Engineer's Role In Resolving Disputes In Offshore Projects

Offshore construction and supply projects involve complex contractual arrangements regulating the relationships of operators, contractors, subcontractors and suppliers. Although every effort is made to prevent the occurrence of disputes when parties enter into contract, it is a fact of life that disputes do arise. This paper explains the role of engineers in the dispute resolution process. It highlights the features of disputes which arise out of the offshore construction and supply industry by way of inclusion of a description of: the life cycle of a typical offshore development; a typical engineering, procurement, construction, installation and commissioning project; the engineer's involvement in the contractual process; types of frequently occurring disputes; and the role of engineers in dispute avoidance. By way of introducing the various methods of disputes resolution, including litigation, arbitration, adjudication, expert determination, mediation, the engineers' functions in these processes are highlighted. The paper concludes that engineers are indeed important if not crucial to every stage of an oil and gas construction project. They have every opportunity to assist in dispute avoidance by being more aware of the contractual relationship between various parties and the project procedure. They can be factual witnesses to set out the chain of events that happened, expert witnesses to assist the court or tribunal in understanding the technical issues, and they are also well placed to judge the rights and wrongs of the parties given their technical backgrounds in understanding the day-to-day running of a project.

1. INTRODUCTION

   Offshore construction and supply projects involve complex contractual arrangements regulating the relationships of operators, contractors, subcontractors and suppliers. Although every effort is made to prevent the occurrence of disputes when parties enter into contract, it is a fact of life that disputes do arise. This paper highlights the role of engineers in the dispute resolution process. It covers the following topics.

   (a) Characteristic features of offshore construction and supply projects.

   (b) The various methods which can be used to resolve disputes.

   (c) In the event of a dispute, the engineer's role in the resolution process, with an emphasis on an engineer acting as an expert witness.

2. CHARACTERISTIC FEATURES OF OFFSHORE CONSTRUCTION AND SUPPLY PROJECTS 2.1. Life cycle of a typical offshore development project

   The life of an offshore development project starts from discovery of the field and finishes with decommissioning of the installation. The major stages are

   (a) discovery/seismic

   (b) drilling

   (c) analysis and economies

   (d ) conceptual studies

   (e) approval and finance

   ( f ) engineering, procurement, construction, installation and commissioning (EPIC)

   (g) infrastructure reception facilities

   (h) operations and logistics

   (i ) inspection and maintenance

   ( j) decommissioning.

   Both seismic and drilling operations require specialised technical inputs. Information such as the size of the reservoir, the recoverable reserves and the flow rates can be gathered from these operations. Once the data are obtained, they need to be analysed and input into an appropriate economic model. Engineers need to work with professionals from other disciplines such as economic analysts. The purpose of the exercise is to find the balance of revenue estimates and the costs involved. During these stages, key design parameters should also be established.

   During the conceptual stage, inputs from development engineers are required. The offshore industry is a fast-developing and innovative industry. New products and techniques are developed to reduce costs and improve performance. Fields that had been considered to be uneconomical may now become viable by using new technology. Likewise, the life of a field can be extended as a result of the enhanced recovery techniques.

   In the next stage, banks require input from engineers to tell them what are the risks involved in developing the field. There are construction risks, reservoir risks, project completion risks, technology risks, operational risks (e.g. information about reliability of the equipment and facilities by way of finding out the up-time). The banks cannot control these risks but they need to have an understanding in order to structure a suitable package.

   Once the project sanction is obtained and the finance is organised, the next phase is for the operator to place an EPIC contract with a contractor. The contractor will in turn contract with subcontractors and suppliers. As an illustration of the level of activities involved in this stage, a £400 million project could involve some 250 subcontracts or purchase orders.

   This paper focuses on the EPIC phase, although many of the points will be applicable to all other phases. This paper is also limited to the issues arising from the engineer's involvement in a dispute resolution environment.

   2.2. A typical EPIC project The traditional arrangement of an EPIC project is that the operator sits at the top of the contractual chain and places a contract with the EPIC contractor who, in turn, subcontracts the work to various specialist subcontractors and suppliers. There are other types of contracting strategies including partnering or alliancing, risk and reward, share gain and share pain. The common general arrangement for all these contracting strategies is that somebody carries out work in consideration of payment in accordance with the agreed contractual provisions.

   2.3. Engineers' involvement in the contractual process The process can be divided into two stages, namely pre-contract award and post-contract award.

   2.3.1. Pre-contract. During the pre-contract stage, the client's engineers will prepare statements of requirements or functional specifications. These requirements or specifications become part of the bid document which goes to the bidders. The contractor's engineers will then review and put together a technical proposal with a method statement as part of the bid submission. Any qualifications should be made clear in the submission. Sometimes bidders submit alternative methods that are claimed to be better, quicker and cheaper to build.

   After the tender is submitted, the client's engineers will study the bid submission. Usually, technical submissions and commercial submissions are assessed separately. Technical proposals will be assessed to see the compliance with the technical requirements, the suitability of the method statements and the viability of the delivery programme. Track records for delivering similar work will also be considered.

   Meetings will be held to clarify any uncertainties in the submissions. Assuming the proposal is also commercially...