WEATHER DOWNTIME
FEATURE SPONSOR
LEGAL RISKS ASSOCIATED WITH WEATHER DOWNTIME
By their very nature, all type of construction projects are subject to the elements, with the impact on offshore projects being particularly pronounced. So what steps can be taken to mitigate your risk, asks construction lawyer Martin Collingwood.
As anyone who has been involved in an offshore project knows, it is very difficult to mitigate the effects of adverse weather. The environment is typically more hostile and by its very nature, is constantly changing, which brings additional risk to the contract.
For vessels located offshore the ability to work safely in terms of construction and installation is heavily weather dependent and the costs of downtime can be significant in any project. This is particularly the case where vessels are unable to operate effectively or cannot operate to their maximum capacity, yet are chartered at a significant daily rate.
STEPS TO MITIGATE YOUR RISK The ability to plan, manage and control the installation and construction of works offshore has a significant impact upon the capital expenditure profile of a project. Such planning relates not only to aspects of construction and
installation which can be seen above the sea - including turbine towers, transition pieces etc. – but also to undersea elements such as foundations, cable arrays and so on.
Developments are on hand to improve the ability of vessels to work in different sea states and in each instance safety is a high priority – walk to work systems being an example for crew transfer vessels to improve safety of personnel.
TENDER STAGE
It is imperative that careful consideration is given to the risks associated with offshore contracts at the tender stage, since they relate to high end risk transfer projects in which contractors take a significant proportion of the risk. Typically, an EPC contract or derivative ensuring that the contract is clear as to where risk lies and what liability there is, is essential.
However, climatic conditions are commonly a ground for extension to time and additional cost to be recovered by you, provided that you comply with the often prescriptive requirements of a contract as to notification of claims. These requirements are often expressed to be a condition precedent to the right to recover
relief. The employer's liability to your contractor may itself be limited and that limitation may be to the contract price only.
DELAY LIABILITY In the event that you are in delay when you are not entitled to an extension of time then you suffer liability for
delay by reference to a pre-determined rate for liquidated and ascertained damages which the employer may deduct. The level of deduction may itself be subject to a limitation, often to a percentage of the contract price.
However, it is not uncommon to find that if a commissioning date is not achieved under the CFD regime then your liability may also include additional expenditure by the employer and other losses and not be restricted to the recovery of liquidated damages itself. Restricting the type of loss recoverable and limiting the extent of responsibility is essential – and perhaps including liquidated damage can assist to mitigate the exposure.
Where liquidated damages are unenforceable offshore contracts commonly provide for the contractor's liability to be the payment of actual damages, although in this instance it may expressly be provided that the unenforceable liquidated damages act as a cap on liability. This is a sensible provision.
Martin Collingwood Head of Construction Andrew Jackson
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