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Cheers - AE

Tuesday, 26 April 2011

It's our fault, now pay up - UPDATED

A couple of weeks back I had a rant about the insanity that is allowing governments to sign contracts which extend far beyond the few years of their term and commit both their successors and the poor bastard taxpayers to what may turn out to be a bad deal. The rant was prompted by news that the Wonthaggi desalination plant, a multi-billion dollar project to secure Melbourne's water supply against drought and which was agreed by the last state government shortly before a particularly rainy year almost doubled the amount of stored water, was at least six months behind schedule because of delays caused by rain. Extra levels of Exile outrage were caused because the bastards were talking about taking legal action against the state because the profit forecast had dropped 98%. My feelings were, and still are, well boo fucking hoo - it was up to bidders to allow for the possibility of bad weather and factor that into their tenders. If the winning bidder failed to do so and is now up shit creek that's nobody else's responsibility but their own, and that Premier Ted Baillieu should make this absolutely crystal clear to the company.

It now turns out that it wasn't an empty threat.
THE companies building Victoria's multibillion-dollar desalination plant are seeking compensation from taxpayers because of the impact of this year's floods on construction.
The state government has confirmed that the Aquasure consortium has lodged a ''force majeure'' claim under the contentious 28-year contract signed by the former Brumby government in 2009.
Force majeure - French for superior force - refers to an event beyond the control of government or contractor.
This is a new legal term for me, but a quick web search tells me that it's fairly common clause in contracts that allows for both parties to walk away without there being any liability. It actually sounds rather like the 'acts of God' stuff you see in the fine print of your insurance policy and it seems like it's being used much the same way in this case. Now I'm no lawyer but to me this whole force majeure thing sounds ripe to be abused. To exaggerate the point, why bother doing any due diligence at all when you can just put in a clause saying that the contract is voided if anything happens which you hadn't thought of? I'm not saying that Aquasure didn't do any due diligence but clearly they didn't allow for the possibility of a severe rain delay, and I still don't see why the financial consequences of that should be borne by the poor bloody taxpayers.

[...] the Brumby government agreed to share the risk for ''act of God'' events with Aquasure.
Wonderful. John fucking Brumby yet again.

Now I know that Brumby is hardly unique in this and that lots of governments sign up their taxpayers for all sorts of long term deals of varying degrees or value and shittiness, but isn't it about time somebody somewhere put the fucking brakes on this?

Baillieu's government is at least taking the same line I would.
The government is resisting the compensation claim. ''We believe this is a matter for Thiess and its insurers and [we] will not comment further on this as it is a commercial matter under the contract,'' said a government spokeswoman in a written statement.
Couldn't agree more, but it shouldn't be necessary. As I've said here a couple of times we need to have contracts limited to the lesser of a single parliamentary term or halfway through the next parliament unless approved by a referendum. The more the whole Wonthaggi business drags on the more certain I am of it.

UPDATE - In the comments Geo points that force majeure is a legitimate clause in most contracts. I'm prepared to believe that it is but it's not really the point I was making. You can put whatever you like in a contract as long as it's legal, and if it's unacceptable it's for the other party simply to not sign the thing. My problem is that governments are able to sign up to all sorts of things with costs and effects that far outlast the government and even the political careers of those involved, and that since governments are also known to be a little too free with other people's money and to pay less attention to details than they might if they personally were going to take the financial hit this is something that ought to be stopped.

As to the validity of the force majeure in this instance, Geo notes that
The unusual rain will almost certainly be accepted by the Adjudicator as a force majeure event if the dispute is not settled.
However, a look at Bureau of Meteorology records for rainfall in the area suggest that the rain wasn't particularly unusual. Australia is, as Dorothea Mackellar wrote a century ago, a land of "droughts and flooding rains" and so I suspected it might turn out to be unusual for recent years but not out of the ordinary in the medium to long term, but not even that as it turns out. The 2010 rainfall (1131.2 mm, not yet QCd) is above average but isn't even in the 90th percentile (1153.3 mm) and has been exceeded many times. Even in recent years during the drought (if it really was a drought rather than increased water consumption - I'll look into that now if I can make time) we've had more rain in one year, 2001 (1157.2 mm). 1995 (1379.0 mm) and 1996 (1182.2 mm) immediately preceding the 'drought' were both much higher and 1991 (1151.7 mm) was also a wetter year, though the 80s and 70s were drier overall. Nor was 2010 affected by a freak month of really high rainfall since none of the monthly figures were record highs. In addition the proposed site was actually flooded in 2007, two years before the winning bidder was announced, which you'd imagine would have rung some alarm bells. With all that in mind I'd have thought they're batting a sticky wicket but of course fuck alone knows what the arrogant twats signed us all up to. For all we know we might be on the hook for the fucking lot.
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