MDA Law
FIDIC Renews its relationship with the World Bank
Infrastructure development is a critical feature of economic growth, productive investment, job creation, and poverty reduction in any country. Financing of investment gaps, estimated to be in the region of $1.3 trillion per year, is a key priority for Multi National Banks[1]. This is no different for the World Bank particularly in Africa. For most countries in Africa, investment gaps exceed traditional sources of infrastructure funding – i.e. investment into infrastructure projects based on the government’s own available financial resources. The World Bank, as does other multilateral development banks (“MDB”), provides an alternative source of funding to fill this gap. Such projects present unique challenges and risks to their participants which include the MDBs. The need to adopt contracting regimes familiar to all parties has remained of critical importance, also ensuring certainty and effective management of risk.
The World Bank recently agreed to adopt the FIDIC 2017 editions of the Rainbow suite of contracts (“the Rainbow Suite”). The adoption extends the association between FIDIC and the World Bank. The agreement follows the adoption of a modified form of the FIDIC Conditions of Contract, 1st Edition, 1999, in which the general conditions contained standard wording applied by MDB’s – also known as the pink book. The purpose of adopting the first modified version was the obvious benefits of standardisation of procurement and bidding documents and to limit the variations (and amendments) often seen between the contracts prepared by the different MDB’s. According to the FIDIC chief executive Dr Nelson Ogunshakin, the adoption of the Rainbow suite “will create more certainty in the market. The familiarity that the FIDIC contracts bring make it easier to get projects under way as many of the typical commercial risks are clearly addressed in the contracts and all the parties understand their obligations and responsibilities[2]”.
Generally, the standard versions of these modified contract amendments reflect the risk profile of the project and the parties involved in such project. Under the modified form of the FIDIC Conditions of Contract, 1st Edition, 1999, the most obvious amendments were seen in the improved wording used throughout the contract – useful clarifications, simplifications and additions – the inclusion of bank-specific contractual requirements – i.e. financial requirements, the increased obligations of the contractor and a more balanced employer position and its obligations[3].
The adoption of the Rainbow Suite is not intended to replace the standard FIDIC conditions of Contract released during the course of 2018. The modified Rainbow Suite contracts shall bare the same structure as FIDIC 2017 suite of contracts. However, they have been modified to include consolidated clauses generally applicable and preferred by the World Bank and other MDB’s around Africa. The modified Rainbow Suite of contracts are available to the World Bank under a license agreement[4].
- https://www.worldbank.org/en/topic/financialsector/brief/infrastructure-finance, 21 February 2019↑
- World Bank adopts FIDIC construction contracts, 14 Feb 2019 – The Construction Index↑
- http://fidic.org/sites/default/files/cons_mdb_changes_8apr08.pdf, 21 February 2019↑
- http://fidic.org/MDB_Harmonised_Construction_Contract, 20 February 2019↑
Author: Tsele Moloi, Associate
