Mona Dajani

Mona Dajani
Partner
November 2014
EPC (Engineering, Procurement and

Construction) Contracts in the Energy Sector in
the USA
USA Infrastructure Day
Mona Dajani, Partner
Baker & McKenzie LLP
November 20th and 21st, 2014
Madrid and Lisbon
Introduction, Objectives & Agenda
Introduction
Objectives
1.
Discuss different types of contracting structures used in large-scale

projects, with a focus on EPC
2.
Consider the key issues that may arise during negotiations and project
implementation
Agenda
Part I: Introduction to Contract Structures frequently used for major projects in
the United States
Part II: Key EPC contracting issues
Part III: Practical tips
2014 Baker & McKenzie
Mona Dajani
mona.dajani@bakermckenzie.com
2
Part I: Contract Structures

2011 Baker & McKenzie 3
Construction Contract
Consultants appointments
OWNER
LEAD DESIGNER
PROJECT MANAGER
Construction
Contract
M&E ENGINEER
MAIN
CONTRACTOR
STRUCTURAL ENGINEER
OTHERS
Sub
Contracts
SUB CONTRACTORS
Separation of design and construction

Original basis of many of the standard forms
Still relevant for large non-project financed contracts and some elements of project-financed projects
cf. hybrid construction approach (novating design to contractor)
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Construction Contract - Pros & Cons

Advantages
greater control of design requirements and construction process
flexibility, including as to pricing approach and selection of contractors
speed of bidding (once design completed)
ability to replace defaulting contractor
Disadvantages
design and construction interface risk
requires full design before commencement of work
buildability issues
adversarial relationship
may be relevant for infrastructure assets but not for plant
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EPC Contract
OWNER
Consultant
appointment
PROJECT MANAGER
EPC Contract
EPC
CONTRACTOR
Other
consultant
appointments
ENGINEER
TECHNOLOGY PROVIDER?
SubContracts
OTHERS
SUB CONTRACTORS
design and construction responsibility taken by the Contractor, i.e. turnkey basis
EPC typically used on power, process and other plants
similar approach used for other civil infrastructure (e.g. ports, roads etc.) called design and build (note
variation in naming convention)
Mona Dajani
commonly used for project financed assets
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EPC - Contract Pros & Cons

Advantages
single point of responsibility
limited interface risk
fixed price (although some variations to pricing structures)
potentially fixed schedule (subject to contractual adjustment mechanisms)
contractor has design liability
bankability
easier contract administration

single or multiple completion dates for Works or Sections
Disadvantages
tender process can be long and costly
prices can be higher all risks are priced
limited pool of contractors competitive pressure may not off-set the risk pricing
contractor default has a significant impact
potentially adversarial relationship
loss of control less Owner involvement and potential for intervention
cf. caps on liability and limitations on liability

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EPCM Contract
Engineering
Procurement and
Construction
Management
Agreement
EPCM CONTRACTOR
OWNER
WORKS CONTRACTS
WORKS CONTRACTORS
EPCM Contractor provides engineering and supervisory services in connection with procurement
and construction but not the procurement and construction work itself
EPCM Contractor's basic role is to:
carry out basic and detailed engineering
manage and co-ordinate the activities of equipment suppliers/construction contractors, in a
project management capacity
assist the Owner to select and enter into contracts with equipment suppliers/construction
contractors for the implementation of the project
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EPCM Contract - Pros & Cons

Advantages
lower bid costs and potential cost savings
efficient design process and fast-track construction
direct contractual relationships
expert contractors
non-adversarial relationship between EPCM Contractor and Owner
replacement of works contractors
higher level of control and intervention by the Owner
Disadvantages
no single point of responsibility
no fixed price or schedule
lower levels of liability for EPCM Contractor and works contractors
questions of bankability
cross claims between works contractors
contract administration
less performance security

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Phased Approach - Convertible EPC Contract

