|Joseph Dirik Norton Rose Fulbright Senior Counsel|
1. Which are the areas where potential disputes are most likely to arise in EPC contracting? Which are potentially the most dangerous for the project itself?
Under EPC contracts, disputes between the owner and EPC contractor often result from (1) completion delays, (2) failure of the EPC contractor to meet performance guarantees, (3) poor workmanship, (4) indemnities, and (5) owner interference. Another source of disputes can result from the various tiers of subcontracts and supplier agreements under the EPC contractor. In my view, the most potentially dangerous disputes involve significant delays in project completion and disputes over liability when performance guarantees are not met.
2. What are the best methods that both contractual parties can use in the pre-dispute phase to solidify their mutual cooperation?
Some of the best practices include informal partnering, mandatory internal discussions and meetings, dispute resolution boards and a project culture of escalating disputes within both organizations when persons at the lower level are unable to resolve a dispute.Informal partnering, while not as popular in recent years, can help if the parties are able to forge relationships at the same level in each organization in an attempt to resolve disputes at the lowest level possible. Formal dispute resolution boards, usually established in the EPC contract, provide an opportunity for a neutral party familiar with the project and parties to act quickly in rendering either a non-binding evaluation or recommendation, or a binding decision.
3. Are there any recent operational or legal advances that make the resolution of potential disputes in megaprojects simpler and faster?
The use of integrated project delivery (IPD) is a relatively new approach in the U.S. that has had some success in large healthcare megaprojects. Internationally, a similar delivery method, Project Alliancing arrangements, have been used with great success on complex oil and gas and other infrastructure projects. These forms of collaborative contracting and project delivery have been known to reduce, expedite and simplify potential disputes on large and complex projects.
4. What general advice would you give to somebody trying to approach and make use of pre-dispute resolutions?
In general, I recommend that the parties discuss the preferred approach to pre-dispute resolution during contract negotiations and incorporate the results of such negotiations into their EPC contract. Be sure to provide sufficient detail so that all parties know what to expect and will administer the EPC contract accordingly.