Four realistic risk management strategies for offshore wind projects

With the predicted increase in offshore wind development in the United States, all project participants should examine and implement risk management strategies that improve planning and coordination before and during construction.

These methods assist participants avoid or at least lessen friction and difficulties that drive up expenses, cause delays, and result in claims and disputes.

This article discusses four practical risk management tactics that may assist all stakeholders focus on their common interests in tight collaboration and clear communication from the start of the project to the end:

  • Scheduling accuracy
  • Communication and clear project documentation are essential.
  • Dispute resolution in real time
  • Agreements on coordination

These methods are not intended to transfer legal duties or risks. On the contrary, the goal is to keep project employees and project management for all participants focused on communicating and cooperating, including tackling genuine difficulties in a responsible manner to minimize or lessen their impact. These techniques, as well as the parties’ attentive implementation of them throughout construction, contribute significantly more to a successful project than anything attorneys and claims experts can offer in post-mortem legal processes.


The Developer’s Challenge: Difficult but Plausible

Offshore wind projects are particularly vulnerable to the unexpected, as well as the resulting construction conflicts, due to their technical and logistical complexity. Offshore wind projects have a number of unique obstacles, including seabed conditions, heavy reliance on support boats, sub-sea cabling, very massive components, floating platforms, and harsh weather, to mention a few.

Furthermore, the need for extensive interfacing among these separate contractors adds another level of complexity and risk to the offshore wind preferred procurement approach of a single developer awarding multiple contracts to specialized contractors and suppliers (turbine manufacturer, cable supplier, foundation fabricator, transportation provider, installation contractor, and so on).

The developer, as the entity responsible for bringing all of the other players together and having the highest stake in the project, has the greatest incentive and capacity to execute the protocols and ensure that they are followed during construction.

When the developer is creating contract paperwork for all of its contractors and suppliers well before building begins, the developer must realize and address the crucial relevance of this interface and coordination with and among all of those parties. Coordination and smooth performance during building cannot be guaranteed by static contract provisions. Throughout the development process, the developer must establish realistic and easy-to-follow procedures and processes.

On a bilateral basis between the developer and its different contractors and suppliers, scheduling, project documentation and communication, and real-time dispute resolution are all crucial. The suggestion for a coordination agreement among the major project players to build a forum and methods to support planning and coordination during construction also brings these problems together.

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Contract clauses and related technical requirements should be prepared by the developer to meet coordination, scheduling, and timely notice duties across construction, supply, and service contracts. To the degree possible, incorporate these terms into all of the contracts concerned.


Scheduling accuracy

The timetable is a vital management tool in the construction industry for planning and coordinating work and avoiding delays. It’s also crucial to track real delays and figure out how to reduce or recuperate them. A well-prepared schedule informs all project participants on what is expected of them by others, as well as what they may anticipate from other participants.

While many people think of project schedules as a tool for filing claims, a well-prepared baseline plan that is updated often and correctly during the construction process can lessen the likelihood of dubious claims and make actual disagreements over delays simpler to settle. Before all project partners are under contract and fully aboard, it’s impossible to put together a thorough and accurate baseline schedule. As a result, at the start of the project, the developer usually does not have a full baseline timetable to include into its numerous contracts and purchase orders.

Instead, at the time of execution, individual contractors, suppliers, and service providers may have only rudimentary scheduling information or performance dates and deadlines in their agreements. This is understandable, but contracts and purchase orders should also account for the requirement for more rigorous timelines after the contract has been signed but before performance.

The contractual parties’ level of participation with the schedule will vary, but the balance of plant (BOP) EPC contractor will most likely be in charge of the most precise baseline schedule and the most frequent schedule updates. Of course, the BOP EPC’s performance will be significantly reliant on the turbine supplier’s delivery schedule, as well as the schedules of other suppliers and service providers with whom the BOP EPC must communicate and on whom the BOP EPC relies to do its work. Suppliers and service providers must also be aware of when their supplies or services are needed.

Before construction begins, a complete baseline schedule should be developed as soon as possible. The BOP EPC is usually in charge of developing the baseline schedule. The turbine supplier, other suppliers, and service providers should be expected to give important dates and constraints for their deliveries and operations, as well as to examine and identify any inconsistencies in the proposed baseline schedule that affect their deliveries and activities.

