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8th Contract and Risk Management for Construction and Capital Projects 

Enhancing Collaboration and Decision-Making to Mitigate Risk and Liability of all Stakeholders 

11-12 September 2019
Houston, TX, United States of America

marcus evans Noth America

What our delegates think of us:

An interview with Dan Schwarzenbach Corporate Counsel at Sunland Construction, Inc

Ahead of the Contract and Risk Management for Construction and Capital Projects, we spoke with Dan Schwarzenbach, Corporate Counsel at Sunland Construction, Inc. on how to mitigate risks and disputes from a contractor standpoint.

What are the best practices in overcoming project delays during unforeseen events? 

For Sunland, we attempt to negotiate contract relief (price and schedule) on the very front end in the contract for construction. Doing a large amount of the work along the Gulf Coast of Louisiana and Texas, we have seen significant adverse project impacts that arise out of tropical storms and flooding affecting the worksite. For a pipeline project, those impacts can be significant given the amount of right-of-way exposed to a tropical storm event and/or flood. State and federal permits and the inability to deliver materials fall into this category also. In addition, there are some insurance vehicles such as builder’s risk and weather insurance that can be used to transfer some of that risk and relieve the parties of a win-lose proposition.

What are some valuable drafting techniques used to fairly allocate risk between project participants? 

The old adage that the participant that can most control the risk should be responsible for it is an overly simplistic but relevant viewpoint when drafting contracts. The problem is that in today’s complex project delivery, those lines are blurred, and there is much more shared responsibility and the need for effective communication and an understanding of expectations between the participants. For instance, inspection responsibilities and timber mats are two examples of project functions that have traditionally been the responsibility of the owner (provided by owner direct employees) and contractor respectively to manage on a pipeline project. Over the past five years, in some instances, third-party inspectors have been hired by owners and timber mat suppliers have sought to contract directly with the project owner. New forms of project delivery and new participants in the process create new opportunities to be more efficient and effective, but contractor and owner (the two participants with the most risk) need to communicate and work to fully understand where those participants might interfere or cause a delay in the project. Both of the participants referred to above (third party inspection and mat suppliers) must maintain the same level of urgency and timely delivery of their respective services. The key is to identify those issues and bottlenecks on the front end and address them in the contract. Unfortunately, experience and an understanding of construction become a critical component to overcoming those issues.

Is there any contract language involving risk mitigation that is often overlooked? If so, are there any strategies to strengthen this during the drafting phase? 

For Sunland, that is in how we address named storms and tropical storm-induced flooding that affects the project and the project deliverables. The Contractor cannot possibly price in such a contingency at a lump sum price without there being a high probability of windfall to the Contractor should the tropical event not happen. We have seen tropical events come and go in all types and variations from a temporary wind event to massive flooding and evacuations of the public and widespread destruction. We have also seen an increasing number of permit delays, landowner issues, and Owner provided material delays (which the Contractor traditionally has no control over) being a project risk to be addressed in the contract. Finally, we have been using builder’s risk more often and find that risk transfer is mutually recognized by the Owner and Contractor as something worth paying for.

 What are the best strategies to narrowly draft indemnification provisions that correlate with insurance policies?

The project participants need to recognize that the typical general liability policy only covers bodily injury and property damage (say it again!). So, any indemnification clause should be so limited and devoid of indemnity for anything else unless the Contractor is comfortable providing indemnity without insurance (which could be devastating.) My recommendation is to reduce the number of times the word “indemnity” and “indemnify” occur in a contract. When absolutely required, try to tie those indemnification responsibilities back to what the general liability policy provides coverage for. Insurance brokers and agents are very good at assisting with this exercise and can assist in exposing gaps in coverage and protecting the parties from unrealistic expectations.

Are there any best practices to go about contract changes and change orders in a seamless manner?

Contract changes can be challenging and fun for the drafters. There is no better feeling than to have a mutually agreed upon contract fully executed with meaningful input and give and take from both parties. Having conference calls and face to face meetings between both sides is worth the effort and time. For redlines, one turn each is my rule of thumb. Once each side has turned the document, accept the second turn of changes, and start the redlining process all over with the other side. Even if you are duplicating redlines you made first, it makes the process cleaner. Finally, help the other side by pointing out errors or misunderstandings in the drafting, for it builds trust. For Change Orders, the time invested in devising Change Order procedures and events that lead to entitlement to Change Orders is well worth the effort. If anything else, having difficult conversations on the front end of contract negotiation can eliminate hurt feeling and project chaos later. The Contractor must start that process and come forward with those items that it deems necessary to have a Change Order for. For the Contractor to proceed without a clear understanding of Change Orders is dangerous for its survival.

Dan Schwarzenbach is one of our keynote speakers

Why you should attend this marcus evans conference?

Practical insights from active practitioners in your sector

Chris Celano 
President & Chief Executive Officer
IHI E&C International Corporation 

Megan Beauregard
Vice President of Legal and Corporate Affairs
Enel - North America 

Dr. Chika B. Onwuekwe 
Vice President, Legal, General Counsel and Corporate Secretary
Trican Well Service Ltd. 

Kelli Wayland 
Senior Counsel 
Baker Hughes, a GE Company 

Victoria Salem 
Managing Counsel 
Oxy 

Cesar Hernandez Espinoza 
General Counsel USA & Latin America 
Worley

Case study: 
Mitigating Risks and Disputes from Contractor Standpoint to Optimize Project Outcome (September 12th at 2:10 PM)

Overcoming project delays during unforeseen or fortuitous events

Discussing drafting methods to properly allocate risk between project participants

Obtaining schedule and price considerations in advance to mitigate disputes

Evaluating alternative methods for effective contract changes and change orders

For registration pricing and multiple attendee discounts, please contact:

Melini Hadjitheori 
melinih@marcusevanscy.com