A Contract for “Just Digging a Hole”

Constantijn P.I.M. Dolmans

A Contract for
“Just Digging a Hole”

Abstract Constantijn Dolmans graduated from

Leiden University in fiscal law (1995)
In 1999 FIDIC published four new standard forms of and has a professional degree in
contract: EPC Turnkey Projects; Plant and Design-Build insurance. He had worked as a cost-
with Design by the Contractor; Construction with controller for BFI (currently SITA,
Design by the Employer (the former FIDIC Red Book); a waste company) since 1992, when in
and the Short Form of Contract. This new work does 1997 he joined IADC. One of his first
not meet specific dredging and reclamation work tasks was to comment upon FIDIC’s
needs. Consequently, FIDIC formed a Task Group to draft for a new “Conditions of Contract
examine the possibility of a contract customised for the for Construction” and he then became a
dredging industry. In the tradition of FIDIC, the new member of FIDIC’s Dredging and
“FIDIC Form of Contract for Dredging and Reclamation Reclamation Contract Task Group. Constantijn Dolmans
Works” has been carefully developed by this Task
Group and is now available in a test edition.

Special thanks go to Philip Jenkinson from WS Atkins

(Dredging Task Group Leader) for his valuable
comments, and to the other members of the FIDIC
Dredging Task Group: Tony Sanders of Mouchel,
Edward Corbett of Corbett & Co. on behalf of FIDIC
and Pieter Boer of Royal Boskalis Westminster on
behalf of IADC.

Introduction
However, the Fourth Edition of the Red Book in 1987
For the smooth execution of a dredging project one did not include these dredging provisions. To meet
cannot do without a strong and clear contract. the specific requirements of dredging projects, IADC
The objectives of this contract should be (Bray et al.): (International Association of Dredging Companies)
- to describe accurately the work to be done and the published a “Users Guide” to this Fourth Edition of
conditions under which it is to be done; FIDIC’s Red Book in 1990. This cooperation between
- to apportion risk; and the IADC and FIDIC provided the basis for developing
- to provide a fair and equitable method of payment the present publication (Figure 1).
for that work when it is completed satisfactorily.

FIDIC, the International Federation of Consulting T HE N EW FIDIC C ONTRACTS

Engineers, has a long history in publishing standard
forms of contract for engineering construction. FIDIC In 1999 FIDIC published four new standard forms of
was founded in 1913 as an association for national contract, the Conditions of Contract for:
member associations in engineering and has at present - EPC Turnkey Projects;
a membership coming from nearly 70 countries. Their - Plant and Design-Build with Design by the Contractor;
first standard forms were published in 1957. Editions in - Construction with Design by the Employer
1969 and in 1977 of the so-called Red Book included (the former FIDIC Red Book); and
explicit provisions for dredging and reclamation works. - the Short Form of Contract.

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 Terra et Aqua – Number 85 – December 2001

high operational costs inevitably means higher than

normal risks in the event of change on a project. The
very nature of dredging activities, i.e. at various depths
underwater, creates difficulties in obtaining accurate
information regarding sub-soil conditions. Climatic and
physical operating conditions such as wave height have
a higher impact than on most other construction
operations, particularly with regard to safety for
workers.

T HE FIDIC D REDGING C ONTRACT ; A L EGAL

F RAMEWORK

The need for a special short and simple dredging con-

tract was clear. IADC contacted FIDIC about the possi-
bility of a separate FIDIC dredging contract and a Task
Group was formed. On the strong basis of FIDIC’s
Short Form of Contract, the Task Group produced the
“FIDIC Form of Contract for Dredging and Reclamation
Works”. The test edition of this dredging contract was
published in June 2001. The formal first edition is to be
published a year later, taking into consideration the
comments that may arise from the test edition.

The contract is published under full responsibility of

FIDIC and the ultimate decisions on the form and
content of the document rests with FIDIC’s Executive
Committee. Input to the contract has been given,
not only by IADC, but also by consulting engineers,
employers and organisations like the World Bank.

