Choosing between the FIDIC Yellow Book (Plant and Design-Build) and the FIDIC Silver Book (EPC/Turnkey) is one of the most critical decisions an Employer or Contractor can make. The fundamental difference lies in risk allocation.
When consider the Yellow Book and avoid the Silver Book?[1]
For example, The Silver Book is not suitable for use in the following circumstances:
- If there is insufficient time or information for tenderers to scrutinize and check the Employer’s Requirements or for them to carry out their designs, risk assessment studies, and estimating;
- If construction will involve substantial work underground or work in other areas which tenderers cannot inspect, unless special provisions are provided to account for unforeseen conditions; or
- If the Employer intends to supervise closely or control the Contractor’s work, or to review most of the construction drawings.
FIDIC recommends that the Second Edition of the Yellow Book be used in the above circumstances for Works designed by (or on behalf of) the Contractor.
When consider the Silver Book and avoid the Yellow Book?[2]
However, the Silver Book maintains the principles of risk sharing established in the 1999 edition, while seeking to build on the substantial experience gained from its use over the past 18 years. For example, this edition provides:
- Greater detail and clarity on the requirements for notices and other communications;
- Provisions to address Employers’ and Contractors’ claims treated equally and separated from disputes;
- Mechanisms for dispute avoidance; and
- Detailed provisions for quality management and verification of Contractor’s contractual compliance.
Summary
Which one should you use?
- Use Yellow if the Employer wants to maintain some control over the design process or if the ground risks are too high/unknown for a contractor to price reasonably.
- Use Silver if the project is being funded by lenders (Project Finance) who demand a fixed price/fixed date and the Employer is willing to pay a higher contract price in exchange for transferring almost all risk to the Contractor.