Arguably more than any other type of construction pro-ject, driving a tunnel will be susceptible to the effects of ground conditions encountered. Considering also the fact that by the nature of tunnelling works there is little opportunity to redeploy resources to another workface and the high time-related cost of tunnelling equipment and personnel, the impact of ground conditions more adverse than were anticipated provide scope for major time and cost overruns.

Risk allocation

Responsibility for ground conditions is essentially an exercise in risk allocation. As a general rule, any commercial contract will allocate the risk of its primary elements between the parties. In a construction contract the primary duty of the contractor is to carry out the works, the primary duty of the employer is to pay for it. This analysis therefore assigns the risk of ground conditions, as part of doing the work, to the contractor. It is often a surprise to contractors, particularly under building, as opposed to civil engineering forms, that they carry this risk, however, unless the contract provides otherwise then it is likely that they will.

Conventional thought is that risk should be allocated to the party best able to control it upon the occurrence of the risk event. Following the above analysis it can be seen that this should be the Contractor as he will be the one making decisions once the condition is encountered.

However, if we consider that it is not so much the particular ground conditions encountered which are the problem, they will always have been there simply waiting for the tunnel drive to find them, it is the fact that they are unforeseen which causes the difficulty. Looked at in this way the degree of foreseeability will be a function of the time, expense and detail of any site investigation undertaken before the contract is let and indeed before any design work is undertaken. This then brings the control of the risk back to the Employer and makes him the party best placed to control it by the extent of investigation he undertakes.

There can be some benefit to the Employer of an approach where he shoulders all the risk, in that if there are no adverse conditions encountered then he will have, theoretically, paid no premium within the contract price, i.e. he will only pay for difficulties actually encountered, if none are, then he pays no addition. The counter to this is the perception that some unscrupulous contractors will manufacture claims in any case despite the fact that they have shared none of the risk.

Standard form treatment of ground conditions

Many civil engineering contracts in use around the world are derived from the UK Institution of Civil Engineers form of contract which, being first published in 1945 is now in its seventh edition (published 1999). The FIDIC forms in particular have until recently closely followed the ICE wording in many respects. Even the ‘new’, 1999 versions of the Red, construction and Yellow, design and build, FIDIC forms maintain what has become ‘traditional’ wording to set up a risk sharing scheme in respect of what they term unforeseen physical conditions.

ICE 7th Edition, Clause 12(1) says, “If during the carrying out of the Works the Contractor encounters physical conditions (other than weather conditions or conditions due to weather conditions) or artificial obstructions which conditions or obstructions could not in his opinion have been reasonably foreseen by an experienced contractor the Contractor shall as early as practicable give written notice thereof to the Engineer.”

The above noted FIDIC forms deal with it slightly differently though to the same effect, Clause 4.12 says, “If the Contractor encounters physical conditions which he considers to have been Unforeseeable, the Contractor shall give notice to the Engineer as soon as practicable.” ‘Unforeseeable’ is then set out as a defined term at Clause 1.1.6.8, ““Unforeseeable” means not reasonably foreseeable by an experienced contractor by the date for the submission of the Tender.”

Both the ICE and FIDIC clauses then go on to allow extensions of time and the payment of additional monies for conditions and obstructions in excess of those foreseeable.

The risk sharing therefore comes about by the application of the test of reasonable foreseeability, note that it is the reasonable foresight of an experienced contractor, small ‘c’. That is not necessarily the foresight of the actual Contractor, capital ‘C’. Though it must be said that the knowledge of the actual Contractor will be taken into account when applying the test. The wording is meant to set an objective standard for application of the test, if the encountered conditions rise above this threshold the Contractor gets his time and money, if they do not and the conditions are found to have been foreseeable then he does not.

In practice however the application of the test gives rise to difficulties, in its commentary on the ICE 7th form, Keating On Building Contracts says in respect of the experienced contractor test, “The words of the sub-clause seems to defy precise analysis …”. The latitude for technical argument that an encountered condition was or was not reasonably foreseeable is wide. Probably because of the large sums of money which will flow, or not, it is unusual for an Engineer to make a quick decision, often reports are drawn up by experts appointed by each party which invariably will reach diametrically opposed views as to whether or not the encountered condition was foreseeable.

The situation is not assisted by the wording of other clauses within the forms of contract being considered here, both the ICE Clause 12 and FIDIC Clause 4.12 are preceded by clauses setting out what information the Contractor is “deemed to” have taken into account when formulating his price, this will include, in the case of the ICE at least, information provided by the Employer and upon the Contractor’s own inspections of the, “…ground and sub-soil and hydrological conditions …”.

