ECC Option E Reactive Contract. Contractor began work, a couple of days after this they arrived at site one morning to find it had been severely flooded overnight. Repairs were required to items of contractor owned equipment (tower lights, excavator, welfare unit) damaged by the flood water.
The contract has the phrase “If the Employer is to provide any of the insurances stated in the Insurance Table” followed by a blank space, suggesting the Employer is NOT providing any insurances?
Therefore the Contractor should supply the insurances stated in the Insurance Table in Clause 84.2 including “Loss or damage to Equipment - insured up to the replacement cost”. However I notice that above the table the wording “provide cover for events which are at the Contractor’s risk”.
Weather Clause 60.1(13) has NOT been deleted from the contract. This makes me think that flooding (as a result of heavy rainfall) is an Employer risk and the repair costs should be paid by the Employer to the Contractor. The Contractor has applied for the repair costs in their Application for Payment and provided invoices as substantiation to the cost - so assume they have not contacted their insurers and expect to be paid the repair costs by the Employer.
Any views/help greatly appreciated.
I think you are right to look at Section 8 of the Core Clauses for matters of insurance. The relevant clauses are clause 80.1 and clause 81.1. Clause 80.1 lists the Employer’s risks under the contract and clause 81.1 confirms that any risk not covered by clause 80.1 is a Contractor’s risk. So in terms of insurance, if this particular risk is not explicitly listed as an Employer’s risk in your contract, then I think the flooding damage is a Contractor’s risk.
For the amount to be paid you should refer to Core Clause 50.2, Option E Clauses 11.2(29), 11.2(23) and the Schedule of Cost Components clause 22 and clause 7. In my interpretation of these clauses the cost for repairs is not a Defined Cost so it is not included in the Price of Work Done to Date or the amount due. And if any other People, Equipment, Materials costs in the Afp are related to the insurable event then these costs should actually be deducted from cost, as per Schedule of Cost Components clause 7.
Since this is an Option E contract, I don’t think that a clause 60.1(13) compensation event has any effect on the amount due to the Contractor, because the Prices are simply the Defined Cost plus the Fee. However the Contractor may well be entitled some extra time.
In summary, I think the flooding damage is a Contractor’s risk, and therefore he is incorrect to include the repair costs in his Application for Payment.
I hope this helps. If you have any further questions please don’t hesitate to let me know.