FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY

Fidic Yellow vs SilverFidic Yellow vs Silver

Weero KosterPartnerNorton Rose LLPFebruary 2012

Weero KosterPartnerNorton Rose LLPFebruary 2012

General application• Yellow Book: design/build contract electrical/mechanical

works, including plant supply and construction works; allocation of risk on basis of insurability, project management principles and ability to foresee and mitigate

• Silver Book: fixed-price, date-certain, lump-sum turn-key contract:• Little risk of price increase (but higher price) or delay

for Employer• Shift of risks to Contractor: design and execution

General risk profile: Shift of risks

• Employer’s Engineer is Employer’s Representative• Employer’s ‘determinations’• Setting Out• (No) Unforeseeable difficulties & verification/

interpretation of Employer data (incl. sub-surface, hydrological and Employer Requirements)

• General design obligations, design error

Shift of risks, cont’d

• No extension of Time for Completion for:• exceptionally adverse climatic conditions

(except FM) • unforeseeable shortages in personnel or goods

by epidemic or government actions• Errors in Employer’s Requirements• Setting Out• Unforeseeable physical conditions

Shift of risks, cont’d

• Employer’s Risk excludes:• Use of works by Employer,• Design of works by Employer’s personnel,• Unforeseeable operation of forces of nature

General risk profile: key employer issues

• Contractor fully responsible for design and design coordination (including Employer design)

• Full ground condition risk to Contractor• Employer to retain influence over project• Right to Variations• Limited scope for Contractor claims for time/money;

Contractor will:• Price these risks, so increase initial Contract Sum• Do extensive due diligence to mitigate, leading to

delay in execution

Payment & security: key employer issues

• Fixed price lump sum payments against schedule of payments & Performance Certificate

• Long payment period• No claim for additional time or money for e.g.

Variations/innovations, ‘in country” Force Majeure, Unforeseen ground conditions, setting out or discovery of fossils

• Robust security package: advance payment bond, performance bond, retention of money

• Warranty bond after Taking Over (> 2yrs)

Programme/delay: key employer issues

• Liquidated Damages for delay (10 – 20 %, > ?)• Limited rights for extension of Time for Completion• Suspension by Employer entitles Contractor

extension of time/ costs

Testing and defects, insurance: key employer issues• Suitable testing regime• Employer technical advisors to set

performance/reliability standards and regime for testing/ performance guarantee levels

• Liquidated Damages for performance (10 – 20 %, > ?)• Defects liability period (1 – 2 yrs): default is 1 yr• Liability cap, sub-caps and ‘carve-outs’• Project specific insurance provisions; all insurance

monies go in separate insurance proceeds account for benefit Employer

Permits, change in law, FM: key employer issues• Employer planning, environmental/ Contractor

construction and transport: permit schedule• Change in law after contract signing/ in force,

EH&S developments• Exhaustive FM list ?• Location of FM, “in country” FM: costs in addition

to EOT ?

FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY