FIDIC contracts: the 2017 Red, Yellow and Silver Books and the money behind them

FIDIC contracts are standard construction contracts from the International Federation of Consulting Engineers.

The main 2017 editions are the Red Book, where the contractor builds to the employer’s design; the Yellow Book, where it designs and builds; and the Silver Book, an EPC turnkey form with most risk on the contractor. Spain uses them on private and international projects.

Below: what FIDIC is, how the three books differ, how a 2017 contract is structured, what Spanish and EU law change and, most importantly for a business, how money moves under the contract: the advance payment and its repayment, monthly interim payments, retention, performance security, variations and claims, delay damages.

Everything is calculated on an illustrative €12 million contract.

Drafting and negotiating the contract itself is work for a construction lawyer; this article is about what the contract does to the contractor’s cash and the employer’s budget.

What FIDIC is

FIDIC is the Fédération Internationale des Ingénieurs-Conseils, the International Federation of Consulting Engineers, based in Geneva.

Its standard forms are known by the colour of their covers.

The first full suite was published in 1999, the second editions of the Red, Yellow and Silver Books in December 2017, and in November 2022 FIDIC issued a reprint with amendments.

When people say “FIDIC 2017”, they mean these editions with the 2022 amendments.

Why use a standard form instead of a bespoke contract?

Banks, insurers, investors and contractors from different countries already know how it allocates risk, who pays what and when, and how disputes are resolved.

That shortens negotiations and makes financing cheaper: a lender does not have to analyse an unfamiliar text from scratch.

This is why FIDIC is used on large projects with international parties, such as power plants, factories, roads and logistics hubs.

FIDIC’s member in Spain is Tecniberia, the association of engineering and consultancy firms, which runs FIDIC contract training in Spanish.

Red, Yellow and Silver Book: the differences

The key question when choosing a book is who designs the works and who carries the risk that the design turns out more expensive or complex. That drives both the price and how the contract pays.

The financial difference is this. Under the Red Book the final price is not known until the last measurement: the employer pays for actual quantities and its budget moves.

Under the Yellow and Silver Books the price is fixed and the contractor carries design risk, so it prices that risk in, and a Silver Book contract usually costs more.

Project lenders tend to prefer the Silver Book because a bank wants a predictable price and completion date.

Beyond the three main books, FIDIC publishes the Gold Book (design, build and operate), the White Book (client and consultant agreement) and the Pink Book, a version of the Red Book for projects funded by multilateral development banks.

How a FIDIC 2017 contract is structured

The contract consists of General Conditions, which the parties do not rewrite, and Particular Conditions.

Part A of the Particular Conditions is the Contract Data: the amounts, percentages, time limits and currencies for that project; Part B contains special provisions that amend the General Conditions.

FIDIC’s 2019 Golden Principles warn that Particular Conditions should not upset the risk balance of the General Conditions.

Almost every financial parameter — advance, retention, securities, delay damages — sits in the Contract Data.

So “we are on FIDIC” says nothing about the money yet: you have to read the figures in Part A.

What changed in 2017 compared with 1999, seen from the money side:

• Strict claim deadlines. A notice of claim is due within 28 days of when the party became aware, or should have become aware, of the event, otherwise the entitlement to money and time is lost; the fully detailed claim follows within 84 days. Employer’s claims follow the same procedure. The Engineer gives a determination within 42 days.
• Dispute Avoidance/Adjudication Board (DAAB). A standing board deals with disagreements during the works and decides within 84 days; if a party does not give notice of dissatisfaction within 28 days, the decision becomes final. Arbitration follows.
• Overall limitation of liability. The contractor’s liability is capped at the amount in the Contract Data or, if none is stated, the Accepted Contract Amount; the cap does not apply to fraud, gross negligence or deliberate default.
• The employer’s money. The contractor may ask for evidence that the employer has the project financing in place; the employer must answer within 28 days and report material changes.

FIDIC in Spain and the EU: what local law changes

FIDIC is a contract, not a law. It works inside the governing law the parties choose and cannot override that law’s mandatory rules. For a project in Spain this means three things.

Public works do not use FIDIC. When the employer is a public authority, the contract follows the Public Sector Contracts Act and its administrative tender conditions (pliego), not a FIDIC book. The financial rules differ:

Private contracts are subject to general rules. Spain’s Late Payment Act, Law 3/2004, caps payment terms between businesses at 60 days, with 30 days as the default where nothing is agreed, and an acceptance check may not take more than 30 days.

