FIDIC Contract – the tool for successful and efficient project implementation

In recent years, there has been an increasing use of FIDIC contract models in the domestic construction industry, in public procurement and among private investors, both domestic and foreign.

There are several reasons for this trend. The opening of the Serbian market to foreign investors in the construction industry and intensive activities in infrastructure projects are certainly the most important. Secondly, many foreign investors, especially those involved in residential and commercial construction, choose FIDIC contract models to regulate relationships with contractors. Development banks such as the World Bank, EBRD, and EIB have also played a key role in promoting FIDIC contract models in our system. Finally, an extremely important role in this process is played by experts gathered around the Association of Consulting Engineers of Serbia (ACES), which became a member of FIDIC in 2009, contributing to Serbia’s return to its rightful place in the field of construction and the implementation of investment projects.

Representatives from the law firm GSM have participated in the training “FIDIC Contracts – Implementation on Projects,” held on March 13-14, 2024, in Belgrade, organized by the Association of Consulting Engineers of Serbia (ACES). This training helped them enhance their work, especially concerning international contracts in the construction industry.

FIDIC contracts indeed represent a key standard in the construction and engineering industry worldwide. Their application allows for a clear definition of relationships and obligations among all participants in construction projects, contributing to efficient project implementation and reducing the risk of potential disputes.

When discussing the FIDIC contract model, it’s important to consider that it is the most commonly applied set of contractual terms in international construction. The reason for this lies in the intensive development of the international construction industry and the existence of various forms of contracts used to regulate relationships between employers and contractors. This diversity of contractual forms necessitated the need for a standardized set of documentation that would simplify the contracting process and could be used in similar or identical types of construction projects.

The most important characteristic of these contracts is risk allocation, as they provide a basis for fair treatment of all project participants. Transparency with clear obligations and rights for all parties contributes to building trust among participants and reduces the potential for conflicts and disputes.

Today, the FIDIC portfolio encompasses a range of standard contract models tailored to different types of construction projects, and these models are presented through various colored books. These books have been published and are still in use today in various colors such as red, yellow, orange, silver, green, pink, white, blue, and gold.

Red FIDIC Book: This contract is a traditional model for the execution of construction works. In this case, the employer prepares the project documentation, and the contractor is responsible for carrying out the works in accordance with the specifications provided in the contract. The Red Book is often used for projects where the project documentation is already detailed, and where requirements are less prone to changes during the execution of works.

Yellow FIDIC Book: This contract is applied in situations where the contractor takes responsibility for engineering, procurement, and construction. In other words, the contractor is not only responsible for executing the works but also for the complete technical and organizational aspects of the project. The Yellow Book is often used in more complex projects where greater contractor involvement in all project phases is required.

White FIDIC Book: This contract is intended for turnkey projects, where the contractor assumes comprehensive responsibility for the design, execution, and commissioning of the facility. This means that the contractor bears the risk related to all aspects of the project, including technical, financial, and time-related aspects. The White Book is often used in projects where the employer wants to transfer a greater portion of the risk to the contractor and where complete functionality of the facility is expected upon project completion.

Each of these books provides a specific framework and rules for project management tailored to different needs and requirements in the construction industry. In any case, continuous monitoring and evaluation of contract management processes enable the identification of areas for improvement and performance optimization throughout the project’s duration.

Despite detailed defined procedures, disputes can arise during the entire implementation of construction projects. However, it is crucial to know that FIDIC contracts contain mechanisms and procedures for their efficient resolution. Mediation, arbitration, and other similar procedures are often incorporated into FIDIC contracts to enable quick and efficient dispute resolution without the need for lengthy court proceedings. Understanding and properly applying these procedures are crucial to ensuring a fair and efficient outcome.

Standardization, flexibility, and fair risk allocation make FIDIC contracts indispensable and key tools for the successful implementation of construction and engineering projects, providing a reliable and equitable framework for all participants.