Power Play | Episode 2 | Project Counsel – Supporting live construction phase projects
Hello, and welcome to the PowerPlay podcast, the podcast that talks tactics for renewable investments and assets. My name is Dan Cashmore, and I'm joined today by Seb Buttard. How are doing, Seb?
Speaker 2:Hello, Dan. I'm very well. Thank you, and thank you very much for having me.
Speaker 1:You're very welcome. In this current series, we're going to be talking about the effective management of risks on assets throughout their life cycle. And we're very much concerned here with the physical aspects of the renewable asset, I e, the kit itself. And in each episode, we're introducing an issue, and then we're gonna talk tactics on how to deal with that in order to maximize value or minimize detriment to the asset or portfolio. And we're obviously coming at this from a contractual legal perspective, but as we do, we'll be weaving in practical and commercial points we've seen from our experience of advising on many energy assets.
Speaker 1:In this episode, we're gonna dive into the construction phase of major energy and infrastructure projects and how we support clients in the management of risks through our role as project council. So first up, Seb, can you please just explain what it is we mean by project council?
Speaker 2:Thanks, Dan. And, yep, as you say, needs some definition upfront. So in a nutshell, when we refer to our role as project council, we're talking about providing day to day and strategic advice throughout the construction phase of energy and infrastructure projects. Like, the different differentiator here for us is that instead of operating as traditional outside counsel for a client, we are fully embedded within the project team, enabling us to provide everything from a asking for a friend style sense check on something through to directing strategy in resolving claims for time, cost, and and quality issues.
Speaker 1:So that's it's almost sounding like a succumbent, Seb. Is is it a succumbent or or a similar thing?
Speaker 2:Well, it's it's it's a good good point. And there's a lot of similarities and crossover between, you know, a traditional secondee into a project and the project council role. And often, we would actually, you know, combine a project council role with a secondee into the project itself depending on its size and duration. And the roles, both secondi and project council, are very much complementary in enabling us to develop a really detailed understanding of the intricacies of a major project. So we get in and we understand all of the contracts, the engineering issues, the politics, and the key commercial drivers that then, in turn, allow us to provide long term bespoke advice to support our clients in in delivering these projects.
Speaker 2:However, I get you know, to your point of secondee versus project council, the the wider benefit of the project council role is that you, as a client, then have a seamless access through specialist coordinated legal support across all of our service lines. So we can deliver practical real time advice as quickly as possible, you know, often in, you know, in in the midst of issues happening on-site with as much flexibility as required. So it's much less full time, say, than a secondant in terms of both, you know, time and money for for us and the clients.
Speaker 1:Thanks, Seb. So, obviously, that's a really useful perspective and one I know comes from firsthand experience that you have of working on and sitting in that project council role as as well as you've obviously had plenty of succumbents as well within major energy infrastructure projects. So real firsthand experience, I think, is important. And I suppose just from your perspective, what do you see as the primary benefit that the project council approach gives clients as opposed to the usual way that we might get instructed where we're asked ad hoc questions or or queries?
Speaker 2:So for me, yeah, ultimately, this is all about most effectively supporting our clients to successfully deliver the project in question. Avoiding those risks that can be avoided, mitigating those that can't, all whilst balancing the key legal, commercial, and technical drivers of the project. And the the key, you know, USPs for the project council role, I think, can be broadly broken down into three. First, it's our early engagement through working alongside the project team that then means we can improve a client's contractual position and provide early strategic direction to then best protect our clients' interests. Essentially, we we are we are addressing issues as they arise on a day to day basis through proactive contract management.
Speaker 2:Second is that we offer bespoke and very flexible fee arrangements for for for project council roles, and this can be through a retainer, rolled up rates, or similar, very much to suit a client's needs and a particular project. And this again gives comfort to the client's team that they can pick up the phone to chat through issues, whether they'd be big or small, and encourage that engagement that avoids issues being sat on until ultimately it's too late to take any meaningful action. And then third, by working alongside the project team over the course of the construction phase, we are fully immersed in the technical, commercial, and contractual background that is off often very, very fast moving. That then again allows us to provide really fully informed and incisive advice to resolve matters for our clients. And this level of understanding and advice goes much beyond, you know, that that's associated with, to your point, you know, the typical ad hoc advisory role.
Speaker 2:And, ultimately, these these three sort of key benefits then come together to avoid the buildup of claims and facilitate the early resolution of disputes, which in turn saves clients cost in legal fees and indeed resources through having to pursue or defend lengthy proceedings.
