Contract Users’ Newsletter ISSUE 4 Dec/Jan 2019-2020
Published by the International Federation of Consulting Engineers (FIDIC)
www.fidic.org
A great year for FIDIC contracts The past 12 months have seen significant gains for FIDIC and its contracts as both have increased their advocacy and influence in the global construction sector, says FIDIC chief executive NELSON OGUNSHAKIN. OGUNSHAKIN Most people working in the international construction industry understand FIDIC contracts. That is why multilateral funding banks like the World Bank, Inter-American Development Bank, European Bank for Reconstruction and Development, Asian Infrastructure Investment Bank, African Development Bank and the Caribbean Development Bank have adopted FIDIC contracts in their standard bidding documents. The reason for this is very simple. Whether you are a private or public sector client, supplier, main contractor, equipment supplier, sub-contractor, or a consultant, there will be a contract in the FIDIC suite that will address your needs. The banks, lenders, investors and insurers understand the risk and the allocation of risk within FIDIC contracts. By understanding risk and its allocation then you can design a mitigation strategy for that risk. The fact that FIDIC contracts are over 50 years old and used by multilateral development banks, NGOs, international governments, multinational
companies, private investors and on major projects worldwide is some endorsement. You don’t need to say any more than that! Notwithstanding this success, FIDIC is certainly not resting on its laurels and 2019 has been an excellent year for our contracts which has in turn helped the organisation to increase its influence with key stakeholders and opinion formers in our industry. This issue of our Contract Users’ Newsletter highlights some of the latest gains we have made and details some of the brilliant work being done by our volunteers in developing our contracts work. FIDIC contracts are highly regarded documents globally because they are written by engineers and practitioners in the industry and not lawyers, so they are
structured in a way that understands risk, regularly updated and the people that draft them are practitioners from different geographical areas around the world. They are also internationally recognised standard forms, that are used and are adoptable in different jurisdictions, and FIDIC is justifiably proud of this and long may it remain so. So, as 2019 draws to a close, FIDIC is looking ahead to 2020, a year when we hope to further increase our influence in the global industry, as clients and construction professionals look to use well-respected and proven contracts that allocate risk equitably and fairly and offer protection should things go wrong.
FIDIC International Contract Users’ Conference London, UK, 2-5 December 2019
www.fidic.org
FIDIC Geneva 2020 INTERNATIONAL INFRASTRUCTURE CONFERENCE
Infrastructure governance and leadership 13-15 September 2020
Kempinski Hotel and Theatre du Léman, Geneva
The premier gathering for the global engineering community Join more than 800 delegates and visitors to discuss: How major construction projects are run The role of project leadership How best to engage with politicians to get the best results International business opportunities
Other future key event dates • • • • •
ICC-FIDIC Conference on International Construction - Sao Paulo, Brazil - 10-11 February 2020 FIDIC Contract Users’ Conferences, dates and locations TBC FIDIC GAMA Conference 2020 - Gaborone, Botswana – 19-21 April 2020 ACEC Annual Convention 2020 - Washington D.C., USA – 26-29 April 2020 FIDIC ASPAC Conference 2020 - Bangkok, Thailand – 14-16 June 2020
Find out more at www.FIDIC.org
An event organised by the International Federation of Consulting Engineers (FIDIC)
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FIDIC International Contract Users’ Conference
London location for contract learnings FIDIC’s International Contract Users’ Conference in London is the organisation’s flagship conference on how to successfully use FIDIC contracts, manage major projects, handle claims, avoid and resolve disputes and much much more. leadership on key FIDIC areas including claims, With more than 50 speakers across four days of variations, DAABs and much more besides. conference and workshop sessions, the latest in As always, the users’ conference agenda will FIDIC’s series of global contract conferences will enable delegates to gain an in-depth understanding be complemented with FIDIC’s ever-popular pre- and post-conference workshop sessions. of managing major projects and resolving Whether delegates are attending to gain a better disputes using FIDIC contracts and the new suite’s understanding of how to safely modify FIDIC enhanced capabilities. contracts, understand the best dispute resolution The conference will open with a ‘fireside techniques or find out more chat’-style discussion between about BIM’s impact on contract FIDIC’s CEO, Dr Nelson “More than 30 FIDIC management, this International Ogunshakin OBE and the leading experts will be present Contract Users’ Conference in arbitrator, mediator and former in London to share London has assembled a top UK High Court judge Sir Vivian team of experts and advisors to Ramsey on the global perspective lessons learnt in help attendees get on top of these on FIDIC Contracts. This will using FIDIC forms of and many other important areas be followed by a lively audience contract” of project administration under Q&A, which is sure to be very FIDIC. interesting. The conference takes place on the second In addition, the London conference will also see the winners of the inaugural FIDIC Contracts anniversary of FIDIC’s publication of the Awards announced. These awards recognise new Red, Yellow and Silver Books and it’s excellence in the use of FIDIC contract forms for appropriate that early adopters of the new project delivery and showcase examples of good FIDIC suite will be coming together to share practice through collaboration from across the their experiences and explain the rationale for world. This exciting initiative will further unite opting for the new forms. Delegates will explore the global contract user community and is set to and learn from new user-led case studies and be an annual feature for years to come. benefit from high-quality and insightful thought
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New contract training courses coming up FIDIC’s wide range of high-quality training conducted by accredited trainers who are international experts on FIDIC contracts continues to be popular, writes FIDIC’s training manager SILVIA FOSSATI. FIDIC has a packed programme of contracts training courses for the remainder of this year and into 2020. Our popular and insightful courses are increasingly being sought out by industry professionals looking to broaden their knowledge of FIDIC contracts and best practice in how to use them. Our trainers have extensive experience in the practical use of FIDIC contracts in international projects and have been assessed by FIDIC to ensure the best quality training is delivered to attendees. Training is delivered via
stand-alone sessions, or a series of sessions and can be online or classroom based. We have a new course coming up in Serbia - FIDIC Advanced Training and Workshop: FIDIC Comparison of 1999/2017 Contracts – which takes place in Belgrade from 10-11 December 2019. This is a brand-new format, created and held for the first time by outgoing FIDIC contracts committee chair Zoltan Zahonyi and is sure to be popular. The two-day event includes training and a workshop on the 2017 Edition FIDIC contracts and attendees
will gain high value insights on the major updates in these new editions. We also have a series of online FIDIC courses planned for early 2020. These include our Module 1 and 2 online courses and the Module 1 advanced online course. These courses are based on the 1999 FIDIC contracts, with highlights of the 2017 Editions. They are based on real-time lectures in combination with directly related case work through which participants will work on real life cases and practise application of the various contract conditions.
