avoiding pitfalls in energy project construction: epc...

Avoiding Pitfalls in Energy Project

Construction: EPC Contract Disputes, Owner

Protections, Resolving Claims

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

The audio portion of the conference may be accessed via the telephone or by using your computer's

speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.

THURSDAY, MAY 2, 2019

Presenting a live 90-minute webinar with interactive Q&A

Judah (Judd) Lifschitz, Principal and Co-President, Shapiro Lifschitz & Schram, Washington, D.C.

Daniel A. Kapner, Attorney, Shapiro Lifschitz & Schram, Washington, D.C.

Tips for Optimal Quality

Sound Quality

If you are listening via your computer speakers, please note that the quality

of your sound will vary depending on the speed and quality of your internet

connection.

If the sound quality is not satisfactory, you may listen via the phone: dial

1-866-755-4350 and enter your PIN when prompted. Otherwise, please

send us a chat or e-mail [email protected] immediately so we can address

the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Quality

To maximize your screen, press the F11 key on your keyboard. To exit full screen,

press the F11 key again.

FOR LIVE EVENT ONLY

Continuing Education Credits

In order for us to process your continuing education credit, you must confirm your

participation in this webinar by completing and submitting the Attendance

Affirmation/Evaluation after the webinar.

A link to the Attendance Affirmation/Evaluation will be in the thank you email

that you will receive immediately following the program.

For additional information about continuing education, call us at 1-800-926-7926

ext. 2.

FOR LIVE EVENT ONLY

Program Materials

If you have not printed the conference materials for this program, please

complete the following steps:

• Click on the ^ symbol next to “Conference Materials” in the middle of the left-

hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a

PDF of the slides for today's program.

• Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

FOR LIVE EVENT ONLY

5Copyright © 2019 | Not to be reproduced without permission of SHAPIRO, LIFSCHITZ & SCHRAM, P.C.

AVOIDING PITFALLS IN ENERGY PROJECT

CONSTRUCTION

PRESENTED BY:

Judah Lifschitz, Esq.

Principal and Co-President

[email protected]

&

Daniel Kapner, Esq.

Attorney

[email protected]

SHAPIRO, LIFSCHITZ & SCHRAM P.C.

May 2, 2019


• “One stop shop”

• Single point responsibility

WHY EPC?

Credit: Martin Nikolaj Bech


“ABC’S” OF EPC CONTRACTS

• In its most classic form, an EPC Contractor is

responsible for

– Engineering: design of the entire power plant

– Procurement: purchase, installation, and

performance of all equipment, for example:

• Turbines

• Generators

• Cooling Towers

– Construction: construction of the power plant

Credit: Oliver Tacke


ENGINEERING

• Engineering functions include:

– Initiation

– Implementation

– Planning & programming

– Estimating and valuation

– DesignCredit: Seattle Municipal Archives


PROCUREMENT

• Procurement functions include:

– Purchasing

– Expediting

– Receiving

– Invoicing

– Performance

– WarrantyCredit: tanakawho


CONSTRUCTION

• Construction functions include all general

contractor, design-build contractor duties, for

example:

– Schedule

– Construction

– QA

– Startup &

commissioning

– WarrantyCredit: USACE


EPC CONTRACT STRUCTURE

Owner

EPC Contractor

All SubconsultantsAll Equipment

& Systems

OEMS

All Subcontractors

and Suppliers

Surety

DESIGN PROCUREMENT CONSTRUCTION

Full Wrap



Owner

OEM-Turbine

Generators

Partial Wrap

Design Construction

Equipment

and Supplies

EPC Contractor

Procurement

Assignment of

Purchase Orders



Owner

Owner Furnished Equipment

DesignConstruction

Procurement

EPC ContractorOEM

Turbines

Major

Equipment

EquipmentInstall Owner

Furnished

Equipment


• Fixed Price

– Fixed price for entire EPC scope

• Firm Price

– Fixed Price subject to adjustment for

escalation

• Target Price

– Cost reimbursement contract with a “non-

binding” target price established through an

open book estimate process

EPC CONTRACT PRICING MODELS


ANATOMY OF AN EPC CONTRACT

• EPC Contractor obligations

• Standard of performance

• Owner obligations

• Price and payment

• Project time and schedule

• Mechanical, Substantial, and Final Completion

• Delay and Performance LD’s

• Changes

• Warranty



• Disputes

• Limitation of Liability

• Other remedy granting clauses

• Suspension, Termination, and

Default


• What is a contract?

• An amalgamation of multiple assumption of

risk formulas

– Each project participant has its own

legitimate self-interests

– The legitimate self-interests of one

participant often compete/conflict with those

of another

– Contract reflects the conflicting interests

and allocates risk between participants



EPC CONTRACTOR’S OBLIGATIONS

• Fundamental obligations include:

– Scope of Work

– Engineering and design

– Procurement

– Construction

– Start-up, testing, and

commissioning

– Training and supervision

– Warranty

– Schedule

Credit: USACE


STANDARD OF PERFORMANCE

• Contract sets forth a Standard of

Performance for the EPC Contractor

Credit: USACE



Contractor shall perform and prosecute all Work in accordance with the

terms and conditions of this Contract, the Milestone Schedule and Exhibit

A, Scope Book, and with all Governmental Approvals and Governmental

Rules applicable to the prosecution of the Work, using methods and

equipment that are accepted as prudent electrical, mechanical and civil

engineering practice and operations. Contractor shall design, install, test

and operate electrical and mechanical equipment and systems in a safe

manner, using licensed personnel where necessary. The Work shall not

include the matters identified in Appendix 0, Optional Items, of Exhibit A,

Scope Book, unless Owner directs Contractor to perform the referenced

work in accordance with the schedule requirements, and for the values, set

forth in that appendix or as otherwise agreed.

Contractor shall perform and prosecute all Work in accordance with the

terms and conditions of this Contract, the Milestone Schedule and Exhibit

A, Scope Book, and with all Governmental Approvals and Governmental

Rules applicable to the prosecution of the Work, using methods and

equipment that are accepted as prudent electrical, mechanical and civil

engineering practice and operations. Contractor shall design, install, test

and operate electrical and mechanical equipment and systems in a safe

manner, using licensed personnel where necessary. The Work shall not

include the matters identified in Appendix 0, Optional Items, of Exhibit A,

Scope Book, unless Owner directs Contractor to perform the referenced

work in accordance with the schedule requirements, and for the values, set

forth in that appendix or as otherwise agreed.