Unless the contract sets its own rate, late payment interest is the ECB rate plus 8 percentage points — 10.40% a year in the second half of 2026 — plus €40 towards recovery costs.

FIDIC’s 56 days fit within this limit, but stretching them to 90 days through Particular Conditions will not work under Spanish law.

Under Spanish law, delay damages are a penalty clause (cláusula penal) under the Civil Code: it replaces damages unless the parties agree otherwise, and a court may reduce it where the obligation was performed in part or irregularly (Articles 1152–1154).

For the employer’s financial model, this means the full delay damages cannot be treated as guaranteed compensation.

For buildings, the Building Act (LOE, Article 17) makes the parties liable to owners for 10 years for structural defects, 3 years for habitability defects and 1 year for finishes, counted from handover.

The FIDIC Defects Notification Period does not replace this liability.

Across the EU payment terms follow a common framework: the Late Payment Directive 2011/7/EU entitles creditors to interest without a reminder and requires public authorities to pay within 30 days, or 60 in special cases; the rate is the ECB reference rate plus at least 8 points.

FIDIC is widely used on projects funded by EU funds and development banks, particularly in Central and Eastern Europe, and in energy and industry.

Spanish contractors working abroad use FIDIC constantly, and their reporting on such contracts is a frequent subject of due diligence when buying a company.

The financial side of a FIDIC contract

Money under a FIDIC contract does not follow the work directly; it moves through a chain of documents: securities → advance → monthly Statement → certificate → payment → release of retention. Each link is a time limit and a percentage, and each one shifts cash.

Advance payment and repayment

The advance payment (Sub-Clause 14.2) is made only if its amount is stated in the Contract Data, and only after the contractor has provided the performance security and an advance payment guarantee.

It is repaid through deductions from monthly certificates: deductions start once certified work exceeds 10% of the Accepted Contract Amount and, by default, equal 25% of each certificate unless the Contract Data states another rate. Any balance not repaid by taking-over becomes due immediately.

The financial point: the advance funds mobilisation — site set-up, equipment, first purchases.

But at the standard 25% rate it is repaid quickly, in the first half of the project, so at the moment of greatest cash strain the contractor is already handing it back. The example below shows this.

Interim payments

After each month the contractor submits a Statement of work done.

The Engineer issues an Interim Payment Certificate (IPC) within 28 days, and the employer pays within 56 days after the Engineer receives the Statement.

The Silver Book has no Engineer: the Statement goes to the employer, and the payment period is the same.

So the contractor pays suppliers and workers for January’s work in January and February, and receives the money at the end of March.

That two-month gap is the main source of the contractor’s cash gap.

Retention money

The employer retains a percentage from each certificate, as stated in the Contract Data, until the total reaches the Limit of Retention Money.

The first half is released after the Taking-Over Certificate for the works, the second after the Defects Notification Period expires.

The second half can be replaced by a bank guarantee where the contract allows it. In practice, retention is often 5–10% of each payment with a limit of around 5% of the price.

For the contractor, retention is part of its margin that arrives a year or two after the works are finished.

Performance security

The contractor provides the performance security (Sub-Clause 4.2) within 28 days of the Letter of Acceptance; the amount comes from the Contract Data and is often 10% of the price in practice.

It stays in force until the Performance Certificate, i.e. the end of the defects period, and is returned within 21 days afterwards.

If variations change the price by more than 20%, the security amount is adjusted.

A bank issues the guarantee against the contractor’s credit line and charges a fee, so a large contract ties up the company’s borrowing capacity for its whole life, including the defects period.

Variations and claims

The employer may change the scope of work, either by instruction from the Engineer or after requesting a proposal from the contractor.

The contract also covers provisional sums, daywork, price adjustments for changes in law and, where the contract includes an indexation schedule, adjustments for changes in the cost of materials and labour.

Each variation changes the price and the time, and so the budget and cash flow of both parties.

A claim is how a party obtains money or time for an event the other party is responsible for; missing the 28-day notice removes that right.

For the contractor this is not legal housekeeping but revenue: a claim not notified in time comes straight off the margin.

