In Africa’s growing construction sector, understanding the distinction between claims and variations in Fédération Internationale des Ingénieurs-Conseils (FIDIC) contracts is vital for the successful execution of projects. Both claims and variations deal with changes and unforeseen circumstances but serve distinct purposes, making it crucial for project managers, contractors, and legal advisers to know how to navigate these processes efficiently. Claims typically arise due to delays, additional costs, or disruptions, while variations involve intentional changes to the project scope. In construction projects across Africa, especially those governed by the FIDIC 1999 and 2017 contracts, understanding these distinctions can help prevent disputes, reduce delays, and ensure fair compensation for all parties involved.
Distinguishing between Claims and Variations
Claims and variations serve different purposes but are often confused. Variations occur when the scope of work is deliberately altered by the employer, while claims are usually triggered by unforeseen circumstances, insufficient information, or delays. Variations are valued based on pre-agreed contract rates, while claims are often compensated based on the unpredictable nature of the events leading to the claim.
The procedural aspects also differ. Variations are usually initiated by the employer or project engineer, while claims require contractors to issue a formal notice within a specified period, outlining the event that triggered the claim.
Variation Procedures under FIDIC 1999 and 2017
FIDIC 1999
Sub-Clause 13 of the Red Book governs variations. The engineer can issue a variation order or request the contractor to submit a proposal for additional work. While the contractor can raise objections, they must continue working unless instructed otherwise.
FIDIC 2017
In the 2017 version, the variation procedure is more detailed. Sub-Clause 13 provides two pathways: variation by instruction, where the engineer instructs changes, and variation by request for a proposal, where the contractor submits a cost-saving proposal at their own expense. The engineer must then confirm or modify the variation instruction. Unlike FIDIC 1999, the contractor has 28 days to submit detailed particulars after receiving the instruction.
Claims Procedure under FIDIC 1999 and 2017
FIDIC 1999
In the FIDIC 1999 contracts (Red, Yellow, and Silver Books), the claims procedure is split into two categories: Employer Claims and Contractor Claims.
Contractor Claims (Sub-Clause 20.1):
The contractor must notify the Engineer within 28 days of becoming aware of any event that could give rise to a claim, such as delays or unforeseen circumstances. If this notice is not submitted within the specified period, the contractor may lose the right to claim. Once the claim notice is submitted, the contractor has an additional 42 days to provide full supporting details. The Engineer is responsible for determining the validity of the claim within a further 42-day period, or they may request more information.
Employer Claims (Sub-Clause 2.5):
The procedure for employer claims is less strict. When the employer becomes aware of a claimable event, they are required to notify the contractor but are not bound by specific deadlines for this notification. After the notice, the Engineer will try to agree on a settlement, and if no agreement is reached, the Engineer determines the claim amount. The employer’s claim is generally deducted from payment certificates.
FIDIC 2017
In contrast, the FIDIC 2017 edition unifies the claims procedure under Clause 20 for both contractors and employers. This streamlining provides a more efficient and transparent approach to claims handling.
Unified Claims (Clause 20):
Under FIDIC 2017, the party wishing to make a claim—whether it be the contractor or the employer—must issue a notice within 28 days of becoming aware of the event. The timeframe for submitting a fully detailed claim is extended to 84 days, providing more time for comprehensive documentation.
Engineer’s Role:
The 2017 version introduces a more defined role for the Engineer. If the Engineer receives a claim notice late, they must issue a notice within 14 days notifying both parties of the time-bar, otherwise, the claim will be considered valid. This creates an added layer of protection for contractors and streamlines the process by ensuring clarity on claim deadlines.
In conclusion, the ability to distinguish between claims and variations in FIDIC contracts is essential for stakeholders involved in African construction projects. As Africa’s infrastructure development surges, understanding the nuances of these concepts helps ensure that projects are completed on time and within budget while preventing costly disputes. Claims usually arise from unforeseen circumstances or delays, whereas variations involve intentional changes in the scope of work.
What we see at the ICC International Court of Arbitration, is that disputes commonly arise where among other things, variations result in a reduction in the originally agreed scope of work which in turn, impact the amounts payable to the contractor. This dispute may be further compounded by the fact that an equal or almost equal amount of additional work was also awarded to the contractor in the course of the project. While an employer may argue that the omitted works have been replaced by the added works, a contractor may still insist on claiming loss and damage for any omitted works. This is just but one of the many instances that the distinction between claims and variations can become blurry.
Naturally, parties would hope that any claims or variations disputes can be settled through amicable settlement. The International Chamber of Commerce (ICC) provides several mechanisms for resolving disputes. The Mediation Rules allows for mediation regardless of whether there is a prior agreement to refer disputes to mediation. Additionally, the Expert Rules provide for expert determination, where an independent expert resolves factual disputes related to contractual matters. Furthermore, the Dispute Board Rules facilitate ongoing dispute resolution through Dispute Boards, which include Dispute Review Boards (DRBs), Dispute Adjudication Boards (DABs), and Combined Dispute Boards (CDBs). Finally, the ICC also offers Arbitration Rules for resolving disputes.
By mastering FIDIC’s procedures, particularly in the 1999 and 2017 editions, construction professionals can effectively navigate challenges, safeguard project timelines, and foster stronger partnerships between contractors, engineers, and employers. Ultimately, this knowledge supports the long-term success and sustainability of Africa’s booming construction industry.
Noella C. Lubano, Kenyan Court Member of the ICC International Court of Arbitration, and Partner at Oraro & Company Advocates. Her colleagues Zahra Omar, Associate, and Alfonce Oduor, who is undertaking pupillage at the firm also contributed to the writing of this piece.