EPC Contractor shall perform the Work…using the care, skill, and diligence

normally applied by licensed contractors and engineers in the performance of

Work similar to that contemplated hereunder, and in accordance with sound

construction and engineering practices and generally accepted professional

standards…; in accordance with the provisions of this Agreement, including the

Scope of Work and in conformity with the Specifications developed pursuant to

this Agreement; in compliance with…applicable Laws, including any construction

standards and codes set forth in the Scope of Work or otherwise required by

applicable Law; [and] in accordance with Good Industry Practice…[which are

defined as] any of the practices, methods, and acts engaged in or approved by a

significant portion of contractors performing design, engineering and/or

construction work for of the independent electric power industry during the

relevant time period, or any of the practices, methods, and acts which, in the

exercise of reasonable judgment in the light of the facts known at the time the

decision was made, could have been…expected to accomplish the desired

result at a reasonable cost consistent with good business practices, reliability,

safety, and expedition, the requirements of all applicable Laws and Permits and

the essential sections of the P.P.A. and consistent with the expected use and

operation of the Facility.

Sample Clause #2



The Work shall be performed by Contractor in accordance with Professional

Standards…. Contractor represents and warrants that it has thoroughly

familiarized itself with this Agreement, that it shall provide all engineering and

design services…necessary for the achievement of the Performance Targets. All

engineering and design performed as part of the Work will be, and will have

been, performed in accordance with Professional Standards and Applicable Legal

Requirements, and the Facility will be engineered and designed to operate in

conformity with the requirements of this Agreement, Professional Standards, and

Applicable Legal Requirements…. the Work will be designed, furnished, and

performed (i) in accordance with Professional Standards and (ii) in compliance

with the provisions of this Agreement and all Applicable Legal Requirements.

Sample Clause #3



“Professional Standards” means those standards and practices used by, and

the degree of skill and judgment exercised by, recognized United States

engineering and/or construction firms, when performing high quality services on

power plants similar to the Facility, taking into account, as appropriate, the

recommendations and requirements of vendors of Equipment and Materials. It is

not intended that Professional Standards as a standard of care may be used by

Owner to require changes to Equipment or Materials that are described with

specificity in Appendix A.

Sample Clause #3


OWNER OBLIGATIONS

• Financial obligations

– Financing

– Payment

– Security of payment

– Taxes

• Site and permits

• Regulatory

• Interconnection

• Hazardous materials

Credit: Salford’s Centre for Construction Innovation


OWNER OBLIGATIONS

• Design and procurement decisions

• Cooperation

• Owner project management

• Owner right to inspect work

• Startup and commissioning

Credit: Franco Folini


OWNER OBLIGATIONS

Owner Security for Payment

As security for Owner's payment and cancellation obligations to Contractor

under the Contract, Owner shall, at Owner's option, either (i) deposit and

thereafter maintain in an escrow account, as of the applicable payment due

date, the amount of the following two (2) months’ scheduled progress payments

from which account only Contractor (subject to a reversion interest in Owner in

accordance with the Escrow Agreement) shall be permitted to withdraw funds,

or (ii) an irrevocable, standby letter of credit in the form attached hereto as

Exhibit S-2 in an amount, as of the applicable due date, equal to the following

two months progress payments not to exceed fifty (50) million dollars. The

escrow agreement shall be substantially in the form set forth in Exhibit S-3. The

financial institution selected by Owner to be the escrow agent shall be

acceptable to Contractor, such approval not to be unreasonably withheld. In the

event that Owner elects to change the form of payment security as described

above, then (i) Owner shall give Contractor reasonable advance notice of such

decision and (ii) once Owner provides evidence that the replacement payment

security is in effect the previous security shall lapse.


OWNER OBLIGATIONS

Facility Site

Owner shall furnish the Facility Site, which shall be free of Hazardous

Wastes or Materials (unless previously identified) that would jeopardize the

safety of Contractor and its employees and agents, or which would impede

construction of the Facility. Owner shall assure reasonable rights of ingress

to and egress from the Facility Site for Contractor and Subcontractors

sufficient for the performance of the Work. Owner shall be responsible for

obtaining necessary real property rights for performance of the Work,

including rights for power lines and water lines (makeup and waste water)

whether on or off the Facility Site; provided that Contractor shall make

reasonable adjustments in the location of such lines as necessary to

facilitate Owner's receipt of such property rights and such adjustments

shall in appropriate cases be subject to treatment as Changes.


OWNER OBLIGATIONS

Permits

Owner shall obtain and maintain all permits, approvals and licenses designated

in Exhibit R-1 as being Owner's responsibility and any other permits, licenses or

governmental approvals that (a) are of a similar nature to those permits,

approvals, and licenses designated as being Owner's responsibility in Exhibit R-

1, (b) relate to the ownership or operational activities of the Project or are

necessary for Owner to perform its obligations under this Agreement, and (c)

are customarily obtained by owners of independent power plants operating in

the State of Texas, but (d) are not designated in Exhibit R-1 as being EPC

Contractor's responsibility.


OWNER OBLIGATIONS

Regulatory

Owner shall secure those Governmental Approvals as are indicated to be

obtained by Owner in Appendix B-2 of Exhibit A, Scope Book, and as may

be hereafter identified by agreement of the Parties. Owner shall not be

responsible for any delay in meeting this obligation to the extent any such

delay is due to a failure or delay of Contractor to provide timely support to

Owner as required under Section 3.5. Owner shall on a timely basis

provide all customary and reasonably necessary support to Contractor in

connection with Contractor’s securing of Governmental Approvals under

Section 3.5.2.

“Governmental Approval” is defined as any authorization, interpretation,

consent, approval, license, lease, ruling, permit, application, certification,

exemption or registration by or with any Governmental Unit, including those

Governmental Approvals listed in Part I, Section 2.2.3 of Exhibit A, Scope

Book.


OWNER OBLIGATIONSHazardous Materials

Owner shall disclose to Contractor, as information becomes available to

Owner, the existence of Hazardous Substances at the Facility Site as to

which Owner has actual knowledge. Owner shall be and remain responsible

for any Hazardous Substances that are brought onto the Facility Site by

Owner or any other Person performing activities on behalf of Owner (other

than Contractor, its Subcontractors, or Agency Suppliers) or that exist on the

Facility Site prior to the Commencement Date or releases caused by Owner

(or any other Person acting on behalf of Owner (other than Contractor, its

Subcontractors, and Agency Suppliers)) and not in accordance with

Contractor’s direction (“Owner Hazardous Substances”), including any

required Remediation and/or site restoration in connection therewith. To the

fullest extent permitted by Applicable Legal Requirements, Owner agrees to

release, defend, indemnify, and hold Contractor, its directors, officers,

employees, agents, and Affiliates harmless from and against all liability

(except for any liability arising from the negligence or intentional Release by

such indemnified Persons) arising out of Owner Hazardous Substances, or

otherwise arising out of fulfilling Owner obligations under this Section 3.9…,


OWNER OBLIGATIONSHazardous Materials

…whether through suits or causes of action in a court of law or claim,

complaints, or penalties arising out of a violation or alleged violation of

Applicable Legal Requirements. If Contractor discovers or encounters any

Owner Hazardous Substances, which under Applicable Legal Requirements

or Professional Standards would require Contractor to suspend Work to

avoid injury to individuals or damage to property, then Contractor shall

promptly give Notice to Owner and cease performance of the Work in and

around the affected area….Contractor shall have no responsibility for the

removal, treatment, transportation, disposal or Remediation of Owner

Hazardous Substances. Contractor shall not have or exert any control over

Owner in Owner’s performance of its obligations or responsibilities in

connection with the storage, transportation or disposal of any Owner

Hazardous Substances. Contractor shall reasonably cooperate with Owner in

connection with the Remediation by Owner of any Owner Hazardous

Substances identified at the Facility Site; provided, however, Contractor shall

not be required to provide disposal services for Owner Hazardous

Substances.