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The courses consist of eight to nine sessions of two hours each, every two weeks over four or five months. Each session is recorded and can be watched after the lecture. The preparation of case work is a vital part of this training and must be made between the sessions, with the outcome discussed during the next classroom session. Participants receive the hardcopies of the FIDIC contracts books involved, plus the electronic version of the FIDIC Contracts Guide. A Certificate of Successful Completion or of Participation is distributed to the participants having met the required criteria of attendance and active participation. Our FIDIC online courses are successfully attended by consulting engineers, project managers, lawyers and other professionals working in the construction consulting industry, wishing to increase their knowledge of FIDIC contracts and benefit from practical insights. Find out more about FIDIC training courses at www.fidic.org/online-fidictraining-courses Also, coming up soon are new training modules on the 2017 Edition contracts. Our partner Matrix is offering FIDIC Module 1: The New FIDIC Contracts 2017 - the 2nd editions of the Red, Yellow and Silver Books, in London. While in Austria and the Netherlands, ECV is offering courses on The Management of Claims and Resolution of Disputes under the 2017 FIDIC Contracts in Vienna and also The Practical Use of the 2017 FIDIC Contracts in Amsterdam.
For full details of all FIDIC training courses visit fidic.org/events
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New plant design and build subcontract launched A new FIDIC contract is launched at the London users’ conference. A new FIDIC Conditions of Subcontract for Plant and Design Build was launched at the International Contract Users’ Conference in London. The Yellow Book Conditions of Subcontract is for use in conjunction with the FIDIC Conditions of Contract for Plant and Design Build, First Edition 1999. The clauses of general application contained in the subcontract are based on the FIDIC Conditions of Subcontract for Construction, First Edition 2011, with changes where necessary to reflect the differences between the FIDIC Conditions of Contract for Plant and Design Build, First Edition 1999 and the FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, First Edition 1999. The document includes a series of flow charts which show the critical sequences of activities which are specific and unique to the subcontract form of contract. These have been included to facilitate an understanding of the procedures and terminology
found in these FIDIC Conditions of Subcontract for Plant and Design Build. FIDIC’s head of legal and compliance Daduna Kokhreidze commented: “When a part of the main works contracted based on the FIDIC Conditions of Contract for Plant and Design Build, First Edition 1999 is sub-contracted, it is equally important for the successful completion of the project that the terms of the sub-contract are properly addressed and drafted. The FIDIC Conditions of Subcontract for Plant and Design Build should serve this purpose.” The publication of the contract is the latest output in a very busy year from the FIDIC contracts committee. With further publications and guidance documents planned for 2020, the coming 12 months are set to be just as busy for this key FIDIC committee.
“Subcontracting deserves greater attention” “When a part of the main works contracted based on the FIDIC Conditions of Contract for Plant and Design Build, First Edition 1999 is sub-contracted, it is equally important for the successful completion of the project that the terms of the sub-contract are properly addressed and drafted. The FIDIC Conditions of Subcontract for Plant and Design Build should serve this purpose.” Daduna Kokhreidze, FIDIC’s head of legal and compliance
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“We responded to market demand” What is the significance of the publication of the Conditions of Subcontract for Plant and Design-Build?
FIDIC contracts committee member SIOBHAN FAHEY outlines why FIDIC published its new Yellow Book subcontract.
FIDIC’s new publication is drafted for design-build subcontracts, where the main contract is based on the FIDIC Conditions of Contract for Plant and Design Build 1999 (often referred to as the FIDIC Yellow Book 1999). As is the case under FIDIC’s Subcontract for Construction, First Editions 2011 (for use with the FIDIC Conditions of Construction 1999, the FIDIC Red Book 1999), the new form of Subcontract is drafted on a back-to-back basis, reflecting the most common practice of subcontracting in engineering and construction projects. That said, FIDIC is known for its fair-and-balanced contracts - and the new design-build subcontract is no exception: the rights of the contractor under the main contract, as well as the obligations, are passed down to the subcontractor.
Copies of The FIDIC Conditions of Subcontract for Plant and Design Build (First Edition 2019) are available from the FIDIC bookshop at http://fidic.org/bookshop
Why did FIDIC publish it and who will it be used by? FIDIC published the Subcontract for Construction in 2011 which has been successfully used on many projects. Since then, FIDIC has received many queries from the market asking for a designbuild subcontract for use with the FIDIC Yellow Book 1999. This latter form of contract is a very popular one, it continues to be used very extensively in many types of engineering and construction projects around the world and so we envisage that the new FIDIC Yellow Book Subcontract will be used by design-build contractors who wish to subcontract significant and important parts of the design-build works.
What are the benefits of using this document? The main benefit is that it is a fair-and-balanced subcontract, as previously noted. Also, the general conditions of subcontract are drafted on
the basis of pay-when-paid, being the most common commercial arrangement between contractors and subcontractors in general - but not pay-if-paid: the subcontractor will not lose their entitlement to be paid if it transpires that the employer does not pay the contractor under the main contract. In those parts of the world where pay-when-paid provisions are not allowed by law, the guidance for the preparation notes of particular conditions at the back of the new subcontract give the example clauses for subcontracts. Additionally, there are example provisions in the guidance at the back of the new subcontract where an engineer’s determination and/or a DAB decision and/ or an arbitral award under the main contract concerning a subcontractor’s claim is to be binding under the subcontract.
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AIIB signs five-year agreement to use FIDIC contracts The Asian Infrastructure Investment Bank has signed a five-year agreement to use FIDIC standard contracts.
FIDIC has signed a major agreement with the Asian Infrastructure Investment Bank (AIIB) that will see the international funding organisation include the use of nine FIDIC standard contracts for the next five years. FIDIC has granted the AIIB a non-exclusive licence to refer to the nine major FIDIC contracts for projects they finance and the documents may be used as part of the bank’s standard tender documents. The contracts include the latest 2017 Second Edition FIDIC contracts and 1999 editions, which cover a wide range of international construction and infrastructure work, and AIIB signing the agreement represents yet another significant endorsement for FIDIC contracts from a major international funding organisation. FIDIC chief executive Dr Nelson Ogunshakin said: “We are delighted to have signed this agreement with the AIIB as it means that FIDIC has now entered into similar agreements with nearly all of the major international funding organisations. This will create more certainty in the market as by adopting the FIDIC contacts on major projects the AIIB is saying that they endorse the fair and balanced approach that these documents offer to parties on major construction contracts. “The AIIB’s endorsement should provide additional comfort to the financial, institutional and private equity investors operating in the global market to adopt the use of FIDIC standard procurement contracts as an effective tool to mitigate the risks associated with investable infrastructure asset class.” Commenting on the signing of the agreement Zheng Quan, director general for the strategy, policy and budget department at the AIIB, said: “We are very pleased that in signing this agreement it will allow the AIIB the opportunity to incorporate FIDIC forms of contract into its suite of standard tender documents which are currently
FIDIC chief executive Dr Nelson Ogunshakin pictured with Asian Infrastructure Investment Bank president Jin Liqun.
“We are delighted to have signed this agreement with the AIIB as it means that FIDIC has now entered into similar agreements with nearly all of the major international funding organisations.” Dr Nelson Ogunshakin, FIDIC chief executive
under development for use by the bank’s clients. The use of FIDIC forms of contract will ensure that infrastructure contracts financed by the AIIB are fit for purpose and will be implemented in accordance with best international standards. The AIIB looks forward to further productive collaboration with FIDIC.” FIDIC president Bill Howard said: “I’m really delighted to see this move by the AIIB. Strengthening FIDIC’s relationships with the banks and the international funding institutions will enhance our efforts to coordinate FIDIC’s engagement with the financial institutions that will benefit the whole industry. Such agreements are good for FIDIC and good for the global infrastructure sector and I look forward to a mutually beneficial relationship with AIIB and all the other multilateral development banks over the coming years.”
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Uniting FIDIC’s contracts community FIDIC’s new Contract Users’ Newsletter is off to a flying start with four issues published in 2019, writes the editor ANDY WALKER. WALKER When we launched the FIDIC Contract Users’ Newsletter in February this year, chief executive Dr Nelson Ogunshakin said that he hoped that the publication would “bring together a community of users, keeping them informed about the latest developments that they need to know about and also provide a dynamic platform for news, views and opinion for FIDIC contract users and the wider contracts community”. With our fourth issue I hope we are well on the way to achieving those aims. Our issues to date have carried news and views about FIDIC contracts and kept readers informed about the latest developments around the world. We have sought to give a platform to those who use these industry standard forms and highlighted a number of major clients and projects that have made the choice to use FIDIC contracts. FIDIC’s work with the multilateral development banks has been well covered in the pages of the Contract Users’ Newsletter and news of the latest bank to sign up to use our contracts, the Asian Infrastructure Investment
Bank, appears on page eight. We expect to report more good news like this in future newsletters as more major funders and leading clients make the FIDIC choice for their major projects. The newsletter has also profiled some of the unsung heroes behind the FIDIC contracts story, who often do not receive public credit for their work and it’s great to be able to give them that recognition. They include the members of the FIDIC contracts committee and task groups, without whose dedication and hard work there would be no contracts, and also our fantastic staff team who keep the show on the road from our Geneva headquarters. While this newsletter will keep readers informed about FIDIC’s news regarding the latest contract developments, we also want to see the experience of our contract user community reflected in the pages of the publication. To that end, we are very keen to hear from clients,
contractors, consultants and legal professionals with their views of working with FIDIC contracts and why they chose them. I hope that over the last 12 months this Contract Users’ Newsletter has been an interesting and informative read and that we have increased our readers’ understanding of the world of FIDIC contracts and the benefits that they bring. In 2020, I look forward to
improving the coverage we offer and to bringing together even more the FIDIC community of users and providing a valuable platform to exchange ideas, news, views and information.
How to get involved Please send your news, views and articles on FIDIC contracts to the newsletter editor, Andy Walker, at awalker@fidic.org Subscribe to the newsletter at http://fidic.org/user/register
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CERN chooses “recognised and accepted” contract
Leading particle physics research organisation, CERN, is using the FIDIC Red Book on its Science Gateway project in Geneva. We spoke to ANNE-LAURENCE GOUVAERTS, who provides legal support for the project at CERN. Tell us about CERN and the Science Gateway project CERN’s work helps to uncover what the universe is made of and how it works. We do this by providing a unique range of particle accelerator facilities to researchers, to advance the boundaries of human knowledge. The laboratory, established in 1954, has become a prime example of international collaboration. Our mission is to provide a unique range of particle accelerator facilities that enable fundamental research at the forefront of human knowledge; perform world-class research in particle physics and unite people from all over the world to push the frontiers of science and technology, for the benefit of all. The future Science Gateway building will showcase the results of
CERN’s work and engage the public in the world of science.
Why did you pick a FIDIC contract to use on this project? Due to its important and sophisticated needs regarding civil engineering infrastructure, CERN has a long history of working with FIDIC contracts. Back in mid-1990s, for the construction of the Large Hadron Collider (LHC), CERN placed its confidence in FIDIC’s Construction Contract. As a lesson learned from its previous contracting for civil construction works, CERN decided to divide the works between three work packages, corresponding to geographical areas of the LHC. Therefore, CERN awarded three contracts to different engineers and contractors. Each of these
three separate contracts were substantially based on the 1987 edition of the Red Book.
What benefits do you believe you will get from using a FIDIC contract? FIDIC contracts and philosophy are well known and accepted by most of the major actors in the construction industry. Proposing a FIDIC
contract places the CERN project in a recognised and accepted scheme for the sharing of risks and liabilities. It also establishes from the beginning clear mechanisms to solve critical issues such as variations management, engineer decisions process or unforeseeable conditions treatment.
