DESIGN RISK ALLOCATION UNDER

A TRADITIONAL BUILD CONTRACT

A paper based on the commended prize entry
in the Hudson Prize essay competition 2011



Kim Rosenberg

September 2012

D140








www.scl.org.uk

1
DESIGN RISK ALLOCATION UNDER
A TRADITIONAL BUILD CONTRACT


Kim Rosenberg



1 Introduction
Under a traditional build contract, who takes responsibility for buildability
deficiencies in the permanent works design?
1
It would be unwise for a
contractor to assume automatically that it has no responsibility for this design
risk and if the risk crystallises, it can lead to significant overrun.
Traditional build contracts are a common means of procuring construction
projects the employer engages the contractor to build the relevant works to
specifications and drawings previously prepared on behalf of the employer.
The basic premise is that the contractor is responsible for constructing the
design provided to it.
2
The design team is separately engaged by the employer
under consultancy agreements to prepare those specifications and drawings
and, in many cases, subsequently to supervise construction and administer the
construction contract.
Accordingly, assuming a simplistic arrangement, the contractual framework
for a traditional build procurement is as follows:





Given that there is no direct contractual relationship between the engineer
3
and
the contractor, the employer shuttles between those two where design issues
arise under the construction contract or where (less likely, given the timing of
procurement) construction issues arise under the consultancy agreement.
This procurement method is commonplace: towards the end of the first decade
of this century, in the United Kingdom nearly 50% of construction contracts

1 This paper focuses on the design for the permanent works not the temporary works.
2 Of course, it is also common for the contractor to expressly take on responsibility for
certain parts of the permanent works design, which ought to be clearly identified in the
construction contract.
3 For ease of reference, this paper uses the term the engineer. However, this is intended
to encapsulate all members of the design team.
Engineer
Employer Contractor
CONSULTANCY AGREEMENT
CONSTRUCTION CONTRACT

2
by number were procured on a traditional build basis and over 18% by value.
4

As a result, this procurement method dominated the smaller project field in
that region. Internationally, traditional build contracts are often used by
international development banks and agencies, particularly when financing
government projects.
5
Hence, this procurement method is also common for
international infrastructure projects.
An important issue that arises is the allocation of responsibility for
deficiencies in the permanent works design which make it more time
consuming or costly (or even impossible) during the construction phase to
build to the specifications and drawings. For ease of reference, this is referred
to as the buildability design risk. At first glance, one might assume that the
contractor has no such responsibility, given the fundamental premise of a
traditional build contract is build only with no design. On that assumption, it
should be up to the employer to shuttle off to the engineer to obtain the
corrected design information and deliver this to the contractor. This would be,
however, an unwise assumption. Contractors, employers and engineers alike
may be surprised by current case law regarding this risk and give greater
thought to it during negotiations. After all, it is not uncommon to find, on
preparation of the working drawings, that crucial information is missing,
members clash, openings have been forgotten and similar such buildability
design deficiencies.
6

To be clear, this paper is not concerned with responsibility for the fitness for
purpose of the permanent works design or, in other words, whether the
finished structure will stay up and perform for its intended life span (the
fitness for purpose design risk).
7
It is only concerned with getting that
structure up in the first place.
8

The structure of the paper is as follows. Section 2 considers current case law
in common law jurisdictions (particularly the United Kingdom) on the
allocation of the buildability design risk. Against that background, section 3
looks in detail at how this risk is allocated under the FIDIC Red Book 1999

4 RICS, Contracts in Use: A Survey of Building Contracts in Use during 2007.
5 For example, see paragraph 2.5 of the Guidelines Procurement Under IBRD Loans And
IDA Credits, May 2004 (revised 1 October 2006 and 1 May 2010); Procurement
Guidelines for the Asian Development Bank, April 2010; African Development Bank
Group, Rules and Procedures for Procurement of Goods and Works, May 2008.
6 It is not suggested that such buildability design deficiencies constitute negligence on the
part of the engineer this is dependent upon the facts of each case.
7 Nor does this paper address the separate issues of whether the contractor has a duty to
warn the employer during the construction phase of (a) design deficiencies which may
mean that the permanent works will not be fit for purpose; or (b) physical conditions that
make it more difficult to construct the design such as unforeseeable ground conditions.
8 This is consistent with the distinction drawn by the Saskatchewan Court of Queens
Bench in Sunnyside Nursing Home v Builders Contract Management Ltd (1986) 2 Const.
LJ 240 in relation to design responsibilities: (a) design proper [or ensuring that the
design is fit for purpose] and (b) involvement in changes in the context of savings,
rectification of errors and clarification, when design did not, because of omissions or
ambiguity, provide adequate guidance to [the contractor] in construction detail
(page 243).

3
(the Red Book)
9
as an example of a standard form contract for traditional build
procurement. Section 4 then considers what arguments the contractor might
advance to avoid the cost and time implications if it is (perhaps unwittingly)
saddled with the buildability design risk. Finally, section 5 sets out the
conclusions.
2 Buildability design risk: current case law
The starting position in relation to current case law in the United Kingdom on
the buildability design risk is the House of Lords decision in Thorn v The
Mayor and Commonalty of London,
10
a case over 130 years old, which
involved a rebuild of Blackfriars Bridge over the Thames in London.
11

The employer advertised the construction contract, based upon drawings and
specifications prepared by an engineer employed on its behalf. The
specifications, which then formed part of the contract, provided, amongst
other things, that the foundations of the piers will be put in by means of
wrought iron caissons and the casing of the lower part of which caissons will
be left permanently in the work. The use of caissons as a construction
method, as opposed to timber coffer-dams, was a novel method of
construction at the time. In terms of the risk allocation, the specifications
provided that the contractor must satisfy himself as to the nature of the
ground through which the foundations have to be carried; all the information
given on this subject is believed to be correct, but is not guaranteed and all
risk and responsibility involved in the sinking of these caissons will rest with
the contractor. The works were to be carried out in three years, with monthly
liquidated damages applying for any delay, and for a lump sum price, subject
to any variations.
Upon winning the construction contract, the contractor proceeded to prepare
the caissons in accordance with the specifications. However, it was
discovered that the caissons would not resist the external pressure of the
Thames at high tide. As a result, the upper parts of the caissons were
abandoned and the corresponding parts of the foundations could only be built
when the tide was sufficiently low.
The contractor had engaged its own engineer prior to tendering for this
contract and it was accepted by the parties that, had that engineer carefully
examined the specifications and drawings, he would have identified the
deficiency with the caissons.
12
The contractor sought to shift responsibility for
this design deficiency to the employer by arguing, on a special case, that the

9 The Red Book: FIDIC (Fdration Internationale des Ingnieurs-Conseils), Conditions
of Contract for Construction: For Building and Engineering Works Designed by the
Employer (1st edition 1999).
10 Thorn v The Mayor and Commonalty of London (1876) 1 App Cas 120. The House of
Lords was constituted by Lords Cairns LC, Chelmsford, Hatherley and OHagan.
11 By current the author means binding case law that has not been overruled and hence
remains good law despite the yellowing pages of the books in which it is reported. In
fact, so much time has passed since this decision that the City of London Corporation is
now on to Blackfriars Bridge Mark III.
12 Whilst not stated, as not an issue in this case, this suggests that the engineer engaged by
the employer may have been negligent in preparing that design.

4
employer impliedly warranted that the bridge could be built according to the
drawings and specifications produced on its behalf in particular, that the
caissons would resist the pressure of the Thames during construction.
The House of Lords unanimously (and vociferously) rejected this argument,
finding that there were no grounds to imply such a warranty. As a result,
despite the shortcomings of the engineers design, it was the contractor who
was left to bear the consequences of the buildability design risk. Lord
Chelmsford made the following remarks:
There can be no doubt that the [contractor], in the exercise of common
prudence, before he made his tender, ought to have informed himself of
all the particulars connected with the work, and especially as to the
practicability of executing every part of the work contained in the
specification, according to the specified terms and conditions. It is said
that it would be very inconvenient to require an intended contractor to
make himself thoroughly acquainted with the specification, as it would
be necessary upon each occasion for him to have an engineer by his side.
Such an imagined inconvenience is inapplicable in this case, as it
appears that the [contractor] has his engineer, who examined the
specification for him, though not carefully. But if the [contractor] ought
prudently and properly to have full information of the nature of the work
he is preparing to undertake, and the advice of a skilful person is
necessary to enable him to understand the specification, is it any reason
for not employing such a person that it would add to the expense of the
contractor before making his tender? It is also said that it is the usage
of contactors to rely on the specification, and not to examine it
particularly for themselves. If so, it is an usage of blind confidence of
the most unreasonable description.
13
[emphasis added]
This judicial pronouncement should ring alarm bells for contractors. How can
the contractor be expected to have the design resources to critique the
specifications? This is a particularly pertinent question if the tender period is
short or if the design is complex and novel especially given that the
contractor is unlikely to have the engineers calculations from which the
specifications have been prepared. This issue is brought into sharper focus
when one moves down the contracting chain to perhaps less sophisticated
subcontractors who are further removed from the head contract and the overall
design.
This decision was followed up two years later by another equally strong
decision of the House of Lords in Tharsis Sulphur and Copper Co Ltd v
MElroy & Sons.
14
This case concerned the construction of a treatment plant
in Cardiff for calcining and precipitating ores from Spain for a lump sum
price, subject to variations.
The specifications required gutter girders to be made of a specified weight and
thickness. However, when the contractor went to cast these girders, it

13 Thorn, note 10, page 132.
14 Tharsis Sulphur and Copper Co Ltd v MElroy & Sons (1878) 3 App Cas 1040. The
House of Lords was constituted by Lords Cairns LC, Hatherley, Blackburn and Gordon.

5
discovered that they were cracking and warping during cooling. The
contractor took this problem to the engineer who agreed, on behalf of the
employer, that heavier and thicker girders could be erected instead. The
contractor then claimed the incremental cost of the girders as variations.
The House of Lords unanimously rejected the claim, finding that the
contractor took on the risk that the specified girders could be built. Lord
Cairns LC stated:
It is sufficient for me to say that, as I understand that contract and its
construction, it was one which obliged the [contractor] to execute the
work which was contracted for, and if in the execution of the work the
castings which were to be supplied (the castings, for example, for the
girders), occasioned any difficulty in the work, if the girders had to be of
a length different from what was specified or of a breadth different from
what was specified, that was a risk which the [contractor] took; and they
were obliged to execute the work with the necessary alterations in the
size of the castings.
15
[emphasis added]
The judge then went on to hold that there was no agreement that the employer
would pay the additional costs of the thicker girders (simply an agreement that
this was a variation for the contractors convenience), so the contractor was
left to bear these costs.
The effect of these two decisions (both of which remain good law) is that the
contractor, in submitting its tender and entering into the construction contract,
agrees that, firstly, it can and will build the design incorporated into the
construction contract and, secondly, it will do so for the specified price even
if that design is flawed from a buildability perspective.
16
Hence, it is the
contractor who takes on the buildability design risk it bears the time and cost
consequences of buildability design deficiencies.
This stance has been supported in other common law jurisdictions.
17
In
particular, in the Canadian case of Grace v Osler, Cameron JA stated that in
agreeing to do the work in the specifications and drawings for an office
building there under consideration, the contractor binds himself absolutely to
do the work in accordance with the drawings and specifications; and whether
these are perfect or imperfect, or, in fact, impossible of execution, is here
immaterial.
18

Of course, the actual risk allocation under a construction contract is subject to
the particular wording in each case. The next section of this paper considers
how a commonly used standard form contract, the Red Book, allocates the
buildability design risk.

15 Tharsis Sulphur, note 14, pages 1043-1044.
16 I N Duncan Wallace, Hudsons Building and Engineering Contracts (11th ed., 1995),
paragraph 4-054.
17 For example: Grace v Osler [1912] 19 WLR 109 (Manitoba Court of Appeal Canada);
Wilkins and Davies Construction Co Ltd v Geraldine Borough [1958] NZLR 985
(Supreme Court, Timaru New Zealand); Catre Industries Ltd v Alberta (1990) 63 DLR
(4th) 74 (Alberta Court of Appeal Canada).
18 Grace v Osler, note 17, page 128.

6
3 Allocation of the buildability design risk under the Red
Book
The Red Book
19
is the latest in a line of traditional build standard form
contracts published by the Fdration Internationale des Ingnieurs-Conseils
(FIDIC) since the first in 1957. It has also been amended specifically for use
by Multilateral Development Banks (the Pink Book).
20
Given the prominence
of the Red Book for traditional build procurement, it has been selected as an
example standard form contract to work through in detail how the buildability
design risk is allocated. For ease of reference, relevant extracts from the Red
Book are set out in the Appendix.
As made clear by its full title (Conditions of Contract for Construction: For
Building and Engineering Works Designed by the Employer), the Red Book
is intended to bestow design responsibility on the employer as expected of a
traditional build contract. However, it is submitted that this risk allocation is
not without ambiguity and the contractor may find itself on the end of a
determination that it bears the buildability design risk under the Red Book.
The starting point of this analysis is Clause 4.1 of the Red Book, which sets
out the contractors general obligations. This provides for the contractors
fundamental obligation that it will execute the works in accordance with the
construction contract (and hence in accordance with the incorporated
permanent works design). The contractor must do all that is necessary to
satisfy this fundamental obligation.
21
This is effectively a repetition of the
decisions in Thorn
22
and Tharsis Sulphur.
23

Clause 4.1 then addresses two separate responsibilities in relation to the
permanent works: (a) how the permanent works design is to be built (i.e.
buildability)
24
and (b) what the design is to do (i.e. fitness for purpose).
25
The
contractor is responsible for the former, but only the latter where the
construction contract specifies that the contractor shall design any part of the
permanent works. But what about the allocation of the buildability design
risk? This boils down to paragraph (ii) of the third paragraph of Clause 4.1:
The contractor shall not otherwise be responsible for the design or
specification of the Permanent Works. What does this mean?
26


