PINK FIDIC

RED FIDIC OR
MDB HARMONISED EDITION OF RED BOOK

Pink Book is the form of contract used by MDBs (Multilateral Development Banks) for
construction projects (building and engineering works designed by the employer) for which
MDBs are providing finance

Harmonised document includes modified General Conditions of Contract but also contains
provisions for Particular Conditions, as most contracts will still need to be tailored to the
requirements of specific projects and countries. The Pink Book also includes sample forms for
Contract Data (Particular Conditions – Part A), Securities, Bonds, Guaran- tees and Dispute
Board agreements
In terms of the presentation, the main difference between the 1999 Red Book and the Pink Book
is the Particular Conditions, which have been divided in the Pink Book into Part A and Part B:

 Part A provides the information supplied by the Employer (the Contract Data), which is
a renamed and partially re-structured "Appendix to Tender".
 Part B includes the Particular Conditions, which are a concise version of those con-
tained in the 1999 Red Book.

THE MOST SIGNIFICANT CHANGES

Clause 1: General provisions
The Pink changes some definitions from those used in the 1999 Red Book. It does not
significatnly influence to the Contract conditions, but expanded some definitions.

Expanding the concepts will make it possible to more clearly define the responsibilities of each
party:

- “Notice of Dissatisfaction” which requires the Party to indicate its “intention to commence
arbitration”

- The Pink Book only allows deviation from the requirement to enter into the Contract
Agreement within 28 days if the “Particular Conditions establish otherwise”.

- the requirement of “to give notice to the other Party if it becomes aware of a defect “of a
technical nature” is widened to require the Parties to give notice of any defect in the
documents.
 - deletes the requirement to provide “the details” of the nature or amount of the delay likely to
be suffered to Enginner

- the insertion of this new sub-clause in the Pink Book allows representatives of the Bank to
inspect the Site and/or to inspect and audit the Contractor’s accounts and records relating to
the Contract.

Clause 2, the Employer:

Clause 2 introduces more stringent requirements for the Customer’s fulfillment of
notification obligations

sub-clause 2.4 : Employer’s Financial Arrangements

the Employer is required to submit reasonable evidence that financial arrangements the Employer to submit the reasonable evidence “before the Commencement Date” as well as
have been made and are being maintained to enable the Em- ployer to pay the Contract within 28 days of the Contractor’s request. In addition, the evidence that the Employer provides
Price, within 28 days of the Contractor’s request to do so. must demonstrate that it is able to pay the Contract price “punctually”
sub-clause 2.5: Employer’s Financial Arrangements:

The amendment to the 1999 Red Book con-cerns the service of the Employer’s notice the Employer must still give notice as soon as practicable, but (in any event) the notice must be
of claim. given within 28 days of the Employer becoming aware, or when it “should have become aware”,
of the circumstances giving rise to the notice. This appears to be a more oner- ous provision
for the Employer. However, the words “should have become aware” makes it difficult to
operate as a condition precedent.
Clause 3, The Engineer
The Pink Book gives more freedom to the Customer in terms of not having to coordinate actions
with the customer in relation to the Engineer, but more onerous for the Engineer

the Employer is allowed to change the authority of the Engineer without the agreement of the
sub-clause 3.1: The Engineer’s duties and authority: Contractor.

the Employer has an obligation not to impose “fur- ther constraints on the Engineer’s
Authority except as agreed with the Contractor.” This change may be seen as
potentially affecting the balance of risk.

sub-clause 3.5: Determinations:

the Engineer is required to give the Contractor and the Employer notice of its the Engineer is required to give the Contractor and the Employer notice of its determination of
determination of any matter not agreed be- tween the parties. any matter not agreed be- tween the parties.
the Pink Book is more onerous for the Engineer as it now fixes a time limit for the
determination (28 days from receipt of the corresponding claim or request).
Clause 4, The Contractor The Pink Book:

 requires the Performance Security to be issued by “a reputable bank or financial

Unlike the Red Book there is no requirement for the Employer to approve the entity institution” selected by the Contractor
and country (or other jurisdiction) from which it is issued
 Expands confidentiality requirements to cover this clause.

 Encourages the use of sub-contractors from the country in which the project is being
constructed

Clause 5, Nominated Subcontractors The Pink Book has a number of additional grounds upon which the Contractor can object to a
Nominated Sub Contractor.

Clause 7, Plant, materials and workmanship Under the Pink Book, any Plant or Materials become the property of the Employer either when
they are incorporated into the Works or when the Contractor is paid for them.

Clause 8, Commencement, delays and suspension The first paragraph of the 1999 Red Book has been replaced in the Pink Book: the Project cannot
commence unless the Contract Agreement has been signed by both parties, the Contractor has
reasonable proof that the Employer can fund the Project and the Contractor has received any
advance payment to which it is entitled. However, it is less clear when the actual
commencement date is, as the maximum 42 day limit has been removed.

Under the Pink Book, the Contractor is now entitled to an extension of time for delays caused by
the Employer’s other contractors anywhere (not just restricted to the Site).

Under the Pink Book, following suspension, the Contractor should only make good any
deterioration or defect in or loss to the Works, Plant or Materials after having received an
instruction from the Engineer.
Clause 11: Defects liability Due to an amendment in the Pink Book (compared to the 1999 Red Book), it would appear that
the Employer can only claim for an extension to the Defects Notification Period, if the damage
can be attributed to the Contractor.

Clause 12: Measurement and evaluation The thresholds for the rates that can trigger the use of rates other than those specified in the
Contract have been increased in the Pink Book, compared to the 1999 Red Book. Furthermore,
any item that was not priced in the Bill of Quantities is to be included in other rates and prices in
the Bill of Quantities and will not be paid for separately. This could mean that the Contractor
is responsible for additional costs accruing from any omission.
Clause 14: Contract price and payment Under the Pink Book, Construction Equipment is now exempt from import duties when imported.
Clause 15, Termination by Employer The Pink Book imposes limits on the Employer’s right to terminate at his own convenience: the
Employer cannot terminate the Contract just because he wants to pre-empt the Contractor’s
termination.

A new clause dealing with corrupt or fraudulent practices has been inserted into the Pink Book.
Clause 16, Suspension and termination by Contractor

similar Similar, but The Pink Book includes two new grounds for termination.

SUMMARY
The Employer's risks under the Pink Book are slightly modified compared
to the 1999 Red Book and are less onerous for the employer.
However, some points of the Pink Book are clearer to apply and allow the
Employer to reduce the number of necessary approvals with the Contractor.
In addition, the Pink Book makes the notice periods between the parties
clearer.

It is evident that the Pink book is a more onerous on the Contractor than the
Red book. Contractors should ensure they are aware of the additional
obligations required for compliance with the Pink book. For example,
fulfilling the conditions precedent, procurement of equipment and materials
from an eligible source country defined by the Bank, supply of food and
water and protection against insects, responsibility for funeral arrangements
and the like.