Delays and delay damages

If the contractor misses the completion date, it pays delay damages (Sub-Clause 8.8): a daily amount stated in the Contract Data, up to the maximum stated there.

These are the only damages for delay, except on termination before completion; the cap does not apply to fraud, gross negligence or deliberate default.

An extension of time for a valid reason (Sub-Clause 8.5) removes the damages — again, provided the claim is notified in time.

When the employer pays late

For late payment the employer pays financing charges (Sub-Clause 14.8): by default, 3 percentage points above the average short-term bank lending rate for the currency of payment, unless the Particular Conditions say otherwise, compounded monthly.

If the Engineer fails to certify, the employer fails to pay or fails to evidence its financing, the contractor may suspend work after at least 21 days’ notice.

As the example shows, interest rarely covers what a payment delay really costs the contractor.

Example: a €12 million contract from both sides

An illustrative Yellow Book contract: Accepted Contract Amount €12,000,000 excluding VAT, 18 months, with monthly work ramping up to mid-project and tailing off at the end (from €91,000 in the first month to €1,042,000 at the peak).

The Contract Data parameters are typical but illustrative; the contractor’s margin is 8%, it pays suppliers after 30 days, and the employer pays two months after each Statement. All figures were calculated by script.

One month. In month six the contractor performs work worth €856,726.

The certificate deducts €214,181 of advance repayment and €42,836 of retention, leaving €599,708 to be paid, or 70% of the work done. That month, the contractor is effectively financing the project.

Peak funding need. With the advance, the contractor is cash-positive for the first six months, but by month 10 the advance has been repaid and it needs €778,538 of its own or borrowed money.

Without any advance the peak is almost the same, €810,977, just earlier, in month 8.

If the parties agree a repayment rate of 12.5% instead of 25%, the advance is spread over the whole works and the peak falls to €342,707 — 2.3 times lower.

This is the cheapest negotiating point for a contractor: the employer pays no more, it simply gets its money back more slowly.

If the employer pays late. If payment arrives four months after the Statement instead of two, the peak rises to €2,580,000 — more than two and a half times the contractor’s margin on the entire contract.

Interest for 30 days’ delay on the largest payment (€989,795) at 10.40% comes to just €8,461. Interest does not close the gap a late payment creates; only a credit line does.

The cost of securities. A €1.2 million performance security for 30 months plus the advance payment guarantee on a declining balance cost about €43,942 at an indicative bank fee of 1.2% a year — 4.6% of the contractor’s margin.

Delay. 30 days late means €180,000 in delay damages, 19% of the margin; 60 days means €360,000, 38% of the margin. The €1.2 million cap is reached after 200 days.

For comparison, under Spanish public procurement law the same price would mean €7,200 a day, and the 5% threshold that allows termination would be reached after 83 days.

The employer’s side. The employer pays the advance on day zero, but holds €600,000 of retention and a €1.2 million security until the end of the defects period.

An 8% variation adds €960,000 to the budget; the 20% threshold for adjusting the performance security is not reached, so the security stays the same.

That is why an employer’s budget carries a contingency for variations and claims, not just the “contract price”.

The project financial model under a FIDIC contract

A model that only sees “the contract price spread over the months” is wrong for both contractor and employer. A financial model for a FIDIC project needs separate lines for:

• The progress curve — an S-curve, not equal instalments; it determines when advance repayment starts and when retention builds up.
• Lags — from work to Statement, Statement to certificate, certificate to payment; and separately, payment terms to suppliers and subcontractors.
• The advance and its repayment using the Contract Data formula, with the start threshold and rate.
• Retention — percentage, limit and two release dates; the second, after the defects period, often falls in the next financial year.
• Securities — bank fees and the credit line they tie up until the end of the defects period.
• Scenarios — employer payment delays of 1–2 months, completion delays of 30–60 days with delay damages, 5–10% variations, price indexation.
• VAT — in Spain, VAT on certificates is charged on top of the price, and its timing also affects cash.

For a project investor or lender, the FIDIC contract is one of the key inputs to the returns model: time limits and damages drive the start-up date and the first cash flows.

How to turn them into a project IRR and test resilience to delays is the job of a project viability assessment.

A typical Spanish case is a solar farm built under an EPC turnkey contract.

