Clause 15.6 Valuation FIDIC 1999 vs 2017: Key Insights

🧭 1️⃣ Purpose of Clause 15.6 – Valuation after Termination for Employer’s Convenience

In essence, Clause 15.6 (📒 2017) is the contractual tool that allows the Contractor to say:

“Okay, you terminated for your own reasons—but I’ve still invested time, money, manpower, and plans. I need to be compensated fairly.”

It lays down the rules for:

• How the value of the completed work is assessed at the point of termination,
• What losses and potential profit you can reasonably recover, and
• How those sums are determined and by whom (spoiler: it’s the Engineer 👷‍♂️ via Sub-Clause 3.7 [Agreement or Determination]).

💼 So why was Clause 15.6 added in 2017?

Great follow-up. FIDIC realized that having a specific and streamlined process for valuing the Contractor’s entitlement in such situations was long overdue. So, in the 📒 2017 edition, they rolled out Clause 15.6 as a standalone provision to:

✅ Remove ambiguity about how and when valuation occurs
✅ Emphasize the Engineer’s neutral role in determining entitlements (via Clause 3.7)
✅ Include explicit reference to loss of profit (a major win for Contractors)
✅ Introduce consistency with other termination scenarios (like Clause 18.5 – Optional Termination)

By doing so, FIDIC aligned with the Golden Principles—especially around fair and balanced risk allocation, transparency, and enforceability. 📏⚖️

🛠️ 2️⃣ Breakdown of Clause 15.6 – Valuation after Termination for Employer’s Convenience

Termination for Employer’s convenience is like pulling the emergency brake 🚨—the Employer says: “Hey, Contractor, we’re stopping here—not because of your fault, but because we’ve decided to walk away.” In such cases, Clause 15.6 (📒 2017) becomes the financial safety net for the Contractor.

Let’s break it down in both editions:

📒 FIDIC 2017 – Clause 15.6 in Action

What happens when the Employer pulls the plug? 🤷‍♂️

Well, the Contractor isn’t left hanging. Under Clause 15.6, once termination under Clause 15.5 [Termination for Employer’s Convenience] happens, the Contractor can submit a detailed breakdown of what they believe they’re owed. This isn’t just a vague invoice—it’s a carefully constructed, clause-backed, evidence-laden submission. Here’s what goes in:

🔹 Sub-Clause 15.6(a): What has already been done

The Contractor can claim:

• ✅ The value of all Works executed up to the termination date.
• ✅ Any sums due under Clause 18.5 [Optional Termination, Payment and Release]. This includes:
  • Cost of Plant and Materials ordered or delivered
  • Demobilisation costs (think: packing up, dismantling, transportation)
  • Cost of returning Contractor’s Equipment
  • Cost related to subcontractors terminated
• ✅ Any amount due under the Final Payment Certificate process (Clause 14.13), excluding sums already paid.

💡 This part is grounded in actual work performed, so it’s pretty easy to quantify. It keeps things objective.

🧑‍🏫 What does the Engineer do?

Enter the Engineer, stage left 🎭. As per Clause 3.7 [Agreement or Determination], the Engineer plays the judge, deciding whether the submitted values and loss of profit claims are fair and within scope.

The Engineer must consult the Parties (as per Sub-Clause 3.7.1), try to reach agreement, or make a fair determination (3.7.2) within 42 days, unless otherwise agreed.

This adds procedural discipline—you don’t want a loose handshake deal; you want a traceable, binding valuation.

🔹 Sub-Clause 15.6(b): What might have been earned

This is where it gets interesting…

Now we talk losses and damages, including:

• 🔺 Loss of profit on the portion of the Contract that the Contractor didn’t get to finish
• 🔺 Other justifiable financial damage directly caused by the Employer’s decision to terminate

This is more subjective, and may require detailed justification. You need to show, with a straight face and solid backup, “Here’s what I could have earned, and here’s why I deserve to be compensated.”

