Caught in a crisis

As I write this feature, another four cases of a disease that has devastated the UK farming industry have been discovered. Since the first case of Foot and Mouth in the UK in 34 years was reported on 20 February 2001, the disease has spread throughout the country, resulting in the culling of hundreds of thousands of cattle, sheep and pigs in the hope of containing the outbreak. Although the farming industry has been the major casualty of the crisis, other industries such as the UK hydro industry have been affected.

Some hydro companies are finding it difficult to gain access to plants as infected areas become restricted. These restrictions are leaving employers, consultants and contractors with cost problems and severe project delays. Some water industry utilities have been stopped, while other projects face escalating costs due to standing labour, machinery and many other additional costs such as disinfecting.

Although access is one of the main problems, many other considerations result from the epidemic. It may be that only a part of the project is affected or that access is denied off site by the Ministry of Agriculture, Fisheries and Food (MAFF) or a farmer. MAFF’s action is legally binding and the farmer’s rights exist under common law. In certain circumstances a project may continue by rescheduling the work, but this in turn means supplies may have to be obtained from a different source than originally anticipated. In all these instances, a party’s liability in time and cost will depend on the particular contract and its circumstances, and it will be a matter of fact and law in each case.

Spread of disease

Foot and Mouth is a highly infectious viral disease in which fever is followed by the development of vesicles or blisters – chiefly in the mouth or on the feet. The disease can be spread by direct or indirect contact with infected animals, and airborne spread of the disease can take place readily. The prevailing meteorological conditions and local topography determine the distance that the disease can travel and this may be considerable. For example, circumstantial evidence strongly suggests that the outbreak on the Isle of Wight in 1981 resulted from the airborne spread of the virus from Brittany in northern France.

The disease is also spread mechanically by the movement of animals, persons and vehicles which have been contaminated by the virus. Meat from the carcass of animals infected with Foot and Mouth at the time of slaughter can transmit the virus. In extremely rare circumstances, humans who have had prolonged exposure to the Foot and Mouth virus may suffer from lesions and a mild fever.

The highly infectious nature of Foot and Mouth is the main reason why farmers are not allowing access through their land, often the only way to reach hydro plants.

One company that has suffered as a result of the crisis is water power turbine manufacturer and installer, Newmills Hydro. Based in Northern Ireland, the company is finding it difficult to gain permission from farmers and landowners to carry out or complete survey work or project implementation on some sites.

‘It means that we are not able to proceed with work we have planned to implement. It delays everything,’ said Terry Maguire, managing director of Newmills. ‘This in turn has a swing on effect to subcontractors in the electrical and general engineering industry, because we would be placing orders with them for certain elements of work.’

There have been temporary job losses within the company until the crisis is resolved, as all walk-over work through farm land has been affected. ‘On our consultancy side, it literally dried up the amount of work we had,’ said Maguire. ‘While it might be possible on specific hydro sites to gain access, one always feels that we are imposing not only on the landowner we visit, but on his neighbours, who in most cases are unaware of the reason for our visit.’

South West Water (SWW) is another company affected by the disease. The company, which provides water and sewerage services to the UK’s West country, has postponed work on two mains modernisation schemes in the wake of local farmers’ requests during the current outbreak. Contractors had been due to start work on mains pipe improvement schemes at Braton Fleming and Tedburn St Mary. Both schemes are in areas on the edge of MAFF exclusion zones.

‘South West Water is very aware of the sensitivity of the outbreak of Foot and Mouth disease to the local farming community,’ said Paul Breakwell of SWW. ‘As a responsible utility company we took the decision to postpone work on both schemes until the outbreak is contained.’

Breakwell added that the company was also taking a range of precautionary measures to help minimise the risk of further infection. Within the exclusion zones, this means that all but emergency journeys across farmlands have been stopped.

‘It’s a question of being aware of the wishes of farmers, and just being able to help where we can,’ Breakwell added.

The wishes of farmers has also been an issue that Scottish and Southern Energy has had to comply with. The company said that some contracts, including inspection and refurbishment of valves at Breachlaich dam in Killin, Scotland, have been delayed because landowners would not allow access. These projects will now be completed at a later date.