OWNER OBLIGATIONS

Cooperation with EPC Contractor

Owner shall cooperate with Contractor during the performance

of this Contract. Such cooperation shall include timely supply of

all those items, personnel, services and information required to

be supplied by Owner under this Contract; no material

interference with Contractor's agents, employees or

Subcontractors; and timely administration of all of Owner's

obligations under this Contract.


OWNER OBLIGATIONSDesign / Procurement

Owner shall also designate a representative to observe the Work on the

Project Site (“Owner’s Field Representative”). Such representative may or

may not be the same individual as the individual representing Owner’s

Construction Manager. Owner’s Field Representative shall have the right to

be present at the Project Site at all times, to occupy the field office of

Owner at the Project Site and to participate in the weekly Project status

meetings conducted by Contractor. Owner’s Field Representative shall

have the right to observe and inspect the progress of procurement and

construction of the Work, and may offer advice to Contractor about the

conformance of the Work with the Contract Documents. A copy of all

written communications from Contractor to Owner shall be delivered to

Owner’s Field Representative simultaneously with delivery to Owner’s

Construction Manager (if separate individuals). Contractor shall inform

Owner’s Field Representative before commencing any significant items of

construction included in the Work. Owner’s Field Representative shall not

have the authority to make decisions or give instructions binding upon

Owner, except to the extent expressly authorized by Owner in writing.


OWNER OBLIGATIONSProject Manager

Section 4.2. Project Manager. Owner shall

designate a project manager to act as a single point

of Owner contact for EPC Contractor with respect to

the performance of the Work.


OWNER OBLIGATIONSInspection

Owner and its designees (including the Engineers and Owner’s Authorized

Representative) will have the right to (a) have access to and inspect the

Work, including Equipment and Materials, (b) be present on the Facility

Site, (c) be present at all tests and inspections, at any stage of completion

on the Facility Site, and (d) reasonable notice of and to be present and

attend all scheduled meetings at the Facility Site between Contractor and

Subcontractors and/or Agency Suppliers. The participation in or

observation of any such inspections or testing by Owner and its

designees…will not be deemed to constitute a waiver of any of Contractor’s

obligations under this Agreement or be construed as an approval or

acceptance of the Work. So long as Contractor provides notice to Owner of

a test or inspection…then the failure of Owner, its designees, or the

Engineers to be present at such test or inspection will not invalidate or

otherwise adversely affect the conduct or results of such test or inspection.

Owner, its designees or the Engineers exercising rights pursuant to this

Section 4.1 shall not unreasonably interfere with Contractor’s performance

of its obligations hereunder.


OWNER OBLIGATIONSStartup and Commissioning

Owner shall provide operations and maintenance Personnel in accordance

with Appendix P and the phase-in plan to be developed in accordance with

Section 2.2.2.1 to assist Contractor in operating and maintaining the

Facility during the Start-up Period of each Unit. Such Personnel will have

the qualifications and experience required pursuant to Appendix P. Such

phase-in plan, may be subsequently adjusted by agreement of the Parties;

provided, however, Contractor must give Notice thereof to Owner as soon

as reasonably practicable but not less than six (6) months in advance of

any proposed adjustment. Scheduling of such Personnel shall be

undertaken by Contractor with the concurrence of Owner and with due

regard for minimizing overtime. Such Personnel shall be trained by

Contractor and shall assist Contractor by performing normal operating,

testing, check-out and maintenance duties during the Start-up Period….


PAYMENT

• Payment Schedule

• Conditions to Payment

• Final Payment

• Release of Liens

• Payment or Use Not Acceptance

• Performance Security

Credit: Natloans


PAYMENT

4.2 Payment Schedule. The Contract Sum, including payments made to

Contractor under the Technical Services Agreement with respect to work

provided thereunder, shall be paid in accordance with the Payment

Schedule attached hereto as Exhibit E….

4.2.1. Request for Payment. No later than the fifth (5th) day of each

month Contractor shall submit to Owner a written request for the payment

due in respect of the immediately preceding month … based upon the

percentage of Work completed during such month as set forth on the

Payment Schedule, and shall certify to Owner that such requested

payment is properly payable….


PAYMENT TERMS

4.2.2. Conditions to Payments. Owner shall make the payment properly

requested by Contractor within thirty (30) days after receipt of Contractor’s

request for payment, including all supporting information, satisfying the

requirements of this Agreement; provided, however, that Owner may

withhold a sufficient amount of any requested payment reasonably

determined by Owner to protect Owner from actual or reasonably

foreseeable Damages for any of the following reasons: (a) Contractor’s

request for payment does not meet the requirements of Section 4.2.1

(including, for the avoidance of doubt, that some or all of the Work for which

payment is requested has not been properly completed); (b) Contractor has

not supplied Owner with the certification and the Lien waivers as described

in Section 4.5; (c) one or more third parties shall have filed a Lien against

Owner, the Project or Project Site resulting from the actions or inactions of

Contractor, any Subcontractor, or any person for whom Contractor is legally

responsible, and Contractor has not furnished a bond meeting the

requirements set forth in Section 4.5 with respect to such Lien….


PAYMENT TERMS

…(d) Contractor has failed to make timely payments of undisputed

amounts due Subcontractors as required under applicable Subcontracts

(or, if Contractor withholds disputed amounts Contractor has failed to

establish reserves sufficient for payment in full of such disputed amounts),

so long as Owner has not wrongfully withheld payments due Contractor

hereunder; (e) Contractor has failed to pay any amounts owing to Owner

under the Contract Documents; (f) A Contractor Event of Default has

occurred; (g) this Agreement is terminated before the Final Payment is

made, in which event Owner shall not be obligated to make further

payments except in accordance with Section 4.4 or Section 15.5, as

applicable; (h) Any Work is shown to be defective or not in accordance with

this Agreement, and such defect or failure of performance has not been

remedied in accordance with this Agreement, including Article 10; (i)

Contractor has failed to obtain or maintain the insurance required by

Section 14.2; or (j) Contractor has failed to deliver and maintain in full force

and effect the Performance Security as required pursuant to Section 4.7.