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For its projects, CERN adapted the FIDIC model to its status as an intergovernmental organisation and its internal decision-making procedures, including on budgetary matters. For example, a certain number of approval duties such as payments were transferred from the engineer to CERN. Regarding the LHC contracts, it was also decided to refer any disputes to a hands-on adjudication panel of five independent experts (which for the LHC works comprised four engineers and one contract expert, the late Michael Mortimer-Hawkins, who used to chair the FIDIC drafting committee and who brought a wealth of knowledge to the Panel) with a view to accelerate the resolution of disputes. Either party would then still have to possibility to go to arbitration if dissatisfied with the award, but so as to protect progress of the works, in no event before contract completion. Until then the parties would have to obligation to follow the panel decision and execute their obligations. It is interesting to note that FIDIC introduced the concept of adjudication panel in the next edition of the Red Book after the LHC project.
license were well adapted and balanced. FIDIC was very responsive and had a very good understanding of our needs particularly regarding timeline. We very much appreciated the follow-up by FIDIC’s team and the good contacts we have built over time with them. We should also acknowledge the outstanding role of our specialised external counsel, Peter Rees QC, in the success of CERN’s contracting practice and dispute resolution.
Was the process straightforward to get the licence?
What benefits will the Science Gateway project bring when it is complete?
It was straightforward and efficient. The terms of the
CERN’s new Science Gateway Building will be an iconic
exhibition space, learning and outreach centre for all CERN’s activities, incorporating all the hospitality infrastructure required to host a large number of visitors of all ages. This approximately 7,000 m2 facility will be located next to the Globe of Science and Innovation and constitute an
integral part of CERN’s site and visits circuit. The Science Gateway Building will host a 1,000-seater auditorium and will be equipped with facilities for permanent and temporary exhibitions, classrooms for hands-on experiments as well as full-immersion spaces, offices and labs.
What is the timescale for the project? The timescale for the project is about three years from now, between the civil engineering construction works and the development and installation of educational content. I am sure it will be a fantastic addition to all the things the Geneva region has on offer!
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FIDIC Contracts Awards win Winners of the inaugural FIDIC Contracts Awards are announced celebrating the great work carried out by an individual, team, project or organisation. The first-ever winners of the FIDIC Contracts Awards have been unveiled at a gala dinner event at the FIDIC International Contract Users’ Conference in London on 3 December 2019. The new awards, which were sponsored by Accura Consulting, aim to recognise excellence in the use of FIDIC contract forms for project delivery and to showcase examples of good practice through collaboration from across the world. The purpose is to bring FIDIC contract users together to create and further enhance this important global community. Seven FIDIC Contracts Awards were handed out at the London event - for Project of the Year, Consultant of the Year, Contractor of the Year, Legal or Professional Services of the Year, Trainer(s) or Adjudicator(s) of the Year, Strategic Partners of the Year and a FIDIC Golden Principles Award. The Project of the Year prize was awarded to APM Terminals MedPort Tangier (TM2) in Morroco, the first, fully automated terminal in Africa which has been constructed under the highest quality and safety standards within time, budget and without any arbitration procedures or claims. Remote-controlled cranes will provide the fastest, safest and most efficient loading and unloading services to the newest ultra-large container ships. The conditions of contract used on the project was the FIDIC Red Book and the project was described as a “world record”, delivered on time, to budget and without serious injury to any of the project associates.
Miguel Angel Clare Gonzalez Revilla took the Consultant of the Year Award in recognition of his work advising the Panamanian state on several major infrastructure projects. He played a leading role in interpreting the FIDIC contract used for the administration of the Panama metro line 1 project, and recently the main electricity transmission company of Panama adopted the FIDIC Red Book for the construction of the country’s fourth electric transmission line. The winner of the Contractor of the Year was Willemen Groep, one of Belgium’s largest family-owned construction groups, who impressed the judges with their proactive and problem solving approach to clients and their ongoing use of FIDIC contracts and their adherence to the FIDIC principles of cooperation and collaboration which has seen them achieve project success on a global scale.
Pinsent Masons won the Legal or Professional Services of the Year Award in recognition of their ongoing
reputation as leading lawyers on the FIDIC suite of contracts. Their FIDIC experience is built on a vast project experience and construction know-how and they have the knowledge required to make FIDIC forms work effectively and efficiently, whether for low value/straightforward procurement/projects or complex mega-projects.
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inners revealed Turner & Townsend were the winners of the Strategic Partners of the Year Award for their sterling work with FIDIC on the recent contract agreements signed with multilateral development banks, including the World Bank, InterAmerican Development Bank, Caribbean Development Bank, European Bank for Reconstruction and Development, African Development Bank and the Asian Infrastructure and Investment Bank.
Awards sponsored by
Winners of the inaugural FIDIC Contracts Awards FIDIC Contracts Project of the Year
APM Terminals MedPort Tangier (TM2) The Trainer(s) or
Adjudicator(s) of the Year Award was won by Shura Construction Management. Its CEO Husni Madi has delivered both public and in-house training through FIDIC; in Africa and the Middle East and impressed the judges with the breadth of his experience and training style and the fact that he has develop his training skills over the years by providing public, in-house and online training in addition to speaking and delivering workshops at FIDIC contract users’ conferences. Finally, the FIDIC Golden Principles Award went to Rob Fraser, formerly of Aurecon South Africa. In over 47 years with his firm, Rob has been a true pioneer in the implementation of FIDIC-based contracts for several large, multibillion-Rand bulk water projects in South Africa and neighbouring countries. He has consistently advocated and innovatively applied the principles of FIDIC and he continues to provide advice to the Aurecon contracts team, always endorsing the FIDIC Golden Principles. The first year of the awards was a success in raising the profile of FIDIC contracts and those who use them. This exciting initiative will further unite the global contract user community and is set to be an annual feature for years to come.