Figure 1. The cover of the new “FIDIC Form of Contract for The aim has been to produce a fair, balanced and
Dredging and Reclamation Works”, Test Edition 2001. straightforward document which includes all essential
commercial provisions. It may be used for all types of
dredging and reclamation work and ancillary construc-
tion with a variety of administrative arrangements.
In the past, the Fourth Edition of the Red Book has
often been used as a basis for contracts for dredging Under the usual arrangements for this type of contract,
and reclamation works. However, IADC felt that its the Contractor constructs the Works in accordance
successor — the new “Contract for Construction with with design provided by the Employer or by his
Design by the Employer” — was not suitable for appli- Engineer. As in the construction industry in general,
cation to dredging and reclamation works. The new more and more works are contractor-designed.
Contract for Construction has an extensive size. Therefore, the form may easily be altered into a
One might say, “It is just a little bit too large for just contract that includes, or wholly comprises,
digging a hole under water”. Furthermore, in this new contractor-designed Works.
Contract for Construction, no special attention is given
to the wide variety of circumstances in dredging and The essential part of a dredging contract is formed by
reclamation works. the description of the activity itself; the specifications,
drawings and design of the work. The “FIDIC Form
The dredging industry is a specialised, capital-intensive of Contract for Dredging and Reclamation Works”
sector of the construction industry. The execution of a provides a legal framework to this. It governs the
dredging project not only necessitates technical general obligations and responsibilities of the contracting
knowledge associated with civil engineering parties. The document starts with an Agreement — a
construction projects but also maritime expertise about simple document that incorporates the tenderer's offer
the operation of a dredging vessel and compliance with and its acceptance. All relevant data should be included
international maritime shipping law. The logistics of in the Appendix to the Agreement. References to
ensuring continuous sufficient work for the specialised documents forming part of the contract such as the
fleet coupled with the massive capital investment and specification and the drawings are also made in this

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 A Contract for “Just Digging a Hole”

Ruled by
Employer FIDIC Contract

assignment
en and mutuall obligations
o
compliance
ewwith duties and responsibilities
po

Engineer Contractor
instructions
NOT Ruled by
FIDIC Contract
Figure 2. Relationships between parties to the Contract and the Engineer.

Appendix. The General Conditions are expected to Bank. However, if there is no need for an Engineer in
cover all essential elements of the legal framework. the Contract — in smaller projects an experienced
Employer may want to act for himself directly — the
Nevertheless, every situation is unique. Modifications FIDIC Dredging Form can be easily adjusted to a con-
may be required in some jurisdictions or may be neces- tract without an Engineer.
sary to suit special circumstances. Users are able to
introduce Particular Conditions if they wish to handle In line with the other major FIDIC Contracts, the Engi-
such special cases or circumstances. neer is no longer expected to be an impartial person or
organisation. After years of discussion, FIDIC broke
with the tradition of the impartial Engineer. The close
C ONTRACT P ARTIES AND THE E NGINEER relationship between the Employer, who pays the bill,
and the Engineer made the independence of the Engi-
The “FIDIC Form of Contract for Dredging and Recla- neer questionable in practice. It does not mean that in
mation Works” is a two-party contract between the the new FIDIC Contracts the Engineer may do what-
Employer and the Contractor. However, contrary to ever he wants. The Dredging Form states:
FIDIC’s Short Form, provision is made for an Engineer,
as is usual for dredging and reclamation works. “The Engineer and any assistants shall exercise their
Although this Engineer is not a party to the contract, duties and authority in a fair manner in accordance with
he has an important role in the execution of the work the Contract”.
(Figure 2).
If disputes or differences between the Employer and
The Role of the Engineer the Contractor, including dissatisfaction with decisions
The FIDIC Dredging Form gives the Engineer several of the Engineer, cannot be settled amicably, the FIDIC
duties and authorities, such as: Dredging Form provides for resolution of the dispute by
- approval of contractor’s design; a Dispute Adjudication Board (DAB). This DAB has in
- the authority to instruct variations to the Contractor; fact taken over the impartial decisional role of the
- the issuing of Taking Over Certificates; and Engineer in case of disputes. Should the decision of the
- the certification of payments. DAB not satisfy one or both parties to the Contract,
the FIDIC Dredging Form provides for international
This important role — especially when executed by an arbitration under the Rules of Arbitration of the Interna-
experienced engineer — is to the benefit of both tional Chamber of Commerce.
Employer and Contractor. The Employer is ensured of
expert advice and the Contractor has an experienced
partner with whom to work, resulting in a more cost- R ISKS AND R ESPONSIBILITIES
efficient execution of the dredging project. The issuing
of Taking Over Certificates and certification of pay- Within the execution of a dredging project there may
ments by the Engineer may often be necessary in never be a situation in which all required information is
projects that are externally financed by government available. Unexpected events, whether caused by
bodies or international organisations such as the World nature or people, may occur. These uncertain factors

