🧩 1️⃣ Purpose of Clause 9.4
🎯 What is Clause 9.4 all about?
Clause 9.4 in both editions deals with the scenario where the Works (or Section) fail to pass the Tests on Completion, which are the technical and performance benchmarks defined to ensure the Works are ready for Taking-Over.
📌 Objective:
- To define the consequences if the Contractor cannot pass the Tests on Completion.
- To outline the options available to the Employer, including taking over the Works with or without deductions, or requiring retesting.
- To manage risk and quality at the project delivery stage, balancing Employer needs and Contractor feasibility.
📜 Historical Context & Evolution:
| Aspect | FIDIC 1999 | FIDIC 2017 |
|---|---|---|
| Tone | Compact and direct | More detailed and procedural |
| Focus | Broad discretion to Employer | Introduces clearer option mechanisms and additional performance-based consequences |
| Risk Allocation | Ambiguity in acceptance despite failure | More structured acceptance vs. performance loss logic |
🧩 2️⃣ Deep Dive Breakdown of Clause 9.4: Failure to Pass Tests on Completion
Imagine this: the Works are almost done, the site looks great, the Contractor is ready to hand it over. But then… the Tests on Completion fail. Maybe the plant doesn’t reach the promised output, or an automated system isn’t responding as designed. Either way, this clause now takes center stage.
We’re going to explore how FIDIC 1999 and FIDIC 2017 each handle this awkward moment.
📕 FIDIC 1999 Edition – Clause 9.4 Unpacked
🎯 Context:
The Tests on Completion have already been retested under Sub-Clause 9.3, but things are still not working as intended. The Engineer must now make a call.
✅ What Options Does the Engineer Have?
🔁 (a) Order More Retesting
The Engineer can say:
“Let’s give it another go.”
This might seem generous, but here’s the catch: there’s no limit set in the clause. Theoretically, the Engineer could keep asking for more tests unless the Employer puts a foot down. There’s no time trigger or test cap. That’s risky — and arguably, a bit loose.
❌ (b) Reject the Works or Section
This is the hammer. The clause says:
“If the failure deprives the Employer of substantially the whole benefit of the Works or Section…”
Then the Employer can reject them.
But what’s “substantially the whole benefit”? 🤨 That’s the million-dollar question. FIDIC 1999 doesn’t define this phrase, leaving it open to interpretation — and potential dispute.
Let’s say the project was a solar plant expected to generate 5 MW. If it only delivers 3 MW after multiple fixes, has the Employer lost “substantially the whole benefit”? 🤷
📎 The remedy? This rejection triggers Clause 11.4(c) — which allows the Employer to:
- Terminate the Contract (fully or partially)
- Recover all sums paid, plus:
- Financing costs
- Dismantling and site clearance
- Return of Plant and Materials
🛑 Bottom line: rejection isn’t just a slap on the wrist — it can lead to full contract termination and major cost consequences.
🧾 (c) Accept the Works – With a Price Reduction
Now here’s where it gets nuanced.
The Employer might say:
“We’ll take the Works, even if they underperform — but we expect a discount.”
In this case:
- The Engineer issues a Taking-Over Certificate.
- The Contractor is still on the hook for every other obligation in the contract (including defects liability).
- The Contract Price is reduced “to cover the reduced value to the Employer.”
📌 But — and this is crucial — 1999 doesn’t tell us how to calculate the reduction.
So what happens?
If the reduction isn’t pre-defined in the Contract:
- The Employer may demand a reduction, and both parties try to agree.
- If they can’t agree, it must be determined under:
- Clause 2.5 [Employer’s Claims]
- Clause 3.5 [Determinations]
This could lead to delays, disputes, and even DAAB proceedings — simply because there’s no formula.
📘 FIDIC 2017 Edition – Clause 9.4 Explored
Fast forward to 2017. This version takes the old Clause 9.4 and gives it a full structural makeover — clearer paths, better risk management, and firm timelines.
We’re still in the same situation: Tests on Completion failed again, even after retesting under Sub-Clause 9.3.
Now, the Engineer has four distinct options — laid out like a menu.
🔁 (a) Order More Retesting
Just like in 1999, the Engineer can instruct:
“Try again.”
But in practice, the structure of the 2017 Contract encourages moving on to other options faster — there’s more procedural clarity coming up.
❌ (b) Reject the Whole Works
If the failure:
“…deprives the Employer of substantially the whole benefit of the Works…”
then the Employer can reject the entire Works, triggering Clause 11.4(d).
🛠️ This clause allows the Employer to:
- Terminate the Contract with immediate effect (bypassing the usual Clause 15.2).
- Recover all sums paid plus financing charges, dismantling, clearance, and return costs.
This is a clean kill — no drawn-out process. It’s intended for catastrophic failures.
⛔ (c) Reject Just a Section
Here’s a smart addition by FIDIC.
If:
“…the Section cannot be used for its intended purpose(s)…”
then the Employer can reject just that Section — and apply Clause 11.4(c).
The Engineer then treats that Section as an omission, as if it was never included under Clause 13.3.1. This avoids total project derailment when only part of the Works is problematic.
✅ (d) Accept with a Deduction
This is where things get real-world practical.
The Employer can say:
“Okay, we’ll accept the Works, but you owe us a deduction.”
