Contract administration – ugh, really?

Contracts are not for everyone.  They can be complicated, convoluted, repetitive, ambiguous, conflicting, confusing and very, very long.  The meaning can be wrapped up in legal speak, and the intention lost behind a wall of whatsoever’s, thereto’s and_ pursuant’s. _

But in a fully-wrapped EPC contracting arrangement, the contract is the biggest tool at the Employer’s disposal; the biggest weapon in the arsenal.  So if the Employer has a nice weapon at their disposal they should surely know how to use it, right?  Right.

Again, as ever, this post focuses on the technical aspects of EPC contracts.  The legal eagles will be better placed to discuss how and when the contract can be enforced, but here are some ideas for making sure the Employer has a handle on some of their rights and obligations.

Know the content

They run for hundreds of pages, but someone on the Employer’s side should have a good understanding of how the contract conditions translate into project execution.  What should the Contractor be doing right now? Should they be carrying out design works? Should they be submitting these for review?  Should they be developing a programme?  Should they be ordering equipment that will take a long time to deliver?  Should they be making sure that someone is reviewing and signing off on design documents?  Should they be preparing manuals/test plans/quality plans?  Should they be submitting progress reports?  What should these reports contain?

The Employer’s requirements, the programme of works (or project schedule), the milestone schedule, the scope of works, the list of deliverables, the other bits… they should all be providing a clear picture of what the Contractor should be doing and how they should be doing it.

If you don’t know what they should be doing, how can you issue warnings when they’re veering off the intended path?

Know your rights and obligations

So the Contractor thinks you should be approving their design drawings, do they? They think you’re at fault if the design is later found to be non-compliant?  If you know your rights you’ll be able to point them to the part of the contract that tells them that they keep that responsibility until the sun sets on the project.

Alternatively, if you don’t know what’s in the contract, you may miss the fact that you’re supposed to have reviewed a document within two weeks, and after that you have no more say.  Then you may be stuck with an O&M manual that misses the point entirely, and a very confused operator.  Oops.  You may also be required to provide the Contractor with a permit before they can finish some scope of works.

Know the limitations of what you can ask for

The Contractor needs to make sure that the facility is designed and constructed in a way that complies with the contract.  This means that they have the responsibility for interpreting the conditions and responding appropriately.  It doesn’t help if the Employer comes along and says ‘do it like this.’  What if ‘this‘ isn’t ‘that‘ and ‘that‘ was in the contract?  The when the thing blows up and it is found to be from ‘that‘, the Contractor can point to the request and put their hands in the air, decrying any responsibility.

Of if the Employer has someone on site, that person can raise a fuss when they see things being done in a way that hasn’t been agreed, but to ask the Contractor to do something directly, which may impact the progress or cost of the project can be a dangerous move.  Unless that request stops something physically dangerous from happening.

Notify the Contractor of an observation, inform them that this is not in compliance with their requirements, ask them what they intend to do about it, ask them for an assessment on how this may have impacted the project.  But it is for them to come up with a solution.  You can ask them strongly.  With some force.  With a LETTER (gasp).  But putting your foot too deeply into the runnings of a supposedly fully wrapped project can open up a can of liability worms.

Make sure they know what’s what

Belting out your version of what’s in the contract can make you feel contractually superior, but this is has a lot more of an impact if the Contractor has also read the thing.  Reminding them of some deliverable in advance can help prevent you from having to chase them for it later.  It also means that they know that you’re on top of things, and that you won’t be letting them sneak through their obligations.  Having a session at the beginning of the project where people who are involved in seeing the thing through get to sit down and discuss what is expected (and contractually required) of both is useful.  Because you don’t really want the lawyers involved if you can avoid it.