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 Terra et Aqua – Number 85 – December 2001

CONTENTS of the FIDIC FORM OF CONTRACT

for DREDGING and RECLAMATION WORKS

A GREEMENT Remedying Effects

Offer Remedying Defects
Acceptance Dredging Works
Appendix Uncovering and Testing

G ENERAL C ONDITIONS Variations and Claims

Right to Vary
General Provisions Valuation of Variations
Definitions Early Warning
The Contract Contractor’s Right to Claim
Persons Variation and Contractor’s Claim Procedure
Dates, Times and Periods Employer’s Claims
Money and Payments
Other Definitions Contract Price and Payment
Interpretation Valuation of the Works
Priority of Documents Advance Payment
Law Monthly Statements
Communications Interim Payments
Statutory Obligations Payment of Retention - Dredging Works
Payment of Retention - Other Works
The Employer Final Payment
Provision of Site Currency
Permits and Licences Delayed Payment
Site Data
Employers Authorised Person Default
Default by Contractor
The Engineer Default by Employer
The Engineer’s Duties and Authority Insolvency
Instructions Payment upon Termination
Approvals
Risk and Responsibility
The Contractor Contractor’s Care of the Works
General Obligations Contractor’s Indemnities
Contractor’s Representative Limit of Contractor’s Liability
Subcontracting Force Majeure
Performance Security
Insurance
Design by Contractor Arrangements
Contractor’s Design Failure to Insure
Responsibility for Design
Resolution of Disputes
Defined Risks Adjudication
Notice of Dissatisfaction
Time for Completion Arbitration
Execution of the Works
Programme Index of Sub-Clauses
Extension of Time Particular Conditions
Late Completion Rules for Adjudication
Notes for Guidance
Taking-Over Annexes - Forms of Securities
Completion
Taking Over Certificate
Taking Over Part of the Works

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 A Contract for “Just Digging a Hole”

in the execution of construction projects are risks.

The purpose of any contract is to allocate these risks
between the parties to the contract. Risks can best be Contractor's share of risk & duties
borne by the party that is best able to handle the risks. Low High
Technical risks, for instance, like the safety of a dredg-
ing vessel, may be best controlled by the Contractor,
whereas an Employer may have better knowledge of
the specific conditions of the Site where the project
has to be executed (Figure 3).
High Low
Employer's share of risk & duties
Of course, the best means of avoiding unexpected
situations is by informing each other as adequately as
possible. Therefore the FIDIC Dredging Form gives the
Employer the obligation to supply the Contractor with Low High
all Site data relevant to the execution of the work prior Contract Price
to tendering. The Contractor is responsible for the
interpretation of these data and for making thorough
enquiries as far as practicable taking into account cost Figure 3. Contractor’s and Employer’s shares of the risks and
and time. duties: the more risk for the Contractor the higher the price.

