Navigating Delays and Milestones: Understanding Deemed PAC in EPC Contracts
The Provisional Acceptance Certificate (PAC) is a critical milestone in EPC (Engineering, Procurement, and Construction) contracts, especially for power plants. It signifies the plant’s readiness for commercial operation. The Deemed PAC clause adds a layer of flexibility by outlining situations where the PAC is considered granted even without a formal issuance.
When is a Deemed PAC Triggered?
A Deemed PAC comes into effect under two main conditions:
- Early Commercial Operation: The plant achieves commercial operation before the formal PAC is issued. This indicates the plant is functional even if minor acceptance procedures remain.
- Unforeseen Delays Beyond Contractor Control: Erection and commissioning delays occur for reasons beyond the contractor’s control, extending beyond a predefined maximum period (latest X months) after delivery. This protects the contractor from penalties caused by external factors.
- Examples of such factors include severe weather conditions or delays by third-party contractors.
The “Latest Clause” and Flexibility
The use of “latest” ensures the most recent deadline is considered for triggering the Deemed PAC. For instance, if the initial deadline is extended, the new extended deadline becomes the benchmark.
Benefits of a Deemed PAC Clause
- Flexibility: Acknowledges the achievement of commercial operation as a key milestone, even if minor formalities are pending.
- Risk Mitigation for Contractor: Protects the contractor from unfair penalties caused by delays beyond their control.
The Deemed PAC clause in EPC contracts for power plants offers a balanced approach. It acknowledges plant functionality while providing flexibility in the formal PAC issuance process. This protects both the owner’s interests (plant readiness) and the contractor’s (unforeseen delays). By carefully drafting and negotiating the Deemed PAC clause, both parties can ensure a fair and efficient handover process.
Created by iax, Enhanced by AI
Proudly powered by WordPress