PAYMENT TERMS

4.3 Final Payment. Upon satisfaction of all conditions to Final

Acceptance and all other conditions to payment contained in this

Agreement or to which Contractor has otherwise agreed, and

subject to completion of all Punch List items, Owner shall pay the

unpaid balance (including remaining Retainage) of the Contract

Sum (the “Final Payment”) within thirty (30) days after Final

Acceptance.


PAYMENT TERMS

Lien Releases for Monthly Payments. At the time of each monthly

payment hereunder, Contractor shall (a) certify to Owner that the

Project, the Project Site and any and all interests and estates therein,

and all improvements and materials placed on the Project Site, are, to

the extent of the most recent payment received by Contractor, free from

any and all Liens, arising out of or in connection with performance by

Contractor or any Subcontractor of the Work, and (b) provide to Owner

(i) Lien waivers, in the form of Exhibit K, with respect to the most recent

payment received by Contractor, and in the form of Exhibit L with respect

to the previous month’s payment received by Contractor, (ii) Lien

waivers, in the form of Exhibit K, from each Major Subcontractor and for

each other Subcontractor under a Subcontract with a value of $250,000

or more to the extent of the most recent payment received by such

Subcontractor, and in the form of Exhibit L with respect to the previous

month’s payment received by such Subcontractor, and (iii) proof that

there are no undisputed amounts owing Subcontractors that are due but

unpaid for more than thirty (30) days prior to the date of such

Contractor’s certificate, in each case as necessary to support

Contractor’s certificate.


PAYMENT TERMS

Withholding. If any Lien is filed by a Subcontractor or any other Person for labor or

material furnished under this Agreement is served on Owner or any Financing Party

or any other Person providing Real Estate Rights for the Project, Owner may

withhold from any payments otherwise due to Contractor an amount sufficient to

discharge any or all such Liens, unless Contractor shall furnish a bond which has

received Owner’s Written Approval to protect Owner, the Project and the Project Site

against such Liens. If any such unbonded Lien has not been discharged within thirty

(30) days from the time such Lien is made, Owner may discharge such Lien with the

moneys withheld, and for purposes of this Agreement such moneys shall be deemed

to have been paid to Contractor hereunder.

Lien Releases for Final Payment. In addition, Contractor shall deliver to Owner (i)

a final release and waiver of Liens, in each of the forms of Exhibit N and M with

respect to the Final Payment received by Contractor, and (ii) from each Major

Subcontractor (and for each other Subcontract with a value of $250,000 or more) a

final release and waiver of Liens, in each of the forms of Exhibit N and M with

respect to the final payment received by each such Subcontractor, in each case

within thirty (30) days after the date on which such Final Payment is made to

Contractor and such final payment is made to each such Subcontractor, as

applicable.


PAYMENT TERMS

Payment or Use Not Acceptance. No payment to Contractor

hereunder or any use of the Project by Owner shall be deemed to

constitute an acceptance of any of the Work or relieve Contractor of

any of its obligations or liabilities with respect thereto or hereunder.


PAYMENT TERMSContractor Parent Guarantee. On or before the Effective Date, Contractor shall

deliver to Owner the guarantee of Guarantor…in a form mutually agreeable to

Owner and Contractor…ensuring the full and faithful payment and performance of

all of Contractor’s obligations hereunder. The Contractor Parent Guarantee shall

be terminated if and when Contractor delivers the Bonds described in Section

4.7.2….

Additional Performance Security. Upon Owner’s request and at Owner’s

expense, as provided below, and so long as both the face amount and the cost of

issuance are based on one hundred percent (100%) of the Contract Sum,

Contractor shall obtain and provide, for the benefit of Owner (and assignable to the

Financing Parties), a payment bond in the form of Exhibit U-1 and a performance

bond in the form of Exhibit U-2, in each case, issued by a surety rated A or better

by A.M. Best, each in an amount equal to one hundred percent (100%) of the

Contract Sum…as security for Contractor’s payment and performance of its

obligations hereunder; provided, however, that neither the delivery nor the amount

of any Performance Security will limit Contractor’s liability hereunder. Contractor

shall be entitled to recover the actual cost of such Bonds through a Scope Change

Order submitted in accordance with Article 12; provided, however, Owner’s request

under this Section 4.7.2 shall be made within sixty (60) days after the Effective

Date and the cost of the Bonds recoverable by Contractor shall not exceed…


PROJECT TIME, SCHEDULE &

COMPLETION

• Time for performance

– Target date

– Guaranteed date

• Schedule

– Baselines schedule

– Updates

– Technical requirements

• Schedule specifications


PROJECT TIME, SCHEDULE &

COMPLETION

• Completion milestones

– First fire

– Mechanical Completion

– Performance Testing

– Substantial Completion

– Final Completion

• Early commercial operations

• Delay and delay LD’s

• Early completion bonus


TIME FOR PERFORMANCE

Contractual Target Substantial Completion Date. Contractor shall

perform the Work with the objective that the Substantial Completion

Date for each Unit will occur on or before the Contractual Target

Substantial Completion Date for such Unit.

“Contractual Target Substantial Completion Date” means, for each

Unit, the date to be agreed and set forth as such in Appendix D,

calculated in each case as a number of Days after the

Commencement Date; as such dates may be adjusted pursuant to this

Agreement.


PROJECT SCHEDULE

Within forty-five (45) days after the Effective Date, Contractor shall

develop and provide to Owner (i) for Owner’s Approval, an initial level

3 Project construction and design schedule,…and (ii) an initial project

execution plan…. Contractor shall construct and install the Work

expeditiously and in accordance with such plan and the requirements

of this Agreement. Contractor shall meet or achieve each critical path

milestone noted as such on the Project Schedule no later than the date

set forth opposite such milestone on such Project Schedule (as such

date may be changed if the Project Schedule is amended from time to

time in accordance with this Agreement).

Contractor shall furnish to Owner (i) revised Project Schedules when

and if necessary…(ii) regularly updated schedules of the Work

supplementing the Project Schedule, (iii) weekly work plans and

schedules for the next three weeks of activities being performed at the

Project Site, and (iv) Monthly Progress Reports of actual progress of

the Work as provided in Appendix W of the Scope of Work….


PROJECT SCHEDULE

The performance of the Work shall proceed in accordance with the

Project Schedule and Contractor shall coordinate and incorporate the

schedules of all Subcontractors into the aforementioned schedules,

work plans and progress reports. Contractor shall update the Project

Schedule on a monthly basis as the Work progresses, including the

incorporation of delay and acceleration analyses where appropriate.


