Look before you leap

Clause 12 of the ICE contract allows the contractor to claim additional loss and expense caused by physical conditions or artificial obstructions that it could not have reasonably foreseen. It may sound straightforward but this clause has led to expensive, protracted disputes.

There are two reasons for this: first, some contractors consider that clause 12 gives carte blanche to tender for works on the assumption that they will proceed with a dreamlike smoothness and that if they do not, clause 12 will act as an insurance policy. Second, some employers consider clause 12 to be irrelevant, on the grounds that contractors are omniscient about the works and site conditions, and should simply get on with their job if ground conditions are worse than the employer’s site investigations suggested at tender stage.

To determine which side of the fence a particular dispute might fall on, it is helpful to consider the original purpose of clause 12: it is inefficient for contractors to include all risks in their tender. This would result in tenders being unnecessarily inflated. Accordingly, the risk of adverse conditions that are unexpected falls to the employer.

Importantly, clause 12 must also be considered in the particular context of the project and the site. Clause 11 states that the contractor will include all information available and obtainable in preparing its tender. Therefore, if the contractor reads a report that puts it on notice of a problem with ground conditions, even if it is unlikely, such a condition is not unforeseeable.

In the case ABP vs Hydro Soil Services judge Havery reaffirmed these principles in deciding two clause 12 claims.

HSS was employed to design and build works to strengthen a quay wall, which would allow an adjacent berth to be deepened. The first clause 12 claim alleged that the quay wall was weaker than expected and during the works deflected significantly.

The judge found that the alleged physical conditions were foreseeable as they resulted from facts reported in documents that were available for inspection at ABP’s office. The fact that the contractor requested to inspect only a few of the documents was a risk for the contractor.

The judge found the alleged physical conditions were foreseeable as they resulted from facts reported in available documents

The judge emphasised that the foreseeability test in clause 12 had to be read in the context of clause 11: information that is available at tender influences whether a condition is unforeseeable.

The second clause 12 claim alleged that additional drilling was required through the original seventies quay wall coping beam. Drawings provided at tender suggested that the coping beam rested on two inches of blinding. In reality the coping beam rested on a metre of mass concrete.

However, the judge found that an experienced contractor should have anticipated that there were two alternative methods of constructing the coping beam, and should have identified a clear risk that the original works had used mass concrete to form the coping beam rather than gravel backfill.

Consequently, the judge found that, although the method of construction was not the only method available, it was, nevertheless, foreseeable. Because this was relevant to a risk that directly affected the contractor’s own method of works, the contractor was, therefore, on notice to either ask the employer about the original method of works or to investigate the risk further.

In summary, although dependent on its particular facts, the case is a reminder of the importance to contractors under the ICE form to establish exactly what information is available from the employer and elsewhere, and to ask all necessary questions of the employer regarding matters that could significantly affect the cost of the proposed works.

Equally, it is important for employers to be open with information and to give every opportunity for contractors to price identifiable risks.