And now — unlike 1999 — we get exact steps:
- The deduction is determined as per Clause 11.4(b)(i) or (ii):
- (i) If there are Performance Damages in the Schedule of Guarantees, they apply.
- (ii) If not, a price reduction is calculated based on lost value.
🕒 If no agreement is reached within 14 days, the Engineer must make a determination under Clause 3.7.
📣 Also — this path doesn’t limit the Employer’s rights. They can accept the Works and still pursue other contractual remedies if needed.
🎯 Recap Comparison: Side-by-Side Snapshot
| 📌 Feature | FIDIC 1999 | FIDIC 2017 |
|---|---|---|
| Retesting | ✅ Unlimited | ✅ Same |
| Rejection – Whole Works | ✅ Broadly defined | ✅ Clearly stated in 9.4(b) |
| Rejection – Section Only | ❌ Not specified | ✅ New in 9.4(c) |
| Acceptance with Deduction | ✅ But vague on process | ✅ Clear path: Clause 11.4(b) applies |
| Reduction Formula | ❌ Usually undefined | ✅ Linked to Performance Damages or Value Loss |
| Engineer’s Role | 💬 Implied via 3.5 | 🛠️ Structured via 3.7 (with 14-day deadline) |
| Employer Rights Reserved? | ❌ Not specified | ✅ Explicitly preserved |
🧠 Final Thoughts on Breakdown
- FIDIC 1999 gave flexibility, but at the cost of ambiguity.
- FIDIC 2017 introduces a well-structured, multi-layered remedy system that helps both parties know what comes next.
🧠 3️⃣ Key Interpretations and Implications
When the Works fail to pass the Tests on Completion, it can be a make-or-break moment in a project. Clause 9.4 acts as the fork in the road — where everyone needs to decide: do we fix, reject, or accept with consequences?
Let’s break this down into practical interpretations, uncover the risks and obligations behind each option, and explore how things play out differently in the 1999 vs. 2017 editions.
💥 What does “Failure to Pass Tests on Completion” really mean?
It’s not just a missed benchmark — it’s about whether the performance, capacity, or safety of the Works (or a Section) meets what’s specified in the Employer’s Requirements.
Some common real-world examples:
- A power plant that generates only 70% of its rated output 🔌
- A wastewater treatment plant that doesn’t meet effluent discharge standards 💧
- An automated system with response delays or accuracy issues 🖥️
Failing these tests means the Works aren’t ready to be taken over — unless the Employer accepts them anyway, which comes with strings attached.
📘 Interpretations – FIDIC 1999 Style
In the 1999 edition, Clause 9.4 gives the Engineer three powers:
- Repeat the tests
- Reject the Works or Section
- Accept the Works (with a reduction in price)
But here’s where things get interesting — and murky:
🔁 Repetition of Tests: How far is too far?
Can the Engineer keep ordering test after test?
- The clause says yes, but doesn’t limit it.
- This creates a procedural risk: The Contractor might feel trapped in endless cycles of “try again.”
👉 Interpretation:
- The Engineer should act reasonably — perhaps after two or three failures, move to the next remedy.
- No clear cut-off = risk of dispute.
❌ Rejection Based on “Substantially the Whole Benefit”
This is one of the most debated phrases in FIDIC:
“…if the failure deprives the Employer of substantially the whole benefit…”
🧠 Key questions:
- What defines “benefit” — performance, commercial value, or functional usability?
- Does a 25% shortfall in performance qualify?
- Is it based on absolute need (e.g., can’t use at all) or relative drop (e.g., not as efficient)?
📌 Implication:
- It’s a subjective trigger that could be used too easily — or contested in arbitration if used prematurely.
✅ Acceptance with Price Reduction — But Based on What?
The 1999 clause allows the Employer to accept the Works with a price cut — but here’s the catch:
- There’s no standard for how the “reduced value” is to be calculated.
- Unless a reduction formula is included in the Particular Conditions, the parties must either:
- Negotiate it (which can stall Taking-Over), or
- Have it determined by the Engineer (under Clause 3.5) or referred to the DAAB.
📎 Implication:
- Potential for disagreement, delay in Taking-Over Certificate issuance, and even cashflow issues for the Contractor.
📘 Interpretations – FIDIC 2017 Style
Now let’s look at how Clause 9.4 evolved in 2017 — and how those same options were reshaped for better clarity and balance.
🔁 Retesting Still Exists — But Less Open-Ended
Engineers still have discretion to repeat tests — but the structure of Clause 9.4 nudges the project toward resolution:
- Once failure recurs, options (b) to (d) are meant to kick in.
- This encourages finality, not indefinite loop-testing.
✅ Implication:
- Clearer progression of remedies improves predictability and reduces procedural abuse.
❌ Rejection Split into Two Paths: Whole Works vs. Section
This is a brilliant addition in 2017.
Option (b): If the entire Works fail to deliver the benefit — reject the whole thing.
Option (c): If just one Section fails its purpose — reject only that part.
👉 This reflects how modern infrastructure is built — in modular phases, allowing:
- Taking over what’s ready ✅
- Rejecting or omitting what’s not ❌
📌 Implication:
- Gives the Employer precision tools rather than a one-size-fits-all hammer.
- Limits unnecessary rejection of usable work.
📉 Acceptance with Deduction — Now Backed by Clause 11.4
Here’s where 2017 shines:
- The Employer can say: “We’ll take it — but you’re paying for that underperformance.”
