The FIDIC Silver Book 2017 (EPC / turnkey) explained
The FIDIC Silver Book 2017 is the conditions of contract for EPC/turnkey projects, where the contractor carries out the engineering, procurement and construction and hands over a facility ready to operate for a fixed lump sum. There is no Engineer: the employer administers the contract itself or through its Employer's Representative, and the contractor carries most of the risk in return for greater price and time certainty for the employer. Payment usually follows a milestone Schedule of Payments, and the Contract Data sets each project's percentages and periods.
By Ta3mir engineering team · Published · Last updated
What sets the FIDIC Silver Book apart from the Yellow Book
The Yellow and Silver Books are both design-build on a lump sum, but the Silver Book moves more risk to the contractor and reduces the employer's involvement in the works. The aim is for the employer to know the final price and completion date with a high degree of certainty from the start, which is why the contractor prices the risks it carries into its tender.
| Aspect | Yellow Book | Silver Book |
|---|---|---|
| Who administers | The Engineer | The employer or its representative; there is no Engineer |
| Who designs | The contractor | The contractor, with procurement, construction and commissioning |
| Price form | A lump sum | A fixed lump sum with fewer adjustments |
| Payment approval | Payment certificates issued by the Engineer | The employer reviews the contractor's Statements and pays, with no Engineer's certificate |
| Unforeseeable site conditions | The contractor may be entitled to time and cost under the contractual procedure | In principle the contractor's risk |
| Errors in the Employer's Requirements | Protection if an experienced contractor could not have found them | In principle the contractor's risk, except specific parts the contract names |
The parts whose correctness stays with the employer in the Silver Book are limited, such as parts stated to be unchangeable or the employer's responsibility, the intended purposes of the works, the testing and performance criteria, and data the contractor cannot verify. Read the Employer's Requirements as if you are responsible for everything else.
Running the contract without an Engineer
- The Employer's Representative: the employer may appoint a representative to act for it in administering the contract, and notifies the contractor of its authority.
- Agreement or determination: on claims and disputed matters the employer or its representative consults the contractor to reach agreement, and failing that makes a fair determination under the procedure and periods the contract sets.
- Review of the Contractor's Documents: the employer may review the design, but the review does not move design responsibility to it.
- Less control over the works: the contractor decides how to build, and the employer focuses on the end result and the performance criteria in its requirements.
- Disputes: a Notice of Dissatisfaction, then the Dispute Avoidance/Adjudication Board, then amicable settlement and arbitration, with the same logic as the Red and Yellow Books.
Risk allocation in an EPC contract
| Risk | In principle on | What the contractor does |
|---|---|---|
| Design errors | The contractor | An independent internal design check before submission |
| Errors in the Employer's Requirements | The contractor, except the parts the contract names | Study the requirements before tender and price their ambiguities |
| Unforeseeable site conditions | The contractor | Investigate the site itself and price the risk explicitly |
| Quantities | The contractor, as the price is a lump sum | An accurate take-off from its own design before fixing the price |
| Changes in laws after the tender date | Usually the employer, as the contract provides | Notice on time of the effect on cost and time |
| Delay or prevention by the employer | The employer | A Notice of Claim and contemporary records from the day of the event |
| Exceptional Events | A special procedure in the contract | Notice of the event and its effect; an extension of time may be due |
This is the allocation the General Conditions assume, and the Particular Conditions may move a risk from one party to the other. That is why an EPC price is usually higher than the same works under a Red or Yellow Book contract: the contractor prices the risks it carries, and the employer pays for certainty.
The fixed price and the Schedule of Payments
The Silver Book contract price is a fixed lump sum that is not remeasured and covers everything needed to hand over a working facility. It changes only as the contract provides, such as Variations, changes in laws, price adjustment where the Contract Data provides it, and established claims. The contractor submits its Statements to the employer, who reviews them, pays what is due within the period the contract sets, and notifies the contractor of anything it disagrees with and why.
| What you need to know | Where to find it |
|---|---|
| The lump-sum contract price | The Contract Agreement |
| Payment instalments and their milestones | The Schedule of Payments in the contract |
| The retention rate and its limit | The Contract Data |
| The advance payment, its amount and repayment | The Contract Data and Particular Conditions |
| Payment periods and document review periods | The Contract Data and the licensed General Conditions |
| Delay damages and their cap | The Contract Data |
Retention and the advance payment exist in the Silver Book too, but their values are written in each project's Contract Data, and bank guarantees may replace retention where the Particular Conditions say so. Never assume a rate from a previous project.
Variations and claims without an Engineer
The employer or its representative instructs Variations before taking over, by instruction or by asking the contractor for a proposal, and the contractor may object in cases the contract sets, such as being unable to obtain what the change needs or its adverse effect on meeting the performance criteria. The change is valued as the contract provides, and a schedule of rates is often attached for that purpose.
The 2017 claims procedure is the same in all three books: a Notice within a set period of becoming aware of the event, then a fully detailed Claim, then agreement or a fair determination by the employer or its representative, then the Dispute Avoidance/Adjudication Board. The difference in the Silver Book is that the decision is made by the Employer's Representative rather than an independent Engineer, which makes the quality of notices and records even more important.
