1

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Procurement in the construction sector and the use of FIDIC contractsBritish Chamber of Commerce seminar and discussion on Smart Public and Private Procurement

Lukáš Klee

2

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Construction industry

-Very unique configuration of processes.

-Risks sometimes hard to foresee or difficult to analyze.

-Realisation on vast sites.

-Time for completion usually exceeds 2 years by large projects.

3

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Construction industry

-Construction project is not a production line.

-Design errors, weather, unforeseeable physical conditions, access to the site, construction permits, environmental activists, changes, variations etc.

-Procurement often based on the one and only criteria of price.

-Conditions of contract have to foresee solutions.

4

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

FIDIC

-Fédération Internationale des Ingénieurs-Conseils (International Federation of Consulting Engineers).

-Most popular conditions of contract for construction projects.

-Used all around the world.

-In civil law and common law environment.

-In the Czech Republic for example as conditions of contract for infrastructure construction projects.

5

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Lump sum contract

More risk at the Contractor= higher price

Lump sum contract

More risk at the Contractor= higher price

Measurement contract

FIDIC Rainbow Suite – First Edition 1999

6

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Recommendations

-Czech Directory of Highways use translation of FIDIC Red Book.

-Red Book - balanced measurement contract.

-Employer is responsible for the design.

-DBB (Design – Bid – Build) Project.

-In CR detailed design in the terms of reference - lot of time to prepare it.

7

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Use of Yellow Book

-Worldwide, in last years increase of D/B (Design – Build) projects.

-Yellow book represents a typical D/B system.

-Yellow Book - lump sum contract.

-Contractor is responsible for the design.

-Use of FIDIC Yellow Book could simplify the preparation.

8

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Clarification of the Engineer’s role

The Engineer -the most important participant of construction project next to the Contractor and the Employer.-Stems from the British tradition. -agent of the Employer and an adjudicator of disputes between the Employer and the Contractor. -confusion in civil law countries - the Engineer, is empowered to give instructions binding on the parties not being the contract party. -It works if the participants understand Engineer's role and respect the rules. -Lack of experience and knowledge in CR.-The solution, where the position of the Engineer is provided by the employees of the client brings a lot of problems. -Clear position of the Engineer could help solve the hazy allocation of responsibility.

9

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Stimulation of Contractor´s Invention

-Public procurement competition in construction - the price prevails.

-Lack of platform for Contractor´s alternative proposals and invention.

-Possibility to submit value engineering proposal.

-Value engineering is something that is positive and it should be stimulated by the Employer and the public procurement act as well.

10

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Best practice Dispute Resolution

-FIDIC documents contain a well-considered three-phase system of dispute resolution.

-First instance deciding a dispute is the Engineer.

-Second instance is the Dispute Adjudication Board as a permanent or ad hoc panel.

-Third instance, which is Arbitration with an Amicable Settlement that must precede.

-This system is seriously damaged within Czech public infrastructure construction projects because the Dispute Adjudication Board and Arbitration are erased out of the conditions of contracts.

11

Smart Public and Private Procurement

Luká

š Kl

ee fo

r BCC

in C

R

Conclusion

-Use of Yellow Book - Design/Build system with the new projects with shortcomings in the preparation stage.

-Necessary clarification and determination of the Engineer’s role with help of education or with help of some detailed regulation.

-Lack of stimulation of Contractor´s Invention that could be solved by specific Value Engineering rules.

-FIDIC Dispute Resolution system that is damaged mainly by the lack of Dispute Adjudication Board.