FIDIC Contracts Consultant of the Year
Miguel Angel Clare Gonzalez Revilla FIDIC Contracts Contractor of the Year
Willemen Groep FIDIC Contracts Legal or Professional Services of the Year
Pinsent Masons LLP FIDIC Contracts Trainer(s) or Adjudicator(s) of the Year
Shura Construction Management FIDIC Contracts Strategic Partners of the Year
Turner & Townsend FIDIC Golden Principles Award
Rob McKenzie Fraser
Thanks to our judging panel chaired by Sir Vivian Ramsey
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Vote of confidence for FIDIC contracts from Russia FIDIC’s Russian member association, the National Association of Construction Engineering Consultants (NACEC), has made a significant gain after the government announced it would base its official universal list of contracts on the FIDIC terms.
The Russian Federation has issued new translation and production will now thinking. “As the managing director of guidance stating that the creation of the possibly work for the Russian government NACEC I’m a member of the Council official universal list of contracts would and this has helped with our licence for Engineering Development in the be based on the FIDIC extension to 2021 for FIDIC documents,” Ministry of Trade,” said contract terms. It’s she said. “This year and next year we Kubanskaya. “Our Ministry great news for FIDIC, will have a lot of work to take the best “We have made for Economic its member association practices from FIDIC, which is excellent numerous proposals into Development NACEC and the for widening the reputation of both FIDIC such strategic high-level has drafted the industry. and NACEC members,” Kubanskaya government programmes The move, which said. concerning the need of strategy for export is likely to lead to The Russian Ministry for Economic harmonisation of the of Russian services the increased use of Development’s decision to ensure the Russian contract base with up to 2025 and this FIDIC contracts on implementation of FIDIC contracts is yet the international standards, strategy includes construction projects, another vote of confidence for a suite of namely FIDIC, as we know was hailed as a contracts which are becoming ever more that FIDIC contracts can the development of significant step forward export of engineering respected on the global stage and a further help to create better project by Olga Kubanskaya, example of the benefits of FIDIC and its management of large services,” managing director member associations working together infrastructure projects. The of FIDIC’s Russian with national governments for mutual adoption of the Strategy of member association NACEC, and the benefit. Services Export 2025 is the evidence that result of an effective lobbying campaign our proposals have by her association. been heard. We hope “Our Ministry for Economic that the ministry’s Development has drafted the strategy strategy will work for for export of Russian services up to the industry and the 2025 and this strategy includes the government alike,” she development of export of engineering said. services,” Kubanskaya explained. “The Kubanskaya said strategy states that Russia should ensure that the move by the the creation of the typical contract list ministry would help based on the FIDIC contract terms. This in raising the profile represents the results of an effective of FIDIC in Russia advocacy campaign we have undertaken,” and the reputation of she said. NACEC members. NACEC was able to use its position “It means a lot for as a respected representative body for NACEC as it means Olga Kubanskaya, managing director of FIDIC’s Russian construction engineering consultants that our agreement member association NACEC. in Russia to influence the government’s for FIDIC books
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Future Leaders Management Certificate 2020
Registrations are now open for young professionals to apply for FIDIC’s training certificate for future leaders. In 2020 the FIDIC Young Professionals Management Training Programme becomes the FIDIC Future Leaders Management Certificate (FLMC). A new name and a revamped format will provide an insightful training experience and registrations are now being taken. The FLMC has been designed to strengthen the business expertise of young engineers and other professionals working in the field of consulting engineering. It also offers networking opportunities and an insight into FIDIC global activities. The certificate programme, which runs from 16 March to 31 August 2020, was developed after extensive surveys covering content and cost and as a result it features a cost-effective training approach and offers optional attendance to FIDIC’s 2020 International Infrastructure Conference in Geneva. The Geneva conference takes place from Sunday 13 to Tuesday 15 September 2020.
Programme participants who opt to attend the conference will attend a two-day workshop at the conference venue (Grand Hôtel Kempinski Geneva) on 11-12 September 2020. Conference participants will have an opportunity to meet the trainers and will have an opportunity to present their thoughts at the FIDIC annual conference. One of the main benefits of attending the conference are the networking opportunities which it affords participants. The training programme itself is made up of a series of interactive webinars, case study work and discussions with trainers. Six webinars are included with the following content: • The consulting firm and profit • The consultant contract • HR and career planning • Business development • Project management • Quality management and ISO • Liability insurance and risk
• Integrity management • Sustainability management and sustainable design Commenting on the transition to Future Leaders from the previous ‘young professionals’ name, Cosmin Tobolcea, chair of FIDIC’s Future Leaders group, said: “The name change very much reflects what our members aspire to be – to be the future leaders of our industry. “We have rebranded ourselves, with a new website and we launched Future Leaders earlier this year at the FIDIC annual conference in Mexico. FIDIC’s CEO Dr Nelson Ogunshakin was present at our relaunch and
is very supportive of what we are doing and I really think that this is a very important moment in our transformation from young professionals to Future Leaders. The reference textbook for the Future Leaders training is the FIDIC Guide to Practice. An electronic copy of the book is provided to the participants, together with any other relevant FIDIC documents. Following successful completion of the programme, participants will become members of the FIDIC Future Leaders group together with some 700 other alumni of previous courses.
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Promoting global best practice FIDIC contracts committee member SIOBHAN FAHEY is a chartered civil and structural engineer and lawyer who specialises in construction law. She talks here about her work on the committee and her views on the industry.
What’s your day job, where do you work and what do you do? My day job is working as a selfemployed and independent dispute resolution practitioner (sometimes referred to as a ‘third party neutral’), helping parties under construction contracts to resolve their disputes. I’m based in Dungarvan, a town on the south coast of Ireland, but I do a lot of travelling with my work, in Ireland and overseas. I act variously as an arbitrator, dispute board member, adjudicator, conciliator and mediator of construction disputes. I also give contractual advice on dispute resolution and dispute avoidance for national and international clients.
Tell us about some of the work you do on the FIDIC contracts committee. In the contracts committee (CC) we very much work as a team for all the work that the committee carries out for FIDIC. This includes drafting and updating FIDIC contracts (and preparing errata memoranda where necessary), preparing guidance documents for use of FIDIC contracts, advising on the interpretation of contractual provisions in FIDIC contracts, advising on the contents of FIDIC contract users’ conferences, and giving input on the development of FIDIC contract training initiatives. That said, we each have specific areas of responsibility. I was the CC’s principal drafter of the 2017 Red, Yellow and
Silver Books and, now that these forms of contract are starting to be used, my work continues on matters that arise from their use. I am also the leader of the task group currently drafting a FIDIC subcontract for the 1999 Yellow Book, which is planned for publication in December 2019.