19 The Red Book: note 9.
20 The Pink Book: Fdration Internationale des Ingnieurs-Conseils, Conditions of
Contract for Construction for Building and Engineering Works Designed by the
Employer Multilateral Development Bank Harmonised Edition (March 2006). This
has the same risk allocation as the Red Book, insofar as relevant to this paper.
21 Clause 4.1, first paragraph.
22 Thorn: note 10.
23 Tharsis Sulphur: note 14.
24 Clause 4.1, third and fourth paragraphs.
25 Clause 4.1, fifth paragraph.
26 Clause 4.1, third paragraph: The contractor shall be responsible for the adequacy,
stability and safety of all Site operations and of all methods of construction. Except to
the extent specified in the Contract, the contractor (i) shall be responsible for all
Contractors Documents, Temporary Works, and such design of each item of Plant and

7
On a proper construction of Clause 4.1, it is submitted, the contractor is
responsible for doing everything necessary to permit it to discharge its
responsibility for the adequacy, stability and safety of all Site operations and
of all methods of construction but not: (a) otherwise in relation to the
permanent works design; or (b) to the extent specified in the Contract.
Arguably the adequacy of all methods of construction means the capability
of the chosen construction methods to permit the contractor to discharge its
fundamental obligation to execute the works in accordance with the
construction contract. On that basis, the otherwise referred to in paragraph
(ii) in relation to the permanent works design can only be a reference to the
fitness for purpose of that design not the buildability of that design. Hence,
under Clause 4.1, the contractor is responsible for the buildability design risk,
but not the fitness for purpose design risk.
27

It is then necessary to consider whether the remainder of the Red Book
displaces this risk allocation both from a time and cost perspective. The two
main provisions in this regard are the variation and extension of time
clauses.
28

Variations
The starting position is that the Red Book specifically dictates that the
contractor cannot change the permanent works design such as to overcome a
buildability design deficiency without a variation instruction.
29
Therefore,
where such a deficiency arises, on the above interpretation of Clause 4.1, the
contractor must persuade the engineer to instruct a variation for its
convenience. However, what of the costs consequences of such a variation?
Where the contractor flags a buildability design deficiency, the engineer can
ask the contractor to submit a variation proposal to overcome it, including any
necessary modifications to the time for completion and the evaluation of costs
resulting from this.
30
Ordinarily, there is no commercial reason for the
engineer to agree to such a variation and therefore the contractor may need to
concede responsibility for the time and cost consequences. If, however, the
engineer does not request a variation proposal but simply instructs the
variation, that variation will automatically fall to be valued in the contractors
favour under the general measurement provision (Clause 12).
31
This is
because in such circumstances the engineer does not have power to include a

Materials as is required for the item to be in accordance with the Contract, and (ii) shall
not otherwise be responsible for the design or specification of the Permanent Works.
27 This interpretation is consistent with sub-clause (c) of the fifth paragraph of Clause 4.1,
which then sets out when the contractor will be responsible for the fitness for purpose
design risk, namely to the extent it designs part of the permanent works.
28 Also note that in the Pink Book, note 20, the employer must specifically approve any
extensions of time or variations (Clause 3.1, seventh paragraph); however, it cannot
unreasonably withhold or delay such approval (Clause 1.3, second paragraph).
29 Clause 13.1, fourth paragraph. Nor can the contractor make any significant alteration to
its construction methods without notification to the engineer pursuant to Clause 4.1,
fourth paragraph.
30 Clause 13.3.
31 Clause 13.3, fourth paragraph. The contractor will also be entitled to time relief for
critical delay under Clause 8.4(a).

8
direction in its variation instruction that the costs of a variation for the
contractors convenience are to be dealt with in a different manner.
32
The
engineers general power to issue instructions arguably does not assist in this
regard, as this power is limited to instructions which may be necessary for
the execution of the Works and the remedying of any defects, all in
accordance with the Contract.
33
The issue of concern is not the execution of
the Works, but rather the costs consequences of a variation for the contractors
convenience. The effect is that in such circumstances the buildability design
risk shifts to the employer. The engineer and the employer need to be aware
of this consequence of the engineers variation instructions.
34

Given that the Red Book is a remeasurement contract, if the change to the
Permanent Works to overcome a buildability design deficiency involves an
increase in quantities, then the allocation of responsibility for the costs
associated with those increased quantities is a more difficult scenario. This
involves a balancing act between the quantities risk borne by the employer and
the buildability design risk prima facie borne by the contractor. The outcome
will depend upon the specific circumstances. However, it is submitted that the
contractor is likely to have the better argument on costs where the bill of
quantities includes a work item for the activities involved in overcoming a
buildability design deficiency.
Extensions of time
Critical delay relief may be available in four circumstances that are potentially
relevant where a buildability design deficiency arises:
(a) Where there is a variation instruction (unless the time consequences
have been agreed as part of the variation proposal process referred to
above);
35

(b) Where there is a substantial change in the quantity of an item of
work;
(c) Where there is any delay, impediment or prevention caused by or
attributable to the employer, the employers Personnel, or the
employers other contractors on the Site;
36
or
(d) Where there is a cause of delay for which the contractor has an
entitlement under another provision of the Red Book.
37


32 Where the engineer has not sought a variation proposal, the only grounds upon which the
engineer can instruct that the costs of a variation are to be evaluated otherwise than under
Clause 12 are where the variation (a) relates to a provisional sum (Clause 13.5) or (b) is
instructed on a dayworks basis (Clause 13.6).
33 Clause 3.3, first paragraph.
34 Cf. Yorkshire Water Authority v Sir Alfred McAlpine & Son (Northern) Ltd (1985) 32
BLR 119 (QB Comm), where the ICE Conditions (5th ed) provided that the contractor
was entitled to a variation if it was impossible to complete the works in accordance with
the construction contract and the engineer issued an instruction to overcome that
impossibility (Clause 13(3)). Such provision is not in the Red Book.
35 Clause 8.4(a).
36 Clause 8.4(e).
37 Clause 8.4(b).

