Project managment

Payment for unforeseen conditions

Aproblem arising with Clause 12 claims is assessing the cost of overcoming the unforeseen conditions. When the contractor has notified a claim under Clause 12(2) he has to give details ‘as soon as practicable’ of how he is overcoming or intends to overcome the unforeseen conditions, with an estimate of the cost and delay they will involve (12(3)). The engineer can step in and instruct the contractor what to do (12(4)). Since the contractor has notified he is making a claim, the provisions of Clause 53 also apply, which require the contractor to keep records of his work in connection with his claim, and send ‘a first interim account’ giving particulars of the amount claimed to date, followed by further accounts at intervals required by the engineer. The contractor is entitled to  receive his costs ‘reasonably incurred’ in overcoming unforeseen conditions, ‘together with a reasonable percentage thereto in respect of profit’.

In this first interim account the contractor will no doubt wish to include the cost of dealing with the unforeseen conditions some days before actually submitting his Clause 12 claim, and this is not unreasonable. ‘Unforeseen conditions’ do not always happen suddenly, they can be conditions which worsen gradually, causing the contractor increasing difficulty and delay as he tries to deal with the situation, until he realizes he has the basis for a Clause 12 claim.
Until then the contractor may have no special records for that part of the work.
So his ‘first interim account’ under Clause 53 may be sparse on detail but contain a large sum for work on the unforseen conditions before he sent in his claim.
While only the engineer can finally decide what should be paid, the work of finding out all costs ‘reasonably incurred’ will fall upon the resident engineer.
Using his own records and the contractor’s, he should endeavour to find data, which supports the contractor’s claim.
Direct costs in meeting unforeseen conditions will comprise labour, materials and plant used. These should be ascertainable from records or, where these are not detailed enough, by judging what must reasonably have occurred, such as labour standing time or uneconomic working as problems created by the unforeseen conditions cause delay or the need to get more plant. Materials costs may have to include abortive temporary measures, such as timbering or temporary concreting. Plant costs may have to be divided into plant working and plant standing.
Indirect site costs comprise salaries and allowances for site staff, transport, office costs, plant maintenance, services and ‘consumables’ of all kinds that it may be impracticable to consider in detail. The contractor may be able to show what ratio they bear to gross labour costs; if they can only be shown in total to date, the current ratio has to be estimated, since the ratio will be higher in the early stages of the contract when site offices and services, etc. have to be set up, than later when more productive work is being undertaken.
Overhead costs for head office management and profit – usually expressed as a percentage on – have to be justified by the contractor showing they are in line with his usual practice.
Where some costs are difficult to elucidate due to lack of records, there are various estimating books published annually which can provide guidance, or be used as a check on the contractor’s submissions.
When the unforeseen conditions occur and the contractor notifies his intention to make a claim in consequence, the engineer should report the matter to the employer. He should take into account the employer’s views as well as the contractor’s when considering whether the conditions could ‘not reasonably have been foreseen by an experienced contractor’. The employer may also require to be consulted on the contractor’s claims and take part in meetings with the contractor about them. Under the ICE conditions the decisions finally rest with the engineer, but he should endeavour to get agreement beforehand to his proposed decision from both contractor and employer, or at least their understanding of the reasons for his decision.

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