Dos and Don'ts: Interface issues

On any major construction project, there are multiple interface issues which, if not dealt with properly, hold enormous potential for disputes. These will have a major impact on costs and timing and may end up in litigation or arbitration - something that all parties will want to avoid.
There is no one-size-fits-all approach - each issue must be assessed on its own merits. Sometimes this means adding bespoke clauses or interface matrices into the individual contracts; sometimes a separate “interface” agreement is needed. In all cases, good programme management is essential.

Below are three common interfaces that occur in major construction projects and an interface specific to process plant projects.

Interface between design and construction

In a design and build/turnkey procurement, all interface issues would be managed by the contractor. In more complex procurements, with multiple contractors and suppliers, each contractor and/or supplier will be appointed separately and no one person will have overall responsibility for the design/construct interface. In this type of project:

Do: Appoint someone with overall responsibility for co-ordination of design with construction. This will very quickly show up gaps in responsibility, and avoid issues at a later date.

Don’t: Assume the project manager will be responsible for delivering all aspects of design and construction - most appointments restrict liability for this.

Don’t push issues into an interface agreement that should be dealt with between the employer and the subcontractor

Interfaces between different contractors working on site

This is most common in construction management or complex projects where there will be multiple contractors on site at the same time, but can also occur in a traditional procurement where independent contractors are on site while the main works are still being completed, or where a number of subcontractors are working concurrently.

Do: Identify who will control the site and the works and ensure all contractors have a clear scope of work and liaise with them.

Contractor/operator interface

This is where interface agreements are most common. The primary purpose of an interface agreement is to regulate the relationship between the construction subcontractor, the operator and any other key subcontractors. It is intended to protect a thinly capitalised special purpose vehicle (SPV) from costly disputes between subcontractors by requiring them to settle various issues between themselves. Areas it is likely to cover include reciprocal liability, indemnity provisions, caps on liability and provisions concerning the allocation of deductions by the SPV.

Do: Consider what practical interfaces may usefully be addressed in the interface agreement (design development, mutual rights of access) and consider what project-specific issues may need to be addressed.

Don’t: Push issues into an interface agreement that should properly be dealt with between the employer and the subcontractor.

The ’liability’w interface in process plant projects

Projects involving process plants sometimes raise a specific interface issue. The technology or “process” may be owned by a third party that will license its use. They may also supply specialist parts of the plant and require that a specialist contractor is engaged directly to carry out the installation while a main contractor carries out the construction.

Liability for poor performance of the plant is clearly a key issue for the client. The main contractor will not want to take responsibility for the successful operation of the “process”. However, if the process does not work and delays completion, although the specialist third party/specialist contractor may ultimately be liable for performance liquidated damages, it is unlikely that they will be at the same level as the damages for delay commonly imposed for major projects.

Do: Make sure that the technology is relatively proven and that performance testing of the process is rigorous both pre- and post-incorporation into the plant.
Don’t: Rely on general copyright licence and intellectual property rights clauses in a standard construction contract to adequately deal with specialist technology licensing for third parties. Direct licensing in favour of the client is usually more appropriate.

Geraldine Laing is an associate director at Berwin Leighton Paisner

This article was originally published under the title ’Get out of my interface’.