SPONSORS

SPONSORS

A New Construction Contract for the 21st Century

SERIES ARTICLE

Risk of Change 

By Keith Pickavance 

London, UK
________________________________________________________________________

In the third article in this series we look at how the CIOB’s Complex Project Contract deals with the risk of change. CPC2013 provides for risk-management in three ways. First, risk must be planned for before the work starts; secondly, there must be a strategy for dealing with risk when it matures to cause a delay to progress; and thirdly, provision is made for extensions of time and compensation when the consequences cannot be avoided. 

Planning for change 

Complex projects are inevitably more risky than simple projects. Apart from anything else, this is because they tend to be conceived, designed and constructed over a longer period of time and, inevitably, the longer the period between inception and completion, the more change is likely to occur.

All standard forms contain some reference to the risks for which the Contractor will be entitled to more time and/or compensation, but there is little in common between them as to how these risks are dealt with. Most separate the cost and time risks and provide a different mechanism for recovery of each. As to time risks, for example, AS4000 uses the formula of a “qualifying cause of delay” which, briefly defined is, in effect, anything other than a breach by the Contractor, or those other risks described in the Contract Appendix.

The AIA form, A201 (2007) contains a short list of risks and “other causes beyond the Contractor’s control”. FIDIC uses the formula of a brief list coupled with any other cause referred to in the conditions, a formula which is also followed by NEC3.  JCT adopts the formula of a list of what it refers to as Relevant Events with cross-references to other clauses, but still, in order to understand what the Employer’s time risks are, the user must trawl through many other clauses of the contract.

CPC2013 adopts a more easily understood approach to the definition of risk. It contains a table in three parts stating the risks and identifying in relation to each, whether it is to be an Employer’s risk as to time, cost or both. The first fifteen Events are identified as being within the control of the Employer and are the Employer’s risk as to both time and cost. The second part contains the descriptions of seven occurrences, which are not normally within either party’s control, the time and/or cost risk of which can be allocated to either party. These are what in other forms may be wrapped up in the rather ambiguous expression force majeure. CPC2013 provides greater flexibility for the parties than is available under any other standard forms by providing for these risks to be carved out according to the commerciality of the contract. Bad weather for example, referred to in the contract as weather in excess of the “Predicted Climatic Conditions” can be commercially varied by defining for the project what climatic conditions are predicted and whether particular conditions in excess of that specified is an Employer’s time risk, cost risk or both.

More…

To read entire article (click here)

Editor’s note: This article is one in a series by Keith Pickavance about the CIOB’s new contract for complex construction projects. For information about the new contract, visit http://www.ciob.org.uk/CPC.  The full article includes footnotes for some of the quotations and section references above.

About the Author

flag-ukkeith-pickavanceKeith Pickavance

Keith Pickavance first qualified as an architect in 1972 and then in 1978 obtained a law degree. After 20 years as an architect in private practice the last 10 years of which also involved construction management, dispute resolution and expert witness services, in 1993 he joined an American company specialising in forensic services and delay analysis. In 1996 he set up on his own again specialising in delay analysis and time management in London and Hong Kong. That practice was acquired by Hill International in 2006, an international construction management and claims consultancy with which he is now appointed an Executive Consultant.  He is  a Past President of the Chartered Institute of Building and has led the CIOB’s time management initiative since its inception in 2007.  Keith is the author of Delay and Disruption in Construction Contracts (4th ed., 2010, Sweet and Maxwell) and numerous other books and articles on delay related issues.   Contact [email protected]