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Anyone in the middle of a project contracting structure needs to ensure, as far as possible, that obligations owed to it from others down the contractual chain are back to back with the obligations by which it is bound up the chain, in order to reduce risk exposure.That applies as much to an employer – who will need to make sure that he is not exposed to any greater obligations under a development agreement than are owed to him by the contractor – as it does to a contractor, in terms of “backing-off” his obligations under the main building contract with subcontractors beneath him in the chain.But it doesn’t stop there: once contracts are in place, they need to be managed so as not to upset that risk structure without fully appreciating the consequences of doing so.The risk for the contractor in the case of MW High Tech Projects UK Ltd vs Haase Environmental Consulting GmbH (HEC) was the additional costs of enhanced or “over-design” carried out by its subconsultant for which it had no entitlement to payment under its own contract up the chain.The facts were that West Sussex council had engaged Biffa Waste to design, build and operate a waste treatment plant. Biffa contracted the design and construction of the plant to MW under a fixed price engineering, procurement and construction (EPC) contract. MW appointed HEC to provide design services. MW maintained that it had based its tender to Biffa on the design proposal produced by HEC.The dispute concerned the question as to which of the parties to the design appointment – MW or HEC – bore the risk of increased costs associated with enhancement of the design for the project.MW said it was HEC because the enhancements did not comply with key contractual documents, namely, the “EPC Delivery Plan” and “EPC Output Specification” so that HEC was in breach of contract.An adjudicator disagreed and held that, provided the design was carried out with reasonable skill and care, then the fact that it would cost MW more to implement that design could not be a breach of contract.If there were changes which did not comply with the relevant EPC documents, then HEC was liable to MW for the cost consequencesWhen the matter came to court, Mr Justice Coulson noted the “stark” financial consequences of the adjudicator’s decision for MW: it had no mechanism for recovering the additional expense of the design changes (some millions of pounds) under the EPC contract and could not recover the extra cost from HEC because the enhanced design was not negligent.MW sought a declaration as to the proper interpretation of the appointment. The judge found that the tests for granting declaratory relief had been met: there was a live dispute between the parties (and probably a raft of further disputes) which arose from the specific facts in the adjudication and the determination of the dispute would be of some practical consequences to them.He emphasised “the extent to which construction adjudication has altered this part of the legal landscape”, leading to an increase in applications for declarations where the loser to an adjudication considers that the adjudicator’s interpretation of the relevant contract is wrong. If the loser doesn’t challenge the adjudicator’s award, it will be final and binding.The judge’s conclusion on the construction of the appointment was that HEC did have an overriding obligation to design using reasonable skill and care. However, the adjudicator had failed to recognise that HEC also had additional obligations to comply with the EPC Output Specification and the EPC Delivery Plan. If it could comply with those documents non-negligently, then HEC was obliged to do that.The upshot was that, if there were changes to the design which did not comply with the relevant EPC documents, then the starting point was that HEC was liable to MW for the cost consequences of those changes. But (and it was a significant “but”), that position would be different if HEC could show that MW had consented to particular design changes and/or waived its right to claim the cost of them. The judge invited the parties to agree a declaration to reflect his judgment.So, having initially protected its design risk by imposing primary obligations on HEC to comply with the key EPC documents, had MW altered that position by its management of the design development regime under the appointment?The answer would depend upon the facts, which could only be decided on an item-by-item basis, and not in Part 8 proceedings. There were “practical limits” to what a declaration in a case like this could achieve.Kirstin Bardel is a counsel and professional development lawyer at international law firm Ashurst
William Clark Partnership was employed to undertake QS and project management services for a developer called Dock Street in respect of a site which included a new build primary health care centre. Not only did the project run £730,000 over budget but William Clark and the developer had a serious falling out. Dock Street refused to pay the consultant’s final fee instalment, arguing that the service provided was inadequate and that its mistakes had contributed to the cost overrun. William Clark sued for its fees and the case ended up being heard in the Technology and Construction Court last year. For case report, see William Clark Partnership Ltd vs Dock St PCT Ltd in the TCC.One of the developer’s gripes was that the consultant had instructed unnecessary and costly variations which had pushed the scheme over budget. For example, the original plan had involved an external paved courtyard which was then changed part way through the project to introduce a “boulder and decorative stone design”. The developer identified seven such changes to the scope, costing in total an extra £215,000, which it argued were unnecessary and had provided no increased value or benefit for the development. It claimed the right to deduct the cost of all these items of work from the fees otherwise due to the consultant.The