ADVERSE WEATHER AND FIDIC

The climate changes bring extreme weather conditions and unpredictable rains and floods to our project sites. When heavy rain obstruct road work and earth slip occurs during execution, the important question arises that which clauses of contract that  has to be  invoked ?

Construction operations are often sensitive to weather conditions such as temperature, humidity, wind, rainfall and snow. When exceptional adverse weather causes construction delays and cost overruns, contractors often submit claims, requesting extension to the project completion time and compensation for extra cost, citing adverse weather as the basis for their claims. many construction contracts include specific clauses that regulate the basis and conditions for submitting weather-related claims. “If adverse weather conditions are the basis for a claim for additional time, such claim shall be documented by data substantiating that weather  conditions were abnormal for the period of time and could not have been reasonably anticipated, and that weather conditions had an adverse effect on the scheduled construction.” In other words, such clauses specifically stipulate that weather-related claims should be supported by appropriate documentation, substantiating that the weather conditions during construction were abnormal and unexpected and that the encountered abnormal weather conditions had an adverse effect on the construction schedule. The intensity of rainfall is expressed by the total amount of rain accumulated during a given period of the day. weather currently incorporates historical weather database for a period of over certain period (30 years) obtained from historical weather data obtained from the closest weather station to the site.

If the Contractor incurs cost or suffers a delay as a result of unforeseeable physical conditions, he should firstly identify the relevant Sub-Clause, which is Sub-Clause 4.12. Sub-Clause 4.12 is relevant because it entitles the Contractor to extension of time and additional costs. The test is then,whether the Contractor encountered Unforeseeable physical conditions. All elements of Sub-Clause 4.12 must be met, which are:

•   Physical conditions (climatic conditions are not covered)

•  Relevant physical conditions must have been Unforeseeable (Unforeseeable is a defined term)

•   Previous notice is required, which should have been given as soon as practicable

•   Claim notice is required according to Sub-Clause 20.1 and 1.3

Let us see what Sub Clause 4.12 -Unforeseeable Physical Conditions stipulates?

“ In this Sub Clause, “physical conditions” means natural physical conditions and man-made and other physical obstructions and pollutants, which the Contractor encounters at the Site when executing the Works, including sub-surface and hydrological conditions but excluding climatic conditions…” 

Climatic conditions are left outside of above Sub Clause, and if we go further, according to Sub-Clause 4.10 the Contractor is deemed to have inspected and examined the Site and the surroundings and he is also deemed to have been satisfied before submitting the Tender as to all relevant matters, including the form and the nature of the Site and the hydrological conditions. Also he may only consider the conditions to have been unforeseeable in line with Sub-Clause 1.1.6.8, according to which Unforeseeable means not reasonably foreseeable by an experienced contractor by the date for submission of the Tender. (We can accept the Contractor as an experienced contractor which he passes from the test of experience during pre-qualification stage).

However two types of adverse physical conditions must be distinguished. The Contractor may encounter conditions at the Site which are (1) subsurface or otherwise concealed physical conditions which differ from those indicated in the contract documents or (2) unknown physical conditions of an unusual nature, which differ from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the contract documents. Sub-Clauses 4.12 does not define the term “adverse”. Thus it may be debated whether the Contractor can rely on Sub-Clause 4.12 to shift the risk to the Employer where an unforeseeable site condition is encountered, which is not an adverse physical condition. 

Obviously some of the risk which is inherent to a construction contract does not depend on chance. It is then not insurable. Thus differing ground conditions (see Sub-Clause 4.12) and unusual climatic conditions (see Sub-Clause 8.4) which may have a critical impact on the successful completion of the works are dealt with separately in FIDIC contracts. This type of risk is also referred to as speculative risk. In principle speculative risks are not unforeseeable. An experienced Contractor should be able to foresee most of the current risks. The question is whether he should also make allowance for the event that the risk occurs. Unforeseeability is dealt with in Sub-Clause 1.1.6.8. According to Sub-Clause 1.1.6.8 unforeseeable means not reasonably foreseeable by an experienced contractor by the date for submission of the Tender. The General Conditions refer to the term unforeseeable as defined in Sub-Clause 1.1.6.8 in several Sub-Clauses, such as:

•   Sub-Clause 4.6:   Unforeseeable cost

•   Sub-Clause 4.12: Unforeseeable physical conditions

•   Sub-Clause 8.4:   Unforeseeable shortages in the availability of personnel or goods

•   Sub-Clause 8.5:   Unforeseeable delay or disruption

•   Sub-Clause 17.3: Unforeseeable operation of forces of nature

FIDIC strongly recommends consulting an insurance expert prior to the conclusion of the contract. It is worth noting that the decennial liability insurance must be obtained before the Commencement Date. It is sometimes very difficult to obtain such insurance cover. Late efforts to obtain such an insurance policy may delay the commencement of the works at the risk of the Contractor.