What are the main contract and business challenges facing the industry as you see them? The increasingly global nature of major construction contracts
has highlighted what can often be fundamental differences in the cultural approach taken by the various stakeholders involved. Those from one part of the world often have a different view on how a project should be managed and executed than those from another. Neither is right, neither is wrong - but I have experience of significant contract and business challenges arising from the underlying, and often opposing, viewpoints and expectations that arise from people’s different cultural backgrounds.
Why is it important for FIDIC to have a contracts committee? FIDIC is best known for its standard forms of contract that are universally recognised as fair and balanced between the
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parties and are used around the world in many different fields of construction. FIDIC also actively engages with the global construction market by disseminating practical information on what is best practice for construction projects. The CC’s role of ensuring that FIDIC contracts are up to date and they meet the market’s needs, of advising on training and conferences, and of recommending what is current international best practice is, I believe, very important for FIDIC.
In your opinion, how highly regarded are FIDIC contracts internationally? In all my dealings with users from around the world, feedback has been very positive. FIDIC contracts, as published, are very highly
regarded internationally! What does tend to cause many difficulties for international users is the tendency to introduce extensive changes to the as-published FIDIC contracts, which very often have a significantly adverse effect on what was originally a fair and balanced contract. While FIDIC cannot ban the introduction of such changes, the CC has recently addressed this issue by preparing and publishing the FIDIC Golden Principles.
Why should clients, contractors and consultants use FIDIC contracts? FIDIC works contracts, together with the FIDIC consultancy agreements, have a very good reputation as being well-drafted, comprehensive, practical and useable. As such, for decades they have been extensively used around the world and, by all accounts, such use continues unabated. Many construction professionals and firms are familiar with FIDIC contracts and experienced in using them. It follows then that if a client chooses a form of FIDIC contract or agreement to go out to tender for works or for consultancy services,
it is more likely that the best qualified potential tenderers will actually submit competitive bids so resulting in more costeffective projects without a corresponding reduction in quality.
If you could change one thing about the construction industry what would it be – and why? It would be that corruption, in all its insidious forms, would be eliminated from construction projects. It is such a waste, of money and funds of course, but also of the integrity of the people working on a project and of the transparency of their dealings. It is very regrettably the case that in those parts of the world where the economy is developing where people most need cost-effective and timely infrastructure to be built for sustainable growth, that corruption too often plays a role in diverting funds from construction projects which then languish or remain unfinished indefinitely. The local societal cost resulting from delays or incompletion of the project is, inevitably, far greater than the monetary benefits that some individuals might receive by corruption.
Special thanks are also due to Paul Oortwijn (Former managing director of ONRI The Netherlands) and to Jeroen van de Rijt (Senior BVA expert - The Netherlands) for their considerable contributions to the drafting of the section ‘BVA-Best Value Approach’ of the guidelines. The committee also appreciates Pablo Bueno (FIDIC past president), William Howard (FIDIC president), Anthony Barry (FIDIC vice president), Jaap de Koning (EFCA internal market committee chair), Jan van der Putten (EFCA managing director and FIDIC BPC member) and Ieva Liaugaude (FIDIC international client manager) for providing comments on the drafts.
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New guide to help fight against corruption FIDIC’s recently published integrity management guide is a significant development for the industry. JORGE DIAZ PADILLA, chairman of the FIDIC integrity management committee, offers his thoughts. FIDIC’s newly published Guidelines for Integrity Management System in the Consulting Industry 1st Edition (2019) Part III, offers a comprehensive toolkit setting out a road map on how consulting engineering firms could apply integrity management in their work. It also provides the details on how firms can develop a FIDIC integrity management system (FIMS) and use it in their day-to-day consulting practice. As such, it is an important publication for FIDIC to produce. “FIMS III is aimed at compliance and aligned with the ISO 37001 Standard and FIMS and ISO 37001 risk management distinguishes between two types of risks integrity risks and compliance risks,” said Jorge Diaz Padilla, chair of the FIDIC integrity management committee. “Integrity risk is defined as a risk caused by the failure of internal control over people, process, technology and external events, while compliance risk is defined as a risk caused by the failure to act in accordance with regulations, laws, or legal obligations in a
given jurisdiction,” Padilla explains. In this regard, the integrity risks identified in the FIMS documents and the compliance risks described in ISO 37001 are risks which, if not proactively managed and mitigated, may negatively affect the continued existence of a consulting engineering company. “Therefore, both the FIMS and ISO 37001 anti-bribery management system (or, in general, any compliance management system) can be understood as a type of risk management system,” said Padilla. “However, FIMS has been developed to manage “integrity risk,” which is seen in a positive light, because a well-defined FIMS will preserve the integrity of the company and its reputation. “Managing compliance risk can be viewed in a more negative light – these activities are developed in order to keep the company “out of trouble” on the issue of bribery. Therefore, FIMS plus ISO 37001 can yield a holistic approach where you have integrity management plus management of compliance risk as it relates specifically to bribery,” he said.