The Contractor must submit supporting particulars—receipts, schedules, breakdowns, logs. This is not “throw a number and hope it sticks.” It’s a claim grounded in evidence 📋📊.

📄 Do you need to submit a Statement? Nope.

Unlike the Final Payment process (Clause 14.11), where a formal Final Statement is needed, under Clause 15.6, the Contractor’s submission itself serves as the basis. The Engineer must proceed even if a formal Statement isn’t issued.

This saves time and administrative back-and-forth. Streamlined process = faster compensation 💸.

📘 FIDIC 1999 – What about Older Contracts?

Now let’s rewind. In the 📘 1999 Edition, there’s no standalone Clause 15.6. Termination for Employer’s convenience is tucked under Clause 15.5, and for valuation? You’re redirected to… Clause 19.6 [Optional Termination, Payment and Release].

Kinda like a scavenger hunt, right? 🕵️‍♀️

In that clause, the Contractor is entitled to payment of:

• ✅ Work done and Plant/Materials delivered
• ✅ Costs of removal/demobilization
• ✅ Costs of returning Equipment
• ✅ “Reasonable profit” on the unexecuted portion

So, similar rights, but the path to get there is not as structured or transparent. There’s no defined process for the Contractor to submit claims, no Engineer-led valuation requirement, and no deadline for payment. You’re relying heavily on general claim mechanisms or even triggering disputes under Clause 20 if things get murky.

💬 So what’s the difference really?

🔍 3️⃣ Key Interpretations and Implications – The Heart of Clause 15.6

Alright, so Clause 15.6 in the 📒 2017 FIDIC Yellow Book is where things start to get real for the Contractor—especially when the Employer decides to pull the plug on the contract “for convenience.” Let’s break down what this clause really means, how it shifts risk, and why the 2017 update matters way more than it seems at first glance.

🎯 First, Let’s Set the Scene…

Imagine this: you’re the Contractor. You’ve been executing the Works diligently, hitting milestones, investing resources, and then—boom—the Employer says, “We’re terminating the contract. Nothing personal—it’s just business.”

Now what? 😳

Is the Contractor left hanging, just waving goodbye to all that planning, labor, and potential profit?

Not anymore. That’s exactly why Clause 15.6 was introduced in the 2017 edition.

✅ Enter the 2017 Edition (📒): Purpose-Built, Clear, and Contractor-Friendly

Now let’s talk about what Clause 15.6 in the 2017 edition brings to the table:

It’s a purpose-built framework that:

• Defines exactly what the Contractor can claim.
• Details how valuation should be performed.
• Assigns responsibility to the Engineer for determination.
• Provides a fair and predictable structure—aka less stress for everyone involved.

Here’s what it says in plain English:

“Hey Contractor, if we (the Employer) terminate this thing for convenience, you can:

• Submit the value of all the work you’ve done so far.
• Include any outstanding payments due.
• Claim reasonable loss of profit and costs incurred as a result of the early termination.
• And don’t worry, you don’t even have to submit a full Final Statement like in Clause 14.11. We’ll fast-track this through the Engineer.”

Pretty refreshing, right?

🧑‍⚖️ Role of the Engineer – The Clause 3.7 Connection

One of the most powerful parts of Clause 15.6 is that it explicitly ties into Clause 3.7 – Agreement or Determination.

👉 That means:

• The Engineer must consult with both Parties, attempt agreement, and if needed,
• Provide a fair determination based on contract terms and context.

This isn’t just “make a payment and move on.” It’s a structured, documented, engineer-led process with:

• Timelines (payment within 112 days—see Clause 15.7)
• Accountability
• Procedural transparency

🎯 In contrast, under the 1999 edition, unless the parties reached an agreement or a DAB was engaged, things could stall or escalate quickly.

⚠️ Risks if Clause 15.6 Is Misunderstood or Modified Poorly

Here’s the twist: Particular Conditions that remove or alter Clause 15.6 could:

• Undermine Contractor rights.
• Reintroduce 1999-style ambiguity.
• Breach FIDIC Golden Principles (especially GP4 and GP5—transparency and enforceability).

