Amendments in the field of construction and infrastructure projects in Romania
Author: Razvan Vlad
The beginning of 2018 has brought certain amendments in the field of construction and infrastructure projects in Romania, by means of a new enactment that strongly impacted the professional life of contractors, who were used to the FIDIC provisions up to that point.. Government Decision no. 1/10.01.2018 ( “GD no. 1/2018”), which approved the general and special conditions for certain categories of public/sectorial procurement contracts related to publicly funded investment objectives (including non-reimbursable and/or reimbursable funds) entered into force and became applicable for all the award procedures whose estimated value exceeds EUR 5 million and were tendered after January 11, 2018. The new Government Decision covers contracts that have as object the execution of works (i.e. formerly red FIDIC), as well as contracts for the design and execution of works (i.e. formerly yellow FIDIC).
The intended purpose of GD no. 1/2018 is to create the appropriate legal framework for the use of standardized forms of contract, known and accepted by both contractors and employers, which would contribute to a significant reduction in the costs associated with the preparation, negotiation and management of contracts, as well as subsequent risks of implementation.
As a preliminary remark, the new contract conditions are heavily inspired by the red and yellow FIDIC Books. However, GD no. 1/2018 provides for major differences in comparison with the “classic” FIDIC rules promoted by the International Federation of Consulting Engineers and is more closely related to the administrative contracts and the principles derived therefrom.
Therefore, it is rather fair to say that the new contracts, while implementing some of the FIDIC rules, obviously tend to depart from the FIDIC nature. Thus, the new enacted templates of procurement contracts have an increased administrative nature and the contracting authorities benefit from more favorable conditions and have more means to easily apply contractual coercion measures against the contractors.
In a nutshell, the powers of the contracting authorities are highly increased as the new rules provide for specific provisions and/or the easier enforcement of the contracting authority’s right to supervise and control, to unilaterally modify the contract (under exceptional conditions), to terminate, to unilaterally terminate (without cause), to sanction, etc.
Of particular concern is, however, the instability of the contractual relation of the parties, since the Employer may unilaterally terminate the agreement (without any cause) and the Employer may easily terminate the contract in contrast to the Contractor’s powers to do the same.. By way of example, the Contractor may terminate the contract if the suspension of works lasts for more than 210 days or if it has not been paid by the Employer for 120 days.
GD no. 1/2018 also introduces different/modified institutions and further elaborates on certain matters, such as:
- allocation of the contractual risk to the party who can manage it;
- force majeure provisions;
- the Engineer will become the Supervisor whose role will become predominant under the contract (including taking over the role of DAB from FIDIC contracts);
- the introduction of the concept of “critical path” and “Gantt graphic” as well as of other amendments regarding the program of works (in terms of content, approval etc.);
- certain provisions were taken over from the set of public procurement enactments transposing the EU Directives in the field of public procurement, such as the ones regarding the subcontractor, which are also reflected / detailed in GD no. 1/2018, including the right of the Employer to directly pay the subcontractor or the ones related to the supporting third-party or consortium;
- the compliance with the feasibility studies may not be mandatory, upon the Employer’s discretion.
Lastly, a specific concept in FIDIC, the DAB, has been eliminated. The Supervisor’s (i.e. the former Engineer) decision on the parties’ claims has gained slightly more authority as regards its enforceability and hence, there are certain particularities of the DAB decision, which have been transposed into the Supervisor’s decision.
The terms provided for the notice of claim, the decision (former Engineer’s determination), the disapproval notice have been changed (usually, a 30-day period) and the procedure of submitting and deciding upon the claims has been regulated in all respects – terms and procedure to be followed. Any non-compliance with the terms is drastically sanctioned by the forfeiture of the right to submit further claims, for both the contractor and the employer (with the possibility for the employer to prove that it was not aware of the event).
In terms of disputes, the claims of parties may be finally submitted solely to CCIR with Bucharest venue (thus excluding the possibility for the parties to choose other arbitration rules, such as the ICC rules).
Finally, note should be made that these provisions are applicable to the contracts to be concluded following the completion of the procurement procedures initiated after January 11, 2018 and they do not apply to the contracts currently under performance and which were concluded under the old legislation.