Risks associated with ground conditions are potentially an important cause of significant delayand costs to an Employer and Contractor, particularly in the Gulf construction market where it is not unusual to find construction taking place on sites such as sand dunes, coast lines and mountainous regions. Further massive infrastructure work that involves tunnelling, dredging, in fill or the compaction of land all involves an inherent risk associated with the ground conditions.
General Principles
It is widely accepted that a Developer does not owe an obligation to a Contractor to provide it with information on the nature of a site including sub-soil conditions. This principle also applies even if a Developer had relevant information but chose not to disclose it to the Contractor, though to do so may delay matters or cause a Contractor to artificially increase its tender price.However if the Developer does provide information and the information proves to be later incorrect, the Contractor may be able to claim for misrepresentation. The Contractor should therefore investigate these matters and satisfy itself with the prospects of completing a project as designed on a site.
You need to definethesitebefore identifying the risks
The definitionofsitewillvarydependingon the nature of the works and the contract. For example, a site containing a Toll road system procured on a Build, Operate and Transfer basis, will typically involve the Road way and if tunnelling is involved the sub-surface and the data centre for operations and data storage. The traditional definitionin an ordinary build contract would be the grounds of the plot, namely the surface area but not ordinarily the sub-surface. The contractual definition used to describe sites are, in our experience, not exhaustive. The lack of a complete description for a site (either by way of reference to a plan or otherwise) often leads to misinterpretation and disputes on the scope and nature of the intended ground works.
Ground Risks
The potential risks associated with the site conditions are numerous and complex. However, for the purposes of this article, the common risks we commonly advise on include reliance by a main contractor on incorrect contour maps and geo-technical drawings supplied by on behalf of a Developer with an associated exclusion of contractual liability on its part, for any inaccuracies of such information or records. Contractors typically seek our advice at the tendering/pricing stage of a contractual bid on important elements such as site or ground compaction works, particularly when they suspect recorded site information is inaccurate once they commence ground works and having failed to satisfy themselves on associated costs elements relevant to submitting delay claims in completing the works actually required and allocating additional resources to deal with the unforeseen contingencies.
The Tender stage
It is our experience that tender documents prepared on behalf of a Developer typically lack in detail or require further clarification.Thesedocuments,whichtypically take the form of geo-technical and environmental reports, will seek to expressly provide that ground conditions are the risk and liability of the Contractor although the Developer may be aware of the condition of the site but not disclose the same to the successful bidder in order to achieve favorable pricing at the Contractor's expense. The essence of all tenders is that the risk, although solely placed on the Contractor, is qualified to the extent that the Contractor is presumed to have conducted its own research and enquiries and therefore satisfied itself as to any unfore seen physical conditions affecting the ground which a reasonable and experienced contractor would have done. This is often not practical during the tender process, given time constraints and expenditure, especially as this is undertaken on a speculative basis and moreso if the bid is unsuccessful. If the Developer makes it clear to a Contractor that they are the preferred bidder, it would be prudent for the Contractor to seriously consider carrying out the testing and sampling of the ground (both surface and sub-soil conditions) before submitting its finalbid and to accordingly qualify its bid to express any recommendations submitted in any geotechnical or environmental report as an express contractual qualification or condition depending on the bargaining strength of the Developer of preference.
Treatment of Ground Risks Under FIDIC
Under the Yellow and Red 1999 FIDIC forms of contract, the Developer (as Employer) is obliged under Clause 4.10 to ensure all relevant information regarding sub-surface ground conditions is provided to a bidder not later than 28 days before the submission of the tender. This information includes results of soil tests, measurements and borehole logs.
In providing the information, the Developer provides a warranty that the information supplied is correct and the Contractor is then entitled to interpret, under Clause 4.11 , the information supplied prior to the submission of the tender. It is important to note that the Contractor's obligation to interpret includes examining a site and associated information. The FIDIC conditions of contract go on to state that the Contractor is assumed to have based the contract price based on the information provided.
Typically under FIDIC the Developer, under Clause 4.12, is responsible for any risks regarding physical conditions which could not have reasonably been foreseen by an experienced Contractor at the time of its tender.
Under the 1999 Silver Book, under Clause 4.12, in addition to the Contractor's responsibility to interpret the information supplied by the Developer, the Contractor is also obliged to check the accuracy of the information there by making the Contractor generally liable for ensuring the works are completed not with standing any problems it may encounter such as unfore seen ground conditions.
Imperative and prudent steps to be taken by a Contractor
The Contractor should therefore do what is necessary to properly undertake all essential investigations of the site in a cost and time effective manner before commitment to the project. In ordinary scenarios of providing quotations for work rather then tendering, the Contractor should qualify any quotation
on that basis, and reserve its position particularly if access to all of the site is not granted prior to the pricing of the works.
When negotiating contractual conditions under the FIDIC forms of contract, pay particular attention to issues including the definition of site, the works with reference to plans, drawings, surveys etc, the obligation on the Developer regarding site access and the mechanism dealing with site access, variations and grounds on which to properly claim for extensions of time, compensation events, payment provisions and dispute provisions.
A Contractor should also seriously consider the engineer's design to ascertain whether the engineer took into account the physical conditions affecting the site. If the engineer did not consider such eventualities it would be difficult for the Developer to argue the Contractor should have foreseen those associated risks.
Imperative and prudent steps to be taken by a Developer
There is no doubt that the Developer is in an advantageous position in comparison to the Contractor. However, the Developer needs to be seen as acting fairly to avoid claims for variations or extensions of time or legal proceedings claiming unjust enrichment on the basis the Developer has greatly benefited from the contract and its conduct during contractual negotiations and calling upon a Court to re-write the wrong simply based on losses and benefits attained by either Party.
Any informative documents provided as part of the tender process should always be expressly provided for limited purposes i.e. informative use only and the Developer should expressly disclaim any liability pursuant to any contractual warranty or representation verbal or otherwise, made by it or on its behalf resulting from any reliance by the Contractor on any such documents.
The conditions of tender should be carefully worded so that it has the legal effect of expressly overriding any applicable provisions relating to pricing of a ground associated risk by a Contractor by virtue of conditions or qualifications either contained in the tender or included in technical documents referred to in the tender documents.
The Developer should allow full and unrestricted access to the site to the bidding Contractor and have the Contractor expressly warrant in the contract documents that the Contractor acknowledges it has received complete and free access to prevent allegations of obstruction or that it was not given a reasonable opportunity in surveying the site and carrying out its inspections or investigations.
To avoid uncertainty both sides should consider
To avoid costly delays in the project, both parties are advised before executing the building contract to be certain of what the ground associated risks are and who is to be responsible for their effects on time and money should they materialise during the course of a project. It is important for the parties to understand their rights and obligations in the event of such risks occurring in respect of potential claims which will involve issues such as price, variations and extension of time. In the event of a potential dispute the Developer should definethe circumstances particular to ground conditions to establish why or why not the Contractor is not entitled to make a valid claim. Where as a Contractor will be looking to provide for circumstances that allow it to make a claim for a variation or extension relating to ground conditions, particularly in unforeseen circumstances or where it was not possible to carry out its own due diligence on site or typically where it has qualified its liability for ground associated conditions and its pricing of the project.
By Edward Sunna Head of Construction and Engineering
© Al Tamimi & Company 2007
