петък, 15 юни 2012 г.

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.