2. A client is building an industrial waterfront facility, which requires driving piles in the water. It is to be built in the northeastern United States starting in early January and finishing in May. The pile driving begins early in the job and is scheduled to take two months. In the Invitation to Bid, the client stipulated that the pile-driving contractor would take the risk of weather downtime, with heavy penalties if the contractor exceeded the completion date. Three crane-barge companies submitted non-compliant bids—each quoting based on the client taking the weather risk. However, Heave-Ho Construction needs this work. They had the lowest bid and offered to accept ten days of weather downtime (the rest to be taken by the client). Their own engineer had advised Heave Ho that they could expect 30–50% downtime during a bad winter. The client invited Heave-Ho to further negotiations, and, eventually, Heave-Ho caved in and accepted the weather-downtime risk, while the client agreed to no penalty for late completion.

Is this risk allocation fair? Explain.

Explain what effect this risk allocation negotiation will have on the relationship between the client and Heave-Ho.