Risk Sharing Principles in Tunnel Contracts

"INTRODUCTION Tunneling and underground excavation is related to handling of uncertainties, risks associated with geological conditions are significant and ‘unexpected geological conditions’ often claimed. This fact was brought to the table long ago, and ITA (the International Tunnelling and Underground Space Association) published its 25 Recommendations on Contractual Sharing of Risks in 1988 (Ref. 1). This public-cation constitutes an important asset to the tunneling industry in terms of being a guideline for those working with contractual issues, even today almost 30 years after being published. A more recent document is the ITIG code of practice for risk management of tunnel works from 2015 (Ref. 9). Various countries or geographical regions have their own view and tradition on risk sharing and tunnel contracts. In Scandinavia unit rates contracts are most commonly used with bid-build model, it shares risk between owner and contractor, owner retains the risk for geological conditions while contractor carries risk for performance efficiency. Rock strengthening is determined assessing rock mass quality encountered at tunnel face. Grouting is applied to stem water. Actual quantities may differ from the contract’s BoQ but a flexible contract with remuneration is installed to enable adjustment of actual quantities. Variations of quantities involve a clause to adjust construction time. Unit price contracts deals with expected and foreseen still ‘unexpected geological conditions’, if the ‘unexpected’ element results in variations in quantities. Work activities have quantities and ‘standard capacities’ for regulation of construction time. Variations in quantities are expected in tunnelling and hardly deserve the term ‘unexpected’. If truly unforeseen geological features necessitate work not included in the BoQ, then the contract must be supplemented and can be said to be inappropriate. Fixed price contracts may not provide the intended predictable cost and is as such also inappropriate in the view of a risk sharing principle, once the geological baseline proves to be incorrect. ‘Adjustable fixed price’ contracts, combining unit rate and fixed price, may prove suitable."