What is FIDIC?

FIDIC, which stands for Fédération Internationale Des Ingénieurs-Conseils, is an international federation of consulting engineers. It was founded in 1913 by a collaboration of engineering organizations from France, Belgium, and Switzerland. The primary objective of FIDIC is to promote and facilitate the work of consulting engineers worldwide, and it has since grown to become a globally recognized organization in the field of consulting engineering.

FIDIC is headquartered in Switzerland and serves as a platform for consulting engineers to exchange knowledge, best practices, and standards and to collaborate on projects and initiatives that advance the field of engineering consulting. Additionally, FIDIC has developed a set of widely recognized standard forms of contract for use in construction and engineering projects, commonly used in international construction contracts.

What is NEC?

The New Engineering Contract (NEC) is a series of standardized contracts used in project management and procurement in the construction and engineering industries. These contracts are renowned for promoting collaboration, innovation, and robust risk management. A pivotal feature of NEC contracts is the early warning system, requiring project parties to promptly notify each other of any factors that could impact project time, cost, quality, or scope. These factors may encompass events, risks, changes, errors, ambiguities, or deviations from the contract. 

The primary purpose of this system is to enable parties to proactively identify and address potential problems, thus preventing their escalation into disputes or claims. To facilitate risk management, parties maintain a risk register and conduct regular risk reduction meetings to agree on actions to mitigate potential issues. However, should disputes arise despite these preventative measures, NEC contracts encourage parties to seek amicable resolutions through negotiation, mediation, or other alternative dispute resolution methods. 

In cases where informal resolutions fail, the contracts provide for adjudication, where an adjudicator issues a binding decision within a defined timeframe to maintain project progress. If needed, parties can agree on other dispute resolution mechanisms like arbitration or litigation after the adjudication process. NEC contracts are widely utilized to emphasize collaborative problem-solving and risk mitigation, aiming for successful project outcomes with minimized disputes.

Palestine Construction Industry

The construction industry plays a significant role in the Palestinian economy, employing over 16% of the workforce and contributing approximately 17% to the Gross National Product (GNP) in Palestine. However, the construction environment in Palestine is unique due to the impact of the Israeli occupation on the economy, including the construction sector.

In addition to political challenges, the Palestinian construction industry faces contractual problems and disputes that often result in cost overruns and project delays. The increasing number of claims and disputes between contractors and project owners can be attributed to several factors:

• One significant cause of disputes is misunderstanding contract documents, mainly general and special conditions. Contractors and project owners may interpret these documents differently, leading to disagreements over contractual obligations and responsibilities.

• Contract specifications can be open to interpretation, and different parties involved in a construction project may have varying interpretations of these specifications. This divergence in understanding can result in disputes over the quality and scope of work.

• Delays in construction projects can stem from various factors, including political instability, resource shortages, and logistical challenges. These delays can disrupt project schedules, leading to disputes over responsibility for the delays and associated costs.

• The contractual relationships between contractors, subcontractors, project owners, and other stakeholders in the construction process can be complex. Disputes may arise over issues such as payment disputes, changes in project scope, or disagreements over contract terms and conditions.

To address these challenges and reduce disputes in the Palestinian construction industry, stakeholders may benefit from improved contract clarity and communication, proactive risk management strategies, and effective dispute resolution mechanisms. Considering contract forms such as the NEC and FIDIC mentioned earlier may help streamline contract administration and minimize misunderstandings, ultimately contributing to the successful completion of construction projects in this unique and challenging environment.

Construction contracts of Palestine (FIDIC and NEC)

• NEC contracts are known for their plain, straightforward language, which reduces the risk of disputes since it is easier to understand by the parties involved. In contrast, FIDIC contracts tend to have a lot of complexity and legalistic plans, potentially leading to misunderstanding and dispute. 
• Both FIDIC and NEC aim to allocate risks fairly and reasonably between employers and contractors. FIDIC’s approach includes balanced risk sharing but may increase dispute opportunities. NEC focuses on proactive and dynamic risk management, emphasizing effective communication between parties.
• Both contract forms address force majeure and prevention events, but their definitions and approaches differ.FIDIC provides a broad definition of force majeure events, while NEC introduces the concept of “prevention events,” potentially offering broader coverage. Both contract forms face challenges in defining and handling these events effectively.
• Variations are a common source of claims and disputes in construction contracts. FIDIC limits variations by quantity and other criteria, potentially leading to disputes over pricing. NEC allows for pre-pricing variations, providing clarity and reducing the chances of pricing disputes.
• FIDIC contracts traditionally involve an engineer who is the employer’s agent and a neutral third party. The engineer’s dual role can lead to conflicts of interest. NEC contracts split the engineer’s role into multiple entities, including the project manager, supervisor, designer, and adjudicator. NEC aims to reduce conflicts of interest but raises questions about the impartiality and effectiveness of these roles.

Conclusion

In the unique and challenging environment of the Palestinian construction industry, the use of NEC contracts, with their focus on effective communication, risk mitigation, and collaborative resolution, may prove particularly beneficial. However, the choice between FIDIC and NEC ultimately depends on the preferences and needs of the parties involved in construction projects in Palestine.