Refinery Repair Project Delay: Owner or Contractor Mismanagement?

Litigation, North America

A refinery owner and contractor disputed the cost and schedule overruns for a time-and-materials contract to repair damages from a process explosion. "He-said-she-said" - the contractor alleged that its performance was negatively affected by owner mismanagement. The owner claimed that the contractor used inexperienced engineers, resulting in design errors and excessive field rework. We produced an expert report of our assessment of the contractor's performance, owner impacts, and standards of care.

A refinery experienced damage to a processing unit following an explosion. Fortunately, no personnel were injured but the refinery's operations were severely restricted until the damage was repaired. The operating company was largely self-insured, so the property damage and business interruption losses were mainly borne by the refinery's owner. The repair work, which was carried out under a time and materials contract, experienced cost and schedule overruns, and this led to a dispute between the owner and the contractor.

The contractor alleged that its performance was negatively affected due to mismanagement by the owner, including long delays in making engineering, design and construction decisions, as well as delays in providing necessary materials. In contrast, the owner claimed that the contractor used inexperienced personnel for the engineering and design work, which led to design errors that resulted in excessive field rework. This field rework also, allegedly, had poor field management and labor quality. The owner claimed that all of these factors contributed to low productivity, high costs, and long completion times.

Baker & O'Brien was engaged to review the owner's management of the project and the contractor's performance and productivity in light of the mismanagement allegations. Actual performance was compared to established engineering and construction labor metrics, and any differences were then related to specific actions or inactions. A report was issued providing an assessment of the contractor's performance, taking into account observed owner impacts and expected standards of care.

Charles G. Kemp

Vice President

Industry
Petroleum Refining
Service
Insurance Claims / Engineering, Procurement, and Construction (EPC) / Litigation
Region
North America