Speaker 1:Thanks, Ed. That's that's really useful. It would be good, I think, just to outline how we as external council fit into that project role given our background, particularly as contentious construction lawyers, some might describe us as litigators, is is do you us to really get into that and whether that's helpful or not? I'm gonna assume you're gonna say yes. But what's your what's your view?
Speaker 2:Absolutely. And and, no, you're entirely right that, yeah, there is that sort of perception of litigators and litigators being on a live project is this not an overly aggressive approach to be taking. What what's going on here? And so working always backwards, it's contentious construction noise. Yeah.
Speaker 2:Historically and traditionally, we get involved usually when the wheels could come off on a project and the parties are in full blown dispute. And through that acting for clients and resolving construction disputes, we have to undertake a very forensic investigation to develop an understanding of where and how the original problems arise and then how these develop and are ultimately resolved. So putting our project council hats on, we essentially reverse engineer this litigation experience to proactively identify and manage live construction issues. And I like to sort of describe it as bringing a litigator's perspective to active contract management, anticipating and resolving things before they actually go too far.
Speaker 1:Yeah. A bit sort of poacher turned gamekeeper
Speaker 2:Yes.
Speaker 1:Kind of situation, I suppose. So could you then said, no. No. We dealt with why we understand, like, what a contentious construction lawyer can bring into the mix. Can you just give us a a high level overview of the type of support that you provide as project council?
Speaker 2:Yeah. Sure thing. So it depends partly on when we are appointed on a project.
Speaker 1:Yeah.
Speaker 2:But if we're appointed right at the beginning, you know, we'll often start out by undertaking a review of the main contracts, subcontracts, both up the line, down the line, depending on where we are, to identify any particular risks. And that in, you know, in part is looking at the core contractual risk allocation. So we got principles of design liability, responsibility for the for ground conditions, delay program, etcetera. And then separately, how have these risks then been passed down through our supply chain? Are we backed off in terms of liability up and down the chain?
Speaker 2:And with that in mind, we would then look to engage with the project team either through training or workshops, whatever it might be, to run through the the key contractual risk areas. And what we can do, again, working hand in hand with the project team to to mitigate these at the outset. And then as work starts on science, and I'd to say it's when work's really going often, it's actually right at the beginning when you don't have access or whatever it might be. Our advice then usually turns to the management of claims for time, money, or quality issues. And this again addresses day to day points such as getting your notices right, issuing your claims, application for payment, whatever it might be, preserving records, making sure that you have the right records in place so that if a claim is brought against you or indeed you need to pursue a claim, we are fully loaded up with all the ammunition we need.
Speaker 2:And then, you know, again, we we look often to instruct experts to support, not necessarily in bringing or defending claims, but in resolving technical issues on-site, Again, with a bit of a weather eye on if this became fully contentious, where are we, and how are we protecting our client? And then sort of beyond just the day to day project as it goes forward will encounter difficulties. And, again, our role there is very much looking at this from a more strategic overview to identify how for the, you know, the the benefit and ultimate success of the project are we going to defend, bring claims, manage issues. So we work again with the client to bring together broader strategies. And then just just finally there, there's then, you know, as the project goes through its life cycle, there are often instances where parties contracting supply chain have come to an impasse, and, actually, it needs to be resolved there and then.
Speaker 2:And that, again, can be done through short fire adjudication, a much faster dispute resolution mechanism, through to, you know, preserving our rights around litigation arbitration. But more often on these types of projects, it's actually getting to a point and helping the client agree almost a line in the sand agreement so that the project can continue, the parties can continue to work together while still preserving rights for either party usually so that, you know, we could live to fight another day on various issues.
Speaker 1:Yeah. I think it's an interesting point. Now you say, Seb, actually around where parties do have that that impasse and it's potentially, you know, prejudicing or adversely impacting the progress of the project. You know? And it's it's uncomfortable for some parties, but actually, you know, in our experience, it is sometimes best to just rip the Band Aid almost and and have that, you know, dispute resolution process there to to allow the parties to find the answer and for them to move on and continue to deliver the project and not store up things right to the end.
Speaker 1:I thought it might be helpful, to just take a practical example and just just picking up on on one of the things that you suggested might and often does pop up on big complex projects is is where a party discovers they've got a defect with their kit mid installation of the works. Just then, what what's what's the role there in terms of project council in supporting that situation?
Speaker 2:Defects are, yeah, really good example, Dan, especially that mid installation live contract construction work is going on. But I personally feel we we add some of the greatest value there that our role splits about fifty fifty between protecting our client's position and the contract. So making sure that in respect of that defect, our client is as best positioned as possible going forward. But, also, we very much work with the team to try and resolve the defect in question. And that's all again with maintaining that that broader picture of program budget so that the project is actually delivered.
