance 623 14.1 Insurance in construction 623 14.2 Commercial risk, risk of damage, and exceptional risk 624 14.3 Risk management in the standard forms of contract 630 14.4 Hazards and risks in construction projects 632 14.5 Insurance requirements in standard forms of contract 640 14.6 Practical aspects of insurance in construction projects 652 14.7 International insurance law and insurance standards in the construction industry 655 15 Risk in Underground Construction 664 15.1 Underground construction hazards and risks 664 15.2 Code of practice for risk management of tunnel works 665 15.3 Alternatives of unforeseeable physical conditions risk allocation 667 15.4 Unforeseeability 684 15.5 Unforeseeability according to FIDIC forms 685 15.6 Site data 686 15.7 Sufficiency of the accepted contract amount 691 15.8 Unforeseeable physical conditions 692 15.9 Unforeseeable operation of the forces of nature 697 15.10 Force majeure 700 15.11 Release from performance under law 701 16 Securities 703 16.1 Securities in construction 703 16.2 Bank guarantees 704 16.3 Functions and parameters of bank guarantees 704 16.4 Specifics of retention guarantee 706 16.5 Governing law 709 16.6 ICC rules related to securities 712 16.7 Suretyship 712 16.8 Stand-by letter of credit 713 16.9 Securities under FIDIC forms 714 17 Civil EngineeringWorks: Infrastructure Construction Projects 716 17.1 Investments in developing countries 716 17.2 The approach to the risk allocation in the United States 717 17.3 The approach to the risk allocation in the United Kingdom 719 17.4 The approach to the risk allocation in Central and Eastern Europe 722 17.5 The polish experience 731 17.6 The czech experience 748 18 Building Construction: Health Care Facilities 756 18.1 Health care facility construction project 756 18.2 Pre-design planning phase 756 18.3 Design phase 757 18.4 Basic structure of a hospital 758 18.5 Efficiency and cost effectiveness 758 18.6 Flexibility and expandability 759 18.7 Therapeutic environment 759 18.8 Cleaning and maintenance 759 18.9 Controlled circulation and accessibility 760 18.10 Aesthetics 760 18.11 Health and safety 761 18.12 Use of information technology 761 18.13 Relevant regulations and standards 761 18.14 Health care facility construction project: Suitable delivery method 762 Appendix A: Interactive Exercises 766 A.1 Interactive exercise 1: Delivery method selection 766 A.1.1 Task 766 A.2 Interactive exercise 2: Claim for delayed site handover 767 A.2.1 Task 767 A.2.2 Time schedule (program) 768 A.2.3 Site handover procedure 768 A.2.4 Mobilization 768 A.2.5 Acceleration 768 A.2.6 Claims 768 A.3 Interactive exercise 3: Claim due to suspension of work 769 A.3.1 Task 769 A.3.2 Suspension 769 A.3.3 Mobilization 769 A.3.4 Claims 770 A.4 Interactive exercise 4: Subcontractor claim for contractor delay (lack of cooperation, inadequate on-site coordination and improper, unclear, and delayed instructions) 770 A.4.1 Task 770 A.4.2 Fact 1 Lack of cooperation 771 A.4.3 Fact 2 Inadequate on-site coordination 771 A.4.4 Fact 3 Improper, unclear, and delayed instructions 771 Appendix B: Sample Letters (Examples of Formal Notices) 772 B.1 Contractor s sample letters: Notice of probable future event 773 B.2 Contractor s sample letters: Notice of contractor s claims 774 B.3 Contractor s sample letters: Contractor s claim No.------- submission (quantification) 776 B.4 Contractor s sample letters: Request for evidences of financial arrangements 777 B.5 Contractor s sample letters:Written confirmation of oral instruction 778 B.6 Contractor s sample letters: Notice of dissatisfaction with a determination of the engineer 779 B.7 Contractor s sample letters: Notice of contractor s entitlement to suspend work 780 B.8 Contractor s sample letters: Notice of contractor s claim under the sub-clause 16.1 781 B.9 Contractor s sample letters: Application for taking over certificate 782 B.10 Employer s sample letters: Notice of employer s claim 783 B.11 Employer s sample letters: Answer to request for evidence of financial arrangements 784 B.12 Engineer s sample letters: Engineer s determination 785 B.13 Engineer s sample letters: Engineer s instruction 787 B.14 Engineer s sample letters: Engineer s notice to correct 788 B.15 Engineer s sample letters: Engineer s instruction to remove a person employed on the site 789 B.16 Engineer s sample letters: Engineer s instruction lack of mobilization 790 Appendix C: Dictionary of Construction Terms: Chinese, Czech, English, French, German, Hungarian, Polish, Portuguese, Russian, and Spanish 791 C.1 Dictionary General part 792 C.2 Dictionary Contractor s claims 800 C.3 Dictionary Employer s claims 804 Appendix D: ClaimManagement System Under FIDIC Forms 807 D.1 Claim management team responsibilities 807 D.1.1 E1 Project manager 807 D.1.2 E2 Design and time schedule (program) 808 D.1.3 E3 Site manager 808 D.1.4 E4 Contract interpretation, monthly statements, invoicing, insurance, subcontractors, employer s claims, mutual Claims in a joint venture 809 D.1.5 E5 Administrative support 809 D.2 Claim management processes 810 D.3 Table of contractor s claims under FIDIC CONS 811 D.4 Table of employer s claims under FIDIC CONS 811 Appendix E: FIDIC Forms Risk Allocation Charts 813 E.1 Chart No.1: Basic risk allocation alternatives in connection with unforeseeable physical conditions 813 E.2 Chart No. 2: Basic comparison of risk allocation (claims options) in FIDIC CONS/1999 red book, P&DB/1999 yellow book, and EPC/1999 silver book 813 Index 817