The new millennium has dawned with high hopes for humanity. To day the challenges being faced by humanity are looking toughest because of the increasing needs of the infrastructure especially in developing countries. Tunnels have become integral part of river valley projects, mining, nuclear waste disposal, transportation and defence sectors. In next century, we would be requiring more and more metro tunnels and underground excavation would be needed on one hand to safeguard environment and on the other hand for oil storage and nuclear waste disposal. 

In the historical perspective, we have examples of 2700 years old Siloan tunnel still being used for water supply in Jerusalem. Ajanta and Ellora caves in India date back to 300 BC. In the 19th century, a number of railway tunnels were constructed. Then a number of tunnels associated with hydropower projects and road tunnels came into existence. One obvious question that comes to our mind is what could be the mode of construction of such tunnels. In the past, many tunnels were constructed departmentally, but today with the increasing complexity, more and more reliance is being placed on using contract system for construction of tunnels. As a matter of fact, contracts have become means of action in Industry and construction. Today, 95% of present construction is done using contractors. Wherever public money is involved, it is duty of persons responsible for implementing projects that value of public money is maximised with enhancement in quality and economy. 

Construction of tunnels is normally associated with many uncertainties and risks. The contract document has therefore to be proactive which can anticipate future problems and accordingly make provisions to deal or cost plus. 

In India, though more than 600 km of tunnel has been bored but technological upgradation is not up to the mark. Even at many projects  with such exigencies. How this aspect is dealt with much depends upon type of contract selected by parties i.e. lump sum or item rate where new technologies have been inducted, the results in terms of progress have been disappointing. The history of project failures indicates that planning, design and engineering, equipment deployment, selection of technology, and application of project management techniques are not themselves adequate unless supported by rightly oriented and equitable contractual arrangement and its effective administration in an atmosphere of mutual trust and harmony. 

Contract management is a part of basic strategy of an organisation, which includes whether to opt for turnkey execution or project works be divided into several convenient packages and whether to adopt contracts based on lump sum or unit price/item rate or percentage rate or cost plus or a combination of two or more of these: Whatever may be the strategy, the core issue in tunnelling contracts would be managing the risks. Therefore, I would first like to discuss some points related to this aspect.

Normally risk means the risk of financial loss. It could be either to the owner or contractor. Thus it is relevant to both the parties of contract. A good contract would be the one, which does not allow a party to gain unfairly at the expense of the other. In the tunnel contract, some of the factors giving rise to risk are geological features, extent and reliability of data as a result off field investigations, accessibility of site, force majeure, poor construction practices and underbidding. A normal argument would be that the owner should assume all the risks because it is he who selected the site. However, owner may try to transfer all the risks to contractor at a cost, which we call a fixed price contract. Whereas I don't agree that all the risk is to be assumed by the owner, but it is neither feasible nor possible or prudent to transfer all the risks to the contractor. The cost payable by the owner would increase in proportion to the risk transferred to the contractor. In case the contractor does not encounter the risks he anticipated while quoting his price, the owner would end up paying an inflated price. Owner always has some risk e.g. contractor leaves the work unfinished, the owner would suffer in terms of time and money irrespective of contractual clauses available for getting balance work executed at the risk and cost of defaulting contractor. The owner can minimize his risk by invoking performance guarantee bond provided by the contractor but he cannot eliminate the risk. As such the golden principle is to assign the risk to a party who is best able to manage it. As far as contractor is concerned, he can reduce the risk by estimating financial implication of all the risks and including the same in his quoted price. His evaluation depends upon the information supplied to him by the owner and acquired by him from his own sources. Probably the risk could be zero if all the information is available to the contractor but it is a hypothetical condition and super human prescience.

Two types of information viz. design information and experiential information is needed to estimate the cost. The Design information is mostly provided by the owner in the tender documents based upon investigation conducted by him. However, it can never be so extensive that all the expected problems can be foreseen and accounted for. No doubt, reasonably good amount of design information can reduce the uncertainty and risk to a large extent. The experiential information is obtained by the bidder from his own sources and his past experience. This information acts as a supplement to design information. The example of experiential information may be man-hour needed to complete an activity, the wastage expected, availability of labour and material etc. In case the bidder does not have ability to collect and utilise experiential information, he is sure to meet his waterloo, even if Owner has provided good amount of design information.

