Safeguarding Your Project Timeline and Budget: Key Clauses in Your EPC Contract
EPC contracts offer efficiency, but unexpected events can disrupt timelines and budgets.
Here’s how to ensure your contract protects your interests:
- Sharing the Burden of Change: The contract should grant “Extensions of Time” and “Extra Costs” for situations beyond the contractor’s control. This includes:
- Scope Creep: If you decide to modify the project’s scope, the contractor deserves additional time and compensation for the extra work.
- Approval Delays: Bureaucratic holdups shouldn’t penalize the contractor. Time extensions are fair when approvals take longer than anticipated.
- Shifting Regulations: Changes in regulations can necessitate adjustments. The contract should provide a mechanism for handling these situations fairly.
- Acts of God and Beyond: “Force Majeure” clauses excuse both parties from performance when unforeseeable events make fulfilling the contract impossible. This might include:
- Natural Disasters: Earthquakes, floods, or hurricanes can bring construction to a standstill. Force Majeure protects both sides in such circumstances.
- War and Terrorism: Unrest can disrupt projects. The contract should acknowledge these possibilities.
- Clear Definitions Matter: Don’t leave room for misinterpretation. Define “Force Majeure” broadly to cover unforeseen events beyond reasonable control. Additionally, include a specific list of events to minimize ambiguity.
- Focus on Recovery, Not Delays: Relief should address the impact, not the cause. For instance, an earthquake might delay construction for a week. The contract should grant an extension for remobilization, not the entire week-long event.
- Timely Communication is Key: The contract should specify deadlines for submitting claims and the documentation required to support them. This ensures prompt resolution of any issues that may arise.
By incorporating these provisions into your EPC contract, you take a conservative approach. It protects you from unforeseen circumstances while ensuring a fair and efficient project for both parties.
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