Impact of the Sustainable Development Goals (SDGs) to the International Standards of Construction Law (SDG 9)

Table of contents

List of abbreviations

1 Introduction

2 International Construction Law
2.1 The nature of construction contracts
2.2 International contract forms
2.2.1 FIDIC
2.2.2 New Engineering Contract

3 The 2030 Agenda for Sustainable Development
3.1 Sustainable Development Goals
3.2 Goal Nr. 9: Industry, innovation and infrastructure

4 Sustainability in the construction sector
4.1 Implementations of the SDGs in the construction industry
4.2 Bechtel as example for sustainable construction

5 Conclusion

Bibliography

List of abbreviations

List of abbreviations

Abbildung in dieser leseprobe nicht enthalten

Introduction

Sustainable development in the construction industry is one of the key issues which are dis­cussed in many governments of the world. This is due to the fact that the construction industry has a considerable impact in the way the natural environment is af­fected by human activities whenever construction takes place, the surrounding environment will get affected. Due to this fact, the focus has been set on sustainable development. In addi­tion, both the need and responsibility of citizens and companies alike to do their utmost to reduce or minimize the impact human activities can have on the surrounding environment.

The idea of sustainable development grew from numerous environmental movements in earli­er decades and was defined in 1987 by the world Commission on Environment movements as the understanding that sustainable development includes a series of areas that sustainability is the idea of environmental, economic and social progress and equity, all within the limits of the world’s natural resources. In short, sustainability means meeting the needs of today with­out compromising the ability of future generations to meet their needs. Therefore it is im­portant to critically analyze the impact of construction projects and to create a framework, which contains sustainability within construction projects.

This paper deals with the impacts of the Sustainable Development Goals to the international standards of construction law. At first, the paper will give an overview about the nature of construction contracts and will describe two common forms of contracts: the International Federation of Consulting Engineers and the New Engineering Contract. In addition, there will be a description of the Sustainable Development Goals, especially about the Sustainable De­velopment Goal 9: Built resilient infrastructure, promote inclusive and sustainable industriali­zation and foster innovation.

Then, the paper deals with how the Sustainable Development Goals can be implemented in the construction industry and what framework is needed. Moreover there will be an example of the Bechtel Company, which already implemented sustainability in their construction pro­jects and thus should be role model for other companies. In the end there will be a conclusion outlining how the construction industry has changed because of the United Nations 2030 Agenda.

2 International Construction Law

2.1 The nature of construction contracts

First of all you have to say that the term “construction law” is worldwide understood to cover the field of law which directly affects the construction industry.¹ Thus, construction is an in­ternational activity because most of the large projects are tendered on the basis of an interna­tional tender. Moreover you can say that a construction contract distinguishes from most other types of contracts because of its variety of factors which have to be considered. The construe- tion process is complex, time-consuming and expensive. In addition, a construction contract is a long-term project and the allocation of these risks is a very important part of the contracts because these factors always result in additional costs. To avoid disputes, especially the risk allocation must be contractually determined.²

A construction contract is a legally binding agreement, usually between two parties - the owner and the contractor - specifically negotiated for the construction of an asset or combina­tion of assets that are closely interrelated or interdependent in terms of their ultimate use or purpose or their technology, function and design. The Contract Documents include the condi­tions of a contract which should specify the obligations and responsibilities of each party. In the case that unforeseen or unexpected problems arise, the conditions determine which party is responsible of delays, additional costs and who has to bear the consequences.³

The construction contract is the key document for an effective project, avoids disputes and describes and records all aspects of the project. The construction contract should always be in written form and should define the basic rights, responsibilities and relationship of the parties who are involved and the rules by which each party must comply. First, a construction con­tract should contain general conditions that defines the project delivery model and describes in detail what the projects involves. Moreover the contract has to explain the service or the work which have to be performed and has to identify which materials have to be incorporated into the project including their quality. In addition clear provisions have to be made to ensure that requirements and the performance for the structure are satisfied.⁴

Furthermore the contract has to define the period of time in which the project is expected to complete. This includes the date of commencement of the service as well as the regulations of progress. Also, there have to be a tool for controlling and monitoring the progress of the pro­ject. The construction contract also has to deal with the price and payment.⁵ The amount and the timing have to be defined. A construction contract is either classified as a fixed price con­tract or as a cost plus contract. The fixed price contract is a contract in which the Contractor has to pay a fixed price per unit whereas the Contractor in a cost plus contract has to pay for the defined costs plus a percentage of these costs. However, some construction contracts con­tain characteristics of both forms. It also has to include the remedies for the contractor which are available in the event for delayed payment and his entitlement to advance payments.⁶

