CONTRACT EXECUTION AND PROJECT MANAGEMENT: THE IN-HOUSE COUNSEL PERSPECTIVE Ludvica Pardi Head f Legal GBS & ICT Lndn, September 4, 2014
Internatinal Cnstructin Cntracts Definitin Cntents The Engineering Cntract The New Types f Engineering Cntract The insurace clause and the claim Case study 2
Internatinal Cnstructin Cntract: Definitin Elements f the cntract are similar t thse f natinal cnstructin cntracts required under the varius jurisdictins The cntract has t be executed in a freign state, ther than the natinal state f the cntractr, in mst cases in emerging cuntries The wner is a public entity belnging t the state where the cnstructin cntract is perfrmed The cntractr is a multinatinal cmpany having its headquarters in an industrial cuntry The scpe f the cnstructin cntract is a cmplex wrk 3
MAJOR CONTRACT TERMS AND CONDITIONS Identificatin f the parties Identificatin f the wrk r services t be prvided Hw may the Owner check that Cntractr s perfrmance cmplies with the cntract? Definitin f time at which the cntractr is expected t cmplete Price and payment Cnsequences f any failure t perfrm a party s bligatin Limitatin f liability Suspensin and terminatin clauses Insurances fr damage t wrks and injury t persns Intellectual prperty rights and wnership f the plant Security package Frce majeure Claims and disputes reslutin Applicable law Bilerplate r standard clauses 4
The Engineering Cntract The cntractr is respnsible fr i) the entire prject - frm design thrugh cnstructin and testing r ii) realizatin f a prject elabrated by ther parties, plus technical assistance, if any The wner is respnsible fr paying the price plus ryalties, if any Tw types f engineering cntract: i) cnsulting engineering: the scpe is the prject f the wrks ii) cmmercial engineering: the scpe is the prject, executin, management and maintenance f the wrks 5
The New Types f Engineering Cntracts Turn Key Cntract The wner requires the general cntractr t execute a prject with a guarantee n the csts, time and perfrmances theref, plus in sme cases, the prject financing Based n the different methd f payment: i) Lump sum the cntractr agrees t prvide specific services fr a fixed price undertaking all risks related t time and csts f the prject ii) Cst plus fee - the wner pays the cntractr the actual cst f the cnstructin (based n cmpetitive bids fr each trade subcntract) plus certain reimbursable expenses withut any prfit mark-up, and is charged a fixed fee by the cntractr fr the services prvided iii) Unit price - the wrk t be perfrmed is brken int varius parts, usually by cnstructin trade, and a fixed price is established fr each unit f wrk Open Bk The parties define the cntract price and schedule n negtiated and transparent basis, fllwing a preliminary phase f basic design and csts estimate 6
The insurace clause and the claim Insurance Clause Cntract Management Claims Management In huse cunsel rle An Enel case 7
Insurance clause Enel shall cntract and maintain until the executin f the Prvisinal Acceptance Certificate with a reputable, internatinally recgnized insurance cmpany an Erectin All-Risks Insurance plicy. The franchise amunts set ut in such insurance plicy shall be paid by Enel as well as additinal premium, penalties and ther amunts t be paid in relatin t such plicy. The afre mentined insurance s csts shall be included in the Prvisinal Frecast Cst Bk f the prject. With respect t the Scpe f Wrk under the Cntract, the beneficiaries f the plicy will be the Emplyer, Enel and the subcntractrs that take part in the perfrmance f the wrks and services under the Cntract. Enel shall require its subcntractrs t maintain in frce all their labr accident and plicies cvering persnnel and civil liability insurance plicies. 8