- The deduction must follow:
- Clause 11.4(b)(i): Apply performance damages, if guarantees exist.
- Clause 11.4(b)(ii): Or determine a reduction in Contract Price based on value loss.
🧠 But what if they can’t agree on how much?
- The Engineer must issue a determination under Clause 3.7 within 14 days.
📎 Implication:
- Reduces negotiation delays
- Adds fairness and structure
- Encourages Contractors to proactively track and quantify value loss (e.g., efficiency shortfall = X% revenue loss)
📢 Obligations Recap: Who Does What?
| Role | Responsibilities |
|---|---|
| Contractor | Must cooperate in further tests, remedial works, and comply with the Engineer’s instructions. |
| Engineer | Makes critical decisions: retest, reject, accept with deductions, and issue fair determinations. |
| Employer | Can reject or accept with compensation — but must notify requests (e.g., Taking-Over) and document reductions. |
🚨 Risk Zones for Each Party
👷 Contractor:
- May be forced into further testing with no guaranteed outcome.
- Faces price reduction or worse, contract termination if failure is serious.
- Needs to manage test protocols, documentation, and root cause analysis effectively.
🧑💼 Employer:
- May be stuck between functional urgency and underperformance reality.
- Can reject, but must ensure it meets the “substantially the whole benefit” threshold.
- Needs to balance commercial use vs. legal recovery.
🧑💻 Engineer:
- Walks the tightrope of being fair to both parties.
- Must be ready to quantify deductions and issue determinations under pressure.
📚 Key FIDIC Concepts in Play
- “Substantially the whole benefit” — a subjective test that must be handled with technical and commercial evidence.
- “Intended purpose(s)” — in 2017, this becomes a decisive trigger for rejecting Sections.
- “Fair determination” — introduced in 2017 to reduce reliance on litigation or DAABs.
🔗 4️⃣ Cross-Referencing with Other Clauses
🧭 Why Cross-Referencing Matters in Clause 9.4?
Clause 9.4 (Failure to Pass Tests on Completion) might look like it lives in the “Testing and Completion” zone — but in reality, it’s the epicenter of multiple contract consequences. It’s like a trigger switch that sets off a chain reaction across the contract. If you know which clauses it connects to, you can:
- 📌 Predict the next steps,
- 🚨 Avoid potential legal traps,
- 💬 And speak with confidence in meetings, disputes, or claims.
🔗 Step-by-Step Clause Interactions
🧪 Clause 9.3 – Retesting: The Entry Point
“If the Works, or a Section, fail to pass the Tests on Completion, Sub-Clause 7.5 [Rejection] shall apply, and the Engineer or the Contractor may require the failed Tests … to be repeated under the same terms and conditions.”
🔍 What’s going on here?
Clause 9.3 is the prerequisite to 9.4. It governs what happens immediately after a failure — i.e., can the Contractor get a second chance?
✅ Key Takeaway:
- Clause 9.4 does not activate unless there’s a retest failure under Clause 9.3.
- The Engineer or Contractor can request retesting.
- Repeated tests are treated as if they are original Tests on Completion — this is confirmed clearly in 2017.
🧠 Interpretation Tip:
- The Engineer’s refusal to allow retesting, or the Contractor’s failure to request it, can significantly alter rights under 9.4.
- Also, retesting doesn’t mean the Employer must wait forever — this is where 9.4 brings finality.
❌ Clause 7.5 – Rejection (Both Editions)
Clause 9.3 makes a quick reference to Clause 7.5, which enables the Engineer to reject work that fails tests.
✔️ In 1999, it’s titled just [Rejection] ✔️ In 2017, it’s [Defects and Rejection], giving more process.
🔁 The rejection mechanism here is early stage — based on test results, not a full clause 9.4 remedy.
🧠 But once retesting fails and the failure is serious, you move from “rejection of work” to “rejection of the Works” — that’s the bridge from Clause 7.5 ➝ Clause 9.4 ➝ Clause 11.4.
🛠️ Clause 11.4 – Failure to Remedy Defects
This is the engine room of remedies — and 9.4 plugs into it like a power cable. Let’s map the exact links:
| From Clause 9.4 | → | Connects to Clause 11.4 |
|---|---|---|
| 9.4(b) (1999) | → | 11.4(c): Employer may terminate, recover payments, dismantling cost |
| 9.4(b) (2017) | → | 11.4(d): Same right, but clarified and immediate |
| 9.4(c) (2017) | → | 11.4(c): Treats defective Section as an omission |
| 9.4(d) (2017) | → | 11.4(b)(i) or (ii): Determines compensation or reduction in price |
💡 Practical wisdom: Clause 9.4 is not the final word. It redirects the real consequences to 11.4, where money, claims, and termination live.
📜 Clause 10 – Taking-Over Certificate
Let’s say the Employer decides:
“We’ll accept the Works, even though they didn’t pass the tests.”
This triggers 9.4(c) (1999) or 9.4(d) (2017), which leads to a Taking-Over Certificate under Clause 10.1.
What’s at stake?
- The Defects Notification Period starts ticking after this.
- The Employer may still be entitled to a price reduction — but the Engineer must sort it out before the final certificate.
📎 Fun fact: If the reduction isn’t agreed or fairly determined, final payment under Clause 14 might get stuck. So Clause 10 actually acts as a hinge between 9.4 and 14.