Detailed design
under FEED or
another Contract
Open Book
Estimate
(or tender
process) of
sub-contract
items
Agreed EPC price
EPC Contract
Further design,
procurement and
construction
Detailed
Execution
Plan
The initial design work is carried out under a separate FEED contract until the EPC price can be
determined
The contract then converts into a full LSTK EPC contract

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Convertible Approach - Pros and Cons

Advantageswhere lump sum EPC contract cannot be readily agreed
EPC risk allocation, upon conversion

lower tender costs
lower contingencies in final EPC price
Disadvantages
loss of competitive pressure (in practice)
lack of initial certainty as to contract price or design
potential failure of parties to agree on EPC contract price on completion of the open book process
need for full transparency in Contractors costs and monitoring by Owner

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Splitting Contracts (Tax)

Issues to consider
rationale (avoiding local corporate taxation on work carried out offshore)
scope of the onshore/offshore contractor work
typical structure (coordination/umbrella agreements)
how do you avoid liability gaps between offshore and onshore contractors?
who takes tax risk if it does not work?
Practical messages
undertake tax analysis as early as possible to determine best contract structure for tax efficiency
(contract split must be driven by tax regime of the deal)
ensure that technical schedules can be split (if necessary)
tender process should reflect the split

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Part II: Key EPC Contracting

Issues
Typical Issues
Why are issues typical?
they represent the balance (levers) between the contract price and the allocation of risk
for the contractor, a higher price may mean it is prepared to take more risk
for the employer, a lower price may mean it must take on more risk
allocation of risk is critical, even in an EPC contract. Engineering projects are inherently risky;
who is best placed to take on the risk?
What are the typical issues?

1.
2.
3.
quality (standards of work or performance):
warranties and standards of care
performance testing and under-performance remedies
time (schedule) and money (costs and finance):
program, time for completion and delay remedies
grounds for extension of time and cost
consequences if things go wrong:
performance security
termination (including force majeure)
limitations on liability and indemnities
Technology

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1. Quality Issues
Warranties
Issues to consider
contractor may not have back-to-back (or PII) protection for non-negligent design
warranties are a product of English law, not typically known in a civil law context
Typical EPC warranties
compliance with Good Industry Practice and contract requirements, including performance
consider specific performance requirements
fitness for purpose, as specified in the Contract there may be issues in negotiating this
standard as may need to define purposes clearly
free from defects in design and workmanship
obtaining required third party IP rights and no infringement
compliance with laws, relevant codes of practice and ethics (which ones?)
designed for minimum specified working life

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Performance Testing and Liquidated

Damages for Performance
Issues to consider
matching up the technical schedules in the contract with the language in the conditions (often
different workstreams)
performance liquidated damages must be a genuine pre-estimate of loss
performance liquidated damages only achieve so much; difficulties of achieving practical sanction
if plant falls below the minimum standards where rejection is not realistic
Performance testing and damages mechanisms; the EPC contract should include
testing regimes and performance liquidated damages in respect of key criteria (eg product quality,
capacity, utility consumption etc.)
mechanisms to recover performance liquidated damages within specified parameters, but right to
reject or reduce price if performance is below minimum standards
clear program for testing whether testing takes place before or after taking-over by Owner (e.g.
on Mechanical Completion or after commissioning or both)
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2. Cost & Time Issues

Time & Cost

Contract program and time for completion
critical issue importance of completion on time to preserve revenue stream
program role, adjustment and legal status under the EPC contract; project to be completed as a
whole or in sections?
defects liability period purpose, effect and extension
Grounds for extending time and cost
acceleration and expediting ability to require Contractor to accelerate or expedite and the
consequences of doing so
extensions of time; allocation of delay risks may be heavily negotiated
Delay liquidated damages
delay liquidated damages for failure to meet Time for Completion for works or relevant section
consider whether interim dates should also attract delay LDs (if so, consider cumulative effect of
LDs at different stages)
daily or weekly rate to be set out in Contract
setting and claiming - must not exceed a genuine pre-estimate of loss (cf. modeling)
unenforceability and general damages claims / sole remedy provisions; ensure correctly
specified in the contract and, if not to apply, is it clear that general damages should apply?
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Time & Cost - Key Principles
Contract drafting is important but consider too the role of law
prevention principle
application of extension of time grounds (cf. case law)
waiver / estoppel
quantum meruit / acts of prevention / time at large
EOT Notice Requirements
Constructive acceleration claims

