Member Article

The beginning of 2018 has brought certain amendments in the field of construction and infrastructure projects in Romania, by means of a new enactment which shivered the contractors' professional life who were used to the FIDIC provisions until this moment. The Government Decision no. 1/10.01.2018 (the “GD no. 1/2018”) which approved the general and special conditions for certain categories of public/sectoral 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 5 million Euros and tendered after the 11.01.2018. The new Government Decision covers the contracts having as object the execution of works (i.e. former red FIDIC), as well as the contracts for design and execution of works (i.e. former yellow FIDIC).

The intended purpose of the 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 decrease of 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, the GD no. 1/2018 provide for major differences in comparison with the “classic” FIDIC rules, promoted by the International Federation of Consulting Engineers and are more closely related to the administrative contracts and the principles derived there from

Therefore, it is rather fair to say that the new contracts, while implementing some of the FIDIC rules, however, they 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 of more favorable conditions as well as 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 for an easier enforcement of the contracting authority’s right to supervise and control, right to unilaterally modify the contract (under exceptional conditions), right to termination, right to unilaterally terminate (without cause), right to sanction, etc.

A particular concern consists of the instability of the contractual relation of the parties since the Employer may unilaterally terminate the agreement (without any cause) and the termination of the contract may be easily achieved by the Employer in comparison with the Contractor's powers to act likewise. By way of example, the Contractor may terminate the contract in case the suspension of works lasts for more than 210 days or if it is not paid by the Employer for 120 days.

GD no. 1/2018 also introduces different/modified institutions or further elaborates on certain matters, such as:

1. allocation of the contractual risk to the party who can manage it;
2. provision of the force majeure;
3. the Engineer shall become the Supervisor who will have an increased role within the contract for multiple aspects (including taking over the role of DAB from FIDIC contracts);
4. the concept of “critical path” and “Gantt graphic” are introduced, as well as other certain amendments regarding the program of works (in terms of content, approval etc.);
5. certain provisions were taken over from the public procurement set of 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 in respect to the supporting third-party or consortium;
6. the feasibility studies may not be mandatory to comply with, upon the Employer’s discretion.

Lastly, a specific institution in FIDIC, the DAB, has been eliminated. The Supervisor’s (i.e. the former Engineer) decision on the parties’ claims have obtained a slight empowerment as regards its enforceability and hence, there are certain particularities of the DAB decision which have been borrowed into the Supervisor’s decision.

The terms provided for notice of claim, decision (former Engineer's determination), disapproval notice have been changed (usually 30-day period) and the procedure of submitting and deciding upon the claims has been in detail regulated in all respects - terms & procedure to be followed. Any non-compliance with the terms is drastically sanctioned with loosing the right to further claim for both the contractor and employer (with a slight way out for the employer who may prove that the event was not known).

In terms of disputes, the claims of parties may be finally submitted solely to CCIR with Bucharest venue (excluding thus the possibility of the parties to choose other arbitration rules, such as the ICC rules).

Finally, it should be noted that these provisions are applicable to the contracts which will be concluded following completion of 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.