💰 Clause 14 – Contract Price and Payment
This is the money zone.
When the Employer accepts the Works under 9.4 but wants a reduction, it needs to be reflected in:
- 💳 The Final Statement (Clause 14.11)
- 🧾 The Final Payment Certificate (Clause 14.13)
If the reduction isn’t agreed? The Engineer must make a fair determination (Clause 3.5 / 3.7), which then flows into the payment calculation.
📌 Note:
- In 1999, Employer must pay reduced price before the Taking-Over Certificate.
- In 2017, reduction is processed as part of the ongoing payment cycle, subject to Clause 20.2 claims process.
⚖️ Clause 3.5 (1999) / Clause 3.7 (2017) – Engineer’s Determination
💥 If the Contractor and Employer disagree on the price reduction (which is often the case), the Engineer is forced to intervene.
In 1999:
- Clause 3.5 gives the Engineer the power to determine matters if parties can’t agree.
- But there’s no timeframe — which means… it could drag.
In 2017:
- Clause 3.7 is much stronger:
- Parties get 14 days to agree.
- Then the Engineer must issue a determination.
- It must be reasoned and explained in writing.
📌 In Clause 9.4(d) (2017), this pathway is clearly linked:
“…shall be subject to Sub-Clause 11.4(b)(ii), and if no agreement is made within 14 days, the Engineer shall make a fair determination…”
That’s tight procedural control — designed to prevent endless back-and-forth.
🧾 Clause 20 – Claims for Payment, EOT, or Disagreement
If the Employer:
- Claims a price reduction under Clause 9.4, and
- The Contractor believes this is unfair…
…then we’re into claims territory.
In 1999:
- Clause 2.5 governs Employer’s Claims
- Clause 20.1 governs Contractor’s Claims — but very limited and procedural
In 2017:
- Contractor can use Clause 20.2 to push back
- Employer’s reduction proposal must be notified and substantiated
📣 Big Upgrade:
In 2017, both parties must follow the claim process or risk losing rights.
🛑 Clause 15.2 – Termination for Default (2017 only)
Sometimes, the failure to pass tests isn’t just technical — it’s contract-breaking.
In 2017, Clause 11.4(d) (referenced from 9.4(b)) bypasses Clause 15.2 and allows immediate termination if failure deprives Employer of the “whole benefit.”
This is fast-track exit — not based on notice or cure period, just functional non-performance.
✅ Important nuance: Clause 15.2 is not required — this is a separate “kill switch.”
🎯 Visual Summary Table
| 🔗 Clause | 🔄 Interaction with 9.4 | 📚 Applies to |
|---|---|---|
| 9.3 | Authorizes retesting before 9.4 | Both |
| 7.5 | Enables rejection after failed test | Both |
| 11.4 | Supplies remedies for each 9.4 path | Both |
| 10.1 / 10.2 | Taking-Over triggered if Works accepted | Both |
| 14.11 / 14.13 | Reduction must reflect in final payment | Both |
| 3.5 / 3.7 | Engineer determines price cut if disputed | Both |
| 20.1 / 20.2 | Claims/disputes over test failures or deductions | Both |
| 15.2 | Termination route in case of fundamental failure | Mainly 2017 |
✅ Final Takeaways
Clause 9.4 is the nerve center of post-completion decisions — but its teeth, triggers, and consequences all come from other clauses. You cannot understand 9.4 in isolation.
🔍 Key Reflection:
When interpreting Clause 9.4, always ask:
“What clause gets activated if this road is taken?”
This way, you can predict outcomes, control risk, and prepare your client or team for what lies ahead.
🎭 5️⃣ What-If Scenarios? – Clause 9.4 in Real Life
Let’s play out scenarios where Tests on Completion fail, and see how both the 1999 and 2017 editions respond. These examples will help you grasp the practical implications, spot grey areas, and understand how to manage them.
🧪 Scenario 1: “The Test Failed, But Only Slightly – Can the Employer Still Reject It?”
🧷 Background:
- A desalination plant was supposed to produce 500,000 litres/day.
- The test shows it can do 480,000 litres/day.
- The Contractor says, “That’s still 96% performance!”
- But the Employer says, “Not acceptable. We reject.”
🔍 FIDIC 1999:
- The key phrase is: “substantially the whole benefit of the Works” (Clause 9.4(b)).
- But what is “substantially”? Is 96% okay? Or is that a breach?
- If the Employer insists on rejection, they can activate Clause 11.4(c) → termination and cost recovery.
💬 Interpretation:
There’s no defined threshold. This could go to the Engineer for determination under Clause 3.5, or even to the DAAB/arbitration if disputed.
🔍 FIDIC 2017:
- Same logic applies under Clause 9.4(b) → triggers 11.4(d).
- But now, the Engineer must make a reasoned determination within 14 days (Clause 3.7) if there’s no agreement.
📌 Risk Tip: Contractors should quantify the value impact of the shortfall — if the remaining capacity still serves the Employer’s needs, rejection may be challenged.
🔁 Scenario 2: “The Employer Accepts the Works Despite the Failure – Now What?”
🧷 Background:
- The Employer says, “Let’s take it anyway.”
- But they want a 10% reduction in Contract Price.
🔍 FIDIC 1999:
- Clause 9.4(c) allows this.
