A CRITIQUE OF RISK ALLOCATION OF UNFORESEEN GROUND CONDITIONS BETWEEN EMPLOYERS AND CONTRACTORS

Abstract

Unforeseen ground conditions (ground risk) are a very common occurrence in many construction projects, for there is only absolute certainty at the specific location where excavation occurs and works commence. Thus, most contract forms use the term “reasonably foreseeable by an experienced contractor” to allocate the ground risk to the Contractor. However, the term is not well-defined, leaving it open to different interpretations, which potentially causes disputes between Employers and Contractors. Given the ambiguity, the author sought to uncover, analyse and compare the risk allocation mechanisms adopted in the commonly used contract forms locally (PSSCOC and REDAS) and internationally (FIDIC and NEC3 suites). Following this, the author also studied the common law position to determine the circumstances where a Contractor would succeed in claiming for ground risk. In summary, it has been established that different contract forms present varying extents of ground risk allocation between Employers and Contractors. Thus, the author proposes the fairer Contract Form to be used so that parties have a chance to reconcile their differences and balance out the ground risk. In addition, to reduce contention on the definition of reasonable foreseeability, Geotechnical Baseline Reports with clear demarcations of what would be considered foreseeable/unforeseeable could be included in the Contract Documents. Further, to eliminate the assumptions involved in ground risk, the author also concurs with the proposition to shift the ground risk to the Employer and allow Tenderers to compete with each other on a more certain ground, resulting in a win-win situation.