court judgment analysed, in turn, each of the seven variations and concluded that the consultant could not be blamed for some of them. In particular, some of the variations were only required because the original scope was inadequate, such that the changes implemented were unavoidable. However, the court found that some of the changes, including the external landscaping, were unnecessary and because the budget was tight, the consultant should not have instructed them. The developer remained liable for part of the consultant’s final fee but subject to a substantial reduction because of these “unnecessary” variations.The case is a timely reminder that consultants can be liable for the cost of the variations they instruct. In particular, attention needs to be paid to the appointment with the client and what it says about the consultant’s authority to instruct changes and obtain prior approval.The case is a timely reminder that consultants can be liable for the cost of the variations they instructMost construction contracts will give the consultant a very wide power, as the named contract administrator, to instruct any type of additional work, with practically no proviso or limitation. In this role the consultant acts as the commercial agent of the employer and has extensive powers to bind the employer to pay the contractor additional money for extra work. The variation mechanism under a construction contract operates such that the contractor can rely on the consultant’s instruction without having to worry about getting authorisation direct from the employer. The contractor will therefore always have a right to be paid for the instructed change even if the employer knows nothing about the variation.Precisely because the consultant has this largely unfettered power to bind the employer to pay for variations means it needs to be exercised with extreme caution.While the variation power under the construction contract will typically contain very few provisos, the consultant’s own appointment with the employer will often place very strict limits on its discretion to instruct changes. For example, the RICS Standard Form of Consultant’s Appointment, clause 11, states that the consultant may not change the scope unless it has the prior written approval of the employer. If the consultant fails to get such approval it will be in breach of contract, potentially making itself liable for the cost of the additional, unapproved, work.Consultants need to act with utmost caution because they will be in day-to-day email exchanges with the contractor concerning the ongoing project and the details of the scope. Any such email could amount to a variation instruction authorising a variation under the contract. After all, most construction contracts do not impose rigorous formal procedures for instructing change. Provided that the communication directing the change to the scope is “in writing” then a contract variation will have been instructed and the employer will be liable to pay the contractor.If the consultant’s appointment is anything like the RICS standard form then unless the employer has given prior written consent, the consultant could well end up on the hook for the cost.Michael Sergeant is a partner in the construction team at Holman Fenwick Willan and the co-author of Construction Contract Variations
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“This license is extremely important since, as a separate legal entity, we could not provide these services without it,” explained Luc Van Heygen, managing director, Americas and Europe, BDP/Project Logistics. “As such, it enhances our ability to support our clients’ projects.”BDP/Project Logistics offers a complete portfolio of services associated with the movement of project cargo, including road, rail, river, ocean and air transportation and related services to support construction and expansion projects for the power generation, infrastructure, mining, oil and gas, chemical, alternative energy and other industries. In connection with these services, it will provide end-to-end materials management and tracking, freight consolidation and carrier cost maintenance, logistics process analysis and optimisation, documentation, coordination of cargo inspections, inland transportation and scheduling, and supervision of heavy lifts, and hazardous cargo, port operations, and jobsite unloading and checking.
Mr K. Raghuramaiah, Chairman of Paradip Port Trust, is quoted as anticipating nearly 10 per cent growth and an estimated traffic throughput of 46.6 million tonnes for 2008-2009, with ongoing increases in volumes of project cargoes for Vedanta and new power plants coming up in the region.
Revenue for the quarter rose 20% to USD137 million compared with USD114 million last year. Meanwhile, the company stated that its backlog stands at USD407 million, up from USD264 million this time last year.”The first quarter of 2009 was a period of exceptional performance. An unprecedented 15 rig transports boosted Dockwise revenues and EBITDA. Dockwise’s global sales network, together with our fully-optimised 20-vessel fleet, combines a reach in maritime transportation markets with operational flexibility which competitors will find hard to match. These advantages position Dockwise well to cope with the changes in industry and economic cycles. As the year progresses and on the basis of the current backlog the contribution from Offshore\Onshore projects to the overall revenue mix will grow notably,” said company boss Andre Goedee.A number of strategic highlights were noted by the company, including:- High rig mobility underpins strong Heavy Marine Transport performance – Further cost reductions with focus on direct expenses – Fleet optimisation programme in action – Divestment of Dock Express 10 effective in Q1 2009 – Divestment of Dock Express 12 effective in Q2 2009 – Mighty Servant 3 expected to return to service end May 2009. The 1984-built ship sank in shallow waters off Angola in 2006 and is in the Bahamas for repairs.