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3. Problem Issues
Performance Security
Issues to consider
from whom should the security be sought?
for how much?
for how long?
Types of security
advance payment guarantee
performance bond
parent company guarantee
retention / retention bond
subcontractor indemnities
or a combination

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Performance Security
Performance Security Typical Key Protections under EPC Contract
Type of Security
Performance Bond
Parent Company Guarantee
Advance Payment Guarantee
Retention
Subcontractor Indemnities
Key Points
% of Contract Price frequently in range of 10%

Adjusted if Contract Price increases by specified percentage
To be provided prior to site mobilisation or any payment

In approved form (attached to Contract) key question: demand or default basis?
Continues until completion of Works and defect rectification

Can be called for any breach
Failure to comply with requirement to be a Contractor default leading to termination
From approved parent company

Subject to same limitations as EPC Contract
Specified form to be attached key issue is to try to include primary obligor guarantee and indemnity
Provided prior to payment
Failure to comply with requirement is a Contractor default leading to termination
Where an advance payment is to be given

For mobilisation and design work
In approved form (attached to Contract) for amount of advance payment

Amortised by pro rata deductions from interim payments
Amount of guarantee reduced each year

Pre-condition to payment
Failure to comply with requirement is a Contractor default leading to termination
Cash retention of specified % (in range of 3-5% generally but may be higher) from interim certificates to a
total of similar % of Contract Price
Released on issuing of Taking-Over Certificate
To be assignable to Owner and will be assigned on expiry of Defects Period.
Typical Termination Rights

Issues to consider
termination is a last resort, but if it happens all parties need to understand the consequences
the consequences of termination will differ depending on the circumstances
remember that if termination occurs, handover may be required
Typical grounds for termination by the Owner
Grounds of Contractor default, if the Contractor:
Typical (FIDIC) consequences
fails to provide or comply with requirements for performance

security
notice of default with cure period for some events, immediate for
others
abandons the Works or demonstrates intention not to continue
commits a material breach of Contract
payment obligations cease further payments to Contractor and

recovery of additional cost to complete
fails to proceed (without reasonable excuse)
practical consequences:
prolonged delay so that liable for Delay Damages up to the cap
becomes insolvent
subcontracts whole Works or assigns without consent
commits a breach of law
vacation of site and delivers goods, documents to Owner

and removes Contractors Equipment
transfer of sub-contracts (best efforts basis)

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Force Majeure
Force Majeure
Not defined under English law so contractual definition is important
General tests plus non-exhaustive list of events or narrower test (perhaps with specific
exclusions)
Consequences for parties obligations time and cost
Possible termination for prolonged delay

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Typical grounds for termination by the Contractor

Grounds of Owner default, if the Owner:
fails to make payment within specified period of relevant payment

period
notice of default with cure period for some events, immediate for
others
substantially fails to perform obligations
instructs a prolonged suspension of whole of Works
becomes insolvent
payment obligations: return of Performance Security; pay for work

done; plant and materials ordered and delivered / to be delivered;
other costs reasonably incurred in expectation of completing
Works; cost of removal of equipment and temporary Works and
repatriating labor
practical consequences: Contractor ceases work (except for

safety), hands over paid-for documents, materials and vacates site
Termination by reason of Force Majeure

Prolonged Force Majeure
If progress of substantially all of the Works prevented for a long

period or multiple periods in aggregate for same FM event, either
party can terminate on notice (periods vary from contract to
contract)
payment obligations: pay for work done; plant and materials

ordered and delivered / to be delivered; other costs reasonably
incurred in expectation of completing Works; cost of removal of
equipment and temporary Works and repatriating labor
Note that FM is not defined under English law so contractual

definition is important
practical consequences: Contractor ceases work (except for

safety), hands over paid-for documents and materials and vacates
site
Termination for convenience