9
The first of these has been addressed above the buildability design risk
(time
38
and cost) will shift to the employer unless the variation proposal
process is employed by the engineer and the contractor agrees to bear the time
and cost consequences of the variation for its convenience.
The second of these circumstances, a change in quantities, has also been
referred to above. Three points are important. It is only substantial changes
that trigger critical delay relief. Next, it is only a change in the quantity (as
opposed to the cost) that is relevant. If there is a small increase in the actual
quantities of a costly work item, though this could have significant costs
consequences, it does not entitle the contractor to critical delay relief. Lastly,
it is only changes to an item of work included in the Contract that provides
relief. Therefore, there can be no critical delay relief for new items of work.
Unless each of these elements is met, the contractor bears the time
consequences of a buildability design deficiency that results in a change in
quantities.
As to the third circumstance, this prima facie may provide relief to the
contractor if the buildability design deficiency can be attributed to the
employer, as the party who provided the design, or if the engineer, who falls
within the definition of employers Personnel, caused the deficiency.
However, it is submitted that this is not without significant doubt. First, if the
design deficiency has arisen because of the specific construction methods
selected by the contractor, the contractor will not be entitled to an extension of
time. Second, it is arguable that this relief is not available for buildability
design deficiencies because the contractor has expressly taken on
responsibility for this risk pursuant to Clause 4.1, thereby superseding any
attribution of this deficiency to the employer or the engineer. Pursuant to such
argument, this relief is available only for impediments caused by or
attributable to the employer or the engineer after contract signature. This is
consistent with the remainder of the grounds in Clause 8.4, which are aimed at
events having a similar temporal trigger.
As to the fourth and final circumstance, there are a number of other potentially
relevant provisions of the Red Book that entitle the contractor to an extension
of time (as well as additional payment):
1 Clause 1.9 provides the contractor with time and costs relief if the
engineer fails to issue drawings within a particular time. However,
this provision is only applicable if the contractor has notified the
engineer that it requires the drawings. In any event, Clause 1.9 only
provides relief if the contractor suffers delay and/or incurs cost as a
result of the failure of the engineer to issue the notified drawing
within a reasonable time not the fact that the drawing needs to be
issued at all or that the content of that drawing constitutes an
amendment to the design (i.e. because there is a buildability design
deficiency).

38 Where time is referred to hereafter, it is a reference to an extension of time where the
buildability design deficiency has caused critical delay. Non-critical delay is not covered
by Clause 8.4.

10
2 The contractor may be entitled to time and costs relief in certain
circumstances where there are errors in the original points, lines and
levels of reference specified in the Contract or notified by the
engineer.
39
However, this relief is only available if an experienced
contractor could not reasonably have discovered such errors and
avoided the delay or additional cost. This condition precedent can
be a high hurdle to surmount. After all, to the extent which was
practicable, the contractor is deemed to have inspected and
examined the site and all available information before submitting its
tender.
40
Further, the contractor may be expected to have checked
the items of reference in the specifications before contract signature
because to simply rely upon the specifications without doing so may
be considered to be an usage of blind confidence of the most
unreasonable description.
41

3 The contractor may be entitled to time and costs relief where it
encounters unforeseeable physical conditions.
42
However, this relief
will only be available if it is the physical conditions that cause the
buildability design deficiency as opposed to a deficiency
regardless of the physical conditions. In addition, this relief is only
available if the physical conditions were not reasonably foreseeable
by an experienced contractor by the date for submission of the
tender. For the same reasons as the previous provision, this
condition precedent can be a high threshold.
4 The contractor is entitled to time and costs relief if any of the
employers risks (which includes design of any part of the Works
by the employers Personnel or by others for whom the employer is
responsible) results in loss or damage to the Works.
43
However,
this does not apply to buildability design deficiencies to the extent
they result only in economic loss, as opposed to physical damage.
5 Finally, the contractor may be entitled to time and costs relief upon
the happening of a force majeure event.
44
However, a buildability
design deficiency cannot be classified as such an event, given that it
is not beyond either partys control and could have been reasonably
provided against before entering into the contract particularly
since, as stated above, the decisions in Thorn
45
and Tharsis
Sulphur
46
decree that the contractor should be examining the
specifications during the tender period to identify any such
deficiencies.
In short, there are certain limited circumstances in which the contractor clearly
may be entitled to time and costs relief when faced with a buildability design

39 Clause 4.7.
40 Clause 4.10.
41 Thorn, note 10, page 132 (Lord Chelmsford). Cf the minority judgment of Thomas J in
R M Turton & Co Ltd v Kerslake & Partners [2000] NZCA 115, paragraphs [122]-[133].
42 Clause 4.12.
43 Clause 17.4, with the employers risks defined in Clause 17.3.
44 Clause 19.4.
45 Thorn v The Mayor and Commonalty of London: note 10.
46 Tharsis Sulphur: note 14.

11
deficiency in the original permanent works design (ie when the buildability
design risk shifts to the employer). It is submitted that these are only where:
(a) The engineer instructs a variation without having sought a variation
proposal from the contractor, the latter having conceded to bear the
costs and time consequences;
(b) There are errors in the levels of reference and an experienced
contractor could not reasonably have discovered such errors and
avoided the delay and/or cost (a high threshold); or
(c) There are unforeseeable physical conditions that would not have
been reasonably foreseeable by an experienced contractor (again a
high threshold).
However, even if the contractor can squeeze within one of these limited
circumstances, the buildability design risk may not shift to the employer if the
contractor fails to comply with the notification and substantiation
requirements in the Red Book when advancing claims for such relief.
47
This
depends upon whether the governing law will enforce notice requirements as
conditions precedent to entitlement. For example, in the United Kingdom and
Scotland, the recent trend of case law is to uphold notice requirements as
conditions precedent to entitlement.
48
In Australia, however, there is
conflicting case law between states.
49

Overall, if the contractor cannot fit within one of these limited circumstances
(or fails to comply with conditions precedent to entitlement), it will bear the
buildability design risk. But the story gets worse for the contractor. Given the
limited contractual relationships underpinning a traditional build procurement
method, the contractor has no contractual cause of action against the engineer
in order to recoup its losses arising out of buildability design deficiencies. The
next section considers alternative arguments that the contractor may advance
to recover these losses.
4 Alternative arguments to relieve contractor
Where the contractor bears the time and cost consequences of a buildability
design deficiency under the construction contract, there may be alternative

47 Clause 20.1. The contractor will not have any entitlement to additional payment or an
extension of time if it fails to provide timely notice of its claim (second paragraph).
Thereafter, the contractor is only entitled to additional payment or an extension of time
that has been substantiated (seventh paragraph).
48 City Inn Ltd v Shepherd Construction Ltd [2001] ScotCS 187, [2003] BLR 468,
paragraph [23]; Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No
2) [2007] EWHC 447 (TCC), paragraphs [103]-[105]; Steria Ltd v Sigma Wireless
Communications Ltd [2008] BLR 79 (TCC), paragraphs [87]-[91].
49 In the Northern Territory: Gaymark Investments Pty Ltd v Walter Construction Group
Ltd [1999] NTSC 143, paragraphs [69]-[71], in which it was effectively held that notice
requirements are not a condition precedent. In New South Wales: Turner Corporation
(Receiver & Manager Appointed) v Austotel Pty. Limited (1994) 13 BCL 378, Turner
Corporation (In Provisional Liquidation) v Co-Ordinated Industries Pty. Limited (1994)
11 BCL 202, Peninsula Balmain Pty Ltd v AbigroupCcontractors Pty Ltd [2002]
NSWCA 211, paragraph [78], in which it was held that notice requirements are a
condition precedent.

