Technical specifications – listing performance obligations for equipment

The contract’s technical specifications (or the Employer’s Requirements) are typically included in a contract schedule, and they list the minimum technical requirements that are to be met by the Contractor in the design, construction, commissioning and operation of the facility.

The most important point in putting these together is that the specs need to be a good balance between detail and not over-specifying technical aspects of the facility.  What this means is that there should be enough defined in the specs to ensure that there is no ambiguity with regards to the Contractor’s obligations, without defining each technical item in its minutiae, to the point where the slightest change in the technical details of the facility requires a contract variation (even if there is no real impact on how the facility will operate).

Let’s consider a bit of a silly example.

Say the contract defines the type, make and manufacturer of the DC cables to be used in a PV facility.  Let’s imagine that ACME inc has an 8mm aluminium cable, model XYZ.  According to the contract, the Contractor is required to use this type of cable for connecting PV modules.

Now imagine that for some reason that one of the following happens:

1. ACME inc goes out of business and are no longer manufacturing cables;
2. The interpretation of local legislations indicate that, after signing the contract, an 8mm cable is not compliant;
3. In operations, it is discovered that this cable is not suitable for the facility design, and there is a risk of overheating/damage; or
4. In operations, it is discovered that the cables have a much higher level of electrical losses associated with it than was anticipated when the cable type was specified.

Now, for scenarios 1, 2 and 3 it is probable that the cable type used would need to be replaced with an alternative make and model.  Clearly if you can’t get it any more, you’d need to find another type, if it doesn’t comply with local regs you can’t use it, and if it presents a danger to the facility’s operation or human safety, it cannot be used.  What this means is that a different cable type would need to be sourced.  Depending on the other terms of the contract (including force majeure with scenario 1), the Contractor may rightly claim that the responsibility for any additional cost or time associated with procuring, installing and testing an alternative cable should be borne by the Employer.

And in scenario 4?  What may come of this is that the overall operation of the facility does not meet the minimum performance requirements.  The Contractor may argue that they were obliged to use the cable specified in the contract, and if they can prove that this is the reason that the facility is underperforming, they may be able to argue their way out of paying performance liquidated damages.

So what to do?  Key components that have been selected based on a review of manufacturer track record, proven equipment performance, stated warranty considerations etc (such as the module type to be used) should be defined in terms of the make and model, as the Contractor should be obliged to procure that specific product.  But for other components, that are not so sensitive, the contract should rather specify the minimum performance requirements that are to be met by the equipment selected by the Contractor.

Should any of the above scenarios occur (outside of any triggering force majeure) the Contractor would be hard pressed to push any time or cost risks onto the Employer.  They should have designed the facility appropriately, selected suitable equipment and carried out energy yield assessments and calculations to ensure that the facility will operate as intended.

Things that should be considered when defining the performance requirements:

• certification requirements required (e.g. IEC/TUV etc)
• manufacturer track record requirements
• compliance with local and/or international standards and regulations
• equipment operational requirements (such as maximum loss allowance/minimum availability obligations etc)