Introduction
You can’t change the weather, but you can adjust the plan…
When vessels or marine tools are unable or unsafe to operate due to adverse weather conditions, their standby can generate significant additional costs (sometimes exceeding hundreds of thousands of euros or dollars per day). On top, any resulting delay to the project’s critical path may expose the parties to an offshore construction contract to substantial financial damages or delay penalties.
Author: Jeremy Peirani, Associate Director, Paris, France, with assistance of the Dutch office
Therefore, all parties face significant pressure to accurately estimate adverse weather days and carefully consider those in the project programme, defining and managing the allocation of the cost and time impacts in the contract, and effectively settling contractual issues and disputes, as expanded on below.
What is adverse weather?
Some legal systems provide definitions of adverse weather: for instance, the U.S. Code of Federal Regulations Title 33 CF 155.1020 states that “factors to consider include, but are not limited to, significant wave height, ice, temperature, weather-related visibility, and currents within the Captain of the Port (COTP) zone in which the systems or equipment are intended to function”.[1]
For offshore works, adverse weather is usually defined by the workability criteria. The contractor sets the criteria based on the safety of the vessel or tool (e.g. a lifting crane, a dredger, etc.) and the concerned works (for instance, precision dredging may require more stringent criteria than bulk dredging). The most obvious criteria relate to the state of the sea: the significant wave height (Hs), the wave peak period, and current speed or direction. Also, wind criteria should be considered: the windspeed, gusts, and direction. These parameters may significantly vary depending on the region and time of the year.
The marine warranty surveyor, typically employed by the client as a third party, also plays an essential role in managing marine risks. The marine warranty surveyor ensures that operations remain safe and compliant with the requirements of the insurance policy usually taken out by the client. The marine warranty surveyor will cross-check the defined workability criteria against industry standards for safe marine operations.
Other considerations may be relevant depending on the specific site conditions, such as the potential exposure to (tropical) storms, extreme heat or cold, spring tides, visibility, and turbidity. In addition to terrestrial weather conditions, solar eruptions may also disrupt communication and navigation tools.
Climate change potentially adds a further layer of complexity to anticipating weather-related risks: for instance, the rising ocean temperatures and atmospheric carbon dioxide content increase the risk of algal blooms, which can impact subsea installation and monitoring activities performed by divers, remotely operated vehicles, and trenching systems.
How to consider adverse weather when creating your project programme?
It is industry practice to estimate the adverse weather days based on the workability limits and (at least) 10 years of historic weather data. In this context, “P50” and “P90” values are often used: P50 means that, 50% of the time, the weather downtime will not exceed the calculated duration; P90 provides 90% certainty that this duration will not be exceeded. Generally, programmes are based on P50 values and the P90 values give an idea of the likely contingency budget that should be considered.
The best way to integrate workability into the programme is to give each vessel its own specific calendar in which, for each month of the year, the anticipated downtime is set as non-workable. This approach allows assessment of the impact of changes, such as variations in start date or execution method later on. The programme should also include periods during which work is fully prohibited because of adverse weather (e.g. periods of ice in the Arctic area).
During the execution of the works, parties will look for workable weather windows i.e., the duration (e.g. 6 hours) when conditions are below a set threshold (e.g. significant wave height Hs lower than 1.5m) to allow the performance of an operation (e.g. subsea cable protection work). When no window is available, adverse weather downtime will be logged.
How is adverse weather addressed in the contract?
Anticipated weather downtime scenarios and allocation of financial impacts should be estimated as much as possible, then negotiated and expressly agreed upon in the contract.
Depending on the definition of force majeure in the contract or in the applicable law, adverse weather conditions may fall within this definition. However, parties should remember that a successful force majeure claim would usually entitle a contractor to an extension of time only. This principle is consistent with the 2017 edition of the SCL Delay and Disruption Protocol, which states that adverse weather conditions are the most common example of delay events where the contractor may receive a time extension but without financial compensation.[2]
Ultimately, parties are free to agree on whether the contractor is entitled to an extension of time and/or financial compensation; in some contracts, the contractor can choose the financial compensation mechanism between a lump sum and the application of daily rates.