As a rule the insured items (Works including material to be used in performing the contract, construction plant and equipment) are covered against any unforeseen and sudden physical loss or damage from any cause not excluded. 

A typical Contractors All Risk (CAR) claim will be composed by three damage headings:

 (1) direct loss(the costs to repair);

 (2) prolongation costs to the employer; and

 (3) the prolongation or extended general conditions costs to the contractor and subcontractors which may include loss of profits and expenses caused indirectly by the event. 

According to Sub-Clause 18.2(a) unless otherwise stated in the Particular Conditions, the insurance for the Works shall be effected and maintained by the Contractor as the insuring party and shall cover all loss and damage from any cause not listed in sub-clause 17.3. The last part gives a tool to the Contractor to claim his losses from the Employer for unforeseeable operation of forces of nature. Sub Clause -17.3 Employer’s Risks stipulates that ; “…. h) any operation of the forces of nature which is Unforeseeable or against which an experienced contractor could not reasonably have been expected to have taken adequate preventive precautions…”

Sub Clause 17.2 Contractor’s Care of the Works gives exception in parallel to above as stipulates that; ”….If any loss or damage happens to the Works, Goods or Contractor’s Documents during the period when the Contractor is responsible for their care, from any cause not listed in Sub-Clause 17.3 [Employer’s Risks ], the Contractor shall rectify the loss or damage at the Contractor’s risk and cost, so that the Works, Goods and Contractor’s Documents conform with the Contract….”

Sub Clause 17.4 Consequences of Employer’s Risks stipulates that, “If and to the extent that any of the risks listed in Sub-Clause 17.3 above results in loss or damage to the Works, Goods or Contractor’s Documents, the Contractor shall promptly give notice to the Engineer and shall rectify this loss or damage to the extent required by the Engineer. If the Contractor suffers delay and/or incurs Cost from rectifying this loss or damage, the Contractor shall give a further notice to the Engineer and shall be entitled subject to Sub-Clause 20.1 [Contractor’s Claims] to:

(a) an extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and 

(b) payment of any such Cost, which shall be included in the Contract Price. In the case of sub-paragraphs (f) and (g) of Sub-Clause 17.3 [Employer’s Risks ], Cost plus profit shall be payable.

After receiving this further notice, the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine these matters.

As conclusion, when landslides occurred and Works damaged due to heavy rains, the Employers always expect from the Contractor to cover his losses and also losses to the Works from the CAR policies. However, the policies may not cover the losses in all circumstances. Also, in most cases EoT is required to cover time losses. Therefore, you have to give timely notices to the Engineer and also particulars of the losses subsequently, therefore you do not loose your contractual rights.

VALUATION OF VARIATIONS

Everybody has been in a position to negotiate with the contractor a new rate or price when an instruction has been issued and you know that if you are an engineer you must have a strong stomach and patience to deal the price. 

One of the reason to raise this question is my opinion that in most forms of standard contracts there are four ways of doing this and this options can raise disputes between the parties.

Variations under the contract can be valued by a number of methods. The price can be agreed by the employer and contractor directly, more usually by means of a quotation mechanism subject to analysis by the engineer. The contract may contain a schedule of rates to be used to value variations or standard published rates may be used as dayworks.
 If the contract contains a bill of quantities then the rates in the bill of quantities may be used as the basis of valuation. Most standard forms of contract (including ICE and JCT Standard Forms in the U.K.) which adopt bills of quantities have a four tiered approach to the valuation of variations. The options are:

1. Valuation using bill of quantity rates or schedule rates
2. Valuation on the basis of rates analogous to 1 above
3. Valuation on the basis of fair valuation or fair rates or reasonable prices
4. Valuation on the basis of dayworks

Which of the above options will apply as the basis of the valuation will depend largely upon the timing of the variation order, the location of the work, the quantity of the work involved and the circumstances in which the work is executed. If it can be established that these factors preclude the valuation on the basis of bill rates then the valuation will usually be based on fair or reasonable prices:


Option 1: The principle is that if the varied work is of a similar character and executed under similar conditions to work priced in the bill of quantities then such bill rates and prices shall be used to value the varied work.

