What's the Value of Terminated Engineering?

Arbitration, Middle East

When an Engineering, Procurement, and Construction (EPC) contract was terminated, Baker & O’Brien was retained to assess whether the engineering design satisfied the EPC subcontract’s technical and operational requirements. Our analysis involved reviewing the development of engineering studies and deliverables to assess the parties’ claims. We produced a technical expert report, a responsive report, and a joint expert report before testifying before the London Court of International Arbitration arbitral tribunal.

A national energy company (the “Owner”) awarded a build, operate, and transfer (BOT) contract to a domestic construction contractor (the “BOT Contractor”) for a mega-project development of oil production facilities. Lacking energy-sector engineering expertise, the BOT Contractor, in turn, awarded a lump-sum engineering, procurement, construction (EPC) subcontract to an international contractor (the “EPC Contractor”).

Limited engineering had been completed before the BOT and EPC contracts were signed. This led to post-contract disagreements, and ultimately, the EPC subcontract was terminated during the engineering phase and before the first major payment milestone. An arbitral proceeding commenced between the parties to resolve, among other issues, payment for the engineering completed to date.

Baker & O’Brien was retained to independently assess whether the EPC Contractor’s engineering design and deliverables satisfied contractual technical and operational requirements. In addition, we evaluated whether the EPC Contractor had carried out the engineering in line with standard international industry engineering practices.

We assessed the development of engineering studies and deliverables, including whether the Owner and BOT Contractor had reasonably withheld document approvals. This included categorizing over a thousand comments on key deliverables between the Owner and the BOT Contractor to analyze their relevance for assessing engineering quality. We determined the relevant comments that identified necessary design modifications to satisfy the contract requirements or to align with normal industry standards. The remaining comments–which we categorized as “Owner preferential,” “sought clarification,” or “irrelevant”–were therefore not a reflection of the EPC Contractor’s work product quality.

Our consultants relied upon their experience and expertise in generally accepted good international industry engineering practices to answer a set of technical expert questions agreed upon by the parties. We provided our opinions in a technical expert report, a responsive report, and a joint expert report and testified before the arbitral tribunal at the London Court of International Arbitration.

Peter P. Bartlett

Senior Vice President

Oil & Gas Production
Standard of Care / Engineering, Procurement, and Construction (EPC) / Litigation / Arbitration / Expert Witness Testimony
Middle East and Africa