Focus on EPCM Disputes - EPCM and Project Advisory Services

Unique challenges

Traditionally, Engineering, Procurement and Construction Management (EPCM) structures were often used in the design and construction of major processing facilities and their associated infrastructure, increasingly other sectors such as the energy sector are now also using them. EPCM is at its heart a multi-contract procurement, which presents its own unique challenges. Our EPCM hub contains a number of articles considering some of these challenges in more detail.

These projects carry significant complexities and risk, which are often exacerbated by the long periods of time over which they are conceived and delivered, but which have to be weighed against the ultimate goal of putting a fully operational facility to use, on time and on budget.

The EPCM Contractor is a critical element of the EPCM procurement structure – on one hand, the EPCM Contractor is required to act as the Client’s eyes and ears but on the other, the EPCM Contractor also has responsibilities and liabilities to the Client as a designer and as a project manager. This two roles need to be balanced by the EPCM Contractor. The contract can assist in driving the right behaviours from the outset. Selecting an experienced EPCM Contractor, who is aligned to the Client’s needs for the project, significantly impacts on the successful outcome of a project. Some of our Clients find that the contract teach-ins offered by Eversheds Sutherland can assist with this alignment (please see below for more detail).

As well as working with our transactional team to develop dispute avoidance and resolution strategies in contracts for Clients, we also offer project advisory services aimed at supporting your project team through every stage of their delivery of these projects, to mitigate sector specific risks and secure successful project delivery.

Our hotline and monthly reviews are structured to offer real-time guidance and advice to Clients - our dedicated lawyers are on hand to explore issues often at a point of time where a dispute can still be avoided. This can be an invaluable tool to minimise the impact that interface issues have on the project costs and completion date for EPCM based projects. If a formal dispute does arise, then we can also assist with that.

Project advisory services

We have set out below a list of services we can provide to support your project team:

1. Hotline

Key senior members of our team will be available to address ad-hoc queries as the project progresses. Those queries will come in various shapes and sizes but we find short, pragmatic and immediate interventions from experienced construction dispute lawyers can help the team resolve a problem quickly and keep the project on track.

2. Monthly reviews

General contractors typically produce progress reports on a monthly basis, which may tie-in with monthly progress payments. Independent review of these through the lens of a disputes lawyer can help identify issues as they arise, including:

• critical employer deliverable risk – a contractor may be gearing up to blame delay on a deliverable for which the client is responsible
• financial distress – this can manifest itself through inflated payment applications and requires careful planning in the background to mitigate the risk of contractor insolvency
• design co-ordination – poorly managed design is often the main source of delays
• inaccurate progress reporting and programming – if this information is inadequate in terms of detail, accuracy and data sets, then if often covers up significant delays to progress, leaving you unable to address the delays and without clear evidence of them in a delay claim later
• failures to notify and update claims for delay events and variations – this can make it impossible to properly and accurately determine whether extensions of time and additional payments are due.

Our goal is to assist the project team in mitigating such risks and escalate any red flags e.g. signs of financial distress

3. Contract teach-ins

Using our experience to highlight key project delivery risks, we can run workshops with the project team to ensure robust and consistent implementation of the relevant contracts. Illustrations include:

• the correction application of payment procedures – ensuring all relevant provisions are identified and compiled with
• contractual procedures – for example relating to early warnings, defects and change management, as well as the importance of protecting and preserving your position where the contractor has not complied with these procedures
• programme monitoring – including enforcing rights to see programme information

4. Dealing with disputes when they arise

Conflicts will arise during the lifecycle of an EPCM project, just as they can with any other construction and engineering project. The vast majority are capable of being resolved amicably between the parties.

We can offer initial support to the project team so that they understand, legally and commercially, what position is in order to achieve the best practical outcome in any negotiation. At the same time, we would guide the project team through the process of reserving an employer’s rights and protecting its position should formal proceedings become inevitable.

We can advise on the following:

• do I have a good case? – a cold towel assessment as to whether the case is sufficiently strong to formalise a dispute
• is it worth it? – an assessment of whether there is benefit (financial or otherwise) to referring the dispute to formal dispute resolution versus the cost of doing so
• what method of dispute should I use? – there is usual a choice and advantages and disadvantages to those choices

Hallmarks of success

With our Client focussed project advisory services, we identify the core themes and underlying causes of problems and give you the benefit of our experience before and during projects. Our services help you to keep projects on track. If the project is de-railed, we intervene early to get the project back on track as painlessly as possible.

A mark of success for our project advisory service includes formal litigation or arbitration being averted, issues are resolved as the project progresses on a well informed and strategic basis, and that the progressive deals struck are achieved at a sensible commercial level.

We offer a fee arrangement that suits you. Our fees are often charged on a fixed monthly drawdown for a given scope of work and those fees form part of the project cost. Please get in touch if we can help.