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QATAR CONSTRUCTION ANDINFRASTRUCTURE
RISK MANAGEMENT FORUM9 MAY 2013
Doha, State of Qatar
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MARSH 123 May 2013
AgendaConstruction & Infrastructure Risk Management Forum
8.00 9.00 Registration & welcome coffee
9.00 9.10 Welcome Address Robert Makhoul,CEO Marsh MENA
9.10 9.40 Keynote Address Ahmed Salem Al-KuwariContracts and Projects Controls
Director, Lusail
9.40 10.20 Managing risk on major infrastructure programs Terry Krause,Vice President/Principal Program
Manager, CH2MHill
10.20 11.00 Risk allocation in construction contracts within the current
environment in Qatar
Simon Harvey,
Partner, Pinsent Masons
11.00 11.30 Coffee Break11.30 12.10 Risk, indemnity and insurance... Connecting the dots Gaurav Bhatnagar, Marsh MENA
Infrastructure Practice Leader
12.10 12.50 Professional negligence in design and supervision - what can gowrong? How far does insurance go?
Martin Stubbs,
Construction Professional Indemnity
Specialist, Marsh
13.00 14.30 Lunch (French Brasserie Restaurant, 3rd
Floor)14.30 15.10 Inherent Defects Insurance - how it works
in practice and legal requirements specific to QatarPatrick Eyer,
Senior Underwriter, Swiss Re
15.10 16.40 Panel discussion
16.40 17.00 Closing remarks Edwin Charnaud, MarshGlobal Infrastructure Practice Leader
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QATAR CONSTRUCTION & INFRASTRUCTURERISK MANAGEMENT FORUM
MANAGING RISK ON MAJORINFRASTRUCTURE PROGRAMS
Terry Krause,Vice President/Principal Program Manager,CH2MHill
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3
3
Risk Management Principles
Role of Key Participants:
Employer
Programme Manager
Developing Programme Risk Register Risk Management:
Pre-Contract Award
Post-Contract Award
Presentation Outline
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4
Risk Management PrinciplesTopics covered in this section:
Risk Management definiton
Risk Management Process
Risk Management Approach A Code of Practice
Ability to influence Risk Use of programme management to deliver major
infrastructure projects
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5
Risk Management Employers roleTopics covered in this section:
Emplyers role according to the Code of Practice
Typical Employer Issues Impacting Major
Programmes
Empolyers representative Employer bahaviour impacts PMs ability to deliver
programme increases programme risk
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6
Risk Management Programmes Manager roleTopics covered in this section:
PMs role: To manage Employer behaviour and
expectations that can negatively impact the delivery
of the programme, the PMs first and on-going tasks
are
Team chartering
Delivery Plan development
Typical contents of Risk Management Plan
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7
Developing a Programme Risk RegisterTopics covered in this section:
Critical task: Develope Risk Register
Three steps to produce Risk Register
Identify
Quantify and measure Develop and implement a Mitigation Plan
Examples of typical Risk Register and Risk Register
Scoring
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8
Risk Mitigation Pre-Award of Construction
ContractsTopics covered in this section:
Responsibility of both Emplyer and PM
Feasibility Study
Site Investigation
Preliminary Design Form of Contract
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9
Risk Mitigation Post-Award of Construction
ContractsTopics covered in this section:
Employ a competent Engineer to manage and administer
the construction contracts the PM can assume this role
Provide independent (of the contractor) Employer oversight -
this can also be provided by the PM
Continue to proactively manage risk and regularly update riskregister through to completion contractors to submit
detailed risk registers and use these to identify omissions in
programme-wide risk register
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10
Thank you
Terry L. Krause, P.E., BCEEProgramme Manager
CH2M HILL INTERNATIONAL
IDRIS Programme Management OfficeThe Public Works Authority (Ashghal)
E-Mail [email protected]
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QATAR CONSTRUCTION & INFRASTRUCTURERISK MANAGEMENT FORUM
RISK ALLOCATION IN CONSTRUCTIONCONTRACTS WITHIN THE CURRENT
ENVIRONMENT IN QATARSimon HarveyPartner, Pinsent Masons
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12
Introduction
Level of competition is increasing truly international
playing field
Increasing levels of sophistication on all sides Greater understanding of risk; not necessarily allocated to
party best able to manage it
ECA support key for players in BoT space Qatar is a key market: programme? Unfavourable Contract
terms?
