01

The Law School

BSM135
International Construction Contracts
Topic One: Introduction to International
Construction Contracts
01 Topic 1: Introduction to International Construction
Topic Preview
This first topic will consider the following:
1. Understanding international construction practice
2. Differences between domestic construction and international construction
practice
3 Brief history of international construction contracts
4. Why use standard form contracts in international projects
5. Major forms of International Construction Contracts
6. Brief introduction to procurement/delivery methods

Topic Content

1. Understanding International Construction practice

International construction practice has provided the world with many beautiful
sights to behold and has made possible the provision of essential infrastructure in
very challenging and in previously impossible locations. Employing innovative
technological structures and complex financing instruments, the sector connects
designs from one part of the world to expertise and finance in another, translate
them into completed projects undertaken by workers of different nationalities in yet
another part of our world, thus traversing a variety of languages and cultures.

International Construction project in its basic form is aptly described by S B

Stebbings as ʻ…projects where the contractor, lead consultant or the employer is
not of the same domicile and at least one of them is working outside its country of
originʼ. International Construction entails engaging resources (whether technical or
financial) from different sources across the globe for the delivery of major aspects
of construction/engineering projects. Due to the increasing involvement of lenders
in projects, a predominantly foreign financed construction project (especially
where the project is funded by one of the multilateral development banks) will
qualify as an international project.

International projects involve complex and multidimensional contractual

relationships; these could include a joint venture comprising local and international
contractors, an employer that lies within a larger bureaucratic structure with
different levels of authority, or international lenders acting in a syndicate. Each set
of relationship is governed by series of documents. The mix of possible documents
in an international construction project could include:

1. An agreement of “business terms” indicating such things as the names

of the parties, description of the project, and the contract sum;
02
2. The construction contract indicating the general and special conditions of the
contract, stating the basic rights, duties, and obligations of the parties;
3. The agreement with the lenders including guarantees and step-in rights;
4. The tender documents;
5. Time and cost schedules;
6. Insurance agreements, consultancy and confidentiality agreements;
7. Others i.e. ancillary agreements, exceptions, manuals, protocols, payment
schedules, specifications and appendices etc.

These documents usually translate to thousands of gigabytes in electronic data and

an avalanche of paper if printed out. International construction is usually
concerned with high net worth projects which create a different matrix of risks and
challenges. These projects are often large and technically complex. Examples of
international construction projects with complex characteristics abound and can be
found across different regions of the world. Letʼs look at the Hong Kong airport
project as an illustration here. The project required 1248 hectare reclamation, a
34km rail and road access, over 30,000 site workers and a web of 225
agreements entered into with contractors from more than ten different countries
including China, Japan, Hong Kong, United Kingdom, Holland, France, Belgium,
New Zealand, Australia, South Africa, Italy amongst others, at a cost of
approximately US $ 20 billion. The construction industry accounts for
approximately 10% of the global Gross Domestic Product (GDP) translating into
receipts of over 7.5 trillion US Dollars. Information from the European International
contractors (the EIC is Europeʼs trade association of construction contractors
involved in international projects) indicates that the turn over of its members in
2016 (for international projects only) was in excess of one hundred and
seventy-one billion Euros.

The growth of international construction is attributable to the increased demand for

infrastructure services across the globe in the past three decades. Bruner and
OʼConnor on construction Law, list seven reasons for the growth of international
construction projects, to wit:
1. Advances in communication technology.
2. Increased political stability and military security.
3. Democratisation of national governments and movement towards cooperation
between nations.
4. Increased interdependency in trade and banking between nations evidenced by
various trade agreements i.e. GATT.
5. The desire of project controllers to obtain the best available resource at the
lowest price located in any part of the world, this trend is specially promoted by
multinational corporations and multilateral lending agencies.
03
6. Continuous increase in the size and financial requirements of construction
projects prompting action to spread risks
7. Willingness by international construction companies to compete for jobs in
different jurisdictions. The global economic problems make going international
even more crucial.