COMPLETION MILESTONES

• Mechanical Completion

• Performance Testing

• Substantial Completion

• Final Completion


MECHANICAL COMPLETION

• Mechanical Completion means what the

contract says it means



6.2.1. Criteria for Mechanical Completion of the Units. Each of the

following conditions must be met for “Mechanical Completion” of a Unit

to occur:

6.2.1.1. Contractor has performed or provided the design, engineering,

procurement, permitting (in respect of Contractor Permits only),

construction and installation of such Unit in accordance with this

Agreement and manufacturer’s requirements, including: (a) the

installation of the Unit, and Equipment and Materials related to such

Unit on foundations, (b) the connection of all such Equipment and

Materials related to such Unit to other applicable Equipment and

Materials as required by way of piping, wiring, controls, and safety

systems, and (c) ensuring that, with respect to such Unit the specific

items set forth in Appendix A and in clauses (i) – (iii) below have been

achieved:

(i) all Equipment is checked out in accordance with Professional

Standards and Turnover Acknowledgements for every System and

Area have been issued, in each case to the extent required by

Prudent Industry Practices for start-up and commissioning;



ii. with respect to Unit 1, all of the Common Facilities required for Unit

1 operation have been completed and are ready for initial

operation; and with respect to Unit 2, all of the Common Facilities

have been completed and are ready for operation; and

iii. an initial Unit 1 Punch List or Unit 2 Punch List, as applicable, has

been provided by Contractor.

6.2.1.2. Contractor has completed the Work necessary to cause the

Unit to be capable of operating safely and in accordance with

Applicable Legal Requirements and Prudent Industry Practices.

6.2.1.3. Contractor has completed the classroom training of Owner

provided Personnel designated for operating and maintenance, as

required by Appendix A.

6.2.1.4. A draft Facility Manual, including vendor manuals related to the

applicable Unit, has been provided as required by Appendix A.


MECHANICAL COMPLETIONSample Clause #2

“Mechanical Completion” shall occur when: (a) the Project is

mechanically and electrically complete; (b) except for minor

items of Work that would not affect the safety and/or

performance or operation of the Project, all materials and

equipment (including the Owner Furnished Equipment)

required to be installed pursuant to this Agreement have been

installed in accordance with the Scope of Work, calibrated,

loop checked and checked for alignment, lubrication, rotation

and hydrostatic and pneumatic pressure integrity; (c) all

Commissioning tests required pursuant to Section 6.1 have

been successfully completed; (d) all such equipment and

Systems have been installed in a manner that does not (i)

void any Subcontractor or vendor warranties relating to such

equipment or Systems or (ii) violate any Governmental

Approvals or Applicable Laws…



...(e) all equipment and facilities that are necessary for the full,

safe and continuously reliable operation of the Project have

been properly constructed, installed, insulated and protected

where required for such operation, and correctly adjusted, and

the Project as a whole can be used safely in accordance with

the requirements of this Agreement; (f) all Systems necessary

for power generation are ready to commence Performance

Tests and operations; (g) the Distributed Control System is

operational and the CEMS has been installed, calibrated and

is fully functional (but need not be certified); (h) the O&M

Manual has received Owner’s Written Approval; and (i) the

initial Punch List has been agreed upon by Owner and

Contractor.



EPC Contractor shall provide written notice to Owner when

(A) EPC Contractor has completed all Work relating to the

installation of necessary components and systems (except

for those items set forth in Exhibit Z (Work After

Substantial Completion) or as to additional Punch List

items as provided in Section 7.5.5); (B) the Facility is

mechanically and electrically complete; (C) the Facility's

equipment may be operated without damage to the Facility

and without injury to any person; and (D) all System

Turnover Packages required pursuant to Section 6.1.2

(Facility Start Up and System Start Up) and necessary to

support start-up testing for the Facility have been

submitted to Owner.


• Testing to confirm performance

• Emissions and regulatory compliance

testing

• Satisfaction of minimum performance

guarantees

PERFORMANCE TESTS


SUBSTANTIAL COMPLETION

• Stage in progress of work when the EPC

Contractor has satisfied the requirements of

Substantial Completion as set forth in the

EPC Contract



Substantial Completion shall be deemed to have occurred when all

of the following have occurred:

a. EPC Contractor has achieved Mechanical Completion.

b. Successful completion of the Performance Tests as described in

Section 7.1 (Performance Tests) and Exhibit J (Performance

Guarantees and Performance Tests) or alternatively, satisfaction of

requirements for occurrence of Substantial Completion at Reduced

Performance Standards pursuant to Section 9.3 (Occurrence of

Substantial Completion at Reduced Performance Standards) and

payment of any applicable Delay Liquidated Damages, Buydown

Damages and Additional Liquidated Damages (or, to the extent

provided in Section 9.3.2, the posting of security for the payment of

such amounts) as set forth in Section 9.2 (Payment of Delay

Liquidated Damages) and Section 9.3 (Occurrence of Substantial

Completion at Reduced Performance Standards).



c. Owner has received all reports and information to be provided to it

by EPC Contractor as described in Section 6.1 (Facility Start Up and

System Start Up) and Exhibit J (Performance Guarantees and

Performance Tests).

d. Owner has received all permits, licenses, and approvals required

to be obtained by EPC Contractor under this Agreement.

e. All O&M manuals and special tools required to operate and

maintain the Facility (other than those provided by Owner Furnished

Equipment suppliers) have been acquired by EPC Contractor and

delivered to Owner.

f. EPC Contractor has satisfied its obligation to provide an

orientation and training program pursuant to Section 12.1

(Orientation and Training Program).

g. The Punch List has been established in accordance with Section

6.1 (Facility Start Up and System Start Up).



7.5.7. Unless expressly assumed by Owner at an earlier date, care,

custody, control and risk of loss of the Project shall become the

responsibility of Owner upon the issuance of the Notice of

Substantial Completion (so long as all requirements of Substantial

Completion have in fact been satisfied) or the earlier termination of

this Agreement, provided that EPC Contractor shall continue to

perform Work on Punch List items, warranty claims, or any other

Work to achieve the Performance Guarantees.

“Care, Custody, & Control”



“Substantial Completion” shall be achieved if and only if with respect

to the Project as a whole:

(a) Mechanical Completion of the Project has been achieved;

(b) all requirements of Mechanical Completion that were waived by

Owner until Substantial Completion have been completed;

(c) Contractor has performed all of the Work, other than any

uncompleted items on the Punch List that do not affect the safe and

continuous operation of the Project;

(d) Contractor has concluded all Performance Tests of the Project

demonstrating that at least the Minimum Project Performance

Guarantees and the Project Reliability Guarantee have been

achieved and has delivered all required reports and test results

relating to such Performance Tests to Owner;

(e) all undisputed Late Completion Payments due under Article 7

have been paid as required;

(f) the CEMS is fully operational and has been certified…

Sample Clause #2


EARLY COMMERCIAL OPERATIONS

Commercial Operations Prior to Substantial Completion. Notwithstanding

any other provision of this contract, the owner shall have the right to cause

commercial operations of one or more combined cycle combustion turbine-

steam turbine-heat recovery steam generator units (“unit” or “units”) to

commence prior to the facility turnover date to the extent that the unit is

capable of safely generating electric energy as follows:

The owner may commence commercial operations of one or more units or

with respect to the facility prior to the date of substantial completion, unless

the contractor reasonably objects to such operation for safety reasons. To the

extent that substantial completion or final completion requires further

performance tests after commercial operations have commenced, the owner

shall cooperate, or shall cause the operator to cooperate, in the performance

of such performance tests; provided, however, that performance tests to

accomplish final completion or performance guarantees shall be subject to

the owner’s commercial operations requirements. The contractor shall be

entitled to an equitable adjustment, pursuant to a change order, (i) to the

performance test results to account for degradation of the unit(s) from

commercial operations of the unit(s) through substantial completion and

(ii) for cost, schedule, or other relief, in each case, as may be appropriate

under the circumstances.


