October 28, 2024
Utility infrastructure will continue to represent a key aspect of ongoing investment across the Australian construction industry. As the Australian population grows, there will be ongoing need to develop and expand existing utility assets and construct new assets.
Procurement Models
Often Contractor’s will be engaged to deliver works on a design and construct basis. Pending the specific scope of works required by the Principal, the Contractor may also be engaged to deliver the ongoing operation and maintenance of the asset as well. The specific scope will be driven by the internal capabilities of the Principal, specifically around if they maintain their own operations team. A Principal may also decide to separate out the construction and maintenance/operation aspects of a contract, based on certain procurement and internal considerations, including where value-for-money and risk allocation will be best achieved.
When a Contractor is engaged to deliver utility assets on a design and construct basis, specific attention should be paid to the project specific requirements. Where a design does not properly take into account the project specific requirements, then once construction commences it may be costly to undertake reworks. Further, minor aspects of the project specific requirements may have wider impacts across the whole of the project, which parties should carefully consider where works are undertaken on a staged basis.
Similarly, where a contract specifically requires that allowances are made for future development of assets, this should be reflected in the design and manner in which the works are undertaken. If future expansion is not facilitated by the works undertaken by the Contractor, then the issues resulting from such may not be seen on an immediate basis, but will expose both the Contractor and Principal to significant risk moving forward.
To properly insulate against such risk, Contractor should ensure that they:
- fully inform themselves of the project specific requirements and any external factors that are likely to impact the operation and functionality of the utility asset;
- ensure that sufficient allowances are made during the Tender phase for the design to be progressed in a manner which allows for proper quality assurance (from both a time and cost perspective) and investigation of the site and any conditions which might impact the asset; and
- appropriate experts are utilised where necessary to provide specific advice that may inform the design, construction, and operation of the works.
Integration with Existing Infrastructure
Any utility infrastructure developments will inevitably require tie in and connection to existing infrastructure.
To make proper allowances for this, parties should take steps, to the extent possible, to inform themselves of the existing state of any assets that are currently in place. Where the condition of such assets is such that a connection would not be feasible, the scope of works may necessarily be expanded to include the necessary upgrades. Similarly, if the condition of assets cannot be known when entering the contract, there should be proper mechanisms in place to ensure an entitlement to claim for such additional works if required. If the Contractor is required to price all potential works because they cannot understand the condition of such assets, it may not deliver a value-for-money approach for the Principal.
Where another contractor is performing the connection works, parties should also ensure all contracts adequately deals with such. Beyond obligations for the respective contractors to work together, it may also be necessary to address potential impacts they might have on the others works, especially when they are performing works near each other at the same time. Contractors may seek to specifically set out in the contract what allowances have been made, and where they will not be responsible for certain acts or omissions (or set out specifically what they will be required to provide).
Procurement Concerns
Parties should also carefully consider what specific materials and equipment will need to be procured in respect of the project.
Some specialised utility infrastructure will require international procurement of certain construction or operating materials, plant or equipment. If this is required, parties should carefully consider how this equipment will be procured, delivered and installed or utilised.
If a Contractor is required to procure such, they may request that payment be made in foreign currencies, to insulate against exchange rate risk that may arise during project delivery. This is especially the case if payment of those foreign suppliers does not occur on an immediate basis.
If parties turn their mind to international procurement risk at contract formation stage, it can ensure proper risk mitigate approaches are implemented by all parties.
Legal Support
Lamont Project and Construction Lawyers have extensive experience working across the lifecycle of utility infrastructure projects, from project development, contract negotiation, ongoing project support, dispute avoidance and support, through to practical completion.
By providing clients a tailored approach to contract negotiations and project support, we can ensure that our clients are best positioned regardless of the particular circumstances.
If you have any questions about your current or future projects, please do not hesitate to contact Lamont Project and Construction Lawyers for a discussion on how we can assist you.
Contact: Peter Lamont or Ryan Bryett
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
Address: Suite 2, Level 2 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064