2. What differentiates domestic construction from international

construction projects?
Complexity and size have been used to differentiate domestic and international
construction projects. The latter is often thought to involve more complex processes.
However, this is not a very helpful analytical tool: many domestic projects have
matched their international counterparts in terms of size and complexity. So what
makes a project international and another domestic?

Professor Nael G Bunni has suggested that a series of factors are peculiar to
international construction. His list include:
1. Vast sums of money are frequently provided by various banks, financial
institutions, and insurance companies, with guarantees.
2. Construction people usually come from different social classes, and
from different countries and cultures.
3. Construction people also come from different firms. Extensive interaction is
required between many of the firms involved in construction, including those
engaged as suppliers, manufacturers, subcontractors and contractors, each with its
own set of commitments and goals.
4. International construction projects are susceptible to unusual risk, i.e. cultural
risk.
5. Many international construction projects are constructed in isolated regions of
difficult terrain, sometimes stretching over extensive areas,
being exposed to natural hazards of unpredictable intensity, frequency, and
return.

The two important factors that distinguish a local construction project

from an international construction project are:
1. The existence of significant foreign element to the project and
2. The projectʼs ʻunusual risksʼ on account of 1) above – these are
risks that are not common to domestic projects and also includes risks although
present in domestic projects, assumes enhanced significance due to the structure of
an international project.

While the first factor is self-explanatory, the second requires further study.
04
2.A. Risks in International Construction Practice
Risk has been the subject of different definitions by various bodies. To understand
the risks involved in international construction practice it is useful to understand
what risk means. The Royal Society in a study on risk analysis, perception and
management in 1992 defined risk using the point of view of an adverse occurrence
as “a combination of the probability, or frequency, of occurrence of a defined
hazard and the magnitude of the consequences of the occurrence.” Hazard as
used in the definition was described as “a situation that could occur during the
lifetime of a product, system or plant that has the potential for human injury,
damage to property, damage to the environment, or economic loss.” Another
definition from this view point defines risks as “the probability that a particular
adverse events occurs during a stated period of time or results from a particular
challenge.

The approach of the latest Australia/New Zealand Standard for Risk Management
(AS/NZS ISO 31000: 2009) is significantly different; their definition focuses on the
dual nature of risk and the possibility of a positive outcome. It defines risk as “the
effect of uncertainty on objectives”. This effect may be negative or positive. The
definition of risk in the Risk Analysis and Management of Projects (RAMP) ( the
third edition published 2014), a collaboration between the Institute of Civil
Engineers (ICE) and the Institute of Actuaries in the United Kingdom, has also
traditionally viewed risk, from the point of view of an event with two possible
outcomes. In construction practice, risk is generally understood as the existence of
potential or actual threats that would affect the objective of a project during the
different stages of construction and use. The fact that a risk could result in a positive
consequence is a relatively recent notion in the industry.

In terms of the risks the construction industry faces, E.J Rimmer writing in 1939 puts
the unique position of the industry aptly when he stated thus: “The subject-matter of
an engineering contract is generally such as necessitates that the documents of
which the contract is composed must make provision for contingencies and events
of a specialnature, and it is chiefly in this respect that it has peculiarities not to be
found in other forms of contract, and is often inevitably of considerable length”.

He added:
“The facts that contract works are to be constructed in or erected and fixed on to
land, and cannot be rejected and sent back to the Contractor if they prove to be
unsatisfactory; that the works are to be carried out in open air under unstable
conditions with material and labour of varying quality; that the conditions of
excavation and foundation cannot be entirely foreseen until the ground is opened
up; that execution of the works may result in damage to property belonging to
05
other persons; that works of specialists may have to be carried out concurrently
with work done by the general contractor; that the period of the contract may
extend over several years and the Employer may desire the use of completed parts
of the work before final completion of the whole; and that the amount of money
involved is often such as to imperil the financial resources of a contractor who has
made an unwise tender.”

He concluded that
“...[This] necessitate that terms should be inserted in engineering contracts which
would be superfluous to ordinary commercial contracts of purchase and sale.”

A casual observation of a minor construction project will reveal the various layers
of risk inherent therein. From accurate design layouts, to purchasing the right
materials, to successfully supervising workers, meeting budgetary targets etc.,
construction projects pose considerable challenges and uncertainties.

