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ESCL Conference August 25th

2006 – Risk in Construction and
how to deal with them.
Duty for the contractor to inspect the site
and other physical conditions according to
FIDIC.
Presented by
Mikael Wahlgren
Former Senior Legal Counsel
NCC Construction Sweden AB
Mikael Wahlgren

NCC Construction Sverige AB

First Edition. ) ("White Book") Mikael Wahlgren NCC Construction Sverige AB . 1987 (reprinted in 1988 with editorial amendments) (the “old Yellow Book”). First Edition. Third Edition.  Conditions of Subcontract for Works of Civil Engineering.  Client-Consultant Model Services Agreement (3rd Ed.. 1987 (reprinted in 1988 with editorial amendments and reprinted in 1992 with further amendments) (the “old Red Book”). Fourth Edition. 1998. Construction. 1994 (to function with the old Red Book). 1995 (the “Orange Book”). and  Conditions of Contract for Design-Build and Turnkey.  Conditions of Contract for Electrical and Mechanical Works.FIDIC’s old standard forms  Conditions of Contract for Works of Civil Engineering Construction.

for building and engineering works designed by the employer) (the “new Red Book”).FIDIC’s (the International Federation of Consulting Engineers) new standard forms  Conditions of Contract for Construction (1999. Mikael Wahlgren NCC Construction Sverige AB . EPC being the abbreviation for Engineer-ProcureConstruct) (the “Silver Book”).  Conditions of Contract for EPC Turnkey Projects (1999. for electrical and mechanical plant and for building and engineering works designed by the contractor) (the “new Yellow Book”). for projects of relatively small value) (the “Green Book”). and  Short Form of Contract (1999.  Conditions of Contract for Plant and Design-Build (1999.

including environmental aspects. prior to the Base Date. The Contractor shall be responsible for interpreting all such data.Clause 4.10 (new Red Book & Yellow Book) – Site Data “The Employer shall have made available to the Contractor for his information. The Employer shall similarly make available to the Contractor all such data which come into the Employer’s possession after the Base Date. all relevant data in the Employer’s possession on sub-surface and hydrological conditions at the Site. Mikael Wahlgren NCC Construction Sverige AB .

accommodation.10 (new Red Book & Yellow Book) – Site Data (cont. (d) the laws. water and other services. personnel. and (e) the Contractor’s requirement for access. procedures and labour practices of the Country (means the country in which the Site (or most of it) is located.) To the extent which was practicable (taking account of cost and time). transport. where the Permanent Works are to be executed).” Mikael Wahlgren NCC Construction Sverige AB . To the same extent. its surroundings. the Contractor shall be deemed to have obtained all necessary information as to risks. the above data and other available information. (c) the extent and nature of the work and Goods necessary for the execution and completion of the Works and the remedying of any defects. (b) the hydrological and climatically conditions. and to have been satisfied before submitting the Tender as to all relevant matters including (without limitation): (a) the form and nature of the Site. facilities. contingencies and other circumstances which may influence or affect the Tender or Works.Clause 4. including sub-surface conditions. the Contractor shall be deemed to have inspected and examined the Site. power.

” Mikael Wahlgren NCC Construction Sverige AB .1 [General Design Responsibilities]. sufficiency or completeness of such data. The Employer shall have no responsibility for the accuracy.10 (Silver Book) – Site Data The last sentence of paragraph 1 have been deleted and replaced the 2nd paragraph with the following wording: “The Contractor shall be responsible for verifying and interpreting all such data. except as stated in Sub-Clause 5.Clause 4.

Mikael Wahlgren NCC Construction Sverige AB .  Contractors are advised to amend this requirement so that the Employer is required to supply all available data on hydrological and sub-surface conditions.Comments to Clause 4.  Reference to “relevant data” limits the information to be provided by the Employer.  In the new Yellow Book should be expanded to include all information relevant to the Contractor’s design.10 – Site Data In the new Red Book and new Yellow Book:  Constitutes a step backwards for the Contractor by inserting the words “relevant data in the Employer’s possession”.

verifying and interpreting all data on subsurface and hydrological conditions. the Silver Book is not suitable for use where “there is insufficient time or information for tenderers to scrutinise and check the Employer's Requirements or for them to carry out their designs.Comments to Clause 4.the Contractor cannot rely on information provided by the Employer during the execution of the Contract. risk assessment studies and estimating” . Mikael Wahlgren NCC Construction Sverige AB . including environmental aspects.  FIDIC recognise that.particularly.1.FIDIC's alternative is the Yellow Book.  Carefully scrutinise the precise extent to which the exceptions offered under Sub-Clause 5.10 – Site Data (cont.  The disclaimer covers any information provided during the performance of the Works .) In the Silver Book:  The Contractor is responsible for verifying data .

which the Contractor encounters at Site when executing the Works. Mikael Wahlgren NCC Construction Sverige AB . the Contractor shall give notice to the Engineer as soon as possible. including sub-surface and hydrological conditions but excluding climatic conditions. and shall comply with any instructions which the Engineer may give. If an instruction constitutes a Variation (means any change to the Works.Clause 4. and shall set out the reasons why the Contractor considers them to be Unforeseeable (means not reasonably foreseeable by an experienced contractor by the date for submission of the Tender).12 (new Red Book & Yellow Book) – Unforeseeable Physical Conditions “In this Sub-Clause. This notice shall describe the physical conditions. which is instructed or approved as a variation). under Clause 13 [Variations and Adjustments] shall apply. using such proper and reasonable measures as are appropriate for the physical conditions. If the contractor encounters adverse physical conditions which he considers to have been Unforeseeable. “physical conditions” means natural physical conditions and man-made and other physical obstructions and pollutants. The Contractor shall continue executing the Works. so they can be inspected by the Engineer.