The winner for Outstanding Service by an Organisation is the London-based Nautical Institute. It was honoured for its support of the professional development of mariners and for its promotion of safety in the maritime industry.The awards are named after Samuel Plimsoll, a British Member of Parliament who strove to end the dangerous practice of overloading vessels. His efforts culminated in legislation passed in 1876 requiring load lines, or Plimsoll marks, to be visible on the hulls of seagoing ships. The awards honour those who, in the spirit of Samuel Plimsoll, make the world a better and safer place for mariners.The Nautical Institute demonstrably embodies that spirit in its work. Founded by a group of master mariners in 1971, the institute has striven to help mariners improve their performance by raising training standards and disseminating information crucial to greater operational efficiency and safety.For example, 20 years ago, the Institute recognized that no operational standards existed for what was then a new technology, dynamic positioning systems. In response, the institute developed a code of practice and a curriculum for training and certifying DP operators. Today schools around the world accredited by The Nautical Institute provide the certification training, while The Nautical Institute itself administers the logbook programme that verifies the mariner’s progress on the path to DP certification.One of the organisation’s most notable contributions to improved safety is the programme makes it possible for the industry to learn from dangerous incidents and implement changes to avoid accidents in the future. The system encourages mariners to report near misses in which they were involved without having their identities publicly revealed. Those reports are then analysed by The Nautical Institute and disseminated in its Seaways magazine.The Nautical Institute’s Chief Executive, Philip Wake, said: ‘We are delighted that our work to improve the safety and efficiency of shipping services through professional standards and development has been recognised by this prestigious Award. It is further encouragement for our members and staff to continue their dedicated efforts for the industry and the protection of the marine environment.’Pictured below is Bridget Hogan, director Publishing and Marketing from The Nautical Institute with left, Captain George Sandberg FNI, president of the Institute’s North East US branch and right, John Gormley, editor of Professional Mariner.
Ships agency services and maritime logistics had been provided in Japan by Wilhelmsen Aall Ships Service and these will combine with the full range of services offered by Wilhelmsen Ships Service to give a seamless continuity to customers under the new Wilhelmsen Ships Service banner across the region.Neal de Roche, area director North East Asia explains the process. “A management restructure during 2008 moved Wilhelmsen Aall Ships Service considerably forward” he said. “Customer feedback over the next couple of years was very positive and the company gained considerable market share in that period.”Wilhelmsen Ships Service then took steps to acquire 100 percent ownership of Wilhelmsen Aall Ships Service, with the objective of accelerating the combination of resources and business opportunities within the existing Wilhelmsen Ships Service entities already in Japan.De Roche adds “It has always been our priority to ensure we operate with daily Wilhelmsen Ships Service values, governance and policies. This acquisition will allow us to move at a faster pace in aligning ourselves with the overall strategy and vision we have for the future in the region.”
Maya Princess is the sixth and final delivery in the series of six “Roymar Class” 34,000 dwt multipurpose tweendecker vessels that the company ordered at a purchase price of USD35.4 million per vessel.This vessel, like her sister ships, has box-shaped holds, open hatches and fully retractable hydraulic tweendecks, is geared with 35 and 40 tonne cranes combinable up to 80 tonnes, and has a modern fuel-efficient engine enabling the vessel to operate efficiently at 15 knots.With the delivery of Maya Princess, TBS’s current fleet expands to 52 vessels with an aggregate of 1.6 million dwt tons, consisting of 30 tweendeckers and 22 handysize/handymax bulk carriers.Joseph E. Royce, chairman, chief executive officer and president, commented: “The addition of Maya Princess to our fleet is an important event for our company, as we have now taken delivery of all six Roymar Class multipurpose tweendecker vessels. These newbuilds were specifically designed by a TBS team of experts to accommodate the needs of our customer base. They have been utilised predominantly in our TBS Pacific trade route which connects the growing economies of Latin America and East Asia, regions where TBS has a long established franchise. These six newbuilds have enhanced our operational efficiency and the TBS Five Star customer service consisting of ocean transportation, projects, port services, operations, and strategic planning.”
