Getting It Right: Deliveries and Acceptance in Your EPC Contract
A successful EPC (Engineering, Procurement, and Construction) project hinges on clear expectations around deliveries and acceptance. Here’s how to ensure your contract sets a solid foundation.
- Delivery on Point:
- INCOTERMS in Action: Specify delivery terms like FOB (Free on Board) or CFR (Cost and Freight). These internationally recognized terms (INCOTERMS) define responsibilities and risk transfer during transportation.
- Acceptance Criteria:
- Clearly Define “Good Enough“: Outline the conditions under which the owner will accept the delivered goods or services.
- Prior Use, Implicit Acceptance? Address situations where the owner already utilizes the delivered items – does it automatically constitute acceptance?
- Documentation is Key:
- Proof of Performance: Specify the acceptance procedures and required documentation. This might include inspections, testing, and detailed reports.
- Connecting the Dots:
- Acceptance, a Chain Reaction: Explain how acceptance triggers other contract milestones: issuing an acceptance certificate, risk transfer, releasing payment holdbacks, performance bond releases, and warranty commencement.
- One Step, Three Names:
- Delivery, Acceptance, Takeover – One and the Same: The contract should clarify that these terms refer to the same concept in an EPC context.
- Taking Care of Business:
- Clause 5: Care of the Works: Don’t forget Clause 5, which outlines who’s responsible for protecting the project between delivery and acceptance.
By addressing these points comprehensively, your EPC contract ensures a smooth handover process, clear communication, and minimizes potential disputes. Remember, a well-defined path to acceptance leads to a successful project completion.
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