Insurance Clause EPC: Article 18 FIDIC The insuring Party shall insure the Wrks, Plant, Materials and Cntractr s Dcuments fr nt less than the full reinstatement cst including the csts f demlitin, remval f debris and prfessinal fees and prfit. This insurance shall be effective frm the date by which the evidence is t be submitted under sub-paragraph (a) f Sub-Clause 18.1 [General Requirements fr Insurances], until the date f issue f the Taking-Over Certificate fr the Wrks. The insuring Party shall maintain this insurance t prvide cver until the date f issue f the Perfrmance Certificate, fr lss r damage fr which the Cntractr is liable arising frm a cause ccurring prir t the issue f the Taking-Over Certificate, and fr lss r damage caused by the Cntractr r Subcntractrs in the curse f any ther peratins (including thse under Clause 11 [Defects Liability] and Clause 12 [Tests after Cmpletin]). The insuring Party shall insure the Cntractr s Equipment fr nt less than the full replacement value, including delivery t Site. Fr each item f Cntractr s Equipment, the insurance shall be effective while it is being transprted t the Site and until it is n lnger required as Cntractr s Equipment. Unless therwise stated in the Particular Cnditins, insurances : shall be effected and maintained by the Cntractr as insuring Party, shall be in the jint names f the Parties, wh shall be jintly entitled t receive payments frm the insurers, payments being held r allcated between the Parties fr the sle purpse f rectifying the lss r damage, shall cver all lss and damage frm any cause nt listed in Sub-Clause 17.3 [Emplyer s Risks], 9
Insurance Claims must be Valid Submitted n time, in cmpliance with the time bar prvisins Cmplete, i.e. cntain descriptin f events cntract and legal references impact n time and csts all prperly dcumented 10
Cntract Management / Claim Management Quantity surveyr Cntract manager Cntract administratr Cntract engineer Legal Cunsel 11
Invlvement f In-huse Cunsel Cnsultive task frce n the rle f the parties and in-huse cunsels in Insurance Claims T encurage the parties t seek agreement n tailr-made prcedures fr each insurance claim that are time and cst effective, having regard t the cmplexity and the value f the dispute T prduce a dcument t assist internal party representatives, in particular inhuse cunsel, in participating effectively in a tailr made prpsal fr a settlement f the insurance claim. In case the cntractr is a cnsrtium r a JV invlving different parties assist internal party representatives fr the determinatin f the allcatin f the liabilities. Any disbursement f the prceeds f the claim payable t ne party is t be dealt with by the ther party withut further reference t Insurers. In case f settlement Insurers are irrevcably released frm any further bligatins r claims arising ut f the claim by any party whatsever. Reclassified as by.the infrmatin cntained in this dcument is the prperty f Enel SpA and must be used by the recipient nly fr the purpses fr which it was received. It may nt be cpied r disclsed in any way withut the explicit permissin f Enel SpA. 12
Majr Activities f an In-huse Cunsel with Respect t Insurance claims Decide whether t submit the claim t the Insurer : prs and cns Manage varius steps f claim prceedings until the reimbursement, cnsisting inter alia f: Careful studying f the case (parties, facts, law and prcedure) Instructing the internal client n the verall strategy f the claim with respect t the rights and liabilities related t the EPC and the parties Preparing files and dcuments in the cmpany fr the claim Art f Anticipatin 13
Enel Case: EPC fr cnstructin f a pwer plant in Alfaland Mid February 2000 End May 2000 September 2000 July 2001 Alfa verifies di an interest f Enel, amng thers, t build a pwer plant in Alfaland The Gvernment f Alfaland grants a cncessin t Alfa fr the cnstructin and management f the pwer plant. Enel have been awarded by Alfa the cnstructin f the pwer plant and signed the EPC cntract fr built and cmmissined a Cmbined Cycle Pwer Plant and a Sea Water Desalinatin Plant Enel issued the Purchase Order n. xxx t BETA (in cnsrtium with DELTA SpA) fr the supply (including supervisin fr erectin and cmmissining) f n.2 Steam Turbines and n.2 Generatrs 14
Enel Case: EPC fr cnstructin f a pwer plant in Alfaland February 2005 July 2008 Octber 2008 During cmmissining activities, a STG2 Generatr statr earth fault incident (the Incident ) ccurred; The Parties respnded t the Incident by duly repairing the STG2 Generatr incurring csts fr such repair Alfa verifies di interest f Enel, Settlement amng between thers, t the build parties a pwer f the cnsrtium plant in Alfaland n liabilities in relatin t the failure f the genereatr. Reimbursement by the Insurer in full satisfactin & discharge f all claims under Plicy N. xxxyyyy fr lss due t failure f the STG2 Generatr which ccurred n February 2005. 15
Many thanks fr this kind invitatin and yur attentin 16