IChemE Blue Book: The Advantages of EPCM Contracting

Last year, the Institute of Chemical Engineers (IChemE) published the Blue Book, which marks a significant milestone for sales and bid managers in the construction industry. As the first standard form contract designed for EPCM (Engineering, Procurement, and Construction Management) contracting, the Blue Book addresses a long-standing challenge: the need to amend professional services contracts or rely on bespoke forms, often leading to legal complexities and increased risks. With a standardised and comprehensive contract tailored to the unique requirements of EPCM projects, sales and bid managers can now streamline the contracting process, reducing ambiguities and facilitating more efficient negotiations.

Mitigating Risks and Fostering Collaboration

One of the key advantages of the Blue Book for sales and bid managers is its approach to risk allocation and dispute resolution. By limiting the EPCM contractor’s liability through features such as an aggregate cap, exclusions on certain types of losses, and a “net contribution” clause, the Blue Book provides a framework for managing risk exposure more effectively. Additionally, the contract emphasises alternative dispute resolution mechanisms, such as negotiation and mediation, promoting collaboration and open communication, minimising the potential for costly legal battles and project delays.

Flexibility and Adaptability for Project Success

The Blue Book’s flexible approach to pricing arrangements is another critical benefit for sales and bid managers. By allowing for cost reimbursable, lump sum, or a combination of pricing models through the use of schedules, the contract empowers sales and bid managers to tailor the pricing structure to the specific needs of each project. Furthermore, the Blue Book’s recognition that the EPCM contractor’s obligations are based on a “skill and care” standard rather than a “fitness for purpose” standard typically applied to construction contractors provides a more balanced risk allocation between the parties.

While the Blue Book represents a significant step forward, the industry continues to evolve. With organisations like FIDIC announcing plans to develop their own standard EPCM contract forms, sales and bid managers can anticipate further advancements in contract standardisation and risk management strategies.

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