These challenges are multiplied in international construction practice. Materials

may be sourced from different locations, in different currencies. Workers may
come from different nationalities and work in different locations. The financier
or lending bank may have an official language different from the language of
the lead contractor. The employer could be a sovereign government creating
both payment and enforcement risks. The sheer volume of papers when disputes
arise- design papers, comments, instructions, telephone messages etc. all created in
the course of one international construction project could fill a small office. Below
is a non-exhaustive list of the common risks associated with international
construction practice:
1. Profit reparation and currency exchange risk
2. Political risk – disruption of project due to wars, unrest etc.
3. Cultural risk
4. Double taxation risk
5. Expropriation risk especially in build–operate–transfer
type agreements
6. Corruption and money laundering risk
7. Regulatory and payment risk

Where projects carry some or all of the above in its risk profile, it would indicate
that it is most probably an international construction project.

The appropriate allocation of these risks is one of the main concerns of construction
contracts especially in common law countries. The understanding of the risk
inherent in a project influences to a large extent the choice of contract
06
(contract terms) for the project. This is very important in international construction
practice where it has been observed that a substantial percentage of participating
stakeholders (contractors, subcontractors, consultants) do not address their minds
sufficiently to the risks and severity of impact that such risks will have on the
delivery of the project. One reason for this is that the nature of international
projects requires segmentation of activities into phases, this usually creates
compartmentalization and information disconnect between stakeholders. This will
often obscure the risk profile of a project leaving the undiscerning participant open
to various unfavourable outcomes.

2.B. Difference between International Construction Contracts and

Domestic Construction Contracts
There is a historical and ongoing argument over the utility of creating different
contracts for domestic and international projects. The argument is premised on the
argumentthat, whatever favourable provisions are included for the benefit of an
employer/ contractor in either segment [domestic or international] should be
passed to the stakeholder in the other.

The counter argument points to the difference in the risk profile of domestic and
international projects and the need to create contracts, which specifically cater for
the risk of each segment of the industry. The decision on the choice of contract for
any project is determined by the parties. However as a general trend, domestic
projects use one of the many standard forms available within the jurisdiction. For
instance, in the United Kingdom the Joint Contract Tribunal (JCT) forms and the
NEC3 are popular. While standard forms used domestically are increasingly being
used for international projects, it is worth noting that parties to international
projects will usually use standard contract forms with established reputation and
association with successful international project delivery. The rationale here is that
these internationally recognised forms provide mechanisms to manage some or all
of the risks associated with international projects. Another rationale is that while
domestic contracts are amended and drafted with a particular legal system in view,
international construction contracts are drafted with multiple jurisdictions in view.

3. Brief History of International Construction Contracts

From the start the institutions that issue industry standard agreements have been
minded to separate domestic and international contracts. ICE ʻGeneral Conditions
of contract and forms of Tender, Agreement, and Bond for use in connection with
Works of Civil Engineering Constructionʼ, is arguably the first form to go
international. After various amendments the last being by 1950, it was finally
prepared for the international audience. This was because the ICE took notice of
the increasing appeal of its form among many professional groupings in the world.
07
Many contracts adopted the format and content of the ICE contract for
international projects. To go beyond the minor changes usually employed when
using the forms in those countries, and to provide for a fair international contract,
the association drew up a new version of the contract differentiated from the
domestic version by the blue colour of its cover. The major changes in the
international version when compared to the domestic form included:
1. The allocation of risk of damage due to unforeseen forces of nature;
this was shifted to the employer from the contractor.
2. Requirement for joint insurance between the parties to secure
against third party risks.
3. Provision for amendment of the contract price where the net effect of a variation
is found to result in the reduction or addition of the sum stated in the tender by
15%.

The culture of designating a contract form as ʻinternationalʼ was followed by the

Fédération Internationale des Ingénieurs Conseils 3 (FIDIC) when it released its first
form in 1957. This culture has been preserved by the Engineering Advancement
Association of Japan (ENAA) whose standard forms maintain the tag
ʻinternationalʼ and Institution of Chemical Engineers (IChemE) which publishes two
parallel forms one for domestic projects and another designated international for
international projects.

