Meaning
Conditions of contract for EPC and turnkey projects represent a standard risk-allocation framework published by the International Federation of Consulting Engineers for high-risk industrial developments. Under the FIDIC Silver Book, the contractor assumes almost total responsibility for the design, procurement, and construction of the facility. This contract model provides the employer with a high degree of certainty regarding the final price and completion date.
It is primarily used for infrastructure, power, and process plants where the owner requires a fully operational facility upon handover.
Allocation Model
Risk transfer under these conditions shifts the burden of unforeseen ground conditions and design errors from the employer to the contractor. This shift distinguishes the contract from other standard forms, and under the FIDIC Silver Book, the contractor carries this risk. The contractor must verify the employer’s requirements prior to signing, as subsequent claims for design adjustments are generally disallowed.
This rigorous allocation protects the project budget but increases the initial contract price to cover the contractor’s risk premium.
Employer Requirement
Project specifications defined by the owner form the baseline against which the completed facility is measured during commissioning. Under the FIDIC Silver Book, the employer provides functional requirements rather than a detailed design. The contractor must translate these parameters into a working system.
Financial Consequence
Price certainty under this regime is protected by strict limitations on the contractor’s ability to claim additional time or money. Delays resulting from design discrepancies, logistics failures, or local labor shortages are borne entirely by the contractor. If the completion date is missed, the contractor must pay liquidated damages, which are typically capped to protect corporate solvency.
