By: Shane Voigt

In this article, construction law specialist Shane Voigt comments on the changes in the proposed new FIDIC Yellow Book pertaining to claims

The proposed draft of the new International Federation of Consulting Engineers (Fidic) Yellow Book (Conditions of Contract for Plant and Design-Build) was released at the Fidic Users Conference, in December 2016, and the finalised draft, together with the proposed new Red Book and Silver Book, is due for publication towards year-end.

The key themes to emerge from the new Yellow Book are active and timely contract management, as well as dispute avoidance. The tools and mechanisms introduced to achieve this require the engineer appointed in terms of the Yellow Book to have a more hands-on role, with detailed step-by-step procedures stipulated for contract management. The new Yellow Book introduces a more prescriptive approach with regard to the engineer’s functions in the form of time periods to carry out project management tasks, deeming provisions to avoid long lapses in time and sanctions for noncompliance. This is something that ought to grab the attention of engineers, as well as their professional indemnity insurers, particularly as the Fidic suite of contracts is currently among the contract forms stipulated by the Construction Industry Development Board for contracts involving State-owned entities.

The new Yellow Book also, sadly, potentially revives the age-old debate about whether the engineer, when executing the quasi-judicial function of determining claims, must (or even can) act impartially. There are too many changes and procedures to attempt to address them all in one article and do them any justice (or retain a reader’s interest).

So, what are the highlights? In this article, I will deal with those pertaining to claims.

The engineer is expressly deemed to be acting for the employer (and, thus, to be the employer’s agent) under the contract. The exception to this is when the engineer is required to issue a determination with regard to any claim (under the new subclause 3.7). In that instance, the engineer is required to act ‘neutrally’. What does this mean? The engineer can never be impartial, as he is paid by the employer. Objectively, there is an unequal influence negating the concept of impartiality, but he can be fair. ‘Fair’ is the word used in the existing Yellow Book. One can be partial but fair – fairness is an objective assessment based on reasonableness in conduct. The word ‘neutral’ potentially muddies the waters and can be confused with ‘impartiality’. It involves fairness and the absence of a perception of bias.

In executing his or her functions with regard to a claim, the engineer is now required to be proactive. The engineer is to proactively “encourage discussion between the parties in an endeavour to reach agreement”. There are strict time limits within which a claim must be submitted and progressed (and these are now to be closely monitored and acted on by the engineer), as well as within which the engineer is to make a determination if no agreement is reached. The engineer is now required to start consultation for the purposes of exploring settlement promptly in order to ensure adequate time for compliance with such time limits. The engineer is required to provide a detailed, written description of any agreement reached between the parties within 42 days of the contractor’s claim submission, together with supporting particulars. If no agreement is reached, the engineer is required to furnish a ‘notice of engineer’s determination’ within a further 42 days, together with reasons and supporting particulars. Should the engineer fail to do this, the new Yellow Book now provides that the engineer be deemed to have given a determination rejecting the claim.

It is now also expressly up to the engineer to unilaterally and proactively consider and deal with any potential time bar to a claim by way of furnishing a provisional view on the time bar. The new Yellow Book is silent on what the consequence will be if the engineer fails to provisionally raise and deal with the potential application of the time-barring provisions to a claim.

Does this deprive the employer of an opportunity to do so, and, if so, is the engineer potentially vulnerable to a damages claim by the employer for failing to do so? It probably does not, however, as the engineer is, as already stated, deemed to be acting for the employer, and it is not inconceivable for the argument to be raised that failure to do so/perceived waiver of the entitlement to do so may be attributed to the employer. If successful, the employer would certainly attempt to recover any losses associated with such omission from the engineer. So, perhaps the use of the term ‘neutral’ is again highlighted as being inappropriate. The new Yellow Book requires the engineer to be proactive.

Voigt heads British-originated law firm Pinsent Masons Africa Inc's construction litigation and dispute resolution department in Johannesburg - shane.voigt@pinsentmanson.com