What to check before signing: common financial mistakes

1. Looking at the price, not the Contract Data. The same contract amount with different advance, retention and payment terms produces very different funding needs — from €343,000 to €2.6 million in the example.
2. Accepting the default 25% advance repayment. The repayment rate is negotiable; spreading it out cuts the contractor’s peak debt several times.
3. Not pricing the securities. The performance security and advance payment guarantee use up bank lines; without them the company cannot take its next contract.
4. Missing the 28-day claim notice. Money for variations and employer delays is lost not in court but in the inbox. Someone must keep a register of events and notices.
5. Not linking delay damages to the margin. If 60 days of damages wipe out almost 40% of the margin and the cap wipes out all of it, that is a risk to be priced in or covered by programme float.
6. Rewriting payment terms against Spanish law. In private contracts you cannot agree more than 60 days, and a court may reduce a penalty under Article 1154 of the Civil Code.
7. Forgetting the Building Act. Liability for a building lasts up to 10 years, long after all FIDIC securities are returned; it is covered by insurance, not by retention.

If you are buying or reviewing a construction company, start with its contract portfolio: which securities are outstanding, how much retention is still to be released, whether there are open claims. More on the business itself in Construction company in Spain.

Frequently asked questions

What is a FIDIC contract in simple terms?

It is a set of standard construction contracts published by the International Federation of Consulting Engineers. The parties take ready-made General Conditions and add only the figures and project specifics, so banks and contractors from different countries know in advance how risk and money are allocated.

What is the difference between the FIDIC Red Book and Yellow Book?

Under the Red Book the employer designs and the contractor builds, and the price is based on measured quantities and rates. Under the Yellow Book the contractor designs and builds, the price is a lump sum, and the contractor carries the design risk.

When is the FIDIC Silver Book used?

For EPC turnkey projects where the contractor is responsible for the whole design and construction and takes on almost all risks: power plants, process plants, and bank-financed projects where the lender needs a fixed price and completion date.

Which FIDIC edition is current?

The 2017 second editions of the Red, Yellow and Silver Books, with the amendments made in the November 2022 reprint. Many contracts still running were signed on the 1999 editions, where the sub-clause numbering differs.

What are the FIDIC payment terms?

The contractor submits a monthly Statement, the Engineer issues an Interim Payment Certificate within 28 days, and the employer pays within 56 days after the Engineer receives the Statement. Advance repayment and retention are deducted from each certificate according to the Contract Data.

How is the advance payment repaid under FIDIC?

Through deductions from monthly certificates: they start once more than 10% of the price has been certified and, by default, equal 25% of each certificate unless the contract sets another rate. Until the advance is repaid, the employer holds an advance payment guarantee.

What is retention money in a FIDIC contract?

Retention is a percentage of each payment the employer holds back until the limit in the contract is reached. Half is released after taking-over of the works, and the other half after the Defects Notification Period ends.

Key points on FIDIC contracts

• FIDIC publishes standard construction contracts; the current editions are from 2017, with 2022 amendments.
• Red Book — employer’s design and payment by measurement; Yellow Book — contractor’s design and a lump sum; Silver Book — turnkey, with almost all risk on the contractor.
• All financial parameters sit in the Contract Data: advance, repayment, retention, performance security, delay damages.
• In Spain, FIDIC is used on private and international projects within Spanish law; public works follow Law 9/2017.
• On a €12 million contract, the contractor’s peak funding need ranges from €343,000 to €2.6 million depending on the advance repayment rate and the employer’s payment discipline.

Sources

• FIDIC: Red Book, Second Ed. 2017 (reprint Nov 2022); Yellow Book, Second Ed. 2017; launch of the 2017 editions; Tecniberia, FIDIC member in Spain.
• Ley 9/2017 de Contratos del Sector Público, Articles 107, 193, 198, 240, 243 — BOE.
• Ley 3/2004 on late payment, Articles 4, 7, 8 — BOE; rate for the second half of 2026 — BOE, 01.07.2026.
• Código Civil, Articles 1152–1155 — BOE; Ley 38/1999 de Ordenación de la Edificación, Article 17 — BOE.
• Directive 2011/7/EU on combating late payment — EUR-Lex.
• 2017 claims procedure and DAAB — CMS, Dec 2017, Fenwick Elliott.
• Worked example — Finetic, illustrative Contract Data parameters, 08.11.2026.