Page 256 - Sustainable On-Site CHP Systems Design, Construction, and Operations

CHP Construction 229

In absence of a risk allocating provision for such unforeseen conditions, prospective
contractors will, quite justifiably, increase the amount of their bids to cover possible
costs associated with the contingency of encountering such conditions. Experienced
construction owners will frequently attempt to allocate this risk by including a “differing-
site-conditions” clause in the contract and providing data on subsurface conditions to
prospective contractors.
Under a conventional differing-site-conditions clause, a contractor can generally
recover additional costs incurred due to unforeseen conditions which materially differ
from those shown in the contract documents, such as unexpected underground utilities.
Recovery is also possible where actual conditions are of an unusual nature, differing
materially from those ordinarily encountered on a project like that being constructed.
In the context of a design-build arrangement, the risk of differing site conditions
creates an interesting dilemma. It is often the responsibility of the design professional
to recommend and conduct a prebid site and subsurface investigation. Consequently, if
a design-build contract incorporates the conventional differing site conditions concept,
the design-builder may benefit by conducting an inadequate investigation.
Parties to design-build contracts for construction of energy projects may want to
resolve this dilemma by negotiating a contract provision specifying an economical and
prudent site investigation program to be undertaken by the design-builder. Thereafter,
if actual conditions materially differ from those revealed by the design-builder’s inves-
tigation, the design-builder would be entitled to an equitable adjustment for additional
costs incurred.
Under this proposed arrangement the owner can avoid paying a windfall in the
form of a contingency amount included in the design-builder’s bid to protect against
the possibility of unforeseen conditions which may never materialize. The contractor’s
risk is reduced since it can expect additional compensation if unforeseen conditions are
experienced and, as a result, its overall price should be lower. As an alternative, owners
should consider paying the design-builder to perform a detailed predesign site investi-
gation prior to contracting for design-build services. Owners who insist upon requiring
a design-builder to fully assume the risk of unforeseen conditions should expect to pay
a sizable premium.
Another issue is the potential risk of the presence of contaminated soil or waste
generated from the host facility, particularly if the host is a refinery or user of hazardous
materials. In absence of a specific contract agreement, there is a question as to whether
the presence of waste material would be a differing site condition so as to justify relief
to the contractor. Because of the potential magnitude of dollars associated with a
cleanup plan, the parties should agree who, as between the owner and contractor, will
bear the risks of this cleanup.

Force Majeure
Virtually all modern construction contracts contain provisions which excuse the con-
tractor’s failure to perform where the failure is due to causes beyond its reasonable
control. These are known as force majeure provisions. These provisions specify the
events that are deemed to be beyond the control of the contractor, which will justify
a time extension to the scheduled date of plant completion. Typical force majeure
events may include floods, civil unrest, governmental or military authority take-over,
insurrection, riot, embargoes, strikes, acts of God or the public enemy, or unusually
severe weather.