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QATAR CONSTRUCTION AND INFRASTRUCTURE RISK MANAGEMENT FORUM

9 MAY 2013

Doha, State of Qatar

Agenda Construction & Infrastructure Risk Management Forum
8.00 – 9.00 9.00 – 9.10 9.10 – 9.40 9.40 – 10.20 10.20 – 11.00 11.00 – 11.30 11.30 – 12.10 12.10 – 12.50 13.00 – 14.30 14.30 – 15.10 15.10 – 16.40 16.40 – 17.00
MARSH

Registration & welcome coffee Welcome Address Keynote Address Managing risk on major infrastructure programs Risk allocation in construction contracts within the current environment in Qatar Coffee Break Risk, indemnity and insurance... Connecting the dots Professional negligence in design and supervision - what can go wrong? How far does insurance go? Lunch (French Brasserie Restaurant, 3rd Floor) Inherent Defects Insurance - how it works in practice and legal requirements specific to Qatar Panel discussion Closing remarks
23 May 2013

Robert Makhoul, CEO Marsh MENA Ahmed Salem Al-Kuwari Contracts and Projects Controls Director, Lusail Terry Krause, Vice President/Principal Program Manager, CH2MHill Simon Harvey, Partner, Pinsent Masons

Gaurav Bhatnagar, Marsh MENA Infrastructure Practice Leader Martin Stubbs, Construction Professional Indemnity Specialist, Marsh

Patrick Eyer, Senior Underwriter, Swiss Re

Edwin Charnaud, Marsh Global Infrastructure Practice Leader

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QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM

MANAGING RISK ON MAJOR INFRASTRUCTURE PROGRAMS Terry Krause,
Vice President/Principal Program Manager, CH2MHill

Presentation Outline
• Risk Management Principles • Role of Key Participants:
– Employer – Programme Manager

• Developing Programme Risk Register • Risk Management:
– Pre-Contract Award – Post-Contract Award

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Risk Management Principles Topics 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 4 .

Risk Management – Employer’s role Topics covered in this section: • Emplyer’s role according to the Code of Practice • Typical Employer Issues Impacting Major Programmes • Empolyer’s representative • Employer bahaviour impacts PM’s ability to deliver programme – increases programme risk 5 .

Risk Management – Programme’s Manager role Topics covered in this section: • PM’s role: To manage Employer behaviour and expectations that can negatively impact the delivery of the programme. the PM’s first and on-going tasks are • Team chartering • Delivery Plan development • Typical contents of Risk Management Plan 6 .

Developing a Programme Risk Register Topics 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 7 .

Risk Mitigation Pre-Award of Construction Contracts Topics covered in this section: • Responsibility of both Emplyer and PM • Feasibility Study • Site Investigation • Preliminary Design • Form of Contract 8 .

Risk Mitigation Post-Award of Construction Contracts Topics 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 risk register through to completion – contractors to submit detailed risk registers and use these to identify omissions in programme-wide risk register 9 .

Thank you Terry L. Krause.Krause@ch2m.com 10 .. P. BCEE Programme Manager CH2M HILL INTERNATIONAL IDRIS Programme Management Office The Public Works Authority (Ashghal) E-Mail Terry.E.

Pinsent Masons .QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM RISK ALLOCATION IN CONSTRUCTION CONTRACTS WITHIN THE CURRENT ENVIRONMENT IN QATAR Simon Harvey Partner.

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 12 .Introduction • Level of competition is increasing – truly international playing field • Increasing levels of sophistication on all sides • Greater understanding of risk.

If risk of the event occurring lies within the control of the Owner or is best managed by the Owner. the cost of delivery 13 . the risk will be priced into the bid of the Contractor.General Observations • Conditions of contract features significant Owner bias • Slowly addressing more oppressive Contract terms • Contracts commonly awarded to low bid with no qualifications to 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.

