The FIDIC Yellow Book 2017: design-build by the contractor

When the FIDIC Yellow Book is used and how it differs from the Red

The Yellow Book is used when the employer wants to define what it needs and leave the contractor to design and build the solution, such as treatment plants and electromechanical plant, or buildings and infrastructure procured as design-build. The employer issues its requirements with the tender, and the contractor tenders its technical proposal and a lump-sum price.

The 2017 second edition aligned the claims and disputes procedure across the three books, so anyone who knows the Red Book claims cycle will find the same logic here. The periods and percentages are read from the licensed text and each project's Contract Data.

The contract documents and their order of priority

A FIDIC Yellow Book contract is made of the Contract Agreement, the Letter of Acceptance, the Letter of Tender, the two-part Particular Conditions, the General Conditions, the Employer's Requirements, the Schedules and the Contractor's Proposal. Where they conflict, the contract's order of priority applies, and what matters to the contractor is that the Employer's Requirements rank above its Proposal: if the Proposal falls short of the Requirements, the Requirements in principle prevail unless the contract says otherwise.

The contractor's design responsibility

• The Employer's Requirements govern: they set the purpose and scope of the works and the design, performance and testing criteria, and the contractor must scrutinise them carefully before tender and after award.
• Fitness for purpose: the contractor undertakes that the completed works will be fit for the purposes defined in the contract, a stricter duty than reasonable skill and care in design.
• Contractor's Documents: designs, calculations and drawings go to the Engineer for review within the review period the contract sets, and the related work does not start before that review ends without objection or with a Notice of No-objection.
• No-objection is not a release: the Engineer's consent or no-objection to a document does not move design responsibility to the employer.
• Errors in the Employer's Requirements: if the contractor finds an error that an experienced contractor exercising due care would not have found when scrutinising the tender, it gives Notice and may be entitled to time, cost and profit as the contractual procedure decides.
• Post-construction documents: as-built drawings, operation and maintenance manuals, and training of the employer's staff where the requirements call for it; taking over is often tied to their delivery.

The lump sum and the Schedule of Payments

Under the Yellow Book the Accepted Contract Amount is a lump sum covering design and construction, and quantities are not remeasured as in the Red Book. The price changes only through Variations, price adjustment where the Contract Data provides it, and claims established by either party. The contractor submits a Statement for each payment period, the Engineer issues the Interim Payment Certificate and the employer pays within the period the contract sets.

If actual progress turns out to be less than the Schedule of Payments assumed, the Engineer may agree or determine revised instalments. An up-to-date programme is what protects the contractor from reduced instalments.

Retention and the advance payment exist in the Yellow Book with much the same mechanism as in the Red Book: retention is deducted from each payment at the rate and up to the limit written in the Contract Data and is released in two stages, part after the Taking-Over Certificate and the rest after the Defects Notification Period expires. An advance payment is due only if the Contract Data provides one, and it is repaid by deductions from interim payments as the contract sets.

Variations and claims under a lump sum

The Engineer may instruct a Variation before the Taking-Over Certificate, either by direct 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. As the price is a lump sum there is no bill of quantities to measure the change against, so it is valued at the rates in the contract's Schedules where they exist and apply, otherwise by a reasonable valuation as the contract provides. That is why it helps the contractor to attach a schedule of rates for the main items to its tender, for valuing changes.

The 2017 claims procedure is the same in all three books: a Notice of Claim within a set period of becoming aware of the event, then a fully detailed Claim with its contractual basis and records, then consultation by the Engineer towards agreement or a fair determination, then the Dispute Avoidance/Adjudication Board if a party is dissatisfied. The periods are all in the licensed General Conditions and the Particular Conditions may change them, so read them in your contract.

Under the Yellow Book the Engineer administers the contract, issues the certificates and decides claims neutrally when agreeing or determining, but does not design the works. Do not wait for it to solve a design problem; propose the solution yourself and ask for its no-objection.

Tests, taking over and the certificates

Common mistakes in design-build contracts

• Pricing before studying the whole of the Employer's Requirements, then finding work needed for the purpose that was not priced.
• Treating the Engineer's no-objection to the design as a transfer of responsibility, which it is not.
• Starting work before the document review period ends, then carrying the cost of changes.
• Leaving the Schedule of Payments vague, so the parties disagree on whether the event that triggers an instalment has happened.
• Missing claim notice periods, which in the 2017 edition follow the same logic as the Red Book.

This page quotes no clause numbers or default periods of the Yellow 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
• Employer's design

  FIDIC Red Book 2017

  Time limits, the payment cycle and claims, by sub-clause number.Read the Red Book guide
• EPC / turnkey

  FIDIC Silver Book 2017

  A fixed price, more risk on the contractor and no Engineer.Read the Silver Book guide
• Retention

  Retention money in payment certificates

  How retention is worked out in each certificate and when it is released.Read the retention guide

Example: a Schedule of Payments for a design-build contract

Illustrative figures: a design-build contract with an Accepted Contract Amount of 12,000,000, whose Schedule of Payments lists six instalments, each due on an event. The instalments are the parties' own in this example, not FIDIC terms.

The instalments add up to the Accepted Contract Amount of 12,000,000, so nothing is paid outside the schedule except through a Variation or an established claim. The amounts are before the retention deduction and the advance repayment that the Contract Data sets. If the main Plant arrives late, the third instalment (3,600,000) is not due until the event happens, even if the contractor has completed other work.

Practical steps for a contractor under the Yellow Book

1. Study the whole of the Employer's Requirements before pricing, log every ambiguity or conflict and raise it during the clarification period.
2. Read the Contract Data and Particular Conditions: the retention rate and limit, the advance, the payment and document review periods, and delay damages.
3. Write a clear Schedule of Payments: each instalment tied to a specific event that a document can prove.
4. Plan design submissions so the review periods fit before the construction dates in the programme.
5. Keep the programme updated to show actual progress is on the Schedule of Payments.
6. Send claim notices on time and keep contemporary records from the day of the event.
7. Prepare as-built documents and operation manuals early so they do not hold up taking over.

Frequently asked questions