In recent years there has been a shift of emphasis from differentiating domestic and
international contracts. FIDIC in the 1987 fourth edition of the Red Book
deliberately dropped the word ʻinternationalʼ in its name and invited parties to use
the contract for both domestic and international projects. The NEC (formerly New
Engineering Contract) published by the ICE is used for both international and
domestic projects; it provides alternative terms that cater for the risk profile of
domestic and international projects.For a particular contract to be fit for purpose it
must anticipate the challenges and the risk in a project. Some contract forms have
embraced the risk and challenges inherent in international construction and
provide appropriate provisions. These contracts are therefore regularly used in
international construction projects. The next section examines why the industry
adopts standard forms. This is followed by an overview of international
construction contracts.

4. Why use standard form in international projects

International commerce has seen a movement towards harmonization of rules and
practice. The need to allow less burdensome transfer of goods and services has
seen the development of rules and guidelines by various international
organisations with the aim of harmonizing rules and practices in different sectors.
08
Notable examples of such harmonizing efforts include the Organization for
Economic Cooperation and Developmentʼs (OECD) contract guidelines, the New
York Convention on the enforcement of arbitration awards in different jurisdictions
and the United Nationʼs Convention on Contracts for the International Sale of
Goods (CISG) amongst others. Construction lawʼs contribution to this process
has been germane even though somewhat different. Standard form contracts have
been the basis for international construction projects for nearly 70 years now.
Unlike other spheres of commerce where standard form contracts are developed
by individual organisations /companies based on cumulative experience and
drafted mainly to protect the organization, in the construction industry standard
forms are prepared by professional organisations with the aim to share risk
equitably.

The advantages of using standard forms of contract in international construction

projects are numerous. Beyond providing predictability, familiarity with the form
and certainty, it also reduces the costs of negotiating an agreement of similar
nature on a repetitive basis. It also removes the balance of bargaining power
conundrum, where the party with superior bargaining power would force onerous
terms on the other party. Standard forms also allow for a more comprehensive
coverage of risk and points the parties to the areas where beneficial and
substantial negotiations could be undertaken without dissipating energy on the less
important aspects.

5. What are the major forms of international construction

contracts?
There are many forms of international construction contracts as well as domestic
contracts which are increasingly gaining grounds in the international construction
market. It would be an error to assume that all the contracts say the same thing in
a different way. As this module progresses, you will gain knowledge of the
significant differences between the popular types of international construction
contracts in use. The following overview acknowledges the work of International
Bar Association subcommittee TI, whose work forms the basis of the overview.
Please note that what follows is exactly what it is meant to be, an outline. As this
module progresses, we shall look at some of the contracts, particularly the FIDIC
and the NEC forms in much detail.

5.1. Fédération Internationale des Ingénieurs-Conseils (FIDIC)

FIDIC produces standard forms of contract for civil engineering construction which
are used throughout the world. FIDIC contracts are often referred to as the
international standard. They are best known by their colours. This module will study
the major colours of the FIDIC suites of contract, these will include, the old Red
Book (1987),
09
the 1999 Rainbow suite- the Red Book, the Yellow Book and the Silver Book; also
the Pink Book and the Gold Book. We shall also introduce you to the new FIDIC
forms released in December 2017.

Contracts under the FIDIC family include:

1. Conditions of Contract for Construction (First Edition, 1999) - Red Book.
2. Conditions of Contract for Plant and Design-Build (First Edition, 1999)- Yellow
Book.
3. Conditions of Contract for EPC/Turnkey Projects (First Edition, 1999)- Silver
Book.
4. Short Form of Contract (First Edition, 1999) - Green Book
5. Conditions of Contract for Construction (the MDB Harmonised Edition, 2010) -
Pink Book

Other Forms of FIDIC Contracts:

6. Form of Contract for Dredging and Reclamation Works “Dredgers Contract” -
Blue Book

7. A form of agreement for engagement of Consultants- White Book

8. A form of agreement for Sub-consultants
8. A joint venture agreement form

In December 2017, FIDIC released its latest forms – the second editions of the
Red Book, Yellow Book and Silver Book. We will look at the main features of
these forms under Topic 6.