FINAL COMPLETION

• Stage in progress of work when the EPC

Contractor has satisfied the requirements

of Final Completion as set forth in the EPC

Contract

Credit: jayneandd


DELAYS

• Types of delays

– Excusable

– Compensable

– Concurrent

– Inexcusable

Credit: Graham Richardson


EXCUSABLE DELAY

“Force Majeure Event” means any event or circumstance which wholly

or partly prevents or delays the performance of any material obligation

arising under this Agreement, but only if and to the extent (i) such event

is not within the reasonable control, directly or indirectly, of the Party

seeking to have its performance obligation(s) excused thereby, (ii) the

Party seeking to have its performance obligation(s) excused thereby has

taken all reasonable precautions and measures in order to prevent or

avoid such event or mitigate the effect of such event on such Party’s

ability to perform its obligations under this Agreement and which by the

exercise of due diligence such Party could not reasonably have been

expected to avoid and which by the exercise of due diligence it has been

unable to overcome, and (iii) such event is not the result of the

negligence or the failure of, or caused by, the Party seeking to have its

performance obligations excused thereby. Events that, subject to the

foregoing, could qualify as Force Majeure Events include flooding,

tsunami, lightning, landslide, earthquake, fire, drought, explosion,

epidemic, quarantine, hurricane, tornado, other natural disaster, war

(declared or undeclared), riot or similar civil disturbance, acts of the

public enemy (including acts of terrorism), blockade, insurrection…


COMPENSABLE DELAY

• EPC Contractor gets time and money


COMPENSABLE DELAY

10.1 Changes. Without invalidating this Agreement, by issuance of a

written order,…changes to the Work or the Facility may be made,… [I]f

and to the extent that a Change Event causes Contractor to suffer a

delay in the critical path of the Work, increases Contractor’s costs in

performing the Work or otherwise increases the costs of the Facility,

impacts the ability of the Facility to achieve the Performance Targets, or

adversely impacts Contractor’s ability to perform any of its other

material obligations under this Agreement, then Owner shall, by Change

Order, equitably adjust the Target Contract Dates in accordance with

Section 10.4, equitably increase the Target Price in accordance with

Section 10.5,…and/or equitably adjust the Performance Targets or other

obligations of Contractor so adversely impacted.


INEXCUSABLE DELAY

• EPC Contractor is liable for delay


INEXCUSABLE DELAY

Contractor shall perform the Work so as to achieve Substantial

Completion not later than the respective Substantial Completion

Dates Guaranteed (the “Schedule Guarantee”). Contractor

understands that if Substantial Completion is not achieved by the

Substantial Completion Date Guaranteed, Owner will suffer

substantial damages, including additional interest and financing

charges, and other operating and construction costs and charges.

Therefore, Contractor agrees that if Substantial Completion is not

achieved by the respective Substantial Completion Date

Guaranteed, Contractor shall pay to Owner as liquidated damages

and not as a penalty, Delay Damages as set forth in Exhibit E, Delay

Damages, Interim Damages, Performance Liquidated Damages and

Buy-Down Amounts.


2.3.3.1 Preparation. If, at any time during the performance of the

Work, Contractor is delayed in its adherence to the progress

described in the Project Schedule for any reason such that any

Target Contract Date is reasonably expected to be delayed,

Contractor shall give Notice to Owner and Owner may require

Contractor to prepare a proposed plan of recovery (the “Recovery

Plan”) and implement it. A Recovery Plan will explain and

demonstrate how Contractor intends that the applicable Target

Contract Dates should be achieved (and the estimated cost thereof),

if practicable, or as soon thereafter as possible if not practicable.

2.3.3.2 Review; Implementation. Contractor shall submit its initial

proposed Recovery Plan to Owner within a reasonable period of

time under the circumstances and in no event to exceed thirty (30)

Days of receiving Notice from Owner of the requirement for

submission of a Recovery Plan. Upon receipt of such proposed

Recovery Plan, Owner shall review and comment upon the same.

Contractor shall coordinate with and consider any comments…

INEXCUSABLE DELAY - RECOVERY PLAN


…proposed by Owner to its proposed Recovery Plan and shall

update and supplement such Recovery Plan as quickly as possible

under the circumstances. Upon Owner’s written request, Contractor

shall implement such Recovery Plan in order that, to the maximum

extent possible, the Target Contract Dates will be achieved. If

Contractor determines it necessary to update or modify its Recovery

Plan to reflect the progress of its recovery Work, it shall as soon as

reasonably possible submit such modified or updated Recovery Plan

to Owner. Neither Owner’s review nor comment upon a Recovery

Plan under this Section 2.3.2, nor Contractor’s efforts to adhere to a

Recovery Plan, shall constitute grounds for a Change Order or

relieve Contractor of any of its obligations under this Agreement.

INEXCUSABLE DELAY - RECOVERY PLAN


DELAY LIQUIDATED DAMAGES

7.2.1. Late Completion Payment. If Substantial Completion does not

occur on or before the Guaranteed Substantial Completion Date,

Contractor agrees to pay to Owner, as liquidated damages and not as a

penalty One Hundred Thousand Dollars ($100,000) per day (or portion

thereof) for each day by which Substantial Completion occurs later than

the Guaranteed Substantial Completion Date (such amount, the “Late

Completion Payments”).

7.2.2. Liquidated Damages Reasonable. Owner and Contractor

acknowledge and agree that the terms, conditions and amounts fixed

pursuant to this Section 7.2 for the Late Completion Payments are

reasonable, considering the anticipated damages that Owner will suffer

in the event of Contractor’s failure to achieve Substantial Completion by

the Guaranteed Substantial Completion Date. The amounts of these

liquidated damages are agreed upon and fixed hereunder because of the

difficulty of ascertaining the exact amount of damage that will be actually

incurred by Owner for late Substantial Completion, and Owner and

Contractor agree that the liquidated damage amounts specified herein

shall be applicable… regardless of the amount of such damages actually

incurred by Owner.