Saudi Arabia also very demanding Contract terms
Kuwait BoT / PPP route
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13
General Observations
Conditions of contract features significant Owner bias
Slowly addressing more oppressive Contract terms
Contracts commonly awarded to low bid with no qualificationsto the form of contract
Performance security gives Owner significant leverage post
award Classic theory: risk should be allocated to the party that is best
able to manage it or mitigate its effects. If risk of the event
occurring lies within the control of the Owner or is best
managed by the Owner, the risk will be priced into the bid of the
Contractor, the cost of delivery
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Topics delivered during presentation
Legal perspective on Tender process
Ground conditions for EPC risk allocation
Standards of Care for Design and Construction
Retention, bonding and guarantees
LDs and Liability Caps
Disputes resolution
Arbitration issues in Qatar / QFC
Insurers view on risk allocation in EPC contracts
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15
Thank you
Simon Harvey
Partner for Pinsent Masons LLP
D: +971 4 373 9682
M: +971 50 600 4143
Ext: 419682
www.pinsentmasons.com www.Out-Law.com
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Combining the experience, resources and international reach
of McGrigors and Pinsent Masons
Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the
Solicitors Regulation Authority, and by the appropriate regulatory body in the other jurisdictions in which it operates. The word partner, used in relation tothe LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm who is a lawyer with equivalent standing and
qualifications. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLPs registered office: 30
Crown Place, London EC2A 4ES, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP and affiliated entities that practise under the
name Pinsent Masons or a name that incorporates those words. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of thoseaffiliated entities as the context requires. Pinsent Masons LLP 2012
For a full list of our locations around the globe please visit our websites:
www.pinsentmasons.com www.Out-Law.com
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MARSH 1723 May 2013
QATAR CONSTRUCTION & INFRASTRUCTURERISK MANAGEMENT FORUM
RISK, INDEMNITY AND INSURANCE...CONNECTING THE DOTS
Gaurav BhatnagarMarsh MENA Infrastructure Practice Leader
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MARSH 1823 May 2013
Connecting the dots
Managing Risk
Risk allocation in Contract
Indemnity Insurance
What is the insurance approach ?
Procurement strategy
Articulated in contract
3D Execution = Define , Design, Deliver
Whilst indemnity principles may be well understood, insurance
provisions are seldom reviewed in detail.
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MARSH
FEED Detailed Design Transit/Construction/
Erection
Installations
Maintenance
Operation
months
$
DamageNon
Damage
Financial
$
Risk Build up / Time
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MARSH 2023 May 2013
Damage Risks
Fire, Explosion
Earthquake, Flood
Tsunami, Cyclone
Water
Subsidence
Lightning
Sandstorm
Faulty
Design/Material/Workmanship
SRCC
Theft
Accidental damage
Manpower shortage
Material shortage e.g. cement, steel
Port blockage
Supply chain management
Technology
Negligence in Design
Unforeseen ground conditions
Environmental
War or Civil War Potable water shortage
Strike
Non - Damage Risks
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MARSH 2123 May 2013
Professional LiabilitiesConstruction Risk
Insured
Risks
Increased
costs
Authorities
requirements
Changes
in scopeDefectivework
Latecompletion
Insured Risks
- CAR / EAR
- TPL
- Contractors Plant
- Marine Cargo
- Workers insurance
Voluntary
assumption of risk
- Indemnities- PI?
- Decennial Liability?