- But if no formula is in the contract, the Employer must:
- Propose a value (Clause 2.5)
- Engineer must determine it (Clause 3.5)
- Until agreed or determined, the Taking-Over Certificate might be delayed.
💬 Catch:
There’s no fixed timeline for resolution. Contractor cash flow can get stuck.
🔍 FIDIC 2017:
- Clause 9.4(d) directly links to Clause 11.4(b):
- If Performance Damages are listed in the Schedule → apply those.
- If not → Engineer determines a fair reduction under Clause 3.7 after 14 days.
📌 Bonus: The Employer can accept the Works and still pursue other rights (e.g., damages) — this is explicitly protected in 2017.
🧯 Scenario 3: “The Contractor Thinks the Test Failure Was the Employer’s Fault”
🧷 Background:
- Test fails because the Employer didn’t supply power to one part of the plant.
- Contractor argues: “This isn’t my fault. The test conditions were unfair.”
🔍 FIDIC 1999:
- The Contractor must issue a claim under Clause 20.1.
- May seek extension of time (EOT) or cost relief.
- But timelines for claim submission are unclear and not strict.
🔍 FIDIC 2017:
- Contractor can raise a formal claim under Clause 20.2 (e.g., “Test failed due to Employer default”).
- Must notify within 28 days.
- If accepted, Employer can’t penalize the Contractor via Clause 9.4.
📌 Pro Strategy:
Contractors should document all test inputs and dependencies — especially if failure could be due to Employer-side inputs.
🧩 Scenario 4: “The Engineer Keeps Asking for More Tests – Can This Go On Forever?”
🧷 Background:
- The Works have failed 2 times.
- The Engineer keeps saying, “Run the tests again.”
🔍 FIDIC 1999:
- Clause 9.4(a) says retesting can continue, but doesn’t limit how many times.
- This could create cost inflation, delay, or even bad faith accusations.
🔍 FIDIC 2017:
- Same retesting right exists in Clause 9.4(a).
- BUT: There’s now a clearly structured exit:
- After multiple failures → the Engineer must choose:
- Reject
- Accept with reduction
- Repeat test once more with justification
- After multiple failures → the Engineer must choose:
📌 Best Practice:
After 2 failed tests, both parties should request the Engineer to formally record the next steps, rather than looping.
🧾 Scenario 5: “The Section Works, but Only for One Purpose – Is It Still a Failure?”
🧷 Background:
- A building’s HVAC system was tested for cooling and heating.
- Cooling works, heating does not.
- Contractor says: “Half the job works!”
- Employer says: “We need both functions — it’s a failure.”
🔍 FIDIC 1999:
- There is no Section-specific remedy in 9.4.
- Employer must either reject the full Works or accept and reduce price.
- Not ideal for multi-use, modular projects.
🔍 FIDIC 2017:
- Beautifully handled in Clause 9.4(c):
“…if the Section cannot be used for its intended purpose(s)…”
- Engineer can reject just that Section.
- Clause 11.4(c) lets the Engineer treat it as an omission, like it was never part of the Contract.
📌 Real Advantage:
Allows phased handover and avoids holding up the entire project due to a non-critical failure in one part.
🚫 Scenario 6: “The Failure is So Bad the Employer Wants to Terminate the Contract”
🧷 Background:
- The Works fail catastrophically (e.g., structural failure or total non-functionality).
- Employer wants to terminate.
🔍 FIDIC 1999:
- Clause 9.4(b) + Clause 11.4(c) allows termination if failure deprives substantially the whole benefit.
- Employer can recover:
- All sums paid
- Financing costs
- Cost of dismantling
- Site clearance
🔍 FIDIC 2017:
- Clause 9.4(b) → Clause 11.4(d): Same concept, but even more precise.
- Allows immediate termination (no need to invoke Clause 15.2).
- Explicit wording: This remedy is independent of normal default-based termination.
📌 Key Insight:
Clause 9.4 failure can become a standalone cause for termination, especially in critical infrastructure projects.
🧠 Big Picture Learning from These Scenarios
| Situation | 1999 Edition | 2017 Edition |
|---|---|---|
| Small shortfall in test? | Risk of dispute due to vague wording | Engineer’s fair determination required |
| Employer accepts anyway? | Vague process for reduction | Linked to Clause 11.4(b), clear paths |
| Employer at fault for test failure? | Claims process not well-structured | Strong 28-day claim window (Clause 20.2) |
| Endless retesting? | No cap, vague discretion | Pushes Engineer toward decisions faster |
| Partial functionality of Works? | Reject all or accept all | Reject or omit only the failed Section |
| Catastrophic failure? | Can terminate via 11.4(c) | Immediate termination via 11.4(d) |
✅ Final Thoughts on What-Ifs
Clause 9.4 is deceptively short — but it can explode into different directions depending on how it’s triggered, how the Engineer acts, and whether the Employer accepts or rejects the Works.
🔧 In 1999: You need to build protections through Particular Conditions and strong Engineer interpretations.
🧠 In 2017: The logic tree is clearer, but you still need to follow procedures, respect deadlines, and document performance shortfalls or Employer-side obstacles.
🛠️ 6️⃣ Suggestions for Clarity and Improvement
🧩 1. Ambiguity: “Substantially the Whole Benefit”
This phrase appears in Clause 9.4(b) (both 1999 and 2017) and is notoriously vague.
🔍 Issue:
- What does “substantially” mean?
