The Ground Risk and Geotechnical Baseline Reports: A Legal Perspective

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construction equipment in tunnel

The Geotechnical Baseline Report (GBR) is a statement representing the known ground conditions in a project site. When the GBR is part of the contract, it sets the range of adverse physical ground conditions that ought to be provided for and included in the contract price. Conversely, site conditions differing from those considered in the GBR are deemed to be ‘unforeseen’ under the contract and ae carried out at the employer’s risk. Properly drafted GBRs reduce construction costs and set clear terms between the parties in the event of more adverse ground conditions, thus contributing to dispute avoidance.

This paper intends to demonstrate that the incorporation of ground baseline conditions/report in contracts is an effective tool for managing the ground risk in construction projects, for reducing costs and for dispute prevention or settlement.

Allocation of Ground Risk

Under English jurisdiction, the contractor bears the risk of changed ground conditions unless it is otherwise expressly provided for in the contract. The rationale of this common law principle lies in the contract since, where the contractor has undertaken to complete a work and comply with contract drawings and specifications he bears the cost of performing the promises, irrespective of changed conditions, without entitlement to variations. In Thorn v London Corporation, the court dismissed the contractor’s allegation that there would be an implied warranty as to plans and specifications providing the use of caissons that were not buildable due to adverse ground conditions, as ‘although it was the engineer who suggested building those caissons, the builder promised he would’. The court upheld the principle of certainty of price and performance.

In the case Mitsui v Attorney General of Hong Kong under a remeasurement contract where actual quantities were in different proportions from those estimated in the B.o.Q, the judge quoted the definition of ‘variation’ from Hudson’s Building and Engineering Contracts (10th edition) at p. 506 as follows:

‘Works which are not expressly or impliedly included in the original contract and, therefore, are not included in the contract price, are generally termed variations, …’ [emphasis added]

What is foreseen in the contract must be included in the price, but the obligations under changed conditions depend on the contract stipulations and the law governing the contract. Therefore, the first question is what conditions are expressly or impliedly foreseen under the contract.

When the parameters of ground conditions that ought to be foreseen cannot be reasonably obtained by the contractor through his site investigations, the information provided by the employer at tender stage becomes essential to define what is foreseeable under the contract, as shown below.

In the ‘tufa’ case Bacal Construction (Midlands) Ltd. v Northampton Development Corporation, where the employer prepared a report on ground conditions on which the tender price was to be based, an English Court held that ‘there should be an implied term or warranty that the ground conditions would accord with the hypothesis upon which the contractors had been contracted’ and the risk, under differing circumstances, should be borne by the employer. If a ground conditions report is not expressly incorporated in the contract, it is not considered a term of the contract on which rights and obligations are measurable by reference to it, but ‘would require an unambiguous wording to give rise to such a result’ and ‘it does not contain any statement sufficiently definite and unqualified to amount to a representation upon which [the parties](…) could reasonably have relied.’ Under the circumstances, the stringent performance requirements of Thorn v London Corporation apply to the contractor.

In conclusion, since ‘it is legitimate, and commercially desirable, that both parties should be able to measure the risk, and agree the price on the basis of the warranties which have been given and accepted’, data and reports on ground conditions may be considered a term or a warranty when they are expressly incorporated in the contract, as long as there is no uncertain language and there are no waivers or disclaimers.

The Geotechnical Baseline Reports: General Concepts

Geotechnical Baseline Conditions or Report (GBR) is a single ‘contract document containing measurable contractual descriptions of the geotechnical conditions to be anticipated (…) during construction’, (D. Page, 2009). In fact GBR should be included as a representation, and not be merely provided ‘for information’.
The Joint Code of Practice for Risk Management of Tunnel Works (2003) defines Geotechnical Baseline Conditions as follows:

Definitive statements about (…) the ground (…) and groundwater together with geotechnical properties of the ground which serve as the basis for construction Contract tendering purposes and for subsequent application of the contract with respect to the conditions actually encountered during Tunnel Works.

A similar definition is included in A Code of Practice for Risk Management of Tunnel Works, prepared by ITIG in May 2012, which used the term of ‘Ground Reference Conditions’.

The above definitions provide the synthesis of the purposes of GBR, i.e. the site data to be considered and relied upon, a measure of the risks to be included in the contract price, the watershed for risk allocation under the contract, and the basic list of hazards to be considered for ground risk management. Then, the contractor does not need to be predictive and include further contingencies in his price beyond the limit of the conditions defined in the contract baseline.

During construction, the baseline may be compared with actual conditions, in order to determine if and how much these circumstances are more unfavorable than expected, and to evaluate the appropriate compensation.

A connected purpose of GBR is risk management during contract implementation, since it can be used as the starting point to prepare a risk assessment and management plan as far as geotechnical conditions are concerned.

The Geotechnical Baseline Report and Its Place in the Contract

Anything can be expected when dealing with ground conditions, and since contracts cannot specify all future eventualities, they should at least incorporate a contractual mechanism to determine how to deal with them. Furthermore, an undefined scope for ground conditions that are to be expected under the contract is an open door to disputes, and the remedy is finding a way to define the parameters of what is or ought to be included in the contract price.

