Geoff Covey and Gerke Faber
Many contractual problems relating to performance can be traced back to inappropriate drafting of the technical specifications. The problems commonly relate to: inclusion of irrelevant or contradictory information, use of ambiguous or undefined terms, or concentrating on the means by which a result is to be achieved rather than on the performance required. Drafting specifications of this sort will maximise the probability of the supplier understanding what was intended and hence of providing what was actually required. It will also minimise the remedies available to the purchaser to resolve problems.
The approach advocated in this paper is to adopt a results oriented specification by which the vendor assumes most of the responsibility for determining the means of achieving these results. This does require greater care by the purchaser in evaluating tenders, but the end result will usually be more efficient and flexible plant and clearer lines of responsibility on the vendor if equipment does not perform as intended.
Many contracts run into difficulties because the technical specification has been written without sufficient care or consideration of what is really required. The commercial, administrative and ‘standards’ aspects of the contract are usually fairly well covered partly because they can be largely built out of standard clauses.
The technical specification is somewhat different. By its nature, it is usually a one-off document and is often written by a person who does not write them very often and mistakenly makes them over detailed. It is often forgotten that the more information that is provided to the supplier about the conditions under which the equipment is to work, i.e. the plant environment, feed conditions etc, the less flexible the piece of equipment supplied has to be. Thus it could be easier for the vendor to meet the letter of the specification while still not providing what the client really wants.
Examples of providing unnecessary or ambiguous information that has led to problems over responsibilities at a later stage include:
- Including background documents such as peripheral research reports and labelling them ‘for reference’ or ‘for information only’ or similar wording. The two sides will rarely agree in their interpretation of what this means. If the matter finds it way to arbitration, the vendor will almost certainly be able to establish they reasonably took it to mean that they were to refer to the document or to use it as a source of information or at the very least, it was intended as a guideline. Even changing the words to a form such as ‘this document is for information and does not form part of the specification’ will not necessarily avoid this problem. At the very least, if the equipment supplied does not work, the supplier will be in a position to say I deviated from my preferred choice because of the information that you supplied. Looked at sensibly, if this information is not part of the specification, it should not be included. If the supplier really does need to see the information, then it must be remembered that its inclusion will have an effect on his contractual responsibilities. In this case carefully spell-out the limited purposes for which the information is relevant and that it is not supplied for any other purpose.
- Including a ‘notional’ flow sheet of the equipment to be supplied on the drawing which shows the existing surrounding equipment. The purpose of this drawing should be to indicate termination points and where streams come from and go to so that new equipment can be designed accordingly. The inclusion of a notional flow sheet for the new equipment on this drawing gives an (unintended) indication to the supplier of what the purchaser wants and may readily cause him to deviate from supplying the most appropriate equipment.
- Ambiguous use of terms. The use of ‘for reference’ has already been noted. A more extreme example was the cas e of a contract for an electrical installation. All the items which were to be installed were listed in the specification, in most cases followed by the words ‘to be provided’. The purchaser had intended this to be read as ‘to be provided by the supplier’. The supplier however read it as ‘to be provided by the purchaser’. In the end the work probably only cost a little more than it should have done (somebody would have had to pay for these items and presumably there were not originally included in the budget of the supplier when tendering for the work). However there were significant delays in completing the contract because no-one had even ordered the hardware until site work was about to start.
- One other extreme, which is possibly an apocryphal story, is of a company which placed an order which simply said ‘one paper machine drive system to suit number X machine’. The supplier was very pleased to receive such a contract which was so vague that they thought they could fulfil it easily until the time came when they sought to sign-off and receive payment, when they were told “No, it doesn’t suit the machine yet”.