- 80% performance? 90%?
- Leaves room for disputes, subjective interpretation, and inconsistent decisions.
🧠 Golden Principle (GP2) says: Particular Conditions must be drafted clearly and unambiguously.
✅ Suggested PC Wording:
“For the purposes of Sub-Clause 9.4(b), a failure shall be deemed to deprive the Employer of ‘substantially the whole benefit’ of the Works if the actual performance deviates by more than 15% from the minimum performance levels stated in the Schedule of Guarantees.”
🎯 Why this helps:
- Gives the Engineer a numeric threshold.
- Reduces litigation risk.
- Aligns with GP2 and GP3 by clarifying intent and ensuring fair allocation of risk.
🔁 2. Ambiguity: “Reduction in Contract Price” — But How?
In both 1999 and 2017 versions, the Employer may accept the Works and impose a reduction in price. But…
🔍 Issue:
- There is no method defined for calculating the reduction unless it’s specified elsewhere.
- Leads to delay in Taking-Over Certificate or disputes during final payment.
✅ Golden Principle (GP2) demands: PCs must explicitly describe how they alter or extend GCs, especially when adding financial consequences.
✅ Suggested PC Addition:
“If the Engineer issues a Taking-Over Certificate under Sub-Clause 9.4(c)/(d), the reduction in Contract Price shall be calculated as a percentage of the Schedule of Performance Guarantees shortfall, based on the following:
(i) 1% reduction for each 1% deviation below guaranteed performance,
(ii) up to a maximum reduction of 10% of the Contract Price.”
📌 Bonus Tip: Include this clause in both:
- 📄 Particular Conditions (Part B)
- 📑 Schedule of Performance Guarantees
This makes the connection between performance and payment crystal clear — exactly what GP2 and GP3 advocate.
🔄 3. Problem: Retesting Can Be Endless (Loop Risk)
Clause 9.4(a) gives the Engineer the right to order further retesting, but doesn’t limit how many times this can happen.
🔍 Risk:
- Endless loop of testing → delays → disputes.
- No termination trigger for chronic failures.
✅ Suggested PC Enhancement:
“The Engineer shall not order more than two further repetitions of the Tests on Completion under Sub-Clause 9.4(a), unless the Contractor provides, at its own cost, a written plan with modifications or improvements justifying additional testing.”
🎯 Why it works:
- Encourages Contractor to take responsibility.
- Prevents misuse of retesting as a delay tactic.
- Satisfies GP4 (reasonable timeframes) and GP1 (fair performance obligations).
🧾 4. No Timeframe for Price Reduction Agreement Before Taking-Over
🔍 Problem in 1999:
Clause 9.4(c) says Taking-Over can occur only after the reduction is paid or determined — but doesn’t set a time limit. This may delay the DNP or project closure.
✅ Suggested Fix:
“If the Parties are unable to agree the price reduction within 14 days, the Engineer shall issue a determination under Clause 3.5. Such determination shall be binding until revised under Clause 20.4 [DAAB] or by arbitration.”
✅ Aligns with:
- 🧠 GP4: Defines a fair timeline
- 🤝 GP5: Promotes early dispute resolution
- ⚖️ GP1: Preserves Engineer’s neutral authority
⚖️ 5. Engineer’s Role Must Remain Independent
Real problem in India (often seen in modified Yellow Books):
The Engineer is asked to “obtain Employer approval” before issuing a determination — this violates GP1!
✅ FIDIC Says:
“It would be a breach of GP1 for a Contract to require the Engineer to seek approval from the Employer before issuing any determination under Sub-Clause 3.7”1. FIDIC Yellow Book 20…
✅ Suggested PC Clause (to ensure GP1 compliance):
“In carrying out determinations under Sub-Clause 3.7 related to Sub-Clause 9.4, the Engineer shall act independently and is not required to seek or obtain prior approval from the Employer.”
📌 This one’s a Golden Principle must-have.
✍️ Sample Particular Conditions for Indian Projects
If you’re drafting for Indian infrastructure (say NH, MRTS, or thermal power), consider integrating this model PC:
🔹 Sample PC for Sub-Clause 9.4 (2017 Edition)
(Modification to the last paragraph of the Clause)
“In the event of the Employer electing to issue a Taking-Over Certificate under sub-paragraph (d) of this Sub-Clause, the reduction in Contract Price shall be calculated in accordance with the criteria set out in the Schedule of Performance Guarantees.
Where such criteria are not defined, the Engineer shall determine the reduction based on the diminished value to the Employer, provided that the total reduction shall not exceed 10% of the Contract Price.
The Engineer shall make this determination within 14 days after failure to reach agreement, and such determination shall be subject to Sub-Clause 3.7.
The Engineer shall act independently and neutrally, without seeking prior approval of the Employer.”
🎯 Final Takeaways for Section 6
| 🧱 Area | 🔧 Problem | 💡 Suggested Fix |
|---|---|---|
| “Substantially the whole benefit” | Too vague | Define in PCs (e.g., 15% performance deviation) |
| Reduction in Contract Price | No formula | Tie to % shortfall in guarantees |
| Endless Retesting | Loop risk | Limit to 2 retests unless justified |
| Delays in Taking-Over | No agreement deadline | Engineer decides in 14 days |
| Engineer’s Role | Can be compromised | Make independence explicit in PCs |
🎓 7️⃣ Final Takeaways – Clause 9.4 Unlocked
📌 What is Clause 9.4 Really About?