As such, those conditions should be considered as the basis, or the baseline, for risk evaluation and pricing. In fact, before executing a contract, the tenderer needs to know ‘with a sufficient degree of certainty’ (J. Barber, 1989) the risk that he is going to price, while the employer needs to know what he is going to pay for. Disclosure of the available site data by the employer falls in line with the principle that he has a duty to facilitate rather than prevent the proper performance of the contract.

When the GBR is included in the contract, becoming the contractually accepted interpretation of the site data, the baselines serve as contractual references to establish where conditions encountered during construction that are materially more adverse, onerous and time consuming, may be considered as ‘unforeseen’. Then, the contract should also include a ‘Differing Site Conditions Clause’ (DSC) that allocates the risk of such changed conditions to the employer.

A Critical View of Geotechnical Baseline Reports

The use of a GBR must be associated with express contract provisions to deal with changed conditions, or the parties will face an uncertain recourse to the governing law of the contract to resolve disputes, defeating the purpose of defining both what is considered ‘unforeseeable’ and the remedies available under the contract.

The contents of the GBR should be balanced and realistic, since ‘overly conservative baselines for items such as obstructions (…) can result in overly conservative and costly bids’ (SME, 2008). Over cautiously drafted baselines may cause the Contractor to bear the total responsibility of the ground risk, resulting in a higher bidding price. The contrary would also be deleterious, when an over simplified baseline would absolve the contractor from otherwise foreseeable risks.

Another good reason to give a balanced position to the GBR is that of motivating each party to resolve the difficulties that eventuate during construction within their capability and in the interest of the project that should be completed on time and within the budget.

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The description should be detailed enough to encompass the range of conditions that might occur in a project. On the other hand, a vague or broad description of ground conditions would not eliminate uncertainties on risk allocation but, after any event, it would leave room for its interpretation with inevitable hindsight knowledge. This would create fertile ground for denial of responsibility and disputes, especially when there is an expensive bill to pay as a consequence of adverse ground conditions. Therefore, baselines and DSC should be ‘most clearly and unambiguously expressed’ (W&S Pollock & Co. v McCrae, 1922).

Another controversial point is when the DSC includes terms that are related to performance, e.g. advance rate of excavation, as they may ambiguous and lead to discussions.

If the description of geotechnical conditions in the GBR falls in contradiction with other contract documents, there could be conflicting interpretations and disputes. For example, geotechnical investigations may include many reports that may be difficult to integrate in a single interpretative work. However, this is the very reason for putting the common seal to a single GBR, warranted and relied upon by the parties.

Above all, since GBR is the formal representation of the ground conditions on which the contract price is founded, it should not be manipulated in any direction, to avoid allegations of misstatement or misrepresentation.

It is difficult to write an appropriate GBR linked with DSC that define in clear terms those circumstances that ought to be foreseen and provide a practical mechanism to measure differences, meting out the relevant remedies. A potential weakness of the GBR lies in this very point.

What Should a Geotechnical Baseline Report Include?

The GBR should include in clear terms the results of site investigations, but should also be drafted as a practical mechanism to measure actual conditions and compare them with those presented in the report.
It is impossible to predict with certainty what lies beneath the surface in any given position, unless the investigations are carried out on that very spot. That is the reason why ground conditions are best expressed in terms of characterization and probability.

The GBR should take a practical approach in defining the site conditions; it should focus not only on the ground but also on the method of work. For instance, in tunneling, this document could identify the expected geotechnical classification, the method of classification, and the distribution of the types of rock classes along the tunnel profile. If the method of work is linked to the baseline conditions established in the contract, it becomes evident when changed site conditions lead the parties into a variation.

Geotechnical Baseline Reports and Dispute Resolution

‘… The CIRIA working party recommended that a set of Reference Conditions be established by the engineer and, by discussion with, and modification by the contractor, these to be used as a basis for settlement of disputes’ (J. Baileys, 2007).

Bidders could be required to disclose the parameters used to calculate the bidding/contract price, that become the reference in case of disputes. If the contractor’s concern is that the employer may disclose this information to other tenderers, a means to dispel it is that of depositing the bidding documents as Escrow Bidding Documents, or EBD to be used only when necessary, e.g. in case of disputes. Also employers may fear that ground information is used to the contractor’s advantage. By contrast, the GBR is a document that is known by all and, when used at the bidding stage, places all contenders on level ground, promoting a conscious and keen tender pricing.

As the contract progress unfolds, the parties can measure the difference between the reference conditions included in the GBR and the actual conditions met on the ground. Finally, the GBR can make the parties lay out clear conditions that prevent ‘the “pinch points” that provide fertile ground for the growth of legal risk …’ (Capper, 1994).

Conclusions

The GBR ‘carries clear definition of risks and their allocations’ and ‘contains an effective means to settle disputes as risks materialise’ (H. Tang, 2001). As such, it is an effective tool for the management of differing ground conditions, provided that the GBR is incorporated in the contract as a warranty and without disclaimers.

Finally, since ‘for the success of any construction contract the risk must be acknowledged and clearly allocated’ (CIRIA, 1983), the GBR provides an answer as to what ground conditions are allocated to the contractor, thus contributing to the successful management of a contract.

Eugenio Zoppis is a PhD Researcher at King’s College in London. He has engineering and legal academic background, and has experience as project manager for Salini Impregilo working on major roads, tunnels, and hydroelectric projects.

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