So, how does FIDIC hope that the guidelines will be used and who is the guide aimed at? “FIMS III and ISO 37001 illustrates how consulting engineering companies that already have a functioning FIMS may move towards the adoption and eventual certification of an integrity management system incorporating an anti-bribery framework under the ISO 37001 Standard,” said Padilla. “Consulting engineering firms that want to become ISO 37001 certified are advised to make a start by following the guidance provided in the document,” he said. This move by FIDIC is a serious step in combatting
corruption at a time when the World Bank estimates that corruption amounts to about 5% of the world´s GDP ($US80 trillion in nominal terms). “It is quite difficult to calculate corruption for the construction sector since this varies from project to project and the data is not reliable. However, rough calculations of corruption in infrastructure projects are in the order of 10% to 25% of the capital investments,” Padilla says. Copies of The FIDIC Guidelines for Integrity Management System in the Consulting Industry 1st Edition (2019) Part III are available from the FIDIC bookshop at http://fidic.org/ bookshop
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FIDIC appoints new head of legal and compliance FIDIC has strengthened its senior management team further with the key appointment of a new head of legal and compliance, DADUNA KOKHREIDZE. KOKHREIDZE FIDIC has appointed Daduna Kokhreidze as its new head of legal and compliance. This key role for the organisation includes advising the chief executive and president on the delivery of internal organisational matters including corporate governance, FIDIC by-laws and statutes, risk management and compliance requirements for the organisation and its global operations. The role also includes leadership, strategic direction and management of operations for the protection of FIDIC’s intellectual property and licencing arrangements with third parties, as well as providing strategic advice and contribution to drafting development to FIDIC’s contracts and management of relevant FIDIC committees and dealing with multilateral development banks and wider stakeholders. Georgian national Daduna, who speaks English, Georgian and Russian, is a qualified lawyer with significant experience in the global construction consultancy and engineering sector. That experience includes advising on procurement, drafting and negotiating construction contracts, dispute avoidance and dispute resolution in all forms including litigation and arbitration and acting as the adjudicator under FIDIC rules. She is used to dealing with FIDIC contracts and was responsible for the translation of the FIDIC Red Book 1999 into the Georgian language. Her early experience was gained in the insurance market working for an insurance company and she has a degree in law from Tbilisi State University and subsequently gained a master’s degree in construction law and dispute resolution from Kings College, London. Previously a partner at Nodia, Urumashvili and Partners, a construction law practice in Georgia, she was also a president
“Daduna has really relevant experience in the global construction and consultancy sector that will greatly benefit FIDIC and our stakeholders and I am so pleased to have her as part of our senior management team.” Dr Nelson Ogunshakin, FIDIC chief executive
of the Georgian Association of Consulting Engineers. She is a fellow of the Chartered Institute of Arbitrators UK, an overseas member of the UK Construction Law Society and a member of the Dispute Resolution Board Federation. She is also a regular speaker at construction industry and arbitration events. Speaking on her arrival in post at FIDIC, Daduna said: “I’m very excited about my new role at FIDIC and the plans that the organisation has for the future. I can’t wait to bring my knowledge and experience to bear at FIDIC and to help expand the organisation’s business, achieve its objectives and strategic plans and to ensure that its governance and compliance structures and FIDIC contracts and publications are widely used, fit for the future and the best that they can be.” FIDIC chief executive, Dr Nelson Ogunshakin OBE, commented: “I am delighted to welcome Daduna as FIDIC’s new head of legal and compliance based in Geneva. This area of our operations is absolutely critical in ensuring that we are able to grow and move forward in a sustainable way. I’m looking forward to Daduna’s input on implementation of our corporate governance, reviewing FIDIC contracts, working with our committees and other stakeholders, ensuring our intellectual property rights are protected and that we provide knowledgeable and timely legal advice and guidance to the FIDIC board, members and stakeholders when it is needed. “Daduna has really relevant experience in the global construction and consultancy sector that will greatly benefit FIDIC and our stakeholders and I am so pleased to have her as part of our senior management team.”
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Contracts collective keeps FIDIC one step ahead FIDIC’s contracts committee is changing, with some new members and a new chair. We spoke to outgoing chair ZOLTÁN ZÁHONYI about the committee and its work.
Zoltán Záhonyi, a partner of Z and Partners Consulting Engineers, was invited to be a member of the FIDIC contracts committee (CC) in 2009 and became its chair in September 2015. When asked what made him want to be on the committee in the first place, Záhonyi’s answer was characteristically modest. “What I ‘want’-ed has always been to serve FIDIC and not take on any specific function,” he said. “So, when the opportunity came, I considered very carefully whether I was capable of taking this huge responsibility and whether I could give it sufficient time and devotion. So, it rather ‘happened’ than I wanted it,” Záhonyi explained. Reflecting on his period as chair, Záhonyi considers the committee’s main achievements during his term as the many documents that have been published including updates and new ones – but is particularly proud of the 2017 suite of updated FIDIC contracts. Asked how he feels about standing down as chair, he said that he hoped that he had managed to help and contribute positively to FIDIC’s contract work. Záhonyi was keen to praise the dedication of all those who sit on the contracts committee and assist in its work. “What is most important that each
individual serving on the committee are volunteers offering their precious time on a pro-bono basis in all their related activities,” he said. “The CC is just the tip of the iceberg, one should remember. All documents are developed by task groups (also made up of volunteers) without whom, it would not be possible to achieve results at all. One of the biggest challenges has been to keep this community together and to achieve our goals within acceptable delivery periods. No question, that my special thanks are due to this enthusiastic and devoted group of highly knowledgeable colleagues!” The committee has faced many key challenges over recent years and the determination and dedication of its members has been crucial in its success. “Keeping the ball rolling and ultimately delivering has been a challenge in itself and pushing these documents through the ‘production chain’ requires collaboration, not just within the CC, but very much beyond and sometimes, unexpected challenges had to be tackled,” said Záhonyi. Clearly, there will be more challenges to come as the world of contracting evolves and develops to keep pace with dramatic industry changes and during that process the work of the FIDIC contracts
committee will become even more important. “More than 60 years ago, FIDIC developed a specific ‘language’ for international construction contracting and these forms are acknowledged to be part of international best practice. The FIDIC contracts committee has been and will be expected to keep this language updated and in line with modern-day expectations,” Záhonyi said. Helping to meet those expectations will be new members of the contracts committee, led by a new chair, Vincent Leloup, founder and managing partner at French construction consultancy Exequatur. New members are Husni Madi, chief executive of Shura Construction Management in Amman, Jordan, Kiri Parr, regional legal counsel at Arup in Australia and UK barrister, Peter Collie. Standing down from the committee are Kaj Möller, president of Sweco International in Sweden and of course Zoltán Záhonyi himself. Sarwono Hardjomuljadi becomes the new secondary FIDIC board liaison for the committee replacing Liu Luobing, while Aisha Nadar remains as primary liaison from the board. Going forward, there is much in the pipeline for the committee. “There are quite a few documents expected
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FIDIC contracts committee outgoing chair, Zoltán Záhonyi.
over the next couple of years,” said Záhonyi. “We have the Brownfield Scenario ‘ODBO’ Form, the update of the 1999 Short Form of Contract (Green Book), a special contract form for off-shore wind farm projects and the long awaited Contracts Guide (2017) and the same for the 2017 suite of agreements,” he explained. Given the work to come and the already significant achievements of the committee, does Záhonyi have any advice for his successor as chair? “Keep up and never compromise on quality,” he said. “Looking ahead, I hope to see FIDIC enjoy even more years offering leading contract forms for the world’s construction and engineering
industry,” Záhonyi said. And, if he had one wish, what would be the one thing he would change about the international construction sector to make it better? He was in no doubt: “MORE engineering AND LESS political influence,” he said. The whole industry would agree to that for sure!