Negligence
In Reality
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MARSH 2223 May 2013
Insurance Perspective - Viewed by Project Phases
ConstructionConstruction
Risks Mostly Familiar
Issues:
Deductible mismatch
Damage to Existing
Property not considered
Sum Insured does not
include free issue
materials, owners costs
Defective Design Coverage
Limitations
Phased Handover
requirement not understood
and as a result Cover does
not cater for Items Put in
Use
OperationalTesting Commissioning
Risks Mostly
Familiar
Issues:
Damage post PAC
where root cause pre-
existing
No damage, but
inherent defect.
Extended
maintenance cover
does not match
defects liability period
Risks Mostly Familiar
Issues:
T&C coverage not fit for
purpose
Satisfaction of T&C clause
criteria not managed
Design or workmanship
issues manifest during
T&C, and after handover
Delays in Project andcontractor keen to
handover. Insurers not
keen to keep extending
construction insurance.
Conflicting interests.
Operational
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MARSH 2323 May 2013
Summary
Be clear about the cover you are actually purchasing!
Not just a tick in the box, consider the extent of actual risk transfer to insurers
A tailor made product will ultimately provide the optimum coverage and price
We design and place highly customised and unique programmes, constantly
challenging the insurance market to adapt to clients requirements
When things go wrong (losses), the quality of both the insurance product and
broker/advisory support (if a broker was involved) will be the acid test.
Thank you! Any Questions?
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MARSH
Contact
Gaurav Bhatnagar
Managing Director
Infrastructure Practice Leader
Marsh MENA
Dubai, United Arab Emirates
Mobile: +971 50 554 9621
Direct: +971 4 212 [email protected]
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QATAR CONSTRUCTION & INFRASTRUCTURE
RISK MANAGEMENT FORUM
PROFESSIONAL NEGLIGENCE IN DESIGNAND SUPERVISION - WHAT CAN GO
WRONG? HOW FAR DOES INSURANCE GO?Martin StubbsConstruction Professional Indemnity Specialist, Marsh
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MARSH 2623 May 2013
Agenda
Project Professional Indemnity Insurance
Coverage in brief
Types of cover What it does not cover
PI and Decennial Liability
Are all PI policies the same
The value of price or the price of value
Are you prepared to pay the price of
cheap cover
What can go wrong
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MARSH 2723 May 2013
Professional Indemnity (PI) Insurance - Coverage in brief
In the simplest terms a PI policy indemnifies the
construction professional (Consultant or Design andConstruct Contractor) against the cost of rectifying anegligent error or omission.
Coverage applies to the costs of rectifying defectswhether or not physical damage has occurred(ie something doesnt work as intended).
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MARSH 2823 May 2013
Professional Indemnity (PI) Insurance
Presentation highlights: Coverage in Brief: PI policies are written on a claims made basis
Coverage in Brief: retroactive coverage
Coverage in Brief: four conditions to trigger a claims made policy
Types of cover: Annual PI vs. Project PI
What does PI not cover? Comparison of PI and Decennial Liability
Many PI policies (annual and project specific) issued in the Middle East containvery restrictive terms and conditions
Why PI cover costs so much? Cheap just a tick in the box policies are veryrestrictive in their terms and conditions.
Typical exclusions: consequential losses, costs of redesign, insured undertakingphysical construction liabilities and more...
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MARSH
Thank you!
Martin Stubbs
Construction Professional
Indemnity Specialist, Marsh
Marsh Ltd.
Tower Place East
London
EC3R 5BU
T: +44 207 357 1000Email:
Scott Davies
FINPRO Senior Client
Executive
Marsh Middle East & North
Africa
Dubai, United Arab Emirates
T: +971 4 212 9164
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MARSH 3023 May 2013
QATAR CONSTRUCTION & INFRASTRUCTURE
RISK MANAGEMENT FORUM
INHERENT DEFECTS INSURANCE - HOW ITWORKS IN PRACTICE AND LEGAL
REQUIREMENTS SPECIFIC TO QATARPatrick EyerSenior Underwriter, Swiss Re
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
3131
Examples of losses and origins of Inherent Defects
IDI Coverage and Value provided
Legal situation in Qatar
Insurance covers relating to Projects
Summary
Contents of the presentation
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
Presentation Highlights
Inherent Defects Affected parts and Responsibility Allocation
Causes of Inherent Defects
Faulty Design
Faulty Construction / Materials
Reasons for obtaining IDI cover
IDI / decennial insurance covers the cost of repairing, restoring or strengthening ofthe insured building which is damaged or threatened by an inherent structural defect.