12
arguments, depending upon the governing law, that it can deploy to recover its
losses. In common law jurisdictions, these arguments include that:
(a) The extra work required for overcoming that deficiency was
executed outside the construction contract;
(b) The construction contract has been frustrated; or
(c) The engineer has breached a duty of care owed to the contractor in
relation to the permanent works design (ie negligent misstatement).
Extra work executed outside the construction contract
The genesis of this argument is the obiter comments of Lord Cairns in Thorn
50

to the effect that if the work required to be carried out to overcome a
buildability design deficiency was so peculiar from that which the contractor
calculated upon when entering into the construction contract, it has two
options, one of which is to only proceed with that work if it is paid outside the
construction contract on a quantum meruit basis.
51
In making this statement,
however, the judge expressly stated that he gave no opinion upon the merits of
such an argument.
Since this decision, contractors have latched on to these comments where
buildability design deficiencies arise. However, it is submitted that such an
argument is unlikely to succeed, given the contractors fundamental obligation
to do all that is necessary to execute the permanent works design.
In the case of Wilkins and Davies Construction Co Ltd v Geraldine Borough,
52

the Supreme Court of New Zealand was faced with circumstances where the
design for a sewage treatment scheme specified a tank and pump chamber to
be sunk below ground level, the floor of the tank to be kept dry by pumping
from a 44-gallon drum. As it transpired, the ground conditions meant that it
was difficult to sink the tank and pump chamber and it was said to be
impossible to keep the tank dry using a 44-gallon drum. As a result, the
design was abandoned and an entirely new design was adopted. The
contractor sought to recover its additional costs of the redesign by arguing that
the work was wholly different from that originally contemplated and hence
was executed outside the construction contract for which it was entitled to be
paid on a quantum meruit basis. The court rejected this argument. Henry J
stated:
It appears to me that the [contractor] expressly took the responsibility for
pumping and the responsibility for sinking the tank, and it cannot escape
liability by calling on [the employer] to pay for additional work which
was acquiesced in and permitted to enable the [contractor] to minimize
its loss as the result of finding it had undertaken a responsibility which it
could not fulfil [T]he work in respect of which the claim was made
was not work done outside the contract. It was work within the contract
necessary to enable the [contractor] to carry out its obligations. It
was an agreed on means whereby the [contractor] was allowed to

50 Thorn: note 10.
51 Thorn, note 10, pages 127-128.
52 Wilkins and Davies Construction Co Ltd v : note 17.

13
complete its undertaking in a modified form and thus avoid exposing
itself to a claim for damages for non-completion. If that be so, no
amount can be recovered under the guise of quantum meruit
53

[emphasis added]
On the basis of this rationale, such a quantum meruit argument will not
succeed. The contractor will have to look to another argument to recover its
losses.
Construction contract has been frustrated
A construction contract will be frustrated where some outside event or
extraneous change of situation happens which, before breach by one of the
parties, renders performance impossible or only possible in a very different
way from that contemplated.
54
There are two outcomes favourable to the
contractor where the construction contract is frustrated. First, the construction
contract is brought to an end, thereby relieving the contractor of its ongoing
fundamental obligation to build the permanent works design. Second, the
contractor may be entitled to be paid on a quantum meruit basis for work
carried out prior to that frustration.
55

It is, however, only a narrow class of events that could trigger the doctrine of
frustration.
56
It is not hardship or inconvenience or material loss itself which
calls the principle of frustration into play. There must be, as well, such a
change in the significance of the obligation that the thing undertaken would, if
performed, be a different thing from that contracted for.
57
In particular,
frustration cannot arise simply because the construction contract is more
onerous to perform.
58

This argument was advanced by the contractor in Davis Contractors Ltd v
Fareham Urban District Council
59
on the basis it had been unable to procure
sufficiently skilled labour so as to permit it to complete the works by the due
date. This argument was rejected by the House of Lords. In the words of
Viscount Simonds, it by no means follows that disappointed expectations lead
to frustrated contracts.
60

A similar outcome ensued in Wilkins and Davies,
61
where the contractor
argued that the discovery of difficult ground conditions constituted a
frustrating event. The Supreme Court of New Zealand rejected this argument.
First, the court considered that it was not impossible for the contractor to
complete the work it was just more difficult and a modified method was

53 Wilkins and Davies, note 52, pages 994-995.
54 J Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyds Rep 1
(CA).
55 In the United Kingdom, the Law Reform (Frustrated Contracts) Act 1943 regulates the
rights and liabilities of parties to frustrated contracts.
56 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (HL).
57 Davis v Fareham, note 56, page 729.
58 J Lauritzen AS v Wijsmuller BV: note 54.
59 Davis v Fareham: note 56.
60 Davis v Fareham, note 56, page 715.
61 Wilkins and Davies: note 52.

14
required. Second, it held that the parties were aware that the works
necessitated the piercing of the ground water level and if the contractor wished
to protect itself from potential difficulties that might ensue, it ought to have
done so expressly. As a result, this argument failed.
Accordingly, it will only be in very limited circumstances that a contractor
will be able to rely upon the doctrine of frustration to relieve itself from the
consequences of buildability design deficiencies. This leaves one last
argument for the contractor and a different target the engineer.
Negligent misstatement by the engineer
Typically, when the engineer produces the specifications and drawings under a
traditional build procurement method, it knows that these will be used for the
purposes of tendering the construction contract and then the construction
phase. To the extent that that design contains buildability design deficiencies
and this constitutes professional carelessness, the contractor may seek to argue
that the circumstances are such that the engineer owed the contractor a duty of
care during the tendering period in producing the design, which has been
breached.
62
The success of this argument is entirely dependent upon the
factual scenario under consideration.
This argument was advanced by the contractor in Galliford Try Infrastructure
Ltd v Mott MacDonald Ltd,
63
albeit in the context of a design and build
contract, on the basis, it said, that pile bracing forces had not been adequately
addressed by the engineer, which resulted in a redesign and, in turn, delay.
The alleged negligence related to a design concept provided by the engineer
orally during relatively informal meetings. Akenhead J stated:
In the ordinary course of events, I have no doubt that an [engineer]
engaged by [the employer] would not owe a duty of care (at least in
relation to economic loss) to tendering contractors even though the latter
had been supplied by the [engineer] with tender information, drawings
and specification upon which to base their tenders. The successful
tenderer would be considered to have taken the risk in respect of that
information. It is very common for there to be oral and written pre-
contract exchanges between the [engineer] and the [contractor] in
connection with the tender. [Engineers] would, I suspect, be surprised
and not a little concerned, if it was established that they owe duties of
care in effect in the context of preventing contractors under-pricing
building jobs, except possibly in exceptional circumstances.
64

The court then determined that there was no material reliance by the contractor
on the engineers relevant design statements during the tender period. This
was, however, very much dependent upon the commercial, contractual and
factual context under consideration.
65


62 This is a claim for negligent misstatement, the foundation for which cause of action is
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL).
63 Galliford Try Infrastructure Ltd v Mott MacDonald Ltd [2008] EWHC 1570 (TCC).
64 Galliford Try, note 63, paragraph [315].
65 Galliford Try, note 63, paragraph [316].