DELAY LIQUIDATED DAMAGES

7.2.3. Payment of Liquidated Damages. Promptly after the end of

each month in respect of which Late Completion Payments are

payable, Owner shall provide Contractor with a statement showing

Owner’s calculation of the Late Completion Payments that are then

payable, and Contractor shall pay such undisputed Late Completion

Payments within fifteen (15) Business Days of receipt of such

statement until Substantial Completion is achieved; provided,

however, that the failure to deliver such statement shall not affect

the liability of Contractor for the amount of the Late Completion

Payments and payments shall continue to accrue and be payable

notwithstanding the failure to deliver such statements.


EARLY COMPLETION BONUS

4.6 Early Schedule Bonus. Contractor shall earn an Early Schedule

Bonus for the period of time, if any, by which any Substantial Completion

(Unit) occurs before the applicable Substantial Completion Date

Guaranteed as provided in this Section 4.6. The Early Schedule Bonus

shall be calculated for each Day by which Substantial Completion

precedes the applicable Substantial Completion Date Guaranteed in an

amount calculated pursuant to Exhibit F, Schedule and Performance

Bonuses. Any Early Schedule Bonus shall be payable by Owner only out

of Owner's Net Revenues on each Day prior to the Substantial

Completion Date Guaranteed for which an Early Schedule Bonus has

been earned. No payment shall be made for fractional Days. Such

bonus, if any, shall be paid as set forth in Section 13 .4.

4.7 Early Completion Bonus. Contractor shall earn an Early Completion

Bonus for achieving any Substantial Completion (Unit) or Substantial

Completion (Facility) before the applicable Substantial Completion Date

Guaranteed in an amount calculated pursuant to Exhibit F, Schedule and

Performance Bonuses. Such bonus, if any, shall be paid as set forth in

Section 13.4.


• Provides damages for EPC Contractor’s

failure to satisfy minimum performance

guarantees

Credit: Tax Credits

PERFORMANCE LIQUIDATED DAMAGES


CHANGES CLAUSE

• Grants right to issue changes in the Work

• Obligates Owner and entitles EPC

Contractor to an “equitable adjustment” to

compensate for additional cost and time

caused by a change

Credit: Matt Brown


WARRANTY

• EPC Contractor’s warranty obligations

• OEM warranty

Credit: Andrew Cosand


EPC CONTRACTOR WARRANTY

9.1 General Warranty of Work, Materials and Equipment. Contractor

hereby warrants to Owner that: (a) the Work will be designed, furnished, and


with the provisions of this Agreement and all Applicable Legal Requirements;

(b) the Work will be free from Defects in workmanship and material; and (c) all

Contractor Equipment and Materials provided by Contractor will be new and

unused at the time of their delivery to the Facility Site….

9.4 Contractor’s Warranty Work. If Owner gives Contractor Notice of a

Warranty Defect during the one (1) year Warranty Period, Contractor shall, at

its sole expense, promptly correct such Warranty Defect by repair or

replacement at Contractor’s sole option, which repair or replacement will

include all access and restoration Work associated therewith…. The plan for

the repair or replacement of a Warranty Defect shall be made in consultation

with Owner and Contractor shall schedule any Work in respect of the Warranty

Defect during off peak hours consistent with Owner’s operating requirements

so as to minimize, to the maximum possible extent, loss of production or use of

any portion of the Facility. Contractor shall use…

9.1 General Warranty of Work, Materials and Equipment. Contractor

hereby warrants to Owner that: (a) the Work will be designed, furnished, and


with the provisions of this Agreement and all Applicable Legal Requirements;

(b) the Work will be free from Defects in workmanship and material; and (c) all

Contractor Equipment and Materials provided by Contractor will be new and

unused at the time of their delivery to the Facility Site….

9.4 Contractor’s Warranty Work. If Owner gives Contractor Notice of a

Warranty Defect during the one (1) year Warranty Period, Contractor shall, at

its sole expense, promptly correct such Warranty Defect by repair or

replacement at Contractor’s sole option, which repair or replacement will

include all access and restoration Work associated therewith…. The plan for

the repair or replacement of a Warranty Defect shall be made in consultation

with Owner and Contractor shall schedule any Work in respect of the Warranty

Defect during off peak hours consistent with Owner’s operating requirements

so as to minimize, to the maximum possible extent, loss of production or use of

any portion of the Facility. Contractor shall use…



…reasonable commercial efforts to conduct its Work associated with

a Warranty Defect on a timely basis (with overtime if appropriate) if

Owner reasonably determines that an expedited schedule is

necessary to avoid or minimize the effects of an outage or load

reduction. Contractor shall bear all costs and expenses associated

with correction of any Warranty Defect notified to Contractor during

the applicable Warranty Period, which amounts do not constitute

Reimbursable Costs. Such costs shall include the costs of necessary

disassembly, transportation, reassembly, retesting, reworking, repair,

or replacement of such Warranty Defect, engineering, and the costs

of testing reasonably required to verify that the repaired or replaced

Work conforms to the applicable warranties and the requirements of

this Agreement. Contractor shall collect and assemble all warranty

documents and deliver them to Owner prior to the expiration of the

applicable Warranty Period or termination of this Agreement,

whichever is earlier….



11.2 Remedies. Upon proper Notice received from Owner during the

Warranty Period, Contractor shall, in a timely manner, without additional

compensation:

(a) Design and Engineering: Re-perform correctly any engineering or

design Work that does not satisfy all of the warranties set out in Section 11.1

and perform or cause to be performed remedial construction work or rework

that is required to effect such re-performed engineering or design Work;

(b) Construction: Re-perform or cause to be re-performed any construction

Work that does not satisfy all of the warranties set out in Section 11.1;

(c) Equipment and Materials: Take such steps as may be necessary to

repair or replace any Equipment or materials which do not comply with all of

the warranties set out in Section 11.1 ; and

(d) Damage Repair: Be responsible for all “in and out” costs necessary to

determine the need for, and to secure access to and perform, remedial Work.

Sample Clause #2


LIMITATION OF LIABILITY

9.1 Limitation of Certain Liabilities. The Contractor’s liability to Owner under

this Agreement for Late Completion Payments and Performance Guarantee

Payments paid shall not exceed twenty percent (20%) of the Contract Sum.

Without limitation on any other provision of this Agreement, in no event shall (a)

Contractor’s liability under Article 7 for Late Completion Payments exceed fifteen

percent (15%) of the Contract Sum or (b) Contractor’s liability under Article 8 for

Performance Guarantee Payments exceed fifteen percent (15%) of the Contract

Sum. The total liability of Contractor relative to or arising out of this Contract

shall not exceed an amount equal to one hundred percent (100%) of the

Contract Sum; provided, that the foregoing limitation shall not apply to or include:

(a) the proceeds of insurance obtained (or required to be maintained) by

Contractor in accordance with the terms of this Agreement, up to the coverage

limits specified in Article 14 (Insurance);

(b) costs, liabilities or obligations which arise from willful misconduct or actual

fraud of Contractor or any Subcontractor;

(c) Contractor’s breach of its obligations in Section 10.5 (No Liens); or

(d) Contractor’s third party indemnity obligations under Article 13

(Indemnification).


