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Contractor's All Risk Insurance

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Contractor's All Risk Insurance

Post by cristem on Sat May 12, 2012 10:17 am

Hi. I wish clarification on the interpretation of the CARI provision contained in the BDS, which states among others:

The Contractor Risk and Warranty Security - The Contractor shall assume full responsibility for the Works from the time project construction commenced up to final acceptance by the Procuring Entity and shall be held responsible for any damage or destruction of the Works except those occasioned by force majeure. The Contractor shall be fully responsible for the safety, protection, security, and convenience of his personnel, third parties, and the public at large, as well as the Works, Equipment, installation, and the like to be affected by his construction work.

If the Contractor did not arm himself with CARI and during the implementation of the contract, a severe storm practically wiped out the accomplished structure which was partially paid, is he liable to restore it without additional cost to the government?

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Re: Contractor's All Risk Insurance

Post by engrjhez® on Sat May 12, 2012 10:57 am

cristem wrote:Hi. I wish clarification on the interpretation of the CARI provision contained in the BDS, which states among others:

The Contractor Risk and Warranty Security - The Contractor shall assume full responsibility for the Works from the time project construction commenced up to final acceptance by the Procuring Entity and shall be held responsible for any damage or destruction of the Works except those occasioned by force majeure. The Contractor shall be fully responsible for the safety, protection, security, and convenience of his personnel, third parties, and the public at large, as well as the Works, Equipment, installation, and the like to be affected by his construction work.

If the Contractor did not arm himself with CARI and during the implementation of the contract, a severe storm practically wiped out the accomplished structure which was partially paid, is he liable to restore it without additional cost to the government?

Please follow the link below for a discussion of CARI
http://gppb.topicsolutions.net/t617-contractor-s-all-risk-insurance-cari

From the above definition, it is clear that such insurance covers only damages or destruction of the Works NOT covered by force majeure - those that cannot be prevented from happening like acts of God. In such cases, we cannot require the contractor to restore the paid works at their own expense. That would not be fair and just if it was of no fault of the contractor.

In case the contractor was not able to secure CARI, there is a provision in the GCC of the Bidding Documents that states that:

15.4. If the Contractor fails to obtain and keep in force the insurances referred to herein or any other insurance which he may be required to obtain under the terms of this Contract, the Procuring Entity may obtain and keep in force any such insurances and pay such premiums as may be necessary for the purpose. From time to time, the Procuring Entity may deduct the amount it shall pay for said premiums including twenty five percent (25%) therein from any monies due, or which may become due, to the Contractor, without prejudice to the Procuring Entity exercising its right to impose other sanctions against the Contractor pursuant to the provisions of this Contract.

I hope it answered your query satisfactorily. Smile
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Re: Contractor's All Risk Insurance

Post by cristem on Sat May 12, 2012 11:44 am

Thanks for your reply, engrjhez. In such cases, what processes should be undertaken?

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Re: Contractor's All Risk Insurance

Post by engrjhez® on Mon May 14, 2012 8:29 am

cristem wrote:Thanks for your reply, engrjhez. In such cases, what processes should be undertaken?

In case of force majeure, the Procuring Entity must provide for appropriate funding (usually from their calamity fund) and works to restore the structure to the last completed stage. Smile
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