Sometimes negotiated (e.g. Owner can terminate on 28 days notice) but may be resisted by Contractor. Generally cannot terminate in order to
execute the Works himself or through another contractor. Consequences are as per a termination for Owner default or FM
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Indemnities
Issues to consider
relationship between indemnities and caps on liability
Typical EPC indemnities

From Contractor
From Owner
personal injury / death caused by Contractor negligence
personal injury / death caused by Owner
property damage (other than the Works)
right to have the Works executed on the land
other site contractors claims caused by this Contractor
Owners risks:
IP infringement
war / hostilities
compliance with laws
rebellion
compliance with export / country of origin law
terrorism
Interference with the public
riot or disorder
damage from transporting goods
ionising radiation / pressure waves
protection of the environment
claims of Contractor personnel / sub-contractors

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Limitation of Liability
Issues to consider
Contractor will expect to cap its liability
questions are the level of the cap and exclusions from the cap
English law position on excluding liability e.g. statutory limitations on exclusions of liability for
fraud, personal injury/death etc.
note interface with insurance and who maintains it
what constitutes direct loss?
Typical provisions might be as follows but will be negotiated

Cap on liability at specified % of the Contract Price
Consequential Loss exclusion (i.e. loss of profits,

loss of contracts etc.)
IP infringement
IP infringement (?)
environmental indemnity (?)
environmental indemnity (?)
personal injury / property damage / third party claims
delay and performance liquidated damages
amounts recovered under insurances (i.e. insured matters)
fraud, deliberate default or reckless misconduct
personal injury / property damage / third party claims

indemnities
cost of defects work
fraud, deliberate default or reckless misconduct

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Technology - Key Principles

There are no specific tailored provisions in standard form EPC contracts (recall Part I of presentation)
so if technology to be used, the parties will need to consider
who is responsible for obtaining the technology rights and what rights are required?
if Contractor obtains tech rights, how and on what basis will they transfer to Owner?
if Owner obtains tech rights, sublicense or direct license from technology provider?
(Confidentiality issues can be sensitive depending on relationship of technology provider and
Contractor)
extent of Contractors responsibility for performance of technology and design work by

technology licensor (i.e. the extent of the wrap); If no or limited wrap, the limitations on
Contractors liability
provisions for performance testing the Works, process guarantees and minimum requirements
and performance liquidated damages
The advantage of having an EPC contractor is that Owner can (to a degree) pass on risk but
remember that the Contractor will price risk in. This is an unavoidable clash and will need to be
considered as a key part of pricing
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Part III: Practical Tips

Practical Tips for the Owner
Pre-negotiation
engage key advisors early (finance, project management, insurance surveys / geophysical)
undertake tax analysis to determine structure
consider the interface between different workstreams upfront
letters of intent commercially may be necessary but risky
if seeking hard points set them out in the tender (cf. pricing)

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Practical Tips for the Owner

During negotiations
maintain bargaining position as long as possible
ensure a balance between allocating risk to Contractor and price
ensure clear and realistic negotiation schedule
integrate technical working groups with commercial working groups (to avoid mismatch between
technical appendices and body of the contract)
coordination and program is key
get insurance provisions done
when do you let the lenders in?
During contract implementation
ensure conduct is consistent with contract (do not delay or waive rights, expressly or impliedly /
be aware of the concept of equity, including the duty to act in good faith, etc.)
keep records (the Contractor will)

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International Standard Forms - FIDIC Suite of Contracts
Red Book (1999)

(Construction Contract)
Employer
Design
Contract
Engineer +
Design Team
Red Book
Contractor
Yellow Book (1999)

(Plant and Design Build)
Engineer Administrative
Role
Employer
Engineer
Yellow Book
Employer
Administrative
Role
Contractor
Design
Contract
Sub-contractors
Use: Building & Civil Engineering