In this context, the geological risks are quite pertinent in case of tunnelling projects. There are varied opinions on this issue. It has been said that the geological features at site were placed by the nature and are part of the site. When the owner acquires the site, the geological feature becomes his. In case the owner has got investigation conducted to a reasonable extent and information is accordingly provided to the contractor, the contractor would not be required to include inflated contingency to cover potential cost over run. As such it would be in the interest of the owner to get the project investigated through use of modem and latest technology. Poorer the investigation, costlier would be design as well as construction. The owner may adopt a strategy of providing disclaimer to the accuracy of subsurface/geological information. It could be sustained in the court of law that contractor was liable for all risks arising out of non-providing or inadequately providing information on investigation but it would not result in effective and competitive bidding. It would also entail delays, litigation and compromised quality of work. A summary of data relating to 22 specific tunneling projects as presented in an article "Coping with Subsurface Risks Bidding Practices that Works" by C. Richard Donnelly ( HRW May 1999) indicates that majority of claims and mostly costly ones were raised by contractors when the pre-construction investigation cost was less than 2% and extent of these claims reduced when investigation expenditure was in the range of 2 to 2.5% of total project cost. Thus additional expenditure on investigation ultimately results in reduction of risk to the owner as well as contractor. The need for an appropriate' mechanism stressing on the disclosure of information is another area, which is relevant. Some owners may like to provide only factual information whereas others may make a  complete disclosure of all engineering information including design reports and calculation. It could be a good idea to disclose all available factual data and an engineering interpretation of the same with clear distinction between the two.

The distribution of risk between the  owner and the contractor would vary with the type of contract selected by parties. In case of lump sum contract there is lesser risk to the owner. If the contract is cost plus fee type, the risk of contractor is reduced and it is minimum, if the fee of the con tractor is a fixed percentage of cost of work. In case of a unit price contract, the level of risk to owner or contractors depends upon the terms and condition of contract. To complete a project in time and at the lowest cost, the risk has to be managed through use of effective contractual mechanism and for this purpose, both the parties should understand, evolve and incorporate suitable provisions before finalisation of contract. 

Experience has shown that "Deviation" clause has been a source of most of the conflicts between the Owner and Contractor. Actually deviation clause defines the risk assumed by each party. In a tunnel contract, deviation may arise due to following reasons: 

• Change in quantities of items specified in Bill of Quantities (BOQ) due to site conditions.
• Change in design requirements, for e.g. change in section of tunnel, support system etc. 
• Geological conditions requiring change in design or change in construction methodology or change in quantities/items. 

To deal with such a situation, three types of risk models could be thought of: 
Entire Risk to the owner

In most of item rate contracts, this model is followed. Rates quoted by the contractor are valid up to certain variation limit say 30% beyond which different approaches for rate settlement are used. It is while settling rates of deviated items, maximum problem is faced. Lingering dialogues and inability to arrive at a particular rate has actually affected the progress of many projects. Though theoretically the model seems to be as entire risk to owner but in actual practice, the pendulum of risk may oscillate towards contractor. Rates for deviated items can be settled in different ways, some of them are discussed below: 

• Make the quoted rates applicable for all deviations in quantities. In this approach, if the quoted rates are abnormally high and deviation is in positive side, the owner's risk increases considerably with unfair gains to contractor. If the "quoted  rates are low, the risk to contractor increases. In such a situation, contractor may avoid quoting unworkable rates and the Owner before accepting the bid has to negotiate to reduce abnormally high rates. 
• Another way could be to pay contractor as per analysed rates derived after considering actual inputs and prevailing market rates. Theoretically, it appears to an ideal approach but it is seen that both the parties are not able to come to an agreed rate even after a considerable lapse of time in many of the cases. It could be that in the name of actual input, the owner is asked to pay for inefficiency of contractor or there could be dispute on inclusion or non inclusion of various factors of cost like indirect cost on labour (It should be included but what is reasonable extent), overhead and profit on the materials supplied by the owner (though entire procurement of materials done by the owner and sup-plied to contractor at the site store, the contractor may insist for additional over head and profit even to the extent of 25% on such material cost). In case of negative deviation, claims of revised rate for the reduced quantity which fetches the contractor an amount exceeding the amount that would have been pay able had the entire quantity originally stipulated was executed, is simply unfair. 
• Third method could be to pay contractor as per analysed cost but with a ceiling on payable rates. One option for deciding the ceiling may be (i) For items having positive variation beyond 30%, the rates would not exceed than that originally quoted by the contractor. (ii) For items having negative variation beyond 30%, the rates for actual quantity executed should be such that the total amount payable to the contractor does not exceed the amount that he would have been entitled to receive on executing 70% of originally stipulated quantity of that item. 
• Whereas stipulation at (ii) is reasonable, stipulation at (i) would be a risky proposition to a contractor who has quoted low rates.
• Fourth method could be to make payment at a certain percentage above or below the rates existing in project schedule of rates of the owners. Such a simplistic assumption may not necessarily work in tunnel contracts where project is subjected to many complexities posed by geological conditions. 
• One alternative could be that Engineer of the owner proposes a guideline for analysis of rates of various items specifying therein ideal/standard input of men, material and machinery and actual market rate of these inputs is used to work out revised rates. Such a guideline may be available to air bidders before they submit their bids. 