Speaker 2:So where a defect arises, and I'm gonna use an example of, you know, grouting offshore foundations. The client is then usually faced with a number of challenges, which include, you know, identifying the technical nonconformity itself. Why is this a defect? What is wrong? That then feeds into what is the appropriate remedial scheme.
Speaker 2:And then thirdly, how does that all fit in with the cost of your contractors and the wider project program, all in a in a very fast moving environment? And, you know, with offshore works, you know, where the cost of your vessel spread is upwards of £200,000 a day, you know, time is very much money. So we, at that point, you know, one of the first questions we are asked is, you know, who is responsible for the defect in the first place? That has an interface with what is the cause of the defect, and there's some technical work that needs to be done there. Essentially, taking our deep understanding of the wider project through our early engagement, we therefore have a really good understanding of the often very complex contractual interfaces between the different contractors, which means we can get to an answer pretty quickly.
Speaker 2:This advice then ties into the question of what are the parties' wider obligations in respect of of of that defect? Do they have to come back and fix it immediately? What happens in terms of the vessel spread? The marine spread has moved on to another location. Can we instruct them to come back and resequence the works to prioritize this foundation?
Speaker 2:And, you know, the the the million pound question is always then who is actually picking up the tab for the issue in question and then the wider costs that are being incurred by the developer contractor in the project. And this contractual advice then very much feeds into discussions with the the engineering and commercial teams to ultimately reach decision on resolving the defects itself in real time on the project.
Speaker 1:And and how do you see that discussion usually playing out given all the complexities and dynamics that you've just described?
Speaker 2:Yeah. And that's that's a very interesting question that can be very polarized. You know, I've I've had projects where there have been systemic defects, and the breach of contract is actually pretty clear, at least to our to our to our our view. However, due to the nature of major energy projects, the the value of lost generation or or even worse losing your CFD or or offtake agreement means that a very careful cost benefit analysis needs to be carried out, and it's often fairly late at night, sadly. And the business decision actually may be to accept the defect or indeed, you know, just get control of the defective kit in the first place to ensure that the works can be completed on time, notwithstanding the defects in question.
Speaker 2:And in this situation, we we'll help our clients very carefully navigate the contract to preserve its rights of recourse down the line and then ultimately best position it to recover potential losses once the kit has been installed and we're up and running.
Speaker 1:Yeah. So it's it's to me very much this is informing ultimately the commercial decision of the client. But but Arrow along with others is making sure that that the decision is made with their eyes wide open as to, you know, in a detailed understanding of the contractual legal risks and aspects of that as well as the technical engineering advice. You know, ultimately, working together as one team to try to mitigate the impact of defects given this is all less than ideal, I suppose.
Speaker 2:Exactly, Dan. Yeah. Absolutely right. And that can be contrasted with other scenarios where defects are identified, notified to the relevant contractor, and then the contractor strictly held to its obligations on remediation of the defect, etcetera. Yeah.
Speaker 2:And and in that type of scenario, one of our key focuses is on managing the multiple interfaces that flow from a defect claim. So, for example, taking time to analyze the root cause of the defect and then implement a remedial solution can take months. And that in itself can then have a significant impact on the wider supply chain and related contractors. And, you know, this is exemplified by critical energy components. So inverters, switchgear, transformers, any issue within any those bits of kit very likely to delay completion of a substation, for example, the subsequent commissioning activities, and then ultimately the energization of of of circuits.
Speaker 2:So fairly major ramifications for for the client. And, again, this is where the sort of the wider project council knowledge, the embed embeddedness in the project team means that we work very seriously with our clients to manage the wider supply chain, the different contracts, and mitigate the impacts of delays here and and additional cost.
Speaker 1:Thank you, Seb. So I think we're gonna have to wrap up there, unfortunately. I know you and I could probably talk about the project council service and how we add value to projects literally all day. I suppose just summarizing what I've been listening to from you. For me, I think the big thing about the project council role is it's all about context.
Speaker 1:The project council service is all about advising on big complex projects that are very dynamic, and this is about investing in allowing your legal team to understand the full and proper context of that project so that we we have the benefit of that when advising on issues as and when they pop up. And the quid pro quo for that is that OC is able to add value, change outcomes, and resolve disputes at an earlier stage. So that's it from us for now. A very big thank you to you, Seb, for talking to me today about the project council service.
Speaker 2:Thank you, Dan. It's been really great to speak this morning.
Speaker 1:And thank you all for listening. Goodbye for now.