⚠️ So if you’re drafting or reviewing Particular Conditions:

• Do NOT delete this clause without a very strong, contractually justifiable reason.
• Any changes should be clearly aligned with fair valuation principles and mirror the procedural protection it offers.

🔎 In the 1999 Edition (📘): A Gray Zone

Let’s start with the 1999 version. The concept of termination for convenience does exist—see Clause 15.5—but when it comes to valuation after that termination?

❌ There’s no dedicated clause like 15.6.

Instead, we’re told to take a detour to Clause 19.6 (“Optional Termination, Payment and Release”)—which, while helpful, wasn’t originally crafted specifically for employer-initiated convenience terminations. It was more about force majeure or optional exit scenarios.

👉 That means:

• Contractors had to infer their rights.
• Valuation principles were scattered across clauses.
• There was no explicit route for claiming things like loss of profit.
• Everything had to go through a more interpretive and negotiable process.

It left room for ambiguity, debate, and… well, disputes. And FIDIC doesn’t love disputes unless it’s Clause 21 calling. 😉

🛡️ So What Can the Contractor Actually Claim?

Let’s list it out so there’s no room for confusion:

💬 This list is not exhaustive, but it gives you the legal buffet you can choose from.

⚖️ A Quiet Revolution: Explicit Profit Recognition

Let’s pause here for a second. 👇

The explicit inclusion of “loss of profit” in Sub-Clause 15.6(b) is a BIG deal.

Why?

Because historically, loss of profit claims were implied rights that often had to be fought for—sometimes in arbitration. By saying it loud and proud, FIDIC’s 2017 edition:

• Acknowledges the business reality of contractor margins.
• Aligns with international good practice (especially in turnkey or EPC projects).
• Creates more predictable outcomes in termination scenarios.

💡 This also aligns with FIDIC’s Golden Principle GP4, which emphasizes clear and balanced allocation of risks—including termination-related ones.

🔗 4️⃣ Cross-Referencing with Other Clauses (Full Deep-Dive)

One of the things that makes Clause 15.6 (📒 2017) such a practical and contractor-friendly innovation is how it seamlessly interacts with a host of other clauses. Let’s look at those interdependencies and how each one plays a supporting role in ensuring that post-termination valuation is fair, comprehensive, and enforceable. 👇

🏁 Starts with Clause 15.5 – Termination for Employer’s Convenience

This is the trigger clause. The Employer can terminate the contract “at any time” for its convenience, without any fault on the Contractor’s part. It’s a “no-fault exit.” But, of course, that right comes with a responsibility: to fairly compensate the Contractor. That’s where Clause 15.6 comes in next.

In 📘 1999, there is also a Clause 15.5, but it’s much shorter and lacks any reference to how the valuation must be handled. Instead, it redirects us to Clause 19.6—which is a bit of a detour.

⚖️ Enters Clause 15.6 – Valuation after Termination (📒 2017)

This clause doesn’t work in isolation—it reaches out to other critical parts of the contract to figure out:

• What’s owed? 💰
• How do we calculate it? 🧮
• Who decides the final number? 👨‍⚖️

And that’s where cross-references come into play:

🧮 Clause 14.13 – Issue of Final Payment Certificate

If Clause 15.6 is the ‘how to assess’ clause, Clause 14.13 is the ‘how to pay it’ clause.

Let’s say the Contractor submits all the supporting documentation after termination for convenience—values of work done, off-site materials, demobilization costs, and even loss of anticipated profit.

📍 Clause 14.13 steps in to formalize this into a Final Payment Certificate—the Engineer’s official stamp that sums up all monies due.

In fact, Clause 15.6 specifically instructs the Engineer to refer to Clause 14.13 to determine any amounts due prior to termination. So you’re not just starting from scratch—you’re anchoring the valuation to what was already done and certified.

