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Wind energy contracts moving to standard forms

28 Mar 2024 / environment Print

Wind-energy contracts moving to standard forms

The International Federation of Consulting Engineers (FIDIC) is developing a new standard form contract for offshore wind projects, according to William Fry lawyers.

In a bulletin, the solicitors point out that Ireland’s offshore renewable energy (ORE) targets are ambitious.

Construction-industry capacity will need to grow significantly to meet these targets and, along with planning aspects, the form of construction contract best suited will need to be considered.

FIDIC has acknowledged the need for a balanced standard form given the sector growth internationally due to the net-carbon-zero agenda.

Current contractual approach

Offshore windfarms are technically complex to design, construct and deliver, William Fry states.

“They lend themselves to an 'engineer, procurement and construct' (EPC) or an 'engineer, procure, construct and install' (EPCI) contract arrangement. Despite advances in offshore wind projects across Europe, to date there has been no standard industry contract form,” the bulletin says.

Such projects are typically contracted based on heavily amended FIDIC conditions of contract (often the FIDIC Plant and Design-Build [Yellow Book] 1999 form), effectively resulting in virtually bespoke construction contracts.

Proportional risk allocation

FIDIC is seeking to develop and publish a more balanced ORE construction contract to reflect industry needs and provide for proportional risk allocation between the employer and the contractor.

FIDIC has assigned a dedicated taskforce to manage the development of this contract form.

Offshore wind-farm projects are costly, the lawyers state.

Supply-chain issues, marine-vessel availability, unique extension of time-and-delay events, inflation, and geopolitical status will all impact on cost.

A more balanced risk allocation arising from contractual compensation events impacting on price will need to be addressed.

Interface risks

Managing and mitigating interface risks between designers, contractors, specialist sub-contractors/suppliers for supply and installation, and other external stakeholders will be challenging.

Contractual measures will likely include a risk-allocation matrix, project-specific contract-management boards and dispute-escalation procedures to deal with live issues.

Weather and climatic conditions play a significant role in planning and delivering construction of Ireland’s offshore wind projects.

The regime of indemnities may adopt the 'knock-for-knock' indemnity approach to risk of loss and damage.

The challenges presented by the seabed-site information available prior to contract and post contract are other issues that will need to be managed.

Other contract options

The International Marine Contractors Association (IMCA) has also announced publication of a standard-form contract for transport and installation works in offshore wind-farm projects.

In Ireland, there is a greater familiarity with the various forms of FIDIC contract in the onshore-energy/renewable-energy sector, including with bespoke amendments.

FIDIC will publish its new contract for offshore wind-farm projects by the end of 2025, William Fry lawyers say.

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