The Orange Book: Updated

FOR some time the IChemE Contracts Committee has been aware that the Minor Works Contract (Orange Book) has needed an update to bring it in line with the UK’s Construction Act and to reflect the way in which the contract is now being applied. Some of the key changes to have been made to the revised form (available now) are as follows:

• design and construction applications;
• UK and international applications;
• more thorough insurance provisions;
• improved Agreement provisions;
• revised intellectual property rights; and
• general improvements to the General Conditions to reflect latest best practice.

Why update?

The Contracts Committee has always aimed to maintain a close relationship with the users of the contracts that it drafts and are published by IChemE. It does this in a number of ways, primarily through the members of the committee, all of whom have a close working relationship with the process industries in terms of project development, planning, operation, contract development and project management. This is further supported by the interaction with the Dispute Resolution Committee whereby feedback of non-confidential information is provided to ensure that the Contracts Committee is made aware of any issues arising from the content of the published contracts and any trends in changes to the manner in which disputes develop between parties. In addition, members of both committees often give both in-house and general training courses on the IChemE contracts during which much valuable feedback is provided by the users. It is through the above that the committee decided that the existing version of the Minor Works Contract (Orange Book) – whilst still being successfully used for its more traditional role which was ‘minor’ packages of construction works within existing process plants – is now being used in a far more comprehensive manner for a range of projects including the design, supply and construction of small pharmaceutical, biotechnology and water/wastewater plants.

What's changed?

For those familiar with the previous edition of the Orange Book, there have been a number of general changes and some reorganisation of the content to reflect current best practice and to bring this Contract in line with the other forms of contract published by IChemE. The two key changes have been:

(a) that the new form is now capable of being used both in the UK and internationally; and

(b) there is recognition that the Contract can be used for design and construction.

In the original edition of the contract, the design, free-issue materials, and equipment would normally be procured and issued to the Contractor by the Purchaser. The Contract now recognises that the Contractor may be required to undertake the design, supply and installation of all or parts of a plant and equipment. It remains the case that this form of Contract would normally be applied to works that are of a limited complexity and value or for which the risk to the parties is of a moderate nature. It is therefore anticipated that the contracts will not normally exceed £5m (US$7m) in value but this would be dependent on the cost of any capital items included within the scope of supply, the project complexity or levels of repetition in the scope of work.

The work may typically comprise activities such as installing equipment or plant or relatively small process systems, modifying existing facilities, and repairing and maintaining equipment or plant. If design is to be included within the Contractor’s scope of work, a Specification will need to be drafted, which was not included in the earlier publications.  The earlier editions dealt with any technical requirement and the scope of the Works in a single schedule; now Schedule 1 (Description of the Works) deals with the scope of the Works and other related matters whereas the Specification deals with the technical, operational and output aspects of any new or existing plant.  It is left to the parties to decide whether a Specification is required and clearly if a simple and limited small construction or installation project is required, a specification may not be necessary at all.

While the previous edition of the Orange Book was published specifically for use in the UK, this latest version is structured so that it may be used in any location. In this regard the committee has followed the same approach adopted for the Professional Services Contract (Silver Book) published last year. The contract includes examples of Special Conditions which have been divided into two sections, the first (Part A) relating to projects that are wholly or partially undertaken in the UK, and the second (Part B) covering optional Special Conditions that may be required either due to the specific content of the Project or due to the location of the Works under specific laws, codes of practice, or regulations. The guidance and example clauses for inclusion in the Special Conditions are provided to assist the user when compiling the Contract.

Liabilities, insurance and intellectual property rights

Overall, the new Orange Book contains a set of General Conditions of Contract, a form of Agreement, Special Conditions, guidance upon drafting the Schedules which form an essential element of the Contract, and brief Guide Notes. Due to the potentially new applications of the project, there are a number of changes to the draft Agreement and to clauses covering liabilities, insurance and intellectual property rights.

There is no predetermined form of payment to the Contractor for performance of the contract. The conditions have been drafted to cover any form of payment from fully reimbursable to fixed lump sum but this is on the basis that the Contractor will be entitled to some form of progressive stage payments. The precise details of the contract price and payments are to be included in a schedule covering the Contract Price and payment terms.

Current best practice

There have been a number of general changes and some reorganisation of the Orange Book's content to reflect current best practice and to bring this Contract in line with the other forms of contract published by IChemE. Although the General Conditions are suitable for work in any manufacturing facility, they have been drawn up primarily for application to work within process plants — that is, plants dealing with chemical or physical changes to materials. Such plants generally comprise a number of process equipment items, process systems, storage facilities, pipework, mechanical handling systems, structures, instrumentation and control systems, and auxiliary mechanical and electrical equipment and systems. There may also be associated utilities, general off-site facilities plus additional civil, structural and building works. The General Conditions should be used in their entirety without alteration. The Schedules and any Special Conditions are to be written on a case-by-case basis. Anyone contemplating modifications to the General Conditions, or the inclusion of Special Conditions to modify or amplify them, should be aware of the risk of introducing inconsistencies within the General Conditions, or conditions which may be legally unenforceable.

As in the case of its other forms of contract, the IChemE has followed, as a basic philosophy, the view that the parties should co-operate to achieve the mutual objective of completing the work successfully rather than regarding the contract as the basis for an adversarial relationship. It is clearly in the best interests of the parties that they should deal fairly with each other and with their contractors, subcontractors and suppliers in an atmosphere of co-operation in order to achieve successful solutions to problems that may arise during the performance of the works and for the contract as a whole. In drafting the contract, particularly now that it can be used internationally, the committee advises that: "In view of the wide variations in law and practices in different countries, advice should always be sought as to the appropriateness of any terms, or the need for additional matters, having regard to the law of the Contract and the law of the country where the Project is to be undertaken or Site (if any) is situated.”

Users of this form of Contract should not lose sight of the fact that it is intended for use in connection with ‘minor’ works. This should be reflected in the extent of the documents incorporated in the Contract which should be restricted to that germane to the task in hand. Furthermore, the documentation that is to be developed during the project execution and as required by the Contract such as  drawings, specifications, procedures and the like should be restricted to those that are necessary, appropriate, and specifically enhance both parties’ understanding of the scope of the work and their ability to successfully carry out their duties under the Contract.