15
This argument has also been advanced in other common law jurisdictions with
mixed degrees of success. In Edgeworth Construction Ltd v ND Lea &
Associates Ltd,
66
the Supreme Court of Canada unanimously determined, on a
pre-trial motion, that the engineer did owe the contractor a duty of care in
relation to design information incorporated into the tender package for a
highway project. The court was of the view that the pleaded facts established
a prima facie cause of action for negligent misstatement against the engineer
and the contractual matrix did not negate the imposition of tortious liability.
Nor did policy considerations. In fact, the court considered that as a matter of
policy, good practical and economic sense required that the responsibility for
the adequacy of the design be placed on the shoulders of the [engineer],
assuming reasonable reliance and barring disclaimers.
67

The opposite outcome arose in R M Turton & Co Ltd v Kerslake & Partners,
68

where the Court of Appeal of New Zealand held, by a majority, that the
engineer did not owe a duty of care to the contractor in circumstances where
the engineers specification provided for certain heat pumps to achieve a
certain standard of performance. It subsequently transpired that those heat
pumps could not achieve that standard. Henry and Keith JJ considered that the
duty of care contended by the contractor would cut across and be inconsistent
with the contractual matrix under consideration, which included carefully
defined liability for the engineer under the consultancy agreement. In
reaching their decision, the majority judges were not swayed by any policy
considerations, in particular, that the effect was that a contractor may be
required to review the professional accuracy of plans and specifications.
69

They majority concluded that they had a measure of real concern in endorsing
what could be construed as a general principle, namely that in a building
contract situation, an architect or engineer will be liable in tort to contractors
and subcontractors for negligence in design or specification.
70

Hence, whilst there might be grounds to make out this tortious argument based
upon the facts under consideration, the tide seems to be against the contractor,
particularly if the engineer has included a disclaimer on its design and has
incorporated a limitation of liability in the consultancy agreement.
This discussion demonstrates the difficult position in which a contractor can
find itself when left shouldering the buildability design risk: it is very difficult
for the contractor to successfully advance alternative arguments to seek to
recover its losses arising out of buildability design deficiencies.

66 Edgeworth Construction Ltd v ND Lea & Associates Ltd [1993] 3 SCR 206.
67 Edgeworth Construction, note 66, page 5.
68 R M Turton & Co Ltd v Kerslake & Partners [2000] NZCA 115, [2000] 3 NZLR 406.
69 Turton v Kerslake, note 68, paragraph [36]. It should be noted that Thomas J dissented,
finding in favour of a duty of care being owed by the engineer to the contractor. The
judge focussed on policy considerations and stated that it is entirely unrealistic today to
expect a tenderer to independently check the engineers design or to ask the employer to
protect the contractor from buildability design deficiencies: paragraphs [122]-[133].
70 Turton v Kerslake, note 68, paragraph [36].

16
5 Conclusions
The allocation of the buildability design risk is an issue to which consideration
ought to be given by all players involved in a project procured on a traditional
build basis particularly the contractor. As demonstrated by an analysis of
common law case law and the Red Book, the contractor may find itself
bearing this risk and without recourse for its losses even if the buildability
design deficiency was a product of the engineers negligent design.
It is suggested that the contractor therefore needs to give some proactive
thought to possible ways that it might stave off the implications of buildability
design deficiencies. To start with, it can try to negotiate a contractual risk
profile where the employer is responsible for the buildability design risk.
Another alternative might be for the contractor to seek the novation of the
consultancy agreement, with retrospective operation,
71
to ensure that it has
contractual recourse against the engineer if they are the culprit for the
problem. However, even if the engineer and the employer agree (which seems
unlikely from a commercial perspective), the employer may require the
contractor to take on the fitness for purpose design risk, converting the
traditional build contract into a design and build contract, which the contractor
may not find satisfactory from a risk profile perspective. As a last ditch effort,
the contractor may consider employing its own design resources to peer-
review the engineers design or procuring liquidated damages insurance to
protect itself from any critical delay arising out of buildability design
deficiencies.
Even if achievable, each of these measures will inevitably add considerable
cost to the contractors tender price and therefore its prospects of being
awarded the construction contract, unless each of the tenderers in the running
is cognisant of, and takes measures to protect itself from, the buildability
design risk. However, this must be weighed up against the risk that a
buildability design deficiency may arise which has significant time and cost
implications, with the contractor, like the former Blackfriars Bridge builder,
left holding the can.

Kim Rosenberg is a Senior Associate at Freshfields Bruckhaus Deringer
LLP in London.

Kim Rosenberg and Society of Construction Law 2012
The views expressed by the author in this paper are hers alone, and do not
necessarily represent the views of the Society of Construction Law or the editors.
Neither the author, the Society, nor the editors can accept any liability in respect of
any use to which this paper or any information or views expressed in it may be put,
whether arising through negligence or otherwise.

71 To overcome Blyth & Blyth Ltd v Carillion Construction Ltd (2001) 79 ConLR 142 (Ct
of Session, Outer House).
APPENDIX
Relevant Provisions of the FIDIC Red Book
72


1. GENERAL PROVISIONS

1.9 Delayed Drawings or Instructions
The contractor shall give notice to the engineer whenever the Works are likely to be
delayed or disrupted if any necessary drawing or instruction is not issued to the
contractor within a particular time, which shall be reasonable. The notice shall
include details of the necessary drawing or instruction, details of why and by when it
should be issued, and details of the nature and amount of the delay or disruption
likely to be suffered if it is late.

3. THE ENGINEER

3.3 Instructions of the engineer
The engineer may issue to the contractor (at any time) instructions and additional or
modified Drawings which may be necessary for the execution of the Works and the
remedying of any defects, all in accordance with the Contract. The contractor shall
only take instructions from the engineer, or from an assistant to whom the appropriate
authority has been delegated under this Clause. If an instruction constitutes a
Variation, Clause 13 [Variations and Adjustments] shall apply.
The contractor shall comply with the instructions given by the engineer or delegated
assistant, on any matter related to the Contract. Whenever practicable, their
instructions shall be given in writing. If the engineer or a delegated assistant:
(a) gives an oral instruction,
(b) receives a written confirmation of the instruction, from (or on behalf of) the
contractor, within two working days after giving the instruction, and
(c) does not reply by issuing a written rejection and/or instruction within two
working days after receiving the confirmation,
then the confirmation shall constitute the written instruction of the engineer or
delegated assistant (as the case may be).

4. THE CONTRACTOR
4.1 contractors General Obligations
The contractor shall design (to the extent specified in the Contract), execute and
complete the Works in accordance with the Contract and with the engineers
instructions, and shall remedy any defects in the Works.
The contractor shall provide the Plant and contractors Documents specified in the
Contract, and all contractors Personnel, Goods, consumables and other things and

72 The Red Book: note 9. Reproduced with the kind permission of the Fdration
Internationale des Ingnieurs-Conseils (International Federation of Consulting
Engineers).

