The following clause was included in the Specification for one of the Project that were being managed by me.
As per the Appendix CC of the 1st Supplemental Agreement described:-
“13. Sub-Clause 1.1.5.5A – Lump Sum Works – means the items of work and good, meterials and services to be supplied hereunder as shown in the Drawings and/or described by the Specification and/or in the Schedule of Prices which are not to re-measured.”
“S4.02 (1) Soil Information
Any information of the properties of the soil that may be shown on the Drawings or obtained by the Contractor as a result of discussion with the Engineer shall alone not be considered as a sufficient basis for the Contractor's Bid Prices.
The Contractor is responsible for his interpretation of information supplied by the Employer and shall visit the Site and possible Borrow Pits prior to making his Bid and shall ascertain the nature of the soil, its quantity, locations, and suitability to meet the specified requirements.
He shall base his Bid estimates on the Employer's soil data supplemented by his own soil investigations.”
This would mean that the Contractor shall be deemed prior to submitting the Tender to have inspected and examined the Site and/or satisfied itself as to the nature of the ground and subsoil. No claim by the Contractor for additional payment or any extension of time shall be allowed on the ground of misunderstanding or misapprehension of these matters.
There was understandable concern from the contracting community when the first contracts containing this clause were issued for tender.
There are two particular difficulties with this approach:
1. the allocation of risk can be less a reflection that the parties have carried out thorough investigations and are comfortable with what they might encounter (and could price for it accordingly), than of the overriding desire by employers to have fixed prices and certain completion dates, and perhaps of unequal bargaining power; and
2. the bidders are unable to price for the risk with any certainty; any contingency would be guesswork. Ultimately, if the risk does not eventuate the contingency is wasted, and if it did, there would be no certainty that the contingency would be enough, resulting in costs to the project elsewhere (even if simply in legal fees).
This gives a gloss on the truism about allocation of risk, that a project which goes off the rails benefits no one. If your project is going to be late, rights in contract aren’t necessarily going to help; much like Neville Chamberlain returning from Munich in 1938, there is little practical benefit in holding up a piece of paper. Once a project has become a loss maker, most contractors will understandably look for ways to reduce that loss, rather than complete the project as well as the employer might have hoped. A right to sue won’t necessarily help anyone other than the lawyers.
Conversely, where there is considerable, high quality geotechnical information available, the contractor has the skill and the resources to deal with what they might find and all parties are comfortable with what will actually be encountered, this can be a very effective allocation of risk.
As per the Appendix CC of the 1st Supplemental Agreement described:-
“13. Sub-Clause 1.1.5.5A – Lump Sum Works – means the items of work and good, meterials and services to be supplied hereunder as shown in the Drawings and/or described by the Specification and/or in the Schedule of Prices which are not to re-measured.”
“S4.02 (1) Soil Information
Any information of the properties of the soil that may be shown on the Drawings or obtained by the Contractor as a result of discussion with the Engineer shall alone not be considered as a sufficient basis for the Contractor's Bid Prices.
The Contractor is responsible for his interpretation of information supplied by the Employer and shall visit the Site and possible Borrow Pits prior to making his Bid and shall ascertain the nature of the soil, its quantity, locations, and suitability to meet the specified requirements.
He shall base his Bid estimates on the Employer's soil data supplemented by his own soil investigations.”
This would mean that the Contractor shall be deemed prior to submitting the Tender to have inspected and examined the Site and/or satisfied itself as to the nature of the ground and subsoil. No claim by the Contractor for additional payment or any extension of time shall be allowed on the ground of misunderstanding or misapprehension of these matters.
There was understandable concern from the contracting community when the first contracts containing this clause were issued for tender.
There are two particular difficulties with this approach:
1. the allocation of risk can be less a reflection that the parties have carried out thorough investigations and are comfortable with what they might encounter (and could price for it accordingly), than of the overriding desire by employers to have fixed prices and certain completion dates, and perhaps of unequal bargaining power; and
2. the bidders are unable to price for the risk with any certainty; any contingency would be guesswork. Ultimately, if the risk does not eventuate the contingency is wasted, and if it did, there would be no certainty that the contingency would be enough, resulting in costs to the project elsewhere (even if simply in legal fees).
This gives a gloss on the truism about allocation of risk, that a project which goes off the rails benefits no one. If your project is going to be late, rights in contract aren’t necessarily going to help; much like Neville Chamberlain returning from Munich in 1938, there is little practical benefit in holding up a piece of paper. Once a project has become a loss maker, most contractors will understandably look for ways to reduce that loss, rather than complete the project as well as the employer might have hoped. A right to sue won’t necessarily help anyone other than the lawyers.
Conversely, where there is considerable, high quality geotechnical information available, the contractor has the skill and the resources to deal with what they might find and all parties are comfortable with what will actually be encountered, this can be a very effective allocation of risk.
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