Construction
Key Features:
Design by Engineer appointed by Employer
so design responsibility on Employer
Price and Payment - option for remeasurement or fixed price
Engineer role acting for Employer
Disputes resolved by Dispute Adjudication
Board, then by ICC arbitration
Employers
Representative
Silver Book
Design team
Contractor
Silver Book (1999)

(EPC and Turnkey)
Employer/
Design Design Team
Contract
Sub-contractors
Sub-contractors
Use: Mechanical and Electrical Plant or

Design and Build
Use: Turnkey Projects, particularly power

or process plants/ frequently used
on limited recourse BOT Projects
Key Features:
Broadly similar conditions to Red Book
Design by Contractor undertakes
fitness for purpose standard for design
and construction
Detailed tests on and after completion
with potential for performance liquidated
damages
Price and payment lump sum fixed price
Risk Sharing approach to allocation of risk
Engineer role acting for Employer
Dispute resolution, as for Red Book
Key Features:
Greater risk allocation towards Contractor
than under the Red/Yellow Book
Intended to provide greater cost and time
certainty needed for BOT projects
FIDIC expects standard form to be amended
to reflect requirements of project
Full turnkey design and construction
responsibility on Contractor
Employers Representative replaces Engineer
Price and payment lump sum fixed price
Important Points:
Good starting point but always need tailoring for particular requirements of project and to correct ambiguities in standard forms
Similar layout/numbering/language for consistency
Based on UK common law origins reflected in risk allocation, language and approach but widely accepted principles and processes for international
construction and engineering
Questions ?
Thank You
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Speaker Biography
Practice Description:
Mona Dajani, who holds a Masters of Business Administration as well as Civil Engineering degrees, is
recognized both nationally and internationally as a leader in the field of public-private partnerships (PPPs).
She focuses her global practice on energy, infrastructure and other commercial and industrial projects. Her
practice focuses primarily on project finance, corporate finance, mergers & acquisitions, and construction for
government and private clients on a global basis. She has represented developers, energy and clean
technology companies, private equity funds, investment banks, commercial banks, regulatory agencies and
multilateral agencies in transactions throughout the North America, Latin America, Europe, Asia, India and
the Middle East.
Mona E. Dajani
Partner
Chicago, USA
Tel: +1 312 861 2975
mona.dajani
@bakermckenzie.com
Global areas of
practice:
Banking, Finance & Major
Projects
Practice Focus:
She has extensive experience structuring, procuring, financing, and negotiating cutting edge PPPs to
develop infrastructure projects in several different industries, including energy,
transportation,
water/wastewater, solid waste, and freight rail. She has developed greenfield and brownfield PPPs, using
concession/franchises, design-build-finance-operate, design-build-operate-maintain, and other alternative
project delivery and innovative finance methods on billions of dollars in projects. Ms. Dajani not only helps
public agencies implement projects, she has particular expertise in advising domestic and foreign agencies
in developing PPP programs from the outset, where she has assisted agencies assess legislative
frameworks and constraints, develop program guidelines and policies, create and implement PPP project
screening and feasibility studies, create consultant conflict of interest policies focused on PPP programs,
and organize and structure master project delivery schedules prioritizing and logically delivering multiple
PPP projects.
Ms. Dajani assists owners and developers throughout the entire project spectrum, commencing at project
conception and continuing through punchlist completion, and beyond, including: selecting the appropriate
project delivery system and contractual structure; drafting and negotiating construction-related agreements,
such as EPC, design-build, EPCM, construction, construction management, engineering, architectural,
program management and development agreements; drafting and negotiating operation and maintenance
agreements and LTSAs; and resolving construction-related disputes.
Awards, Honors & Skills:

