Cut & Paste Contracts, bespoke or industry standard - which is best?

Over the last few weeks I have been reviewing some large marine infrastructure tenders (+EUR250M) and I have noticed some disturbing trends.

In one tender the Client proposed a FEED Contract with 'fit for purpose' whilst the design was complete and totally unnecessary for a dredging project with a designated design depth and side slopes. Clearly this FEED Contract had been a cut & paste arrangement and lifted from a LNG facility infrastructure project where completed modules had to be delivered and installed. Totally inappropriate in my view.

The second project's Form of Contract was a bespoke EPC ‘entire’ risk form of contract for a greenfield site with a structure closely based on a FIDIC Yellow Book but highly amended to make it a FIDIC Silver Book in all but name.

The third projects' Form of Contract was a totally bespoke EPC contract also for a greenfield site with no proper clause structure, it missed key boilerplate clauses such as an extension of time clause and had a no claim clause for any events and to make things worse no proper dispute clause.

These three contracts all had me wondering just what advice, terms of reference or direction the contract drafter had been given as to allocation of risk to apply on combined marine & civils projects. For the FEED Contract I believe the Client being from the LNG sector was familiar with entire risk FEED Contracts so their legal department thought this could be used for a marine contract. For the 2nd project and the FIDIC EPC 'clone' Contract I believe the contract drafter purposely used the FIDIC mantle of recognisable clauses but made key adjustments to furtively pass on the entire project risk to the contractor whether this was reasonable to do so or not. For the 3rd project, I believe the contract drafter was totally out of his or her depth drafting a major infrastructure contract and basically failed in their duty of care. That contract is not fit for use on any major project and if left unamended would undoubtably end up with a major dispute.

This brings me back to why we have industry-standard contracts in the first place. In my view they set proper ground rules in contract administration and contracts such as FIDIC and NEC4 have been honed by many years of use and tested in arbitration or the courts. Contract drafters are well advised to stick to what is tried and tested in the construction market rather than trying to reinvent the wheel with a bespoke contract or come up with a risk allocation which they believe protects their client but in fact just exposes them to potential claims.

Whilst these three projects are in developing or emerging countries it is sad to report this sort of approach is also followed in developed countries as well. Improper risk allocation is a curse which plagues the construction sector worldwide. For me, I feel project lenders have to set an example and require that industry-standard contracts are used. The World Bank and other financial institutions do this, they require clients to use FIDIC Contracts if they are lending money however it is uncertain if they vet the Particular Conditions which are drafted for a particular project.

The IADC have published an excellent article in Terra et Aqua titled 'How to select the appropriate Dredging Contract' it can be read here. This should be distributed to all clients considering a dredging project so they can properly assess what contract to use.

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