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Infrastructure Resilience Conference 2018

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Contracting for Resilient Infrastructures

CONTRACTING FOR RESILIENT INFRASTRUCTURE

Contract law generally provides for non-enforceability of promises in so-called force majeure situations. This paper provides novel data showing that infrastructure contracts deal with a larger set of resilience situations. As contract theory would predict, we find that the parties adopt tailor-made force majeure clauses, thus specifying the infrastructure’s resistance to high-magnitude/low probability disruptions. However, we also uncover evidence of contractual clauses dealing with infrastructure resilience, i.e. the capability to recover, adapt and learn when disruptive events occur. More specifically, we show that highway contracts deal with low probability as well with high probability events and do so very comprehensively, by covering infrastructure design, construction, exploitation and maintenance. We also provide evidence of other types of infrastructure contracts providing for soft (via organizational requirements) and hard (via technology requirements) resilience. In the ‘low tech’ area, power grids contracts specifically address issues of network organization and functioning. In the high tech area, space contracts go a step further and deal with the capacity to address long term technological developments, e.g. when it comes to artificial intelligence. The paper concludes by examining the extent to which infrastructure contracts may reflect competition or political constraints.

Gerard Hertig
ETH Zurich
Switzerland

Luh Luh Lan
National University of Singapire (NUS)
Singapore

Lucien Rapp
University of Toulouse
France

 

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