‘Despite the delay, disruption and costs have been kept to a minimum because it has been workable to rearrange the projects,’ said Neil Sandilands, civil engineering manager at Scottish and Southern Energy. ‘We delayed because we did not want to upset landowners.’

For some companies, however, Foot and Mouth has had no impact. James MacArthur of Mott Macdonald, an independent consultancy involved in water supply, wastewater treatment, dams and hydraulic structures, said he was not aware of any problems experienced by his colleagues as a result of the crisis.

Contract terms

To help those companies who have been affected, representatives from the Institution of Civil Engineers (ICE), the association-of-consulting-engineers (ACE) and the Civil Engineers Contractors Association (CECA) convened an urgent meeting in April 2001 to discuss how to manage construction projects – including hydro projects affected by the Foot and Mouth crisis – run under the ICE Conditions of Contract and the New Engineering Contract (NEC).

‘In the present unfortunate and unforeseen crisis, financial strains will be imposed upon contractors, consultants and employers just like some farmers,’ said Mike Casebourne, chief executive of the ICE. ‘We have discussed the circumstances with the ACE and CECA and, in the spirit of best practice, it is essential that all affected parties keep talking to each other to ensure the best possible solution is reached.’ The ICE Conditions of Contracts and the NEC contracts have not been written with an epidemic outbreak of disease such as Foot and Mouth and there is therefore no express provision for it. However, both sets of contracts do provide for various delaying circumstances.

In the ICE Conditions of Contracts the employer’s representative or engineer should actively manage the interface between the employer and the contractor. They should decide with the employer what action they wish to take or accept, and ideally also consult with the contractor. Parties should not stand back and demand proposals from others while doing nothing themselves, but should work together to try to find the best solution under the circumstances.

The NEC contracts require the project manager to manage the contract in a pro-active manner. The NEC expressly requires the parties to co-operate and use the early warning procedure to identify the preferred solution. If there are several options available to try to achieve the employer’s objectives, then the project manager must make the decision on the appropriate option.

A function of the ICE’s employer’s representative and the NEC’s project manager is to facilitate active dialogue between parties. Key matters to be considered would be essential work to ensure safety. For example, partially completed earth works or power cables that may be exposed on land to which access is prohibited. In these circumstances, MAFF and HSE must be consulted before proceeding.

Each party should also check their insurance arrangements and should also consider the possible consequences of liability to third parties from accidentally spreading contagion by continuing with the works while taking appropriate precautions.

But what is the UK government doing to support businesses affected? Some companies in the worst hit areas of the UK are able to apply for temporary deferment of tax, VAT and National Insurance. The government has also announced help with rates for businesses seriously affected. The rateable value is based on the annual rental value of the property. If this has fallen because of Foot and Mouth disease preventing access to properties, then an appeal against the rating assessment can be made.

Relief measures

However, a survey released in May 2001 by the British Chambers of Commerce (BCC) claims that fewer than one in 10 businesses affected by the Foot and Mouth outbreak have sought to take up the relief measures offered by the government.

The survey, detailing the views of 646 businesses UK-wide, reveals that while well over a third (41%) of firms say the outbreak has had an impact on their business, only 5% have applied for temporary deferment of tax, VAT and National Insurance payments, and only 6% have applied for business rate relief. Affected firms have instead sought to explore new markets and expand into new areas of work (28%), or seek general information or advice (19%). Few firms (8%) have sought assistance from their bank.

‘It is encouraging to see that firms have sought to remain competitive and limit the impact of Foot and Mouth by creating new opportunities,’ said David Sear, deputy director general of the BCC. ‘However, concerns remain over the complex red-tape attached to the relief process, which in some instances has meant filling in forms of up to 40 pages.’

It is difficult to make predictions but it may take many months before Foot and Mouth is eradicated from the UK livestock industry, according to the National Farmers Union (NFU). In the meantime, some hydro companies will continue to be affected as projects get pushed back. However, as more and more exclusion zones are lifted, those affected will get back to business as usual, unlike the agricultural industry which is losing an estimated US$353.8M per month. As Paul Breakwell said: ‘Yes, there have been effects in our industry, but not to the extent that it’s affected others.’