It’s about what happens when the Contractor hands over the Works — but they don’t pass the Tests on Completion. That could mean:
- A bridge doesn’t support the designed load.
- A water treatment plant doesn’t meet purity targets.
- A control system fails automation tests.
📣 Clause 9.4 is the crossroads between:
- Retesting 🔁
- Rejection ❌
- Acceptance ✅ (with a price cut)
And depending on which road is chosen, you unlock a different set of contract remedies.
⚖️ Key Differences: 1999 vs. 2017
| 🔍 Feature | FIDIC 1999 | FIDIC 2017 |
|---|---|---|
| Retesting Limit | Not defined | Not defined, but structured remedy paths encourage finality |
| Rejection Options | Works or Section | Clearly split into Works (9.4(b)) and Section (9.4(c)) |
| Acceptance with Deduction | Vague price reduction | Linked to Clause 11.4(b), with timeline and fallback |
| Price Reduction Mechanism | Only if agreed or determined | Structured: 14-day window, then Engineer must act |
| Engineer’s Determination | Clause 3.5 | Clause 3.7 (more procedural clarity) |
| Finality of Employer’s Rights | Not stated | Explicitly preserved even after Taking-Over |
💬 The Clause in Plain English
Let’s simplify the logic so you can explain it in a meeting:
“If the Works don’t pass their final test, the Engineer can ask for retesting. But if they fail again, the Employer can either:
- Reject the Works or just the failed part,
- Or take it over, but reduce the price. If there’s disagreement about the reduction, the Engineer steps in and decides.”
And remember — it’s not just about performance. It’s about value to the Employer and functional usability.
⚠️ Risks to Watch Out For
For the Contractor:
- 💸 Loss of revenue due to price reductions
- 🚫 Rejection = possible termination
- 🕒 Delay in Taking-Over = delay in final payments and DNP start
- 📝 Claims forfeited if not notified (especially in 2017)
For the Employer:
- ⚖️ Must prove “substantially the whole benefit” was lost (or Section unusable)
- ⌛ Delays in Taking-Over can backfire if deductions aren’t defined
- 🧾 Must ensure documentation for test failures, impact, and deductions is tight
📚 Key Cross-References to Always Consider
When Clause 9.4 comes into play, you should immediately think of:
| 🔗 Clause | Why It Matters |
|---|---|
| 9.3 | Must fail a retest before 9.4 activates |
| 11.4 | Remedies triggered (termination, omission, reduction) |
| 10 | Taking-Over Certificate may be delayed |
| 14 | Final payment needs to reflect deductions |
| 3.5 / 3.7 | Engineer determines if no agreement |
| 20.1 / 20.2 | Disputed deductions must be claimed timely |
| 15.2 (2017) | Clause 11.4(d) allows direct termination for total failure |
🧰 Pro Tips & Best Practices
✔️ Define reduction formulas in Particular Conditions (e.g., 1% deduction per 1% underperformance)
✔️ Document all retesting attempts (time, data, root cause, Employer’s involvement)
✔️ Train Engineers on making fair, reasoned determinations — no rubber-stamping
✔️ Prepare claims promptly if you think failure is due to Employer-side reasons
✔️ Structure Section testing criteria clearly — especially in EPC contracts with multiple handovers
✔️ Limit retesting cycles to avoid getting stuck in a loop
✍️ Sample One-Liner for Your Report
“Clause 9.4 transforms technical test failure into legal and commercial decision-making — making it one of the most consequential clauses at the handover stage of any EPC contract.”
🎯 Final Reflection
If you remember nothing else, remember this:
📌 Clause 9.4 is not just about passing or failing a test.
It’s about deciding what happens next — with money, responsibility, and risk on the line.
✅ Clause 9.4 Compliance & Action Checklist
🔧 A. Contractor’s Checklist
| ✅ Task | Description | ✔️ Check |
|---|---|---|
| 1. | Confirm if Tests on Completion were performed under agreed conditions. | ☐ |
| 2. | Document failure reasons with technical evidence (incl. inputs from Employer). | ☐ |
| 3. | Request retesting formally under Clause 9.3 if failure is questionable. | ☐ |
| 4. | Cooperate with Engineer’s instructions on retesting or remedial works. | ☐ |
| 5. | If accepted with reduction, verify how deduction is calculated (Clause 11.4). | ☐ |
| 6. | Submit claim under Clause 20.1 (1999) / 20.2 (2017) if failure is not Contractor’s fault. | ☐ |
| 7. | Track and preserve evidence in case of disagreement or potential DAAB referral. | ☐ |
🧑💼 B. Employer’s Checklist
| ✅ Task | Description | ✔️ Check |
|---|---|---|
| 1. | Assess whether failure affects “substantially the whole benefit” (or purpose of Section). | ☐ |
| 2. | Decide formally (with reasons): reject, accept, or retest. | ☐ |
| 3. | If accepting Works, propose Contract Price reduction (per PC or Clause 11.4). | ☐ |
| 4. | Ensure Taking-Over Certificate isn’t issued until reduction agreed/determined. | ☐ |
| 5. | If rejecting, follow up with Clause 11.4 actions (termination or omission). | ☐ |
| 6. | Ensure Engineer acts independently in making determinations. | ☐ |
| 7. | Keep written records to justify rejections or deductions in case of claims. | ☐ |
🧑🔧 C. Engineer’s Checklist
| ✅ Task | Description | ✔️ Check |
|---|---|---|
| 1. | Confirm that failure occurred after valid testing under Clause 9.3. | ☐ |
| 2. | Limit retesting orders to reasonable cycles (2–3) to avoid open-ended delay. | ☐ |
| 3. | Document all failure results and related instructions in writing. | ☐ |
| 4. | If reduction is proposed but disputed, trigger Clause 3.5 (1999) / 3.7 (2017) process. | ☐ |
| 5. | Issue a fair determination within 14 days (2017) if agreement isn’t reached. | ☐ |
| 6. | Avoid seeking Employer approval for determinations (per GP1). | ☐ |
| 7. | Ensure deduction appears in final payment calculations (Clause 14.13). | ☐ |
✉️ Sample Letters under Clause 9.4 Scenarios
📩 1. Contractor to Engineer – Request for Retesting (Clause 9.3/9.4)
Subject: Request for Retesting under Clause 9.3 following Test on Completion Failure
Date: [Insert Date]
To: The Engineer
From: The Contractor
Contract: [Project Name/Number]
Dear Sir/Madam,
We refer to the outcome of the Tests on Completion conducted on [insert date], where certain parameters did not meet the Employer’s Requirements as specified in the Contract.