There has been talk that the Special Ministry of Ports (SEP) might be scrapped and its functions subsumed by the Ministry of Transport, and Pedro Brito (pictured right below), the former – and first – Minister of Ports was on the high-powered panel that opened the conference, as was his successor Jose Leonidas Cristino (pictured left below), and the ports minister himself, Paulo Passos.These are key days in the transport and logistics sector for Brazil which is undergoing an economic boom right now that is causing significant transport “Gargalos”, or bottlenecks and a new National Logistics Plan (PNLI) was launched that will combine two existing plans – the National Transport Plan (PNLT) and the Naitonal Ports Logistics Plan (PNLP).And it was the first time Cristino and Brito (who is now a director at the Waterways, Maritime and Ports regulatory board Antaq) had been on the same panel at any conference. Both made calls to arms – well for even more logistics progress at least – to the packed auditorium but Cristino’s was the louder and more passionate: hardly surprising considering it is his job that is at stake if the SEP is disbanded.Passos, who is now in his third term as Minister of Transport and is regarded as a safe pair of hands, said that the government was now working on this new (PNLI) logistics plan for the country, which would merge the existing two plans.He told the conference: “It is an ambitious plan, for sure, but it will create a concentrated mobilisation of forces for the good of the country. We will look to Reporto [the legislation that allows gantry cranes to be imported without paying punitive, 45 percent plus import taxes] as an example of how we can improve matters, to stimulate investment. We will identify the problems and then invest in infrastructure with a clear direction.”Up to USD300 billion could be invested in infrastructure projects under the plan by the year 2030.All three agreed that the current transport matrix in Brazil – with 60 percent of cargo within its borders moved by road, 25 percent by rail and just 13 percent by cabotage – would have to change dramatically in favour of rail and sea.With 67 port terminal contracts – made before the Port Law of 1993 – running out this year, and new tenders in the pipeline, the existence (or not) of the SEP will be a key aspect of how these concessions will be tendered for. The maritime and ports sectors have been pleased with the progress – in dredging and some new facilities – since the SEP was inaugurated five years ago, and will be aggrieved if it is swallowed up by the Ministry of Transport.One member of the audience who is involved in the transportation of project cargo, but who did not wish to be identified told HLPFI: “The SEP is a good thing because it gives focus to our sector and channels government funding more quickly to where it is needed. This politicking and these new long-term transport plans need to be resolved soon or the country as a whole will suffer.”The 18th Intermodal South America has a record number of 550 stands and many of the small booths have moved outside of the main exhibition area and into the entrance hall to maximise the space allocation. The organisers, UBM Media, say that more than 45,000 people will attend the event, which will also set a new record.
In a statement the port authority said: “During this period inland vessels which normally use this lock will be rerouted via another parallel lock (the Boudewijn lock) as much as possible.”50 percent of the capacity of the Boudewijn lock has been reserved. By taking these measures, Antwerp Port Authority hopes to keep disruption to a minimum.” The lock is being shut down for operational maintenance, including the replacement of key equipment. The work will be finished in January 2011, but the port said it would open for traffic in April 2011 to allow a three-month buffer.
The grouping of freight professionals is now represented in 80 countries through nearly 200 members offices.www.con5con.com
The machinery touched down in Kenya onboard three AN-124-100 freighters.The aircraft transported large ‘semi-rings’ used in the gold mining process, each one weighing 50 tonnes.The airline says that the cargo required extremely precise loading and unloading, as the clearance on either side of the AN-124’s hold was only 77 mm. A specialised frame had to be constructed in order to safely distribute the load over the aircraft’s cargo floor.Alexey Soshnikov, head of loading/unloading equipment design & support section, Volga Dnepr, stated: “The nature of our outsize and heavyweight air cargo business means there are no standard loading procedures for these types of cargo so every shipment is deemed to be unique and relies on the expertise of our planning and loading teams.”www.volga-dnepr.com