Contracting conditions around the world are complex and numerous. Service contracting is a high-risk activity and risk exposure can be very large and bear no relationship to contract value. With these challenges in mind, IMCA - the International Marine Contractors Association published their contracting principles a year ago; and since then has taken on board feedback from their members and their members' clients to ensure a win-win situation.
In 2002, one oil company commissioned a study of the business environment in offshore contracting. The study included interviews with 15 major contractors and a dozen oil companies and summary results were shared with the contributors. The feedback identified some bad experiences and an inequitable balance of risk and reward for contractors. The root of the problem was almost always in the conditions of contract.
The eight-page "IMCA Contracting Principles" highlights fifteen principles with a legal definition being given followed by a comment more easily understood by the layman showing clearly how each principle measures up to IMCA's fair risk allocation goals.
The principles covered are:
- Company group and contractor group property and personnel
- Project works (including both company and contractor supplied items)
- Third parties
- Consequential losses
- Warranty obligations
- Limitation of liabilities
- Minimum insurance requirements
- Force majeure and suspension
- Delay and variation orders
- Free access to worksite
- Intellectual property rights
- Termination by company for convenience
- Company's obligation to pay contractor
The Principles are not intended to represent a complete analysis of all risks, which are covered by contracts in the oil and gas industry. In general, they reflect well-established industry custom and practice in addressing certain risks, such as the knock for knock indemnity regime. They are not contractual clauses, do not in any way form a standard contract, nor is their adoption in any way mandatory.