5.2. Institution of Civil Engineers (ICE)

ICE is an independent engineering institution and represents approximately
80,000 civil engineers worldwide. Principal membership is in the United
Kingdom, but it has memberships in China, Hong Kong, Russia, India and roughly
150 other countries.

The ICE documents are traditionally for Engineering Contractors. Pre1987

versions of FIDIC were based on ICE forms but there is far less similarity now.
Traditionally, they were Engineer-based contracts where the Employer appointed
the Engineer.

Available Documents
1. ICE Conditions of Contract Measurement Version 7th Edition: July 2004
2. ICE Conditions of Contract Design and Construct 2nd Edition: July 2004
3. ICE Conditions of Contract Minor Works 3rd Edition: July 2004
10
4. ICE Conditions of Contract Term Version: July 2004
5. ICE Conditions of Contract Ground Investigation 2nd Edition: July 2004
6. Agreement for Consultancy Work in respect of Domestic or Small Works:
amendments.

From August 2011, ICE withdrew from the publication of the ICE conditions. It has
now been taken over by other organisations (Association for Consultancy and
Engineering (ACE) and the Civil Engineering Contractors Association (CECA))
and renamed the Infrastructure and Construction Contract (ICC).

The New Engineering Contract (the NEC)

The NEC was developed by ICE in the early 1990s with the aim of introducing a
new form of non-adversarial contract strategy which would contribute towards
more effective and smoother management of projects. NEC is now in its Fourth
Edition. The third edition is currently used across the spectrum of engineering and
construction activities by a wide range of clients, consultants and contractors. Its
use encompasses projects large and small, civil engineering and building,
national and international. It has been used on a number of high profile projects
including the 2012 Olympics and the on-going Crossrail project. Internationally,
NEC has been used on projects such as the Christchurch Art Gallery re-level
project in New Zealand, the Mt. Mercer wind farm project completed in 2014 in
Australia and the Witwatersrand University project in South Africa.

The NEC is radically different from previous standard forms. It is a legal

framework of project management procedures designed to handle all aspects of
the management of engineering and construction projects. In this module, we will
study the provisions of NEC with emphasis on the NEC 3 ECC. The NEC4
Contract refines and fill gaps identified with NEC3. To this extent, it represents an
improvement over the forms preceding it. Details of the changes introduced by
NEC4 will be examined under Topic 10.

Structure of the NEC

The main NEC3 contract, the Engineering and Construction Contract (ECC) and
its associated sub-contract, are based on nine core clauses, a set of main clauses
(six main options) and a series of secondary option clauses.
The six main Option clauses are:
Option A: Priced contract with activity schedule
Option B: Priced contract with bill of quantities
Option C: Target contract with activity schedule
Option D: Target contract with bill of quantities
Option E: Cost reimbursable contract
Option F: Management contract
11
Depending on the Main Option Clause selected, an Employee may incorporated
additional clauses by selecting from series of secondary options (19 in total).
These include Options X1(price adjustment for inflation), X2 (changes in the law)
and X3 (Multiple currencies). The Main Options under both NEC3 and NEC4 are
the same but NEC4 introduces some additional secondary option
clauses and has also modified the names of some of the existing secondary options
under NEC3. We shall examine the content of the NEC Conditions in some detail
under Topics 9 and 10.

5.3. III. Institution of Electrical Engineers (IEE)

The IEE, based in London, England, is an international organization for electronics,
electrical, manufacturing and IT professionals, with specifically tailored products,
services and qualifications to meet the needs of today's technology industry.
The IEE, jointly with the Institution of Mechanical Engineers (IMechE), issues a
range of model forms of general conditions of contract (including, inter alia, Forms
of Tender, Agreements and Performance Bonds) and guides (known as
"commentaries") to their use. These are Model Forms of Contract for electrical and
mechanical work and consultancy. The contents of these publications are decided
by a joint committee of IEE /IMechE members and others representing the various
interests of the electrical and mechanical engineering industries. IEE has developed
the Joint IMechE/IEE Model Forms of General Conditions of Contract. Apart from
Model Form MF/4 and Model Form MF/3, the model forms have also been
adopted and are recommended by the Association of Consulting Engineers (ACE).