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Guiding clients to better project outcomes FIDIC has recently republished its popular Guidelines for the Selection of Consultants. The guide was produced by the FIDIC business practice committee, whose chair ANDREW READ outlines the thinking behind the updated publication.
Why did the guide need updating and what are the changes from previous edition? The original driver for the update of the guide was to incorporate a method of consultant selection that was being used in Europe – Best Value Approach (formally known in some countries as Best Value Procurement). This method was developed because of some negative experiences when lowest price was the selection method. It complies with the latest EU directives. Best Value Approach focuses on the same goals as FIDIC’s recommended selection method, Quality Based Selection, but includes the cost of services as a selection factor.
How do you hope the guide will be used? It is hoped that the guide will be used by those involved in consultant selection to assist them in better understanding the implications their selection method has on project outcomes. Selecting a consultant is one of the most important decisions an owner or client makes. The guide helps the user to see that success of any project depends upon obtaining the most appropriate expertise available in terms of skill, knowledge, past experience, managerial abilities and reputation.
What benefits does it offer to users? The purpose of these guidelines is to present the commonly used methods of consultant selection worldwide, to explain the respective procedures and to combine all of these in one compact document, as well as
to emphasise and explain to a degree, FIDIC’s policies on the subject. In this one guide, users compare the methodologies they may be familiar with to those that are used in other parts of the world.
Why is this an important FIDIC publication? One of FIDIC’s key strategic priorities is to lead the consulting engineering industry visibly and effectively. This guide is a prime example of FIDIC doing this. Providing guidance to FIDIC member associations and firms can often be best served by sharing best and common practice from around the world, in
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parallel to FIDIC membership. Guidance on better outcomes for clients and owners strengthens FIDIC’s position in the overall construction sector.
capacity building, integrity, and fair competition are the hallmarks of great selection processes.
What are the key things to bear in mind when selecting a consultant?
How did the FIDIC business practice committee work together in producing the guide?
The most important item to consider is the quality of the services. A selection process which is focussed on criteria, developed out of the specific project attributes, outcomes, benefits and potential risks, is most likely to identify the most appropriate consultant for the project and increase the certainty of outcome for all stakeholders. Transparency,
Members of the task group that prepared the latest edition of this guide are located around the world and have been involved with FIDIC for many years. The group, brilliantly chaired by Fatma Colasan, prepared and circulated drafts of the proposed document for review and comment. This ensured that the diversity of perspectives and approaches
were encompassed in the final document. Input from the FIDIC board and users of BVA were actively sought to ensure the document reflected current and best practice. Fatima deserves great credit for coordinating all the diverse issues in bringing this document to publication and she has been involved with the guide since its first publication in 2003.
What else is the business practice committee currently working on? The business practice committee has specialist task groups working on the impact of technology on business, the use of information (including BIM) on the world of construction, best practice in contractor selection and how to achieve better outcomes when using Quality and Cost-Based Selection methods rather than FIDIC’s recommended Quality Based Selection.
Is there anything else you want to say about the guide? I really want to thank Fatma Colasan for her excellent leadership of the task group who prepared the guide, along
Andrew Read, FIDIC’s business practice committee chair.
with Kiran Kapila (India), Peter Rauch (Switzerland), Andrew Steeves (Canada), Mark Steiner (USA), Nelson Ogunshakin (FIDIC CEO), Enrico Vink (FIDIC special advisor) and Italo Goyzueta (FIDIC deputy director). Special thanks are also due to Paul Oortwijn (Former managing director of ONRI The Netherlands) and to Jeroen van de Rijt (Senior BVA expert - The Netherlands) for their considerable contributions to the drafting of the section ‘BVA-Best Value Approach’ of the guidelines. The committee also appreciates Pablo Bueno (FIDIC past president), William Howard (FIDIC president), Anthony Barry (FIDIC vice president), Jaap de Koning (EFCA internal market committee chair), Jan van der Putten (EFCA managing director and FIDIC BPC member) and Ieva Liaugaude (FIDIC international client manager) for providing comments on the drafts.
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Contract Users’ Newsletter
CONTACT US l Please send news, views and articles on FIDIC contracts to the newsletter editor Andy Walker at awalker@fidic.org
l For contract order queries email FIDIC at fidic.pub@fidic.org
l Send general FIDIC enquiries to fidic@fidic.org
Upcoming FIDIC conferences and events Future FIDIC Contract Users’ Conferences are taking place in Mexico City, Gaborone, Washington D.C. and Bangkok so make sure you save the dates today.
ICC-FIDIC Conference on International Construction, 10-11 February 2020
FIDIC Middle East Contract Users’ Conference, February 2020
Location: Sao Paulo, Brazil
Dates to be confirmed. Location: Hotel TBC
3rd FIDIC Latin America Contract Users’ Conference, March 2020 Dates to be confirmed. Location: Crowne Plaza Hotel de México, Mexico City, Mexico
FIDIC GAMA Conference 2020, 19-21 April 2020 Location: Gaborone, Botswana
ACEC Annual Convention 2020, 26-29 April 2020 Location: Washington D.C., USA
FIDIC ASPAC Conference 2020, 14-16 June 2020 Location: Bangkok, Thailand
Find out more at http://fidic.org/events All dates/locations may be subject to change.