The following Construction guidance note Produced in partnership with Clyde & Co provides comprehensive and up to date legal information covering:
EPC (engineering, procurement and construction) contracts are frequently drafted to be turnkey agreements—the contractor builds the works and all the employer has to do is turn the key to the finished plant. The employer's aim in such contracts is to pass almost all of the potential risks inherent in the project to its EPC contractor with the contractor pricing the contract accordingly.
Nevertheless, the contractor can still make claims under turnkey contracts in specific circumstances. This Practice Note considers the types of claims that EPC contractors can make, the procedure for bringing a claim or resolving a dispute regarding a claim and the points to consider when negotiating the contract in relation to such potential claims.
EPC contracts are generally drafted so that the majority of the risks rest with the contractor. There are good commercial reasons for this—price escalation can cause financing difficulties if funding for the project is insufficient to cover substantial price increases.
Equally, the employer may have entered into agreements that require project completion by a certain date, eg where the contract relates to a new power station and the employer agrees contracts for electricity supply with specific start dates before construction commences. In such circumstances the employer could incur substantial expense if extensions of time (EOTs) awarded to the contractor delay completion of the project.
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