Ms. Dajani is consistently ranked as one of the worlds leading project finance lawyers by Chambers. Ms.
Dajani has been awarded America's Leading Lawyers for Business, and is similarly evaluated in numerous
"Who's Who" and other rankings by various organizations and publications. A frequent writer and speaker
on issues of interest to the energy industry and the legal profession, she has lectured extensively throughout
the country and abroad on issues for organizations including Lorman Education Services, Law Seminars
International, Urban Land Institute, Construction Law Superconference and Middle East Project Finance
Conferences in the United Arab Emirates. She is an adjunct professor at the University of Southern
California Gould School of Law where she teaches project development, infrastructure construction,
project finance and renewable energy law.
She has appeared on CNBC, FOX News and the Rachel Maddow show and has been quoted in the New
York Times, Business Week, Wall Street Journal, Forbes, Financial Times and other key publications
on renewable energy issues. She is listed in The International Who's Who of Real Estate Lawyers,
Who's Who in America, Who's Who of American Women, and Women in Project Finance/Project
Development Law. She serves on the board for the City of Hope Hospital in Los Angeles and also serves
on the national board for United Cerebral Palsy of Greater Chicago.
Representative Legal Matters:
Infrastructure & Public Private Partnerships

For the last 16 years, lead counsel for Deep Tunnel Project or the (Chicago Deep Tunnel). This megaproject is one of the largest civil engineering project ever undertaken in the U.S. terms of scope, cost and
timeframe. The project is managed by the Metropolitan Water Reclamation District of Greater Chicago in
conjunction with the U.S. Army Corps of Engineers. Completion of the system is not anticipated until
2019, but substantial portions of the system have already opened and are currently operational. Acted as
fully-integrated member of the owner's management team, providing day-to-day advice on all aspects of
design and construction. Also worked with the owner, designer and construction manager to resolve
problems quickly and keep construction moving and assisted in reporting to the owner's Board of
Directors, the Department of Justice, the U.S. EPA, the federal court overseeing the project and various
regulatory bodies;
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Representative Legal Matters:
A global cement manufacturing company with respect to a construction, procurement and supply agreements for the worlds
largest cement manufacturing plant;
A joint venture in the development of a petrochemical facility in Saudi Arabia, valued at $20 billion and constituting the largest
petrochemical facility ever built in a single phase;
A global mining company in the drafting and negotiation of an EPCM agreement for the engineering, procurement and
construction management of a $1 billion copper mining facility located in the Andes Mountains of Chile;
An electric utility company with the drafting and negotiation of an EPC agreement for the design and construction of a 2000
MW greenfield nuclear power plant in the Southeastern United States;
Freeport LNG Development in the drafting and negotiation of an EPC agreement to expand its LNG import facility to
incorporate LNG liquefaction capabilities (the first and second trains), the expansion which is valued in the billions of dollars;
An owner with respect to the drafting of a dredging contract valued in excess of $1 billion for a major port project in the United
Arab Emirates;
Presidio Parkway Public-Private Partnership project, a $1.1 billion highway project to replace Doyle Drive, the southern
access to the Golden Gate Bridge, in San Francisco, California, and the first transportation infrastructure project completed
under California's new enabling statute for P3 projects;
El Arryan wind energy project, a 115-MW wind farm and Chile's largest wind project;
Port of Miami Access Tunnel in Florida, named the 2009 P3 Deal of the Year by Project Finance International, the 2009
North America P3 Deal of the Year and the 2009 Global Deal of the Year by Project Finance, and shortlisted as a Deal of
the Decade by Infrastructure Journal;
Pocahontas Parkway in Virginia, which was named 2006 Project Finance Deal of the Year (Americas) by IFLR;
Lead counsel for build-transfer arrangement with the Los Angeles Department of Water and Power for a 120- megawatt wind
project in California and the build-transfer arrangement with an energy company for an approximately 220-megawatt wind
project in Washington, including related turbine purchase and balance of plant negotiations for both projects;
Lead counsel for representation of the lenders to Midway Investment and Development Company LLC, the preferred bidder
selected by the City of Chicago in connection with the privatization of Chicago-Midway airport; and
Lead counsel for representation of the New Jersey State Treasurers office in connection with the proposed concession of the
New Jersey Turnpike, the Garden State Parkway and the Atlantic City Expressway.
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Professional affiliations:
American Bar Association - Vice Chair, Project Finance of the Energy Infrastructure & Siting
Committee and Forum on Construction Industry
Association of International Petroleum Negotiators (AIPN) - Member
Institute for Energy Law - International Section