Elements of IDI cover and essential definitions
Types of occupancies that can be covered and underwriting base
IDI cover and legal framework in Qatar
Translation into International IDI
C t S l ti
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
3333
IDI and other Insurances relating to projects
Construction period Maintenanceperiod
Practical Completion date /
Issue of certificate of approval
Inherent Defects Insurance, 10 years
Contractor All Risks (CAR) policy
Technical Inspection
Property Insurance (Fire, Explosion, Natural perils etc.), annual cover
C t S l ti
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
3434
IDI is a First Party cover to indemnify physical damage or threat of
imminent collapse resulting from a defect inherent in the structural
elements to the property insured as opposed to damage arising from any
external cause
Agreement of terms happens at the inception of construction policy
Coverage incepts at the completion of construction and upon receipt of a
certificate of approval from the technical inspection agency confirming that
the building represents a normal risk for inherent defects insurance
This is a long term policy and non cancellable. Provision has to be made
for inflation during the period. The benefits can be transferred to parties
who may have an insurable interest
Insurance provides cover even if liable designer / contractor does not existanymore.
Yet, financial stability and stable long term outlook of ID-Insurer should be
given attention, too.
Summary
Corporate Solutions
C t S l ti
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
35
Thank you
Corporate Solutions
aPatrick EyerSenior Underwriter
Swiss ReZurich, SwitzerlandDirect: +41 43 285 2198Mobile: +41 79 823 [email protected]
Corporate Solutions
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Patrick Eyer | May 2013 | Doha
Corporate Solutions
36
Legal notice
2013 Swiss Re. All rights reserved. You are not permitted to create any
modifications or derivatives of this presentation or to use it for commercial or
other public purposes without the prior written permission of Swiss Re.
Although all the information used was taken from reliable sources, Swiss Re does
not accept any responsibility for the accuracy or comprehensiveness of the
details given. All liability for the accuracy and completeness thereof or for any
damage resulting from the use of the information contained in this presentation isexpressly excluded. Under no circumstances shall Swiss Re or its Group
companies be liable for any financial and/or consequential loss relating to this
presentation.
36
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MARSH 3723 May 2013
QATAR CONSTRUCTION & INFRASTRUCTURE
RISK MANAGEMENT FORUM
PANEL DISCUSSIONCONTRACT DISPUTES
Edwin Charnaud (Moderator)Marsh Global Infrastructure Practice Leader
Robert MusgroveCEO, Qatar International Court and Dispute Resolution Centre
Biju VarugheseSenior Manager Procurement & Contracts, Msheireb Properties
Michelle NelsonPartner, Pinsent Masons
Todd VandenhaakVice President, Marsh Risk Consulting
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MARSH 3823 May 2013
CLOSING
REMARKSEdwin CharnaudMarsh Global InfrastructurePractice Leader
QATAR CONSTRUCTION &INFRASTRUCTURE
RISK MANAGEMENT FORUM
> Welcome Address
> Keynote Address
> Managing risk on majorinfrastructure programs?
> Risk allocation in construction
contracts within the currentenvironment in Qatar
> Coffee break
> Risk, indemnity and insurance...Connecting the dots
> Professional negligence in designand supervision - what can gowrong? How far does insurancego?
> Lunch
> Inherent Defects Insurance - howit works in practice and legalrequirements specific to Qatar
> Panel discussion ContractDisputes
>> Closing remarks
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