Claim management & Dispute Resolution Consultants/Experts in Construction Arbitrations

1. OVERVIEW OF TYPICAL DISPUTES & CLAIMS IN ENGINEERING, PROCUREMENT CONSTRUCTION CONTRACTSPRESENTER- ROHIT SINGHAL Claim management & Dispute Resolution Consultants/Experts in Construction Arbitrations

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3. Contracts with EPC Arrangement • EPC Projects includes engineering, procurement & commissioning works in the scope of the contractor • Contractor is exposed to higher risks when Engineering is part of Contractor scope • The tender/contract generally contains preliminary design drawings and details suitable for estimation of the price

4. EPC-Claims/Risks • How and when these risks/issues are identified and managed will facilitate overall success of the project • Communication and Rationale decision- Key to success • Not all risks can be foreseen, and often it is the unforeseen impacts that create increased distress amongst the parties • Most effective way to resolve these claims/disputes:- • Common doctrine of prevention and/or early recognition • Efficient change management utilizing solid contract documents that identify and allocate the risks amongst the parties • Unfortunately, such idealistic circumstances rarely, if ever occur

5. Typical Claims EPC • Blurred and thin line between Contractor’s responsibilities as per the Scope and what is finally delivered • Disputes can occur because of undeclared and misunderstood differences between the parties • Contractor is likely to favor specific factors in design & procurement process that makes it competitive • Common EPC technical claims:- • Changes in the specifications /Data Sheets • Technical changes resulting in time and cost implications • Challenges:- • Design change or Design development • Unlike, other contracts, contractual provisions make it difficult to put claims

6. EPC Disputes-Typical Issues • Death by thousand cuts • Good FEED vs Bad FEED • Contractor submissions are in conflict with Owner expectations • Owners desires & needs • Lack of coordination between parties • Unrealistic timelines • Contractor’s exposure versus exposure of the critical item vendors • Individuals in position of management powers adopt an approach of individual and/or company preservation ignoring the basis of contract agreement and its fair and reasoned administration and application • Balance of power shifts once the work finishes

7. Typical Contractual Challenges • Owner approval process • FEED verification clause • Details given in the tender are preliminary in nature • Any change in FEED /Tender inputs to be undertaken by the Contractor without any time and cost implication • Notification of the claims • Concurrent delays • Unforeseen conditions • Experienced contractor • Stepped negotiations/settlement

8. Typical Contractual Issues • Extension of Time/Liquidated Damages • Variation in scope • Change in specifications • Incomplete tender data • Non-availability of front/interface related delays • Cash flow problems • Record Keeping • Global Claims • Approval Process of the Drawings/Documents

9. Typical Delay Events • Change Orders- Instructions for Change • Contractor caused delays including inefficiency, lack of resources • Defective and deficient FEED • Interface delays • Delay in approval of drawings/documents/submissions • Front not being released on time • Changes in Owner’s Quality Requirements • Statutory Approvals • Late Delivery of Equipment's and Materials • Variation in estimated quantities • Strikes • Weather Conditions/Force Majeure • Late issuance of Notice to Proceed • Payment Delays • Delays in Owner’s decisions

10. Claims – Types • Typically in EPC - Claims can be bifurcated into:- • Techncial Claims • Commercial Claims • Typical Technical claims:- • Changes in specifications • Technical change orders • Interface related changes • Changes in quantities • Typical commercial claims:- • Liquidated damages related claims • Extention of time compensation claims • Financial claims- BG cost/Insurance cost • Cash flow related claims • Payment Delays • Techncial claims are easier to justify than commercial claims

11. Claims – Key Points • Important aspect in claims management is cause and effect • Global Claims:- • Global claims are not entertained • Global Claims are claims without cause and effect adequately demonstrated • Prolongation claims quantum needs to be backed up suitably and with details • Prolongation claims- Should consist of Time related costs only • Salary slips, equipment details, man power details have to be retained as records • Essential to review Arbitration clauses • Language • Law or location • Venue • Institutional or Adhoc • Selection of arbitrator Key to success • Tender Stage Queries Critical in Arbitration • Unknown and Unforeseen clause supports the claims • Force Majeure – What all is considered as Force Majeure?

12. Types of Delay • Excusable Compensable • Delays that entitles contractor to time and cost and are not attributable to Contractor • Generally due to delays solely attributable to the Owner • Excusable Non-compensable • Delays that allow extention of time to the Contractor with out Liquidated Damages but no additional cost for extention • Generally due to concurrent delays of Owner and Contractor, Force Majuere • Inexcusable Delays • Contractor to be penalised • Are primarily Contractor caused delays • Concurrent Delays • Delays attributable to both Contractor and Owner and taking place concurrently

13. Concurrent Delays- Difficult to Comprehend Under the English Law, the “Prevention Principle” applies to the determination of liability and damages resulting from Concurrent delay. Unless contractually provided otherwise, which is rare, “the essence of the prevention principle is that the promisee cannot insist upon the performance of an obligation which he has prevented the promisor from performing”. The but-for test may also apply, wherein the owner argues that the owner-responsible event relied upon by the contractor in fact caused no delay because the contractor had caused delay to the completion of the works. The defense is that the contractor cannot prove that it would have completed on time “but-for” the owner’s delay.

14. Malmaison Approach on Concurrent Delays • The most significant English case regarding concurrent delay was Henry Boot Construction v. Malmaison 1999. The court found that: “If there are two concurrent causes of delay, one of which is a relevant event [an employer risk event], and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of the other event.”

15. Solution- Delay Analysis • Retrospective Schedule Analysis focuses on comparing baseline, as built or updated schedules to identify and quantify the delays on the critical and near critical path schedules. This analysis is called Delay Analysis • The schedule might be existing or developed and could be in simple excel format or could be in MS Projects/Primavera software formats. • As part of this analysis following steps are undertaken by Expert Delay Analyst:- • Identify the delay events and the duration of the same • Origin and quantification of the delay is done • Identify who is responsible for the delay event with proper screening of the supporting documentation. • Responsible parties could be Owner, Contractor or Third Parties. • Process involves extensive review of the project documentation to analyze and understand the cause and effect relationship attributable to each party. • Useful for both Contractors and Owners- A scientific methodology used for Extension of Time claims

16. Types of Delay Analysis • Based on circumstances, suitable methodology i.e. Time Impact, As-Built But-For, and Windows analysis is adopted; whichconsider planned versus actual durations, labor and equipment resources, means and methods, contractual requirements, as well as the actions and inactions of the parties. • Two standards governing methodology of Delay Analysis’:- • Society of Construction Law Guidelines • Association of Advancement of Cost Engineering-RP

17. EPC Projects- Important Aspects • Communication • Early resolution • Contract compliance/notifications • Change management/Record keeping • Schedule updates • Realistic expectations-Less can be more • Legal/Expert Advice • Dangerous practice of inflating claims • Time implications associated with technical changes • Avoid Global Claims

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