4 [Extension of Time for Completion].12 (new Red Book & Yellow Book) – Unforeseeable Physical Conditions (cont.Clause 4. the Engineer shall proceed in accordance with Sub-Clause 3. whether on or off the Site. gives such a notice. and suffers delay and/or incurs Cost by the Contractor. After receiving such notice and inspecting and/or investigating these physical conditions. but does not include profit) due to these conditions. under Sub-Clause 8. if completion is or will be delayed. and (ii) the matter described in sub-paragraphs (a) and (b) above related to this extent. Mikael Wahlgren NCC Construction Sverige AB . and (b) Payment of any such Cost. the Contractor shall be entitled subject to Sub-Clause 20.5 [Determination] to agree or determine (i) whether and (if so) to what extent these physical conditions were Unforeseeable. including overhead and similar charges.) If and to the extent that the Contractor encounters physical conditions which are Unforeseeable.1 [Contractor’s Claim] to: (a) an extension of time for any such delay. which shall be included in the Contract Price.

the Engineer may proceed in accordance with Sub-Clause 3. However.” Mikael Wahlgren NCC Construction Sverige AB . but shall not be bound. which may be included (as deductions) in the Contract Price and Payment Certificates. by any such evidence. the Engineer may also review whether other physical conditions in similar parts of the Works (if any) were more favourable than could reasonably have been foreseen when the Contractor submitted the Tender. the net effect of all adjustments under sub-paragraph (b) and all these reductions. shall not result in a net reduction in the Contract Price.12 (new Red Book & Yellow Book) – Unforeseeable Physical Conditions (cont.5 [Determination] to agree or determine the reductions in Cost which were due to these conditions.) However. which may be made available by the Contractor. before additional Cost is finally agreed or determined under sub-paragraph (ii). for all the physical conditions encountered in similar parts of the Works. If and to the extent that these more favourable conditions were encountered.Clause 4. The Engineer may take account of any evidence of the physical conditions foreseen by the Contractor when submitting the Tender.

(b) by signing the Contract.Clause 4.12 (Silver Book) – Unforeseeable Difficulties “Except as otherwise stated in the Contract: (a) the Contractor shall be deemed to have obtained all necessary information as to risks.” Mikael Wahlgren NCC Construction Sverige AB . contingencies and other circumstances which may influence or affect the Works. and (c) the Contract Price shall not be adjusted to take account of any unforeseen difficulties or costs. the Contractor accepts total responsibility for having foreseen all difficulties and costs of successfully completing the Works.

Entitlement to recover additional costs will not include profit. Relief for cost and time due to unforeseeable “natural physical conditions and man made and other physical obstructions or pollutants” and “including subsurface and hydrological conditions”.12 (new Red Book & Yellow Book) – Unforeseeable Physical Conditions         Unforeseeable” is a defined term = “not reasonably foreseeable by an experienced Contractor by the date of submission of the Tender”. An alternative is to agree the foreseeable conditions . Engineer may take into account whether “other Physical Conditions in similar parts of the Works (if any) were more favourable than could reasonably have been foreseen when the Contractor submitted its Tender”. New concept that allows for the Contractor to provide evidence of the physical conditions foreseen in his tender Mikael Wahlgren NCC Construction Sverige AB calculation. No relief due to impediments encountered off the site.Clause 4. Excludes climatic events.

“Except as otherwise stated in the Contract”.  The Contractor is to foresee and allow in the price for every eventuality however unforeseeable!  It is difficult to imagine a clause which would be more threatening to contractors .12 (Silver Book) – Unforeseeable Difficulties The language is uncompromising in the extreme and  its scope and application are much more wideranging.  The consequential effects of all unforeseen difficulties are passed to the Contractor.Clause 4.Contractors should beware! Mikael Wahlgren NCC Construction Sverige AB .

Mikael Wahlgren NCC Construction Sverige AB . and  the number of competing standard forms.Conclusion & final notes The main reason for the diminishing use of the FIDIC standard forms :  need quite substantive amendments.  many law firms have produced and promote their own bespoke contract forms.

 projects financed by the World Bank.1). contractors may try (if the facts justify it) to claim for: – site conditions on the basis that the Employer did not make relevant data available (clause 4. and – Force Majeure in extreme cases (clause 19.  If the Silver clauses remain unchanged. that duty does not include taking its own soil borings.Conclusion & final notes (cont.12) can give time and money for unforeseen site conditions whereas Silver Book says largely the reverse – the Contract Price should not be adjusted for unforeseen difficulties or cost.1(d)).  Under US law. – ground conditions on the basis of inability to verify (clause 5. Mikael Wahlgren NCC Construction Sverige AB .) Regions where FIDIC standard forms are used:  projects in Africa and Asia.  The new Red and Yellow Book (clause 4. where the contractor has a duty to inspect.10). A contractor is entitled to rely on the borings provided by the Employer.