Pursuant to Sub-Clause 9.3 [Retesting], and further to Sub-Clause 9.4 [Failure to Pass Tests on Completion], we hereby request that the failed tests and associated related works be retested under the same terms and conditions, following our remedial measures completed on [insert date].
We remain available to coordinate all test arrangements and ensure that proper records are maintained.
Kind regards,
[Name]
[Title]
For and on behalf of the Contractor
📩 2. Engineer to Contractor – Notice of Price Reduction Following Employer’s Acceptance (Clause 9.4(c)/(d))
Subject: Notification of Contract Price Reduction due to Non-Compliance with Tests on Completion
Date: [Insert Date]
To: The Contractor
From: The Engineer
Contract: [Project Name/Number]
Dear [Contractor’s Name],
Following the Employer’s decision to accept the Works under Sub-Clause 9.4(c)/(d) despite the Works not meeting certain performance parameters, please be informed that the Contract Price shall be reduced accordingly.
As required under Sub-Clause 11.4(b)(ii), and in the absence of Performance Damages, we propose a reduction of [insert amount or %], based on the value reduction determined due to the failure of the Works to meet the guaranteed [insert performance parameter].
Please confirm your agreement within 14 days. Failing agreement, we shall proceed with a determination in accordance with Sub-Clause [3.5 (1999) / 3.7 (2017)].
Yours faithfully,
[Name]
The Engineer
📩 3. Employer to Engineer – Instruction to Reject Works due to Failure (Clause 9.4(b))
Subject: Instruction to Reject Works under Clause 9.4(b) due to Failed Tests
Date: [Insert Date]
To: The Engineer
From: The Employer
Contract: [Project Name/Number]
Dear [Engineer’s Name],
In view of the Contractor’s repeated failure to pass the Tests on Completion under Sub-Clause 9.3, and based on the latest test results dated [insert date], we hereby instruct you to reject the Works under Sub-Clause 9.4(b), as the failures have deprived the Employer of substantially the whole benefit of the Works.
Please proceed with issuing the relevant notices and initiating the remedies available under Sub-Clause [11.4(c) – 1999 / 11.4(d) – 2017].
Kind regards,
[Name]
[Title]
For and on behalf of the Employer
📩 4. Contractor to Engineer – Objection to Proposed Price Reduction (Clause 20.1 / 20.2 Claim)
Subject: Notice of Claim – Objection to Proposed Reduction Following Acceptance under Clause 9.4
Date: [Insert Date]
To: The Engineer
From: The Contractor
Contract: [Project Name/Number]
Dear Sir/Madam,
We refer to your letter dated [insert date], proposing a reduction in the Contract Price pursuant to Sub-Clause 9.4(d) due to failed Tests on Completion.
We hereby notify a claim under Sub-Clause [20.1 – 1999 / 20.2 – 2017], on the basis that the failure arose due to circumstances attributable to the Employer, including but not limited to [e.g., late supply of Employer-Furnished Materials, incorrect inputs, lack of access].
We reserve our rights under the Contract and request that this claim be assessed as per the procedures set out in Clause 20.
Yours sincerely,
[Name]
[Title]
For and on behalf of the Contractor
📩 5. Engineer to Contractor – Determination of Reduction (after 14-day Disagreement Window, 2017)
Subject: Engineer’s Determination of Reduction under Clause 9.4(d) and 11.4(b)(ii)
Date: [Insert Date]
To: The Contractor
From: The Engineer
Contract: [Project Name/Number]
Dear [Contractor’s Name],
Following the Parties’ failure to agree on the reduction in Contract Price pursuant to Sub-Clause 9.4(d) and 11.4(b)(ii) within the stipulated 14-day period, and in accordance with Sub-Clause 3.7, I have determined the reduction to be [insert amount or percentage], which represents the reduction in value to the Employer based on the failed performance of [insert details].
This determination is binding unless and until revised under Clause 21 [Dispute Avoidance/Adjudication] or arbitration.
Kind regards,
[Name]
The Engineer