Option 2: It requires the engineer to break down the quoted rates into the elements of plant, materials, labour and overheads, in order to make the appropriate adjustment. The engineer is required to do so even if he does not have from the contractor any build up of the rate upon which the new rate is based. In that case he will have to arrive at a notional build up. He may be assisted in doing so by information obtained from the contractor's contemporary records. The elements of the rate are to be adjusted to make appropriate allowances for the effects of the variation, but those elements unaffected by the extra effort are not changed.

Option 3: It applies if the other two rules do not apply. It requires a fair valuation to be made. A fair valuation generally means a valuation which does not give a contractor more than his actual costs reasonably and necessarily incurred plus similar allowances for overheads and profit.


Option 4: I will not comment it because it is very clear how this option must be applied.

What's difficult when using this four tiered approach? It's clear-a lot of disputes  arise from it.

Last edition of NEC (new engineering contract) is trying to avoid this problem by reimbursing the contractor his actual additional costs. How does NEC do it? If the bill of quantities originally included a piece of work (a) which is now to be replaced by a piece of work (b) the compensation is assessed as the difference between the forecast actual cost of (b) and the forecast actual cost of (a). The fee is then added to this difference and the resulting total amount is issued to change the prices. The original price for (a) does not enter the assessment. 

So NEC doesn't use the first two options anymore which are the sources of disputes and apply only the third option which I think is a modern trend in dealing with the valuation of variations. 

DESIGN QUALITY CONTROL

How does the PM control the quality of the design works? I already mentioned that the quality management plan is a part of the PMP. But what does really quality management plan mean?

The quality management plan should answer the questions of who is responsible and when in time actions should occur. Since the primary product of the design phase is construction contract documents for construction contractors, decisions about quality requirements for construction and manufacturing need to be planned and included in the contract documents. The processes used for controlling quality of design are described hereinafter.

For a design/bid/build project, the project manager coordinates and oversees reviews at the design criteria, conceptual, preliminary engineering, 30 percent, 60 percent, 90 percent, 100 percent, and bid documents stages. The percent refers to the approximate ratio of design budget spent over total budget. Reviews at these points in design are key control points to the design management process.

Another process which the Clients are encouraged to apply is VE (value engineering). The objective of VE is to satisfy the required functions of the project at the lowest initial total cost and cost over the life of the project.

Peer review technique should be an early step in the design process that can add an external perspective to enhance the functionality of design, construction, and operation. Used in addition to a VE study, that is usually later in the design process, peer review is based on the question "can we do this better?" and can be used to provide an independent critique of the design phase.

Later in the design process, the design team will need to perform constructability reviews as part of the design process. Participants for constructability reviews can come from within Client team, the design team, or assistance can be obtained from, code officials, independent consultants, or contractors. The constructability reviews should be prior to completion of 90 percent and preferably shortly after 60 percent of the design.

The design manager is responsible for overseeing the design QA system. The design team can accomplish this by setting up an in-house QA system for the project and having the design manager perform the QA by overseeing the design consultant's QC efforts. As the project manager you will need to maintain an oversight role to acquire confidence that the quality management system for design is achieving the project quality objectives.

And last the method of documentation of comments and coordination responses should be described in the quality management plan. All comments made by phase reviewers shall be recorded either by copy of memos, e-mail, letters and/or marked plans received from the reviewers. In the event that comments are received through meetings with reviewers, there shall be minutes prepared that summarize the comments received. All comments shall be addressed to the designer responsible for the discipline that prepared the document being reviewed. The response shall be in writing and shall be formatted in a manner that identifies the document review date, reviewer’s comments and responses to the comments. The designer will be responsible for submittal of comment responses to the reviewing entity. Where it is necessary and prudent to discuss the comments with the reviewer(s) prior to making a response, the designer shall arrange for the meeting. Copies of all comments and responses shall be kept in the project files.

TIME MANAGEMENT

Do we manage time in construction? How do we cope with delay? How do we use technology?

I strongly recommend viewing following presentation if you want to develop your time management skills:

http://www.youtube.com/watch?v=rsU7EftWVx0&feature=relmfu