Case Studies > Gas Fired Power Station

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The development of a new gas fired power station comprising all associated building and civil engineering works, mechanical, electrical, operation, instrumentation and control systems, boilers, gas fired turbines, power generation and power distribution systems up to connection to the national grid. The contract was awarded by a power generation company (the Employer) to a consortium (the Contractor) of which our Client was consortium leader, responsible for the turnkey provision of all mechanical and electrical systems, the turbines, power generation and distribution and all instrumentation and control systems.

KEY FEATURES
The Employer awarded a contract to the consortium on a fixed-price, lump-sum, turnkey basis, utilizing its own form of EPC contract amended to include the commissioning, testing and trial run commercial operation prior to hand over. Within a matter of a few weeks, the contract programme began to suffer significant slippage due to numerous causes of design disruptions and delays. This became a pattern which continued throughout the engineering, procurement, delivery and construction phases, again, arising primarily out of major design changes instructed by the Employer. The impacts of these instructions were further aggravated by a series of complex interfaces with other contractors engaged by the Employer on the project. Various claims were submitted by the consortium to the Employer and most were successfully negotiated and compensated. Our Client, however, was subsequently confronted with substantial claims from the civil works consortium partner as a result of alleged design changes instigated by our Client rather than the Employer.

CONSULTANCY SERVICES - Claims Management (Defence)
Our Client appointed Lancaster House International Consulting to undertake an initial review of the claims received from their consortium partner with a view to establishing the extent of responsibility and possible liability.

A team of four claims consultants experienced in gas fired power station design were mobilized within a matter of days to our Client’s offices overseas. They undertook a complete review of the project design, from the tender inquiry stage through contract negotiations and award to during the execution phase. They also perused all contract documentation, inclusive progress and financial analysis reports, correspondence between the consortium members themselves as well as with the Employer, claims submitted by the consortium to the Employer and the results of those submissions.

Lancaster House International Consulting initially found that once again, here was an example of a consortium partner who had failed to provide a reasonable level of claim bases, neither in terms of the extent and quality of documentary evidence, nor relation to the contractual provisions, nor demonstrative clarity in the factual and contractual argumentation, nor linkage between cause and effect,. Not even sufficient basis and transparency was shown in the financial calculations of damages suffered. In short, there was little to nothing in the way of proper substantiation of its claims commercially and contractually. In addition, our experts were also able to argue with conviction that there were technical flaws in the consortium partner’s contentions.

Accordingly, we rebutted the submissions on demonstrable grounds as initially made and then requested full substantiation of the various statements of claim, inclusive further and better particulars on maters of fact and record regarding events alleged to have caused either disruption or delay or both; more detailed evaluations substantiation of the alleged impacts upon the contract programme, greater clarity on the manner and method of financial calculations, as well as details of compliance with contractual notice provisions.

Without such further and better particulars we were satisfied that an accurate review of the claims received could not be undertaken which while it made the job of rebuttal quite simple, was not conducive to the avoidance of a dispute that was not in the interest of either party.

Subsequently, we received some of the further and better particulars we had requested in support of its claims. The extent and quality was insufficient for the purpose of having a proper set of entire professionally presented claims documents, but it did prove adequate in the circumstances to explain to the consortium partner that they were not entitled under the terms of their agreement to allege that the cited design changes were the liability of our client, even in circumstances where our Client had initiated them, per se, or the changes had passed via them emanating from either the Employer or another consortium member. With the exception of the agreement of specific minor variations to the works, the consortium member’s claims were withdrawn in entirety and a costly dispute avoided.