Risk allocation in the Silver Book

Mike Ankers

Mike Ankers discusses an alternative form of contract, which places risks at the hands of the contractor rather than the employer.

The Fidic “Silver Book” is a significant departure from typical risk allocation contained in the other Fidic forms of contract. This change of risk allocation is designed to give employers an alternative to the standard form when a pre-determined fixed final cost is the most important factor for the employer; even more so than obtaining the lowest price for a project.

For certain employers there is a need to know the cost from the beginning of the project and how this is achieved is not the primary concern. Fidic recognises this need and rather than having employers heavily amend the existing standard contracts, has set out to produce a contract specifically to fit this need.

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The Silver Book achieves greater price certainty in a simple way; major risks that would normally rest with the employer are placed firmly with the contractor.

The Silver Book is a design and build type contract where the contractor produces a design to satisfy the employers requirements.

In a normal contract, the employer is responsible for the correctness of the employers requirements and the contractor is responsible for his own proposal and detailed design.

With the Silver Book, the contractor is responsible for checking the employers requirements, as well as the contractors proposal, whilst making sure that both are correct. Any errors found in the employers requirements are to be corrected by the contractor at the contractor’s cost.

Other risks, which the Silver Book places with the contractor rather than the employer, include unforseeable shortages of personnel and materials.

Changes to risk allocation under the contract do not extinguish these risks, but merely move responsibility to the contractor.

With the Silver Book risk allocation, the contractor must determine the potential likelihood of the risk materialising and the cost that may be associated with that risk.

The contractor needs to make the commercial decision on the risk allowance to be included in his tender.

In this way, the employer pays for the risk whether it occurs or not, and the contractor can either benefit from an additional profit if the risk does not occur or loses if he underestimates the risk.

It should also be borne in mind that risk allocation in the Silver Book construction, is not a risk free enterprise. Fidic still leaves certain risks with the employer, such as employer variations and delays caused by the employer. Standard forms of contract will not protect the employer from additional costs caused by his own actions.

Fidic recognises that it is for employers and contractors to decide whether the conditions are appropriate for a particular project. It is for the parties to decide what is best for their own particular circumstances. The original standard form of contract provides a universally recognised starting point.

Who is Mike Ankers?
Ankers is a senior quantity surveyor currently assigned to the Government of Abu Dhabi Claims Committee Team as part of a multi-disciplined team, tasked to review and make recommendations on outstanding contractual claims that cannot be resolved in-house by the Abu Dhabi Government’s various Works Departments.

His responsibilities include the detailed analysis of contractual entitlement, causation and damages on Abu Dhabi Public Works infrastructure building and civil engineering projects.