If your O&M contractor is an equipment supplier, in most cases you will find that you need to purchase all the equipment from or through the O&M supplier. There will be no way to explore other providers, even if they offer a more appropriate technology or a better offer. You may even feel like your supplier is maximizing their spare parts sales or promoting unnecessary spending on their orders. The plant owner will benefit from the expertise of O&M`s workforce, whose knowledge can be shared across the entire ownership group. In addition, the operations and maintenance workforce is supported by the contracting company, whose expertise can be put to good use in case additional support is needed at the plant. As a customer, ask yourself if and when you should be able to purchase services from third parties. For example: (i) in circumstances where the Contractor has not performed or is unable to perform; and (ii) with respect to additional Services, if the scope and pricing of such additional Services does not work for you. This means that the scope, pricing and liability of contractors will evolve under these projects and, as a result, contractors will likely be reluctant to enter into longer-term contracts on the same terms. The client should look for a renewal option after five years and be aware of the need to find new contractors to replace the old ones in a timely manner. The contractor will want to ensure that some form of liability cap is included in the operations and maintenance phase, and the client should think about what those caps should look like and what liabilities will be cut out of the cap. If and when an upper limit is reached, what other remedies should the customer have? This usually includes the possibility of terminating operations and maintenance or obtaining services from elsewhere. Keep in mind that the contractor`s fault can affect the project`s revenue and the project`s ability to service the debt.

The short-term benefits of an operations and maintenance agreement are pretty clear. You start operating your plant with a team of ready-made experts who strive to prove their value and, if your operations and maintenance contractor is also your equipment supplier, your investment in their technology. But what about the long term? What advantages and disadvantages can you expect from your O&M contract? Operations and maintenance contracts must refer to all levels of performance achieved by the EPC contractor at the time of delivery. Those established levels, adapted to deterioration, should form the basis of the operator`s performance obligations. For example, for an energy project, it is imperative that technical and legal advisors ensure that the performance tests and performance guarantee, as well as the flat-rate compensation plans of the agreement, comply with the corresponding schedules of the construction contract. Agree that if exclusivity (i.B i.e., limiting the customer`s ability to engage another contractor to provide the services) does not apply to the planned and unplanned services. If this is the case, the interface between the operations and maintenance committee and the EPC must be taken into account and consequential provisions must be included in each contract that prevent the contractor and the construction supplier from relying on: (i) the acts or omissions of the other as a defence against its own delay or non-performance of the contract in question; or (ii) delays or underperformance on the part of the other in order to obtain compensation from the Customer under the relevant contracts. There may be an obligation for the project company to provide the initial inventory of spare parts, which should be consistent with the inventory of spare parts to be supplied by the contractor under the EPC contract. There may also be an obligation for the owner created by the removal agreement to keep records of the operator`s compliance with matters that may affect the owner`s payment obligations under the agreement. If you entrust the operation of the plant to external contractors and do not invest in your own workforce, you are obliged to the operation and maintenance company to operate the plant and at least partially your business. If things go well and you decide to expand the business, you`ll consider another operations and maintenance agreement instead of transferring some of your own qualified employees.

The knowledge within the group to make business decisions would also be limited, so you would rely on the entrepreneur to get their feedback, which can be biased. Although it is theoretically possible to break the contract, the practical aspects of reducing the entire workforce and restarting it make it almost impossible. The disruption to operations would be enormous unless the majority of the people working for the O&M contractor were rehired by the cement manufacturer, somewhat negating the goal of replacing the contractor. Of course, all employees have goals to achieve. But employee expectations in an operations and maintenance agreement are doubled – once by the plant owner and once by the operation and maintenance contractor. Workers must maximize production if they want to keep the contract. The interweaving of front-end legal concepts and the scope of services listed in the operations and maintenance schedules is sometimes not fully targeted, which can lead to a gap between the parties` service expectations and, in the worst case, a complete contradiction that leads to disputes. Indeed, the description of the contractor`s service obligations will be complex and will require project-specific technical expertise, which in turn will have to be integrated into effective legal development.

The extent to which the contractor guarantees that the project will meet certain operating and performance standards (or if it only agrees to comply with applicable industry standards in order to achieve a certain level or standard) is negotiated by both parties. The payment and performance terms set for the O&M contractor are always very short-term and often focus on clinker production, so the systems reach their limits regardless of a longer plant life, which often leads to higher long-term maintenance costs. Given the usual long-term nature of O&M agreements, there is a high probability that O&M`s regulatory and legislative systems and their compliance will change over the life of O&M regulatory and legislative systems. courses in other project agreements. If the operator and the EPC contractor are the same or related companies, the agreement should prevent one from relying on a delay or under-performance of the other to obtain an exemption from the owner from its contract. The agreement should also prevent a contractor from relying on the actions of the other as a defense against a claim by the owner for delay or non-performance. When reviewing operations and maintenance, it should be clear at the beginning whether the contractor is somehow more connected to the project. For example, is the contractor a member of the same group of companies as the construction service provider under the engineering, procurement and construction (EPC) contract? If this agreement is provided for by the project proponent, it must be addressed in the shareholders` agreement by and between the project participants and in the loan documents. Although this agreement would seriously affect the bankability of the project. Operations and maintenance agreements generally do not require or take into account the transfer of project personnel to the contractor. Instead, the entrepreneur typically adds a management layer to the existing HR structure.

Some operations and maintenance contracts may also require the operator to maintain project resources, which even extends to the cost of systematically replacing small parts or low-quality equipment. Such features require increased monitoring to ensure that results are achieved and are typically associated with higher integration costs. The most essential contractual obligation of the operator in operations and maintenance contracts is to operate and maintain the project for the duration of the operation and maintenance contract. It is of paramount importance to know whether the operator`s responsibilities are defined in sufficient detail. Operation and maintenance contracts include clauses such as the following: in cases where the obligations of the project company are largely limited to the payment of the operator, provisions on force majeure should be included in the operation and maintenance contracts and should be common to all project financing documents. To the extent that these provisions are not coordinated and there are significant liability gaps identified by the project company, it is customary for project proponents to require any form of support or guarantee from the proponent to cover the risk. Parties to an operations and maintenance agreement should be aware that the consequences of a force majeure event during the construction of the project can be serious, but are generally manageable, as a force majeure event only increases construction costs and delays completion. .