👷‍♂️ Clause 18.5 – Optional Termination, Payment, and Release

Here’s a clever design move in the 2017 Book: it cross-references Clause 18.5 when valuing the Contractor’s entitlements under 15.6(a).

Why? Because Clause 18.5 contains a comprehensive list of payments due when the contract is terminated under exceptional circumstances (like force majeure). And since both force majeure and convenience terminations are no-fault scenarios, the logic for compensation overlaps.

So, under Clause 15.6(a), the Contractor can claim:

• Work properly executed
• Reasonable return of Contractor’s Equipment
• Costs of repatriation of personnel
• Costs of termination of subcontracts
• Removal of Temporary Works

In other words, anything recoverable under 18.5 becomes automatically valid under 15.6(a). That’s some seriously smart cross-linking! 🔗📘➡️📒

📜 Clause 3.7 – Agreement or Determination by the Engineer

Now here’s the procedural backbone. Once the Contractor submits its valuation claims under Clause 15.6, it doesn’t go straight to the bank. Instead, the Engineer must agree or determine the amount due—Clause 3.7 is the legal compass here.

The Engineer must:

• Consult with both parties
• Attempt to reach agreement (Clause 3.7.1)
• If no agreement is reached, make a fair determination (Clause 3.7.2)
• Do all this within a maximum of 42 days (Clause 3.7.3)

And the Engineer’s decision is binding—unless a Notice of Dissatisfaction (NOD) is issued.

💡 This creates a fair and formal path from Contractor’s claim ➡️ Engineer’s decision ➡️ Payment. No ambiguity. No guesswork.

⏱️ Clause 15.7 – Payment Timeline

This is one of the most contractor-conscious clauses in the entire Yellow Book 2017.

After the Contractor submits its claim under Clause 15.6, the Employer must pay the determined amount within 112 days. Not “a reasonable time.” Not “eventually.” A specific, hardcoded 112-day window. 📆✅

That’s legal certainty in action, and it reduces dispute risks significantly.

By contrast, in the 📘 1999 edition, there’s no fixed timeline for final payment after a convenience termination—again, the process is murkier.

🤝 Cross-over to Claims & Disputes

In the event of disagreement over the valuation, the Contractor may invoke:

• Clause 20.1 (📘) or Clause 20.2 (📒) – for formal claims
• Clause 21 (📒) – for Dispute Avoidance/Adjudication Board involvement

This makes Clause 15.6 not just a money clause, but a potential entry point into the broader dispute resolution ecosystem of FIDIC.

🏗️ 5️⃣ What-If Scenarios? — Let’s bring Clause 15.6 to life

Imagine you’re the Contractor, and after months of mobilizing, coordinating with suppliers, and sweating through design submissions… you receive a letter: ❝The Employer is terminating the Contract for convenience.❞

You didn’t mess up. There’s no default. It’s purely a business decision—budget cuts, funding dried up, or perhaps a change in priorities. Whatever the reason, it’s not your fault.

So, what now? Let’s explore how Clause 15.6 steps in with some practical, and surprisingly fair, answers.

🧱 Scenario A: Mid-Project Termination – You’re Halfway In

You’ve completed 50% of the Works. Materials are on site, some Plant is installed, staff are still mobilized, and procurement is in full swing. Suddenly the Employer pulls the plug.

Under 📒 Sub-Clause 15.6(a):

• You can claim the value of work done, including what’s physically complete and what you’ve done offsite (designs, procurement, partially fabricated equipment).
• You can even reference your entitlements under Clause 18.5 (which includes demobilization costs, unpaid amounts, and return of Contractor’s Equipment).

But here’s the gold nugget:

📒 Sub-Clause 15.6(b) says you can also claim for loss of profit and other losses or damages resulting from this termination.

💬 So you’re not just being paid for past effort—you can also seek compensation for the future earnings you’re now missing out on.

