-
8/6/2019 Shumway Sorensen International Construction Disputes
1/39
Collaboratory for Research
on Global ProjectsGlobal Projects Seminar Series
Avoiding and Settling Disputes onInternational Construction Projects
Professors Ron Shumway & Nick Sorensen
-
8/6/2019 Shumway Sorensen International Construction Disputes
2/39
Prof. Ron Shumway
JD, Duke University LawSchool; BA, BYU
Director KPMG; ManagingDirector FTI Consulting
Bechtel Principal Counsel forContracts & Disputes
Eurotunnel ClaimsManagement Committee
General Counsel, AtkinsonConstruction Company
Atkinson
-
8/6/2019 Shumway Sorensen International Construction Disputes
3/39
Prof. Nick Sorensen
Juris Doctor, University ofChicago Law School; BA,Brigham Young University
Bechtel Claims ManagerBART Extension to SFO,
Special Counsel
General Counsel, Ball, Ball
& Brosamer and The ScottCompanies
Associate General Counsel,Dillingham Construction dillingham
-
8/6/2019 Shumway Sorensen International Construction Disputes
4/39
Global Projects Seminar Series
A Tale of Three Projects
Positive and Negative Examplesfor
International Project Development
-
8/6/2019 Shumway Sorensen International Construction Disputes
5/39
Global Projects Seminar Series
Lo Que Mal Abarca, Mal Termina
[Spanish Proverb]
-
8/6/2019 Shumway Sorensen International Construction Disputes
6/39
Project #1 - Guri Dam
Caroni River, Venezuela SE of CaracasCompleted 1985
Cost US$ 4-5 Billion
Provides 70+% of Venezuelas electricityFinished without a claim or dispute
everyone happy
[But it wasnt always that way . . .]
-
8/6/2019 Shumway Sorensen International Construction Disputes
7/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
8/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
9/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
10/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
11/39
Why Guri (finally) worked well
Cost reimbursable contractIncentives:
Target Fee
Milestone BonusesGood contract administration
[But more importantly . . .]
Owner did their homework up front [more onthat later]
-
8/6/2019 Shumway Sorensen International Construction Disputes
12/39
Project #2 - Eurotunnel
Strange solicitation for proposals withschemes for fixed link
Governments of UK and France selectedwinner, but did not invest (privately financed
by 220 banks)Offers of helium balloons, Euro-Bridge
(cars), Euro-Route (trains & cars),Eurotunnel (trains)
Bid at US$7 Bn; finished at US$13 BnTechnological triumph; financial disaster
-
8/6/2019 Shumway Sorensen International Construction Disputes
13/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
14/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
15/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
16/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
17/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
18/39
Why Eurotunnel went wrong
Winner of proposal stage composed entirely ofcontractors
First negotiated construction contract with selfwhile Eurotunnel (owner) was captive ofcontractors
Eurotunnel later spun off and sold stock to (mostlyFrench) widows & orphans
During negotiations, banks were the onlycounterweight
Result was good for contractors, less so for ownerProject met projections for traffic & sales but not
payback of loans; widows & orphans lose
-
8/6/2019 Shumway Sorensen International Construction Disputes
19/39
How to get it Right
[Details after Professor Sorensen
dissects Dabhol / Enron]
-
8/6/2019 Shumway Sorensen International Construction Disputes
20/39
The Dabhol PowerProject
-
8/6/2019 Shumway Sorensen International Construction Disputes
21/39
India and the State of
Maharashtra
-
8/6/2019 Shumway Sorensen International Construction Disputes
22/39
The MajorPlayers
-
8/6/2019 Shumway Sorensen International Construction Disputes
23/39
Initial Plan:The Gas Pipelinefrom the Caucasus
-
8/6/2019 Shumway Sorensen International Construction Disputes
24/39
Under Construction
-
8/6/2019 Shumway Sorensen International Construction Disputes
25/39
Stopped
-
8/6/2019 Shumway Sorensen International Construction Disputes
26/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
27/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
28/39
Restartedthe Dabhol Power Plant LNG Terminal
-
8/6/2019 Shumway Sorensen International Construction Disputes
29/39
Getting it right up front:
Will my investment be protected by locallaws, authorities and institutions?
Will governmental bodies and financialinstitutions honor their agreements with
me?
If theres a dispute, will it be in a forumthats timely and fair to me?
-
8/6/2019 Shumway Sorensen International Construction Disputes
30/39
Getting it right up front
Realistically: an Owner must prioritize, and haslimited control over cost, schedule and quality:
First Priority +60%
Second Priority +30%
Third Priority +10%
-
8/6/2019 Shumway Sorensen International Construction Disputes
31/39
Example:
Owner says:
Gotta keep the cost down cost comes first!
Generally means fixed price and competitive bids
Which generally means design-bid-build
Takes longerQuality suffers
-
8/6/2019 Shumway Sorensen International Construction Disputes
32/39
If the Owner wants...
Priorities Type of Contracting
Cost, schedule,quality Design-bid-build
Cheapest, but takes longest."Quality" is inversely proportional to completeness,accuracy, etc. of design.
Cheap design = poor quality + disputes.
-
8/6/2019 Shumway Sorensen International Construction Disputes
33/39
If the Owner wants...
Cost, schedule, quality Fixed price design-bid-build, or .. . *
Cost, quality, schedule Fixed price design-bid-build; butmore on design
Schedule, quality, cost Very tough combination workwith bonuses
Schedule, cost, quality Fixed price, design-build[goodbye quality]
Quality, cost, schedule Cost + with GMP [but . . .]
Quality, schedule, cost Cost + design-build
* Can jigger all these with incentives & bonuses
-
8/6/2019 Shumway Sorensen International Construction Disputes
34/39
Can you make the Contractorfinancially responsible?
Lets look:
-
8/6/2019 Shumway Sorensen International Construction Disputes
35/39
Top Ten Contractors
1985 - 2005
From Engineering News-Record
-
8/6/2019 Shumway Sorensen International Construction Disputes
36/39
Top U.S. Contractors1985 - 2005
1985 20051. Kellogg Rust, Inc. 1. Bechtel Group, Inc.
2. Fluor Corp. 2. KBR
3. Bechtel Group, Inc. 3. Centex
4. The Parsons Corp. 4. Fluor Corp.
5. Stearns Catalytic Corp. 5. The Turner Corp.
6. Brown & Root, Inc. 6. Skanska USA Inc.
7. Lummus Crest, Inc. 7. Jacobs
8. Stone & Webster 8. Bovis Lend Lease
9. FosterWheeler Corp. 9. URS
10. Raymond International 10. Washington Group
-
8/6/2019 Shumway Sorensen International Construction Disputes
37/39
Remember . . .
Over the long haul, all contractors areheaded the same place
Make sure your career doesnt head thesame way
Sign up for CE 290 L, Law for Engineers Spring Semester 2007
-
8/6/2019 Shumway Sorensen International Construction Disputes
38/39
-
8/6/2019 Shumway Sorensen International Construction Disputes
39/39
The EndThe End
CE 290 L
Law for Engineers