Engineering and Construction - Volgina, Gafurov, Naumov

ENGINEERING AND
CONSTRUCTION CONTRACTS
VICTORIA VOLGINA, PHILIPP NAUMOV, EGOR GAFUROV
NRU HSE, FACULTY OF LAW
2019
COMMON CONTRACT TYPES
EPС: pros and cons
+ -
1) lump sum (foreseeable) price; 1) Higher mainly due to delegation of more risk to the
contractor. This in turn may lead to contractor profit
2) simpler budget policy from the lender’s perspective; when the risks are not realized.
3) faster project implementation and foreseeable
completion date; 2) Limited control over the design in progress and over
project realization.
4) enforcement of performance liabilities can be narrowed
to one particular entity;
5) contractor efficiency in searching for cheaper and
quicker solutions;
6) single point contractor’s responsibility for construction
works and design
Engineering, Procurement and Construction (EPC) is a particular form of contracting

arrangement used in some industries where the EPC contractor is made responsible for all the
activities from design, procurement, construction, commissioning and handover of the project
to the end-user or owner.
EPСM: pros and cons
+ -
1) Reduced costs in cases of smooth realization of 1) Difficulty in coordinating individual contractors (compatibility
work of plants, coordination of sequencing and the like), the success
of which largely depends on the EPCM contractor’s experience.
2) Broader access to contractors’ market 2) Difficulty in allocating and demonstrating responsibility where
3) Flexibility individual contractors should fail.
3) Difficulty in coordinating liabilities between the EPCM
4) Lower risk of non-performance or contractor contractor and themain plant contractor.
insolvency – risk is spread to facilitate fewer 4) Lower level of contractual penalties and liquidated damages in
‘sub-risks’ allocated to more contractors. contracts with smaller contractors.
5) Single point responsibility for the design and 5) High demands on employer capacities.
coordination of the works.
Engineering, Procurement and Construction Management (EPCM) is a special form of contracting arrangement.

In an EPCM arrangement, the client selects a contractor who provides management services for the whole
project on behalf of the client. The EPCM contractor coordinates all design, procurement and construction work
and ensures that the whole project is completed as required and in time. The EPCM contractor may or may not
undertake actual site work.
FIDIC CONTRACTS
According to FIDIC Statutes and By-Laws (October
2011), the Federation’s objectives are:
1. to represent the consulting engineering industry

globally;
2. to enhance the image of consulting engineers;
3. to be the leading authority on issues relating to
business practice;
4. to promote the development of a global and viable
consulting engineering industry;
5. to promote quality;
6. to actively promote conformance to a code of
ethics and to business integrity;
7. to promote commitment to sustainable
development.
‘CONS’ or the ‘Red Book’
• well-balanced risk allocation
• intended for projects where the risks associated with the design are
to be borne mainly by the employer.
• usually the employer (their designer) prepares a detailed design;
• the contractor evaluates the rates and prices of the tender bill of
quantities.
• works are measured on the basis of actually completed works, using
the fixed rates and prices.
P&DB or the ‘Yellow Book’
• well-balanced risk allocation
• risks associated with design are to be borne mainly by the contractor
• unlike CONS, P&DB does not use the employer’s detailed design for
the purpose of the tender (terms of reference).
• even though the contract price is taken as a lump sum price, it may be
subject to modifications through variations and claims raised for
additional payments and extensions of time.
EPC or EPCT or the ‘Silver Book’
• most of the risks are allocated to the contractor
• recommended where entire investment sets (such as nuclear power
plants) are to be contracted out and where the requirement is to
secure total price and completion time.
• EPC - the price is taken as a lump sum.
Soft law: UNCITRAL and the EU
UNCITRAL Legal Guide on Drawing Up International
Contracts for the Construction of Industrial Works
• Adopted in 1987 by the Working Group on the New International Economic Order of the United Nations
Commission on International Trade Law
• The Group consulted with practitioners and other experts in the field of international works contracts,
publications, articles and other textual materials, as well as model forms of contract, general conditions of
contract and actual contracts between parties.
• Foreword:
"Considering that legally sound, balanced and equitable international contracts for the construction of
industrial works are important for all countries, and in particular for developing countries,
"Being of the opinion that a legal guide on drawing up international contracts for the construction of
industrial works, identifying the legal issues to be dealt with in such contracts and suggesting solutions of those
issues, will be helpful to all parties, in particular those from developing countries, in concluding such contracts
• legal issues that arise in connection with the construction of industrial works, covering the pre-contractual,
construction and post-construction phases, and suggests possible ways in which the parties may deal with these
issues in their contracts.
UNCITRAL Legal Guide on Drawing Up International
Contracts for the Construction of Industrial Works
Part 1: Matters arising prior to drawing up a contract
Chapter I: Pre-contract studies Chapter XVII. Security for performance
Chapter Il. Choice of contracting approach Chapter XVIII. Delay, defects and other failures to
Chapter III. Selection of contractor and conclusion of contract perform
Part 2: The drawing up of specific provisions of a works contract Chapter XIX. Liquidated damages and penalty clauses
Chapter IV. General remarks on drafting Chapter XX. Damages
Chapter V. Description of works and quality guarantee Chapter XXI. Exemption clauses
Chapter VI. Transfer of technology Chapter XXII. Hardship clauses
Chapter VIII. Supply of equipment and materials Chapter XXIll. Variation clauses
Chapter IX. Construction on site Chapter XXIV. Suspension of construction
Chapter X. Consulting engineer Chapter XXV. Termination of contract
Chapter XI. Subcontracting Chapter XXVI. Supplies of spare parts and services after
Chapter XII. Inspections and tests during manufacture and construction
construction Chapter XXVII. Transfer of contractual rights and
Chapter XIII. Completion, take-over and acceptance obligations
Chapter XIV. Passing of risk Chapter XXVIII. Choice ef law
Chapter XV. Transfer of ownership of property Chapter XXIX. Settlement of disputes
Draft Common Frame of Reference
(DFRC)
The Draft Common Frame of Reference (DCFR), a joint project of the
Study Group and Acquis Group was published in December 2007.
“It is clear that many of the researchers and stakeholders working on
the project believe that the ultimate long-term outcome will be a
European code of obligations or even a full-blown European Civil Code.”
Draft Common Frame of Reference
(DFRC)
Book IV: Specific contracts and the rights and obligations arising from them
Chapter 3: Construction
IV. C. – 3:101: Scope
IV. C. – 3:102: Obligation of client to co-operate
IV. C. – 3:103: Obligation to prevent damage to structure
IV. C. – 3:104: Conformity
IV. C. – 3:105: Inspection, supervision and acceptance
IV. C. – 3:106: Handing-over of the structure
IV. C. – 3:107: Payment of the price
IV. C. – 3:108: Risks
REFERENCES & STUFF TO CHECK
OUT
1) Klee L. International Construction Contract Law: Wiley Blackwell
2) I.A. Goddard International legal and national legal regulation of cross-
border construction contracts
3) FIDIC page: http://fidic.org/
Thank you.

Engineering and Construction - Volgina, Gafurov, Naumov

Uploaded by

Copyright:

Available Formats

Engineering and Construction - Volgina, Gafurov, Naumov

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Engineering and Construction - Volgina, Gafurov, Naumov

Uploaded by

Copyright:

Available Formats

ENGINEERING AND

Engineering, Procurement and Construction (EPC) is a particular form of contracting

Engineering, Procurement and Construction Management (EPCM) is a special form of contracting arrangement.

1. to represent the consulting engineering industry

You might also like