BuildLaw Issue 35 April 2019 | Page 33

process, site conditions can change quickly over short distances, and ground investigations are by no means a guarantee of what may be found during excavation. The consequences in terms of construction method, programming and cost can be enormous. As a result, the practice of presenting terms that allocate most (if not all) site risk to the contractor is unfair and misplaced, unless a premium is to be paid to avoid that risk. There should be mutual risk sharing according to what is appropriate for each project, and draft terms presented by government ought to start from that footing.
4. Fitness for purpose: There is no place for fitness for purpose obligations in construction contracts. To begin with, this obligation cannot be insured against. What is more, consultants and contractors have a duty to design and construct according to the specification and with reasonable care; it is not reasonable to expect them to go further and effectively warrant that the design or structure will also be fit for purpose.
5. Defect Liability Periods: A DLP obligation is standard fare in construction contracts. It requires the contractor to remedy defects or snags that emerge within a specified period following practical completion. However, this should not be structured as an ‘evergreen’ DLP – whereby the DLP across the whole works is re-set each time a defect is identified or remedied however small it might be. That approach establishes an uncertain and potentially indefinite liability period, with disproportionate consequences for the contractor in terms of retentions, banking requirements, and balance sheet. It also raises the question of whether retentions are necessary at all on public sector projects given the cashflow impact, the Government’s buying power, and the other sanctions/remedies available to protect against a recalcitrant contractor.
6. Time at large: Modern construction contracts include provisions that allow extensions of time if the contractor is delayed through no fault of their own. Nonetheless, while rare, these provisions will not necessarily respond to every conceivable delay event that is outside the contractor’s responsibility. This is where the ‘prevention principle’ will step in to provide a safety valve by putting time “at large”. Trying to prohibit by contract time being put at large misunderstands the prevention principle and will potentially cause significant injustice, especially if liquidated damages are specified.
7. Concurrent delay: Where construction works are delayed at the same time by two independent causes – one the fault of the contractor and the other the responsibility of the principal – the contractor would usually receive an extension of time but not prolongation costs. That way the contractor avoids delay damages but must bear the additional cost of having extended overheads. This risk sharing should not be altered so as to deny the contractor an extension of time. For more on concurrent delay please see: A Guide to Concurrent Delay.
8. Standard forms: The construction sector benefits from various standard form agreements, which are widely recognised and understood, and are reasonably well balanced. As a result, they require significantly less negotiation and revision than bespoke agreements. Most head contracts are based on standard form conditions, which ought to be universal for public sector projects. For consistency, contractors could also be asked to subcontract on standard forms (eg SA-2017).
While some amendments are usually necessary to tailor standard forms to the particular project, the volume of special conditions in government contracts can be excessive in an attempt to re-set the balance too far in favour of the principal.
9. Engineer to the Contract: The Engineer has an important role in the efficient and just administration of a construction contract. Problems arise where the Engineer is unable (or is perceived as being unable) to discharge their decision making functions fairly and impartially. To mitigate this familiar issue, at least for larger public projects, the Engineer should be appointed outside of the design