A close look at what is contained in the IChemE’s new consultancy agreement for the development of process plants

Kumara Mallikaaratchi

The Silver Book may be the official nickname of FIDIC’s well-known turnkey works contract but that hasn’t stopped the Institution of Chemical Engineers (IChemE) from engaging in a bit of name borrowing for its latest publication.

So the same moniker now also adorns IChemE’s new consultancy agreement. Rather naturally, the Silver Book has been written to align with the terms of its polychromatic contract suite, the Red, Green, Yellow, Orange, Brown and Burgundy Books. It’s timely, with 2017 already proving a milestone year for construction contracts.

So, what innovations can one expect from an organisation whose documents are intended for the development of process plants?

As a novel touch, the Silver Book comprises both long and short form consultancy agreements. Unsurprisingly, the short form is expected to be used in circumstances where there is a relatively low contract price, simple content and short programme. For services with a higher fee, and which are more complex in nature, the long form makes a better match. The short form defaults to the courts as the means of finally resolving disputes. In the international arena, this may hold some issues regarding the language of proceedings, the pool of qualified advocates and enforceability in different jurisdictions.

Rights of suspension and termination reflect industry expectation on major projects

Arbitration tends to be more appropriate for complicated projects where specialist appraisers,
cross-border and confidentiality issues tend to come to the fore; this is reflected in the long form. IChemE considers both forms will be appropriate where engineers are required to produce feasibility studies, project management services, help in business development or provide cost and management expertise. The presence of two variants creates consistency and flexibility.

The Silver Book works both in the UK and internationally, using a similar set-up to NEC. Part A of the Special Conditions is UK-specific. Part B of the Special Conditions is the equivalent of NEC’s “X” clauses. They are optional and designed to assist the parties in dealing with particular issues or matters encountered overseas, such as insurance, subcontracting, delays, confidentiality and intellectual property matters.

Process plants can involve substantial innovation, as well as trade secrets, and this is recognised under the contract’s general conditions, where any new intellectual property is stated to belong to the client and the consultant, in lieu, receives a licence to use that material.

For consultants who feel that clients would benefit more from their unique know-how than is reflected in their fee, this may be a dealbreaker and, consequently, the special conditions permit the ownership situation to be inverted.

The payment provisions in both comply with UK law. Consultants will be pleased with the inclusion of a limitation on liability in both forms of agreement. The long form limits the consultant’s liability to an agreed amount and the short form limits the exposure to the contract price. The long form also includes a net contribution clause, which will be a point of negotiation.

Rights of suspension and termination reflect industry expectations on major projects. The client may suspend performance of the consultant’s services without cause or terminate the consultant’s services for convenience on seven days’ notice.

Curiously, there are no provisions to require collateral warranties. Both the general conditions and the special conditions also fail to include clauses regarding bonds, guarantees or to secure advanced payments.

The agreement makes reference to registered post and recorded delivery in respect of the issue of notices; both services have been retired by the UK’s Royal Mail in favour of a “signed for” alternative. The third option of special delivery is consequently the safest for inland UK correspondence.

In summary, the Silver Book feels like a welcome addition to the IChemE suite. Consultants may consider the Silver Book to be client-friendly in terms of duties of care. Employers will find it light in others areas. That, of course, is the nature of the beast.

For the process plant industry, it’s an obvious choice to align the consultancy agreement with the IChemE forms of the engineering contract but the organisation hopes that the wide drafting will make it a suitable for other construction and engineering projects.

In that stead, it will be interesting to see the industry’s view on the Silver Book as compared with recent new editions from NEC, ACE, FIDIC and JCT.

Kumara Mallikaaratchi is an associate at Penningtons Manches