Sometimes one party can more easily fulfil an essential

condition for the execution of the project than the other
party. In dredging projects the Employer, for instance
a port authority, can often obtain the permits and Figure 4. Major dredging projects today often involve multiple
licences needed for the execution of the work more vessels from several companies, working 24 hours a day, 7
readily. The FIDIC Dredging Form therefore makes the days a week. The FIDIC Form of Contract addresses the need
Employer responsible for this activity. for clarity in contractual agreements amongst all parties.
 Terra et Aqua – Number 85 – December 2001

Of course, circumstances differ from project to project

(Figure 4). The allocation of risk must fit the specific
project and the General Conditions of the FIDIC
Dredging Form should be adjusted by Particular
Members of
Conditions when necessary. However, the allocation of
risk should remain fair and practicable. In a project
where the Employer is responsible for almost
everything, there is little incentive for optimal
the FIDIC
performance by the Contractor. On the other side of
the balance, an Employer that transfers all the risks and
duties to the Contractor will have to pay a very high
Dredging
price. In that case there is little flexibility for variation
and the project will certainly be expensive. Task Group
Liability
The fact that one party bears the risk for an event that
happens or has not fulfilled his duty — in other words Philip Jenkinson graduated from Oxford University
that party is responsible — does not automatically in Engineering Science, qualified as a Chartered Civil
mean the party is liable for the consequences and that Engineer, and is now a Principal Consultant with
these consequences result in a valid claim under the WS Atkins. He became Task Group leader for
contract. The Dredging Form is clearer on this subject FIDIC’s Short Form of Contract and most recently
than the other FIDIC Forms of Contract. A clear view of leader of the Dredging and Reclamation Contract
risks and liability is of course very important in the Task Group.
execution of dredging projects where small things can
have major consequences in time and money. Tony Sanders OBE is a chartered quantity surveyor
and Director of Dispute Management of Mouchel
Responsibility may lead to a liability when a party suffers Consulting, specialised in civil engineering. Prior to
a loss as a consequence of inappropriate action of the joining the Dredging Task Group, he worked with
responsible party. Sometimes, when a party suffers a FIDIC on the Orange Book and the Short Form of
loss as a consequence of certain events like adverse Contract. He is a member of the FIDIC President’s
climatic conditions, this may also lead to liability of the List of Approved Adjudicators and the FIDIC List of
responsible party (Figure 5). When a party is liable he Experts.
should indemnify the other party for his loss according
to the conditions of the contract. The way the Edward Corbett MA MSc FCI Arb, studied law at
indemnification — a valid claim — should be calculated Oxford University and is the principal of Corbett &
may already have been agreed in the contract, Co, a practice specialising in international construc-
particularly in the Appendix. tion law. He authored FIDIC Fourth Edition - A
Practical Legal Guide and is now working on a Guide
Insurance arrangements may cover the indemnifica- to the Orange Book. He is a member of the Interna-
tions that have to be paid by one party to the other. tional Bar Association's committee on the FIDIC
The general provision in the FIDIC Dredging Form is contract as well as the Task Group for the Short
that the Contractor effects these insurances before the Form and Dredging Form of Contracts.
work starts. The FIDIC Dredging Form takes care of the
specific needs in dredging projects related to insurance. Pieter Boer graduated as civil engineer from Delft
University (1964),started at the Public Works
In general, the marine insurance policy of the Contractor Department of Rotterdam. He then switched to
will cover hull and machinery and often liability for the Hydronamic bv and continued his career within the
dredging vessels. For dredging works, insurance of the Royal Boskalis Westminster group, becoming
Works, Materials, Plant and Fees (as in a normal Con- Director of Boskalis International in 1986. Retired
struction All-Risk or Contract Works Insurance) is not from Boskalis, he is currently chairman of IADC’s
possible. You cannot insure a hole under water. But legal committee and as such was asked to join the
when non-dredging works are involved, the FIDIC Dredging Task Group.
Dredging Form also requires insurance of these during
the construction. Of course, damage to other property Constantijn Dolmans, author of this article, is
of the Employer, death or injury to the Employer, Assistant to the Secretary General of the IADC and
Engineer or their personnel and third-party liability as such was invited to be a member of the
should also be insured under the FIDIC Dredging Form. Dredging Task Group.