A Model Forms Information Pack which expands on the Model Forms and which
contains copies of all Supplements, Amendment Slips and Amendment Lists relating
to the current range of Model Forms is available on the IEE website. The website
also sets forth the terms and conditions upon which a licence to install and use the
texts of the IEE copyright Model Forms on users' computing systems may be
purchased.

5.4. Institute of Chemical Engineers

IChemE as an organisation, is similar to IMechE/IEE, but is interested in production
of contracts for the specialist process industry. The forms of contract have been
significantly updated in recent years to cover the spectrum of contract possibilities.
Like FIDIC, IChemE contracts are often known by their colour and a list of available
contracts is set out below:

IChemE (Green): Form of Contract –Reimbursable Contracts, 4th Edn. 2013

IChemE (Brown): Form of Contract – Subcontract for Civil Engineering Works, 3rd
Edn. 2013
12 IChemE (Orange): Minor Works 2nd Ed 2003

IChemE (Red): Form of Contract – Lump Sum Contracts, 5th Edn. 2013

IChemE (Yellow): Sub Contracts 4th Edn. 2013

IChemE (Burgundy): Target Cost, 2nd Edn. 2013

IChemE (Silver): Professional Services Agreement, 2015

IChemE (White): Rules for Expert Determination 3rd Ed 2001

IChemE (Pink): Arbitration Procedures

5.5. The Joint Contracts Tribunal (JCT)

Since 1931, the JCT, based in London, England, has been producing standard
forms of contract, guidance notes and other standard documents used in the
construction industry. The JCT range of contracts are fundamentally building rather
than civil engineering contracts but are used for projects where both building and
civil engineering works are involved. They cover orthodox contracting and design
and build and management contracts. Some forms deal with less complicated or
expensive forms of contract. The major types of form are listed below. Traditionally,
English building contracts have been divided into With and Without Quantities
forms to cover both methods of measurement.

The JCT helpfully publishes a document entitled – Practice Note – Deciding on the
appropriate JCT Contract, which provides guidance on what they would consider
to be the appropriate JCT Contract for different situations, e.g. design and build,
traditional contracting, cost plus or management. The note also contains a detailed
list of JCT style contracts available.

In a radical departure from previous JCT forms, the JCT launched on 1 March
2007, a new set of contract documents entitled JCT – Constructing Excellence. JCT
following changes in legislation in the UK, published in September 2011, the 2011
set of JCT contracts:

1. 2011 Standard Form of Building Contract

2. 2011 Intermediate Form of Building Contract
3. 2011 Minor Works Building contract among others
The body released the 2016 Edition of the JCT suite of contracts during the latter
part of 2016.
13
The following is a list of the forms included in the new (2016) edition:

1. Standard Building Contract With Quantities (SBC/Q)

2. Standard Building Contract Without Quantities (SBC/XQ)
3. Standard Building Contract With Approximate Quantities (SBC/AQ)
4. Standard Building Contract Guide (SBC/G)
5. Standard Building Sub-Contract Agreement (SBCSub/A)
6. Standard Building Sub-Contract Conditions (SBCSub/C)
7. Standard Building Sub-Contract with sub-contractorʼs design Agreement
(SBCSub/D/A)
8. Standard Building Sub-Contract with sub-contractorʼs design Conditions
(SBCSub/D/C)
9. Standard Building Sub-Contract Guide (SBCSub/G)
10.Standard Building Contract With Quantities (SBC/Q) Tracked Change
Document
11.Standard Building Contract Without Quantities (SBC/XQ) Tracked Change
Document
12.Standard Building Contract With Approximate Quantities (SBC/AQ) Tracked
Change Document
13. Collateral Warranties for different types of Works, 2016.