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 • LD’s and Liability Caps • Disputes resolution • Arbitration issues in Qatar / QFC • Insurer’s view on risk allocation in EPC contracts 14 .

com www.com www.Thank you Simon Harvey Partner for Pinsent Masons LLP D: +971 4 373 9682 M: +971 50 600 4143 Ext: 419682 simon.pinsentmasons.com 15 .Out-Law.harvey@pinsentmasons.

© Pinsent Masons LLP 2012 For a full list of our locations around the globe please visit our websites: www. Reference to ‘Pinsent Masons’ is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. 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. and by the appropriate regulatory body in the other jurisdictions in which it operates. A list of the members of the LLP.com www.Out-Law. London EC2A 4ES. is displayed at the LLP’s registered office: 30 Crown Place. 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.Combining the experience. used in relation to the LLP. and of those non-members who are designated as partners. The word ‘partner’.pinsentmasons.com . 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. United Kingdom.

.. INDEMNITY AND INSURANCE. CONNECTING THE DOTS Gaurav Bhatnagar Marsh MENA Infrastructure Practice Leader MARSH 23 May 2013 17 .QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM RISK.

insurance provisions are seldom reviewed in detail…. Deliver Whilst indemnity principles may be well understood. MARSH 23 May 2013 18 . Design.Connecting the dots… • Managing Risk • Risk allocation in Contract – Indemnity – Insurance • What is the insurance approach ? – Procurement strategy – Articulated in contract – 3D Execution = Define .

Risk Build – up / Time $ months FEED Detailed Design Transit/ Construction/ Erection Installations Maintenance Operation $ Damage Non Damage Financial MARSH .

g. cement. Explosion • Earthquake. Cyclone • Water • Subsidence • Lightning • Sandstorm • Faulty Design/Material/Workmanship • SRCC • Theft • Accidental damage MARSH Non .Damage Risks • Fire. Flood • Tsunami. steel • Port blockage • Supply chain management • Technology • Negligence in Design • Unforeseen ground conditions • Environmental • War or Civil War • Potable water shortage • Strike 23 May 2013 20 .Damage Risks • Manpower shortage • Material shortage e.

PI? .Decennial Liability? 21 .Indemnities .In Reality Construction Risk Professional Liabilities Defective work Changes in scope “Negligence” Insured Risks Insured Risks Late completion Increased costs Authorities’ requirements MARSH CAR / EAR TPL Contractors Plant Marine Cargo Workers’ insurance 23 May 2013 Voluntary assumption of risk .

owners costs Defective Design Coverage Limitations Phased Handover requirement not understood and as a result Cover does not cater for Items Put in Use MARSH 22 . 23 May 2013 Operational Operational Risks Mostly Familiar Issues: Damage post PAC where root cause preexisting No damage.Viewed by Project Phases Construction Construction Risks Mostly Familiar Testing Commissioning 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.Insurance Perspective . Conflicting interests. Extended maintenance cover does not match defects liability period Issues: Deductible mismatch Damage to Existing Property not considered Sum Insured does not include free issue materials. Insurers not keen to keep extending construction insurance. and after handover Delays in Project and contractor keen to handover. but inherent defect.

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.Summary • • • • • Be clear about the cover you are actually purchasing! Not just a “tick in the box”. 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? MARSH 23 May 2013 23 . constantly challenging the insurance market to adapt to clients’ requirements When things go wrong (losses).

Contact Gaurav Bhatnagar Managing Director Infrastructure Practice Leader Marsh MENA Dubai. United Arab Emirates Mobile: +971 50 554 9621 Direct: +971 4 212 9142 Gaurav.Bhatnagar@marsh.com MARSH .

Marsh .WHAT CAN GO WRONG? HOW FAR DOES INSURANCE GO? Martin Stubbs Construction Professional Indemnity Specialist.QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM PROFESSIONAL NEGLIGENCE IN DESIGN AND SUPERVISION .

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 MARSH 23 May 2013 26 .