👉 In the 1999 edition, you’d have to rely on Clause 19.6 [Optional Termination, Payment and Release]—which isn’t even in the same part of the contract! You’d be digging around the Force Majeure clause to find your footing. That’s less than ideal. 😕

🚧 Scenario B: You Haven’t Been Paid for the Last IPC

Let’s say you submitted your last Interim Payment Application, but before the IPC was certified, the Employer terminated the contract. You’re worried your last month of work might slip through the cracks.

🔎 Good news: Under 📒 Clause 15.6(a), you can include that amount in your submission for valuation. Even if the IPC wasn’t formally issued, you can refer to the entitlement under Clause 14.13 (Final Payment Certificate)—which helps tally everything that’s still outstanding.

💡 The Engineer will then act under Clause 3.7 to agree or determine the final amount. So, you have a structured and fair path forward—even post-termination.

🔧 Scenario C: You Already Invested in Long-Lead Items

You’ve placed orders for custom-built chillers, switchgear, or structural steel that’s still in fabrication overseas. You’ve paid deposits. These aren’t sitting on site yet, but they’re part of your plan.

📒 Clause 15.6 is written with this kind of nuance in mind. Why?

Because the value of work done under 15.6(a) isn’t just limited to what’s on-site. It includes:

• Design work completed
• Plant and materials properly ordered and paid for
• Fabrication stages in off-site workshops

Plus, if cancelling those orders means incurring losses or penalties—you can bring those forward under 15.6(b) as “losses or damages suffered.” 🧾

🏗️ Scenario D: The Employer Asks You to Demobilize Immediately

You’re told to leave the Site next week. You’ve got cranes to disassemble, temporary facilities to remove, and equipment to ship back across borders. Not to mention, you’ve got local labor contracts to terminate.

Under Clause 15.6, this situation entitles you to claim:

• Demobilization costs 🏗️
• Repatriation expenses ✈️
• Site clearance operations
• Even potential damages or penalties from breaking subcontracts early

All of these fall under either 15.6(a) (actual costs incurred) or 15.6(b) (losses and damages resulting from termination). And the beauty is—you don’t need to file a Final Statement. Just submit supporting details, and the Engineer will assess it through Clause 3.7.

💬 Scenario E: You Had Reasonable Expectations of Future Profit

Let’s say your margin was modest but reasonable—maybe 7–10% of your total forecast. You’ve priced lean, but still accounted for a healthy return by the end of the job.

📒 Clause 15.6(b) allows you to bring that to the table.

Of course, it won’t be handed to you blindly. You’ll need to:

• Provide reasonable calculations
• Show progress forecasts and cashflow models
• Demonstrate why your expectation of profit was realistic and contractually based

But the right to claim that profit is clearly recognized, which wasn’t the case so explicitly in the 📘 1999 edition. There, you’d be negotiating in more ambiguous territory.

💡 6️⃣ Suggestions for Clarity and Improvement (Enhanced with Examples & Golden Principles)

🔍 Ambiguities and Issues to Address

1. “Loss of profit or other losses and damages” — What qualifies? Is it gross margin? Net margin? Site overhead?
   • 🔁 Unclear terminology may lead to disputes during determination.
2. “Supporting particulars as reasonably required by the Engineer” — what is “reasonable”? This is ripe for argument.
3. Valuation linkage to Clause 14.13 (Final Payment Certificate) and Clause 18.5 (Optional Termination) creates back-and-forth referencing.
4. No mention of a cap or method for profit estimation, which may lead to inflated or contested claims.

📘 Crosswalk to FIDIC Golden Principles

🧱 C. Practical Example

Scenario: A Contractor was halfway through a water treatment plant project when the Employer terminated the contract for convenience due to funding withdrawal.

Under standard wording:

• Contractor claims $3.5M in profit loss.
• Engineer disputes basis and deems most cost “speculative.”

🛠️ Under the modified Clause 15.6:

• Contractor can only claim up to 10% of the unexecuted value (say, $7M × 10% = $700,000 cap).
• Profit must be audited, itemised, and linked to demonstrable planning and incurred indirect costs.

This clarity streamlines dispute resolution and prevents inflated or unsupported claims.