When the Silver Book fits and when it does not
| Situation | Silver Book suitable? | Why |
|---|---|---|
| A power station, factory or integrated process plant | Yes | A facility handed over ready to operate, with measurable performance criteria |
| A privately financed project whose lenders want price and time certainty | Yes | The fixed price and risk transfer suit lenders' terms |
| Extensive underground work or unknown site conditions | Usually not | The contractor cannot price risks it had no chance to investigate |
| A tender with little time and little information on the site and requirements | No | The contractor cannot study the requirements and price the risks with care |
| An employer who wants to review every drawing and supervise the works daily | No | That conflicts with leaving the method of construction to the contractor |
| An ordinary building designed by the employer | No | The Red Book fits better, or the Yellow Book if the design moves to the contractor |
Tests, taking over and the Performance Certificate
The contractor carries out the Tests on Completion to show the facility meets the performance criteria in the Employer's Requirements; the employer then takes over the works with a Taking-Over Certificate it issues itself, and the Defects Notification Period starts. The contract may also call for Tests after Completion in operation. After the Defects Notification Period the employer issues the Performance Certificate, and the final account is settled.
This page quotes no clause numbers or default periods of the Silver Book, because Ta3mir's reference data does not cover its text yet. Refer to the licensed publisher copy and your Contract Data.
- Comparison
FIDIC Red, Yellow and Silver and Law 182 compared
Who designs, the price form, payment, retention and the advance in one table.Read the contract forms comparison - Design-build
FIDIC Yellow Book 2017
Design-build for a lump sum administered by the Engineer.Read the Yellow Book guide - Employer's design
FIDIC Red Book 2017
Time limits, the payment cycle and claims, by sub-clause number.Read the Red Book guide - Certificates
How to prepare a payment certificate
Previous, current and cumulative, deductions and approval.Read the certificate guide
Example: a milestone Schedule of Payments for an EPC contract
Illustrative figures: an EPC contract for an industrial facility at a fixed lump sum of 40,000,000, whose Schedule of Payments lists six milestones, each instalment due when its milestone is achieved. The milestones and amounts are the parties' own in this example, not FIDIC terms.
| Milestone | Instalment | Cumulative | Left of the price |
|---|---|---|---|
| Basic engineering complete | 4,000,000 | 4,000,000 | 36,000,000 |
| Purchase orders placed for the main equipment | 6,000,000 | 10,000,000 | 30,000,000 |
| Main equipment delivered to Site | 12,000,000 | 22,000,000 | 18,000,000 |
| Mechanical completion | 10,000,000 | 32,000,000 | 8,000,000 |
| Commissioning and Tests on Completion passed | 4,000,000 | 36,000,000 | 4,000,000 |
| Taking over by the Employer | 4,000,000 | 40,000,000 | 0 |
| Total | 40,000,000 | 40,000,000 | 0 |
The instalments add up to the fixed price of 40,000,000. By mechanical completion the contractor has been paid 32,000,000, and 8,000,000 stays tied to successful commissioning and taking over, so the facility's performance is what unlocks the last payments. The amounts are before the retention deduction and the advance repayment that the Contract Data sets.
Practical steps for a contractor before signing an EPC contract
- Investigate the site and available data yourself before pricing, since unforeseeable conditions are in principle your risk.
- Identify in the Employer's Requirements the parts the employer stays responsible for, and treat everything else as yours.
- Price the risks explicitly in your tender rather than relying on later claims to cover them.
- Read the Contract Data and Particular Conditions: retention, the advance, payment periods, delay damages and their cap.
- Tie each instalment in the Schedule of Payments to a milestone a clear document can prove.
- Get the authority of the Employer's Representative in writing, and send every Notice as the contract requires.
- Plan the Tests on Completion and the performance criteria early, as they unlock the last payments.
Frequently asked questions
What is the FIDIC Silver Book?
It is FIDIC's conditions of contract for EPC/turnkey projects, in which the contractor carries out the design, procurement and construction and hands over a facility ready to operate for a fixed lump sum, carrying most of the risk. Its latest edition is the second edition of 2017.
What does EPC or turnkey mean?
EPC stands for engineering, procurement and construction: one party designs, buys the equipment and materials, builds and commissions, then hands the facility to the employer ready to use, as if handing over the key.
Is there an Engineer under the FIDIC Silver Book?
No. The employer administers the contract itself or through a representative it appoints, reviews the contractor's Statements, pays and agrees or determines claims under the procedure the contract sets.
What is the difference between the FIDIC Yellow and Silver Books?
Both are design-build for a lump sum, but the Yellow Book is administered by an Engineer and protects the contractor from some errors in the Employer's Requirements and from unforeseeable conditions, while the Silver Book has no Engineer and in principle puts those risks on the contractor.
When does the FIDIC Silver Book not fit?
When there is extensive underground work or the site conditions are unknown, when tenderers do not have enough time and information to study the requirements, or when the employer wants to review every drawing and supervise the works daily.
How to do it in Ta3mir
In Ta3mir you prepare interim and final certificates that go through a clear approval path, so you follow each instalment from submission to collection whatever the contract form.
- Certificate items as previous, current and cumulative, with retention and deductions to date at the foot of each certificate.
- Approved variation orders adjust the contract value, and each project has a register of contractual claims.
- After a certificate is approved you issue a claim with a due date and track its collection in receivables ageing.
- The in-app contracts reference covers the FIDIC Red Book 2017 and Law 182 with its Regulation today.
Sources
This guide is an explanatory summary written by the Ta3mir engineering team. It is not the text of the law or of any contract and it is not legal advice. Figures in the examples are illustrative. Your contract and the officially published text govern, so check them with a contracts adviser before acting.