Civil Engineering Reference
In-Depth Information
employer. The contractor must bear such risks from the starting date of the
contract until the defects certificate has been issued. It is perfectly sensible
and in accordance with law that the parties must stand by their bargain and
that, in respect of the works for which the contractor originally contracted,
he will bear such risks. However, in this instance, the clause is dealing with
the effects of a compensation event. By its very nature, a compensation
event is one over which the contractor has little or no control. Many of the
compensation events rank as breaches of contract on the part of the
employer for which the contractor could expect to recover damages suffi-
cient to put himself in the position he would have occupied if the breach
had not occurred. It is obvious that the effect of a compensation event could
well include what would normally be considered as contractor's risk items
under clause 81.1. The contractor's costs for dealing with such items would
also be part of the recoverable damages. Indeed, it appears that the con-
tractor can raise a claim at common law for the whole of his damages where
a compensation event is also a breach of contract on the part of the em-
ployer. This is not a matter that the contractor must include for his risk items
as part of a quotation to carry out additional work. Here, the contract is
dealing with the assessment (which may be the contractor's quotation or it
may be the project manager's assessment) consequent upon a compensation
event.
Although the wording of clause 63.5 could be much clearer (hence the
difficulty) the common-sense interpretation of it is that the assessment of the
effect of a compensation event must include the cost to the contractor of
what would otherwise be cost and time risk allowances for matters which
have a significant chance of occurring and are at the contractor's risk under
the contract. That also appears to be the legal interpretation. If the contractor
is preparing the assessment, he will include his costs and, if the effects are in
the future, he will have to make a forecast. Such a forecast will no doubt be
on the generous side.
Clauses 63.8, 63.9, 63.10 and 63.11 deal with variations concerning the
main options. Assessments under options A and C will be in the form of
changes to the activity schedule, but assessments under options B and D
will be in the form of changes to the bills of quantities. However, under
options B and D, the project manager and the contractor may agree to use
the lump sums and rates in the bill of quantities instead of the actual cost
and resulting fee. No doubt this will appeal to many. So far as A and B are
concerned, the assessment which includes sub-contracted work has the
contractor's fee percentage added to the actual cost, but obviously any
fees payable by the contractor to the sub-contractors are not to be added.
In the case of main contract options A, B, C, D and E, if the project manager
and the contractor agree, the contractor may carry out the assessment by
using the shorter schedule of cost components. In any event, where the
project manager is to assess, he may use the shorter schedule. The recovery
of the fee will usually amount to the difference between the fee percentage
applied to actual cost before and after the effect of the compensation event is
taken into account.