18
services, whether of a temporary or permanent nature, required in and for this design,
execution, completion and remedying of defects.
The contractor shall be responsible for the adequacy, stability and safety of all Site
operations and of all methods of construction. Except to the extent specified in the
Contract, the contractor (i) shall be responsible for all contractors Documents,
Temporary Works, and such design of each item of Plant and Materials as is required
for the item to be in accordance with the Contract, and (ii) shall not otherwise be
responsible for the design or specification of the Permanent Works.
The contractor shall, whenever required by the engineer, submit details of the
arrangements and methods which the contractor proposes to adopt for the execution
of the Works. No significant alteration to these arrangements and methods shall be
made without this having previously been notified to the engineer.
If the Contract specifies that the contractor shall design any part of the Permanent
Works, then unless otherwise stated in the Particular Conditions:
(a) the contractor shall submit to the engineer the contractors Documents for this
part in accordance with the procedures specified in the Contract;
(b) these contractors Documents shall be in accordance with the Specification and
Drawings, shall be written in the language for communications defined in Sub-
Clause 1.4 [Law and Language], and shall include additional information
required by the engineer to add to the Drawings for co-ordination of each
Partys designs;
(c) the contractor shall be responsible for this part and it shall, when the Works are
completed, be fit for such purposes for which the part is intended as are
specified in the Contract; and
(d) prior to the commencement of the Tests on Completion, the contractor shall
submit to the engineer the as-built documents and operation and maintenance
manuals in accordance with the Specification and in sufficient detail for the
employer to operate, maintain, dismantle, reassemble, adjust and repair this
part of the Works. Such part shall not be considered to be completed for the
purposes of taking-over under Sub-Clause 10.1 [Taking Over of the Works and
Sections] until these documents and manuals have been submitted to the
engineer.

4.12 Unforeseeable Physical Conditions
In this Sub-Clause, physical conditions means natural physical conditions and man-
made and other physical obstructions and pollutants, which the contractor encounters
at the Site when executing the Works, including sub-surface and hydrological
conditions but excluding climatic conditions.
If the contractor encounters adverse physical conditions which he considers to have
been Unforeseeable, the contractor shall give notice to the engineer as soon as
practicable.
This notice shall describe the physical conditions, so that they can be inspected by the
engineer, and shall set out the reasons why the contractor considers them to be
Unforeseeable. The contractor shall continue executing the Works, using such proper
and reasonable measures as are appropriate for the physical conditions, and shall
comply with any instructions which the engineer may give. If an instruction
constitutes a Variation, Clause 13 [Variations and Adjustments] shall apply.
If and to the extent that the contractor encounters physical conditions which are
Unforeseeable, gives such a notice, and suffers delay and/or incurs Cost due to these

19
conditions, the contractor shall be entitled subject to Sub-Clause 20.1 [contractors
Claims] to:
(a) an extension of time for any such delay, if completion is or will be delayed,
under Sub-Clause 8.4 [Extension of Time for Completion]; and
(b) payment of any such Cost, which shall be included in the Contract Price.
After receiving such notice and inspecting and/or investigating these physical
conditions, the engineer shall proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine (i) whether and (if so) to what extent these
physical conditions were Unforeseeable, and (ii) the matters described in sub-
paragraphs (a) and (b) above related to this extent.
However, before additional Cost is finally agreed or determined under sub-
paragraph (ii), the engineer may also review whether other physical conditions in
similar parts of the Works (if any) were more favourable than could reasonably have
been foreseen when the Contactor submitted the Tender. If and to the extent that
these more favourable conditions were encountered, the engineer may proceed in
accordance with Sub-Clause 3.5 [Determinations] to agree or determine the
reductions in Cost which were due to these conditions, which may be included (as
deductions) in the Contract Price and Payment Certificates. However, the net effect
of all adjustments under sub-paragraph (b) and all these reductions, for all the
physical conditions encountered in similar parts of the Works, shall not result in a net
reduction in the Contract Price.
The engineer may take account of any evidence of the physical conditions foreseen
by the contractor when submitting the Tender, which may be made available by the
Contactor, but shall not be bound by any such evidence.

8. COMMENCEMENT, DELAYS AND SUSPENSION

8.4 Extension of Time for Completion
The contractor shall be entitled subject to Sub-Clause 20.1 [contractors Claims] to
an extension of the Time for Completion if and to the extent that completion for the
purposes of Sub-Clause 10.1 [Taking Over of the Works and Sections] is or will be
delayed by any of the following causes:
(a) a Variation (unless an adjustment to the Time for Completion has been agreed
under Sub-Clause 13.3 [Variation Procedure] or other substantial change in the
quantity of an item of work included in the Contract,
(b) a cause of delay giving an entitlement to extension of time under a Sub-Clause
of these Conditions,
(c) exceptionally adverse climatic conditions,
(d) unforeseeable shortages in the availability of personnel or Goods caused by
epidemic or governmental actions, or
(e) any delay, impediment or prevention caused by or attributable to the employer,
the employers Personnel, or the employers other contractors on the Site.
12. MEASUREMENT AND EVALUATION
12. 1 Works to be Measured
The Works shall be measured, and valued for payment, in accordance with this
Clause.

20
Whenever the engineer requires any part of the Works to be measured, reasonable
notice shall be given to the contractors Representative, who shall:
(a) promptly either attend or send another qualified representative to assist the
engineer in making the measurement, and
(b) supply any particulars requested by the engineer.
If the contractor fails to attend or send a representative, the measurement made by (or
on behalf of) the engineer shall be accepted as accurate.
Except as otherwise stated in the Contract, wherever any Permanent Works are to be
measured from records, these shall be prepared by the engineer. The contractor shall,
as and when requested, attend to examine and agree the records with the engineer,
and shall sign the same when agreed. If the contractor does not attend, the records
shall be accepted as accurate.
If the contractor examines and disagrees the records, and/or does not sign them as
agreed, then the contractor shall give notice to the engineer of the respects in which
the records are asserted to be inaccurate. After receiving this notice, the engineer
shall review the records and either confirm or vary them. If the contractor does not so
give notice to the engineer within 14 days after being requested to examine the
records, they shall be accepted as accurate.

12. 3 Evaluation
Except as otherwise stated in the Contract, the engineer shall proceed in accordance
with Sub-Clause 3.5 [Determinations] to agree or determine the Contract Price by
evaluating each item of work, applying the measurement agreed or determined in
accordance with the above Sub-Clauses 12.1 and 12.2 and the appropriate rate or
price for the item.
For each item of work, the appropriate rate or price for the item shall be the rate or
price specified for such item in the Contact or, if there is no such item, specified for
similar work. However, a new rate or price shall be appropriate for an item of work
if:
(a) (i) the measured quantity of the item is changed by more than 10% from the
quantity of this item in the Bill of Quantities or other Schedule,
(ii) this change in quantity multiplied by such specified rate for this item
exceeds 0.01 % of the Accepted Contract Amount,
(iii) this change in quantity directly changes the Cost per unit quantity of this
item by more than 1%, and
(iv) this item is not specified in the Contract as a fixed rate item;
or
(b) (i) the work is instructed under Clause 13 [Variations and Adjustments],
(ii) no rate or price is specified in the Contract for this item, and
(iii) no specified rate or price is appropriate because the item of work is not
of similar character, or is not executed under similar conditions, as any
item in the Contract.
Each new rate or price shall be derived from any relevant rates or prices in the
Contract, with reasonable adjustments to take account of the matters described in sub-
paragraph (a) and/or (b), as applicable. If no rates or prices are relevant for the
derivation of a new rate or price, it shall be derived from the reasonable Cost of
executing the work, together with reasonable profit, taking account of any other
relevant matters.