Whatever may be methodology, disputes can be avoided only if both the parties have a positive and honest attitude towards the contracting. In this context, another problem which is normally faced, is with respect to substituted and new items, which arise due to change in design and geological reasons or the execution of items may require different logistics or different type of construction methodology. It is difficult to evolve a standard guideline for deriving rate of an item whose construction methodology or technology to be used itself is not anticipated at the time of preparation of Detailed Project Report. The mutual cooperation and understanding between the owner and contractor is probably the best avenue to resolve such issues. 

Limited risk to the owner 

Such a model is manifest in Turnkey contracts. Here owner takes limited risk say up to a particular percentage of contract price and beyond that cost of works executed is to the account of the contractor. In turnkey contracts, the responsibility right from the planning and design of structures and equipment till the commissioning of project is with the contractor. In case the contractor is a consortium of contractors, all the members of consortium are jointly and severally responsible and liable to the owner for the due and faithful performance of the work. Breach by any contracting party is deemed as breach by all the members of the  consortium provided that the contracting parties other than who was in breach had been given opportunity to remedy the breach and such a breach would be established only when they have failed to remedy the same. The responsibility of coordination amongst various consortium members lies with the leader of consortium. The most important aspect of such a contract is that total amount payable to the contractor has a ceiling i.e. contract price plus a contingency (contingency expressed as percentage of contract price) to cover variation in quantities and new items arising due to design changes, geological surprises and site conditions. It means that liability of the owner gets fixed except for additional cost, which may arise due to certain clearly identified reasons in the contract. 

Uri Hydroelectric Project in Kashmir Valley in India was executed through a turnkey contract and it is a fine example of this type of model. Only the actually executed quantities identified in BOQ were paid at the rates originally stipulated in . BOQ and total payment to contractor was limited to contract price plus a fixed ceiling as a percentage of contract price. No payment was made for any new item even if it was required to be executed. The above said ceiling was referred as contingency. It means that it does not turn out to be a wind fall to the contractor, since he gets paid only for actual quantity of work executed subject to a ceiling. No doubt, if the assessment of contractor goes wrong, he would suffer heavy losses and as such it is essential for the owner to select only experienced contractors having excellent track record and credibility in market so that the contractor does not abandon the work midway on one pretext or the other and jeopardise the project. 

Another variant of this model could be that In case cost of works increases beyond above said ceiling limit, the contractor instead of bearing entire additional cost, absorbs additional cost up to a certain limit only and beyond which all the cost of execution of project is borne by the owner. Here the contractor's risk factor decreases and chances of abandoning the project on account of abnormal increase in cost also decreases. In my knowledge such a model has nowhere been tried so far.

No risk to owner 

It is typically a lump sum contract. The owner may feel happy that he has frozen his liability but really it may not be true. If contractor finds himself unable to complete the work within contract price, he would resort to litigation unless he has exceedingly high reputation, credibility and a sense to complete the project even at a loss. In case of unforeseen events which the contractor had accounted for do not take place, it would mean windfall to the contractor. Unless adequate and reliable investigation results are available, this type of model may not be an ideal one. 

There are many contractual issues, which have been a constant source of disputes. I would not like to  elaborate on them but make a mention of them. The price variation clause especially when it is based on indices, whether to apply indices of the month when the work was actually executed or supplies were procured or when actually billed, what if the contract period gets extended where contractor had quoted fixed price contact with no provision of escalation. How to deal with force majeure and impact of changes in taxes, duties, levies and exchange rate fluctuations? What should be extent of insurance and who to obtain? How to deal with non-insurable risks? These issues are not only contractual but have legal overtones and financial implications thereof could be very large. One aspect, which I want to stress, is the risk of underbidding. It has been rightly said that lowest bid is not necessarily the best. In the name of competitive bidding, sometimes contractors submit unworkable and low bids and later resort to tactics for raising disputes, seek revision of rates, delay work, seek deferment of recoveries of advances etc. and do not adequately mobilise resources in view of restricted cash flow, thus defeating the very purpose of timely completion of project. Under public funded projects, it is normally difficult for the owner to ignore lowest bid especially when the bid is submitted by a pre-qualified party. The natural victim of such a situation is the owner who suffers delays and wastes a lot of his energy in resolving avoidable issues raised by the contractor, whose genesis is nothing but low rates. This issue should be pondered over and such mechanism and norms should be developed which can avoid such situations. 

