Construction contracts – who bears the risk for the costs of new shelters
The fact that the Government, in the Total Preparedness White Paper (Totalberedskapsmeldingen), has recently opened for reintroducing a requirement for shelters in new buildings over 1,000 square metres has consequences for stakeholders in the real estate industry.
The question of where the population is to seek cover if the Civil Defence sirens or mobile phones warn that there is a danger of attack is again being brought to the fore by the Government’s recent opening in the Total Preparedness White Paper for reintroducing a requirement for shelters in new buildings over 1,000 m². The previous obligation to do precisely this has been put on “pause” since 1998. If this is implemented as communicated by the Government, it has been announced that the requirement will apply to buildings that are erected from 1 January 2026.
The Total Preparedness White Paper states:
“Provided that the Storting repeals the decision from 1998 on the temporary suspension of the obligation to build shelters in new buildings, the Government will shortly send for consultation a proposal for adjustments to the regulatory framework with new criteria for requirements for the construction of permanent protective shelters to protect the population from harm in the event of acts of war.”
Economists have begun calculating the costs, and stakeholders and politicians are talking about who “should” pick up the bill.
No one has all the answers yet, and a final decision lies some way off in time. At the same time, projects are moving forward. Can contractors and clients simply lean back and wait, or should precautionary measures be considered in contracts already now?
Read more: Brækhus’s expertise in Defence, security and preparedness
When will the requirement affect the construction industry?
In Box 6.3 of the Parliamentary White Paper it is stated only that shelters must be built “upon construction” of buildings exceeding 1,000 m². Buildings will typically (still) be “constructed” long after the contract has been entered into, and this gives rise to questions as to which projects the change may affect.
Can such a change have effect for ongoing projects with completion deadlines after 1 January 2026, but which are already signed now or will be signed before an amendment enters into force? Or will such a change only affect projects that start after the amendment enters into force?
If one equates “construction” with completion, this will affect construction projects that are ongoing on 1 January 2026. This would in that case affect a number of contracts and projects that have already been entered into. It could have unfortunate consequences, including imposing substantial additional costs and uncertainty.
It must be assumed that any proposals sent for consultation will also clearly specify the cut-off point for the effect in relation to (ongoing) projects, both at the design, contracting and execution stages.
The client’s responsibility under the standard contracts
Under NS 8405/15 the client has the design responsibility and, as a general rule, bears the risk for, among other things, public authority matters that affect the design after the contracts have been entered into. Under these standards, it will therefore be the client who bears the risk of new requirements for shelters arising.
The situation may, however, be different in NS 8407/17 contracts, where the contractor bears the design risk with respect to public requirements. The starting point is also here that the client bears the risk of the exercise of public authority that changes the requirements imposed on the contract works during the project, but there is also a condition that the contractor should not have knowledge of the relevant exercise of public authority at the time of tender submission for the client to bear this risk.
What about the contractor’s risk?
We mentioned above that who bears the risk for new public requirements has an element of discretion in contracts based on NS 8407/17.
Regarding legislative amendments (etc.) from public authorities that affect the requirements for the contract works, NS 8407 states that such matters are, as a starting point, the client’s risk, as long as the design–build contractor should not have taken changes in law or regulation, or individual administrative decisions, “into account when the tender was submitted, and he also should not have avoided the consequences of them”.
For contractors who use the NS 84X7 family, the relevant question will be whether knowledge of the Government’s intention to reintroduce this requirement is sufficient to mean that they should take this into account in their tenders going forward. This is probably not the case.
So, what level of knowledge is required for the condition to be satisfied? Is the knowledge requirement only met when a legislative amendment has been adopted (but not yet entered into force), is it met when it has been sent for consultation in the Storting, or is it met when the Government has expressed its intention to send the proposal for consultation, provided that the Storting lifts the temporary suspension of the obligation?
The legal sources indicate that rather clear grounds are required to conclude that a proposal sent for consultation in the Storting will be adopted, before the contractor must take this into account at the time of tender. The situation is the opposite if an amendment has been adopted but has not yet entered into force. This is typically a circumstance that the contractor should have taken into account.
At the time of writing, there is neither a proposal out for consultation nor an adopted amendment. On the contrary, the Government has only communicated an intention to initiate a consultation process in the Storting. According to the Total Preparedness White Paper, a precondition for this process is that the Storting lifts the temporary suspension from 1998. It is therefore not possible to state with certainty whether a concrete bill will be sent for consultation and, if so, when.
How should this be handled now?
At present there is probably not sufficient basis, legally speaking, to “seek cover” or for the parties to take up entrenched positions. Before the Government provides further information about any proposal and its content, there will be a situation that constitutes an uncertainty in the relationship between the stakeholders. All parties generally benefit from reducing the risk of disputes in construction projects, and it is therefore sensible to start thinking about this already now, even if the issue has not yet been sharpened in a legal sense.
Our advice is therefore that the parties maintain an open dialogue on the topic and, not least, consider whether reservations related to this should be included. The solution may be to draft contracts with mechanisms that cater for any requirements for shelters, for example in the form of more specifically regulated termination options, options or various forms of risk sharing.
In any case, one should follow the process going forward and bear in mind that any adoption of an amendment to the rules on shelters may become a disputed issue in the years to come, particularly as regards what contractors should have taken into account in their tenders.
This article was first published in Estate Nyheter.