21
Until such time as an appropriate rate or price is agreed or determined, the engineer
shall determine a provisional rate or price for the purposes of Interim Payment
Certificates.

13. VARIATION AND ADJUSTMENTS
13. 1 Right to Vary
Variations may be initiated by the engineer at any time prior to issuing the Taking-
Over Certificate for the Works, either by an instruction or by a request for the
contractor to submit a proposal.
The contractor shall execute and be bound by each Variation, unless the contractor
promptly gives notice to the engineer stating (with supporting particulars) that the
contractor cannot readily obtain the Goods required for the Variation. Upon
receiving this notice, the engineer shall cancel, confirm or vary the instruction.
Each Variation may include:
(a) changes to the quantities of any item of work included in the Contract
(however, such changes do not necessarily constitute a Variation),
(b) changes to the quality and other characteristics of any item of work,
(c) changes to the levels, positions and/or dimensions of any part of the Works,
(d) omission of any work unless it is to be carried out by others,
(e) any additional work, Plant, Materials or services necessary for the Permanent
Works, including any associated Tests on Completion, boreholes and other
testing and exploratory work, or
(f) changes to the sequence or timing of the execution of the Works.
The contractor shall not make any alteration and/or modification of the Permanent
Works, unless and until the engineer instructs or approves a Variation.
13.2 Value engineering
The contractor may, at any time, submit to the engineer a written proposal which (in
the contractors opinion) will, if adopted, (i) accelerate completion, (ii) reduce the
cost to the employer of executing, maintaining or operating the Works, (iii) improve
the efficiency or value to the employer of the completed Works, or (iv) otherwise be
of benefit to the employer.
The proposal shall be prepared at the cost of the contractor and shall include the items
listed in Sub-Clause 13.3 [Variation Procedure].
If a proposal, which is approved by the engineer, includes a change in the design of
part of the Permanent Works, then unless otherwise agreed by both Parties:
(a) the contractor shall design this part,
(b) sub-paragraphs (a) to (d) of Sub-Clause 4.1 [contractors General Obligations]
shall apply, and
(c) if this change results in a reduction in the contract value of this part, the
engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to
agree or determine a fee, which shall be included in the Contract Price. This
fee shall be half (50%) of the difference between the following amounts:
(i) such reduction in contract value, resulting from the change, excluding
adjustments under Sub-Clause 13.7 [Adjustments for Changes in Legislation]
and Sub-Clause 13.8 [Adjustments for Changes in Cost], and
(ii) the reduction (if any) in the value to the employer of the varied works, taking
account of any reductions in quality, anticipated life or operational efficiencies.

22
However, if amount (i) is less than amount (ii), there shall not be a fee.
13. 3 Variation Procedure
If the engineer requests a proposal, prior to instructing a Variation, the contractor
shall respond in writing as soon as practicable, either by giving reasons why he
cannot comply (if this is the case) or by submitting:
(a) a description of the proposed work to be performed and a programme for its
execution,
(b) the contractors proposal for any necessary modifications to the programme
according to Sub-Clause 8. 3 [Programme] and to the Time for Completion,
and
(c) the contractors proposal for evaluation of the Variation.
The engineer shall, as soon as practicable after receiving such proposal (under Sub-
Clause 13.2 [Value engineering] or otherwise), respond with approval, disapproval or
comments. The contractor shall not delay any work whilst awaiting a response.
Each instruction to execute a Variation, with any requirements for the recording of
Costs, shall be issued by the engineer to the contractor, who shall acknowledge
receipt.
Each Variation shall be evaluated in accordance with Clause 12 [Measurement and
Evaluation], unless the engineer instructs or approves otherwise in accordance with
this Clause.

20. CLAIM, DISPUTES AND ARBITRATION
20. 1 contractors Claims
If the contractor considers himself to be entitled to any extension of the Time for
Completion and/or any additional payment, under any Clause of these Conditions or
otherwise in connection with the Contract, the contractor shall give notice to the
engineer, describing the event or circumstance giving rise to the claim. The notice
shall be given as soon as practicable, and not later than 28 days after the contractor
became aware, or should have become aware, of the event or circumstance.
If the contractor fails to give notice of a claim within such period of 28 days, the
Time for Completion shall not be extended, the contractor shall not be entitled to
additional payment, and the employer shall be discharged from all liability in
connection with the claim. Otherwise, the following provisions of this Sub-Clause
shall apply.
The contractor shall also submit any other notices which are required by the Contract,
and supporting particulars for the claim, all as relevant to such event or circumstance.
The contractor shall keep such contemporary records as may be necessary to
substantiate any claim, either on the Site or at another location acceptable to the
engineer. Without admitting the employers liability, the engineer may, after
receiving any notice under this Sub-Clause, monitor the record-keeping and/or
instruct the contractor to keep further contemporary records. The contractor shall
permit the engineer to inspect all these records, and shall (if instructed) submit copies
to the engineer.
Within 42 days after the contractor became aware (or should have become aware) of
the event or circumstance giving rise to the claim, or within such other period as may
be proposed by the contractor and approved by the engineer, the contractor shall send
to the engineer a fully detailed claim which includes full supporting particulars of the

23
basis of the claim and of the extension of time and/or additional payment claimed. If
the event or circumstance giving rise to the claim has a continuing effect:
(a) this fully detailed claim shall be considered as interim;
(b) the contractor shall send further interim claims at monthly intervals, giving the
accumulated delay and/or amount claimed, and such further particulars as the
engineer may reasonably require; and
(c) the contractor shall send a final claim within 28 days after the end of the effects
resulting from the event or circumstance, or within such other period as may be
proposed by the contractor and approved by the engineer.
Within 42 days after receiving a claim or any further particulars supporting a previous
claim, or within such other period as may be proposed by the engineer and approved
by the contractor, the engineer shall respond with approval, or with disapproval and
detailed comments. He may also request any necessary further particulars, but shall
nevertheless give his response on the principles of the claim within such time.
Each Payment Certificate shall include such amounts for any claim as have been
reasonably substantiated as due under the relevant provision of the Contract. Unless
and until the particulars supplied are sufficient to substantiate the whole of the claim,
the contractor shall only be entitled to payment for such part of the claim as he has
been able to substantiate.
The engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to
agree or determine (i) the extension (if any) of the Time for Completion (before or
after its expiry) in accordance with Sub-Clause 8.4 [Extension of Time for
Completion], and/or (ii) the additional payment (if any) to which the contractor is
entitled under the Contract.
The requirements of this Sub-Clause are in addition to those of any other Sub-Clause
which may apply to a claim. If the contractor fails to comply with this or another
Sub-Clause in relation to any claim, any extension of time and/or additional payment
shall take account of the extent (if any) to which the failure has prevented or
prejudiced proper investigation of the claim, unless the claim is excluded under the
second paragraph of this Sub-Clause.

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The object of the Society
is to promote the study and understanding of
construction law amongst all those involved
in the construction industry


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Jill Ward
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