Government outsources “dealing with protestors”

national | miscellaneous | opinion/analysis Tuesday April 17, 2007 22:40 by El Bull

In February of this year, the government released new forms of contract to be used for the procurement of public sector construction projects. Designed to deliver cost certainty, the new forms of contract transfer considerable risk to the Contractor. It is widely accepted that one of the results of these controversial new contracts will actually be higher construction costs, albeit with certainty about the (higher) contract prices. However, there are some other very significant implications of these new contracts, in particular with regard to how protestors will be treated on construction sites in the future.

Earlier on this year, the government brought into force, without any attendant fanfare or such publicity seeking measures, a brand new form of contract for use on public procurement contracts.

Nothing too exciting here, it might appear. Why shouldn’t the state update its procedures for procuring public projects, with the stated aim of achieving price certainty? After all, if the government is spending billions of our euros, shouldn’t they make sure that they are using the best and most up to date documents & contracts available? Especially given that the Contractors building these projects are creaming it in with massive cost over-runs. Well, just on those issues, there are a few points worth noting:

> The contracts that were in place heretofore for public procurement contracts were long established and have been tried and tested. For example, the “Conditions of Contract for use in connection with Works of Civil Engineering Construction" (third edition) were adopted by the Institution of Engineers of Ireland in 1980 and have had just about every clause tested in the courts, so there was a high degree of legal certainty attached to contracts administered under these conditions.

> Other conditions that have been used in Ireland in recent times, such as the FIDIC suite of contracts, are in use internationally and have the advantage of offering varying degrees of price certainty.

> The introduction of the new contracts this year achieved the remarkable feat of uniting Contractors, Architects, Engineers, Surveyors and their respective organisations in opposition to their introduction. There is unanimous dissatisfaction throughout the industry with these contracts, which are being pushed through by the Dept. of Finance.

But that’s all incidental to the point of this article. I want to discuss a couple of interesting clauses of these new contracts, which haven’t had much of an airing to date. Just before I do, I’ll provide a few more introductory comments on these contracts.

The new Forms of Construction Contracts for Public Works, to give this suite of documents their full title, have been in effect since the 19th February 2007. Their implementation comes on the back of almost 3 years of planning and consultation. They were brought in as a value for money initiative, to address cost over-runs.

The key element of these contracts is that Contractors submitting a tender for a public works contract will have to submit a fixed price lump sum tender. In order to achieve this, it is necessary to clearly set out which risks are assumed by the client and which risks are assumed by the Contractor. One of the most controversial features of these contracts is that a huge amount of risk has been transferred to the Contractor. There is a strong consensus throughout the industry that the government has gone too far and has transferred too much risk to the Contractor. It is widely acknowledged that one of the results of this inappropriate transfer of risks is going to be more expensive contract prices. Isn’t that some irony – the government is getting price certainty, only it’s going to be a higher price! This is almost inevitable, because Contractors putting together a tender for a project will have to include for costs associated with a host of different costs, which may or may not arise in the contract.

There is a very interesting clause tucked away in these contracts. Clause 7.2 transfers all risks associated with Trespassers, onto the Contractor, viz. “…the Contractor shall be responsible for activities of trespassers, protesters and others… on the site”. The implications of this clause are massive.

Picture your typical motorway project going through a woodland that eco-protestors want to protect (not an unknown situation in Ireland). A few dozen environmentalists up a tree halt work. However, it is no longer the government footing the bill (which can run up to millions of euro in no time at all). It’s the Contractor who is responsible for such costs. Now, the question is, how will the Contractor deal with such trespasses onto his site? Methinks that Contractors will be much more sensitive to the costs involved that the government has been previously, and much less accommodating of protestors on their sites.

Another risk that is transferred to the Contractor relates to Archaeological Objects, viz. “If any fossils, coins, antiquities, monuments… are discovered… the Contractor shall not disturb them, but shall take all necessary steps to preserve them, and shall promptly notify the Employers Representative [and comply with any instructions]”. Just picture it – the Contractor is now responsible for preserving any archaeological monument that he comes across during his works. Anyone know the cost of dealing with all those Vikings uncovered during the construction of the Waterford ring road? Anyone think a Contractor will do his best to preserve such findings, in the event of such a discovery under the new contracts?

In conclusion, I would like to point out that my comments are not intended to reflect on the character or motivation of Contractors; rather, they are observations on the financial drivers & motivators that this new suite of contracts gives rise to.