This latter Contractor inspection of the sub-soil suggests that each tenderer should have undertaken his own sub-soil investigation – a clearly impracticable and uneconomic proposition, hence the wording that that the Contractor is ‘deemed’ to have made such inspections. Relief for the Contractor in this regard can be found at ICE Clause 11(1) where Employer-provided information shall only be taken into account where it was made available to the Contractor before submission of his tender. The scope for arguing that a Contractor should have discovered an encountered condition is however, still there.

Before relying too heavily on the requirement for Contractor investigation however, Employers/Engineers would do well to note that non-disclosure of information which is in the Employer’s or his Engineer’s possession may render them liable to claims for misrepresentation in common law jurisdictions or breach of good faith in civil jurisdictions. Further, there are obvious implications for health and safety arising out of non-disclosure which, quite apart from the moral imperative involved, may render the Employer/Engineer liable for damages arising out of negligence or even criminal prosecution.

The FIDIC forms are slightly more pragmatic as regards the information which the Contractor is deemed to have obtained for himself, by requiring that he obtain all necessary information to the extent practicable, “taking into account cost and time”, therefore seemingly recognising the undesirability of multiple site investigations by several tenderers

Contradictory provisions

The point is though, that the provisions for information deemed to have been taken into account and the reasonable foreseeability test for deciding if the Contractor is due additional time and money, appear to be contradictory. It would seem that the standard forms, in striving to be even-handed have formulated a recipe for argument, counter-argument and dispute which is where such matters often end up. In the meantime the Contractor must proceed at risk or in some circumstances the works stop altogether until a resolution is achieved. The upshot is that as often as not the matter is left to be decided by some form of formal dispute resolution, an outcome which whilst it may provide an eventual ‘winner’ or ‘loser’ is unlikely to be in the best interests of the project as a whole.

The fact that these contradictions have been in place since 1945 and have survived even through to recent re-drafts of the considered forms means that it does not look as though the situation will be resolved any time soon. The nub of the problem is not having clear criteria by which to measure foreseeability. It often strikes me when dealing with disputes arising out of such problems and reviewing reports on what the Contractor should or should not have foreseen, that if there had been some kind of statement or agreement at the outset giving a degree of certainty to the parameters of foreseeability then much of the heartache might have been avoided.

As often as not, arguments will come down to analysis of the physical characteristics of the encountered ground, the hardness of the rock; the composition of the face; the degree of hydrostatic pressure. These are all elements which are measurable by engineers on both sides of the contractual divide and should be capable of being set out, perhaps initially by the Contractor then reviewed by the Engineer such that there are agreed parameters of what conditions are foreseen to be encountered. Such a statement could say some thing like, between chainage a) and b) the contractor expects the rock strength to be between x) and y) MPa, if the rock exceeds that strength band then it was unforeseeable.

Of course such an approach can lead to its own difficulties, not least in assessing different tenderers who might propose different parameters meaning that deciding which tenderer presents the best value for money when such risks are taken into account is that much more complicated. Also, the statement would need to be approached with a degree of openness and fairness by both sides which is not always present even at the outset of a project.

Other FIDIC provisions

Setting the type of banded parameters outlined above might also assist in determining a novel feature introduced in the latest versions of the FIDIC contracts under consideration here. Clause 4.12 of the ‘new’ FIDIC forms now allows the Engineer to abate the additional time and cost otherwise due to the Contractor by reviewing whether physical conditions in other parts of the works were more favourable than could have been anticipated. Whilst it is clear that this addition is a policy decision on the part of FIDIC to redress a perceived imbalance in the previous provisions, it is submitted that it can only serve to increase the scope and grounds for disputes in this already contentious area.

FIDIC Silver

To complete our analysis of the ground conditions provisions of the FIDIC suite, the FIDIC Silver (EPC/Turnkey) contract, in line with its contractor-takes-all-risk policy for this form, makes the Contractor completely responsible for the consequence of any ground conditions encountered. As has been outlined in previous articles this form carries a ‘health warning’ that it should only be used where a prospective Contractor has time and opportunity to undertake extensive site investigation and the Employer is willing to pay the premium that such risk loading will attract. As noted above, the impracticality of having several tenderers each undertaking their own site investigation and the premium which would be charged make the Silver book unsuitable for tunnelling projects.

Conclusions

It would seem then that the current regime for dealing with adverse ground conditions as contained in the main civil engineering forms leave little incentive for either side to follow best practice. On the one hand there is scope for the Employer not to undertake as much initial site investigation as he might otherwise do arguing that, notwithstanding the impracticality of such an approach, the Contractor is deemed to have made investigations himself. On the other hand if a contractor can satisfy the test of reasonable foreseeability then he will be compensated for losses arising, there is little to encourage him to minimise the effect. Any improvement on the standard forms, for instance introducing the types of ‘reference conditions’ outlined above would have to be made by bespoke amendment.


Contract Law