To avoid any disputes over how weather should be forecast and monitored during execution, the contract usually stipulates that the parties should agree beforehand on a reliable weather forecasting service and the weather recording tools to be used (usually a weather buoy).
For obvious safety reasons, the vessel master has the final word to decide whether it is safe or not to work, even if the weather conditions fall within the workability limits; the contracting parties must then agree which party is responsible for the commercial impacts.
Parties should also consider the allocation of responsibilities in the event of concurrent issues; for instance, parties generally agree that the contractor is not entitled to an extension of time or financial compensation during weather downtime when the vessel or marine tool is in mechanical breakdown.
However, sometimes due to the complexity of the works changes may still occur, such as changes in the work scope, methodology, or season. For instance:
- If a so-called walk-to-work vessel is used but was not foreseen in the initial scope (e.g. crew transfers initially planned by helicopters or boats) and no workability limit is defined in the contract, which party is then responsible for the standby costs and/or delays when the actual wind conditions are too dangerous for using its gangway?
- If a contract provides for two vessels, (a) a dredger and (b) a barge, with respective Hs(a) and Hs(b) which were supposed to work on different scopes, what Hs shall apply if vessels (a) and (b) actually work jointly? The easy answer could be: the lowest Hs - say Hs(a); however, in some instances one could argue that this approach is too stringent because vessel (b) actually stabilises vessel (a) when they are in each other’s vicinity. Or, on the contrary, such interference may create instability and additional risks, so even considering Hs(a) may be unsafe.
- Which party is responsible for the standby costs and/or delays when a combination of weather parameters becomes critical, even where each of them remains within itheir workability limit?
- If the parties have agreed acceleration measures and bonus schemes to secure offshore construction works right before a weather window during which work is forbidden (e.g. the winter period in the Caspian Sea), but the target is missed due to exceptionally adverse weather, what compensation is the contractor entitled to?
Accordingly, some cases might lead to arguments and disputes. How to get best prepared then?
Commercial and contract management, dispute avoidance, and resolution
One common issue for contractors is the transfer of conditions relating to weather downtime from the main contract to subcontractors: a back-to-back arrangement would limit the contractor’s exposure. However, specialist subcontractors may either reject the proposed conditions or significantly increase their prices to accept them. This can end up in difficult situations for the contractor: for instance, if the contractor is compensated via a lump sum but its subcontractor only accepts to be compensated on a day rate basis, then the subcontractor may not be as motivated as the contractor to expedite progress.
To help assist the efficient settlement of contractual issues and disputes, the execution of the works should be well documented. In particular, weather forecasts, actual conditions, weather standby time, and any other relevant information (e.g. vessel maintenance or breakdown) should be recorded in daily progress reports signed by the relevant parties. For rapidly changing/unreliable weather predictions, parties should organise specific meetings and sign the minutes to avoid subsequent arguments or misunderstandings.
Ideally, adverse weather delays and their impact on the works should be reviewed by the parties on a monthly basis to ensure transparent discussions between the employer and contractor and to assist with the quick resolution of potential disputes.
Conclusion
Offshore construction contracts need to address various adverse weather risks and set out how to deal with such risks. Parties should be aware that they may face unforeseen scenarios due to complex combinations of events. In any case, the parties ought to be prepared to expect the unexpected and to settle each issue promptly after occurrence. As always, the golden rule for contract management and dispute avoidance or resolution will apply: records, records, records!
This article was originally written for issue 29 of the Diales Digest. You can view the publication here: https://www.diales.com/diales-digest-issue-29
1. https://www.ecfr.gov/current/title-33/chapter-I/subchapter-O/part-155/subpart-D/section-155.1020
2. Society of Construction Law Delay and Disruption Protocol, 2nd edition of February 2017, paragraph 12.2.