Two more aspects i.e. assimilation of relevant technology and measurement & payment clauses are quite relevant for any tunnelling contract. In tunnels construction especially in India, following points are cause for anxiety and concern:

• Lack of advance knowledge of tunnelling media . Poor blasting techniques 
• Lack of instrumentation 
• Poor planning and inadequate deployment of construction equipment.

The contract specifications should take care of these aspects and only such contractors are selected who are able to cope with the requirements of these areas. It is worthwhile to mention that in early nineties, state of the art technology was adopted at Uri Project, which involved some typically difficult Himalayan rock conditions. Advance Probing, drilling and pre-grouting of tunnelling media, use of highly productive blast designs, rock support consisting of fibre shotcrete, rock dowels, swellex bolts; tunnel lining using telescopic shutter and shaft excavation by raise borer and raise climber were some of the example of technological adoption by the contractor. The net result was that nearly 22 km of tunnel was bored in 3 years, 200 m/month progress of tunnel boring from one face was achieved a number of times and from 7-8 working faces, 1200 m of monthly progress was achieved. The average progress of tunnel lining was 200 m per week. The tunnel lining of 90-m high surge shaft of 22-m diameter was done in a period of 45 days through Continuously moving slip form shutter. 

I am reminded of one project, where new technology with new type of equipment was inducted and contractors were told that it would be possible to achieve good progress. Contractors not able to adopt technology properly, instead of thinking to improve their skills opted to blame equipment for poor progress. In tunnelling contracts, issues related to overbreak, shotcrete and concrete lining are often issues of debate and argument. I would briefly touch these issues. 

Should measurement of excavation, shotcrete and concrete lining be based upon section of tunnel at minimum excavation line (say A-line) or B-line which is marked 10 to 20 cm away from minimum excavation line? Normally the basis is B-line. In one of the Projects excavation and shotcrete were paid at minimum excavation line. Concrete lining was  however, paid at B-line. The effort of the contractor should be to adopt such blasting techniques so as to avoid excavation beyond minimum excavation line and it if goes beyond that, the extra excavated section should be minimum. With technological advancement taking place, we have to think on this issue to avoid wastage of energy, materials and money. 

How to pay excavation, shotcrete and concrete in overbreak areas? The overbreak could be due to geological reasons or due to poor blasting techniques or delayed application of primary rock support system. In one of the contracts, a line (say C-line) was drawn 50 cm away and beyond B-line. Any excavation and shotcrete between, B-line & Cline was not to be paid. Concreting between B-line and C-line was paid at 50% of normal rates. Beyond C-line, if overbreak was due to geological reasons, excavation was paid at 50% of normal excavation rates and concrete at 75% of normal concrete rate. For excavation in overbreak area, not much hue and cry is raised but contractors always insist for payment of concrete and shotcrete at full rates in the entire overbreak areas. The simplistic assumption is that there is no fault of contractor in application of techniques and skill and it is the geology always to be blamed. In my opinion, our perception should change and we should evolve and adopt stricter norms to ensure quality, effect economy and accelerate speed of construction. 

For any contract to be successful and amenable to proper administration, the interest of both owner and contractor has to be safeguarded. Whereas the contractor should be able to get his due payment with inbuilt mechanism to maintain proper cash flow, the owner should be clear about his responsibilities and should have enough control to obviate avoidable time over-run. It has to be understood that proper management of contract is duty and obligation of both the parties. The contract document should be used more as a facilitator to execute the work than a tool to grind one's own axe ignoring that the ultimate sufferer is the project and in other words both the owner and contractor. Implementation of contract conditions in their true perspective is most important, as desired result would not flow only from the good Contract conditions. Contract administration as such should be entrusted to competent and positive minded managers. On the part .of contractors, they should fulfill the commitments they make in the contract. Contractors should not make excuse that they signed the contract because they were forced to do so or they did not have time or resources to go through and understand the contract. In case of any ambiguity, both parties should think who is the best to bear burden of any additional financial implications than trying to pass on the buck. The contractor should mobilise resources at right time to avoid delays in work, distress purchase and wastage of materials.

At the end, I would call for evolving a code of ethics for the Owners as well as Contractors. The disputes and consequent delays can be reduced to a large extent, if such an attempt becomes successful. We have to accept that we cannot and should not wish away involvement of legal experts in major construction contracts but too much of a legalistic attitude is not desirable. Without any way compromising on the necessity of having a clearly worded equitable contract, I wish to conclude with the words that it is neither contract nor the law, but it is the positive thinking, cooperative attitude, dedication, and honesty of purpose of the owner and contractor that makes the contract successful.