the contractual containment of risk
DESCRIPTION
TRANSCRIPT
VDDB
THE CONTRACTUAL CONTAINMENT OF RISK
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
Reducing uncertainties and risks to all parties involved when compiling EPCM contracts
VDDB
RISK
• Risk is a short word• + EPCM• + project
• = UNCERTAINTY
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
HOUSEKEEPING
• Purpose
• Delimitation
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
TERMINOLOGY / PARTIES
• Risk – possibility of danger, loss, injury• Employer – desires the works• Contractor – executes the works• Contract – arrangement between the two
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
EPCM
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
EPCM• Contractual arrangement
• Employer hires capability
• Specialist to provide solution
• Between construction/ installation only
and turnkey
• Contracting before full definitionIIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
RISK IN CONTRACTUAL CONTEXT• Project flags difficulty to predict
• Yet knowledge base is large
• Risk allocation document
• Valid contract: What? How much? Who?
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CLARITY
• Completeness
• Communication
IRR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
OBJECTIVES WITH RISK HANDLING
Prevent - if possible
Avoid - if not preventable
Mitigate - if unavoidable
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
BALANCED ALLOCATION
• Consider the nature• Consider the cost• Balanceo Between nature and costo Between parties
• Allocate to capability
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CONSTRUCTING THE CONTRACT - 1
• Select set of general conditions
• Borrow or set up appropriate framework
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CONSTRUCTING THE CONTRACT - 2• General conditions:o Known and fitting?o Knowledge base (reference)?o Suited to works?
• Framework:o Known by user?o Knowledge base (know outcome)?o Suited – similar?
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CONSTRUCTING THE CONTRACT - 3
• Clarity on:o Start – what is there now?o End – what is required?o Works – manageable and measurable
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CONSTRUCTING THE CONTRACT - 4• Form of agreement• Schedule of parameters• General conditions of contract• Special conditions of contract• Scope of requirements• Technical data and information• Non-technical information• Price schedules• Financial schedules
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
PRINCIPLES:• Suitability• Complete-
ness• Accuracy• Clarity
VDDB
CLARITY AND UNDERSTANDING - 1
• What is clarity?
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CLARITY AND UNDERSTANDING - 2• Each party understands – risk allocation
understood• Use domain knowledge experts –
engineering, commercial, cost, legal• Third-party test• Peer review (upfront)• Writing skills – a gap in training?• clear and concise• domain language, linked to contractual and legal
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
DEFINING THE PARTIES
• Legal persons – real names
• Roles, responsibilities, authorities
• Real people – e g “the Engineer”• Contractual authority different from
being a stakeholder
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
COMMUNICATING THE CONTRACT
• Enquiry and contract must be loved
• Contract champion
• Promote actively
• Adherence committee
• Continued clarity and communicationIIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
VDDB
CONCLUSION
• EPCM uncertain by nature = RISK
• Apply skills:o General – writingo Domain – engineeringo Support – cost, commercial, legal
Contract can put risk in containment
IIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk
QUESTIONS?
VDDBIIR’s 3nd Annual EPCM Conference: The Contractual Containment of Risk