The baseline schedule is merely the start of the process. Throughout the building process, regular updates are necessary to represent actual progress, difficulties, and delays. The BOP EPC is normally responsible for schedule updates, but other project partners should be expected to give correct, up-to-date information and disclose errors in their scope. The project schedule, if correctly maintained, may be the most effective form of vital communication and recording of what happened during the project’s life cycle, both for looking back and planning toward completion.

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An erroneous schedule update loses its utility as a management tool if it isn’t updated properly, and it can mislead and complicate the situation during construction. In the case of a post-construction dispute, erroneous updates make it more difficult to assign blame for delays. Furthermore, those that maintain or do not object to false changes may face a difficult legal struggle if they seek to separate themselves from the schedule modification after it has occurred.


Communication and clear project documentation are essential

Beyond schedule updates, there is a large quantity of textual communication and paperwork on an offshore wind project. The emphasis should not be on “scorching points” with obnoxious emails or fabricating a fake or misleading record. Instead, throughout the building process, all project partners must recognize the necessity of clear, accurate, and timely communication. This is essential to sustain the contract’s real-time flow of important information, as well as the smooth execution of construction and the adjustment to changes or unforeseen conditions.

Keep these considerations in mind when writing project communications or documentation, whether in the form of letters, emails, meetings, meeting minutes, change order requests or claims, daily reports, or otherwise, to improve communication during the project and avoid creating inaccurate records in the event of later disputes:

  • To disclose crucial updates and prevent losing contract rights unintentionally, follow the time and content of notice obligations.
  • Emotions and personal or professional assaults should be avoided. Concentrate on the facts as well as the technical and time challenges.
  • Take into account the conditions of your contract. Use language that is consistent with your agreement and frames your message in a way that is consistent with your rights and duties.
  • Write in a straightforward and simple manner. Legal language should be avoided. Provide clarifications if some receivers do not comprehend technical jargon.
  • If further documentation is needed to comprehend the message, make a note of it and, if possible, attach it.
  • If you don’t accurately communicate the level of urgency for action, you risk having to deal with matters that aren’t as urgent.
  • Recognize that terrible news does not become better as you get older. Rather of ignoring problems and hoping for the best, bring them up on the table and look for solutions.


Dispute resolution in real time

In addition to claim processes and formal conflict resolution requirements (litigation or arbitration), all project participants are interested in real-time, nonbinding dispute resolution procedures that allow the parties to address issues on a project-by-project basis. These real-time methods can include tiers of “meet and confer” phases, mediation, conflict review boards, or single-person project neutrals who provide non-binding suggestions to help parties resolve difficulties quickly.

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The developer should memorialize coordination procedures that include participation by key project participants in the form of interface or coordination agreements, in addition to separate but (hopefully) coordinated scheduling, project documentation and communication, and real-time dispute resolution provisions in each separate agreement with the BOP EPC, turbine supplier, and other suppliers service providers.

The coordination agreement does not have to bind the principal project participants to any legal responsibilities. Relief or liability (in terms of time or money) might be limited to the developer’s and individual project participants’ bilateral responsibilities. In this case, the coordination agreement is restricted to developing mechanisms and a platform for communicating and promoting cooperation, as well as identifying, avoiding, mitigating, and resolving coordination issues before they arise. As concerns or delays emerge, early notification to the developer and the parties to the coordination agreement should be part of the process.

In terms of real-time dispute resolution, the developer should consider including an independent disputes advisor in the coordination agreement to resolve coordination issues and disputes among key participants as they arise, with the goal of resolving such issues early and before they have an impact on the project and cause disputes. The coordination agreement’s real-time dispute resolution process should be independent and different from the developer’s bilateral agreements with the BOP EPC, the turbine supplier, and other project participants’ real-time conflict resolution procedures.

If a coordination conflict cannot be addressed with the help of the independent adviser, the developer should have the major project participants align their formal dispute resolution procedures. Despite the possibility of opposition, the developer should consider incorporating discretionary wording concerning the developer’s power to combine project problems.


Agreements on coordination

Implementing these risk management measures on offshore wind projects should result in improved communication and transparency between the parties throughout the project, allowing the parties to prevent or at the very least lessen disagreements. These approaches emphasize the necessity of providing project staff with a venue and processes that allow them to remain focused on their common goal of a successful project rather than on claims and disputes.

What the most expert attorney or claim consultant can do after the fact in formal legal processes is considerably more useful, far cheaper, and far more successful than how project staff perform their roles and communicate during construction. If formal legal processes are inevitable, these strategies improve the chances of a successful outcome.

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