We are often asked to provide contractual advice in relation to projects that include both process plant works and civil building works being carried out by separate contractors. This is the first blog in a series looking at the interface between the different forms of contracts used within this sector.
When a process plant is being designed, installed, and commissioned, it will often be housed in a new or refurbished building. Typically, different contractors will be responsible for the civil building works and the process plant but will often be required to work together on the same site at the same time. This will likely be due to programme and budget pressure. Ultimately, the goal is the optimal functioning of the process plant, that allows for a targeted volume of the product by a certain date.
Sometimes the sheer physical size of the process plant (for example a pot stills for whisky making) can only be housed in the building if they are brought to the site and installed before an element of the civil works are completed, such as roof or glazing façade. However, the process plant cannot be installed until elements of the new building are complete such as foundations and ground works.
The successful delivery and completion of both civil and plant works is often dependent on how well the interface between the two is managed.
Pinch points – the technical interfaces
Process plant contracts (such as for new distilleries) are performance based, and the industry has developed different standard form contracts to deal with the requirements of these projects which both contractors and employers are often familiar with and comfortable using (such as IchemE/ MF/1 and FIDIC forms). Likewise, the JCT/SBCC family of contracts are usually the 'go-to' contracts for carrying out civil building and refurbishment works. However, these different types of contracts don’t expressly 'speak' to each other and without careful consideration, the employer could be stuck in the middle carrying all the risk in terms of any interface between the two contractors. This is where bespoke drafting and complimentary interface provisions can provide the employer with some protection to mitigate its exposure to risk.
The key interfaces and timings between the civil work and the process plant installation will need to be developed at a technical level first so that the contractual provisions can be tailored to suit. This could include exchange of design information; timing for elements of the works that are a pre-condition to the process plant being installed; testing and commissioning required before any element of the process plant can be covered up etc.
There are different ways to document the interface risk. One way is to schedule out a regime of key milestones and corresponding dates or time periods to complete various tasks to allow each contractor unhindered or dominant access to parts of the site for the duration required. Where one contractor is in culpable delay, the prolongation costs of the other contractor can be recovered often at a liquidated (pre-agreed) rate. In addition, the parties may agree to share the risk of certain, unforeseen events and/or the employer could hold a contingency for those.
If parties are clear on the interface requirements and expectations of each contractor, this can be factored into programme and pricing at tender stage, enabling the employer to mange its own budget and appetite for risk on the project.
In the next blog we will look at some of the key provisions in typical process plant contracts.