Practical Law

On 4th March 2014 I attended a presentation at the Society of Construction Law (SCL) by John Uff QC and John Banyard from the drafting committee concerning the re-launch of the ICC Infrastructure Conditions of Contract.

Originally, these were the ICE Conditions of Contract familiar to many generations of civil engineers. However, they have had a chequered history of late having been discontinued by the ICE in favour of NEC in 2010. Subsequently, ACE and CECA took them over and in 2011 they issued a suite known as the ICC Infrastructure Conditions of Contract. However, they remained substantially in the same form as the original ICE version. Confused?

Re-launch

Well, now we have something rather different because the ICE/ICC conditions have been substantially revamped. The purpose of the talk was to introduce the consultative edition of the new conditions. These were helpfully made available to SCL members and I understand you may request a copy from the ACE or CECA.

John Uff spoke about the genesis of the re-launched conditions and his colleague discussed in more detail the thinking behind some of the revised terms. Assuming the consultative draft is adopted, what will be new?

Shorter and re-focused

The first thing to notice is that there are far fewer clauses in this version. ICE/ICC had 70 clauses and the drafting committee aimed to keep to 20 (although a further four are available by way of supplementary clauses).

The second aim of the drafting committee was to bring together disparate references on various topics into easily locatable individual clauses. An example would be the treatment of risks, which was to be found in several separate clauses in the old version. Now Clause 8 explains which party bears which risk and which risks are shared.

End of remeasurement?

Perhaps the most striking change is to be found at Clause 11.1. This shows that this contract is a lump sum contract rather than a re-measurement contract. In a passage which is starkly at odds with the philosophy of the old conditions, Clause 11.2 states that:

“…quantities set out in the Bill of Quantities are deemed to be Fixed Quantities unless expressly identified therein as subject to re-measurement…”

The thinking behind this radical shift in emphasis is that it should now be possible to produce adequately measured Bills of Quantity at the tender stage so that a subsequent re-measurement is unnecessary.

Sub-contractors

Sub-contracting is, despite the drafting committee’s aim, not dealt with in just one clause but in both Clauses 3 and 7. There are three types of sub-contractor:

• First, those to whom the contractor may sub-contract subject to the engineer’s consent which is not to be unreasonably withheld.
• Second, labour-only subcontractors for which no consent is required.
• Thirdly and finally, (and this was emphasised) there are nominated subcontractors who are identified in the contract as those identified in the contract or those whose employment is instructed by the engineer.

A particular feature of the employment of nominated subcontractors is that, if the contractor fails to prove that they have been paid in accordance with a payment certificate, then the employer may make payment direct to the nominated subcontractor; he can then deduct the relevant amount from sums otherwise payable to the contractor. Rather surprisingly, there is no exception for insolvency of the main contractor, since in this event the pari passu rule might be engaged, which might then defeat the effect of such payment.

Any nominated subcontractor to whom the contractor objects may be employed by the employer as a direct contractor and his work scope will be outside the contract works.

Treatment of risk

Risk is treated in Clause 8 by way of definitions of those risks which are excepted (for which the contractor is not liable), the employer’s or shared. All other risks are borne by the contractor. Two points to note in relation to risk are that:

• The employer bears the risk of physical conditions that could not have been reasonably foreseen by an experienced contractor. This is similar to Clause 12 in the old conditions.
• There is no “sweeper” clause in the definition of either excepted or employer’s risks so that, if the employer commits an act of prevention not provided for in Clause 8 or elsewhere in the contract, then it is likely that time will be put at large.

Disputes: engineer’s decision

Dispute resolution has also been revised so that the engineer’s decision makes (as John Uff said) something of a comeback in Clause 19. It is for the engineer to decide a dispute between the contractor and employer which is referred to him but, before any reference is made, he must have given a determination of the matter which either party seeks to challenge. The process is therefore two-stage. The engineer’s decision is (temporarily) binding on the parties unless one of them disputes it within 28 days. Even then the decision remains binding and may be enforced. If not disputed, if appears to become final.

Whether or not a dispute has been referred to the engineer, either party may require a dispute to be referred to adjudication. The adjudicator’s decision is also binding on the parties but may be revised by arbitration or litigation if referred within 28 days. Otherwise, it would appear that it also becomes finally binding.

It is not clear whether a “dispute” can arise before an engineer has made a determination; what would be the position if he failed to make a determination upon a matter being referred to him? This seems to be a gap in the drafting.

A nod to the NEC?

A phrase not previously seen in an ICE/ICC contract is found at Clause 6 where the contractor, employer and engineer are required to collaborate in a spirit of trust and mutual support in the interest of the timely, economic and successful completion of the works. Further, provision is made for early warning notices of any matter likely to affect design, delay or cost. After such notice the engineer is to arrange a meeting of “appropriate authorised persons” and they may reach an agreement as to necessary measures which may include payment or extension of time. Otherwise, the engineer is to issue instructions as appropriate.

Thoughts for the future

The drafting committee are to be praised for having managed to condense the ICE/ICC conditions into a shorter and more manageable format. However, the inclusion of some new concepts and different approaches to the contents of the contract has led to some potential for difficulty. In particular, the interpretation of the word “dispute” in Clause 19 and the lack of a “sweeper clause” in Clause 8.

The most radical move in the contract is to abandon the former provision for re-measurement so that anyone taking on this contract on a lump sum basis will need to provide definite quantities at the outset or accept that any revision necessitates a Variation.

Finally, the speakers stressed that this was a contract for infrastructure not buildings. In this regard, it seems likely that its main rival will be the NEC. Some features of that contract have also been incorporated into the new drafting, in particular the duty to collaborate, and this may lead to more case law similar to the recent Compass Group case on the interpretation of this and similar phrases.