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 A Contract for “Just Digging a Hole”

Figure 5. Adverse climatic conditions, be it tropical storms or icey waters, as

seen here, can have an influence on the risks involved in a dredging operation.

Defects liability
A specific responsibility that may lead to liability of the
Contractor is a defect of the work. As under the other
FIDIC Forms, the Contractor has to remedy at no cost
to the Employer any defects due to the Contractor’s
Design, Materials, Plant or his (lack of) workmanship. Figure 6. Risks and responsibilities in the FIDIC Dredging Form.

Normally, this obligation ends one year after taking over

the project or the relevant part of the project. However,
remedying defects after demobilisation of high value duties risks
dredging equipment may lead to unreasonably high
costs for the Contractor if remobilisation of this equip-
ment is required. Furthermore, natural processes may
also have their effect on the completed dredging work
responsibility
which may lead to defects that could not have been
foreseen. Therefore, under the FIDIC Dredging Form,
the Contractor has no obligation to remedy defects in
dredging works after the completion date of these liability
works. This does not mean that the Contractor will not
be held liable for the defect after completion. When the
Contractor is liable, he may still have to indemnify the indemnity
Employer.

When the contract involves more than dredging works

insurance
only, a clear distinction should be made in the specifica-
tions and the drawings between dredging works and
non-dredging works. The FIDIC Dredging Form explicitly

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 Terra et Aqua – Number 85 – December 2001

Figure 7. Dredging works are often a part of larger construction projects, such as this fixed link bridge in Argentina. The FIDIC
contract asks for a clear distinction between dredging and non-dredging works.

asks for such a distinction (Figure 7). It may appear to circumstances, the FIDIC Dredging Form can easily be
be in favour of the Contractor that there is no time adjusted and particular conditions can be added. In
period allocated for notification of defects after addition, comments from users may in the future
completion of dredging works. However, this condition improve the FIDIC Dredging Form even further.
is also very much for the benefit of the Employer, as
the existence of a defects notification period for
dredging works would certainly increase the contract References
price. Nevertheless, the Employer has to be
indemnified when he suffers a loss as a consequence FIDIC (1999).
of defects in dredging works due to one of the Conditions of Contract for Construction (for Building and
Contractor’s responsibilities. Engineering Works designed by the Employer);
Conditions of Contract for Plant and Design-Build (for Electrical
and Mechanical Plant and for Building and Engineering Works
Conclusion designed by the Contractor);
Conditions of Contract for EPC Turnkey Projects;
Thanks to the cooperation of FIDIC and IADC as well as Short Form of Contract.
other organisations and persons, there is once again a
standard construction contract that meets the special FIDIC (2001).
requirements of dredging and reclamation projects. Form of Contract for Dredging and Reclamation Works.
In large projects where dredging and reclamation are
just a part of the work, one of the other FIDIC contracts Bray, R.N., Bates, A.D. and Land, J.M. (1997).
may still be suitable. However, even in these cases, “The Dredging Contract”. Dredging, a Handbook for Engineers,
the straightforward provisions and clear conditions of 2nd Editon. UK. pp 313-345.
the FIDIC Dredging Form may help to design particular
conditions for these standard contracts to meet
specific dredging needs.

The “FIDIC Form of Contract for Dredging and Recla-

mation Works” creates a fair and balanced legal frame-
work for the optimal execution of dredging and dredg-
ing related projects. In general the provisions will suit
most dredging projects. When needed due to specific

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