• Risk provision
• Dispute and termination issues
18.10.6 Construction Agreement
As explained earlier, the Project Company may itself be an Engineering and/or
Construction firm, or may decide to contract out the construction of, say, the civil
works components of the BOT project, to an outside contractor, or alternatively to a
contractor having participation in debt or equity of the project’s financial package.
In any of the above, scenarios, a Construction Agreement is normally prepared,
which specifies essentially:
• Scope of the project and limits of possibilities of variations to the scope of the
project
• Time and manner of performance
• Payment terms and costs
• Provision of penalties for time overruns in the form of Liquidated Damages
• Performance guarantees/warranties
It is to be noted that generally in BOO - BOT projects, because of the limited
recourse financing inherent therein, the construction contract is of the Turnkey type
with fixed dates and costs.
18.10.7 Operations and Maintenance (O & M) Agreement
This agreement is normally required if the Project Company is not itself an experienced operator, and consequently requires that the operation and maintenance of the
plant be entrusted to an outside contractor.
It will usually be similar, in many respects to a Sales/Purchase Agreement.
It may additionally address issues pertaining to personnel training and
development.
18.10.8 Insurance Policies
This contract or agreement is usually entered into by the Project Company and the
Project Insurers, if applicable.
It will specify essentially the following:
• Builder’s risk
• Third Party Liabilities
528
18 Infrastructure Markets and the Private Sector
• Dispute and termination issues
18.10.6 Construction Agreement
As explained earlier, the Project Company may itself be an Engineering and/or
Construction firm, or may decide to contract out the construction of, say, the civil
works components of the BOT project, to an outside contractor, or alternatively to a
contractor having participation in debt or equity of the project’s financial package.
In any of the above, scenarios, a Construction Agreement is normally prepared,
which specifies essentially:
• Scope of the project and limits of possibilities of variations to the scope of the
project
• Time and manner of performance
• Payment terms and costs
• Provision of penalties for time overruns in the form of Liquidated Damages
• Performance guarantees/warranties
It is to be noted that generally in BOO - BOT projects, because of the limited
recourse financing inherent therein, the construction contract is of the Turnkey type
with fixed dates and costs.
18.10.7 Operations and Maintenance (O & M) Agreement
This agreement is normally required if the Project Company is not itself an experienced operator, and consequently requires that the operation and maintenance of the
plant be entrusted to an outside contractor.
It will usually be similar, in many respects to a Sales/Purchase Agreement.
It may additionally address issues pertaining to personnel training and
development.
18.10.8 Insurance Policies
This contract or agreement is usually entered into by the Project Company and the
Project Insurers, if applicable.
It will specify essentially the following:
• Builder’s risk
• Third Party Liabilities
528
18 Infrastructure Markets and the Private Sector