The Energy Lawyers Network - Member
American Council on Renewable Energy - Member
United Cerebral Palsy of Greater Chicago - Board of Directors
Lawyers for the Creative Arts Member
Education and admission

Education:
Loyola University Chicago School of Law (J.D. summa cum laude) (1996)
University of St. Thomas (M.B.A. with Distinction) (1992)

University of Illinois (B.A./B.S. Economics, Engineering and Political Science magna cum laude) (1988)
Admissions:
New York~United States (2013)
U.S. District Court, Northern District of Illinois~United States (1996)

Illinois~United States (1996)
Pro bono and community involvement
United Cerebral Palsy of Greater Chicago - Board of Directors

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Speaker Biography
Practice Description
Jos Antonio Morn is the chair of the Firm's North America Banking, Finance & Major Projects Practice
Group. He has represented clients in numerous high-value deals, including one recognized by Thomson
Project Finance International as the largest merger and acquisition deal in Latin America. The Legal 500
United States recognized him in the 2014 edition in the areas of project finance and real estate and
construction. Mr. Moran has been trained as a lawyer under a civil law system and a common law system.
Jos Antonio Morn

Partner
Chicago, USA
Tel: +1 312 861 2829
Jose.Moran
@bakermckenzie.com
Global areas of
practice:
Banking & Finance
In addition to his practice, he serves as a lecturer at Loyola University School of Law in the Comparative Law
Seminar on Legal Systems in the Americas and as visiting professor at Northwestern Law School as a
lecturer in the Project Finance class. Mr. Moran acted as the Vice Chair of the Banking and Financial
Services committee of the International Institute for Conflict Prevention and Resolutions (the CPR). Mr.
Morn is the chair for the North America Banking, Finance & Major Projects practice group.
Practice Focus
Mr. Morn concentrates primarily on transactions in the US, Spain and Latin America. He has assisted major
US banks and institutional lenders in negotiating and drafting documents regarding loan syndications for
Latin American borrowers, as well as US and European-based oil and gas companies in Latin America in
acquisitions. He has also represented contractors in connection with ground-up, design/build projects, bulk
fuels, and construction and renovation projects in military environments pursuant to NATO and Status of
Forces Agreements in Spain, Portugal, Korea, Japan, Jordan, Iraq, Afghanistan and Qatar.
Cross-Border Counseling
Mr. Morn serves as counsel in major project finance and infrastructure transactions, moving complex
projects through development, financial closings and operations.
Major Projects
Representative Experience
Advised Obrascon Huarte Lain in connection with the P3 concession work for the I-77 High Occupancy
Toll Lanes Project in North Carolina.
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39
Representative Experience (contd.)
Represented Maxam Corp (Europes largest explosives manufacturer) in connection with Maxams
joint venture in China. This joint venture will be dedicated to the manufacturing and commercialization
of civil explosives and initiation systems for the sectors of mining, quarries and construction of
infrastructures inside the Chinese market.
Represented Obrascon Huarte Lain in connection with the acquisition of 50.1% of the equity capital of
Judlau Contracting.
Represented OHL Construction Canada Inc. and Fomento de Construcciones y Contratas Canada Ltd.
in connection with the structuring and formation of OHL-FCC-DIBCO North Tunnels Canada Inc., for
the bid and upon winning the bid the implementation of the tunneling projects for the Toronto Transit
Commission subway line expansion.
Represented the Gas Natural Group, as purchaser in connection with the implementation and
performance of the Share Purchase Agreement with Electricite de France and Mitsubishi Corporation.
Representation of a major international pipeline, oil and gas company and an international oil and gas
field services company as co-venturers in all phases of a BOO project in northeastern Venezuela for
medium and high pressure facilities for the compression of natural gas and reinjection into the El
Furrial oil field, including creation of a joint venture project company, negotiation and documentation of
major equipment purchase contracts and EPC contracts, and negotiation of terms for financing from
the Overseas Private Investment Corporation.
Represented the Bank of Montreal, acting through its Toronto branch, as borrower in connection with a
credit facility for an amount in Mexican pesos not exceeding the equivalent of USD100 million provided
by Banco Inbursa, S.A., Institucion de Banca Multiple, Grupo Financiero Inbursa, as Lender.
Represented the concessionaire for the railway connecting the Atlantic and Pacific coasts between the
Panamanian ports of Colon and Balboa in connection with the debt and equity financing for renovation
costs sponsored by the International Finance Corporation.
Advised the sponsors and project companies in Argentina in connection with the renegotiation of
approximately USD1 billion in multi-lateral and bank indebtedness. The project companies are
engaged in providing potable water and wastewater services in Buenos Aires and two provincial
capitals.
Professional Affiliations
Madrid Bar Association
Illinois State Bar Association
Chicago Bar Association
American Bar Association
District of Columbia Bar
Education and Admission