LIMITATION OF LIABILITY

9.2 CONSEQUENTIAL DAMAGES. NEITHER OWNER NOR CONTRACTOR

NOR ANY CONTRACTORS OR AGENTS OF EITHER PROVIDING

EQUIPMENT, MATERIALS OR SERVICES FOR THE PROJECT SHALL BE

LIABLE TO THE OTHER OR ANY OF ITS CONTRACTORS OR AGENTS FOR

CONSEQUENTIAL DAMAGES, AND OWNER AND CONTRACTOR EACH

HEREBY RELEASES THE OTHER AND ITS CONTRACTORS AND AGENTS

FROM ANY SUCH LIABILITY. THE FOREGOING EXCLUSION SHALL (I) NOT

PRECLUDE RECOVERY, WHERE APPLICABLE, OF LIQUIDATED DAMAGES

PURSUANT TO SECTION 7.2, 8.1 OR 8.2, AND (II) NOT BE CONSTRUED TO

LIMIT RECOVERY UNDER ANY INDEMNITY IN ARTICLE 13 IN RESPECT OF

THIRD PARTY CLAIMS FOR DAMAGE TO OR DESTRUCTION OF

PROPERTY OF, OR DEATH OF OR BODILY INJURY TO, ANY PERSON.

9.3 Further Limitation of Liability. The limitations of liability and the exclusions

of consequential damages set forth herein shall apply irrespective of whether a

Party or any affiliate thereof, or any partner, shareholder, officer, director or

employee of a Party or an affiliate thereof, asserts a theory of liability in contract,

tort, negligence, misrepresentation (including negligent misrepresentation), strict

liability or any other theory of liability.


SUSPENSION

• Grants Owner limited right to suspend or

delay Contractor’s performance of work

• Typically may limit Contractor to an

“adjustment” (not “equitable adjustment”)

• EPC Contract may provide Contractor right

to terminate if suspension exceeds a certain

period, e.g. one hundred eighty (180)

consecutive days


TERMINATION AND DEFAULT

• Sets forth rights and obligations of Owner

and EPC Contractor with respect to

terminating the contract

• Clauses typically include:

– Events of Default

– Termination for Convenience

– Termination for Default

Credit: Grant Hutchinson


OWNER’S RIGHT TO PERFORM

In addition to Owner's right to suspend or early terminate this

agreement, as set forth at Section 17.5, (Suspension or Termination

Upon Event of Default), if there exists an Event of Default by EPC

Contractor, Owner has the right to (i) immediately step-in and

complete deficient Work or perform the Work described in the

Recovery Plan or (ii) direct EPC Contractor to complete deficient

Work or perform the Work described in the Recovery Plan or as is

otherwise necessary or appropriate to remedy the Event of Default.


TERMINATION FOR CONVENIENCE

• Provides Owner with right to terminate the

contract for its “convenience”

• Limits Contractor’s recovery to costs

incurred prior to termination, plus

reasonable profit for work performed to

date of termination, and costs related to

termination



15.1 Termination For Convenience. Owner may, for any reason or

no reason, at its convenience terminate this Agreement after giving

notice to Contractor as described below, in which event Contractor

shall be entitled to be paid the Termination Payment under Section

4.4. Any termination by Owner pursuant to this Section 15.1 (a

“Termination For Convenience”), shall be effective on the date

specified in the notice of termination given to Contractor.

4.4.1. Termination Payments Due to Contractor. Upon a

termination of this Agreement pursuant to Section 15.1, Contractor

shall be entitled to a payment (the “Termination Payment”) equal to

the sum of (i) that portion of the Contract Sum applicable to the

percentage of the Work completed up to the date of termination and

which has not previously been paid to Contractor, (ii) the

documented direct, out-of-pocket costs reasonably incurred by

Contractor in withdrawing its equipment and personnel from the

Project Site and in otherwise demobilizing, (iii) the documented…



…direct, out-of-pocket costs reasonably incurred by Contractor in

terminating contracts with Subcontractors, and (iv) three percent

(3%) of the amounts described in clauses (ii) and (iii) to cover all of

Contractor’s claims for overhead, profit and other expenses;

provided, however, that Owner may, at its option, pay any

termination costs under any Subcontracts or other supply

agreements directly to the applicable Subcontractor or supplier, in

which event such amounts shall not be subject to clause (iv).

4.4.3. Termination Payment Contractor’s Sole Remedy. Payment

of the Termination Payment shall be the sole and exclusive liability of

Owner, and the sole and exclusive remedy of Contractor, with

respect to termination of this Agreement under Section 15.1, and

Owner shall have no further liability to Contractor, notwithstanding

the actual amount of damages that Contractor may have sustained

in connection with such termination. Calculation of the Termination

Payment has been agreed upon and fixed hereunder because of…


AVOIDING AND MANAGING CLAIMS

• Disputes are caused by:

– Failure to plan for the unexpected

– Poor risk management/allocation

– Unreasonable expectations/budget

– People

Credit: Robert Lowe


TEN COMMANDMENTS

OF CLAIMS AVOIDANCE

1. Claims avoidance begins at project

conception

2. Selecting the “right” EPC project delivery

system and commercial model

3. Reasonable budget

4. Adequate contingency

5. Clear scope of work

6. Clear delineation of responsibilities


TEN COMMANDMENTS

OF CLAIMS AVOIDANCE

7. Achievable contract schedule

8. Achievable performance guarantees

9. Real time project management and

problem solving

10. Be reasonable


DISPUTES

• Establishes mechanism for resolving

disputes arising under or relating to the

contract

• Requires EPC Contractor to continue

performing during dispute resolution

process

• Multiple levels of dispute resolution

– Executive level conference

– Mediation


DISPUTES

– Arbitration

• Institutional or ad hoc

– Litigation

• Forum

• Waiver of jury trial


• Understanding the dispute process

– Claims, Disputes, Arbitration, Litigation – not all

that it’s cracked up to be

– Time consuming

– Costly

– Risky

DISPUTE RESOLUTION PROCESS


• Dispute resolution process

– Executive Management Meeting

– Mediation

– Arbitration

– Litigation

DISPUTE RESOLUTION PROCESS


• Non-binding marriage counseling for business

people

• Parties determine their own fate

• Experienced facilitator

• Efficient

• Economical

MEDIATION

Credit: Roy Blumenthal


• Forum selected by parties in contract

• Federal Arbitration Act

• Arbitration Forums

– American Arbitration Association

– JAMS

– Private

ARBITRATION

Credit: Vihula Manor


• Myths of arbitration

– Faster

– Cheaper

– Better

• Discovery can be limited

• No “real” appeal

ARBITRATION


• In court before judge and/or jury

• State or federal court

• Established rules of procedure and evidence

• Discovery process

• Opinion or verdict

• Right of appeal

LITIGATION

Credit: Tori Rector