Moreover the consequences of any failure need to be implemented into the contract. This in­eludes delay damages as well as other defaults. Especially the party's right to terminate the contract in the case the other party is suspending the work has to be defined. Also the effect of force majeure⁷ or unforeseeable events for which neither party is responsible have to be de­fined. It should be noted when a party can be excused in such an event, with what effect and for how long. In addition to this, it is important to define the responsibility for damage to the works and injury to persons. This includes the compulsory insurance, intellectual property rights, and the ownership of plant, materials and equipment which is intended or used for the works. Beyond that, social issues, like labour standards and protection, need to be covered in construction contracts as well as environmental issues like local anti-pollution regulations. Also the security for performance of the parties’ obligations has to be defined which includes retention and performance guarantees and bonds. It is also important to implement procedures for both parties to make a claim against the other party and how claims may be determined when made. It should be noted how disputes should be resolved and what steps need to be taken before a formal and binding process, like court or arbitration, is introduced. Above all, a standard clause need to be completed, which deals with the governing law of the contract, the agreed language of the contract and the notice provisions of the contracts for example whether all notices need to be in writing or if they can be given by e-mail.⁸

In the case a construction contract contains the above mentioned conditions each party knows which risks he beats and what consequences are should a risk eventuate. All risks have to be clearly and completely allocated so that each party is able to manage their risks efficiently and taking steps to protect against the consequences. That is the reason why a properly written construction contract can minimize the risks and that risk allocation is an essential element of the contract and the management of the project itself.⁹

There is a variety of standard forms of contract in use in the construction industry. The deci­sión of a particular contract will depend upon the circumstances surrounding the construction project and the size of the project.¹⁰ The International Federation of Consulting Engineering Contract and the New Engineering Contract will be discussed and compared in the following section as examples of a standard form of construction contract.

2.2 International contract forms

2.2.1 FIDIC

The International Federation of Consulting Engineers (FIDIC), founded 1913, is charged with implementing and promoting the consulting engineering industry’s goals on behalf of its Members and publishes international standard forms of contracts. The vision of FIDIC is to enable the development of a sustainable world as the recognized global voice for the consult­ing engineering industry. Moreover FIDIC promotes and enhance the leading position of FIDIC’s forms of contract and wants to maintain and enhance their representation of the con- suiting engineering industry worldwide. In addition, they actively promote integrity and high standards of ethics among all stakeholders involved in the development of infrastructure worldwide. Today, the FIDIC membership currently covers 104 countries of the world.¹¹

The FIDIC is a private organization, not a supranational institution with legislative powers. Furthermore, the FIDIC - conditions are not part of lex mercatoria.¹² The conditions of con­tracts prepared by the FIDIC are today the most widely used form of contracts for construe- tion projects. These contracts are known as the “International Best Practice Documents” be­cause the user is presented with a complete toolbox of documents which includes a variety of samples and templates ranging from tender forms right up to dispute adjudication issues. Moreover, explanations, commentary and user instructions are implemented in individual FIDIC forms.¹³ Certainly in Germany, the FIDIC-conditions are still largely unknown and are treated only as terms and conditions in accordance with §§ 305 ff BGB.¹⁴

FIDIC contracts are considered as the standard form of contract for use on international pro­jects, a fact that is recognized by international institutions such as the World Bank and the International Monetary Fund, so that in 1999 the FIDIC developed its standard forms of con­ditions of contract, with the publication of a first edition of a new family of contracts compris­ing major four new standard forms of contract which are helpfully colour coded for ease of use:

i. FIDIC Conditions of Contract for Construction (Red Book)
ii. FIDIC Conditions of Contract for Plant and Design-Build (Yellow Book)

[...]

¹ Uff, Construction Law, p. 1.

² Adriaanse, Construction Contract Law, p. 1 f.

³ Surahyo, Understanding Construction Contracts, p. 1.

⁴ Surahyo, Understanding Construction Contracts, p. 61.

⁵ Godwin, International Construction Contract, p. 10.

⁶ Adriaansc. Construction Contract Law, p. 218.

⁷ Force majeure refers to exceptional events generally are beyond the parties' control, which could not have been foreseen at the time the contract was entered into or prevented by the affected party.

⁸ Godwin, International Construction Contract, p. 11.

⁹ Godwin, International Construction Contract, p. 9.

¹⁰ Klee, International Construction Contract Law, p. 268.

¹¹ FIDIC, About FIDIC.

¹² Hök, Handbuch des internationalen und ausländischen Baurechts, p. 244.

¹³ Klee, International Construction Contract Law, p. 268.

¹⁴ Hök, Handbuch des internationalen und ausländischen Baurechts, p. 244.