4 technology 'hotspots' in modern Construction Contracts
Despite a longstanding preference for the 'tried and trusted', increasingly construction projects are featuring deployment of new models of equipment and technological innovation.
Here are just four of the ways in which they are impacting on Construction and OM contracts.
Stakeholders (including project funders) will anticipate additional defect warranty and performance protection for any of the unprecedented, the relatively unproven and the scaled-up. Depending on the industry sector and the criticality of the performance of the new technology to outcomes, this may take the form of extended defect periods, serial defect protection (where appropriate within the project and sometimes across the fleet) and root-cause analysis and remediation remedies – the latter being a regular negotiation battleground between developers and OEMs. For power and other plant projects, it will also typically involve availability-type warranties being expressed on an output rather than an outage basis.
Insurers might impose restricted cover arrangements (or different deductibles) on unproven systems. This might lead to a requirement for Contractors/OEMs to provide first tier cover. Additionally, it is increasingly common for Contractors and OEMs to be asked to underwrite premium increases on operational period policies to the extent these are referable to the new technology/equipment.
OEMs will, understandably, seek to protect 'black box' copyright information. Escrow arrangements to deal with such restrictions have been around for some time but we are seeing increasing use of them, for example, in renewable energy projects. A further hotspot has been the growth in restrictions in assignment and change in control clauses on transfer to competitors.
In the past, project owners have been happy to rely on licenses to use information being restricted to the project itself. However, asset owners and OEMs alike are keen to explore how data-mining could help increase efficiencies across a portfolio. This is an emerging area of negotiation and, again, one that is rarely addressed by standard-form license clauses.
Similarly, contract warranties might be referenced to performance outcomes on other R&D or path-finding projects which would require data-sharing from such projects. Do any of the parties have the ability to obtain and share such data?
The starting point for all of the above issues is awareness. This might seem obvious to non-lawyers but very often technology advances are not announced/widely known to the wider project team and model numbers stay the same despite major software or hardware upgrades.
New technology is, of course, being deployed to improve project processes and this also brings fresh challenges. For example, only a few standard forms and older in-house precedent contracts take account of BIM and the whole subject of integrated iterative design models available to multiple parties (but that is a subject for another blog).