Coverage in brief • In the simplest terms a PI policy indemnifies the construction professional (Consultant or Design and Construct Contractor) against the cost of rectifying a negligent error or omission. • Coverage applies to the costs of rectifying defects whether or not physical damage has occurred (ie something doesn’t work as intended). MARSH 23 May 2013 27 .Professional Indemnity (PI) Insurance .

costs of redesign.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. insured undertaking physical construction liabilities and more. 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 contain very restrictive terms and conditions • Why PI cover costs so much? ‘Cheap’ – just a tick in the box – policies are very restrictive in their terms and conditions.. • Typical exclusions: consequential losses. MARSH 23 May 2013 28 ..

Davies@marsh. United Arab Emirates T: +971 4 212 9164 Scott.com MARSH . Tower Place East London EC3R 5BU T: +44 207 357 1000 Email: Martin.Thank you! Martin Stubbs Construction Professional Indemnity Specialist.com Scott Davies FINPRO Senior Client Executive Marsh Middle East & North Africa Dubai. Marsh Marsh Ltd.Stubbs@marsh.A.

HOW IT WORKS IN PRACTICE AND LEGAL REQUIREMENTS SPECIFIC TO QATAR Patrick Eyer Senior Underwriter.QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM INHERENT DEFECTS INSURANCE . Swiss Re MARSH 23 May 2013 30 .

Corporate Solutions Contents of the presentation Examples of losses and origins of Inherent Defects IDI – Coverage and Value provided Legal situation in Qatar Insurance covers relating to Projects Summary Patrick Eyer | May 2013 | Doha 31 .

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. 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 Patrick Eyer | May 2013 | Doha . restoring or strengthening of the insured building which is damaged or threatened by an inherent structural defect.

10 years Property Insurance (Fire.Corporate Solutions IDI and other Insurances relating to projects Practical Completion date / Issue of certificate of approval Construction period Maintenance period policy Contractor All Risks (CAR) Technical Inspection Inherent Defects Insurance. annual cover Patrick Eyer | May 2013 | Doha 33 .). Explosion. Natural perils etc.

financial stability and stable long term outlook of ID-Insurer should be given attention. Patrick Eyer | May 2013 | Doha 34 .Corporate Solutions Summary 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 exist anymore. too. Yet.

Corporate Solutions Corporate Solutions a Thank you Patrick Eyer Senior Underwriter Swiss Re Zurich.com Patrick Eyer | May 2013 | Doha 35 . Switzerland Direct: +41 43 285 2198 Mobile: +41 79 823 0752 Patrick_Eyer@swissre.

Patrick Eyer | May 2013 | Doha 36 . Although all the information used was taken from reliable sources. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation. 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 is expressly excluded. 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.Corporate Solutions Legal notice ©2013 Swiss Re. All rights reserved.

Marsh Risk Consulting MARSH 23 May 2013 37 . Pinsent Masons Todd Vandenhaak Vice President. Qatar International Court and Dispute Resolution Centre Biju Varughese Senior Manager Procurement & Contracts.QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM PANEL DISCUSSION CONTRACT DISPUTES Edwin Charnaud (Moderator) Marsh Global Infrastructure Practice Leader Robert Musgrove CEO. Msheireb Properties Michelle Nelson Partner.

. Connecting the dots > Professional negligence in design and supervision .what can go wrong? How far does insurance go? > Lunch > Inherent Defects Insurance .QATAR CONSTRUCTION & INFRASTRUCTURE RISK MANAGEMENT FORUM > Welcome Address > Keynote Address > Managing risk on major infrastructure programs? > Risk allocation in construction contracts within the current environment in Qatar > Coffee break > Risk. indemnity and insurance.how it works in practice and legal requirements specific to Qatar > Panel discussion – Contract Disputes >> Closing remarks CLOSING REMARKS Edwin Charnaud Marsh Global Infrastructure Practice Leader MARSH 23 May 2013 38 ..