Admission
New York~United States (2008)
District of Columbia~United States (2001)
Illinois~United States (2000)
Madrid~Spain (1994)
Education
Loyola University Chicago School of Law (J.D.) (1999)
Fordham University School of Law (LL.M.) (1996)
Complutense University of Madrid (J.D.) (1994)

Mona Dajani
41
Mona Dajani
Partner
Baker & McKenzie LLP
+1 312 861 2975
Mona.Dajani@bakermckenzie.com
The materials contained in this PowerPoint are provided for informational purposes only and
do not constitute legal advice or legal opinions. These materials are intended, but not
promised or guaranteed to be current, complete, or up-to-date and should in no way be taken
as an indication of future results. Transmission of the information is not intended to create,
and the receipt does not constitute, an attorney-client relationship between sender and
receiver. You should not act or rely on any information contained in this PowerPoint without
first seeking the advice of an attorney.
Mona Dajani
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Mona Dajani

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EPC (Engineering, Procurement and

Introduction, Objectives & Agenda

Discuss different types of contracting structures used in large-scale

Part I: Contract Structures

Separation of design and construction

Construction Contract - Pros & Cons

EPC - Contract Pros & Cons

easier contract administration

2014 Baker & McKenzie

EPCM Contract - Pros & Cons

2014 Baker & McKenzie

Phased Approach - Convertible EPC Contract

Agreed EPC price

2014 Baker & McKenzie

Convertible Approach - Pros and Cons

EPC risk allocation, upon conversion

2014 Baker & McKenzie

Splitting Contracts (Tax)

2014 Baker & McKenzie

Part II: Key EPC Contracting

What are the typical issues?

quality (standards of work or performance):

warranties and standards of care

performance testing and under-performance remedies

time (schedule) and money (costs and finance):

program, time for completion and delay remedies

grounds for extension of time and cost

consequences if things go wrong:

termination (including force majeure)

limitations on liability and indemnities

2014 Baker & McKenzie

Typical EPC warranties

free from defects in design and workmanship

obtaining required third party IP rights and no infringement

designed for minimum specified working life

2014 Baker & McKenzie

Performance Testing and Liquidated

performance liquidated damages must be a genuine pre-estimate of loss

2. Cost & Time Issues

Time & Cost

critical issue importance of completion on time to preserve revenue stream

defects liability period purpose, effect and extension

Grounds for extending time and cost

extensions of time; allocation of delay risks may be heavily negotiated

Delay liquidated damages

daily or weekly rate to be set out in Contract

Time & Cost - Key Principles

Contract drafting is important but consider too the role of law

2014 Baker & McKenzie

from whom should the security be sought?

for how much?

for how long?

advance payment guarantee

parent company guarantee

retention / retention bond

2014 Baker & McKenzie

Parent Company Guarantee

Advance Payment Guarantee

% of Contract Price frequently in range of 10%

To be provided prior to site mobilisation or any payment

Continues until completion of Works and defect rectification

Failure to comply with requirement to be a Contractor default leading to termination

From approved parent company