Authors: Gry Bratvold and Sanne Kjær Bygholm
FIDIC, the International Federation of Consulting Engineers, is the global representative body for national associations of consulting engineers. FIDIC has developed international standard forms of contract for use on national and international construction projects. These forms of contract were developed for use on onshore projects, but are increasingly used also on offshore wind projects. There are several issues with this, as offshore work comes with different risk factors that require different considerations.
Unfamiliar Risk Allocation
Contractors who traditionally have operated in the oil service segment have in the recent years also offered their services and equipment to the offshore wind market. These contractors have considerable knowledge and expertise from offshore work, valuable for the less mature offshore wind market. Contractors coming from an oil service background, should be aware of the different risk allocation provided for in the FIDIC forms of contract compared to the contracts traditionally used on offshore projects.
FIDIC Yellow Book
The FIDIC Plant and Design-Build Conditions of Contract, also called the FIDIC Yellow Book, is reportedly the FIDIC form of contract most commonly used for offshore wind projects. Typical amendments to make it more suitable for offshore work include provisions regulating weather risk, the involvement of a marine warranty surveyor, the use of marine vessel spread and the inclusion of a knock for knock indemnity regime. Another key issue that should be carefully considered, is the concept of “rely upon information".
Rely-upon Information
Contractors will perform its engineering, procurement, construction and services based on certain available information. Some of this information will generally be provided by the company, and the contractors will need to know which parts of the information can safely be relied on, and what information the contractor is expected to verify himself. If any data identified as “rely upon” should change or is later discovered to be incomplete or incorrect, contractors will generally expect a variation order for any impact this may have on the price and/or schedule. Furthermore, the contractor may want to expressly exclude liability for any defects caused by incorrect rely upon information from its warranties.
Site Data
Data regarding the site where the services are to be performed or the goods are to be installed, is essential for the design and engineering of offshore installations and for timing services to be performed. Such data could include the water depth, soil conditions and current, wave, sea level and meteorological data (metocean data) that requires particular expertise and can be costly to verify. Where the company provides such information, contractors with offshore background will generally expect this to be rely upon information.
Under the FIDIC Yellow Book, contractors are not only expected to inspect and examine the site, including e.g. its sub-surface conditions, but will also be deemed to have performed such inspection before having submitted its tender. Although there are provisions in the Yellow Book modifying the contractor's risk for site data, the overall exposure is nevertheless likely to be unacceptable to most contractors. When used in the context of an offshore project, the parties may therefore agree that this regulation is not suitable, and include special terms (called 'Special Provisions') more suitable for an offshore project.
Shifting the Risk
When amending the risk allocation envisaged in the FIDIC Yellow Book for a given risk factor such as site data, several other provisions of the standard will need to be amended as a consequence to avoid ambiguity and inconsistencies with other related terms. The parties will also need to negotiate and amend or include mechanisms in the 'Special Provisions' to provide for what the consequences shall be of any errors or omissions in rely upon information. How to best structure and draft these mechanisms will depend on what risks the parties are willing to accept as well as the particulars of the project. Some examples of issues that the parties generally would need to consider are: the measures the contractor shall take if an error in the rely-upon information is discovered at different stages of the project; the mechanism for dealing with any impact the error or omission may have on cost or schedule and the implications such errors shall have on the contractor's warranties. These are just examples, and there may be several other implications, depending on the circumstances.
Conclusion
Tailoring the FIDIC Yellow Book into a suitable contract for an offshore wind project, requires careful consideration and drafting. FIDIC has reported that it is looking at launching a set of standard particular conditions of contract for renewable energy projects/offshore wind, but it is unclear when this may be expected. In the meantime, it remains crucial that the necessary adjustments are made when using the FIDIC Yellow Book for offshore wind projects.