In today’s very connected world, fear and anxiety may run rampant and a myopic certainty for those who fail to foresee signs of improvisation, adaption and diversification. As evident it has been, the outbreak of #COVID-19 has been termed a fundamental force of nature, raising the buzz word of #Force #Majeure around a lot. This fundamental force of nature, like any natural disaster has displayed a destructive and unforgiving situation for the exposed nations, communities and organizations. So, taking Que from occurrence of such Force Majeure situation, the key foresight for a nation, community and organization is to improvise, adapt and diversify.
Taking the context forward, we shall focus on the #FIDIC suites of Contract. The very reason for its existence is to provide the ability to its takers is to provide the above three key strengths. In this article, I have made an attempt establish how FIDIC helps a project to absorb and can prepare for such Force Majeure events and to establish that all costs and time incurred by the effected party(s) in overcoming the Force Majeure event is a value added to the project, therefore shall not go in vain. We must note that Clause 19 of the Contract only highlights the detailed deliberation of the Force Majeure event and is armed to empower the affected parties only in terms of extended time in the best-case scenario. therefore, the effected parties must have the know how and foresight to ensure that any exceptional measures undertaken, shall be compensated as per the terms of the Contract.
All formats of FIDIC, which are called the General Conditions of Contact (in any project) have branched out from the #FIDIC #Red version. FIDIC establishes certain obligations for the Contractor to establish and maintain readiness of Health, safety and sensitization of fronts and operations at site by means of Clause 4.8, Clause 4.12, Clause 4.18, Clause 6.6, Clause 6.7 etc to name a few. The Employers/ Financers for the project may further strengthen and allot payment for the Contractor to ensure implementation of these measures. Nonetheless, the Contractor has to consider the cost implications for implementation and obligations for these measures. It is in Contractor’s benefit to ascertain and put a cost component for implementation. Even proposing a mode of measurement and payment as per the terms of Clause 12, at the bidding stage of the project or during ongoing operations shall benefit the Contractor. However, such proposals and introduction of works as per Clause 12, the Contractor shall be able to justify the permanent nature of these works and define it as a necessary value addition to the envisaged works, during and after commissioning of the work. The Employer can also introduce provisions of partial payment against controlled supply and inventory of critical material at site. these measures shall avoid any ambiguity and reduce uncertainty for the progress of the project.
It shall also be noted that these measures might have been taken by the Contractor in the manner that such measures are beyond the envisaged expertise of the Contractor. Therefore, the Contractor shall ensure that such measures are implemented citing instructions from empowered governing authorities or from the Employer. Implementation of instructions shall picture into a possible window for payment to Contractor vide the norms of Clause 13 of the General Conditions of Contract.
Introduction of these measures and implementation of these measures shall benefit the project and stakeholders in following manner:
Favorable insurance terms ad guarantees
Reduction in cost of safety
Heightened scrutiny of health and hygiene of manpower deployed at site
Ensured access and possession of site
Reduction in wastage incurred by the Contractor
The Employer may present a certain obligation as a responsibility. It is unto our wits to make the Employer accountable and ensure payment for the works are done. FIDIC always encourages the exercising authorities to practice fair determination of works. Implementation of these measures can help Employer ensure better loan grants from Global Financing Banks such as Asian Development Bank, World Bank, Japan International Cooperation Agency and Asian Infrastructure Investment Bank to name a few. These measure collectively may cost to the project a (1-3) % of the project value.
It is a concern to note that the Contractor may entail several measures applicable as per above-mentioned terms of the Contract, however these costs shall not be considered as expenses. All stakeholders shall note that it is in the benefit of the Employer, communities and the market linked to the project that the manpower deployed in these projects are able to perform as per the Contract. FIDIC terms and conditions provide numerous opportunities to the Contractor to ensure that all measures taken by him, even in the extraordinary conditions, shall do so with the confidence that these costs are applicable to be paid for and has duly benefited the Employer or the End User.
Conclusively, we shall not restrict ourselves to expressed terms of Contract on Force Majeure and shall explore all opportunities to ensure that every penny invested on genuine effort from a proactive Contractor to sustain the progress of works shall be a value addition as well. I welcome your opinions, interpretation, take aways and comments on this read through. Happy hunting!
P.S.: This article was first posted by the Contributor on Linkedin.com
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