5.6. International Chamber of Commerce (ICC)

The Commission on Commercial Law and Practice (CLP) (one of the Commissions of
the ICC) based in Paris, France, has developed the ICC model contracts and ICC
model clauses, which give parties a neutral framework for their contractual
relationships. These contracts and clauses were carefully drafted by the experts of
the CLP Commission without expressing a bias for any one particular legal system.
The idea behind ICC model contracts and clauses is to provide a sound legal basis
upon which parties to international contracts can quickly establish an evenhanded
agreement acceptable to both sides. The contracts are constructed to protect the
interests of all parties, combining a single framework of rules with flexible
provisions allowing the parties to insert their own requirements. Currently, the
following ICC model contracts have been developed:

1. ICC Model Turnkey Supply of an Industrial Plant Contract, 2003

2. ICC Model Turnkey Contract for Major Projects, 2007
2. ICC Model Sub-contract (for Turnkey Projects), 2011
14
5.7. Liaison Group of the European Mechanical, Electrical, Electronic
and Metalworking Industries (ORGALIME)
ORGALIME publishes Model forms covering a wide range of issues including
construction. In March 2003, the ORGALIME Turnkey Contract for Industrial Works
was published. It is their most comprehensive contract publication on the subject.
ORGALIMEʼs premise was that purchasers and contractors in the engineering
sector, who had used existing models, had not found them as suitable for industrial
works as for civil engineering contracts. In April 2015, it published the Model form
of Consortium Agreement to be used where two or more companies agree to
cooperate to tender and deliver a large industrial installation(s).

5.8. ENAA the Engineering Advancement Association of Japan (ENAA)

ENAA is a non-profit organization established in 1978 with the support of the
Ministry of International Trade & Industries Japan to promote the advancement of
engineering capabilities and the development of the engineering service industry.
A major feature of ENAA is the close cooperation it receives from its numerous
member engineering firms which cover a broad spectrum of the industry.

ENAA publishes model contract form for international construction; these include
International Contract for Process Plant construction (Turnkey Lump sum
Basis),2010, the ENAA Model Form - International Contract for Power Plant
Construction, 2012 and the ENAA Model Form-International Contract for
Engineering, Procurement and Supply for Plant Construction, 2013. In preparing
these forms ENAA point to having engaged in substantial consultations.

6. Procurement/Project delivery Methods

A number of factors may determine what type of contract form may be used on a
project. These include the procurement or delivery method and types of
construction contracts (which invariably also reflect payment arrangements).
There are different types of delivery methods suitable for international construction
projects. These include the traditional design-bid-build method, design and build,
management contracting and construction management. Others often used on
major projects include prime contracting, alliancing, partnering (though there still
remain some debate on whether partnering is a procurement method),
Public-Private Partnerships (PPP), Build –Operate and Transfer (BOT) and Design –
Build and Operate (DBO). The procurement option is also dictated by several
factors including the nature of the project, the parties, the project location and
funding requirements.

Whatever the options may be, the choices parties make regarding the delivery
method influences substantially the kind of contract form they will ultimately use.
15
A close observation of the various forms reviewed will disclose that some of them
are modelled on the various types of delivery methods outlined above. The JCT
Suite of contract forms provides a good example of standard forms which have
been fashioned to cater for most of these procurement/delivery options. The FIDIC
Red Book, 1999 is said to be suitable for situations where the Employer or its
representative is primarily responsible for the design of the project. In most
instances where the Red Book will be used, the design is likely to be separated from
construction. This reflects the traditional design-bid-build procurement method.
Similarly, the Yellow Book is suitable for design and build projects, whilst the Silver
Book is primarily suitable for turnkey projects.

Some of the standard forms make contract types primary distinguishing feature.
Thus, a standard form may be more suitable for use where the proposed contract
is a lump sum or fixed price, prime cost/cost plus or reimbursable contract, target
cost contract or unit price. A good example here is the NEC3 Options A-F (see
Section 5.2 above). It is important that you read further on the delivery methods
and the contract types if you are not already familiar with them. This will provide
the relevant context for subsequent discussions on the various standard forms.